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Frameworks for: Integration of IS and Business Strategies (Planning frameworks) Strategic Alignment

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Frameworks for Integration of IS and Business Strategies-Planning f/works

6.1 DEFINITION OF A FRAMEWORK AND ITS CONTENTS A framework is a basic conceptual structure used to

solve a complex issue. Frameworks contain Methodologies.

Methodology is defined as "the analysis of the principles of methods, rules, and

postulates employed by a discipline" or "the development of methods, to be applied within a

discipline" "a particular procedure or set of procedures".

A Methodology includes the following concepts as they relate to a particular discipline or field of inquiry:

a collection of theories, concepts or ideas; comparative study of different approaches; and critique of the individual methods

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Methodology continued Methodology refers to more than a simple set of methods;

rather it refers to the rationale and the philosophical assumptions that underlie a particular study. This is why scholarly literature often includes a section on the methodology of the researchers.

A methodology must contain at least the following four elements: A structure that gives guidance on what to do, and when

to do it. A definition of techniques to do what needs to be done Advice on how to manage the quality of the results Tools to automate the process.

Methodology will consist of tasks. Each task is completed by using techniques. There must be a set of deliverables.

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6.2 PURPOSE OF FRAMEWORKS The IS strategy is the outcome of the IS strategy planning

process and having a framework for that process helps the organization avoid getting bogged down in inappropriate detail.

6.3 CLASIFICATION OF PLANNING FRAMEWORKS

Frameworks for planning may be classified by:

1. Intention of framework. This is further classified as: Business Impacting or Business Aligning

2.Nature of the planning environment. This is further classified as: Social- technical Developmental

3. Nature of the Planning process

Top-Down, Bottom up

Eclectic, Innovative

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Intention of framework6.3.1.1 Business Impacting Bergeron, Buteau and Raymond (1991) suggested the

following impact planning techniques- covered earlier: Competitive forces (Porter, 1979 and McFarlan (1984)). Competitive strategies: (Porter, 1980) Value chain: (Porter, 1985 and Rackoff (1985)). Consumer resource life : Ives and Learmonth 1984 Impact of IS/IT: Parsons 1983 Strategic opportunities: Benjamin (1984)

These techniques aim to determine which IS strategy to adopt in order to impact positively on the business.

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6.3.1.2 Business Aligning The three most widely used techniques include

Critical success factor analysis- Business systems planning Strategy set transformation -- Strategic set

transformation King (1978)

Earl’s strategic alignment model (To be covered here below)

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6.4 Alignment Problem Traditionally assumed purpose of strategic alignment is to

align IT with corporate or business strategies Problems with this assumption:

Supposing corporate or business strategies don’t exist! What if IT drives the organization’s strategy e.g. in information

intensive firms like banks? We use Extended strategic alignment model by Earl

Info. needs drive the alignment process Central to alignment is corporate strategy and existing IS supporting

the organization (IS map) Info. needs are met via business domain (business strategy &

business organization) and IS domain (IS strategy & IS infrastructure & resources) interacting to support the organization

THUS parallel development of IS and business strategy is driven by info. needs

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6.5 Earl’s strategic alignment model Used in Strategic Alignment Process and is based on the 5

stages of IS planning proposed by Earl:Stage 1 of IS planning Planning context: inexperience in IS planning,

unawareness of importance of IS Task: mapping of IS resources to assess the coverage

and quality of technology and applications (IS/IT mapping)

Objective: greater management understanding Methodology: survey of existing IS (bottom-up) Direction/involvement: led by DP/IT Once there is confidence in assessing IS, attention

moves to analyzing business needs as the driver for IS (stage 2)

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Stage 2

Planning context: inadequate business plans for the purpose Task: business direction Objective: agreeing priorities Methodology: driven by business strategy (top-down) Direction/involvement: led by senior management

Stage 3

Brings together stages 1 & 2 into a coherent IS strategic planning approach.

Planning context: apparent complexity Task: detailed planning Objective: firming up the IS strategic plan Methodology: matching top-down and bottom-up outputs

plus investigations and prototypes Direction/involvement: users and IS staff involved

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Stage 4

The competitive advantage stage. Most organizations aspire to get to this stage but few make it! Even when achieved, few sustain it!

