1. 1 FB5003–7 Strategic IS Planning “We don’t do IT projects at JetBlue. We do Business Projects” – CIO Joseph Eng.

2. 2 Story One The CEO of an insurance company wonders why a key competitor seems so much more innovative and responsive to customer needs. “How do they manage to initiate, customize, and support such a variety of insurance products so quickly?” she asks. “We could not cope with the complex information processing that must be required! What are they doing differently with their people and technology? Our systems personnel are always bogged down with last year’s priorities…” The CEO of an insurance company wonders why a key competitor seems so much more innovative and responsive to customer needs. “How do they manage to initiate, customize, and support such a variety of insurance products so quickly?” she asks. “We could not cope with the complex information processing that must be required! What are they doing differently with their people and technology? Our systems personnel are always bogged down with last year’s priorities…” Chan, MISQE, 1, 2, 97-112.

3. 3 Analysis The competitor: The competitor: has developed core competence in the application of IS to business needs. has developed core competence in the application of IS to business needs. has developed the ability to respond to business conditions effectively (business intelligence + KM) has developed the ability to respond to business conditions effectively (business intelligence + KM) has employees who has employees who can apply relevant knowledge efficiently & effectively. can apply relevant knowledge efficiently & effectively. are focused on today’s tasks are focused on today’s tasks has identified information as a critical resource has identified information as a critical resource ensures that the IS fits and supports the business ensures that the IS fits and supports the business has, in consequence, a better Business-IS alignment has, in consequence, a better Business-IS alignment

4. 4 Story Two A CIO wonders when he will be accepted at top management meetings. Although he has won a long, hard battle to be present at these meetings, to understand new business directions better, he senses that his presence is merely tolerated. His ideas have little clout. His colleagues acknowledge that IT is becoming increasingly important to business operations, but their thinking and behavior stifle innovation. A CIO wonders when he will be accepted at top management meetings. Although he has won a long, hard battle to be present at these meetings, to understand new business directions better, he senses that his presence is merely tolerated. His ideas have little clout. His colleagues acknowledge that IT is becoming increasingly important to business operations, but their thinking and behavior stifle innovation. Chan, MISQE, 2, 1, 97-112.

5. 5 Analysis The organisation itself barely recognises the importance of information The organisation itself barely recognises the importance of information The CIO is marginalised The CIO is marginalised perhaps useful as someone important for operational support, but not strategic planning. perhaps useful as someone important for operational support, but not strategic planning. The organisation is probably failing to align its overall business direction with its IS policies, skills, capabilities The organisation is probably failing to align its overall business direction with its IS policies, skills, capabilities

6. 6 Story Three The CEO says to his board “we need a new kind of CIO; someone who understands our whole business, someone whose career is *not* over [laughter], someone who can help drive this company in these turbulent times. Do people like this exist?”. The CEO says to his board “we need a new kind of CIO; someone who understands our whole business, someone whose career is *not* over [laughter], someone who can help drive this company in these turbulent times. Do people like this exist?”.

7. 7 Analysis What do you think? What do you think? Do these people exist? Do these people exist? What kind of background would a person like this have? What kind of background would a person like this have? What changes have occurred in the firm – changes that inspire a CEO to talk like this? What changes have occurred in the firm – changes that inspire a CEO to talk like this?

8. 8 Questions to Ask about Organisational IS Does IS drive your organisation’s competitiveness? Does IS drive your organisation’s competitiveness? What role does IS play in your corporate strategy? What role does IS play in your corporate strategy? Mission critical, integrated? Mission critical, integrated? Peripheral, supporting? Peripheral, supporting? Now? Five years later? Now? Five years later? Are significant resources devoted to IS, or just a few $$ here and there? Are significant resources devoted to IS, or just a few $$ here and there? Are IS people deeply engaged in many aspects of your business? Are IS people deeply engaged in many aspects of your business?

