IT StrategyIT StrategyS. RamanathanS. Ramanathan

What is IT Strategy?What is IT Strategy?

Provide effective, efficient, responsive and Provide effective, efficient, responsive and flexible systems to meet the current and flexible systems to meet the current and future business and legislative needsfuture business and legislative needs

Components of IT StrategyComponents of IT Strategy

IT application strategyIT application strategyTechnology management strategyTechnology management strategyIT management strategyIT management strategy

Application StrategyApplication Strategy

Identify business areas which need IT Identify business areas which need IT interventioninterventionSelect, prioritize and decide about Select, prioritize and decide about investment and approach for investment and approach for implementationimplementationEvaluation based on present and future Evaluation based on present and future importance of the applicationimportance of the application

SupportSupport Local improvementsLocal improvementsincremental cost savingincremental cost savinginitiated by end users with ITinitiated by end users with IT

Factory: Factory: Cost reductionCost reduction QualityQuality primarily engineered by IT in primarily engineered by IT in consultation with consultation with business business usersusers

Turn AroundTurn Around Exploit emerging Exploit emerging strategic opportunitiesstrategic opportunitiesDriven by businessDriven by business

StrategicStrategicTop level involvement in ITTop level involvement in IT

Strategic Grid

Present

Future

Technology StrategyTechnology Strategy

Planning and selection of technology Planning and selection of technology components and toolscomponents and toolsConsiderations:Considerations: Skills availableSkills available CostCost Resources availableResources available

IT Management StrategyIT Management Strategy

ChallengesChallenges High employee turnoverHigh employee turnover Quality and reliability of bespoke productsQuality and reliability of bespoke products Risks due to system failureRisks due to system failure Heightened expectations of business usersHeightened expectations of business users Trend Trend High service level requirementsHigh service level requirements Managing cultural changes among IT staff and Managing cultural changes among IT staff and

usersusers

Information Management Information Management maturity Modelmaturity Model

Level Organization Information maturity

Breakaway Prescriptive, realtime pattern-based strategies with situational context

Differentiating Business Process Integration

Prediction, Contextual business rules, patterns

Competitive Process automation and workflow

Master data management, Dashboard, Scorecards

Foundational Task integration Production reporting, Data warehouses. Governance,

Adhoc Command and Control; Spreadsheets

How Information Gives You Competitive Advantage

Michael E. Porter and Victor E. Millar

Strategic Significance of IT

Information Technology is changing the way companies operateIt is affecting the entire process by which companies create their productsIt is reshaping the product itself

Value ChainTechnologically and economically distinct activities a company performs to do its business – Value activitiesA business is profitable if the value it creates exceeds the cost of performing the value activitiesTo gain competitive advantage over its rivals, a company must either perform these activities at a lower cost perform them in a way that leads to differentiation

Value ActivitiesNine generic categoriesPrimary activities

Receipt from suppliers Physical creation of the product Marketing Delivery to buyers After sale support

Support activities Procurement Human resources management Technology development Firm infrastructure (general management, legal,

accounting…)

Value System

Value chain of suppliers +Value chain of the firm +Value chain of the channels +Value chain of the buyer

Cost reduction / Differentiation in any / all of these may lead to competitive

advantage

Competitive ScopeBreadth of a company’s activitiesFour key dimensions

1. Segment scope2. Vertical scope (degree of vertical integration)3. Geographical scope4. Industry scope (range of related industries in which the

company operates)Broad scope can allow the company to exploit interrelationships between the value chains serving different industry segments, geographies or related industriesNarrow scope allows focused customization of value chain for a particular segment and thus derive advantage

IT and the Value Chain

Information technology transforms the way value activities are performed and the linkages between them (Exhibit III)Also affects competitive scope and reshapes the way products meet buyer needs

IT and the Value Chain – Contd.

Every activity has a physical and information processing componentMassive amount of data can be processed, stored and retrieved at a very fast pace at a very low cost due to information technologyTransforms physical processing too – computer-controlled machine tools

IT and the Value Chain – Contd.

IT affects the linkages too. Drug store providing terminals to customers for easy ordering and invoicingEffect on competitive scope – coordination of value activities across remote geographies

Transforming the Product

Historically, a product’s physical component is more important for the buyer than its information componentBut service supported by sound data makes the product more attractive for customersExpanding information content in product as in dishwashers and automobilesEmergence of information as a product

Information Intensity

See Exhibit IV

IT is Changing Rules of Competition

IT changes the industry structure and in so doing alters the rules of competitionIT provides new ways to outperform rivals and thus provides competitive advantageIT spawns new businesses often from existing operations

Changing the Industry StructureFive competitive forces (Exhibit V) – Information technology can alter each of theseEmpower the buyer with more information and make services quick and available round the clock to make it attractive for buyerMake high investments in technology as in Banks to create barriers to entryThrough flexible computer-aided design and manufacturing, reduce threat of substitutesElectronic databases as substitutes for library researchBoundaries between suppliers and buyers are blurring – electronic integrationSince scale is not important automation, barriers to entry are falling in many industriesAutomation no longer leads to inflexibility – flexible manufacturing systemsFalling cost of product design has created opportunities to serve small niche marketsLethal potential of IT: Transparent fares allow airlines customers to shop around

