R. Ching, Ph.D. MIS Area California State University, Sacramento 1 Week 3 Monday, February 6 Strategic Alignment Business Networks

R. Ching, Ph.D. • MIS Area • California State University, Sacramento 1

Week 3Week 3Monday, February 6Monday, February 6

Strategic AlignmentStrategic Alignment

Business NetworksBusiness Networks


Strategic AlignmentStrategic Alignment

• Alignment between the business and IT strategiesAlignment between the business and IT strategies• Alignment between strategy and capabilitiesAlignment between strategy and capabilities

BusinessBusiness ITIT

StrategyStrategy StrategyStrategy

CapabilitiesCapabilities CapabilitiesCapabilities

ValueValue

Including infrastructureIncluding infrastructure Including infrastructureIncluding infrastructure

IT infrastructureIT infrastructure• Technology IT Technology IT

infrastructureinfrastructure• Human IT Human IT

infrastructureinfrastructure


Porter’s Five Forces ModelPorter’s Five Forces ModelForces that Shape StrategyForces that Shape Strategy

Industry Industry CompetitorsCompetitors

Rivalry among Rivalry among existing firmsexisting firms

SuppliersSuppliersSuppliersSuppliers Customers and Customers and BuyersBuyers

Customers and Customers and BuyersBuyers

Potential Potential EntrantsEntrantsPotential Potential EntrantsEntrants

SubstitutesSubstitutesSubstitutesSubstitutes

Bargaining power of buyersBargaining power of buyers

Threat of substitute products or Threat of substitute products or servicesservices

Bargaining power of Bargaining power of supplierssuppliers

Threat of new entrantsThreat of new entrants

How will the business How will the business react to threats (and react to threats (and

opportunities)?opportunities)?


Strategy and ThreatsStrategy and Threats

ThreatsThreats OpportunitiesOpportunities StrategyStrategy

How does the business capitalize on its threats?How does the business capitalize on its threats?


Strategic Information Systems Planning Strategic Information Systems Planning (SISP)(SISP)

• DefinitionDefinition... a process conducted within the contexts of scope, ... a process conducted within the contexts of scope, perspective, time frame, and level of abstraction, perspective, time frame, and level of abstraction, with any or all of the following agenda: (1) with any or all of the following agenda: (1) supporting and influencing the strategic direction of supporting and influencing the strategic direction of the firm through identification of value-adding the firm through identification of value-adding computerized information systems, (2) integrating computerized information systems, (2) integrating and coordinating various organizational technologies and coordinating various organizational technologies through development of holistic information through development of holistic information architectures, and (3) developing general strategies architectures, and (3) developing general strategies for successful systems implementation.for successful systems implementation.

Segars, Grover and Teng.1998Segars, Grover and Teng.1998


Architectures forArchitectures for sharingsharing

organizational andorganizational and interorganizationalinterorganizational

data and data and integrationintegration

technologiestechnologies

Architectures forArchitectures for sharingsharing

organizational andorganizational and interorganizationalinterorganizational

data and data and integrationintegration

technologiestechnologies

SISP ProgressionSISP Progression

IS viewed as IS viewed as strategic strategic resourceresource

Enabling Enabling initiatives for initiatives for

gaining gaining competitive competitive advantageadvantage

Enabling Enabling initiatives for initiatives for

gaining gaining competitive competitive advantageadvantage

Alignment ofAlignment of IS strategyIS strategy

with corporate with corporate strategystrategy

Alignment ofAlignment of IS strategyIS strategy

with corporate with corporate strategystrategy


Context Characteristics of SISPContext Characteristics of SISP

Scope (broad)Scope (broad)Scope (broad)Scope (broad)

Perspective Perspective (upper management)(upper management)

Perspective Perspective (upper management)(upper management)

Time Frame Time Frame (long range)(long range)Time Frame Time Frame (long range)(long range)

Level of AbstractionLevel of Abstraction(conceptual)(conceptual)

Level of AbstractionLevel of Abstraction(conceptual)(conceptual)

Strategic Strategic Information Information

Systems Systems PlanningPlanning

• Supporting and influencing the strategic direction Supporting and influencing the strategic direction of the firm through identification of value-adding of the firm through identification of value-adding computerized information systemscomputerized information systems

