Lecture 6 Strategic Alignment Techniques

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  • 1. BIS3000 Information Systems and Strategic Management
    • Dr Matthew Montebello
    • [email_address]
  • 2. Lecture Schedule
    • Lecture
    • Strategic Alignment Techniques 2 nd June 09
    • eBusiness 9 th June 09
    • Knowledge Management 16 th June 09
    •  CW1 Deadline - Presentations
    • Change Management 23 rd June 09
    •  CW2 Deadline - Report
    • Protecting IT Assets (Wed)1 st July 09
    • Review 7 th July 09
  • 3. Lecture 6 Strategic Alignment Techniques
    • What is Strategic Alignment
    • Important of Alignment
    • Strategic Alignment Maturity Levels (5)
    • Maturity Level Criteria
    • Strategic Alignment Model
    • Alignment Interaction Process (6)
    • Execution / Assessment
     Business Strategy Choices  Role of IT Managers in Strategy  Business Environment  Balanced Scorecard
  • 4. 1. What is Strategic Alignment
    • The matching up of two or more organisational strategies in order to ensure the overall objectives of the organisation are met.
    • Example:
      • If a systems administrator is providing a given manager with the information they need in order that they can take the decisions they have to take then the two are aligned in terms of information delivery
    • What brought about the need for Strategic Alignment?
      • At strategic level the linkages can appear very complicated
      • Importance of IT and Business Environment
  • 5. Two Meanings of ‘Alignment’
    • Making sure that :
    • 1. The IS is a good fit for the business strategy
      • (i.e. business strategy leads IS strategy)
    • 2. The different functional elements (i.e. separate departments) are each integrated with each other - including their individual IS - and jointly serving the overall business needs.
    • Note that some organisations may have developed separate IS strategies for each department
  • 6. Information Strategy Alignment Information Strategy Business Strategy Organizational Strategy
  • 7. Strategy Alignment Teaser …
  • 8. Today’s Business Environment
    • Increased globalization
    • Increased competitive pressure
    • Frequent mergers
    • Rapidly changing technology
    • Evolving patterns of consumer demand
  • 9. Competitive Advantage Today
    • Unsurpassed relationships with one’s customers and suppliers
    • Unique and adaptable business processes
    • Ability to harness information and knowledge of employees
    • Must become “Change Leaders”
  • 10. IT Management Should:
    • Be knowledgeable about how new IT technologies can be integrated into business
    • Be privy to senior management's tactical and strategic plans
    • Be present when corporate strategies are discussed
    • Understand strengths and weaknesses of technologies and implications
    • So what is Alignment so important?
  • 11. 2. Importance of Alignment
    • Effectiveness
    • Efficiency
    • Link Technology and Business
    • Optimise the Business model
    • Ensure success
    • There exist different levels of Strategic Alignment … different maturity levels …
  • 12. IT as Architects of Alignment
    • Knowledgeable about new technologies
    • Privy to tactical and strategical plans
    • Be present in corporate strategy discussions
    • Understand technology strengths and weaknesses
  • 13. Six Key Enablers to Alignment
    • Senior executive support for IT
    • IT involved in strategy development
    • IT understands the business
    • Business-IT partnership
    • Well-prioritized IT projects
    • IT demonstrated leadership
  • 14. Six Inhibitors to Alignment
    • IT/business lack close relationships
    • IT does not prioritize well
    • IT fails to meet commitments
    • IT does not understand business
    • Senior executives do not support IT
    • IT management lacks leadership
  • 15. Business Strategy Choices
    • Selection of business goals
    • Choice of products and services to offer
    • Design and configuration of policies
    • Appropriate level of scope and diversity
    • Design and organization structure and administrative systems
  • 16. Three Business Strategy Elements
  • 17. Business Strategy Elements : Vision
    • Where the company wants to go
    • What the company aspires to be
    • Clear, compelling, exciting
    • Big Hairy Audacious Goals (BHAG)
  • 18. Business Strategy Elements : Strategy
    • How vision will be accomplished over specified time period
    • Use of checkpoints
    • Benchmarks to check strategy effectiveness
    • Aligned with company mission and core values
    • Provides architectural bridge between mission and vision
  • 19. Business Strategy Elements : Mission
    • Reasons the IT function exists
    • Concise statement of what business the group is in
    • Purpose and function of IT
    • Review to identify for themes and ideas
    • Identify core values
  • 20. 3. Strategic Alignment Maturity Levels
    • Initial/Ad Hoc Process
      • Business and IT not aligned
    • Committed Process
      • Organization commits to becoming aligned
    • Established Focused Process
      • Established and Focused on business objectives
    • Improved/Managed Process
      • Reinforcing concept of IT as “Value Center”
    • Optimized Process
      • Integrated/Co-adaptive business and IT strategic planning
  • 21.  
