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9 Developing Business/IT Strategies

I. LECTURE OVERVIEW

Foundation Concepts: Developing Business/IT Strategies, emphasizes the importance of the planning process indeveloping IT/business strategies, and the implementation challenges that arise when introducing new e-business

strategies and applications into an organization.

Organizational Planning Managing information technology requires planning for changes in business goals,processes, structures, and technologies. Planning is a vital organizational process that uses methods like thescenario approach and planning for competitive advantage to evaluate an organizations internal and externalenvironments; forecast new developments; establish an organizations vision, mission, goals, and objectives;develop strategies, tactics, and policies to implement its goals; and articulate plans for the organization to act upon.A good planning process helps organizations learn about themselves and promotes organizational change andrenewal.

e-business Planning Strategic e-business planning involves aligning investment in information technology witha companys e-business vision and strategic goals such as reengineering business processes or gaining competitiveadvantages. It results in a strategic plan that outlines a companys e-business/IT strategies and technologyarchitecture. The technology architecture is a conceptual blueprint that specifies a companys technology platform,data resources, applications architecture, and IT organization.

Implementing e-business Change Implementation activities include managing the introduction andimplementation of changes in business processes, organizational structures, job assignments, and workrelationships resulting from e-business strategies and applications such as e-commerce initiatives, reengineering

projects, supply chain alliances, and the introduction of new technologies. Companies use change managementtactics such as user involvement in e-business planning and development to reduce end user resistance andmaximize acceptance of e-business changes by all stakeholders.

II. LEARNING OBJECTIVES

Learning Objective

Discuss the role of planning in the business use of information technology, using the scenario approach andplanning for competitive advantage as examples.

Discuss the role of planning and business models in the development of e-business strategies, architectures,

and applications.

Identify several change management solutions for end user resistance to the implementation of new e-business

strategies and applications.

III. LECTURE NOTES

Section I: Planning Fundamentals

INTRODUCTION

e-business technology has created a major shift in the way companies do business. Companies must create andimplement an action plan that allows them to make the transition from the old business design to a new e-businessdesign. e-business planning is the

Analyzing The Rowe Cos. & Merrill Lynch:We can learn a lot about the business value of various business/IT planning methodologies from this case. Take afew minutes to read it, and we will discuss it (See Rowe Cos. & Merrill Lynch in Section IX).

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ORGANIZATIONAL PLANNING [Figure 9.2]

The components of an organizational planningprocess consist of:

Team building, modelling, and consensus

Evaluating what an organization has accomplished and the resources they have acquired

Analyzing their business, economic, political, and societal environment

Anticipating and evaluating the impact of future developments

Building a shared vision and deciding on what goals they want to achieve

Deciding what actions to take to achieve their goals.

Plan the results of the organizational planning process is referred to as a plan. This plan formally articulates theactions that are felt necessary in order to achieve desired goals. Thus, a plan is an action statement. Plans lead toactions, actions produce results, and part of planning is learning from results.

Implementation the planning process is followed by implementation, which is monitored by control measures,which provide feedback for planning.

Strategic Planning- deals with the development of an organizations mission, goals, strategies, and policies.Corporations may begin the process by developing a shared vision using a variety of techniques, including team

building, scenario modelling, and consensus creating exercises.

Strategic Visioning team planning sessions frequently include answering strategic visioning questions.

Tactical planning involves the setting of objectives and the development of procedures, rules, schedules, andbudgets.

Operational planning is planning done on a short-term basis to implement and control day-to-day operations.Typical examples are project planning and production scheduling.

THE SCENARIO APPROACH: [Figure 9.4]

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Thescenario approach to planning has gained in popularity as a less formal, but more realistic, strategic planningmethodology for use by business professionals.

In the scenario approach, teams of managers and other planners participate in simulation exercises where they cansafely create, experience, and evaluate a variety of scenarios of what might be happening, to what might happen inthe real world.

PLANNING FOR COMPETITIVE ADVANTAGE: [Figure 9.5]

Planning for competitive advantage is especially important in todays competitive e-business arena and complexinformation technology environment. So strategic e-business planning involves an evaluation of the potential

benefits and risks a company faces when using e-business strategies and technologies for competitive advantage.

Strategic planning models that can be used to generate ideas for the strategic use of information technologies tosupport e-business initiatives include:

Competitive forces model competitors, customers, suppliers, new entrants, and substitutes.

Competitive strategies model cost, leadership, differentiation, growth, innovation, and alliances.