Creating Competitive Advantage

Lowering cost: Insurance under-writing: optimal offer by a computer model reducing no’ of insurers and documentationEnhancing differentiation: Digital Equipment’s artificial intelligence system, XCON for decision rules to develop custom computer configurations – dramatic reduction in order filling time and increase in accuracyChanging competitive scope: Dow Jones pioneered page transmission technology linking its 17 printing plants in US to produce a truly national newspaperCreating interrelationship among industries

Spawning New Business1. By making new business technologically

feasible: Blending of imaging and telecommunications

technology to support facsimile services such as Federal Express’s Zapmail

American Airlines made SABRE available to other airlines – new revenue stream

IRCTC e-commerce site2. By creating derived demand for new products:

Western Union’s Easylink services3. By creating new businesses within old ones:

use of barcode scanners in supermarkets market research data

Competing through ITFive steps

1. Assess information intensity - existing and potential intensity of products and processes

2. Determine role of IT in the industry structure – how IT would affect in future: would it change the five forces or boundary itself: would there be a new definition of industry?

3. Identify and rank the ways in which IT might create competitive advantage.

1. What are the value activities that are likely to be affected most in terms of cost and differentiation?

2. How would IT affect the competitive scope?3. Can IT help the company serve new segments? Or woyld the technology

allow narrowing scope and hence focused advantage in niche segments?4. Would IT allow new competitors to enter niche markets?5. Would IT provide leverage to expand globally?6. Would IT facilitate interrelationships?7. Can the company bundle more information with the product?

Competing through IT – Contd,4. Investigate how IT might spawn new business

1. Could the company sell some information generated?2. Do we have some information processing capacity that could

help start a new business?3. Does IT make it feasible to produce new products?

5. Develop a plan to take advantage of IT1. Strategic investments necessary in hardware, software and

new product development2. Organizational changes3. Functional managers should own information technology

initiatives. IS would manage the technology – architecture, standards

Business – IT AlignmentBusiness – IT Alignment

What is Business – IT What is Business – IT Alignment?Alignment?

Capability of IT to deliver what business Capability of IT to deliver what business needsneedsAbility to play a strategic role in shaping a Ability to play a strategic role in shaping a new business strategynew business strategyAchieved by ability to absorb new Achieved by ability to absorb new technology opportunities for business technology opportunities for business benefitsbenefitsRequires IT to transform from back office Requires IT to transform from back office support function to strategic differentiatorsupport function to strategic differentiator

Strategic Alignment ModelStrategic Alignment Model

OpportunitiesPrioritiesPosition

Opportunities for process improvement

Technology changesRisk managementProject priorities

PeopleProcesses

GovernanceInfrastructure

Culture

PeopleProcessesControls

ToolsTechnology

Culture

Strategy

Capabilities

Business IT

Value

Strategic GridStrategic Grid

An assessment method to check the An assessment method to check the alignment of IT with the strategic goals of alignment of IT with the strategic goals of the firmthe firmTwo key dimensions to assess an Two key dimensions to assess an organization’s IT initiativesorganization’s IT initiatives Impact on business operationsImpact on business operations Impact on strategyImpact on strategyOversight and governance need to be Oversight and governance need to be defined accordinglydefined accordingly

SupportSupport Local improvementsLocal improvementsincremental cost savingincremental cost savinginitiated by end users with ITinitiated by end users with IT

Factory: Factory: Cost reductionCost reduction QualityQuality primarily engineered by IT in primarily engineered by IT in consultation with consultation with business business usersusers

Turn AroundTurn Around Exploit emerging Exploit emerging strategic opportunitiesstrategic opportunitiesDriven by businessDriven by business

StrategicStrategicTop level involvement in ITTop level involvement in IT

Strategic Grid

Impact on Operations

Impact on strategy

Can IT Support and Drive Can IT Support and Drive Strategy?Strategy?

Can IT change the basis of competition?Can IT change the basis of competition?Can IT change the nature of relationships Can IT change the nature of relationships and the balance of power among buyers and the balance of power among buyers and customers?and customers?Can IT build or reduce barriers to entry?Can IT build or reduce barriers to entry?Can IT decrease switching costs?Can IT decrease switching costs?Can IT add value to existing products and Can IT add value to existing products and services or create new ones?services or create new ones?

Can IT Change the Basis of Can IT Change the Basis of Competition?Competition?

At its core IT’s function is to automate activitiesAt its core IT’s function is to automate activitiesBut while automating IT can But while automating IT can inform inform and and transformtransformAnd in this IT can transcend business boundariesAnd in this IT can transcend business boundariesA streamlined value chain can produce better A streamlined value chain can produce better efficienciesefficienciesTimely information produced better coordination and Timely information produced better coordination and controlcontrolIT enabled products and services – new players in the IT enabled products and services – new players in the marketmarket(eg) American Hospital Supply Corporation, American (eg) American Hospital Supply Corporation, American AirlinesAirlines

Can IT Change the Nature of Relationship and Can IT Change the Nature of Relationship and Balance of Power in Buyer – Seller Relationship?Balance of Power in Buyer – Seller Relationship?

