The Value of Strategic IS Planning: Understanding Consistency, … · 2017. 12. 28. · gic planning stems not only from a common criti-cal assumption, i.e., a belief that planning

Strategic IS Planning

The Value of StrategicIS Planning:UnderstandingConsistency, Validity,and IS Markets

By: John C. HendersonMassachusetts Institute of

TechnologySloan School of Management30 Wadsworth StreetE53-316Cambridge, MA 02139

John G. SifonisArthur Young & Co.Strategic Management Consulting

Services277 Park AvenueNew York, NY 10172

Abstract

The impact of IS technologies on the competi-tive capability of the firm has increased the needfor effective strategic IS planning. This paperargues that an effective strategic IS planningprocess must provide for (1) definition of keymarkets (within the firm) for IS products andservices; (2) internal consistency, particularly be-tween the strategic business plan and strategicIS plan; and (3) a means to assess the validityof the planning process. The need to establishvalidity is seen as critical in today’s highly tur-bulent business environment. Results of anactual planning process are used to illustratehow assumption surfacing can be used as onemeans to address the vafidity issue.

Keywords: Strategic planning, strategic IS plan-ning, critical success factors, assump-tions surfacing

ACM Category: H.0

IntroductionThe potential for using information technologyto affect the competitive position of the firm(Cash and Konsynski, 1985; Rockart, 1979) hasserved to highlight the importance of effectiveinformation systems planning. As the criticalityof effectively linking the strategic IS plan to thestrategic business plan has increased, the needto better understand the nature of strategic plan-ning, in general, and strategic IS planning, inparticular, has also increased. It is now particu-larly relevant to ask how strategic IS planningadds value to efforts to devise a strategic busi-ness plan. A better understanding is requiredof both the types of products produced by a stra-tegic IS plan as well as the impact on the over-all planning process.

Venkatraman (1986) argues that the intersec-tion of interest between IS planning and strate-gic planning stems not only from a common criti-cal assumption, i.e., a belief that planningpositively affects the performance of the firm, butalso from the similarity in the research questionsand methodological issues that have been pur-sued. Strategic planning is often approachedfrom a systems view of planning and design.A system can be viewed as a theory of objects,relationships between objects, and performance(Churchman, 1971). Just as Alexander (1964)suggests that a house is a reflection of an archi-tect’s theory of how people live, strategic plan-ning can be viewed as a process of building atheory of the firm. That is, planning is an at-tempt to prescribe sets of objects and relation-ships so that desirable performance is achieved.

When viewed from this systems perspective, thecommonalities between strategic IS planning andstrategic business planning are apparent. Re-searchers in both disciplines have struggled withat least three major systems issues:

1. ways to represent the levels of abstractioninherent in the planning and design process;

2. separability (decomposition) and its implica-tions for creating a narrow planning context orframe; and

3. the need for cooperative behavior amongexperts.

Each of these issues is resolved explicitly or im-plicitly by any given planning methodology.These planning techniques offer the potential to

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strengthen the link between IS planning and stra-tegic business planning. This article exploresthese issues in the context of both IS and stra-tegic planning. The next section provides a briefoverview. Following is a planning approach thatfocuses on the consistency between levels ofabstraction and the validity of a planning con-text as two major concepts that strengthen thelinkage between IS and business planning. Whilethis approach also calls for a value-based busi-ness modeling approach as another method forimproving linkage, this aspect receives limitedattention. This is followed by an example plan-ning exercise, which further illustrates the con-cept of assessing the validity of a planning con-text. The final section summarizes the majorconcepts found in the proposed approach andsuggests areas for future research.

Strategic Business and ISPlanningEach of the three planning issues identified inthe introduction has long been a subject of re-search. At the core of planning and design isthe recognition that this process requires the par-ticipant to move between multiple levels of ab-straction (Henderson, 1986; Kottemann andKonsynski, 1984). For example, strategic plan-ning is often envisioned as having three levels:corporate, business, and functional (Hofer andSchendel, 1978). Each level reflects varying setsof stakeholders that are affected by or can affectthe plan, the extent to which forces external tothe firm are explicitly addressed, the extent towhich organizational boundaries within the firmare viewed as constraints, and so on. In es-sence, the planning process addresses the over-whelming complexity of a large system by de-composing it into dimensions such as resources,function, time, space, and so on.

In IS planning, the concepts of top-down plan-ning and structured analysis emphasize theneed to systematically decompose a complexsystem into smaller and more concrete repre-sentations. The notion of a design transform hasbeen used to describe this process (Gane andSarson, 1979; Kotteman and Konsynski, 1984).A design transform is a conceptual or physicalchange in the design artifact or target system.The systems design life cycle (Bostrom andHeinen, 1977; Gane and Sarson, 1979; McLeanand Soden, 1977) describes the IS design proc-ess as a sequence of transformations that

moves the designer from an abstract statementof need to a concrete reality of a system thataffects the behavior of individuals within the firm.While the IS life cycle has been used primarilyto conceptualize design, there is recognition thatthis activity must be linked to a predesign or plan-ning process.