Value chain model chain or network of basic activities that add value to s product or services support

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Prof. Anatoly Sachenkoprocesses and primary business processes.

Strategic opportunities matrix evaluate the strategic potential of proposed e-business opportunities, as

measured by their risk/payoff probabilities.

SWOT Analysis:Strengths, weaknesses, opportunities, and threats SWOT is used to evaluate the impact that each possiblestrategic opportunity can have on a company and its use of information technology.

Strengths core competencies and resources in which it is one of the market or industry leaders.

Weaknesses areas of substandard business performance compared to others in the industry or marketsegments.

Opportunities potential for new business markets or innovative breakthroughs that might greatly expand

present markets.

Threats potential for business and market losses posed by the actions of competitors and other competitive

forces, changes in government policies, disruptive new technologies, and so on.

BUSINESS MODELS AND PLANNING

A business model is a conceptual framework that expresses the underlying economic logic and system that proveshow a business can deliver value to customers at an appropriate cost and make money. A business model answersvital questions about the fundamental components of a business, such as:

Who are our customers? What do our customers value?

How much will it cost to deliver that value to our customer?

How do we make money in this business?

A business model specifies:

What value to offer customers, and which customers to provide this value to using which products and services

at what prices.

How the business will organize and operate to have the capability to provide this value and sustain any

advantage from providing this value to its customers.

A business model is a valuable planning tool because it focuses attention on how all the essential components of abusiness fit into a complete system. Done properly, it forces entrepreneurs and managers to think rigorously and

systematically about the value and viability of the business initiatives they are planning. Then the strategicplanning process can be used to develop unique business strategies that capitalize on a firms business model tohelp it gain competitive advantage in its industry and the markets it wants to dominate.

e-BUSINESS PLANNING: [Figure 9.8]

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Processes, focuses on discovering innovative approaches to satisfying a companys customer value and businessvalue goals is referred to as e-business planning. This planning process leads to development of strategies and

business models for new e-business and e-commerce platforms, processes, products, and services. Then a companycan develop IT strategies and an IT architecture that supports building and implementing their newly planned e-

business applications.

Both the CEO and the chief information officer (CIO) of a company must manage the development ofcomplementary e-business and IT strategies to meet its customers value and business value vision. This co-adaptation process is necessary because information technologies are a fast changing, but vital component in all e-

business and e-commerce activities. The e-business planning process has three major components:

Strategy Development Developing e-business and e-commerce strategies that support a companys e-

business vision, use information technology to create innovative e-business systems that focus on customerand business value.

Resource Management Developing strategic plans for managing or outsourcing a companys IT resources,

including IS personnel, hardware, and software, data, and network resources.

Technology Architecture Making strategic IT choices that reflect an information technology architecture

designed to support a companys e-business and e-commerce initiatives.

Information Technology ArchitectureNote to students that theIT architecture that is created by the strategic e-business planning process is a conceptualdesign, or blueprint, that includes the following major components:

Technology Platform: - The Internet, intranets, extranets, and other networks, computer systems, system

software, and integrated enterprise application software provide a computing and communicationsinfrastructure, or platform that supports the strategic use of information technology for e-business and e-commerce.

Data Resources: Many types of operational and specialized databases, including data warehouses and

Internet/intranet databases store and provide data and information for business processes and decision support.

Applications Portfolio: Business applications of information technology are designed as an integrated

portfolio of information systems that support strategic e-business initiatives, as well as cross-functionalbusiness processes.

IT Organization: The organizational structure of the IS function within a company and the distribution of IS

specialists is designed to meet the changing strategies of a business. The form of the IT organization dependson the managerial philosophy, e-business vision, and business/IT strategies formulated during the strategic

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IDENTIFYNG e-BUSINESS STRATEGIES: [Figure 9.9]

A strategic positioning matrix can help a company identify where to concentrate its use of Internet technologies togain a competitive advantage with E-business and E-commerce. The quadrants of the matrix represent:

Cost and Efficiency Improvements

Performance Improvement in Business Effectiveness

Global Market Penetration

Product and Service Transformation

Cost and Efficiency Improvements

This quadrant represents a low amount of internal company, customer, and competitor connectivity and use ofIT via the Internet and other networks.

Strategy: Focus on improving efficiency and lowering costs by using the Internet and the World Wide Webas a fast, low-cost way to communicate and interact with customers, suppliers, and business

partners.