• Integrating and coordinating various Integrating and coordinating various organizational technologies through development organizational technologies through development of holistic information architecturesof holistic information architectures

• Developing general strategies for successful Developing general strategies for successful systems developmentsystems development


PlanningPlanningEffectivenessEffectiveness

PlanningPlanningEffectivenessEffectivenessCoalignment*Coalignment*Coalignment*Coalignment*

Six Process DimensionsSix Process Dimensions

ComprehensivenessComprehensivenessComprehensivenessComprehensiveness

FormalizationFormalizationFormalizationFormalization

FocusFocusFocusFocus

FlowFlowFlowFlow

ParticipationParticipationParticipationParticipation

ConsistencyConsistencyConsistencyConsistency*Alignment of dimensions*Alignment of dimensions

Favorable coalignment will Favorable coalignment will lead to effective planninglead to effective planning


1. Comprehensiveness1. Comprehensiveness

• Thoroughly canvassing a wide range of alternativesThoroughly canvassing a wide range of alternatives• Surveying a full range of objectivesSurveying a full range of objectives• Carefully weighing the costs and risks of various Carefully weighing the costs and risks of various

consequencesconsequences• Intensively searching for information to evaluate Intensively searching for information to evaluate

alternative actionsalternative actions• Objectively evaluating information or expert judgment Objectively evaluating information or expert judgment

regarding alternative actionsregarding alternative actions• Re-examining the positive and negative consequences Re-examining the positive and negative consequences

of all known alternativesof all known alternatives• Making detailed plans, including consideration of Making detailed plans, including consideration of

contingencies, for implementing a chosen actioncontingencies, for implementing a chosen action


2. Formalization2. Formalization

• Existence of structures, techniques, written procedures Existence of structures, techniques, written procedures and policies that guide the planning processand policies that guide the planning process– Written policies that structure the process of Written policies that structure the process of

planningplanning– Formalized techniques adopted for the purpose of Formalized techniques adopted for the purpose of

conducting strategic planningconducting strategic planning– Known procedures for initiating the planning processKnown procedures for initiating the planning process

• Processes systemize information collection and Processes systemize information collection and disseminationdissemination

Formalization vs. FlexibilityFormalization vs. Flexibility


3. Focus3. Focus

• The balance between creativity and control The balance between creativity and control orientations inherent within the strategic planning orientations inherent within the strategic planning systemsystem

Innovation vs. IntegrationInnovation vs. Integration– Innovative orientation nurtures creativity Innovative orientation nurtures creativity

(innovative, novel solutions)(innovative, novel solutions)– Integrative orientation focuses more on control Integrative orientation focuses more on control

(budgetary, cost performance, controlled (budgetary, cost performance, controlled diffusion of assets within the organization)diffusion of assets within the organization)


4. Flow4. Flow

• Locus of authority or devolution of responsibilities Locus of authority or devolution of responsibilities for strategic planning for strategic planning – Roles played by corporate and divisional Roles played by corporate and divisional

managers in the initiation of the planning managers in the initiation of the planning process (vertical orientation)process (vertical orientation)

Top-down vs. Bottom-upTop-down vs. Bottom-up– Top-down: limited participation of lower level Top-down: limited participation of lower level

managers in the initiation of the strategic managers in the initiation of the strategic planning processplanning process

– Bottom-up: functional management Bottom-up: functional management involvement in the initiation of strategic involvement in the initiation of strategic planningplanning


5. Participation5. Participation

• Breadth of organizational involvement in strategic Breadth of organizational involvement in strategic planningplanning– Representation from the functional areasRepresentation from the functional areas

Narrow vs. BroadNarrow vs. Broad– Narrow: fosters an isolated approach to plan Narrow: fosters an isolated approach to plan

formulation with little involvement or formulation with little involvement or interaction among various functional or interaction among various functional or operational managersoperational managers

– Broad: a variety of functional and operational Broad: a variety of functional and operational areas help offset “bounded rationality” of top areas help offset “bounded rationality” of top managersmanagers


6. Consistency6. Consistency

• Concerned with the frequency of planning activities or Concerned with the frequency of planning activities or cycles, and evaluation /revision of strategic choicescycles, and evaluation /revision of strategic choices

