Strategic Planning

for Information
Systems
Third Edition
CHAPTER 6
Determining the
John Ward and Joe Peppard
Business Information
Systems Strategy

1
 Learning Objectives
1. Objectives in determining the IS/IT
strategy
2. Strategic planning techniques & their
relationships
3. Main factors influencing balance of
portfolio
4. Identifying how IS/IT could impact the
strategy
5. Key business issues in IS/IT planning
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 Strategy: Review
A strategy is ‘an integrated set of actions
aimed at increasing the long-term well-being and
strength of the enterprise.’

The set of decisions made to best ensure

achievement of the desired objectives, based on
an assessment of:
... one's own current situation/position; capabilities
& shortcoming; competitive position
... options/alternatives -- risks
... timing

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 Determining the IS Strategy
• Systems and information already exist and
normally be deployed
• Strategy MUST identify what is eventually
required and what has already been achieved
• IS plan must identify migration path that:
– overcomes existing weaknesses,
– exploits strengths and
– enables new requirements to be achieved so that it
can be resourced and managed appropriately

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 Determining the IS Strategy
• IS/IT strategy MUST be integrated in
terms of information, systems and
technology via coherent set of actions and
process of adaptation to meet changing
needs of organisation as it evolves
• Changing circumstances will mean the
organisation will have to be capable of
effective responses to unexpected
problems and opportunities

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 Objective in Determining the IS
Strategy
• Identify required applications & their
priority
• Be able to deploy resources to achieve
them successfully
• One end product is the application
portfolio Existing applications – in place or in development
Required applications –Necessary to achieve business
objectives & strategy within the planning horizon
Potential applications –Might prove valuable in the future if
feasible to deliver and can produce demonstrated benefit
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 Main Factors Influencing
Balance Of Portfolio
• External long term – external business
environment
– State of the industry in terms of profitability, growth and
structure
– Degree to which IS/IT is capable of changing the
products, markets and interrelationships
• External short term – external IS/IT environment
– Actual use of IS/IT by competitors and other industry
players to gain relative advantage
– Opportunities created by IS/IT to change balance of
competitive forces and influences

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 Main Factors Influencing Balance Of
Portfolio
• Internal long term - internal business environment
– How new IS/IT applications could more effectively
support or enhance business strategy
– How new IS/IT applications could enable business to
adopt more appropriate strategy to suit future business
environment
• Internal short term – current application portfolio
– Degree to which existing systems support chosen
strategy and criticality of systems avoiding business
disadvantage and/or sustaining existing advantages
– Existing approach to IS/IT management and
appropriateness to business strategy
– IS/IT resources and competencies the organisati0on
has/or can easily acquire

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 Strategic Planning Techniques &
Their Relationships
• Internal and external factors considered in
terms of influence in determining what
could and should be done rather than
how to do it is the focus of this stage in
planning process

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 Continue…
• The process for formulating the IS/IT
strategy emphasize the need to determine
requirements before deciding how to
satisfy them.
• Demand for IS/IT in a particular business
unit can be described as a ‘business
information systems strategy’ using the
portfolio concept

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 Inputs To IS/IT Strategy Formulation &
Techniques Used To Populate The Portfolio

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• Next stage involves HOW various techniques
and approaches can be brought together to
ensure that the products of analysis are
consistent and can be reconciled in more
detailed planning
• Main objective of determining the IS strategy is
to identify required applications and priorities
and be able to deploy resources to achieve them
successfully (see fig. 6.2 pg. 281 Framework for
determining business IS Strategy)

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Over All Framework for Determination
of the Business IS Strategy Identifying Potential
Assessing the Need for Appraisal of IS/IT as
Immediate Investments it Relates to the Future Investment
(6-12 mths) Business (1-3 yrs)
Informal
creative
Understand the industry thinking
structure and business
position (Inc SWOT) Consider potential IS/
Interpret business
IT impact on product/
objectives and strategy
markets, etc.
Analyse the external
value chain & information
flow implications
Determine CSFs for Consider the strategic
the enterprise or unit potential of IS/IT to change
the structure & performance
Analyse the internal value of the value chain
chain & organizational
relationships
Identify critical business Assess options for new
processes & activities IS/IT investment &
Assess the business select most beneficial
contribution of existing
systems
Determine short-term
focus for investments
Existing
Required
Potential
Applications Portfolio

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Parts of Application Portfolio
• Portfolio divided into three components
– Existing – currently in place & being developed to be
installed in near future (6-12 months)
– Required – those necessary to achieve business
objectives and strategy within business planning
horizon and shown to have specific contributions to
make
– Potential – those that might prove valuable in the
future provided they prove feasible to deliver and can
produce relevant benefits