Planning context: impatience, especially with detailed and formal planning processes

Task: competitive advantage Objective: finding business opportunities occasioned by

developments in IT or seeking opportunities afforded by IT which may yield competitive advantage or create new strategic options

Methodology: inside-out processes (IS strategy linked to what the business could do) – requires “bright sparks” & powerful “champions” & an environment that encourages innovation and working around normal rules

Direction/involvement: executive management and users. Note the absence of IS – Often IS has moved to executive management

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Stage 5

For the most successful organizations. IS and corporate strategy are integrated within a participative environment encompassing users and managers within the organization.

Planning context: maturity in IS strategic planning Task: IT strategy connection Objective: integrating IS and business strategies Methodology: multiple methods accepted (combination

of stages 1-4 methods) Direction/involvement: partnership of users, general

management and IS

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Notes on IS mapping: Useful only as an aid to thinking about the strategy

process The IS map in any organization will be a complex

mixture of all the stages: the purpose of mapping is to attempt to map this complexity

However, the understanding implicit in earlier stages is important to being able to successfully undertake later stages

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6.6 The Business & IS Domain Business domain consists of business strategy and the

business organization or infrastructure IS domain consists of IS strategy and IS infrastructure &

processes All elements of business & IS domains are continuously

aligned (all elements dynamic) around corporate strategy and IS map; and in satisfaction of the overall information need

Strategic alignment process consists of 2 stages: determining an alignment perspective undertaking the alignment process

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6.7 The Alignment Perspectives Perspective builds from the position determined by IS mapping

(i.e. IS mapping used to determine alignment perspective) & looks at how strategic alignment can be pursued given the organizational context

1. Strategy execution: Driver: business strategy – organizational design and IS are

adapted to the changing business strategic needs Role of top management: strategy formulator Role of IS management: strategy implementer Performance criteria: cost/service centre Problem: supposing the current organizational design &

available choices of IS infrastructure to support business needs are so constrained that the strategic vision is unattainable?

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Strategy execution perspective

Business strategy

Business Organization

IS Infrastructure and process

Driver Role of top management Role of IS managementPerformance criteria

Business strategy Strategy formulatorStrategy implementerCost/service center

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2. Technology potential: Similar to strategy execution but without the same

constraints Focuses on available technologies and infrastructure

necessary to their success, with business organization & strategy following the technological lead

Aim: to identify the best IS and organizational configurations needed to implement the chosen strategies – assumes the organization has the necessary flexibility to achieve these (e.g. change business org.)

Driver: business strategy Role of top management: technology visionary Role of IS management: technology architect Performance criteria: technology leadership

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Technology PotentialBusiness strategy

IS strategy

IS infrastructure and process

Driver Role of top managementRole of IS managementPerformance criteria

Business strategy Technology visionaryTechnology architectTechnology leadership

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3. Competitive potential: Aim: to exploit emerging IT capabilities to generate

competitive advantage, either by enhancing products or by improving processes, with business strategy being modified to take advantage of new opportunities

Driver: IS strategy Role of top management: business visionary Role of IS management: catalyst Performance criteria: business leadership Problem: may often fail to deliver anticipated benefits,

esp. if the focus is on IT rather than IS resources in general

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Competitive PotentialBusiness strategy

IS strategy

IS strategy Business visionaryCatalystBusiness leadership

Driver Role of top managementRole of IS managementPerformance criteria

Business Organization

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4. Service level: Aim: improved organization through IS strategy and IS

infrastructure and resources Driver: IS strategy Role of top management: prioritizer Role of IS management: executive leadership Performance criteria: customer satisfaction Problem: may become detached from business strategy

and loose focus

Summary Info needs is driver of IS strategy IS strategic alignment is a continuous process of

aligning business domain with IS domain in accordance with corporate strategy and organization’s IS map

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Service level perspective

Business Organization

IS strategy

IS infrastructure and process

DriverRole of top managementRole of IS management Performance criteria

IS strategy Prioritiser Executive leadershipCustomer satisfaction

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6.7 Undertaking the Strategic Alignment Process

Iterative process of info. needs analysis and aligning business & IS domains in satisfaction of those needs

1. Information needs analysis: Aim: to assess info. needs in relation to both internal & external

organizational environments EE: use PEST (Politics, Economic, Sociology and Technical