It has not been particularly useful to focus re-search on the possibility that a specific numberof transformations that best describe the plan-ning process exists. IS planning has been de-scribed as having as many as fourteen levels(Pyburn, 1983). More relevant are two basicissues that must be addressed regardless of thegranularity of the levels used to describe the plan-ning and design process: external validity andinternal consistency.

External validity refers to the appropriateness ofthe resulting planning. Mitroff and Feathering-ham (1974) suggest that "errors of the thirdkind", i.e., good solutions to the wrong problems,are particularly prevalent in ill-structured andmessy problem settings. The planner faced withan ill-structured environment must be concernedwith the validity of the planning process as wellas its consistency.

Internal consistency refers to the need to ensurethat actions envisioned at one level are correctlyoperationalized at lower levels. As Churchman(1971) suggests, planning and design are, at theextreme, attempts to prescribe a complete andconsistent causal model for a system. While plan-ners would not be so bold as to claim they havea complete and consistent causal model of thefirm, they nevertheless strive to attain high in-ternal consistency across multiple levels ofplanning.

King (1983) includes validity and consistency two critical components of any systematic evalu-ation of a strategic planning process. His pro-posed framework uses the concept of externalstandards as a basis for a comparative assess-ment of validity. King assesses consistency interms of the extent to which the strategic ele-ments of a plan are internally consistent.

External validityThe planning methodologies require the partici-pants to establish a planning context or frameof reference. For example, business systems plan-ning (IBM, 1984) calls for developing a global

188 MIS Quarterly~June 1988

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business model to serve as the planning con-text for a strategic IS plan. Research rangingfrom individual decision making (Carroll,Thomas, and Miller, 1978; Thomas and Carroll,1979) to general theories of inquiry (Churchman,1971) recognizes a dilemma introduced by anygiven planning context in that in order to copewith the complexity of a system, the plannermust define boundaries. But doing so clearlylimits the scope of the planning effort and maynot incorporate all relevant co-producers of per-formance. If this is the case, the planner risksprescribing a system that is flawed. Stated dif-ferently, the planner risks committing an errorof the third kind (Mitroff and Featheringham,1974), that is, defining a system that solves thewrong problem.

How does the planner validate a given contextor frame? If one creates a model of the busi-ness, surfaces assumptions, and generates aninternally consistent set of beliefs and behavior,is there not still a risk of a significant methodsbias? That is, might everyone involved in theplanning process systematically ignore some-thing that is critical to the success of the strat-egy? This fundamental issue is addressed to vary-ing degrees in the strategic planning and ISplanning literature (Venkatraman, 1986; Schen-del and Hofer, 1979). Efforts to insure correct-ness of the planning process may be thoughtof as attempts to achieve external validity.

Mason and Mitroff (1973) use the concept of al-ternative inquiring systems to emphasize theneed for the IS planner to explicitly consider themechanisms for guaranteeing validity of a planor design. The use of dialectics in strategic plan-ning (Churchman, 1971; Mason and Mitroff,1973; Mason and Mitroff, 1981) is an exampleof an attempt to increase the likelihood that thechosen strategy is robust and valid. Strategic plan-ning and IS planning processes often rely onan implicit strategy of using agreement amongdomain experts (a Lockean consensus ap-proach) to assess validity (Mason and Mitroff,1973). The limitations of a Lockean approach,discussed by Churchman (1971), Mason & Mi-troff (1973) and others, suggest a need to es-tablish an alternative mechanism to examine theexternal validity. We argue that the ability to ex-plore the external validity of the plan is as criti-cal to performance as achieving internal consis-tency with the planning process. Further, as theplanning environment becomes more turbulent,the issue of external validity becomes more criti-

cal as well as more problematic. This issue isan important component of this article andwill be illustrated in the planning examplediscussion.

Internal consistencyThe issue of internal consistency has been ad-dressed in two major ways. The dominant focusof most IS planning methodologies is the crea-tion of an internally consistent behavioral or proc-ess model of the firm. The planning process canbe viewed as defining a series of means/endschains that move from abstract concepts of thefirm’s behavior to realization of particular sys-tems and products that affect the behavior ofindividuals in (hopefully) predictable ways. major contribution of the critical success factorplanning methodology is the introduction of ameans-end relationship between the goals of in-dividuals and their needs for information(Rockart, 1984; Boynton and Zmud, 1984). CSFplanning does not ask what information youdesire to meet your goals, but instead first es-tablishes those factors (abstract processes) thatwill most affect your ability to succeed (goal at-tainment) and then asks how these behaviorsinduce desires for information. This means-endlinkage has served to create an intermediatedesign transformation that has proven valuableto the overall IS planning and design process.

