Information Systems Planning. 2 IS Planning The Changing World of Planning –Why planning is so difficult –Traditional vs Sense-and-Respond Approach Seven

Information Systems Planning

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IS Planning

• The Changing World of Planning– Why planning is so difficult– Traditional vs Sense-and-Respond Approach

• Seven Planning Techniques– Stages of Growth– Critical Success Factors– Competitive Forces Model

Five Forces Analysis of the Internet– Value Chain Analysis– E-Business Value Matrix– Linkage Analysis Planning– Scenario Planning

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Paradox

• IS planning is becoming more difficult and more important at the same time:– Technology changing so fast: “Why bother?”

YET– Most organizations’ survival is dependant on

technology

• Good News = variety of approaches, tools and mechanisms available

• Bad News = no ‘best’ way to go about it

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What is IS Planning?• Some managers believe = “determining

what decisions to make in the future”

• Turbulent environment = developing a view of the future that guides decision making today

– Subtle difference = ‘strategy making’ Strategy = stating the direction in which you

want to go and how you intend to get there

– The result of strategy-making is a plan

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What is IS Planning?

Types of Planning:• Planning is usually defined in three forms,

which correspond to the three planning ‘horizons’. – Strategic = 3-5 years– Tactical = 1-2 years– Operational 6 months – 1 year

• Emphasis on strategy has undergone a definite shift in recent years – Basic trend = move from a tactical midrange focus

to a truly strategic effort

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Types of Planning

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Planning Shift

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Why IS planning is so difficult?

• Business Goals and Systems Plans Need to Align

Some believe = “too sensitive” = PROBLEMS Fortunately = trend for CIOs to be part of senior

management

• Technologies Are Rapidly Changing• Continuous planning?

– Old days of planning at ‘start of year’ = gone– Advanced technology groups to monitor changes;

adjustments in current decisions

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• Companies Need Portfolios Rather Than Projects

Evaluation on more than their individual merit– How they fit into other projects and how they balance

the portfolio of projects (Internet Value matrix)

• Responsibility Needs to be Joint– IS planning by CIO no longer effective– Partnership among CEO, CIO, CFO, COO IS Planning=Business planning, no longer just a

technology issue

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• Infrastructure Development is Difficult to Fund Everyone “knows infrastructure development

is crucial”, BUT difficult to get funding just to develop or improve infrastructure

Often done under the auspices of a large application project

– Challenge = develop improved applications over time, so that infrastructure improves over time

• Mainframe-client server: to share corporate and desktop computing

• ERP: to centralize and standardize data• Web presence: to give users access to back-end systems• Web services architecture: to work intercompany

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• Other planning issuesTop-down Vs. bottom-up; radical

change Vs. continuous improvementMost organizations have a planning

‘culture’ into which the systems plan must fit

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The Changing World of Planning

• Technology (Internet etc.) ‘introduced’ speed into the business environment and transformed how people think about time, how much time they have to plan, react to competitors etc.

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• Traditional Strategy-Making:1. Business executives created a strategic business plan =

where the business wanted to go2. IS executives created an IS strategic plan = how IT

would support the business plan3. IT implementation plan created to describe exactly how

the IS strategic plan would be implemented

• Assumptions:– The future can be predicted– Time is available to do these 3 parts in sequence– IS supports and follows the business– Top management knows best (broadest view of firm)– Company = like an ‘Army’

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The Changing World of Planning • The future cannot be predicted –

discontinuous change Who predicted Internet, Amazon, eBay etc.?

New models will appear

• Time is not available for the sequence• IT implementation plan means IS Dept. already

‘late’ to support business plan; it needs to be ahead of business strategizing

• IS does not JUST support the business anymore; it shows IT-based opportunities– No longer business first, IS second– At the very least together

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• Top management may not know best• ‘Front-line’ people (closest to customers,

partners, suppliers) identify opportunities Inside out Vs. outside in approach

• An organization is not like an army Industrial era metaphor (top-down) no

longer always applies (e.g. failure of BPR) Organizations are living entities; do not

command, but nurture and tender; different type of leadership required (Semco)

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Today’s Sense-and-Respond Approach

• Let Strategies Unfold Rather Than Plan Them: In times of fast change long term enterprisewide strategy

(predictions) are risky the way to move into the future is step by step using a sense-

and-respond approach– Sense a new opportunity and immediately respond via testing it– Myriad of small experiments in parallel

• Formulate strategy closest to the action: IT (Internet) enabler of communication (inside as well as with

customers, suppliers and partners) So, corporate strategy must be aligned with marketplace.