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 Continue…
• Products of each category needs to be
interrelated and consolidated
– iterative process – refers to
• Need to continually reappraise how both external and
internal environs are changing and role IS/IT is or
should be fulfilling in business and its relationships
(central column)
• Need to identify and monitor new and emerging IS/IT-
based opportunities to create potential advantages (or
that might result in disadvantages if ignored) (right
column)
• Need to make decisions on HOW to best deploy
available business and IS/IT resources in immediate
future (left column)

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 Identifying How IS/IT Could
Impact The Strategy
• Understanding the industry and the
potential impact of IS/IT on products and
markets
• Interpreting business objectives and
strategy
• Analyzing the industry (external) value
chain and information flows
• Determine critical success factors
• Determine strategic potential
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 The Steps which Define the
Strategic IS Potential & Options
Assessing the Need for Appraisal of IS/IT as Identifying Potential
Immediate Investments it Relates to the Future Investment
(6-12 mths) Business (1-3 yrs)
Informal
creative
Understand the industry thinking
structure and business
position (Inc SWOT) Consider potential IS/
Interpret business
IT impact on product/
objectives and strategy
markets, etc.
Analyse the external
value chain & information
flow implications
Determine CSFs for Consider the strategic
the enterprise or unit potential of IS/IT to change
the structure & performance
Analyse the internal value of the value chain
chain & organizational
relationships
Identify critical business Assess options for new
processes & activities IS/IT investment &
Assess the business select most beneficial
contribution of existing
systems
Determine short-term
focus for investments
Existing
Required
Potential
Applications Portfolio

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Understanding the Industry & Potential
Impact of IS/IT on Products & Markets
Key Business Issues should be considered
• Business units & relationships
• Stage of maturity of the industry where the business
compete
• Product & customer portfolios of business units and the
contributions to revenues and profits, and demands on
resources
• Competitive forces affecting business units and
corporation - SWOT analysis
• Key competencies required to succeed – status of
competency in each dimension: customer, product &
operation
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Results of Examining Business Issues
1. Consideration of business strategy in
established environment
2. Identification of ways IS/IT can impact
products/services/economics and affect
competitive forces

The understanding of the organization in term of

business units, their relationships and the
similarities and differences among them and the
environments in which they operate.

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Interpreting Business Objectives
• Business objectives & strategies products of
number of considerations
– What the organization might do based on
environment it operates in or by moving into new
environments
– What the organization wants to do based on the
values and views of senior executives and
stakeholders
– What the organization must do if it is to survive in its
environment, depending on the pressure groups and
their influence.
– What the organization can do based on its
resources and capabilities 20
 Prioritizing Objectives
• Objectives need to be prioritized into low
medium and high and measurement criteria
established
• Another way of structuring objectives is to
consider them at three levels
– Permanent – reflect mission and overall company
goals and long-term intentions=> why the company
needs or intends to do things
– Strategic – which the company wants to achieve in
medium-term
– Tactical - company and divisions can & must
achieve in short-term to make strategic and
permanent objectives achievable 21
 Prioritizing Objectives
• IS/IT may change objectives due to its potential
impact on the business environment.

• Bring together the potential impact of IS/IT on

the industry and the objectives of the
organization either to develop new objectives or
qualify the priority given to existing objectives
based on IS/IT threats and opportunities.

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 Analysing the Industry Value
Chain and Information Flows
• Industry value chain effectively a high-
level information flow model

• Demonstrates role information can play

in determining overall performance of
industry & how it can be used by
suppliers, customers and competitors to
effect potential achievement of strategy

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 Analysing the Industry Value
Chain and Information Flows
• The product of the analysis is an
understanding of the information
relationships and entities that all players in
the industry need to manage well to
achieve success.

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 Analysing the Industry Value
Chain and Information Flows
• External value chain and information
models form a framework for more
detailed considerations of internal
implications
• Data flow analysis and entity modelling
can then be used to define detailed
information involved – potential sources
and uses

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 Determining Strategic
Potential
• Next stage to consider in more detail how
key business processes (information &
systems terms) relate to & are affected by
other organizations’ systems in industry
value chain

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 Determining Strategic
Potential
• Strategic potential of IS/IT & its effect on overall
value chain can be identified
• RLC analysis and SOG enable consideration of
which other parties in industry, to what extent &
for what purpose organization can & should
extend information through external value chain
& exert pressure to accommodate external
changes in industry & processes

