Strategic Information

Systems Planning

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 Dilemma of IS Planning
• Most organization's survival now depends on IT
– Planning of its effective use is a matter of
organizational life and death
• IT is changing so fast
– Is it useless to do IS planning?

• A variety of approaches, tools and mechanisms

available for IS planning
– No best way to do it.

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 Mindset for Planning
• Traditional view
– Determining what decisions to make in the future
• A better view
– Developing a view of the future that guides
decision making today

• Subtle difference: strategy making instead of

planning
– Strategy: stating the direction in which a firm
wants to go and how it intends to get there
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 Types of Planning
Duration Type Issues Primary
/Focus Responsibility
3-5 Strategic Vision, Senior
years architecture, management, CIO
business
goals
1-2 Tactical Resource Middle
years allocation, management, IS
project line partners,
selection Steering
committees
6 months Operational Project IS professionals,
-1 year management, Line managers,
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meeting time partners
Why Planning Is So Difficult? (1)
• Business goals and systems plans need to align
– Strategic systems plans need to align with business
goals and support those objectives
– Will be difficult if CIO is not part of senior
management
– Sensitivity (PROBLEMS), trend
• Technologies are rapidly changing
– Continuous planning based on monitoring and
experimenting new technologies
– Advanced technology groups

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Why Planning Is So Difficult? (2)
• 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

• Infrastructure development is difficult to fund

– Often done under the auspices of a large application
project
– Challenge: develop improved applications and
improve infrastructure over time
• Mainframe C/S ERP Web application Web Services

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Why Planning Is So Difficult? (3)
• Responsibility Needs to be Joint
– Systems planning has become business planning, not
just a technology issue
– It is better done by a full partnership of C-level officers

• Other planning issues

– Top-down Vs. bottom-up
• Radical change Vs. continuous
– Planning culture in which the systems planning must
fit
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 Traditional Strategy Making
• Three parts:
– Business executives created a strategic
business plan - where the business wanted
to go
– IS executives created an IS strategic plan -
how IT would support the business plan
– IT implementation plan created - describe
exactly how the IS strategic plan would be
implemented

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Traditional Strategy Making (2)
• Assumptions
– The future can be predicted
– Time is available to do these 3 parts
– IS supports and follows the business
– Top management knows best (broadest view
of firm)
– Company - like an ‘Army’

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 A World of Rapid Change (1)

• Today, due to the Internet and other

technological advances, these
assumptions no longer hold true:
– The future cannot be predicted
• Who predicted Internet, Amazon, eBay etc.?
– Time is not available for the sequence
• Never enough time in Internet Age
• IT implementation planning needs to go ahead of
business strategizing

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A World of Rapid Change (2)

– IS does not JUST support the business

anymore
– Top management may not know best
• Inside-out Vs. outside-in approach
– Customizing best performed by those
closest to customers;
– Top mgmt distant from front lines that
interact with customers, partners, and
suppliers.

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A World of Rapid Change (3)
– An organization is not like an army
• Industrial era metaphor no longer
always applies

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Today's Sense-and-Response Approach

• If yesterday’s assumptions no longer hold

true, what is taking the ‘old’ approach’s
place?
• Formulate strategy closest to the action:
– Close contact with the market
• Employees who interact daily with customers,
suppliers and partners (organizational edges)
– Employees who are closest to the future
should become prime strategists.
• In the Internet Age, this means younger employees
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 Today's Sense-and-Response
Approach (2)
• Let strategies unfold rather than plan
them:
– A sense-and-respond approach when
predictions are risky
• Sense a new opportunity and immediately
respond by testing it
• Myriad of small experiments

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 Old-era and New-era Strategy
Comparison

• Old-era strategy:
– One big choice, long commitment

• New-era strategy:
– Many small choices, short commitments
• Guide Strategy Making with Strategy Envelope

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 Case Example: Microsoft
• Abandoned proprietary network despite big
investment when it did not capture enough
customers
• Moved on to buying Internet companies as well
as aligning with Sun to promote Java
• Over time, they moved into a variety of
technologies:
– Web, Cable news, Digital movies, Cable modems,
Handheld OS, Video server, Music, Xbox, .Net,
Search engines...
• Not all strategies came from top management
– e.g. first server came from a rebel's unofficial project
• Getting its fingers into every pie that might
become important 16
 Seven Planning Techniques
• Stages of Growth
• Critical Success Factors
• Competitive Forces Model
• Value Chain Analysis
• E-business Value Matrix
• Linkage Analysis Planning
• Scenario Planning

