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McGraw-Hill/Irwin Copyright 2008, The McGraw-Hill Companies, Inc. All rights reserved.
Developing Business/IT Strategies
Chapter
11
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Discuss the role of planning in the businessuse of information technology, using the scenario
approach and planning for competitive advantage
as examples
Discuss the role of planning and business models
in the development of business/IT strategies,
architectures, and applications
Identify several change management solutions for
end user resistance to the implementation of new
IT-based business strategies and applications
Learning Objectives
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Planning Fundamentals
Information technology has created a seismicshift in the way companies do business
Just knowing the importance and structure of
e-business is not enough
You must create and implement an action plan
that allows you to make the transition from an
old business design to a new e-business design
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Case 1: The Portfolio Approach to IT
7-Eleven blends its IT investments with a rangeof assertive IT practices and capabilities
Counselor visits to stores twice a week
Delivers of stock three times a day A transparent information infrastructure
that links 70,000 computers at stores,
headquarters, and supplier sites
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Case 1: The Portfolio Approach to IT
MIT identified four broad classifications of ITinvestments that can be managed as a portfolio
to minimize business risk and optimize return
Transactional: used to cut costs or increase
throughput for the same cost
Informational: provide information for
accounting, reporting, compliance,
communication, or analysis
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Case 1: The Portfolio Approach to IT
Strategic: used to gain competitive advantageby supporting entry into new markets or by
helping to develop new products, services, or
business products
Infrastructure: typically aimed at providing
a flexible base for future business initiatives or
reducing long-term IT costs via consolidation
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Case Study Questions
What is the portfolio management approachto IT planning?
Use the four classifications of IT investments
and examples of companies in this case to
illustrate your answer
What are the keys to 7-Eleven Japans great
success compared to other retailers in Japan?
How does IT support such success? How could 7-Eleven Japan do even better?
What role would IT play?
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Components of Organizational Planning
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Planning
Strategic Planning Deals with the development of an organizations
mission, goals, strategies, and policies
Begins with strategic visioning questions
Tactical Planning The setting of objectives and the development
of procedures, rules, schedules, and budgets
Operational Planning Done on a short-term basis to implement and
control day-to-day operations
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Strategic Visioning Questions
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The Scenario Approach
Gaining in popularity as a less formal, but morerealistic, strategic planning methodology
Teams of managers and planners participate in
microworld or virtual world exercises
Business scenarios are created and evaluated
Alternative scenarios are then created
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Trends that Affect Strategic Planning
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Planning for Competitive Advantage
Strategic business/IT planning Involves evaluating the potential benefits
and risks of using IT-based strategies and
technologies for competitive advantage
The following models can help generate ideas
for the strategic use of IT to support initiatives
Competitive forces
Competitive strategies
Value chain
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Strategic Opportunities Matrix
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SWOT Analysis
SWOT stands for Strengths: a companys core competencies
and resources
Weaknesses: areas of substandard business
performance compared to others
Opportunities: potential for new business
markets or innovative breakthroughs that
might expand current markets Threats: anything that has the potential for
business and market losses
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Business Models and Planning
Business model answers vital questions aboutthe fundamental components of a business
Who are our customers?
What do our customers value?
How much will it cost to deliver that value?
How do we make money in this business?
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Questions for all Business Models
Customer value Are we offering somethingdistinctive or at a lower cost
than our competitors?
Scope To which customers is this valuebeing offered?
What range of products/services
offered embody this value?
Pricing How do we price the value?
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Questions for all Business Models
Revenue source Where do the dollars come from?Who pays for what value and when?
What are the margins in each
market, and what drives them?
What drives value in each source?
Connected
activities
What do we have to do to offer this
value and when?
How connected are these activities?
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Questions for all Business Models
Implementation What structure, systems, people, andenvironment do we need to carry out
these activities?
What is the fit between them?
Sustainability What is it about the firm that makes
it difficult for other to imitate it?
How do we keep making money?
How do we sustain our competitive
advantage?
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Questions for all Business Models
Capabilities What are our capabilities andcapabilities gaps?
How do we fill these gaps?
Is there something distinctive about
these capabilities that lets us offer
the value better than other firms?
Is this capability hard to imitate?
What are the sources of thesecapabilities?
