MIS2-Session 1 AP

8/3/2019 MIS2-Session 1 AP

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IT Strategy in Businesses

Prof. Anindita Paul

Indian Institute of Management Kozhikode


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What is IT Strategy?

IT strategy for any organization provides effective, efficient,responsive and flexible systems to meet the current andfuture business as well as legislative requirements.

IT strategy is further subdivided into the followingsubcomponents: IT application strategy(identifies applications to address the

business needs) classified as Support, Factory, Turnaround orStrategic category

Technology management strategyfor IT (addresses the choice oflong-term view of the technology, their sustainability, availability

and reusability) IT management strategy(IT projects must meet the business

expectations in desired time, cost and budget; decision onoutsourcing vs. doing in-house; change management)


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Why is IT Strategy important?

Long term view of IT

Spells out the current needs and vision to sustaincompetitive advantage

Assist in operationalisingcompanys processes Provides a cost effective framework for executing

business strategy

IT Strategy would provide and sustain an informationtechnology framework to enable the firm to meet itsmission, objectives and strategic aims


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Business Strategy

BS is a set ofobjectives, plans, and policies forsuccessful competition in markets.

Porter defines business strategies such as costleadership, differentiations, niche focus or innovation

which a firm can adopt. Characteristics of BS

It is long-term (3-5 years) in nature.

It specifies what the organization's competitive advantagewill be.

It focuses on a few key areas.

The pattern of decisions made over time is, in fact, anorganization's business strategy.


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Course Objective

To help business executives take important steps

on the path of IT enabled transformational

change.

Create an environment for executives in defining

and executing not only technology strategy, but

also business strategy.


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Course Outline

Today IT Strategy in Business

Strategies for Planning and Applying IT (SISP)

Organizing and Leading ITMid Terms

Strategies for IT Program Management, IT

Service Management Planning and Measuring Returns on IT

Investment


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Text Book

Lynda M Applegate et.al. (2007) Corporate

Information Strategy and Management, 7th

Edition. Tata McGraw Hill


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Challenges

Global competition

Individual firms need to operate at same level of

efficiency

Quality needs to be at par

Acceptable prices

Differentiation that provides a unique mix of

value necessary for survival


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Opportunities Provided by IT

IT cuts cost, increases speed and supports businessactivities through applications, communications andtechnology (Operational effectiveness and efficiency inPizza Hut, Dominos)

IT provides variation and choice by pooling togethercapabilities to support the activities of the firm. (Uniquevalue for Toyota and Dell customers)

Extending scope and reach to customers through theinternet (more products more audiences). Not necessarilyselling their own products such as airlines becoming travelcompanies, hospitals are getting into health tourism,Moser-Baer getting into media distribution.


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Threats of the IT-Enabled World

The legal and social definitions of an organization as businesspractice outpaces legal and regulatory policy

International competitiveness and trade, intellectual property, privacy,

security, family, community, education, and culture.

Companies are spending huge amount to manage their IT .However, businesses struggle to quantify the results of the IT

systems and consider it as cost of doing business.

Technology has become a core enabler and, in some cases,

the primary channel through which business is done. Most of

it is done without long-term thinking or proper planning.


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Business executives have begun to wrest controlfrom IT executives who have failed to meet thechallenges.

The ripple effect of one industry, one country orone natural disaster is felt more often in otherplaces, sooner than expected in the changedworld where IT is implemented.

This needs IT deployment keeping utmost levels ofconstant preparedness, "battle ready" conditions andagility in mind.


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Conflicting views of IT in business

Business executives often view IT with apprehension, asthe province of technocrats primarily interested in newfeatures that may have little relevance to real-worldbusiness problems.

Technology executives often consider business managers

to be short sighted, lacking the vision to exploit all thattechnology has to offer.

Both business executives and technology executivesstruggle as they attempt to implement increasinglycomplex systems in the face of rapid change in businessand technology.

Applegate, L. M., Austin, R. D., and McFarlan, F. W. (2007), CorporateInformation Strategy and Management, Tata McGraw-Hill, New Delhi.


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IT Strategy Development for

Competitive Advantage

How organizations can use IT to gain competitiveadvantage?

For this, the IT strategy planner must understand thestrategic dimension, points of opportunity as well as

areas of concern. Identifying the IT systems as strategic, support, turnaround

or factory type.

