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BIS3000 Information Systems and  Strategic Management Dr Matthew Montebello [email_address]
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
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
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
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
Information Strategy Alignment Information Strategy Business  Strategy Organizational Strategy
Strategy Alignment Teaser …
Today’s Business Environment Increased globalization Increased competitive pressure Frequent mergers Rapidly changing technology Evolving patterns of consumer demand
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”
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?
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 …
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
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
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
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
Three Business Strategy Elements
Business Strategy Elements : Vision Where the company wants to go What the company aspires to be Clear, compelling, exciting Big Hairy Audacious Goals (BHAG)
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
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
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
 
Level 1 – Initial/Ad Hoc Process Lowest level of strategic alignment Understanding of IT by business is low Investment in IT is underleveraged
Level 1
Level 1
Level 1
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
Level 2
Level 2
Level 2
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
Level 3
Level 3
Level 3
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
Level 4
Level 4
Level 4
Level 5
Level 5
Level 5
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
Visual of Balanced Scorecard  Adapted from  The Balanced Scorecard  by Kaplan & Norton
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
The Balanced Scorecard  by K2 Performance Group
4. Strategic Alignment Maturity Criteria Communications  Competency/value measurements Governance Partnerships Scope and Architecture Skills
 
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
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
c) Governance Clearly defined decision-making authority Integrated enterprise-wide strategic business plan
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
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
f) Skills Include all human resource considerations for organization Consider cultural and social environment
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)
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
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
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
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
5. Strategic Alignment Model
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
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
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
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
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
Components of Strategic Alignment Model (Henderson & Venkatraman)
Components of Strategic Alignment Model (Henderson & Venkatraman)
Functional Integration Linkage between the IT strategy domain and business strategy domain Support requirements and expectations of business’ organizational structure and processes
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
 
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
“ 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
SWOT Analysis Strengths Weaknesses Opportunities Threats Recommend strategies that ensure best alignment between external and internal environments
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
Weaknesses Observation of existing business and IT problems Weaknesses will emerge from observation Effect on firm’s strategic positioning
Opportunities – Ansoff Matrix
Ansoff Matrix Positioning Strategies
Delta Model
Threats Rivalry Between Existing Firms Risk of New Entrants Power of Buyers Power of Suppliers Threat of Substitutes
Environmental Factors Political and Legal Environment Macroeconomic Environment Social Environment Technical Environment Demographic Environment
Strategy Alternatives Analysis
Scenario Planning Grid
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
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.
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
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
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
 
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
Periodic Review Ensure initial assumptions are correct Ensure implementation of plans are on schedule Measurements are captured and reported
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
Examples of Key Success Factors Design talent Fast concept-to-production cycle Low-cost manufacturing efficiency
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
Next  Lecture eBusiness impact on strategy In preparation you should all read……  Chaffey & Wood pages 93-103

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Lecture 6 Strategic Alignment Techniques

  • 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
  • 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
  • 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
  • 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
  • 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
  • 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
  • 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
  • 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
  • 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
  • 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