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 Determining Strategic
Potential
• Ability to take advantage of such
opportunities depends on
– Effectiveness of existing internal systems in
linking chain together
– Possibility of economics of obtaining
additional information
– Willingness of suppliers & customers to co-
operate, based on benefits they perceive

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 Establishing Relative Priorities
for IS/IT Investments
• Analyzing the internal value chain and
organizational relationships
• Identify critical business process activities
• Assessment of new options for investment
• Determining the future application portfolio

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 Analyzing the Internal Value Chain
and Organizational Relationships
• Involves analysis of internal value chain to
identify what business does and how it
could be better carried out
• Analysis of organization to show how it is
structured to do it will most likely produce
a ‘mismatch’

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 Analyzing the Internal Value Chain
and Organizational Relationships
• Equally inevitably existing systems and
information resources will have been
established more from organizational than value
chain perspective
• Value chain offers firmer foundation than
current organisational structure or relationships
model in terms of understanding and analysing
key business processes and activities &
identifying appropriate requirements

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 Analyzing the Internal Value Chain
and Organizational Relationships
• Important to identify primary activities
– those essential to value-adding processes &
to describe key information requirements of
each & links among them
• As a result, existing value chain can be
‘extended’ or redefined in terms of
external relationships

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 Analyzing the Internal Value Chain
and Organizational Relationships
• Processes needing most improvement
should be identified from analysis of
competency
– eg. Customer intimacy – IS/IT should be
targeted on innovation or extension of
customer-facing activities
– Problematic processes need to be targeted
to bring back to required levels

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 Analyzing the Internal Value Chain
and Organizational Relationships
• Opportunities for gaining advantage for IS/IT
exist in both primary & support activities as do
‘opportunities’ to incur a ‘disadvantage’
• Disadvantage incurred more immediately due to
failure of primary activities
• Analysis details how and how effectively
business relates to trading partners

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 Analyzing the Internal Value Chain and
Organizational Relationships
• The organizational structure can be examined to
identify how the activities of each function
contribute to or fulfil a primary role.
• Some support activities will exist merely
because of poor linkages with other functions,
their existence being the result of failure in
another part of the organization.
• Support activities more organisationally
dependent
– assist in planning or controlling primary activities

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 Analyzing the Internal Value Chain
and Organizational Relationships
• Support activities require analysis in terms of
the information they need from primary
functions, plus any additional information, and
in terms of how primary functions can obtain
information from them in order to manage their
activities successfully.
• IS can be used to:
– enhance efficiency,
– Enhance management’s performance or
– add value to business in terms of external
relationships and perceptions
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 Analyzing the Internal Value Chain and
Organizational Relationships
• A very useful step in the analysis to
position each of the CSFs in the value
chain to identify which activities, or sets of
related activities, need most attention to
sustain or improve overall business
success

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 Identify Critical Business
Process and Activities
• The nature of the potential for business improvement will vary
depending on the relationship b/w the value adding, cost and
the CSFs associated with activities and processes
– A high-cost, low-value-adding activity with few CSFs clearly only offer
cost-reduction possibilities from IS/IT investment
– A high-value adding activity could be made effective through IS/IT
investment, if its improvement relates directly to agreed business CSFs.
– A high-cost as well as a high-value-adding activity, then IS/IT may still
help to reduce cost
– Activities associated with a CSF, then they need to be assessed in terms
of option for enhancing the value or reducing the cost of each, via IS/IT
developments
– If an activity add little value and is not associated with any CSFs, it is
more important to question whether it is needed at all than to consider
how to improve it through IS/IT.

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 Assessing New Options
for Investment Questions
• What could IS/IT do for all firms in industry in
terms of changing parameters & relationships?
• What could IS/IT do for the organization based
on its particular position in industry?
• Which options offer most immediate benefit in
terms of business objectives/strategy & way the
business operates & is managed?

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 Determining the Future
Application Portfolio
• Need to consolidate strategic and high-potential
applications plus a need to address the
weakness of existing key operational and
support systems
• It is worth emphasizing that it is more important
to deal with serious weakness first, especially if
they could soon result in a real threat to the
business
• Some opportunities that are not dependent on
anything else should be pursued, in particular
where they build on existing strengths, giving
more chance of success. 40
 Determining the IS Strategy
Large Organisations & Multiple
SBUs
• Number of factors to be considered (see page
295)
• Corporation overall needs to gain from
synergies and economies
• Need to compare results of each SBU analysis
and share ideas
• Reveal cross-unit opportunities so results can
be ‘pooled’ and made available to others to
‘adapt’, adopt or join in development if
appropriate
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