Support or factory applications can be outsourced so thatless management intervention is needed in managing

them. Whether corporate strategy should drive IT or vice

versa?


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McFarlans Strategic Grid


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Incremental improvement

Centralizing internal processes such as back-office processes(payroll, purchasing, and benefits management)

Business Process Design Re-engineering

Core operating process-Supply chain management, new productdevelopment

Emerging Opportunities

Revenue growth from new service offerings that built on internalIT-enabled business processes.

Business Transformation

IBM Business Transformation Outsourcing (not only outsourcingbut into consulting as well)


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Sustain Competitive Advantage(Piccoli and Ives, 2009)

Response Lag Driver- The time it takes for competitors torespond aggressively enough to erode the competitiveadvantage.

4 barriers to erosion fully capture the determinants of

sustainability IT Resources Barrier (firms endowment of IT resources)

Complementary Resources Barrier (co-specializedcomplementary assets such as access to distribution channels,cross-selling)

IT Project Barrier (design, develop, and introduce theinformation processing functionality needed to deliver the valueproposition)

Preemption Barrier(even after successful imitation, the leadersposition cannot be threatened)


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Barriers Response Lag Drivers

IT Resources Barrier IT Assets IT Infrastructure

Information Repositories

IT Capabilities Technical Skills

IT Management Skills

Relationship Asset

Complementary

Resources Barrier

Complementary

Resources

IT Project Barrier Technology

Characteristics

Visibility

Uniqueness

Complexity

Implementation

Process

Complexity

Process Change

Preemption Barrier Switching Costs Tangible co-specialized investments

Intangible co-specializedinvestments

Collective Switching Costs

Value System

Structural

Characteristics

Relationship Exclusivity

Concentrated Links


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2 dynamic processes that contribute to

reinforce barriers

Organizational Learning

The capacity or processes within an organization to

maintain or improve performance based on experience

Asset Stock Accumulation

The process by which a firm accrues or builds up aresource over time as a result of a consistent pattern of

resource flows.


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What does Business and IT Alignment

mean? Business Strategy is a firms long-term plan regarding its products and

services, its core competencies and behaviour in the marketplace.

IT strategy pertains to the firm's long-term decisions regarding choice oftechnology, application development or use of packages solution,outsourcing or in-house staffing and initiatives to make IT strategic to itsbusiness.

The alignment between IT and business is a construct concerning thedegree of congruence of an organization's IT strategy and IT infrastructurewith the organization's strategic business objectives and infrastructure.

Due to the use of IT in all walks of business processes and execution,complexity and investment in IT systems have grown manifold.

Business and IT are so interdependent these days that it cannot win unlessthey have a common envision drive towards the goal, support each otherand run at equal speed and energy.


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How to use the

Strategic Alignment Model

Building Blocks: Strategic Fit Functional Integration and Cross-Domain

Relationship

Identify your strongestand weakest domain Need to develop

communication with andincrease understanding ofweaker domains

Understand relationshipbetween domains whenchange in strategy occurs

Scope

Competencies

Governance

Structure

Processes

Skills

Scope

Competencies

Governance

Infrastructure

Processes

Skills

Strategy

(External)

Infrastructure

(Internal)

Business Information Technology

Functional

Integration

Strategic

Fit


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Strategy Execution

IT is an Expense

Business Strategy is the driver of both Business and IT Infrastructures Priority is to improve business processes, which places focus on changing

business infrastructure. IT focus is on application development, driven

by need to support business infrastructure

Business Strategy

Scope

Competencies

Governance

Business Infrastructure

Structure

Processes

Skills

IT Strategy

Scope

Competencies

Governance

IT Infrastructure

Infrastructure

Processes

Skills

Top Mgmts Role?

Strategy Formulator

IT Mgmts Role?

Strategy Implementor

Performance Criteria

for assessing IT

financial parameters

reflecting a costcenter focus

Risk?

IT reacts to support

business processes

not viewed as astrategic resource


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Technology Transformation

Business Strategy Drives Need to Develop IT Strategy

Assume: Business strategy and infrastructure arealigned

IT strategy needs to define technologies integral tobusiness strategy

Focus is aligning IT strategy and IT infrastructure

Business Strategy

Scope

Competencies

Governance


Structure

Processes

Skills

IT Strategy

Scope

Competencies

Governance

IT Infrastructure

Infrastructure

Processes

Skills

Top Mgmts Role?Technology visionary

IT Mgmts Role?

