CISB444 - Strategic Information Systems Planning Chapter 2 - An Overview of Business Strategy Concepts and the IS/IT Strategy Implications Part I

Course Overview Chapter 2 considers approaches and techniques involved in business strategy formulation and strategic management and their implications for IS/IT strategy development. CISB414 - Strategic Information Systems Planning

Main topics The evolving nature of strategy and strategic planning in organisations The strategic framework Strategy implementation Strategy tools and techniques CISB414 - Strategic Information Systems Planning

Introduction Most organisations are today aware that information systems strategies must be developed within the wider context of the corporate and business strategy formulation and implementation processes. It has become increasingly important that investments made in information systems and technology throughout an organisation are directed toward the achievement of business objectives and plans. IS/IT can also be an enabler of new business strategies that are not possible without the application of IT

Introduction In the past, a significant proportion of the money spent on information systems and technology has had little relationship with meeting corporate objectives. This is one of the many reasons why the potential benefits from investments made in IT have frequently not been realised. Therefore, it is vital that business managers are involved in the process of developing information and systems strategies - It must be related to their business issues

What is Strategy Metaphorically: A strategy is concerned with: setting out the purpose of the journey (i.e. what we want to be when we get there), where we want to go (including any intermediate destinations that we might visit in order to measure our progress), when we are going to get there, how we are going to achieve it, and what factors will influence our ability to complete the journey successfully.

What is Strategy The strategy therefore specifies ends and path-ways, with intermediate milestones which we can use to measure success. Strategy can therefore be defined as: an integrated set of actions aimed at increasing the long-term well-being and strength of the enterprise relative to competitors

Strategic Management Strategic Management is concerned with the management, control, and monitoring of these ends and pathways in order to ensure success: Effective combination of coherent planning, incisive thinking, and astute opportunism Include not only setting the strategy but also implementing and adapting it

Strategic Planning Strategic Planning on the other hand, is concerned with developing the: plans, projects, and initiatives which will allow the strategic intent to be translated into operational achievement. Systematic, comprehensive analysis to develop a plan of action

Strategic Thinking Creative, entrepreneurial insight into the ways the enterprise could develop.

Strategic Thinking Strategic Thinking is concerned with challenging, evaluating, and shaping strategy in order to ensure that the enterprise is optimally positioned in terms of its: markets, competitors, and other environmental factors.

Thinking Strategically: The Three Big Strategic Questions Where are we now? 2. Where do we want to go? Business(es) to be in and market positions to stake out Buyer needs and groups to serve Outcomes to achieve 3. How will we get there?

The Strategic Framework The framework considers the factors involved in business strategic management in three layers: The external environment; Pressure groups and stakeholders; Internal business strategising and planning

External Environment Businesses operate within a broadly-defined external environment which need to be thoroughly analysed, understood, and interpreted early in the business strategy process.

External Environment The 6 factors that are of enduring importance and relevant to most industries and organisations because of the speed with which they are changing and the effect they have on an increasingly ‘global’ business marketplace include: Economic Social Political Legal Ecological Technological • Careful monitoring of these factors may lead to significant business opportunities or identification of potential threats in time to take action to mitigate the effects.

Pressure Groups and Stakeholder Businesses also operates and functions under the direct influence of two sets of forces: • Pressure groups Characterised by making demands of the organisation Shareholders, Competitors, Customers/Suppliers • Stakeholders Have a direct financial interest in the organisation, and demand a fair share of the wealth created Shareholders, Competitors, Customers, Suppliers, Government, Employees, Unions, The Public, Financial Institution, The Media

Business Strategy Formulation and Planning Processes Having considered the external environment as well as the threats and opportunities posed by the pressure groups, the organisation has to identify, evaluate and decide the strategies it is going to pursue. It then has to establish how to achieve these strategies by planning for the required actions and by effective development and use of resources. The key components of a business planning process: Objectives Situation analysis Future strategies

Strategy Implementation Strategy implementation requires adequate resources that are allocated effectively, appropriate organisation and responsibilities are in place, and people are motivated to contribute to the achievement of the strategies. It is also important to monitor performance and to control activities to ensure actions taken are producing the specific results that will lead to achievement of the overall set of objectives. The results of this performance measurement will be used in a feedback loop to refine the objectives of the organisation.

Company’s Strategy A company’s strategy will be affected by: Regulatory regime Adverse economic conditions Disruptive technologies New entrants • Strategy must be periodically reviewed, to assess: whether it is necessary to make minor short-term alterations to the strategy, or whether more radical by-passing is required in the face of unforeseen obstacles

Strategy Is Partly Proactive and Partly Reactive A company’s strategy is typically a blend of: Proactive and purposeful actions on the part of company managers As-needed reactions to unanticipated developments and fresh market conditions.

Why Do Strategies Evolve? A company’s strategy is a work in progress • Changes may be necessary to react to A failing strategy Shifting market conditions Evolving customer preferences Fresh moves of competitors Technological breakthroughs Crisis situations?

Emergent Strategy The strategy develops over time in response to change: mapped out expected journey ready to reoriented the journey with new destination (if there are better opportunities or the old destination is no longer relevant to the enterprise)

Strategy Tools and Techniques Business analysis framework – a frequently used tool which allows users to demonstrate a summary of complex issues in graphical form Often comes in 2x2 or 3x3 matrix E.g. The Boston Consulting Group Business matrix which categorises business according to : Present market share Future growth of that market Once we know the category of our business, we can start with the strategic planning, can be used as a predictive device

The Boston Consulting Group Business matrix Y axis shows market growth rate for that industry. X axis shows the market share relative to the industry leader

The Boston Consulting Group Business matrix Source : http://www.brs-inc.com/models/model14.asp

Implication of IS/IT strategy Quadrant IS/IT strategy Star System to support a leading role Focus should be toward customer (know them, understand better of their requirement) Also focus on allowing more growth , such as handling greater order volumes or variety product mixture or types of customer services. To aim for business innovation – satisfy market requirement and stand out among competitors Cash Cow System used to ‘milk’ the business To defend current strong position in market share and keep expenditure low or at least match to that of the competitors System focus is on the control of business activities and relationships, not on innovation

Implication of IS/IT strategy Quadrant IS/IT strategy Wild cat Focus on product and process development Be used to indentify potential customers, ensure affective information exchanges to enable exact specification of service and product requirement Dog Unlikely to attract much corporate investment funding – dying in market Divestment may be the aim Undesirable to consider integration of IS/IT strategy.

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