Example: The use of E-mail, chat systems, discussion groups, and a company Web site.

Performance Improvement in Business Effectiveness

A company has a high degree of internal connectivity and pressures to substantially improve its businessprocesses, but external connectivity by customers and competitors is still low.

Strategy: Make major improvements in business effectiveness.

Example: Widespread internal use of Internet-based technologies like Intranets can substantially improveinformation sharing and collaboration within the business and with its trading partners.

Global Market Penetration

A company that enters this quadrant of the matrix must capitalize on a high degree of customer andcompetitor connectivity and use of IT.

Strategy: Develop E-business and E-commerce applications optimize interaction with customers and buildmarket share.

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Prof. Anatoly SachenkoExample: E-commerce websites with value-added information services and extensive online customer

support.

Product and Service Transformation

A company and its customers, suppliers, and competitors are extensively networked. Internet-basedtechnologies, including E-commerce websites, and E-business Intranets and extranets, must now beimplemented throughout the companys operations and business relationships.

Strategy: Develop and deploy new Internet-based products and services that strategically reposition it in

the marketplace.

Example: Use the Internet for electronic commerce transaction processing with customers at company Websites, and E-commerce auctions and exchanges for suppliers.

e-BUSINESS APPLICATION PLANNING

The e-business application planning process begins after the strategic phase of e-business planning has occurred.Application planning process includes:

Evaluation of proposals made by the IT management of a company for using information technology to

accomplish the strategic e-business priorities developed earlier in the planning process.

Business case for investing in proposed e-business development projects is evaluated by company executives

and business unit managers based on the strategic e-business priorities that they decide are most desirable ornecessary at that point in time.

Developing and implementing e-business applications, and managing their development projects.

e-business Architecture Planning

e-business architecture planning combines contemporary strategic planning methods like SWOT analysis andalternative planning scenarios with more recent business modelling and application development methodologieslike component-based development. e-business (and e-commerce) strategic initiatives, including:

Strategic goals, constraints, and requirements, are developed based on SWOT analysis and other planning

methods.

Application developers used business process engineering methods to define how strategic e-business

requirements are to be implemented, using organizational, process, and data models to create new internaland interenterprise e-business processes among a companys customers, suppliers, and other business

partners.

e-business and e-commerce component-based applications are then developed to implement the new business

processes using application software and data components stored in a repository of reusable business modelsand application components.

Business process engineering and component-based application development activities are supported by a

companys technology infrastructure, which includes all the resources of its IT architecture, as well as thenecessary component development technologies.

e-business architecture planning links strategy development to business modelling and component

development methodologies in order to rapidly produce the strategic e-business applications needed by acompany.

Section II: Implementing ChallengesIMPLEMENTATION

Implementation is an important managerial responsibility. Implementation is doing what you planned to do.Implementation can be viewed as a process that carries out the plans for changes in e-business strategies andapplications that were developed in the planning process.

Analyzing Verizon, F.X. Coughlin, and A-decWe can learn a lot from this case about the important implementation challenges that arise when implementing

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Prof. Anatoly Sachenkonew e-business strategies. Take a few minutes to read it, and we will discuss it (See Verizon, F.X. Coughlin, and A-dec in Section IX).

IMPLEMENTING INFORMATION TECHNOLOGY: [Figure 9.15]

Introducing e-business and other applications of information technology impact an organization. Major new e-commerce initiatives can enable a company to redefine its core lines of business and precipitate dramatic changeswithin the entire interenterprise value chain of an e-business enterprise.

Implementing new e-business strategies requires managing the effects of major changes in key organizationaldimensions such as business processes, organizational structures, managerial roles, employee work assignments,and stakeholder relationships that arise from the deployment of new e-business systems.

END USER RESISTANCE AND INVOLVEMENT

People dont like change. End user resistance can be minimized by formal technology implementation programswhich end user managers and IS consultants can develop to encourage user acceptance and productive use ofreengineered business processes and new information technologies. Some keys to solving problems of end userresistance include:

Proper end user education and training

Improved communications with IS professionals

End user involvement in the development and implementation of new systems.

Involvement and commitment of top management and all other business stakeholders.

Direct end user participation in systems development projects before a system is implemented is especiallyimportant to reducing the potential for end user resistance. Allow end users members of e-business systemsdevelopment teams or do their own development work. This involvement helps ensure that end users assumeownership of a system, which is designed to meet their needs.