The IS planning literature clearly reflects this em-phasis on internal consistency of means/endsrelationships (behavior). Business system plan-ning (IBM, 1984) and structured analysis (Ganeand Sarson), to name a few approaches, attemptto systematically guide the IS planner throughthe process of creating these interlinked behav-iors that range from abstract representation ofthe firm to rule-based procedures for producinginformation in a purposeful manner. A quite simi-lar tradition is found in strategic planning as re-flected by the flow from corporate to businessto function planning (King, 1978; Schendel andHofer, 1979). It is interesting to note that Porter(1980) describes strategic planning in a similarfashion by emphasizing the concept that a stra-tegic plan provides policies (means) to achievegoals (ends).

More recently, the need to achieve consistencyin beliefs and assumptions of individuals as wellas in their behaviors has been recognized bystrategic planners. In the strategic planning lit-erature, consistency of beliefs has been ad-

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dressed by research on issues such as corpo-rate culture (Schein, 1985), the concept organizations enacting their environment (Daftand Weick, 1984), and perhaps more indirectly,methodologies emphasizing participatory plan-ning and design (Boland, 1978; Bostrom andHeinen, 1977; De Greene, 1973). Mason andMitroff (1981) formalized the means to explicitlysurface underlying assumptions or beliefs in theirstrategic assumption surfacing technique. Inpart, this approach argues that attempts to gainshared assumptions, or at least to clarify andperhaps reduce conflict that revolves around un-certain assumptions, are fundamental to thecreation of a corporate strategy, While many ofthe means/ends (behavior-oriented) methodolo-gies attempt to incorporate a discussion ofassumptions, the strategic assumption surfacingtechnique methodology is an example of astrategic planning approach that centers onunderstanding and attaining consistency inbeliefs.

Henderson et al. (1984) combined assumptionsurfacing and critical success factor analysis toprovide a more comprehensive IS planning ap-proach. Mason and Mitroff (1981) and othershave applied assumption surfacing or variationson this methodology in an IS planning context.Konsynski et al. (1985) have incorporated thetechniques of assumption surfacing and analy-sis into a generalized IS planning supportsystem. In essence, the IS planning field is rec-ognizing, as is the strategic planning field, thatthe lack of consistency with respect to criticalbeliefs or assumptions could create a fundamen-tal instability in a plan and must be explicitlyaddressed.

Cooperative behaviorA third major issue addressed in the planningliterature centers on the need for cooperativebehavior in the planning process. The need totap many sources of expertise and gain a sharedcommitment is related to the issues of internalconsistency and external validity, and while notthe focus of this article, the need to gain coop-eration among experts is a major component ofmost theories of planning and design. The ISplanning literature has borrowed heavily from re-search on change management (Keen andGerson, 1977; Keen and Scott Morton, 1978),participatory decision making (Boland, 1978; Bos-trom and Heinen, 1977; Leonard-Barton, 1983)and political science (Barriff and Galbraith, 1978;

Markus and Pfeffer, 1983) as a basis for pre-scribing approaches to design. Strategic plan-ning has recognized both the need to accessmultiple experts for their knowledge base as wellas to incorporate key stakeholders in order toachieve consistency and commitment (Bostromand Heinen, 1977; Mason and Mitroff, 1973;McLean and Soden, 1977; Pyburn, 1983).

Finally, the issue of the organizational impactof the information systems planning processmust be highlighted. King (1983) suggests thatsystematic assessment of the performanceimpact of a plan requires understanding the plan-ning process in terms of a variety of dimensions,including adaptiveness, effectiveness, and so on.Clearly, to define planning as a purposeful ac-tivity requires the planner to consider the rela-tionship of the recommended systems to anotion of organizational performance. StrategicIS planning often assumes that the organiza-tional goals that provide the basis for definingbenefits have been Passed down via the moreabstract process of strategic business planning.The methodology proposed in this article directlylinks strategic business goals to the IS strategy.An evaluation of the internal consistency of theplanning process is one way to assess the ef-fectiveness of this linkage. To the extent thatthis linkage is effective, the opportunities or mar-kets for IS products and services (including in-vestment in a data infrastructure) will have a highpositive impact on the firm. Ensuring a valid andconsistent linkage between the business planand the IS plan is a necessary condition for ra-tional investment in IS.

The following section describes a strategic ISplanning approach and its relationship to a stra-tegic business planning process. While theissues of internal consistency and external va-lidity are the main focus, the need for an impactorientation is also discussed.

A Strategic IS PlanningApproach

Strategic business planFigure 1 depicts the proposed planning method-ology. This planning process is an attempt tocreate an internally consistent and externallyvalid IS plan, consisting of three phases: (1) busi-ness strategy formulation; (2) strategic IS for-



ExternalStrategicModels

StrategicBusiness Planning

Strategy

StrategicIS Planning

CriticalSuccessFactors

CompetitiveSocial/Political

ISInvestment

Plan

ISProducts

andServices

Figure 1. The IS Planning Process

mulation; and (3) action plan and resource allo-cation. This overall view is consistent withresearch that calls for a strategic linkage be-tween business strategy and IS strategy. To theextent that the business strategy calls for signifi-cant use of IS resources, the linkage betweenthese stages is critical. As will be discussed, thislinkage is achieved both by using common con-cepts and through iteration between phases.