Frequent vs. InfrequentFrequent vs. Infrequent– Infrequent: time frame longer, face-to-face Infrequent: time frame longer, face-to-face

meetings tend to be ad hoc or sporadic, planning meetings tend to be ad hoc or sporadic, planning cycles may be year-to-year (vs. continuous or cycles may be year-to-year (vs. continuous or consistent process)consistent process)

– Frequent high levels on consistency characterized Frequent high levels on consistency characterized by continuous planning process with frequent by continuous planning process with frequent meetings, constant communication among planning meetings, constant communication among planning participants, and frequent assessment and revision participants, and frequent assessment and revision of strategic directionof strategic direction


PropositionProposition

• Strategic IS planning systems that reflect a profile Strategic IS planning systems that reflect a profile of rational adaptation will be positively associated of rational adaptation will be positively associated with planning effectiveness. The structure or with planning effectiveness. The structure or internal coalignment of a rational adaptive internal coalignment of a rational adaptive planning system includes:planning system includes:– higher levels of comprehensivenesshigher levels of comprehensiveness– higher levels of formalizationhigher levels of formalization– a focus on control vs. creativitya focus on control vs. creativity– a top-down vs. bottom-up planning flowa top-down vs. bottom-up planning flow– higher levels of participationhigher levels of participation– higher levels on consistency higher levels on consistency

Segars, Grover and Teng.1998Segars, Grover and Teng.1998


CoalignmentCoalignment

• Coalignment strongly associated with planning Coalignment strongly associated with planning effectivenesseffectiveness– If dimensions of strategic planning systems If dimensions of strategic planning systems

favorably align, the planning system as a favorably align, the planning system as a structure should be more successful than its structure should be more successful than its individual dimensionsindividual dimensions

– Effectiveness may be beyond performance Effectiveness may be beyond performance measurement (e.g., ROI, ROE)measurement (e.g., ROI, ROE)

– Alternative: Alternative: value-addedvalue-added approach approach• Improved management makingImproved management making• Lower costs of developmentLower costs of development• Plans that are actionable and implementedPlans that are actionable and implemented


Planning effectivenessPlanning effectivenessPlanning effectivenessPlanning effectiveness

Internal Planning System CoalignmentInternal Planning System Coalignment

• The planning system should be structured The planning system should be structured process of opportunity search that “adapts” process of opportunity search that “adapts” through consistent feedback and wide through consistent feedback and wide participationparticipation– Rational planning tendencies of extensive Rational planning tendencies of extensive

alternative generation and solution search, alternative generation and solution search, formalized procedures and policies for formalized procedures and policies for planning, a focus on control, and top-down planning, a focus on control, and top-down planning flowplanning flow

– Adaptive tendencies of wide participation Adaptive tendencies of wide participation profiles and high levels of planning consistencyprofiles and high levels of planning consistency

Rational adaptationRational adaptationRational adaptationRational adaptation


Implications for Strategic IS PlanningImplications for Strategic IS Planning

• Planning must be designed, evaluated, and Planning must be designed, evaluated, and refined such that the overall activity of planning refined such that the overall activity of planning does not become dysfunctionaldoes not become dysfunctional

• Emergent systems of planning should reflect the Emergent systems of planning should reflect the environmental and organizational context within environmental and organizational context within which they functionwhich they function


Source: Source: “Strategic Information Systems Planning: Planning “Strategic Information Systems Planning: Planning System Dimensions, Internal Coalignment and Implications System Dimensions, Internal Coalignment and Implications for Planning Effectiveness,” Albert H. Segars, Varun Grover, for Planning Effectiveness,” Albert H. Segars, Varun Grover, and James T. Teng. and James T. Teng. Decision SciencesDecision Sciences (journal), vol. 29, no. 2 (journal), vol. 29, no. 2 (Spring 1998).(Spring 1998).