AHSC rose to power within the hospital supplies industry AHSC rose to power within the hospital supplies industry by streamlining channels, dramatically decreasing cost, by streamlining channels, dramatically decreasing cost, improving order accuracy and increasing speed of order improving order accuracy and increasing speed of order fulfillmentfulfillmentCustomers encouraged channel consolidationCustomers encouraged channel consolidationSensing risk of exclusion, suppliers put their catalogs Sensing risk of exclusion, suppliers put their catalogs onlineonlineWith electronic links with suppliers, AHSC customers With electronic links with suppliers, AHSC customers could directly order from supplier inventory, which could directly order from supplier inventory, which enabled further reduction in cost and cycle time for all enabled further reduction in cost and cycle time for all members of online marketmembers of online marketThis neutral third party distributor created such a This neutral third party distributor created such a significant shift in the balance of power that in 1985, it significant shift in the balance of power that in 1985, it was bought by Baxter Healthcare, a hospital supplierwas bought by Baxter Healthcare, a hospital supplierA few years later, responding to market pressure, Baxter A few years later, responding to market pressure, Baxter was forced to spin off the supply chain business to was forced to spin off the supply chain business to ensure neutralityensure neutrality

Does Internet Shift Power from the Does Internet Shift Power from the Suppliers to Channel Players and Suppliers to Channel Players and

Buyers?Buyers?During late 90s, internet based channel players During late 90s, internet based channel players flooded the marketflooded the marketBy 2004, many of them were struggling / closedBy 2004, many of them were struggling / closedAs neutral channel players faltered, established As neutral channel players faltered, established players rushed inplayers rushed in(eg) Global Healthcare Exchange (GHX) (eg) Global Healthcare Exchange (GHX) launched by five of the largest healthcare launched by five of the largest healthcare suppliers (with 70% of all products and services suppliers (with 70% of all products and services for hospitals and doing business with 90% of the for hospitals and doing business with 90% of the hospitals) ; within months, more than half the hospitals) ; within months, more than half the independent players disappearedindependent players disappeared

Can IT Build / Reduce Barriers to Can IT Build / Reduce Barriers to Entry?Entry?

Proprietary systems of AHSC and AA provided initial Proprietary systems of AHSC and AA provided initial entry barrier.entry barrier.But more sustainable advantage came from the But more sustainable advantage came from the information generated by the technology and the value of information generated by the technology and the value of the loyal community of customers and suppliersthe loyal community of customers and suppliersInternet, being low cost and shared, does not provide Internet, being low cost and shared, does not provide advantage to any one playeradvantage to any one playerCompetitive advantage should come from building Competitive advantage should come from building proprietary capabilities such as loyal customer proprietary capabilities such as loyal customer community or quick responsecommunity or quick responseIn such a scenario, first mover advantage may turn a In such a scenario, first mover advantage may turn a disadvantage alsodisadvantage also

Case Study: Amazon.comCase Study: Amazon.com1995: The company was started in a modest way1995: The company was started in a modest wayQuickly became no.1 online book sellerQuickly became no.1 online book sellerWithin two years, sales: $ 148 m and customer base: > 2 mWithin two years, sales: $ 148 m and customer base: > 2 m1998: replicated the success in online music and video stores1998: replicated the success in online music and video stores1999 – 2000: spent $ 500 m in sophisticated order fulfillment 1999 – 2000: spent $ 500 m in sophisticated order fulfillment capability capability Knowledge management infrastructure was created to understand Knowledge management infrastructure was created to understand needs of individual customers to personalize servicesneeds of individual customers to personalize servicesLate 2000: Customer base: > 25 mLate 2000: Customer base: > 25 m2001: internet stocks crashed. Need to reinvent business from retail 2001: internet stocks crashed. Need to reinvent business from retail product sale to services model for quicker profitabilityproduct sale to services model for quicker profitabilityUnderstood the need for taking ownership of physical inventoryUnderstood the need for taking ownership of physical inventory2004: established relationship with a number of “brick-and-mortar” 2004: established relationship with a number of “brick-and-mortar” retailers to avoid creation of equivalent capability retailers to avoid creation of equivalent capability redefined redefined business from e-tailer to online / offline logistics service providerbusiness from e-tailer to online / offline logistics service provider

Can IT Raise / Lower Switching Can IT Raise / Lower Switching Cost?Cost?