Strategy development must take place at the organizational ‘edges’, with employees who interact with customers, suppliers and partners

Employees who are closest to the future (young) should become prime strategists. In the ‘Internet Age’ = younger employees

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Figure 4-6

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Today’s Sense-and-Response Approach

• Guide Strategy-Making with a ‘Strategic Envelope’:– Having a myriad of potential corporate strategies

being tested in parallel could lead to anarchy without a central guiding mechanism

– That mechanism is the ‘Strategic Envelope’– Top management doesn’t set strategies (as in

traditional way), it defines the parameters for the experiments (= a ‘strategic envelope’), and then continually manage that context

– Need to meet often to discuss: Shifts in the marketplace How well each of the experiments is proceeding Gaining ‘followership’ or showing waning interest?

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• Manage the strategic envelope by:1. Defining a territory2. Holding ‘strategic conversations’

• Regular meeting by executives to monitor environment and respond– COO reports on ‘today’ (size of mobile workforce)– CIO reports on ’tomorrow’ (developments in Web

Services)– VP of HR reports on ‘people’ issues

Helps to spot trends, launch new projects, add or cut funding to existing projects

• Regular meetings with experimenters

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• Be at the Table :– IS executives must be involved in business strategising,

NOT react to business strategies (which is tactical and operational)• Note: first = need to make department credible• Second= need to outsource operational work to free IS staff

for planning

• Test the Future– IS Dept. needs to test potential futures before the business

is ready for them (thinking ahead of the business), by:1. Providing funding for experiments2. Working with research organizations3. Having an emerging technologies group

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• Put the Infrastructure in Place:– Today, moving quickly means having the right IT

infrastructure in place.– The most critical IT decisions are infrastructure.– IT ‘experiments’ must include those that test

‘painful’ infrastructure issues such as how to: Create and maintain common, consistent data

definitions Create and instil mobile commercial standards among

handheld devices Implement e-commerce security and privacy measures Determine operational platforms (ERP, Supply Chain

Management …)

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Seven Planning Techniques

1. Stages of Growth

2. Critical Success Factors

3. Competitive Forces Model

4. Value Chain Analysis

5. E-business Value Matrix

6. Linkage Analysis Planning

7. Scenario Planning

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1. Stages of Growth (Nolan and Gibson)

• Stage One: Initiation: Early successes increase interest and experimentation

• Stage Two: Contagion: Rapid proliferation, little planning, much spending; learning period

• Stage Three: Control: Management concerned about benefits, so introduces control; IS Dept and users become accountable; Efforts towards standardization

• Stage Four: Integration:take advantage of new technology to integrate existing systems.

• (Stage Five: Data Administration: DP function created to plan and control use of organization’s data)

• (Stage Six: Maturity: IS part of managerial processes; alignment with business plan.)

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1. Stages of Growth • The eras overlap each other slightly at points of

“technology discontinuity”– Discontinuity happens when proponents of the proven struggle

with proponents of the new and unproven designs• ‘Inevitably’ the new win out

• Importance of this conceptual framework is understanding at which stage the org. is a precursor of IS planning– e.g. if use of Web services is in Stage II, too much control can kill

of new uses of technology

• Management principles differ from stage to stage

• Organization may be in different stages at any point in time (i.e. Stage II in terms of planning and control, but Stage III in terms of IS function organization)

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2. Critical Success Factors(Rockart)

• Used to identify the information systems that a company needs to develop / improve

• Fewer than 10 CSF per executive to monitor

• CSF are time dependent (must be re-examined)

• Four sources: – industry the business is in, – company itself and situation within industry, – environment (consumer trends, leveraging the

Internet), – temporal organizational factors (too much/little

inventory)

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2. Critical Success Factors

• Two types of CSFs

–Monitoring CSFs: to keep abreast of ongoing operations

–Building CSFs: to track progress of programs of change

• Steps to determine CSFs– Goals and objectives– Factors to accomplish these objectives– 2-3 measures for each factor (most difficult part)– Plan systems to support monitoring of these

measures

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3. Competitive Forces Model(Porter)

1 Threat of new entrants2 Bargaining power of customers and buyers3 Bargaining power of suppliers4 Substitute products or services5 The intensity of rivalry among competitors

Today, 5 forces and 3 strategies enabled/supported by IS.

Analysis of forces shows which systems to include in IS plan.

HOW DOES THE INTERNET CHANGE THIS?

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4. Value Chain Analysis(Porter)

• Five primary activities, 4 support activities

• Analyzing the value chain shows• how a firm can add value to each activity• determine where an other company can add

more value and team up with that firm, outsourcing that activity to this partner

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4. Value Chain Analysis • Virtual Value Chains?