IT and OrganizationsIT and Organizations

ControlControl

Organizational RedesignOrganizational Redesign


ControlControl

• Ensures the organization’s goal and objectives are Ensures the organization’s goal and objectives are metmet– Mechanisms for monitoring the differences Mechanisms for monitoring the differences

between desired and actual performance (i.e., between desired and actual performance (i.e., checks and balances)checks and balances)

• Types of controlsTypes of controls– Action controls – operational control levelAction controls – operational control level– Result controls – toward the strategic Result controls – toward the strategic

planning levelplanning level– Personnel controls – Recruiting, hiring and Personnel controls – Recruiting, hiring and

retaining the right people with the right skillsretaining the right people with the right skills– Transaction controls – accurate and complete Transaction controls – accurate and complete

documentation of financial and legal documentation of financial and legal transactions with regular review to ensure transactions with regular review to ensure risk and asset managementrisk and asset management

Design Design into the into the Organiza-Organiza-tiontion


Ad Hoc Planning and Ad Hoc Planning and Organizational RedesignOrganizational Redesign

Duck Tongues: A Tale of Redesigning the DuckDuck Tongues: A Tale of Redesigning the Duck

Longer tongueLonger tongue

Longer billLonger bill

Counterbalance Counterbalance weightweight

Larger wingsLarger wings

Strengthen legsStrengthen legs

Volume increases by its Volume increases by its cube (cube (vv33), area by its ), area by its

square (square (aa22))

Strengthened neckStrengthened neck


Common ProblemsCommon ProblemsWith Organizational RedesignWith Organizational Redesign

• Failure to redesign end-to-Failure to redesign end-to-end processesend processes

• Failure to realign Failure to realign operations with other operations with other components of the components of the organizational redesignorganizational redesign

Piece-meal approachPiece-meal approach

• Operating processes – activities that define how a Operating processes – activities that define how a firm designs, produces, distributes, markets, sells firm designs, produces, distributes, markets, sells and supports its products and servicesand supports its products and services

• Management processes – activities that define Management processes – activities that define strategic direction and coordinate and control strategic direction and coordinate and control operationsoperations

Business cycleBusiness cycle


StrategyStrategyStrategyStrategy ManagementManagementProcessesProcesses

ManagementManagementProcessesProcesses

StructureStructureStructureStructure

IndividualsIndividualsand Rolesand Roles


TechnologyTechnologyTechnologyTechnology

MIT90 FrameworkMIT90 FrameworkFive Inter-Related ComponentsFive Inter-Related Components

Dynamic Equilibrium: Any change to a component requires an Dynamic Equilibrium: Any change to a component requires an adjustment to the othersadjustment to the others

Organization and coordinationOrganization and coordination

Information Information TechnologyTechnology

Vision and Vision and directiondirection

Human resourcesHuman resources

Planning and controlPlanning and control


MIT90 FrameworkMIT90 Framework

• Strategy - pattern of missions, objectives, policies, Strategy - pattern of missions, objectives, policies, and significant resource utilization plans stated in and significant resource utilization plans stated in such a way as to define what business the company such a way as to define what business the company is in (or is to be in) and the kind of company it is or is is in (or is to be in) and the kind of company it is or is to be. It definesto be. It defines– The product line, markets and market segments for which The product line, markets and market segments for which

products are to be designedproducts are to be designed– The channels through which these markets will be reachedThe channels through which these markets will be reached– The means by which the operation is to be financedThe means by which the operation is to be financed– The profit objectivesThe profit objectives– The size of the organizationThe size of the organization– The image which it will project to employees, suppliers and The image which it will project to employees, suppliers and

customerscustomers

Bullen and Rockart, 1981 Bullen and Rockart, 1981



• TechnologyTechnology - encompasses all of the factors - encompasses all of the factors that directly enter into the transformation of that directly enter into the transformation of organizational inputs into organizational organizational inputs into organizational outputsoutputs– Tools, equipment and machinery used in the Tools, equipment and machinery used in the

transformation processtransformation process– Technical procedures and systemsTechnical procedures and systems

Porras and Robertson (1990)Porras and Robertson (1990)



• Information TechnologyInformation Technology - “comprises those - “comprises those technologies engaged in the operation, technologies engaged in the operation, collection, transport, retrieval, storage, access collection, transport, retrieval, storage, access presentation, and transformation of information presentation, and transformation of information in all its forms”in all its forms”

Boar (1997)Boar (1997)


IT and the OrganizationIT and the Organization

Technology Technology PushPush

• Cost Cost performance performance trendstrends

• Connectivity Connectivity capabilitiescapabilities

IT as a IT as a Strategic Strategic ResourceResource

Competitive Competitive PullPull

Innovative IT-Innovative IT-enabled enabled applications to applications to obtain obtain differential differential benefits in the benefits in the marketplace to marketplace to stay competitivestay competitive