Internet has lowered switching costInternet has lowered switching costPrice comparisons being easy, customer loyalty is rare in Price comparisons being easy, customer loyalty is rare in Internet economyInternet economyBut some companies have succeeded in creating switching But some companies have succeeded in creating switching cost on the Internet too (eg) Intuit, which allowed customer cost on the Internet too (eg) Intuit, which allowed customer to store personal information in their financial services to store personal information in their financial services software. Data have to be reentered, if the customer moves software. Data have to be reentered, if the customer moves to a different product. Intuit quickly became market leader in to a different product. Intuit quickly became market leader in the market segment with 80% market share and 90% the market segment with 80% market share and 90% retention rate, competing against giants like Microsoftretention rate, competing against giants like MicrosoftServices such as bill payment. Banking online, tax Services such as bill payment. Banking online, tax calculation and payment, managing portfolio of investments calculation and payment, managing portfolio of investments were all addedwere all addedIntuit’s online version of TurboTax gained over 80% market Intuit’s online version of TurboTax gained over 80% market share in a highly competitive marketshare in a highly competitive market

Can IT Add Value to the Existing Can IT Add Value to the Existing Products or Create New Ones?Products or Create New Ones?

Grocery stores selling information to Grocery stores selling information to market research firmsmarket research firmsInformation component in products is Information component in products is increasing as in automobilesincreasing as in automobilesTotal transformation of product in books, Total transformation of product in books, magazines, music, video and gamesmagazines, music, video and games

IT Impact on Strategic RiskIT Impact on Strategic Risk

Can emerging technologies disrupt current Can emerging technologies disrupt current business models?business models?Are we too early / too late to exploit an IT Are we too early / too late to exploit an IT opportunity?opportunity?Does IT lower entry barriers?Does IT lower entry barriers?Does IT trigger regulatory issues?Does IT trigger regulatory issues?

Can emerging technologies disrupt Can emerging technologies disrupt current business models?current business models?

Key features of disruptive technologiesKey features of disruptive technologies Evolve significantly faster than the dominant Evolve significantly faster than the dominant

technology in the industrytechnology in the industry Enables new products, services, pricing, business Enables new products, services, pricing, business

models that change the basis of competitionmodels that change the basis of competition Trigger regulatory changes or significant customer Trigger regulatory changes or significant customer

dissatisfaction with the status quodissatisfaction with the status quoThese may be viewed as threats or opportunities, These may be viewed as threats or opportunities,

depending on which side you aredepending on which side you are(eg) emergence of minicomputers and PCs(eg) emergence of minicomputers and PCsResponding to risk: IBM example, p 50 - 52Responding to risk: IBM example, p 50 - 52

Are we too early / too late to exploit Are we too early / too late to exploit an IT opportunity?an IT opportunity?

Ability to identify the right time to enter Ability to identify the right time to enter with an organization to suit the needwith an organization to suit the needAllied issuesAllied issues How much to invest?How much to invest? How long?How long? How do we sustain cash flows?How do we sustain cash flows? When would the pay-off start?When would the pay-off start?

Does IT lower entry barriers?Does IT lower entry barriers?

Wide-spread availability of Internet with Wide-spread availability of Internet with low cost open standard technologies may low cost open standard technologies may bring the barrier downbring the barrier down

Does IT trigger regulatory issues?Does IT trigger regulatory issues?

IT successes may invite complaints of IT successes may invite complaints of unfair competitionunfair competitionBaxter was forced to spin off hospital Baxter was forced to spin off hospital supply business after its acquisition of supply business after its acquisition of AHSCAHSC

Assessing IT-enabled Business Assessing IT-enabled Business Opportunities - IOpportunities - I

What business are we in? What business are we in? Who are our customers, suppliers and business Who are our customers, suppliers and business partners?partners?What value do we provide to these key What value do we provide to these key constituencies? (incl. employees and owners)constituencies? (incl. employees and owners)What are the competitive dynamics and balance What are the competitive dynamics and balance of power within the industry?of power within the industry?Can IT be used to create value and change the Can IT be used to create value and change the basis of competition?basis of competition?

Assessing IT-enabled Business Assessing IT-enabled Business Opportunities - IIOpportunities - II

Who are the biggest competitors today?Who are the biggest competitors today?Who will they be in future?Who will they be in future?How easy / difficult for the new players to How easy / difficult for the new players to enter into our markets, offering a unique enter into our markets, offering a unique value proposition and / or substitute value proposition and / or substitute products and servicesproducts and servicesHow easy / difficult would it be for How easy / difficult would it be for customers, suppliers or partners to customers, suppliers or partners to switch?switch?

Assessing IT-enabled Business Assessing IT-enabled Business Opportunities - IIIOpportunities - III

How efficient / effective are our How efficient / effective are our processes?processes?How easy / difficult is it for customers, How easy / difficult is it for customers, suppliers and partners to do business with suppliers and partners to do business with us?us?Could we continuously improve our Could we continuously improve our products / services and the way we do our products / services and the way we do our business?business?

Assessing IT-enabled Business Assessing IT-enabled Business Opportunities - IVOpportunities - IV

Are there any disruptive changes looming Are there any disruptive changes looming on the horizon?on the horizon?Are we in a position to capitalize on these Are we in a position to capitalize on these changes?changes?What is the risk / return profile and the What is the risk / return profile and the window of opportunity?window of opportunity?Do we want to lead the industry or a fast Do we want to lead the industry or a fast follower?follower?