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Questions Specific to E-Business Models
CustomerValue What is it about Internet technologiesthat allows us to offer customers
something distinctive?
Can Internet technologies help us
to solve a new set of problems forcustomers?
Scope What is the scope of customers that
Internet technologies enable us to
reach?
Does the Internet alter the product or
service mix that embodies the firms
products?
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Questions Specific to E-Business Models
Pricing How does the Internet make pricingdifferent?
Revenue source Are revenue sources different with
the Internet?
What is new?
Connected
activities
How many new activities must be
performed as a result of the Internet?
How much better can Internet
technologies help us perform
existing activities?
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Questions Specific to E-Business Models
Implementation How do Internet technologies affectthe strategy, structure, systems,
people, and environment of the firm?
Capabilities What new capabilities do we need?What is the impact of Internet
technologies on existing capabilities?
Sustainability Do Internet technologies makesustainability easier or more difficult?
How can the firm take advantage
of it?
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Business Models as Planning Tools
A business model forces rigorously andsystematic thinking about the value and
viability of business initiatives
The strategic planning process is then used
to develop unique business strategies that
capitalize on a business model
The goal is to gain a competitive advantage
in an industry or marketplace
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The Business/IT Planning Process
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The Business/IT Planning Process
The business/IT planning process has threemajor components
Strategic development
Resource management
Technology architecture
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Information Technology Architecture
The IT architecture is a conceptual designthat includes these major components
Technology platform
Data resources
Application architecture
IT organization
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Balanced Scorecard
The balanced scorecard measures a companysactivities in terms of vision and strategies
The system has four processes
Translating vision into operational goals Communicating the vision and linking it
to individual performance
Business planning
Feedback/learning and strategy adjustment
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Balanced Scorecard
The business perspectives a scorecard measures Financial: reflects financial performance,
such as cash flow or ROI
Customer: measures having a direct impact on
customers, such as time to process phone calls
Business process: reflects the performance of
key business processes, such as time spent
prospecting or process costs Learning/growth: the companys learning curve,
such as how many hours are spent training staff
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Identifying Business/IT Strategies
The most valuable Internet applications allowcompanies to
Transcend communication barriers
Establish connections that enhance productivity
Stimulate innovative development
Improve customer relations
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Strategic Positioning Matrix
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Strategic Matrix
Cost and Efficiency Improvements Use the Internet as a fast, low-cost way to
communicate and interact with others
Use of e-mail, chat systems, discussion groups,
and company websites
Performance Improvement in Effectiveness
Major improvements in business effectiveness
recommended
Increase use of Internet-based technologies,
such as intranets and extranets
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Strategic Strategies
Global Market Penetration Capitalize on a high degree of customer and
competitor connectivity and use of IT
Use e-commerce websites with value-added
information services and extensive online
customer support
Product and Service Transformation
Develop and deploy new Internet-based
products and services that strategically
reposition it in the marketplace
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E-Business Strategy Examples
Market Creator:be among the first to marketand remain aheadof the competition by
continuously innovating
Channel Reconfiguration: use the Internetas a new channel to directly access customers,
make sales, and fulfill orders
Transaction Intermediary: Use the Internet
to process purchases
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E-Business Strategy Examples
Infomediary: use the Internet to reduce thesearch cost; offer a unified process for collecting
the information needed to make a large purchase
Self-Service Innovator:provide a comprehensive
suite of services that the customers employees
can use directly
Supply Chain Innovator: use the Internet to
streamline supply chain interactions
Channel Mastery: use the Internet as a sales
and service channel
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Business Application Planning Process
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Comparing Planning Approaches
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E-Business Architecture Planning
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Implementation
Many companies plan changes very well
Few manage to convert a plan into action
This is true even if senior management
consistently identifies e-business as an
area of great opportunity
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Case 2: Infosys Implementation Challenges
Company adage is learn once, use everywhere Developed a companywide knowledge
management program
Offered knowledge currency units (KCUs)
for contributions to jump-start usage
Issues encountered
Information overload
Slow searches for reusable information Shortage of volunteer reviewers
Contributions of questionable quality
Information hoarding
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Case 2: Infosys Implementation Challenges
Revamped the System Formulated a composite KCU score based
on information usefulness and benefit
Information rated by actual users
Demanded justification for high ratings
Reduced the number of KCUs awarded for
reviewing contributions
Raised the bar for cashing in KCU incentivepoints for monetary rewards
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Case Study Questions
Why do you think the knowledge managementsystem at Infosys faced such serious
implementation challenges?