– Marketplaces VS Marketspaces– Marketspaces where information substitutes

for physical product and location How can companies create value in a

marketspace? How can companies create value in a

marketplace and marketspace concurrently leveraging off each other? (Delta)

Use Porter’s Value chain to find the answer

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4. Virtual Value Chains

• In traditional value chains, information is a support element, not a source of value in itself

• To compete in the marketspace use information to create value for customers (UPS tracking system opened up for customers)

• Creating value in the marketspace also involves a value chain but here activities are performed with information and through information.

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• At every step in the virtual chain value through information can be added by:

1. Gathering information

2. Organizing information

3. Selecting information

4. Synthesising information

5. Distributing information

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4. Virtual Value ChainsEvolution in virtual value chains

1. Making operations visible: create ways to see physical operations through information. Usually visibility of production systems allowing employees to coordinate activities in the physical value chain, sometimes leading to competitive advantage– Frito-Lays’ store by store input of sales and

competitor data to schedule production, local promotions. Fast reaction to marketplace changes.

Foundation for a virtual value chain

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4. Virtual Value ChainsEvolution in virtual value chains

2. Mirroring capabilities: – substitute virtual activities for physical ones

(e.g. Purchasing through Web-based supply chains)

– Vitual world-wide teams, no time and space limitations (e.g. Texas Instruments)

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Virtual Value ChainsEvolution in virtual value chains

3. Space-based customer relationships: deliver value to the customer in new ways– Insurance company example:

– customer data collected by company made available to employees to give advice and quick answers (visibility stage)

– Create customer risk profiles and customize policies New product lines like insurance for boat

owners (mirroring capabilities)– Expand to new areas like offering financing for

boat purchases

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4. Virtual Value ChainsRULES

• Digital assets are not used up in consumption; information can be reused in many forms at a low cost.

• New economies of scale: small companies can compete against large ones due to lower overhead costs even in large geographic areas

• New economies of scope allow companies to offer financing and discount programs

• Transaction costs are lower in the marketspace, so companies can capture information they were not able to capture in the past (Frito-Lay)

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• Mindshift from– Supply-driven thinking to demand-driven thinking

• So,– ‘Sense and respond’ rather than ‘make and sell’

Significant strategic opportunity for companies: IS should play a role in identifying it and help the company to take advantage of it.

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5. E-Business Value Matrix(Alexander)

• A ‘portfolio’ planning technique to prioritize projects.

• Tool used by Cisco

• Every IT project is assessed in two categories:– Criticality to the business

– Newness of idea

• Each project is placed into one of four categories to assess its value to the company:

– New fundamentals: Low-Low=provide a fundamentally new way of working in overhead areas, not business-critical areas (3-6 months)

– Operational excellence: High-Low=medium risk because they may involve reengineering work processes (no immediate returns rather increase corporate agility, customer satisfaction; 12 months)

– Rational experimentation: Low-High=test new technologies and ideas (short time frame; if successful become one of the other 3 types)

– Breakthrough strategy: High-High=potentially have a huge impact on the company (eBay, extranets shared by partners)

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6. Linkage Analysis Planning(Primozic and Leben)

• Examines the links organizations have with one another to create a strategy for utilizing electronic channels

• Steps in the Methodology:

1. Define power relationships among the various players and stakeholders:

– Identify who has the power

– Determine future threats and opportunities for the company

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6. Linkage Analysis Planning

2. Map out your extended enterprise to include suppliers, buyers, and strategic partners

– The enterprise’s success depends on the relationships among everyone involved

– Some 70% of the final cost of goods and services is in their information content

– Win-win: a supplier keeps buyer’s inventory and delivers just-in-time, but gets paid electronically upon delivery

3. Plan your electronic channels to deliver the information component of products and services

– Create, distribute, and present information and knowledge as part of a product or service or as an ancillary good

– Those who control the electronic channels will be the winners

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7. Scenario Planning(Schwartz)

• Scenarios are stories about the way the world might be in the future

• The goal of scenario planning is not to predict the future, but to explore the forces that could cause different futures to take place, and then decide on actions to take if those forces begin to materialize

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7. Scenario Planning • Four steps in Scenario Planning:

1. Define a decision problem and time frame to bound the analysis

‘How will IS be managed 10 years from now?’

2. Identify the major known trends that will affect the decision problem. Categories are:

• Environment, government, regulations, society, technology, financial considerations...

• Each trend is judged:– ‘What impact will it have on the decsion

problem?’– What are the directions of each impact?’

• Trends with unknown or contradictory impacts are judged as uncertain

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3. Identify just a few driving uncertainties• Most uncertainties cluster around a few driving

uncertainties. – Choose two drivers, with two possible states for each

= 4 scenarios

4. Construct the scenarios• Each scenario is based on a driving uncertainty• Each scenario must be plausible

– To make it plausible include a ‘triggering event’ (9/11, Enron scandal, major court decision)

• Scenarios show the end state and how we arrived at it.