Assessing IT-enabled Business Assessing IT-enabled Business Opportunities - VOpportunities - V

Will changes in related industries (or even Will changes in related industries (or even unrelated industries) influence our unrelated industries) influence our industry?industry?Could we extend into new products / Could we extend into new products / markets?markets?Do we have processes in place to Do we have processes in place to understand and manage risks?understand and manage risks?

Challenges in Business – IT Challenges in Business – IT alignmentalignment

1.1. Well articulated business strategyWell articulated business strategy2.2. Uniform communication of strategy to all Uniform communication of strategy to all

levelslevels3.3. IT’s ability to capture end-user IT’s ability to capture end-user

requirements with speedrequirements with speed

Inhibitors of Business – IT Strategy AlignmentInhibitors of Business – IT Strategy Alignment

1.1. Desire of business leadership to take IT along in Desire of business leadership to take IT along in strategy formulation and executionstrategy formulation and execution

2.2. IT’s ability to understand businessIT’s ability to understand business3.3. Communication gap between business and ITCommunication gap between business and IT4.4. IT’s ability to deliverIT’s ability to deliver5.5. Management support to IT in application prioritization, Management support to IT in application prioritization,

development process and budgetary requirementsdevelopment process and budgetary requirements

Business – IT Alignment at Business – IT Alignment at Three LevelsThree Levels

1.1. Knowledge of business needsKnowledge of business needs2.2. Application development processApplication development process3.3. Management of technologyManagement of technology

achieved byachieved by1.1. Planned development of infrastructurePlanned development of infrastructure2.2. Anticipating future needsAnticipating future needs3.3. Driving for resultsDriving for results

Strategies for Achieving Strategies for Achieving Business – IT AlignmentBusiness – IT Alignment

Recognition of strategic role of IT by Recognition of strategic role of IT by ManagementManagementGood communication between CEO and Good communication between CEO and CIOCIOCIO’s involvement in strategic CIO’s involvement in strategic management of businessmanagement of businessCross rotation of IT managers in business Cross rotation of IT managers in business functionsfunctionsHiring candidates with business Hiring candidates with business experience into IT functionexperience into IT function

Strategies for Achieving Business – Strategies for Achieving Business – IT Alignment (Contd.)IT Alignment (Contd.)

Create an IT architecture to suit the Create an IT architecture to suit the business processesbusiness processesUse IT innovations such as SOA to derive Use IT innovations such as SOA to derive better business advantagebetter business advantageImprove operational level performance of Improve operational level performance of IT through frameworks such as ITILIT through frameworks such as ITILImplementation of IT governance for better Implementation of IT governance for better management of IT resources to provide management of IT resources to provide service at acceptable levels and keep the service at acceptable levels and keep the IT staff motivated and involved in businessIT staff motivated and involved in business

Business – IT Alignment - Business – IT Alignment - TechniquesTechniques

1.1. Cross-functional Steering Committee to keep the Cross-functional Steering Committee to keep the projects on track and deliver business benefitprojects on track and deliver business benefit

2.2. Joint Application Development (JAD)Joint Application Development (JAD)3.3. IT champion in user departmentsIT champion in user departments4.4. User advocate / subject matter expert in ITUser advocate / subject matter expert in IT5.5. Sabbatical for IT staff in user functionSabbatical for IT staff in user function6.6. Making IT staff part of strategy groupsMaking IT staff part of strategy groups7.7. Co-authoring of papers and presentations by user and Co-authoring of papers and presentations by user and

ITIT8.8. Joint training for users and IT on non-technical topicsJoint training for users and IT on non-technical topics

IT Strategy and Business IT Strategy and Business MaturityMaturity

Control IT resources

Solve business problems

Partner with IT culture

Differentiate with IT

Business

centric

Process

automation

Technology

provider

Customer

centric

Extending the EnterpriseExtending the Enterprise

Network – Emerging Organizational Network – Emerging Organizational FormForm

In pre-Internet economy, sharp boundaries between organization and marketIn pre-Internet economy, sharp boundaries between organization and marketNetwork form of an organization blurs the boundary between the twoNetwork form of an organization blurs the boundary between the twoTypical organizational hierarchies have well-defined authority and control; markets do Typical organizational hierarchies have well-defined authority and control; markets do not have enduring relationshipnot have enduring relationshipNetwork falls between the two – cross-enterprise collaborationNetwork falls between the two – cross-enterprise collaborationNo command and control mechanism; but relationships are more enduring than No command and control mechanism; but relationships are more enduring than typical marketstypical marketscross-enterprise collaboration emerges when two or more firms voluntarily agree to integrate human, financial, or technical resources in an effort to create a new, more efficient, effective, or relevant business modelThe parties to a network agree to forego the right to pursue their own interests at the expense of othersTrust is one of the defining elements of a network form of governance, and the network form of governance is therefore not reducible to a hybridization of market and hierarchical forms, which, in contrast, are premised on a more adversarial postureTraditional forms of organization do not have the adaptability and flexibility of network organizationSuccessful collaboration requires the development of new skills, mindsets, and corporate architectures.

