TMS6104

INFORMATION TECHNOLOGY
STRATEGY AND GOVERNANCE

Frameworks for Integrating IS Strategies with

Business Strategies
Contents

Reasons for Top-Down Aligning A framework for Information and

Planning IS Strategies and IS/IT strategy Systems to meet
Framework Business Strategies formulation Business Objectives
Reasons for Planning Framework

To introduce the required analysis and planning

disciplines, tools and technique, to establish good
relationships, and to identify roles and responsibilities
for developing and maintaining the strategy.
As quickly as possible, the IS/IT strategy process
needs to become an integral part of the
development of business strategy and its subsequent
implementation.
Achieving alignment with the business
strategy is established through a Top-Down Aligning
combination of analytical and evaluation IS Strategies and
methods, although it should be remembered Business Strategies
that relevant, creative ideas can arise at any
time during the analysis.

The objective is to take the existing business

strategy, not to change it but to understand
the implications in terms of current and future
IS/IT requirements.
Understanding the current situation

Two inputs relate to the business perspectives – external and

internal

The perspectives on these two elements should be identified

and analysed, so that the demands they place on IS can be
derived and ways of exploiting opportunities or countering
the threats they contain can be determined
 External
Business
Environment
‘Where to compete’

It is essential to understand and analyse the

economic and competitive environment, so ways
in which IS/IT can impact the business and its
industry and contribute to the shaping of the
business strategy can be identified and explored.
 Internal
‘What assets do we have’ Business
Environment

The elements of the internal environment that need to

be identified, analysed and understood, are:
The business strategy, both the The organizational environment,
Existing business processes,
objectives and the intended covering its structure, assets and
activities, systems and the main
means of achieving them, skills, and the less tangible factors
information entities (eg: customer,
including ongoing and planned such as knowledge,
stock item, store, account) and
projects and change competences, values, style,
how they interrelate.
programmes; culture and relationships.
Interpreting Business Strategy
◦ In analysing the current business
strategy, the main requirements are to:
◦ Define IS needs arising directly from
the implementation of the current
strategy and identify any new,
emergent elements of the strategy
that require IS/IT support
◦ Interpret and analyse the strategy
from both business and IT viewpoints
and compile and confirm any relating
IS requirements. This is best done by a
group with both business and IS/IT
disciplines and skills represented.
The mission, vision, objectives and key performance indicators
(KPIs) set the targets for defining or assessing current initiatives.
Information
needs for IS
Strategic initiatives are increasingly likely to have and IS/IT Strategy
content that is essential to achieving the desired results, These
usually represent medium-term requirements that may be
application specific or point to necessary improvements in IT
services and the infrastructure.

The business area plans usually have short-term IS/IT

requirements, often carried forward from earlier cycles, but
perhaps with different priorities, based on the current
objectives.

The CSFs, often used in conjunction with KPIs and ‘Balanced

Scorecard’ can lead to two different types of IS/IT
requirements: those that will enable success and those that
monitor progress (i.e, information provided via dashboards,
displays and reports).
 A framework for
Using arrange of tools and techniques to satisfy
efficiency, effectiveness and competitiveness IS/IT strategy
objectives. formulation

Some ‘formal’ techniques are needed to ensure

that all important elements of the business are
explored in a structured manner and the business
drivers are used to achieve effective prioritization.

Informal techniques are also included to

encourage creative thinking and capture
innovative ideas to leverage IS/IT can occur at
any time.
The IS/IT or
digital strategy
model
◦ a. External business environment - The economic, industrial,
social, regulatory and competitive climate in which the
organisation operates
◦ b. Internal business environment - Current business strategy,
products and services, objectives, resources, process and the
culture and values of the business. 1. Inputs
◦ c. External IS/IT environment - Digital technology trends and
economics plus potential application opportunities from new or
emergent technologies and the use or made of IS/It by others,
especially customers, competitors and suppliers, but also
companies in other industries.
◦ d. Internal IS/IT environment - The current IS/IT role and
perspective in the business, its maturity, business coverage and
contribution, skills, resources and the technological infrastructure.
◦ The current application portfolio, including those under
development, or planned but not yet under way, is also part of
the internal IS/IT environment.
◦ a. Business IS strategy - How each unit or function will deploy IT in
achieving its business objectives.
◦ b. IT strategy - Policies and strategies for management of
technology and specialist resources
◦ c. IS/IT management strategy - The common elements of the
strategy that apply throughout the organisation, ensuring
2. Outputs
consistent policies where needed.
◦ d. Application portfolios - Alongside each business objectives are
application portfolios to be developed for the business unit. The
portfolios may include how IT will be used at some future date to
help the units achieve their objectives