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• When the scenarios are developed, planners decide how their current strategies would fit in each case

• Then they ask ‘Is there a better strategy?’

• They also identify the factors they should monitor closely to spot changes in trends


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CASE EXAMPLEScenarios on the Future of IS Management

• Four potential futures are presented:1. The Firewall scenario could occur if companies use

traditional forms of management and see their data as proprietary

2. The Worknet Enterprise scenario could occur if companies outsource management of their data and share it extensively with specific partners

3. The Body Electric scenario could occur if new organizational forms flower (such as people owning parts of work cells in which they work) and obtain all their IT from interconnected service providers

4. The ‘Tecknowledgy’ scenario could occur if there is an open information society where any kind of information is available for a price. The main job of IS could be facilitation of knowledge processes across organizations

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Scenario Planning

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Conclusion• Based on the successes and failures of

past information systems planning efforts, we see two necessary ingredients to a good strategic planning effort:1. IS plans must look towards the future

Future is not likely to be an extrapolation of the past Successful planning needs to support “peering into

the future” – most likely in a sense-and-respond fashion

2. IS planning must be intrinsic to business planning

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Conclusion• Sense-and-respond is the new strategy-

making mode– Creating an overall strategic envelope and

conducting short experiments within that envelope, moving quickly to broaden an experiment that proves successful

• IS plans typically use a combination of planning techniques presented– No single technique is best and no single one

is the most widely used in business

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Conclusion

“Peering into an unknown future”

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PART I Discussion Case

IT Strategy for

Royal Dutch/Shell Group

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• Abandoned proprietary network despite big $ when it did not capture enough customers

• Moved on to buying Internet Companies as well as aligning with Sun to promote Java

• Over time = moved into a variety of technologies:– Web, Cable news, Digital movies, Cable modems,

Handheld OS, Video server, Music, Multiplayer gaming

• Not all came from ‘top management’ e.g. first server came from a ‘rebel’ project

• Getting its fingers into every pie that might become important– Missed some – paid $$$ later

MICROSOFTCase example: Sense and Respond Strategy-Making

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• Incubator for testing ideas on IT, social relationships, and networking for Skandia, the large Swedish insurance company

• Different generations (3G: 25+, 35+, 45+) collaborate on ‘on-the-edge’ projects

– In order to talk = focus on questions (= dialog) rather than answers (= debate)

– Presented as ‘plays’ (Vs. Report)

• “Garden” = some of the projects are growing; others = not

• Combining senior wisdom with young people’s entrepreneurship leads to a real powerhouse

SKANDIA FUTURE CENTERSCase example: Formulate Strategy Closest to the Action

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• New GM believed change would only occur if he went directly to his ‘front lines’ (gas station employees). Set aside 50% of his time

• Goal = not to drive strategy from ‘Corporate’ (tried and failed dismally) but to interact directly with the grass roots and support their initiatives

• Technique = use of action labs (6 to 8 people):

– Week long retailing ‘boot camp’, peer challenges, ‘hot seats’, 60 day plan implementations, report back etc.

– Projects spawned many more projects

• Guidance and nurturing came from the top, so that there was not complete chaos

SHELL OILCase example: Guide Strategy-Making with a ‘Strategic Envelope’

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• The Internet tends to dampen the profitability of industries and reduce firms’ ability to create sustainable operational advantages because:– It increases the bargaining power of buyers

– Decreases barriers to entry

– Increases the bargaining power of suppliers

– Increases the threat of substitute products and services, and

– Intensifies rivalry among competitors

• Recommend = focus on your strategic position in an industry and how you will maintain profitability – Not growth, market share or revenue

Framework ExampleFive Forces Analysis of the Internet

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AN AUTOMOBILE MANUFACTURERCase Example – Virtual Value Chain

• The rental car subsidiary turned to auctioning off clean used cars to dealers to sell, via marketspace

• Dealers can view the cars (and their stats) to be auctioned from a screen in their dealership, and then place bids during the online auction, held once or twice a month

• The auction saves them time and effort, and the cars are guaranteed

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CISCO SYSTEMSCase Example – E-Business Value Matrix

• Cisco’s expense reporting system fits in its new fundamentals category

• Its executive dashboards are an example of operational excellence projects

• Multicast streaming video used for company meetings is a rational experiment, and

• Its development of a virtual supply chain is seen as a breakthrough strategy

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• EPRI’s challenge - compress “information float” - elapsed time from availability research findings to the use of those results in industry

• Answer: EPRINET - a natural language front end for accessing online information, expert system-based products, e-mail facilities, and video conferencing

Electric Power Research InstituteCase example: Linkage Analysis Planning

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Documents

Information Systems Planning. 2 IS Planning The Changing World of Planning –Why planning is so difficult –Traditional vs Sense-and-Respond Approach Seven