CHANGE MANAGEMENT [Figure 9.17]

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People and processes are a major focus of organizational change management. Change managementincludesactivities such as:

Developing innovative ways to measure, motivate, and reward performance.

Designing programs to recruit and train employees in the core competencies required in a changing

workplace.

Analyzing and defining all changes facing the organization, and developing programs to reduce the risks and

costs and to maximize the benefits of change.

Change experts recommend: Involve as many people as possible in reengineering and other change programs.

Make constant change part of the culture.

Tell everyone as much as possible about everything as often as possible, preferably in person.

Make liberal use of financial incentives and recognition.

Work within the company culture, not around it.

A Change Management Process: [Figure 9.18]

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This change management model shows an eight-level process of change management for organizations. Thischange management model is only one of many that could be applied to manage organizational changes caused bynew e-business strategies and applications and other changes in business processes.

IV. KEY TERMS AND CONCEPTS - DEFINED

Business Model:A business model is a conceptual framework that expresses the underlying economic logic and system that proveshow a business can deliver value to customers at an appropriate cost and make money.

Change Management:Managing the process of implementing major changes in information technology, business processes,

organizational structure, and job assignments to reduce the risks and costs of change, and optimise its benefits.

e-business Planning:Process that focuses on discovering innovative approaches to satisfying a companys customer value and businessvalue goals. Process leads to development of strategies and business models for new e-business and e-commerce

platforms, processes, products, and services.

e-business Planning Application Planning:

Process includes the evaluation of proposals made by the IT management of a company for using informationtechnology to accomplish the strategic e-business priorities developed earlier in the planning process.

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e-business Planning Architecture Planning:Planning process that combines contemporary strategic planning methods like SWOT analysis and alternative

planning scenarios with more recent business modelling and application development methodologies likecomponent-based development.

e-business Planning Strategic Planning:Strategic e-business planning involves aligning investment in information technology with a companys e-businessvision and strategic goals such as reengineering business processes or gaining competitive advantages.

End User Involvement:End users are involved in the development of new or improved computer applications without the directinvolvement of professional systems analysts.

End User Resistance:A new way of doing things generates some resistance in the people affected. New systems may result in end userresistance. The key to minimizing end user resistance is to provide proper end user education and training,

provide for good communications with IS professionals, and get the end users involved in the systems developmentand implementation.

Implementation:Implementation is dong what you planned to do. Implementation is a process that carries out the plans for changesin e-business strategies and applications that were developed in the planning process.

Implementing e-business Change:Implementing new e-business strategies requires managing the effects of major changes in key organizationaldimensions such as business processes, organizational structures, managerial roles, employee work assignments,and stakeholder responsibilities that arise from the deployment of new e-business systems.

Information Technology Architecture:

The IT architecture that is created by the strategic e-business planning process is a conceptual design, or blueprint,that includes the following major components: technology platform, data resources, application architecture, andIT organization.

Organizational Planning:Fundamental planning process consisting of (1) team building, modelling, and consensus, (2) evaluating what anorganization has accomplished and the resources they have acquired, (3) analysing their business, economic,

political, and societal environment, (4) anticipating and evaluating the impact of future developments, (5) buildinga shared vision and deciding on what goals they want to achieve, and (6) deciding what actions to take to achievetheir goals.Planning for Competitive Advantage:

Involves evaluation of the potential benefits and risks a company faces when using e-business strategies andtechnologies for competitive advantage. Models such as competitive forces, competitive strategies, value chain,and SWOT analysis can be used.

Scenario Approach to Planning:Teams of managers and other planners participate in exercises to simulate the real world.

SWOT Analysis:

Model which is used to evaluate the impact that each possible strategic opportunity can have on a company and itsuse of information technology.

V. DISCUSSION QUESTIONS

Planning is a useless endeavor, because developments in e-business and e-commerce, andin the political, economic, and social environments are moving too quickly nowadays. Do

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Planning and budgeting processes are notorious for their rigidity and irrelevance tomanagement action. How can planning be made relevant to the challenges facing an e-business enterprise?

What planning methods would you use to develop e-business and e-commerce strategiesand applications for your own business?

What are several e-business and e-commerce strategies and applications that should be

developed and implemented by many companies today? How can a company use change management to minimize the resistance and maximize the

acceptance of changes in business and technology? Many companies plan really well, yet few translate strategy into action. Do you think

this is true? What major business changes beyond e-business and e-commerce do you think

most companies should be planning for the next ten years?