Leveraging ITLeveraging ITEnhancing ProductivityEnhancing Productivity


IT to differentiate the organization from othersIT to differentiate the organization from others

IT IT InfrastructureInfrastructure

Reengineering Reengineering Business Business

ProcessesProcesses

Strategic Strategic Application of Application of

ITIT

Basic IT to remain competitive in industryBasic IT to remain competitive in industry

Basic IT to do businessBasic IT to do business

IT Application FrameworkIT Application Framework


MIT90 FrameworkMIT90 Framework• Management ProcessesManagement Processes - Ensure the orderly production - Ensure the orderly production

of goods and servicesof goods and services– Planning is the process of deciding on objectives, on Planning is the process of deciding on objectives, on

changes in these objectives, on the resources used to changes in these objectives, on the resources used to attain these objectives, and on the policies that are to attain these objectives, and on the policies that are to govern the acquisition, use, and disposition of these govern the acquisition, use, and disposition of these resources.resources.

– Control is the process by which managers assure thatControl is the process by which managers assure that• Resources are obtained and used effectively and Resources are obtained and used effectively and

efficiently in the accomplishment of the organization's efficiently in the accomplishment of the organization's objectivesobjectives

• Specific tasks are carried out effectively and efficientlySpecific tasks are carried out effectively and efficiently

Anthony (1965)Anthony (1965)



• StructureStructure - organization and coordination - organization and coordination– CommunicationCommunication– AuthorityAuthority– WorkflowWorkflow

Leavit (1965) Leavit (1965)



• Individuals and RolesIndividuals and Roles - people and skills - people and skills necessary to utilize the technologynecessary to utilize the technology– Designs of jobs required to use the Designs of jobs required to use the

technologytechnology– Technical expertise of organizational Technical expertise of organizational

membersmembers

Porras and Robertson (1990)Porras and Robertson (1990)


IT InfrastructureIT Infrastructure

• Technology IT infrastructure – Hardware and Technology IT infrastructure – Hardware and software software

• Human IT infrastructure – People to make the IT Human IT infrastructure – People to make the IT workwork– Without the right people, an organization Without the right people, an organization

would not benefit from the most advanced ITwould not benefit from the most advanced IT


Influence of IT on Organizational ResignInfluence of IT on Organizational Resign

TechnologyTechnologyTechnologyTechnology

StrategyStrategyStrategyStrategy

StructureStructureStructureStructure





SuccessfulSuccessfulBusinessBusinessModelModel

SuccessfulSuccessfulBusinessBusinessModelModel

Strategy incorporates a Strategy incorporates a vision of technologyvision of technology


Extending the EnterpriseExtending the Enterprise

Role of IT in Integrating the BusinessRole of IT in Integrating the Business


InputsInputs ProcessesProcesses OutputsOutputs

What does it take to get What does it take to get groceries into a home?groceries into a home?


Business NetworkBusiness Network

How does IT provide a competitive advantage?How does IT provide a competitive advantage?

ManufacturersManufacturers

DistributorsDistributors

DeliveryDelivery

ConsumerConsumer

PeapodPeapod


Business NetworksBusiness NetworksDifferentiation vs. IntegrationDifferentiation vs. Integration

• Design of business networkDesign of business network– Differentiation – defines how individuals, groups Differentiation – defines how individuals, groups

and organizations are subdivided into specialized and organizations are subdivided into specialized work unitswork units• Horizontal, vertical and spatial networksHorizontal, vertical and spatial networks

– Integration – defines the relationships and links Integration – defines the relationships and links between units that are required to unite between units that are required to unite specialized individuals, units and organizations to specialized individuals, units and organizations to enable them to achieve a common purpose and enable them to achieve a common purpose and create shared valuecreate shared value• Task-based relationships, information- or Task-based relationships, information- or

expertise-based relationships, or social expertise-based relationships, or social relationships relationships