9. 9 IS and Strategic Positioning Consider the following companies. Consider the following companies. Is IS strategic, mission critical, supporting? Is IS strategic, mission critical, supporting? China Light & Power, HK Electric China Light & Power, HK Electric Cathay Pacific, MTR, OOCL Cathay Pacific, MTR, OOCL HSBC, HK Post Office HSBC, HK Post Office CityU, Sun Hung Kai Properties, PWC CityU, Sun Hung Kai Properties, PWC Low-tech SMEs Low-tech SMEs

10. 10 What about Risks? Risks are involved in different aspects of an IS/IT portfolio. Risks are involved in different aspects of an IS/IT portfolio. The level of the risk depends on the importance of the IS/IT to the organisation The level of the risk depends on the importance of the IS/IT to the organisation Risks apply to software & applications, hardware, networks, procedures, … and … people & culture. Risks apply to software & applications, hardware, networks, procedures, … and … people & culture. Each competence needs to be risk- assessed. Each competence needs to be risk- assessed.

11. 11 The Consequences of Poor Business-IS Alignment? Competencies are not developed, promoted or managed. Competencies are not developed, promoted or managed. Risks are poorly assessed (if at all). Risks are poorly assessed (if at all). Business executives cannot clearly articulate their IS needs and don’t really understand what IS is for. Business executives cannot clearly articulate their IS needs and don’t really understand what IS is for. IS people have limited business vision or knowledge. IS people have limited business vision or knowledge. IS investments are expensive and yield low returns. IS investments are expensive and yield low returns. “We have 25 different (unintegrated) CRM systems!” “We have 25 different (unintegrated) CRM systems!” First rate ideas from first rate people are not developed appropriately (or at all). First rate ideas from first rate people are not developed appropriately (or at all).

12. 12 Then What is (IS) Alignment? “the degree to which the IT mission, objectives and plans support and are supported by the business mission, objectives and plans” “the degree to which the IT mission, objectives and plans support and are supported by the business mission, objectives and plans” [Reich & Benbasat, MISQ, 24, 1, p.82] [Reich & Benbasat, MISQ, 24, 1, p.82] “fit” & “integration” among business strategy, IT strategy, business infrastructure, and IT infrastructure. “fit” & “integration” among business strategy, IT strategy, business infrastructure, and IT infrastructure. [Henderson & Venkatraman, IBMSJ, 32, 1, 4-16] [Henderson & Venkatraman, IBMSJ, 32, 1, 4-16] Effective IS management requires a both a balance and effective alignment across four domains. Effective IS management requires a both a balance and effective alignment across four domains.

13. 13 Henderson & Venkatraman’s Strategic Alignment Model Strategy Alignment Process (Linkage & Automation) IS/IT Infrastructure and Processes IS/IT Strategy IS/IT Transformation Organisational Infrastructure and Processes Business Products and Services IS/IT Products and Services Internal Business Transformation External Business Strategy Business Domain IT Domain Adapted from Henderson & Venkatraman, 1992

14. 14 Problems and Possibilities How can we align IS and the Business? How can we align IS and the Business? How can we balance the different activities? How can we balance the different activities? How can we remain agile to emerging opportunities? How can we remain agile to emerging opportunities? By not looking solely at profit, but also other legitimate stakeholders By not looking solely at profit, but also other legitimate stakeholders By looking at the business, and its operating context as a whole By looking at the business, and its operating context as a whole By changing internal processes By changing internal processes

15. 15 Beyond Alignment is Agility & Innovation Strategic IT investments that will change the enterprise Strategic IT investments that will change the enterprise Web 2.0 and Interactive platforms Web 2.0 and Interactive platforms A climate of continuous change is more powerful than globalisation A climate of continuous change is more powerful than globalisation Project requirements will change (long) before the project is complete. Project requirements will change (long) before the project is complete. Agile Enterprise Management is needed to thrive in an environment of continuous change Agile Enterprise Management is needed to thrive in an environment of continuous change

16. 16 What is Enterprise Agility? The ability to respond, innovatively to market challenges and opportunities fast enough so as to enhance or maintain enterprise value. The ability to respond, innovatively to market challenges and opportunities fast enough so as to enhance or maintain enterprise value. Is it better to focus on efficiency or value- added? Is it better to focus on efficiency or value- added? Rapid decision making is key to agility Rapid decision making is key to agility Agile management is a critical part of an agile enterprise. Agile management is a critical part of an agile enterprise.