Network Organization ImperativesNetwork Organization Imperatives

Each potential participant of a business network has its Each potential participant of a business network has its own strategies, models, and processes for the present own strategies, models, and processes for the present and the future. and the future. Therefore the network should create a joint business Therefore the network should create a joint business logic that matches or complements each company's logic that matches or complements each company's strategic objectives strategic objectives This means that each partner in the network should This means that each partner in the network should reveal its true strategic goals concerning its cooperation, reveal its true strategic goals concerning its cooperation, after which the network may jointly make decisions over after which the network may jointly make decisions over the target for the network. the target for the network. Often takes a considerable amount of time to build a Often takes a considerable amount of time to build a sufficient level of trust between the parties before sufficient level of trust between the parties before strategic intentions are articulated and communicated strategic intentions are articulated and communicated and actions are taken accordingly and actions are taken accordingly

Emerging Extended Enterprise Emerging Extended Enterprise ModelsModels

Based on ownership and governanceBased on ownership and governance Network within a corporationNetwork within a corporation AllianceAlliance CommunityCommunity

Trust – Need of the Inter-firm Trust – Need of the Inter-firm NetworksNetworks

Process-based: emerging from transactions in Process-based: emerging from transactions in an interdependent environmentan interdependent environmentAffiliation-based: feeling of identity within a Affiliation-based: feeling of identity within a groupgroupInfrastructure-based: tied to organizational and Infrastructure-based: tied to organizational and social structuressocial structuresTrust is transferable from a trusted party to an Trust is transferable from a trusted party to an unknown party through provision of unknown party through provision of endorsement / verifiable evidenceendorsement / verifiable evidence

Obstacles for Building TrustObstacles for Building Trust

different units of network members may not different units of network members may not share a common view of the benefits of joining share a common view of the benefits of joining the network. the network. strategic advisability for partnering may be strategic advisability for partnering may be marred by short-term needs to generate income marred by short-term needs to generate income widespread adoption of short-term management widespread adoption of short-term management through increasing shareholder value may be a through increasing shareholder value may be a major stumbling block in the road of many major stumbling block in the road of many networks networks

Steps Towards Building a Steps Towards Building a Successful Network OrganizationSuccessful Network OrganizationChoice of a leader / coordinatorChoice of a leader / coordinatorShould be from the focal company – that which Should be from the focal company – that which provides critical core competence in the new provides critical core competence in the new service conceptservice conceptJoint business model: both top-down and Joint business model: both top-down and bottom-up approachesbottom-up approaches Top-down: alignment of corporate goals to suit the Top-down: alignment of corporate goals to suit the

new business modelnew business model Bottom-up: aligning the business processes to Bottom-up: aligning the business processes to

business modelbusiness model

Business model and context (synthesis from Osterwalder & Pigneur, 2002 and e-factors, 2002)

CSOFT OntologyCSOFT Ontology

Ann Becker S., The Role of Business Models in Developing Business Networks, Electronic Commerce: Concepts, Methodologies, Tools, and Applications, Volume 1 ,IGI Global @ 2008 citation

Potential Benefits from a Virtual Potential Benefits from a Virtual CommunityCommunity

Increase purchasing intention.Increase purchasing intention. A virtual community containing a wide range of A virtual community containing a wide range of information and options for customers can reduce customers' risk perception involved information and options for customers can reduce customers' risk perception involved in making a purchase. Current customers sharing their positive opinions can also in making a purchase. Current customers sharing their positive opinions can also influence potential customers to make purchases.influence potential customers to make purchases.Access to customer opinions.Access to customer opinions. A virtual community can provide valuable feedback A virtual community can provide valuable feedback to the company about its products and services, and how these compare with rival to the company about its products and services, and how these compare with rival companies.companies.Greater ability to meet customers' demands.Greater ability to meet customers' demands. A virtual community can connect A virtual community can connect companies to their customers in order to work together in developing products that companies to their customers in order to work together in developing products that meet customers' needs.meet customers' needs.Additional sources of revenue.Additional sources of revenue. A virtual community provides a means for the A virtual community provides a means for the company to gather detailed information on customer profiles. This information could company to gather detailed information on customer profiles. This information could be used to attract advertisers or sold to marketing companies. Alternatively, if the be used to attract advertisers or sold to marketing companies. Alternatively, if the community is of substantial value to the customer, the company could charge community is of substantial value to the customer, the company could charge subscription or membership fees.subscription or membership fees.Lower customer service costs.Lower customer service costs. A virtual community can help reduce the costs A virtual community can help reduce the costs associated with customer service personnel as community spirit could prompt associated with customer service personnel as community spirit could prompt members to help each other with product advice and thus save on customer service members to help each other with product advice and thus save on customer service costs otherwise incurred by the company.costs otherwise incurred by the company.

NASDAQ – Case StudyNASDAQ – Case Study

Have the Rules of Strategy Have the Rules of Strategy Changed with Internet?Changed with Internet?