Differentiation and IntegrationDifferentiation and Integration

Horizontal divisionHorizontal division

Vertical divisionVertical division

Power authority Power authority levelslevels

SpecializationSpecialization

NetworksNetworks

IntegrationIntegrationInformation/expertise

Information/expertise

Task-basedTask-basedSocialSocial

StrategicStrategic

TacticalTactical

OperationalOperational


Network RelationshipsNetwork Relationships

• Required in environments characterized by Required in environments characterized by increased complexity, uncertainty and increased complexity, uncertainty and turbulence, especially when the network contains turbulence, especially when the network contains a large number of highly differentiated nodes a large number of highly differentiated nodes (units) that must work closely together to achieve (units) that must work closely together to achieve a common goala common goal

• Environments that requireEnvironments that require– Innovative and creative thinkingInnovative and creative thinking– Information sharing and decision makingInformation sharing and decision making– Coordination and cooperationCoordination and cooperation


Designing High-Performance Inter-Firm Designing High-Performance Inter-Firm Business NetworksBusiness Networks

• Decisions considering…Decisions considering…

1.1. Network differentiation and unit groupingsNetwork differentiation and unit groupings

2.2. Network integration and interdependenciesNetwork integration and interdependencies

3.3. Network ownershipNetwork ownership


1. Network Differentiation and Unit 1. Network Differentiation and Unit GroupsGroups

• Capabilities and resources to execute strategy Capabilities and resources to execute strategy and achieve the business’ goalsand achieve the business’ goals

• Activities required to acquire these capabilities Activities required to acquire these capabilities and resourcesand resources

• Grouping activities in specialized units to focus on Grouping activities in specialized units to focus on developing the best in class capabilities, and developing the best in class capabilities, and efficiently and effectively achieving the goals efficiently and effectively achieving the goals


2. Network Integration and 2. Network Integration and InterdependenciesInterdependencies

• Managing specialized units internal or external to Managing specialized units internal or external to the organizationthe organization

• Organizational solutions to coordinate and control Organizational solutions to coordinate and control interdependencies among specialized units (in interdependencies among specialized units (in the network)the network)

• Alignment between business environment and Alignment between business environment and strategy to enable network to achieve goals and strategy to enable network to achieve goals and create valuecreate value


Interorganizational Governance ModelsInterorganizational Governance Models

• Market models – transaction based (exchange of Market models – transaction based (exchange of goods and services for payment)goods and services for payment)

• Hierarchical models – formal contracts and Hierarchical models – formal contracts and authority govern the activities to be performed, authority govern the activities to be performed, products or services to be provided, price to be products or services to be provided, price to be paid, and length of the relationship paid, and length of the relationship

• Partnerships – complex, uncertain and Partnerships – complex, uncertain and critical interdependencies to the success critical interdependencies to the success of the partners (businesses)of the partners (businesses)

Supply chain Supply chain managementmanagement


3. Network Ownership3. Network Ownership

• Within the corporation or Within the corporation or organizationorganization

• Alliance between two Alliance between two members (businesses)members (businesses)

• Ecosystem – community of Ecosystem – community of diverse members, each diverse members, each working together toward working together toward achieving a common goal achieving a common goal (collaborative community)(collaborative community)

Pre-1980sPre-1980s

1980s and early 1990s1980s and early 1990s

(Unknown)(Unknown)


Hybrid Governance Models:Hybrid Governance Models:Collaborative CommunitiesCollaborative Communities

• IT opens new opportunities for collaboration among IT opens new opportunities for collaboration among businessesbusinesses– Enable coordinating and controlling inter- and Enable coordinating and controlling inter- and

intra-firm interdependenciesintra-firm interdependencies• Distinguishing features:Distinguishing features:

– Shared purpose and values stress an ethic Shared purpose and values stress an ethic contributioncontribution

– Organizational configurations and solutions Organizational configurations and solutions support horizontal relationships (and vertical, support horizontal relationships (and vertical, authority-based and market-based relationships)authority-based and market-based relationships)

– Development of interdependent form of identity Development of interdependent form of identity that motivates and engages active participation that motivates and engages active participation and affiliationand affiliation


Business NetworkBusiness Network

How does IT provide a competitive advantage?How does IT provide a competitive advantage?

ManufacturersManufacturers

DistributorsDistributors

DeliveryDelivery

ConsumerConsumer

PeapodPeapod


Documents

R. Ching, Ph.D. MIS Area California State University, Sacramento 1 Week 3 Monday, February 6 Strategic Alignment Business Networks