17. 17 Agile Management Structures Have highly distributed power coupled with the authority (and willingness) to make decisions Have highly distributed power coupled with the authority (and willingness) to make decisions Information must be readily available Information must be readily available Clear rules and lines of responsibility Clear rules and lines of responsibility Instant access to EKRs and communities of experts Instant access to EKRs and communities of experts When change is the competitive driver, nothing is sacred When change is the competitive driver, nothing is sacred

18. 18 In an agile enterprise… Leadership must be collaborative Leadership must be collaborative Strategic planning and action are no longer solely the prerogative of the CxOs Strategic planning and action are no longer solely the prerogative of the CxOs Business unit managers and business developers must be involved too Business unit managers and business developers must be involved too Reliance on Web 2.0 social networking applications will become commonplace Reliance on Web 2.0 social networking applications will become commonplace The right IT must be in place (not just EIS) for BUMs and BDs, where IT complexity is managed and Web 2.0 is leveraged at the enterprise level. The right IT must be in place (not just EIS) for BUMs and BDs, where IT complexity is managed and Web 2.0 is leveraged at the enterprise level.

19. 19 IT Payoff? Historically, CIOs have struggled to make the case for IT ROI. Historically, CIOs have struggled to make the case for IT ROI. Where did all that $ in IT go? Where is the payoff? Where did all that $ in IT go? Where is the payoff? Agility could be a large part of the ROI Agility could be a large part of the ROI Time to market is increasingly IT dependent in an agile world. Time to market is increasingly IT dependent in an agile world. Web 2.0 should add value Web 2.0 should add value

20. Innovation at Haier Haier prides itself on innovation Haier prides itself on innovation Each employee, individually, is encouraged to be innovative, to be responsible for a personal contribution to the firm’s success Each employee, individually, is encouraged to be innovative, to be responsible for a personal contribution to the firm’s success This requires a very special organisational culture This requires a very special organisational culture That rewards individual initiative That rewards individual initiative 20

21. 21 Alignment and Accountability Several years ago, CIOs were expected NOT to understand the business Several years ago, CIOs were expected NOT to understand the business Today, if you don’t understand the business, you can’t be a CIO. Today, if you don’t understand the business, you can’t be a CIO. If a new system/product that the CIO delivers does not achieve the expected business value, it is the CIO’s fault (no one else’s). If a new system/product that the CIO delivers does not achieve the expected business value, it is the CIO’s fault (no one else’s). IT-Business Alignment also means IT-Business Accountability IT-Business Alignment also means IT-Business Accountability

22. 22 The Balanced Scorecard One way to achieve alignment, accountability, agility and innovation is to use the Balanced Scorecard (BSC) One way to achieve alignment, accountability, agility and innovation is to use the Balanced Scorecard (BSC) The BSC was designed, in recognition of the limitations of financial accounting measures: The BSC was designed, in recognition of the limitations of financial accounting measures: They provide a narrow and incomplete picture of business performance They provide a narrow and incomplete picture of business performance They hinder the creation of future business value They hinder the creation of future business value They are lagging not leading measures They are lagging not leading measures

23. 23 Financial Perspective Are we meeting the expectations of shareholders? Customer Perspective Are we delighting (or at least satisfying) our customers? Internal Process Perspective Are we doing the right things? Are we doing things right? Learning and Growth Perspective Are we prepared for the future? Adapted from Kaplan & Norton (1992) Perspectives & Relationships in the Balanced Scorecard

24. 24 Translating the Vision into Desired Outcomes VISION Intended Direction/Destination Balanced Scorecard What do we want to achieve? STRATEGY How will we achieve “success”? Strategic Initiatives What do we need to do? Personal Initiatives What do I need to do? DESIRED OUTCOMES Satisfied Shareholders Delighted Customers Effective & Efficient Processes Motivated & Prepared Workforce Martinsons, 2005

25. 25 From Desired Outcomes to Initiatives Motivated & Prepared Workforce Motivation Preparation What initiatives will improve employee motivation? better prepare employees to be innovative? but also what initiatives will create more efficient / effective processes? delight customers? Martinsons, 2005