  • 22. Level 1 – Initial/Ad Hoc Process
    • Lowest level of strategic alignment
    • Understanding of IT by business is low
    • Investment in IT is underleveraged
  • 23. Level 1
  • 24. Level 1
  • 25. Level 1
  • 26. Level 2 – Committed Process
    • Committed to begin process for Strategic Alignment Maturity
    • View IT as an asset to the organization
    • Directed at local situations or functional organizations
    • Alignment at the level is difficult to achieve
    • Potential opportunities are recognized
  • 27. Level 2
  • 28. Level 2
  • 29. Level 2
  • 30. Level 3 – Established Focused Process
    • Concentrates on governance, processes, and communications toward specific business objectives
    • Needs better governance to invest in IT
    • Focus on business processes that generate long-lasting competitive advantage
    • Effectively communicate its vision and get “buy-in” from employees and management
  • 31. Level 3
  • 32. Level 3
  • 33. Level 3
  • 34. Level 4 – Improved/Managed Process
    • Leverage IT assets on an enterprise-wide basis
    • Focus on driving business process enhancements to gain competitive advantage
    • Views IT as an innovative and imaginative strategic contributor
    • Capitalize on information and knowledge
    • Utilize IT assets by deploying enterprise-wide architecture
  • 35. Level 4
  • 36. Level 4
  • 37. Level 4
  • 38. Level 5
  • 39. Level 5
  • 40. Level 5
  • 41. Balanced Scorecard
    • A strategic planning and management system that is used extensively in business and industry, government, and nonprofit organizations worldwide.
    • Employed to align business activities to the:
    • vision and strategy of the organization,
    • improve internal and external communications,
    • and monitor organization performance against strategic goals
  • 42. Visual of Balanced Scorecard Adapted from The Balanced Scorecard by Kaplan & Norton
  • 43. Why a Balanced Scorecard ?
    • Increase focus on strategy and results
    • Improve organizational performance by measuring what matters
    • Align organization strategy with the work people do on a day-to-day basis
    • Focus on the drivers of future performance
    • Improve communication of the organization’s Vision and Strategy
    • Prioritize Projects / Initiatives
  • 44. The Balanced Scorecard by K2 Performance Group
  • 45. 4. Strategic Alignment Maturity Criteria
    • Communications
    • Competency/value measurements
    • Governance
    • Partnerships
    • Scope and Architecture
    • Skills
  • 46.  