It makes strategy more vital than ever – PorterIt makes strategy more vital than ever – Porter““In our quest to see how the Internet is different, In our quest to see how the Internet is different, we have failed to see how the Internet is the we have failed to see how the Internet is the same” – Portersame” – PorterVirtual value chain (as value chain for physical Virtual value chain (as value chain for physical flow of goods) - value-adding steps for flow of goods) - value-adding steps for information (gathering, organizing, selecting, information (gathering, organizing, selecting, synthesizing, and distributing) synthesizing, and distributing)

Michael Hammer’s Prescription for Michael Hammer’s Prescription for Customer EconomyCustomer Economy

make yourself easy to do business with make yourself easy to do business with sell through, not to, your distribution sell through, not to, your distribution channels; channels; push past your boundaries in pursuit of push past your boundaries in pursuit of efficiency; efficiency; lose your identity in an extended lose your identity in an extended enterprise enterprise

These are directly facilitated by the Web These are directly facilitated by the Web initiativesinitiatives

Things to Consider in an EC Things to Consider in an EC InitiativeInitiative

the source and target (business, consumer, the source and target (business, consumer, government)government)the focus (internal or external or both)the focus (internal or external or both)whether the objective is efficiency or whether the objective is efficiency or effectivenesseffectivenessgo it alone versus partnershipgo it alone versus partnershipproactive versus reactive approachproactive versus reactive approachtargeting one-time versus ongoing customerstargeting one-time versus ongoing customersphysical versus virtual goodsphysical versus virtual goodssingle good/service versus package single good/service versus package

Strategic IT Planning (SITP)Strategic IT Planning (SITP)

Strategic planning is the systematic Strategic planning is the systematic examination of opportunities and threats in examination of opportunities and threats in the business environment so that you are the business environment so that you are in a position to identify those opportunities in a position to identify those opportunities that should be exploited and those threats that should be exploited and those threats that should be avoided that should be avoided

––George SteinerGeorge Steiner

Strategic Planning ProcessStrategic Planning Process

You are here

You want to be here

Current IT support

Best practices

Gap Assessment IT strategy

SITP ExplainedSITP Explained

The core purpose of SITP lies in identifying future The core purpose of SITP lies in identifying future directions of investments in information technology directions of investments in information technology and systems to assist the organization realize its and systems to assist the organization realize its business goal (Tuebner and Mocker)business goal (Tuebner and Mocker)Planning is a process by which deployment of Planning is a process by which deployment of resources (people, money, hardware / software etc.) resources (people, money, hardware / software etc.) is decided based on the strategic direction, is decided based on the strategic direction, importance of current operation and the returns each importance of current operation and the returns each investment is going to produce in terms of cost investment is going to produce in terms of cost saving, customer satisfaction or competitive saving, customer satisfaction or competitive advantage (3 Cs)advantage (3 Cs)

Strategic IT Planning MethodsStrategic IT Planning Methods

Top down analytical approachTop down analytical approach Identify and agree on business objectiveIdentify and agree on business objective Define critical success factors (CSF)Define critical success factors (CSF) Arrive at information systems portfolio that Arrive at information systems portfolio that

supports / enables these factorssupports / enables these factors

Bottoms up evaluative approach: Emphasis Bottoms up evaluative approach: Emphasis on current systems – graded by business on current systems – graded by business value and technical quality and options are value and technical quality and options are exercisedexercised

Bottoms-up Evaluative Bottoms-up Evaluative ApproachApproach

Divest Reassess

Renew Maintain and Enhance

Perceived value

Lo Hi

Lo

Hi

Creative ApproachCreative Approach

Explore external factors too for innovationExplore external factors too for innovation

Challenges in Developing and Challenges in Developing and Executing SITPExecuting SITP

Continuous improvement of applications Continuous improvement of applications and infrastructureand infrastructureLack of joint ownership between business Lack of joint ownership between business and ITand IT

SITP Approaches – Business SITP Approaches – Business Systems Planning ApproachSystems Planning Approach

Developed and promoted by IBMDeveloped and promoted by IBMFocus on data and processes; based on Focus on data and processes; based on these an information architecture is these an information architecture is proposedproposedIdentify missing systemsIdentify missing systemsPrioritize for developmentPrioritize for development

SITP Approaches – Critical SITP Approaches – Critical Success Factor ApproachSuccess Factor Approach

Focus on important managerial issuesFocus on important managerial issuesIdentify the information needs for the Identify the information needs for the CSFsCSFs

SITP Approaches – Stages of SITP Approaches – Stages of Growth ApproachGrowth Approach

Six stages of IT adoption as identified by Six stages of IT adoption as identified by Richard NolanRichard Nolan

Maturity IT as a resource: IT projects deliver expected results

Data Administration

Shared data and common systems. Users are made accountable for the success of systems

Integration Of processes and systems with support for innovation

Control Disjointed applications lead to sub optimization of resources, cost over run and delayed delivery requiring management intervention to discipline

Expansion Automation demands: multiple stand-alone applications

Initiation Computerization of routine processes like payroll, FA

SITP Approaches – Value SITP Approaches – Value Chain AnalysisChain Analysis

All the generic activities are examined to All the generic activities are examined to determine how they can be improved to determine how they can be improved to lower cost / increase value and how this lower cost / increase value and how this can be achieved using ITcan be achieved using IT