Technology Architect


for assessing ITBased on technology

leadership often

utilizing a bench-

marking approach

Risk?

IT is not integratedIT infrastructure lags

and does not

adequately support

business

infrastructure?


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Service Level

Providing IT services

Information is a core product or service Business strategy and IT strategy may be aligned

Focus is to enable business infrastructure by

fitting IT infrastructure to IT strategy

Business Strategy

Scope

Competencies

Governance


Structure

Processes

Skills

IT Strategy

Scope

Competencies

Governance

IT Infrastructure

Infrastructure

Processes

Skills

?

Top Mgmts Role?Prioritizer

IT Mgmts Role?

Leadership


for assessing IT-Based on customer

satisfaction (end-user-

needs surveying,

service-level

contracting)

Risk?

May lose sight of

business strategy; IT

viewed as a service

function independent

of business strategy.


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Competitive Potential

IT Enables Strategic Opportunities Assume: IT strategy and infrastructure are aligned

IT strategy necessary to build distinctive corecompetency

Business infrastructure needs to evolve to fitnew business opportunities enabled by IT

Business Strategy

Scope

Competencies

Governance


Structure

Processes

Skills

IT Strategy

Scope

Competencies

Governance

IT Infrastructure

Infrastructure

Processes

Skills

?

Top Mgmts Role?

Business Visionary

IT Mgmts Role?

Catalyst


for assessing IT-

Based on businessleadership with

qualitative and

quantitative

measurements

Risk?Large IT investments;

Change organizational

structure to address

info flow problems;

Re-train employees

with new IT.


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Lessons from the

Strategic Alignment Model

Need for IT external and internaldomains

Understand strong/weak domainsand cross-domain relationships

Different roles of business and ITexecutives

Re-conceptualize assessment of the

performance of IT


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Facilitators of Alignment

Leadership level congruence (business leadershipsdesire to take along IT leadership in strategyformulation development and execution).

IT's ability to identify and partner with business (ITs

ability to understand business and develop IT planslinked to the business plan to gain competitiveadvantage)

IT's ability to deliver (how IT delivers and meets itscommitment)

If the first two have been done right, the third factorbecomes somewhat easy.


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Challenges of Alignment

Mismatch between strategic objectives andthe deployment of IT (mostly due to theabsence of a well-articulated strategy)

Limitation in capturing the end-usersrequirements

Lack of uniform and seamless communication

of the strategy to the entire organization (toprepare the employees to respond to thestrategic IT plan initiatives)


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Frameworks for IT and Business

Alignment

Communication (alignment is achieved through good

communication between the CEO and CIO and ITs strategically

positioning within the organization)

Architecture (first define business architecture and superimpose IT

architecture; now add information and structure; information is theglue that binds business and IT, it is the structure that translates

strategy into processes and infrastructure)

Technology (operational alignment at the user level covering

business role, information role, function of IT as well as of IT

infrastructure)

People (high-performing businesses with a tactical and supporting

role for IT require informed and responsive support from the IT

utility team)


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Tips for Business and IT Alignment

1. Steering committee

2. Joint task force group

3. Appointing IT champion in the user department

4. Appointing function wise user advocate or subject matter expert

in IT department

5. Sabbatical to IT or business user function

6. Joint projects for innovation

7. Making IT members part of executive committee, strategy group

8. Co-authoring papers and seminar presentations by user and IT on

its achievements

9. Team developments, joint training of user and IT professionals

10. Encourage cross transfer of IT and business users at managerial

level


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Prep for Next Class

Strategies for Planning and Applying IT (SISP) Chapters 3 and 4 Applegate

Grover and Segars (2005)

Case - World Bank

Optional Reading

Brown, Irwin, "Strategic Information Systems Planning: ComparingEspoused Beliefs with Practice" (2010). ECIS 2010 Proceedings. Paper 140.http://aisel.aisnet.org/ecis2010/140

Information Technology Strategic Plan 2009-2013. (2009). (pp. 1-27):

Department of Homeland Security. Office of the Chief Information Officer.(http://www.dhs.gov/xlibrary/assets/cio_infotech_strategic_plan_2009-2013.pdf)

Documents

MIS2-Session 1 AP