The strategic IS planning process assumes theexistence of a vision and of a business strategyrelationship. The vision is analogous to the tra-ditional business planning concept of mission.It is a futuristic picture of the organization andits environmental surroundings. The businessstrategy used to achieve this vision is a macro-level articulation that reflects the direction andmagnitude of efforts in particular markets andthe criticality of various organizational resourcesto these efforts. In this context, it is assumedthat the strategic business planning process pro-duces a set of strategic goals and, at least, animplicit set of assumptions underlying thesegoals.

There are many planning processes commonlyused to create a strategic business plan (Hoferand Schendel, 1978; Lorange and Vancil, 1977;Porter, 1980; Schendel and Hofer, 1974). Forthe purposes of this discussion, the mechanism

used to generate this business plan is not ad-dressed other than the emphasis that will beplaced on understanding the consistency be-tween beliefs and behaviors that underlie the ISplan and the business plan. For this reason, anexplicit assessment of assumptions is warranted.The reader should review the assumptions sur-facing methodology developed by Mason andMitroff (1981) for an example of an existing tech-nique for assumption definition and analysis. Itshould also be recognized that various tech-niques including value-added flow models(Porter, 1980), critical success factors (Rockartand Scott Morton, 1979), and others, have beenused to help define the key processes or be-haviors involved in the strategies developed aspart of the strategic business plan. Both theseabstract behaviors and the underlying assump-tions can be used as a basis to establish con-sistency between the IS and business plan.

Strategic IS planAs indicated in Figure 1, a consequence of iden-tifying the key processes or behaviors and as-sumptions at the business strategy level is theformation of strategic goals that will be actedon by the organization. The vision/strategy(means-ends) relationship thus provides the con-text or frame of reference for a subsequent and



more specific means-ends relationship. This phe-nomenon has been recognized by users of thecritical success factor methodology. Rockart(1979), Boynton and Zmud (1985), and otherspoint out the hierarchical relationships thatemerge in an organizational CSF planning proc-ess. That is, the CSFs for the executive man-agement team often become specific goals fororganizational subunits. Henderson, Rockart,and Sifonis (1984) note, however, that while con-sistency between levels of means-end relation-ships is one requirement for internal consistencyfor the planning process, internal .consistencymust also exist among the critical beliefs or as-sumptions. As will be discussed, the proposedmethodology builds upon the need to establishconsistency for both behavior and beliefs as onemechanism to ensure that the strategic informa-tion systems plan is appropriately linked to thestrategic business plan.

The proposed strategic IS planning process usesthe goals established in the strategic businessplanning process to provide a direct linkage tothe IS plan. These goals serve the equivalentrote in the IS planning process as the vision didin the business planning process. The criticalsuccess factor method is used to develop ameans/ends relationship that serves to focus theIS strategy on areas that are critical to meetingthese strategic goals. As discussed in the previ-ous section, the CSF method links the goals ofindividuals or organizations to a set of criticalinformation requirements (Boynton and Heinen,1985; Henderson, Rockart and Sifonis, 1984;Munro and Wheeler, 1980; Rockart, 1979). Ingeneral, the CSF approach involves a three stepprocess: (1) interviews with relevant managersand key staff; (2) focus group sessions to evalu-ate and characterize the relevant CSF; and (3)feedback, critique and adoption of these CSFsto provide a final CSF statement.

Many alternative techniques can be used to gen-erate and validate the CSFs. For example, Hen-derson, ~Rockart and Sifonis (1984) describe theuse of structured group processes in a strategicIS plan0ing process that could be incorporatedinto the general CSF approach. In general, thespecific techniques used to generate and vali-date the CSF require a tradeoff between the per-ceived benefits of defining a comprehensive setof CSFs and the cost, both financial and psy-chological, of any given technique. The readershould refer to Henderson and Nutt (1978) fora ~’eview of this cost/benefit tradeoff.

The CSF method does have limitations. Davis(1979, 1980) has suggested three possibleareas of concern. The first concern is the de-pendence on skilled analysts.