◦ Whatever the structure and format an organization may choose

to document the outputs, the objective is to ensure that users,
management and IS/IT professionals all understand the key
elements of the strategy and each appreciates those parts of
the strategy they have to deliver.
Key Characteristics of the chosen
approach
A. Be flexible and modular and each process stage should build an outputs from
previous stages or techniques used;
B. Have the emphasis on the expected deliverables and how the results can best
communicated to the different audiences, eg: senior executive team, business
managers, application users and IS/IT specialist and technology partners and supply.
C. Clear checkpoints for interim review and progress
D. Emphasize the importance of engaging all types of people in the process in ways that
will enable them to contribute their time, knowledge and experience.
E. Use simple diagramming and documentation tools – such as power point or Visio,
spreadsheets and word processing.
The Strategic Planning Process
◦ The process for creating the strategy involves the following steps:
• Initiate the process – gather the team, set the scope, put the governance structures in
place (approval mechanisms etc)
• Understand the current situation and interpret the business need – analysis of the inputs
described above, including making assessments of the existing IS and business
capability.
• Define/Update information and systems architectures – Uses the results of the analysis
of processes and information needs in order to build a proposed information and
systems architecture to enable and support the current and future business operating
model.
The Strategic Planning Process (cont..)
• Determine the business IS Strategy – business IS strategy how the business will deploy
information, systems and technologies in achieving its objectives.
• Formulate the IT Strategy – how technical resources and technologies will be acquired,
managed, and developed to deliver applications and services required by the
business IS strategy
• Prepare migration plans and business cases – now the fun starts. Actually this step
seems like it would really be multiple initiatives – the commencement of the “real
work”.
Framework for
IS/IT Strategy
Formulation and
Planning Process
Information and Systems to meet
Business Objectives
Use of Balanced Scorecards (BSC) and Critical Success Factors (CSF) analysis to
develop the link between data, information and business results.

The Balanced Scorecard, identifies the information required to measure performance

(often called Key Performance Indicators (KPIs) against the business objectives.

CSF analysis identifies what has to be done, or changed in order to achieve those
objectives, including new or better information.

In combination, they provide a way of getting agreement to the priority of the IS/IT
investments required to achieve the business objectives, for the next 6-12 months.
 DIKAR model
◦ The link between data,
information and business results.
◦ Left to right 
◦ Technology view
◦ Represents the traditional IT
perspectives where the focus is
on data processing and the
provision of information to the
business
◦ Right to left 
◦ Business view
◦ Focus on business results and the
actions and knowledge required
to achieve those results.
Popular framework not only for managing the
Balanced
performance or organizations but as a tool for the
development of strategy itself. Scorecard
(BSC)

It is based on the premise that financial measures only

report the results of past decisions and that, if
performance measurement is to have any meaningful
impact, a more comprehensive and balanced set of
objectives and measures is required.

The BSC promotes the examination of performance

from four interrelated perspectives, each seeking to
address specific questions.
Information and
the Balanced
Scorecard
Financial – How do we look to our shareholders
and those with a financial interest in the
organization?

4 perspectives
Customers – How do our customers perceive us
in term of products, services, experience,
relationship and value-added?

Internal business operations – What do we have

to excel at if we are to meet the expectations
of our employees and trading partners?

Learning and growth – How will we continue to

improve and create future value for our
stakeholders?
◦ Each objectives can be established, initiatives to
achieve objectives identified and relevant measures –
the Key Performance Indicators (KPIs) – assigned, 4 perspectives
leading to the information needed to measure
performance against the objectives. (cont..)

◦ The four perspectives are Interrelated

◦ Top down – expected financial performance driving
decisions about products, services and resources

◦ Bottom up – learning and innovation to improve the

customer offers and also the business processes
leading to creation of more value or reducing
business costs.
CSF – the limited number of areas in which results,
if they are satisfactory, will ensure successful Critical
competitive performance for the organization.
Success Factor
(CSF) Analysis
Few key areas where things must go right or do
wells for the business to flourish.

The activity should receive constant and careful

attention from management.