26. 26 MTR Corporate Strategy Map Revenue Operating Cost Shareholder Value Satisfaction Index Market Share Patronage Safety Index Service Pledge Talent Leadership Manpower & Succession Strategic Alignment Partnering & Teamwork Employee Satisfaction Culture Organisational Capability Customer Processes Financial Learning & Growth © MTR, 2005

27. 27 Southwest Airlines Southwest uses a different balanced scorecard layout to achieve the same kind of planning objective. Southwest uses a different balanced scorecard layout to achieve the same kind of planning objective. Note the detailed objectives, measures, targets, and initiatives. Note the detailed objectives, measures, targets, and initiatives. This is a general BSC – not IS specific – but note that IS will play a critical support role, e.g. in data collection/analysis. This is a general BSC – not IS specific – but note that IS will play a critical support role, e.g. in data collection/analysis.

28. 28 Airline Scorecard Parameters Objectives Fast ground turnaround Objectives: What the strategy is trying to achieve Targets 30 Minutes 90% Targets: The level of performance or rate of improve- ment needed Cycle time optimization Initiatives: Key action programs required to achieve targets InitiativesMeasures On Ground Time On-Time Departure Measures: How success or failure is monitored Strategic Theme: Operating Efficiency Profits and RONA Financial Learning Ground crew alignment Lowest prices Fewer planes Customer Internal Fast ground turnaround Strategy Map On-time Service Attract & Retain More Customers Grow Revenues Wagner, 2003

29. 29 % Ground crew trained % Ground crew stockholders The Scorecard is a Programme for Action ObjectivesMeasures # Customers FAA On Time Arrival Rating Market Survey On Ground Time On-Time Departure Strategic Theme: Operating Efficiency Initiatives Cycle time optimization Ground crew training ESOP Customer loyalty program Quality management Targets 30% CAGR 20% CAGR 5% CAGR 12% growth Ranked #1 30 Minutes 90% yr. 1 70% yr. 3 90% yr. 5 100% Profitability Grow Revenues Fewer planes More Customers Flight is on-time Lowest prices Fast ground turnaround Ground crew alignment Strategic Theme: Operations Excellence Profits and RONA Financial Learning Ground crew alignment Fewer planes Customer Internal Fast ground turnaround Strategy Map Attract & Retain More Customers Grow Revenues Lowest prices On-time Service Wagner, 2003

30. 30 IS dept is an internal service supplier IS dept is an internal service supplier IS projects are carried out for end- users and the organisation IS projects are carried out for end- users and the organisation Four Perspectives for IS Four Perspectives for IS business value business value internal processes internal processes user orientation user orientation future readiness future readiness What About a Balanced IS Scorecard?

31. 31 Business Value Perspective Are we satisfying management? Are we adding value? User Perspective Are we delighting (or at least satisfying) our users? Internal Process Perspective Are we doing the right things? Are we doing things right? Future Readiness Perspective Are we ready for the emerging technologies & practices? The Balanced IS Scorecard

32. 32 Extension to the BSC Extension to the BSC innovation and learning (future readiness) innovation and learning (future readiness) the specifics of monitoring and control (key measures ) the specifics of monitoring and control (key measures ) Measuring and evaluating business value Measuring and evaluating business value short-term cost-benefit evaluation short-term cost-benefit evaluation cost control, selling to third parties cost control, selling to third parties long-term perspective (based on information economics) long-term perspective (based on information economics) business value of IT project, strategic options and risks business value of IT project, strategic options and risks business value of IT department/functional area business value of IT department/functional area Measuring and Evaluating IS (1)

33. 33 Measuring and evaluating user orientation Measuring and evaluating user orientation metrics for being the preferred supplier of applications and operations metrics for being the preferred supplier of applications and operations metrics for building and maintaining relationships with users metrics for building and maintaining relationships with users metrics for satisfying end-user needs metrics for satisfying end-user needs Measuring and Evaluating IS (2)