  • 47. a) Communications
    • Ensure ongoing knowledge sharing
    • Use people in formal inter-unit liaison roles
    • Cooperation among business-IT partners
    • Trust and openness between units and IT
  • 48. b) Competency/Value Measurements
    • Service levels that assess commitment of IT
    • Tie service levels to criteria
    • Take action based on measurements of performance factors
    • Understand factors that lead to missing criteria
    • Understand what can be learned to improve the environment continuously
  • 49. c) Governance
    • Clearly defined decision-making authority
    • Integrated enterprise-wide strategic business plan
  • 50. d) Partnership
    • Relationship between business and IT organizations
    • Give IT function equal role in defining business strategy
    • Perception of contributions
    • Partnership should enable and drive change
  • 51. e) Scope and Architecture
    • Go beyond back office and into front office
    • Assume role supporting flexible infrastructure
    • Evaluate and apply emerging technologies effectively
    • Enable or drive business processes and strategies
    • Provide solutions customizable to customer needs
  • 52. f) Skills
    • Include all human resource considerations for organization
    • Consider cultural and social environment
  • 53. Role of IT Managers
    • Set of decisions made by IT and senior management
    • Deployment of technology infrastructures
    • Relationship of technology choices to business choices
    • These involve:
      • Strategic (Develoment Policy)
      • Tactical (Control Policy)
      • Operational (Implementation Policy)
  • 54. Aligned IT Strategy
    • Intimate understanding of customers and evolving needs
    • Managing knowledge- and information-based asset management
    • Continuously innovate strategically relevant new processes
    • Coordination of activities involving people, procedures, and technology
  • 55. IT Roles in Strategy
    • Transformation driver
      • Create and exploit new markets
      • Link customers to firm
      • Define new standards of excellence
    • Enabler of transformation
      • Interconnect people and processes
      • Span organization boundaries
      • Bridge geographical distances
  • 56. IT as Inhibitor
    • IT strategy not aligned with business strategy
    • Over-emphasis on technology
    • Failure to recognize effective use of IT requires business process change
  • 57. Three Management Subcultures
    • Executive
      • Focused on maintaining financial health
    • Engineering
      • Focus is outside organization
      • Views humans as source of potential error
    • Operator
      • Based on human interaction
      • Frequently operate at cross-purposes
  • 58. 5. Strategic Alignment Model
  • 59. Internal Business Domain
    • Administrative Structure
      • Functional, matrix, decentralized, process-based, geographic, or hybrid
    • Critical Business Processes
      • Identification of salient processes
    • Human Resource Skills
      • Acquisition and development of people skills
  • 60. Strategic Fit
    • Scope of Firm’s Business
      • Customers, products, markets, and competitors
    • Distinctive Competencies
      • Core competencies
      • Critical success factors that provide competitive advantage
    • Governance of the Firm
      • Impact of regulatory agencies
  • 61. Strategic Alignment Variables
    • Scope of Firm’s Technology
      • Impact and support business strategy decisions and initiatives
    • Systemic Competencies
      • Technology capabilities
    • IT Governance
      • Pursue relationships and alliances to obtain IT competencies
  • 62. Internal IT Strategy Domain
    • IT Architecture
      • Selection of technology and infrastructure
      • Models used to define data, information, networks, applications, and systems
    • IT Organizational Processes
      • Critical to operation of IT organization
      • Systems development, IT operations
    • IT Skills
      • Acquisition and development of people
  • 63. Components of Strategic Alignment Model (Henderson & Venkatraman)
    • Business Strategy
      • Business Scope
      • Distinctive Competencies
      • Business Governance
    • Organization Infrastructure and Processes
      • Administrative Structure
      • Processes
      • Skills
    • Strategy
      • Technology Scope
      • Systemic Competencies
      • IT Governance
    • IT Infrastructure and Processes
      • Architecture
      • Processes
      • Skills
  • 64. Components of Strategic Alignment Model (Henderson & Venkatraman)
  • 65. Components of Strategic Alignment Model (Henderson & Venkatraman)
  • 66. Functional Integration
    • Linkage between the IT strategy domain and business strategy domain
    • Support requirements and expectations of business’ organizational structure and processes
  • 67. Planning IT Strategy
    • Sequence of activities that transforms current alignment state to future alignment state
    • Actively involve IT staff in development of vision and strategies
    • Strengthen degree of strategic alignment
  • 68.  