As Boynton and Zmud (1984) note, this concernis common to most, if not all, strategic planningmethodologies. Second is the risk of analyst biasintroduced in the interview process. However,Munro and Wheeler (1~80) indicate that the CSFprocess produces consistent results, and, thus,the issue of bias appears to be of less concern.Boynton and Zmud (1984) support this finding.Further, as suggested above, this risk can alsobe addressed through the use of appropriategroup and survey techniques that augment thestandard CSF approach.The third concern is t~e possibility that CSFsoveremphasize current concerns and crises andthus may not address the full range of organiza-tional needs, focusing :on narrow and perhapsinappropriate factors. Rockart (1979) suggests corollary to this: CSFs are time-dependent. Thus,even if the appropriate factors are identified,events may alter the criticality of these factors.One major contribution of the approach proposedherein is to provide a direct means to validate theproposed CSFs and to provide an "early warning"mechanism to alert management to key changes.It is also argued that this assessment process willstrengthen the linkage between the strategic ISplan and the strategic business plan.

The ability to specify an effective planning proc-ess, apart from selection of a particular inter-view or structured group technique, requires theplanner to define the specific products or deliv-erables that will be generated. Further, the plan-ner must consider how the validity of the plan-ning process will be addressed. The means toaddress these two issues are discussed in detailin the following sections.

IS planning productsThe CSF process provides the foundation fordeveloping four object sets: (1) critical assump-tion sets; (2) critical decision sets; (3) value-based p~rocesses; and (4) strategic data models.(See Figure 1.) These sets of objects along withthe CSFs are viewed as the primary productsof a strategic IS planning effort. From a proce-dural viewpoint, the method calls for (1) gener-ating the CSF; (2) usihg each CSF as a frameor question to generate the four object sets; and



(3) evaluating the benefits of investments in to affect elements of each set. As discussed ear-lie~’, the specific techniques used to generate andvalidate the CSFs and each object set are im-portant operational decisions made by the plan-ner. However, a key criteria for this choice isthat any given technique must address the needfor feedback to and debate among the primarysource of the CSF, i.e., key managers. Whilestructured techniques may improve the efficiencyand perhaps lower the risk of omitting an impor-tant issue, CSFs are fundamentally a value state-ment by management. They are a direction ora focus. Thus, the method must provide for it-eration and evaluation by those key managersthat will ultimately "own" the direction or focusthat is taken.

As will be discussed later, this iterative evalu-ation involves refining the statements of ele-ments within a particular object set, mappingthese elements to the CSFs and other externalmodels, and using those mappings to evaluatethe internal consistency and external validity ofthe planning process. Again, a variety of tech-niques can be used to implement this evaluation.In the example discussed later, judgements ofindependent experts are used to map elements ofthe critical assumption set to Porter’s strategiccompetitive forces model. This approach allowsthe planner to use the consistency of judgementsacross experts to assess reliability of the mappingprocess.

An important point in this approach is that CSFsare elicited from managers charged with attain-ing specific strategic goals. In this sense, theyrepresent a more concrete specification of proc-esses than the broader organizational policiesor behaviors generated during the strategic busi-ness planning effort. The consistency betweenthese two abstract behaviors is a traditional meas-ure of the internal consistency of a plan.

The four object sets linked directly to the CSFsare (1) the critical decision set; (2) value-basedprocesses; (3) the critical assumption set; and(4) the strategic data model. Each of these setsdefines an important market to which the IS or-ganization can provide products and services.That is, the sets do not specify directly an ISsystems application or service. Rather, they iden-tify a market for IS products and services thatshould have strategic value to the firm.

Critical Decision Sets. The CSFs are used asa planning context to help ensure that the ele-

merits in each of these sets are value-focused.Specifically, the critical decision set contains de-cision processes that will most affect one ormore CSFs. For example, if a CSF is "to retainhighly skilled employees," a critical decision setmay be the promotion decision, hiring decision,or perhaps the job assignment decision. The ob-jective is to identify a subset of critical decisionsfrom the set of all possible decision processesin the firm. This effort serves to qualify the DSSmarket and to suggest high impact DSS prod-ucts or services for investment. Further, it pro-vides a decision-making view of the data re-source that can help identify those data that arestrategically important to the firm.

Value-Based Processes. The value-based proc-esses set recognizes that achievement of theCSFs will ultimately rely on the efficient and ef-fective performance of critical business proc-esses. Rockart (1979) has likened the CSF meth-odology to a quick-and-dirty business systemsplanning process (Keen and Scott Morton,1978). That is, CSF methodology provides a wayto focus a business-modeling process on proc-esses that are critical to the firm. Thus, whilerecognizing the need to understand processesand their relationship to the data resource, CSFmethodology uses value-based processes to em-phasize a value-focused process model that cap-tures the strategically important processes andtheir interrelationships.

This concept is similar to the notion of value-added processes described by Porter (1980).However, value-based processes do not neces-sarily include a cumulative or value-added flow,but rather a recognition that each function or proc-ess is tightly linked to a CSF; therefore, effectivemanagement of these processes will add strategicvalue to the firm.