34. 34 Measuring and evaluating internal processes Measuring and evaluating internal processes The planning and prioritization of IS projects The planning and prioritization of IS projects The development of new IT applications The development of new IT applications The operation and maintenance of current IT applications The operation and maintenance of current IT applications Measuring and evaluating future readiness Measuring and evaluating future readiness Improving the skill set of IS specialists Improving the skill set of IS specialists Updating the applications portfolio Updating the applications portfolio Putting effort into researching emerging technologies Putting effort into researching emerging technologies Measuring and Evaluating IS (3)

35. 35 Develop awareness of the BSC/IS concept Develop awareness of the BSC/IS concept Collect and analyse data Collect and analyse data Define company-specific objectives & goals Define company-specific objectives & goals Develop preliminary BSC/IS Develop preliminary BSC/IS Solicit stakeholder comments and feedback Solicit stakeholder comments and feedback Reach a consensus on BSC/IS Reach a consensus on BSC/IS Communicate both BSC/IS and its underlying rationale to all stakeholders Communicate both BSC/IS and its underlying rationale to all stakeholders Gain employee buy-in and innovation Gain employee buy-in and innovation Building a Balanced IS Scorecard (1)

36. 36 Three principles for BSC Three principles for BSC Cause-and-effect Cause-and-effect Performance drivers Performance drivers Linkage to financial measures Linkage to financial measures Three criteria for BSC/IS metrics Three criteria for BSC/IS metrics quantifiable quantifiable easy to understand easy to understand cost-effective to measure cost-effective to measure One over-riding concern One over-riding concern Ensure that the BSC/IS is aligned with the corporate BSC Ensure that the BSC/IS is aligned with the corporate BSC Building a Balanced IS Scorecard (2)

37. Scorecard Details For each of the four perspectives in a scorecard there are four items to identify: The objective is what you want to achieve The initiative is the action to take to achieve the objective The measure is the thing that you are measuring so as to assess if you have achieved the objective – it must be quantitative or quantifiable The target is the precise amount of the measure at a certain point in time. 37

38. 38 PerspectivesObjectivesInitiativesMeasuresTargets Business Value Increase profit $ 10% CAGR User Delighted users Involve users in sys-tems design procedures User satisf- action index 95% satisfied by 2015; 99% by 2018 Internal Process ???? Future Readiness Skilled IT staff Focused training budget Prof & Acad Quals 100% with MSc by 2015; 75% with PhD by 2018 BSC for the IS Support Unit of a Global Shipping Firm

39. 39 Questions for Slide 38 1.Suggest suitable internal process objectives, measures, targets and initiatives. 1.Suggest suitable internal process objectives, measures, targets and initiatives. 2.Explain why the user perspective initiative may not result in the the intended objectives being achieved. 2.Explain why the user perspective initiative may not result in the the intended objectives being achieved. 3.How does the label “user perspective” constrain the work that the IS support unit does? 3.How does the label “user perspective” constrain the work that the IS support unit does? 4.Why is it so critical that the IS support unit establish relationships between initiatives and objectives in its BSC? 4.Why is it so critical that the IS support unit establish relationships between initiatives and objectives in its BSC? 5.How should this BSC/IS be aligned with the corporate BSC? 5.How should this BSC/IS be aligned with the corporate BSC?

40. 40 Errors to Avoid Errors to Avoid failure to include specific long-term objectives failure to include specific long-term objectives failure to relate key measures to performance drivers by means of cause-and-effect relationships failure to relate key measures to performance drivers by means of cause-and-effect relationships failure to communicate the contents of, and rationale for the BSC/IS failure to communicate the contents of, and rationale for the BSC/IS failure to integrate the BSC/IS with a corporate BSC failure to integrate the BSC/IS with a corporate BSC All employees should be encouraged to use the BSC to gain a holistic understanding of the organisation All employees should be encouraged to use the BSC to gain a holistic understanding of the organisation Lessons 1

41. 41 Lessons 2 Critical Success Factors Critical Success Factors Identify key cause-effect relationships, performance drivers and measures Identify key cause-effect relationships, performance drivers and measures This is very hard for non-financial/quantifiable measures This is very hard for non-financial/quantifiable measures Make measures simple and measurable Make measures simple and measurable Very hard to collect reliable data, but IS can help Very hard to collect reliable data, but IS can help Maintain intra-organisational communication Maintain intra-organisational communication Link BSC/IS to performance appraisal criteria for individual IS specialists Link BSC/IS to performance appraisal criteria for individual IS specialists Ensure staff awareness of the BSC and its value. Ensure staff awareness of the BSC and its value.