The current level of performance in each area

should be continually measured and the results
made widely available.
Purpose to interpret the business objective in terms of
actions or initiatives required to achieve them and
resulting information and new or improved applications
Critical Success
needed.
Factor (CSF)
Analysis (cont..)
For assessing the strengths and weaknesses of existing
applications and processes, in the context of future
business plans.

The agreement of the business unit managers to these

CSFs is important in obtaining consensus on the major IS/IT
investments required.

Also tend to be a structured, cascading relationship in a

large organization between objectives and CSFs (next
Figure)
Objectives
and CSFs
Critical Success Factor (CSF)
◦ It can be used at individual executive
level to determine which of those
activities that he or she performs are the
most important for achievement of
success against a particular objective
◦ Can assist in prioritizing activities and
information requirements, both at
individual manager and at business unit
level.
◦ In both cases, the CSFs technique helps
to focus attention on the key issues.
Critical Success
Factors – Basic
Processes
• 5 – 8 is reasonable and
manageable number
for each objective.
• Too many –
unachievable
• Too few – not ambitious
enough
• Should be consolidated
across objectives, since
CSFs may well recur.
Critical Success Factor (CSF) Analysis

Ranking the importance of objectives and/or the number sharing

the same CSFs will give a relative priority to the achievement of CSFs.

By implication, if each CSF is achieved, the probability of achieving

the related objectives is increased. In reverse failure to address a
CSFs successfully could prevent achievement of several objectives.
Limitation
Need to be used with a degree of caution:
◦ To be of value, a CSFs should be easily and directly related back to the objectives of
the business unit.
◦ The nature of CSFs and KPIs reflects a particular executive’s management style. The
chief executive of one airline judged performance by load factors. His predecessor
judged performance on the number of letters of complaint. Both are valid, but reflect
different perspectives.
◦ When used ineptly, the approach can cause frustration, even despondency, and may
turn management against the strategy process. The most common cause of problems
is that ‘critical’ in not differentiated from ‘important’, resulting in long lists of factors that
effectively describe everything the organization does.
Combining Balanced Scorecard with
CSF Analysis
◦ A comprehensive set of IS requirements may therefore, be obtained by combining the
output of the balanced scorecard and the critical success factors. The balanced
scorecard links measures to business objectives while the critical success factors
analysis identifies what is critical to achieving the intended results.

◦ The combination of these techniques makes it possible to achieve a thorough

assessment of prioritized IS opportunities. Table 1 shows an example of how the
balanced scorecard analysis approach may be used to derive improvements to
information system operational activities and to identify both internal and external
information requirements for the activities.
Example

Manufacturing company providing a product and parts service primarily to SMEs. It produces a
wide range of electrical products that are assembled from mainly imported components.

Orders tend to be for unique products configured to customer specification. As far as possible, the
company attempts to meet all customer orders direct from component stock. However, this has
implications for stock holding costs, both of components and finished products. The time between
order placement and fulfilment can be severely impacted by the availability of component parts.

CSF analysis used to identify the actions necessary to enable achievement of each objectives.
Table 1: Application of the Balanced
Scorecard Analysis
Perspective Objectives Measures
Financial To reduce costs I.Stock turn
II.Write offs
III.Stock holding costs
To increase product profitability I.Product Margins
II.Gross profit
Customer Increase responsiveness I.Order to delivery lead time
II.Enquiry response time

To be more price competitive I.Benchmarks versus competitor prices

II.Customer value / price perception

Internal To provide fast track services to best customers I.Reduce lead time to specific
customers
II.Customer satisfaction
To remove interface costs/ delays with agents I.Cost of rework
II.Number of referrals

Innovation To reduce product lead times by 30% I.Design to sale time

II.No slack in elapsed time

To find new channels to reach SME customers I.New channel exists

II.Number of options reviewed / tested
Using the Balanced Scorecard and Critical
Success Factors Analysis for strategic reasons
Outputs of the Balanced Scorecard and the
CSF Analysis
◦ A Critical Success Factor is not a Key Performance
Indicator (KPI).
◦ Critical success factors are elements that are vital for a CSF & KPI
strategy to be successful.
◦ KPI’s are measures that quantify objectives and enable
the measurement of strategic performance.
For example:
• KPI = number of new customers/ response time
• CSF = installation of a call centre for providing
quotations
Examples of Performance Measures Used
in Balanced Scorecard Perspectives