The value-based process model provides twomajor contributions. First, it provides a monitor-ing and control perspective to the potential setof IS markets. This design perspective oftenleads the planning team to focus on productsand services that have been the traditionaldomain of MIS. Second, it provides a direct linkto the existing application base. Since many ofthe existing systems were developed to supportfunctions or processes, the inclusion of thisobject set helps IS planners assess their strat-egy in the context of the existing IS asset base.This aspect is critical to the ability to effectivelytranslate the strategic IS plan into a viable de-velopment action plan.

MIS Qua~erly/June 1988 193


Critical Assumption Sets. The critical assump-tion set consists of assumptions that underlie theCSFs. They are the reasons why planners andstakeholders believe the CSFs to be valid. Theassumptions can be used by the planner in twoways. First, they can serve to identify a criticalIS market-executive information systems. Ex-ecutive information systems are defined as in-formation systems used to monitor and analyzecritical assumptions. As the term suggests, thismarket is of particular relevance to senior ex-ecutives. Since these assumptions often involvebeliefs about the environment, thereby requiringexternal data, the critical assumption set offersa significantly different and important view of thestrategic data model. Second, the critical assump-tion set provides data that can be used to assessthe external validity of the IS plan. This usageof the assumption set will be discussed in thenext section.

Strategic Data Models. The representationalform of the strategic data model is often an entityrelation data model and is similar to the globaldata modeling concept (Gane and Sarson, 1979;IBM, 1984), currently advocated by those pur-suing a data resource management strategy.However, the strategic data model differs in acritical way: there is no attempt to create a com-plete and consistent data model. Rather, thefocus is on identifying the significant value-added data classes and how they relate.

The strategic data model provides two services.First, it facilitates the coordination of investmentsacross a range of management support systemmarkets, e.g., DSS, MIS, and EIS. Second, itestablishes where to focus initial efforts to moreeffectively manage the data resource. While thisdata model is not complete (given the focusingeffort of the CSFs), the ability to provide man-agement with strategic data requires this modelto address the critical needs represented by thestrategic goals and their CSFs.

A key issue in using strategic data models ismaximizing the probability that the models reflectthe strategic data needs of management withoutlosing the focusing characteristic of the planningprocess. Henderson, Rockart and Sifonis (1984)discuss this issue, arguing that the validity ofthe strategic data model is gained through dataview integration rather than through an exhaus-tive assessment of a single perspective. Thatis, each of the object sets (critical decision sets,value-based process, and critical assumption

set) reflects a different perspective of informa-tion requirements. Integrating these perspectivesinto a single strategic view of the data resourceis one rfiechanism to ensure validity of the stra-tegic data model. As is th.e case throughout thisprocess,, a second mechanism is the feedbackand evaluation processes with key managersand stakeholders.

It is important to note that the strategic datamodel is intended to. augment rather than re-place a detailed data model that underlies theinformation systems infrastructure. Such detaileddata models provide a means to control the ac-curacy and the integrity of specific data re-sources within the firm. The strategic data modelis intended to provide the basis for justifying theinvestment necessary to define and implementdata resource management systems across theorganization.

Consistency and Validity

Beyond identifying the products of a strategicIS planning effort, the proposed methodology ad-dresses two related issues: the internal consis-tency and the external validity of the IS plan.

The internal consistency of the plan should beassessed for both beliefs and behaviors. Sincet.his strategic IS planning approach explicitly elic-its both CSFs and critical assumptions, the in-ternal consistency of the plan with respect to thestrategic business plan can be directly assessed.That is, a planning process offen requires sig-nificant interpretation between organizationallevels and therefore is subject to inconsistency.The strategic business plan is generated froma different, more general planning context thanthe IS plan and often involves individuals whowill not directly participate in IS strategic plan-ning. As a result, inconsistency in either behav-iors or beliefs is possible. The approach takenhere allows the planner to use the CSFs andassumptions to identify possible inconsistenciesand to focus attention on resolving them.

External validity of the IS plan addresses thepossibility that a given planning process mayomit or incorrectly address relevant factors. Anexternal!y valid plan is one that does not suffersignificantly from the collective bias of those in-volved in the process. As discussed previously,techniques such as a dialectic planning processmay serve to increase the likelihood that a givenplan is externally valid. ’The approach taken here


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adopts the notions discussed by Churchman(1971), King (1983), and others. External crite-ria and multiple models are used to assess thevalidity of a plan. In particular, the critical as-sumption set provides data for this assessmentusing multiple externally competitive models orsocial models. The results of this assessmentare fed back to the strategic business planner.Such an assessment can indicate inconsisten-cies or omissions suggesting either: (1) the stra-tegic business plan is invalid; or (2) the strate-gic business plan was not communicated orinterpreted at the lower levels in an appropriateway. Either planning failure could result in aninvalid IS strategic plan.

While many external models could be used toassess the external validity of IS planning, thetwo important classes include a competitivemodel of the firm and a social/political modelof the firm. In the next section we use Porter’s(1980) competitive forces model to illustrate assessment of the critical assumption set. Whilea social/political model is not used in this analy-sis, such an evaluation could provide additionalinsight to critical social/political trends.