Developments) and SWOT (see earlier module) IE: aim is to determine the balance of culture and structure (see

earlier module on analysis of values and objectives) – see also case of structure/culture conflict

EE & IE analysis should be participatory – in order to gain and improve understanding within the organization

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The Process of Strategic AlignmentInformation needs analysis

Business Domain

Business strategy

Business organization

Informationsystems domain

IS infrastructureand processes

IS and IT strategy

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The structure for corporate information

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2. The business domain: Use Porter’s value chain analysis (see earlier module)

with the following perspective: IS provide the links between the primary activities

and the means of ensuring that secondary activities are used to their full advantage

e.g. firms using JIT manufacturing systems, procurement, inbound logistics & operations are linked by technology-based systems, which ultimately control the whole manufacturing process

Corporate strategy is also taken into consideration here Care must be taken to ensure that business domain

analysis fits the structural and cultural issues raised by the information needs analysis

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Using Porter’s Value Chain in Business Domain Analysis

The primary tool for analysing a company's internal business domain is Porter's value chain.

Porter casts the value chain as an integrated model, rather than as a collection of functional areas.

Administration & Infrastructure

Product/ Technology/ Development

Human resource management

Procurement

Inboundlogistics

OperationsOutboundlogistics

Sales &marketing

Services

Value Added-

Cost=

MARGIN

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3. The IS domain: Analysis of IS infrastructure and resources starts with

strategic grid – compares current & potential IS applications according to their current and future value (see figure) – similar to BCG matrix on product

Strategic grid used to map IS applications & hence to gain an understanding of role of IS applications. It also implies changes required for applications that are not having an impact

Applications move round the quadrants e.g. entering in Turnaround or Strategic and moving until Support

Applications in Support selectively divested & replaced with those from emerging & pacing quadrants (see fig.)

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Using the Strategic Grid for IS Domain Analysis

The strategic grid

Source: McFarlan (1989)

Strategic High PotentialCritical to the business and of the greatest potential value

Potential value high but not confirmed

Essential for primary processes

Needed to support the business but of little strategic value

Factory Support

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Problem: Organizations hanging onto dying systems,

e.g. because of resistance to change. IT has a life cycle close to that of IS applications:

Phase 1 - start with untried technology (development – turnaround)

Phase 2 – major competitors sample it (development/growth – strategic)

Phase 3 – all organizations are using it – none can survive without it (growth/maturity – factory)

Phase 4 – keeping the technology is a liability – become uncompetitive (decline – support) (see fig.)

Plot a life cycle for PC operating systems or a popular RDBMS

NB – if promised potential is not realizable, org. must get rid of particular IT (can be very expensive!)

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The Technology Life Cycle

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Uses of the strategic grid: Helps identify IS resource allocations on the basis of

business importance Gives a snapshot of the status & role of IS now and in

the future and makes this role explicit – a vital part of IS strategic planning

Helps match existing technologies against applications and to plan for future technologies (tech. impl. grid) Emerging technologies being used for systems which have

high potential (Turnaround) but which are not critical to business, and must be monitored carefully until a decision to utilize them can be made

Pacing technologies (Strategic/Turnaround) should be invested selectively for applications in which competitors are investing. Aim is to decide those likely to become Key and use them to build Strategic/Factory systems and selectively divest from Base technologies

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Technology Implementation Grid

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Weaknesses of the strategic grid: Originally used to determine the required level of

senior mgnt attention in managing IS – but has been used for many IS strategic issues. For strategic IS planning, it has the following weaknesses:

Leaves the strategic value of IS as something to be assessed after the fact

Cannot model the situation when an organization is aware of the strategic importance of IS but has no current or planned IS applications This (latter) may however be solved by using CSFs

(another top-down IS planning tool) – determines priority IS requirements whether the IS exists or is planned for

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Summary of objectives of IS domain analysis: To conduct internal and external audits to determine the

current position regarding IS applications and the technology to support them (valuable tools include the strategic grid and technology implementation grid)

To classify the business value of IS applications using the strategic grid

To determine the available technologies, categorized as emerging, pacing, key or base

To match current IS applications and technologies to those available

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4. Summary of strategic alignment action: Strategic IS alignment is an integral part of the process

of aligning corporate, business and IS domains all driven by information requirements

Alignment process is iterative and participative A combination of tools should be used