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 Stages of Growth (1)
• Richard Nolan observed four stages in the
introduction and assimilations of a new
technology
– Early Successes
• Increased interest and experimentation
– Contagion
• Interest grows rapidly; growth is uncontrolled; learning
period for the field
– Control
• Efforts begun toward cost reduction and standardization
– Integration
• Dominant design mastered; setting the stage for newer
technology
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 Stages of Growth (3)

• The importance of the theory is

understanding where a technology or
company resides on the organizational
learning curve
– e.g. Web Service is currently in Stage 2, too
much control at the learning and experimentation
stage can kill off new uses of technology

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 Critical Success Factors
•Developing a method for defining
individual executive information needs.
•Has become a popular planning approach
and used to help companies identify ISs
they need.
•For each executive, CSFs are the few key
areas of the job where things must go right
for the org to flourish
•Usually fewer than 10 of these fctors
 Competitive Forces Model (1)
• Michael Porter's Five Forces Model
– A model that determines the relative
attractiveness (competition) of an industry.
– The five forces:
• Bargaining power of customers and buyers
• Bargaining power of suppliers
• Threat of substitute products or services
• Threat of new entrants
• The intensity of rivalry among competitors

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 Competitive Forces Model (3)

• Five forces
– Bargaining power of customers and buyers
• High when buyers have many choices of whom to
buy from, and low when the choices are few.
– Bargaining power of suppliers
• High when buyers have few choices of whom to
buy from, and low when there are many choices.

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 Competitive Forces Model (4)

– Threat of substitute products or services

• Low if there are very few alternatives to replace the
product or service.
• Switching costs
– Costs that can make customers reluctant to switch to
another product or service.
– Threat of new entrants
• High when it is easy for competitors to enter the
market
– The intensity of rivalry among competitors
• High when the industry is less attractive.
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 Competitive Forces Model (5)
• Three strategies for dealing with these
competitive forces:
– Differentiate product and services - make
them “better” in the eyes of the consumer
• Probably the most popular of the 3 strategies
– Be the lowest-cost producer - not just a low-
cost producer
– Find a niche - e.g.: geographical market

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Five Forces Analysis of the Internet

• The Internet tends to dampen the profitability

of industries
– Increases the bargaining power of buyers
– Decreases barriers to entry
– Increases the bargaining power of suppliers
– Increases the threat of substitute products and
services
– Intensifies rivalry among competitors

• Success depends on offering distinct value

– Firms should focus on their strategic position in an
industry and how they will maintain profitability
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Value Chain Analysis (1)
• A value chain for a product or service consists of
major activities that add value during its
creation, dev, sale and after-sale service.
• Five primary activities that form the sequence of
the value chain:
– Inbound logistics: receiving and handling inputs
– Operations: converting inputs to the product/service
– Outbound logistics: collect, store, and distribute the
product/service to buyers
– Marketing and sales: the means/incentives for buyers
to buy the product/service
– Service: enhancements/maintenance of the value of
the product/service
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 Value Chain Analysis (2)

• Four supporting activities that

underlie the entire value chain:
– Organizational infrastructure
– Human resources management
– Technology development
– Procurement

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 Linkage Analysis Planning

– 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
– 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

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Linkage Analysis Planning (2)
– Examines the links orgs have with one
another with the goal of creating a strategy for
utilizing electronic channels.
– Three steps:
• Define power relationships among the various
players and stakeholders.
• Map out your extended enterprise to include
suppliers, buyers, and strategic partners
– The enterprise’s success depends on the relationships
among everyone involved

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Linkage Analysis Planning (3)

• Plan your electronic channels to

deliver the information component of
products and services

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 Scenario Planning
• Long-term planning has traditionally
extrapolated from the past and has not factored
in low-probability events that could significantly
alter trends
– Straight-line projections have provided little help!
• Four steps in Scenario Planning:
– Define a decision problem and time frame to bound
the analysis
– Identify the major known trends that will affect the
decision problem
– Identify just a few driving uncertainties
– Construct the scenarios

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