SITP Approaches – Value SITP Approaches – Value MatrixMatrix

Operational excellenceResource optimization

Time to market

BreakthroughNew market expansion

Customer value creation

Routine applications HR, Finance Experimentation led applications (eg) mobile commerce

Busines criticality

InnovationLo Hi

Hi

Useful for application prioritization

SITP Approaches – Linkage SITP Approaches – Linkage AnalysisAnalysis

Suitable for e-businessSuitable for e-businessIdentifies inter-organizational linkages, their shortcomings and Identifies inter-organizational linkages, their shortcomings and then plans for their reinforcementthen plans for their reinforcementFive stepsFive steps

Innovate to focus on revenue generation than cost controlInnovate to focus on revenue generation than cost control Invest in technology Invest in technology Understand who wields power among the various players and build Understand who wields power among the various players and build

electronic linkageselectronic linkages Manage across supply and distribution channelsManage across supply and distribution channels Improve information across the network thro electronic channelsImprove information across the network thro electronic channels

The method advocates use of information technology to The method advocates use of information technology to redefine network affiliation and restructure the industrial space redefine network affiliation and restructure the industrial space

SITP Approaches – Scenario SITP Approaches – Scenario PlanningPlanning

Several possible scenarios are crafted for Several possible scenarios are crafted for the futurethe futureA team complies possible future events A team complies possible future events that may have influence over outcome of that may have influence over outcome of each scenarioeach scenarioIdentify business strategy for the Identify business strategy for the shortlisted scenarios shortlisted scenarios Envisage IT applications needed for each Envisage IT applications needed for each of these strategiesof these strategies

Integrated Planning ApproachIntegrated Planning Approach

Combines elements of different methodsCombines elements of different methods Perform business analysis to understand Perform business analysis to understand

critical areascritical areas Identify potential IT projects to serve these Identify potential IT projects to serve these

areasareas Rank projects on 3C principleRank projects on 3C principle

Typical Content of SITPTypical Content of SITPa)a) Executive summaryExecutive summaryb)b) Objectives of SITPObjectives of SITPc)c) Basic structureBasic structure

a)a) Data modelData modelb)b) Process diagramProcess diagram

d)d) Identified application portfolioIdentified application portfolioe)e) Applications available off-the-shelf / to be developedApplications available off-the-shelf / to be developedf)f) Recommended implementation planRecommended implementation plang)g) Budget Budget h)h) HR Plan – skill requirement, recruitment and training planHR Plan – skill requirement, recruitment and training plani)i) Organization planOrganization planj)j) Change management plan for process changesChange management plan for process changesk)k) Technical architecture – hardware, networks, software, data base, interfacesTechnical architecture – hardware, networks, software, data base, interfacesl)l) Migration planMigration planm)m) Project calendarProject calendarn)n) Policies for project management, systems development and package selectionPolicies for project management, systems development and package selectiono)o) Security planSecurity planp)p) Cost – benefit analysisCost – benefit analysisq)q) Risk managementRisk managementr)r) Projection of possible future requirements and comparison of past IS performanceProjection of possible future requirements and comparison of past IS performance

Why Does SITP Fail?Why Does SITP Fail?Inadequate resources (financial, technical, human) for implementationInadequate resources (financial, technical, human) for implementationLack of user involvement during implementationLack of user involvement during implementationInadequate analysis of information needsInadequate analysis of information needsFailure to anticipate changes in external environment (architecture should Failure to anticipate changes in external environment (architecture should be made flexible enough to allow mid-course correction)be made flexible enough to allow mid-course correction)Resistance to change – fear of loss of job, authority etc.Resistance to change – fear of loss of job, authority etc.Poor choice of technologyPoor choice of technologyNo ownership of SITPNo ownership of SITPLack of management supportLack of management supportCommunication issuesCommunication issuesIT’s inability to understand business requirements IT’s inability to understand business requirements Poor IT leadershipPoor IT leadershipLine managers fail to appreciate long term goals and do not support SITPLine managers fail to appreciate long term goals and do not support SITP

Implementation Best PracticesImplementation Best Practices1.1. Strong implementation teamStrong implementation team2.2. Clarity of expectationsClarity of expectations3.3. Ownership by stakeholdersOwnership by stakeholders4.4. Process-driven approachProcess-driven approach5.5. Proper monitoring / reviewProper monitoring / review6.6. Addressing root causes of slippagesAddressing root causes of slippages7.7. Proof-of-concept approachProof-of-concept approach8.8. Documentation of requirementsDocumentation of requirements9.9. Change managementChange management10.10.Involving users in implementation team full-timeInvolving users in implementation team full-time

Enterprise IT ArchitectureEnterprise IT Architecture

Establish alignment between business Establish alignment between business strategy and IT strategystrategy and IT strategy

Develop strategic IT planDevelop strategic IT plan

Enterprise IT ArchitectureEnterprise IT Architecture

Application DevelopmentApplication Development