  • 69. Forming the Team
    • Senior decision makers from corporate IT, business IT, and senior business management
    • Include systems architect and CIO
    • Establish join understanding
    • Commitment to goals and objectives
  • 70. “ As-Is” State Description
    • Specify both business strategy and organizational infrastructure
    • Baseline for senior management and IT
    • Understand firm’s strategic positioning in IT marketplace
    • IT governance
    • Facilitated interactive workshop sessions
    • 10-12 participants
  • 71. SWOT Analysis
    • Strengths
    • Weaknesses
    • Opportunities
    • Threats
    • Recommend strategies that ensure best alignment between external and internal environments
  • 72. Strengths
    • Distinctive Competencies
      • Critical success factors
      • Core competencies
      • Brand, research, manufacturing, product development, cost and pricing structure, sales and distribution channels
    • Systemic Competencies
      • Capabilities and success factors important to strategies
  • 73. Weaknesses
    • Observation of existing business and IT problems
    • Weaknesses will emerge from observation
    • Effect on firm’s strategic positioning
  • 74. Opportunities – Ansoff Matrix
  • 75. Ansoff Matrix Positioning Strategies
  • 76. Delta Model
  • 77. Threats
    • Rivalry Between Existing Firms
    • Risk of New Entrants
    • Power of Buyers
    • Power of Suppliers
    • Threat of Substitutes
  • 78. Environmental Factors
    • Political and Legal Environment
    • Macroeconomic Environment
    • Social Environment
    • Technical Environment
    • Demographic Environment
  • 79. Strategy Alternatives Analysis
  • 80. Scenario Planning Grid
  • 81. 6. Strategic Alignment Process
    • This ‘good fit’ does not happen automatically. Alignment is hard work and requires systematic evaluation. In this lecture we look at two different approaches that can help:
    • Customer Orientation
    • Contingency Approach
    • Such a process requires initial assessment
  • 82. Customer Orientation
    • Lockamy and Smith (1997) advise managers to ensure that:
    • Strategy is driven by customer needs and expectations;
    • Processes selected for redesign by IS create value for the customer;
    • IS supports those processes in a way that supports the strategy.
  • 83. Contingency Approach
      • This is based on the idea that information systems should reflect the organisation characteristics and business type in which they are used. The variables are :
    • primary tasks of the organisation
      • routine or non-routine
    • degree of interdependency between those doing the tasks
      • high or low
    • environment of the organisation
      • stable or unstable
  • 84. Primary Objective of Assessment:
    • Agree that criterion needs to be improved
    • Agree that a criterion is good, but can be better
    • Disagree with how good/bad a criterion is
  • 85. Six Step Process
    • Set the Goals and Establish a Team
    • Understand the Business-IT Logic
    • Analyze and Prioritize Gaps
    • Specify the Actions (Project Management)
    • Choose and Evaluate Success Criteria
    • Sustain Alignment
  • 86.  
  • 87. 7. Execution / Assessment
    • Execute the strategy
    • Commitment and engagement of senior business management
      • Must occur prior to implementation planning
    • Strategic Alignment Maturity
      • Ability to adapt in harmonious fashion
    • Adoption of Measurement Criteria
      • Measure effects in several different dimensions
  • 88. Periodic Review
    • Ensure initial assumptions are correct
    • Ensure implementation of plans are on schedule
    • Measurements are captured and reported
  • 89. Identifying Industry Key Success Factors
    • Answers to three questions pinpoint KSF’s
      • On what basis do customers choose between competing brands of sellers?
      • What resources and competitive capabilities does a seller need to have to be competitively successful?
      • What does it take for sellers to achieve a sustainable competitive advantage?
    • KSF’s consist of the 3 - 5 really major determinants of financial and competitive success in an industry
  • 90. Examples of Key Success Factors
    • Design talent
    • Fast concept-to-production cycle
    • Low-cost manufacturing efficiency
  • 91. Assessing Strategic Alignment Maturity
    • This does not fit the organization, or the organization is not very effective
    • Low level of fit for the organization
    • Moderate fit for the organization, or the organization is moderately effective
    • Fits most of the organization
    • Strong level of fit throughout the organization, or the organization is effective
  • 92. Next Lecture eBusiness impact on strategy In preparation you should all read…… Chaffey & Wood pages 93-103