Assessing the ExternalValidity of an IS StrategicPlan: An ExampleOur case example concerns a large retail or-ganization that developed a strategic IS plan.This firm manages a large number of conven-ience stores and has been an innovative leaderin expanding the range of products and serv-ices offered by these stores.

The strategic IS planning processThe strategic IS planning process proceeded asindicated in Figure 1. The executive manage-ment team and many upper level managerswere interviewed by members of the IS plan-ning team to elicit its CSFs and critical assump-tion sets. Focus group sessions were used toclarify and consolidate both the CSFs and thecritical assumption sets. In total, over 50 inter-views were conducted.

The IS strategic planning process was con-ducted after completion of a strategic businessplanning process. Although Figure 1 capturesthe nature of the overall planning process, it is

important to recognize that the business plan-ning process and IS planning process utilizeddifferent consulting firms as external facilitators.These processes differed in terms of the levelof participation and influence of key managers.Thus, as discussed earlier, the overall planningprocess required effective transmission of theproducts of one planning stage to the partici-pants of a subsequent stage, given shifts in thelevel of participation and influence of specific in-dividuals. In this case, while the strategic busi-ness planning process did not explicitly developCSFs, the planning process was quite extensiveand generated a set of strategic goals for theorganization. These goals were used as a start-ing point for the strategic IS planning exercise.

Strategic assumptions of the firmTable 1 shows the thirteen strategic assump-tions resulting from the IS planning process. Al-though we have modified these assumptionssomewhat to avoid revealing specific concernsof the firm, they represent the basic orientationof the critical assumption set. Figure 2 showsan assessment of the distribution of these as-sumptions across Porter’s (1980) five competi-tive forces.

Porter (1980) argues that five major sourcesaffect the competitive position of the firm: (1) intra-industry rivalry; (2) buying power; (3) supplierpower; (4) threats of new entrants; and (5) sible substitute products. The description ofthese competitive forces provides a basis forevaluating each assumption and mapping eachassumption into a particular force. Of course,this mapping process is in itself an assessment-- some assumptions could fall under more thanone competitive force. The debate necessary toclassify a particular assumption often helps toclarify and perhaps suggest alternative mappingsfor some assumptions. In this case, the assess-ment was conducted by a member of the plan-ning team and an external expert familiar withthe Porter model. Although minor differences inassessments were noted, subsequent discus-sions resolved any conflicts, leading to the con-sensus mapping shown in Figure 2.

Intra-lndustry Competition AssumptionsTwo significant issues emerge from the assess-ment illustrated in Figure 2. First, as might be



Table 1. Critical Assumptions

1. Existing retail outlets are the core/primary business.2. The industry is mature.3. Quality people with specific characteristics are needed and will be less available.4. Energy-related organizations are our long-term competition.5. If we cannot broaden our market, our growth is limited.6. Working with other energy companies is complementary to strategy.7. Acquisition is not a primary path for growth.8. Electronically delivered services will have a viable marketplace.9. Technology will improve producitivity in specific ways.

10. It will be two to three years before we achieve key information flow from a strategicIS system.

11. The ~etail business is market-driven and is changing in specific ways.12. Different types of markets must be managed differently.13. Our real estate investment must be completed.

expected, the strategic IS plan was driven pre-dominantly by assumptions relating to how thefirm competes with intra-industry rivals -- a criti-cal assumPtion recognized the emerging threatof new entrants, e.g., gas stations could expandtheir services to include products and servicesoffered by their convenience stores.

Perhaps more significant was the lack of assump-tions relating to threats from substitute productsand supplier power. Discussions with senior man-agement on this apparent omission suggestedthat the IS strategic plan did not reflect all as-pects of the emerging business strategy. Thatis, it seemed that the use of this external modelto assess the products of the I$ plan indicateda lack of validity. But given the nature of theproducts and services delivered by these retailoutlets, significant erosion of the firm’s competi-tive position caused by substitute products is un-likely. Therefore, the lack of critical assumptionsconcerning threats of substitute products wasnot surprising.

However, effective management of supplier re-lations is a key strategic issue for the firm. Infact, the firm has been vertically integrating toaffect its supplier relations. Not surprisingly, thefirm has had a clear intent to invest in informa-tion technology that would affect its ability toremain flexible in its supplier relationships. Thelack of assumptions relating to this issue wasviewed iby managers as an omission and indi-cated the need to adjust the IS ~trategic planand to check whether the strategic business planadequately addressed this issue.