42. 42 Are the perspectives and measures necessary and sufficient? Are the perspectives and measures necessary and sufficient? How do cultural and institutional factors affect the BSC/IS? How do cultural and institutional factors affect the BSC/IS? Can we create BSCs at the level of the individual employee? Can we create BSCs at the level of the individual employee? What are the experiences of your companies? What are the experiences of your companies? What Else?

43. 43 And Now… Time for you to create a BSC for the IS function of a company with which you are familiar Time for you to create a BSC for the IS function of a company with which you are familiar Use the blank sheet available from the course web page – and when you are done, email it to me. Use the blank sheet available from the course web page – and when you are done, email it to me. Feel free to adapt the blank sheet to your own needs, design, etc. Feel free to adapt the blank sheet to your own needs, design, etc.

44. 44 References Reich, B. & Benbasat, I. (2000) Factors that influence the social dimention of alignment between business and information technology objectives, MIS Quarterly, 24, 1, 81-113. Reich, B. & Benbasat, I. (2000) Factors that influence the social dimention of alignment between business and information technology objectives, MIS Quarterly, 24, 1, 81-113. Henderson, J.C. & Venkatraman, N. (1993) Strategic Alignment: Leveraging Information Technology for Transforming Organizations, IBM Systems Journal, 32, 1, 4-16. Henderson, J.C. & Venkatraman, N. (1993) Strategic Alignment: Leveraging Information Technology for Transforming Organizations, IBM Systems Journal, 32, 1, 4-16. Chan, Y.E. (2002) Why Haven ’ t We Mastered Alignment? The Importance of the Information Organizational Structure, MIS Quarterly Executive, 2, 1, 97-112. Chan, Y.E. (2002) Why Haven ’ t We Mastered Alignment? The Importance of the Information Organizational Structure, MIS Quarterly Executive, 2, 1, 97-112. Martinsons, M.G., Davison, R.M. and Tse, D. (1999) A Foundation for the Strategic Management of Information Systems, Decision Support Systems, 25, 71-88. Martinsons, M.G., Davison, R.M. and Tse, D. (1999) A Foundation for the Strategic Management of Information Systems, Decision Support Systems, 25, 71-88. Kaplan, R. and Norton, D. (1992) The balanced scorecard ‑ measures that drive performance, Harvard Business Review, 70, 1, 71 ‑ 79. Kaplan, R. and Norton, D. (1992) The balanced scorecard ‑ measures that drive performance, Harvard Business Review, 70, 1, 71 ‑ 79. Kaplan, R. and Norton, D. (1993) Putting the Balanced Scorecard to Work, Harvard Business Review, 71, 5, 134 ‑ 142. Kaplan, R. and Norton, D. (1993) Putting the Balanced Scorecard to Work, Harvard Business Review, 71, 5, 134 ‑ 142. Kaplan, R. and Norton, D. (1996) Using the Balanced Scorecard as a Strategic Management System, Harvard Business Review, 74, 1, 75 ‑ 85. Kaplan, R. and Norton, D. (1996) Using the Balanced Scorecard as a Strategic Management System, Harvard Business Review, 74, 1, 75 ‑ 85. Kaplan, R. and Norton, D. (1996) The Balanced Scorecard: Translating Strategy into Action, Boston: Harvard Business School Press. Kaplan, R. and Norton, D. (1996) The Balanced Scorecard: Translating Strategy into Action, Boston: Harvard Business School Press. McFarlan, F.W., McKenney, J.L., Pyburn, P. (1983) Information Archipelago: Plotting a Course, Harvard Business Review, 61, 1, 145-156. McFarlan, F.W., McKenney, J.L., Pyburn, P. (1983) Information Archipelago: Plotting a Course, Harvard Business Review, 61, 1, 145-156. Davis, G.B. and Davis, M. (1984) Management Information Systems, McGraw Hill. Davis, G.B. and Davis, M. (1984) Management Information Systems, McGraw Hill.