What steps did the KM group at Infosys taketo improve participation in the KM system?
Why were some of these initiatives
counterproductive?
The KM group responded well with corrective
initiatives. Do you think these will succeed?
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Case Study Questions
What change management initiatives shouldthe KM group have initiated in Infosys before
attempting to develop and implement
knowledge management at the company?
Defend your proposals, paying particular
attention to the final quote in the case by
a long-time KM manager at Infosys
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Implementing Information Technology
Many businesses have undergone multiplemajor reorganization since the early 1980s Business process reengineering
Installation and upgrades of an ERP system
Upgrading legacy systems to be Y2K compliant Creating shared service centers
Just-in-time manufacturing
Sales force automation
Contract manufacturing The introduction of euro currency
E-business is the latest organizational change
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Impact and Scope of Implementing IT
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Intranet Enterprise Portal Challenges
Security, security, security Defining the scope and purpose of the portal
Finding the time and the money
Ensuring consistent data quality
Getting employees to use it
Organizing the data
Finding technical expertise
Integrating the pieces Making it easy to use
Providing all users with access
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Enterprise Resource Planning Challenges
Getting end user buy-in Scheduling/planning
Integrating legacy systems/data
Getting management buy-in
Multiple/international sites and partners
Changing culture and mind-sets
IT training
Getting, keeping IT staff Moving to a new platform
Performance/system upgrades
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End User Resistance and Involvement
Any way of doing things generates someresistance from the people affected
CRM projects have a history of failure
Up to 75 percent of CRM projects fail tomeet their objectives
This is often due to sales force automation
problems and unaddressed cultural issues
Sales staffs are often resistant to, or fearful
of, using CRM systems
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Keys to Solving End User Resistance
Keys to solving end user resistance problems Education and training
End-user involvement in organizational
changes and system development
Requiring involvement and commitment of
top management and all stakeholders
Systems that inconvenience or frustrate users
cannot be effective, no matter how technicallyelegant or efficient
Ob l KM S
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Obstacles to KM Systems
Ch M t
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Change Management
People factors have the highest levelof difficulty and the longest time to resolve
of any dimension of change management
K Di i f Ch M t
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Key Dimensions of Change Management
Ch M t
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Change Management
Implementing a new e-business applicationmay involve
Developing an action plan
Assigning managers as change sponsors
Developing employee change teams
Encouraging open communications and
feedback about organizational changes
Ch M t
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Change Management
Key tactics recommended by change experts Involve as many people as possible in e-business
planning and application development
Make constant change an expected part
of the culture
Tell everyone as much as possible about
everything, as often as possible, in person
Make liberal use of financial incentives andrecognition
Work within the company culture, not around it
A Ch M t P
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A Change Management Process
A t M h ll T f ti
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Avnet Marshalls Transformation
C 3 St t i f S d M
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Case 3: Strategies of Second Movers
Gain an edge by observing what the firstmover has done
Be better, faster, cheaper, easier
Trip up incumbents with tactics from other fields
Swipe business models and start your own race
Follow the biggest leader you can find
Aim for the leaders Achilles heel
C St d Q ti
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Case Study Questions
Is the second-mover advantage always agood planning strategy?
What can a front-runner business do to foil
the assaults of second movers?
Do second movers always have the
advantage in Web-based business success?
Case 4 Planning for Inno ation
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Case 4: Planning for Innovation
Federal Express spends $1 billion/year on IT Primary focus is on revenue-generating,
customer-satisfaction-generating, and
strategic-advantage technology
Operational technology receives slightlyless attention
Company philosophies
Its easier to copy than to innovate
Move, communicate, and shoot
Case Study Questions
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Case Study Questions
How do the IT investment strategies and focusof FedEx and its main competitor UPS differ?
Which company has the better strategy?
Is FedExs move, communicate, shoot ITstrategy a good one for its competitive battle
with UPS?
Is it a good model of competitive IT strategy for
other types of companies?
Case Study Questions
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Case Study Questions
FedEx CIO Carter says his company is in thebusiness of engineering time.
Is this a good business vision for FedEx?
How vital is IT to this definition of FedExs
business?