Iterative Nature of the Planning ProcessA second major concept illustrated by this ex-ample is the iterative nature of many strategicplanning processes. The initial strategic businessplan is created and then tested in the contextof strategic resource-planning efforts. This itera-tive strategy should nbt be confused with theconcept of incrementalism. The intent of the stra-tegic planning process is to prescribe a set ofgoals (ends) and policies (means) that achieve these goals and to foster a consistentset of beliefs that will constitute the foundationfor interpreting the environment. An iterative plan-ning process recognizes that resource strategiesprovide an intermediate transformation betweenthe business strategies and the investment oraction plans necessary to accomplish a givenbusiness strategy. The resource strategy notonly helps to set a more concrete planning con-text for the action plan but also serves to pro-vide evidence as to the internal consistency ofthe strategic planning process in general, as wellas the external validity of the resource plan giventhe interpretation of the business strategy by theorganization. The emphasis on interpretation re-flects the fact that an invalid plan can result fromomission of key issues introduced by a givenplanning context or from an imperfect communi-cation link between the two planning levels.

This concept is consistent with the current plan-ning and design methodologies advocated, forturbulent, ill-structured environments. For exam-ple, evolutionary or adaptive planning is the domi-nant approach taken for DSS (Keen and Scott


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BargainingPower ofSuppliers

Potential NewEntrants

BargainingPower ofBuyers

Threat ofSubstituteProducts

* This is an example of a social/political assumption that does not fit easily within the Porter framework.

Figure 2. Initial External Assessment

Morton, 1977; Naumann and Jenkins, 1982).The need for multilevel feedback during a designprocess, particularly to address the validity ofa planning frame, is emphasized by Churchman(1971) and recognized by the strategic planningresearch community (Lorange and Vancil, 1977;Schendel and Hofer, 1979). As the conveniencestore example illustrates, feedback from themore concrete IS strategy planning effort canprovide a means to assess the external validityof a strategic resource plan, as well as provideevidence as to the effectiveness of the linkagebetween two levels in a planning process.

Summary

This article attempts to define the componentsof a strategic IS plan and show how the prod-ucts of this effort can serve three purposes:

1. provide a context for defining the markets aridthereby the products and services to be deli-vered by the information systems function;

2. provide a basis for establishing the internalconsistency of an IS plan for both behaviorand beliefs; and



3. provide a basis for assessing the externalvalidity of an IS plan.

This last issue is the focus of the example dis-cussed in the previous section. An importantissue relates to the selection of the externalmodel to be used in the validity assessment.Why choose Porter’s (1980) model over otherstrategy-competitive frameworks? As Church-man (1971) argues, the answer to this questionis to use multiple models, not to attempt to finda single universal model. For example, onecould assess the validity of the IS strategy froma social/political perspective, thereby emphasiz-ing issues such as regulatory trends. Even if thestrategic business planning process effectivelyuses techniques such as stakeholder analysisto minimize the risk of omitting a key issue, poorcommunication of the strategic business plan isstill possible. Thus, a validity assessment is stillwarranted.

A final issue concerns the appropriate level ofeffort to be committed to the strategic businessplanning process prior to the strategic resourceplanning effort. As advocated by planning meth-odologies such as adaptive design, the level ofeffort for strategic business planning in the in-itial iteration should be sufficient to identify high-impact opportunities. This planning processcould be executed with an intent to iterate. Incontrast, the traditional top-down strategic plan-ning process often assumes little organizationallearning and little iteration as a result of the stra-tegic planning process. The position taken hereis that many organizations are facing novel op-portunities and threats that are due, in large part,to new information technology. As a result, astrategic planning process that emphasizes learn-ing and focuses on iterative feedback, as wellas validity checks between the strategic busi-ness plan and strategic IS plan, will prove bene-ficial to the organization.

AcknowledgementThe authors wish to thank the reviewers for theirmany useful comments. This work was sup-ported by the M.I.T. Management in the 1990sproject.

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AboutJohn C. Henderson received his Ph.D. from theUniversity of Texas, Austin. He is an associateprofessor of management science at the SloanSchool of Management and a member of theCenter for Information Systems Research, M.I.T.Prior to joining the faculty at M.I.T., he servedon the faculty at Ohio State and Florida Stateuniversities. Dr. Henderson has taught and pub-lished in the fields of decision support systems,MIS design and implementation, and the strate-gic impacts of information technology. His workhas appeared in Management Science, MISQuarterly, Journal of Management InformationSystems, Academy of Management Review,Omega and IEEE Transactions on Management.

the AuthorsJohn 13. $ifonis is a partner in the nationaloffice of Arthur Young & Co. and is the nationaldirector of Strategic Management Services forthe firm. He is a graduate of the Case Instituteof Technology and has Completed additional post-graduate work there and at the University Of Min-nesota School of Management. Mr. Sifonis hasbeen a guest speaker at several universities andfor The Conference Board. Rated as one of thetop 10 MIS consultants according to a recenttrade journal, he has appeare~d on local televi-sion stations discussing subjects such as the useof computers in general business and strategicinformation systems planning. Mr. Sifonis has co-authored articles with Drs. John C. Hendersonand John F. Rockart, of the Sloan School ofManagement, M.I.T.

200 MIS Quarterly/June 1988

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