Transcript Week 3 Monday, February 6 Strategic Alignment Business Networks

Week 3
Monday, February 6
Strategic Alignment
Business Networks
R. Ching, Ph.D. • MIS Area • California State University, Sacramento
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Strategic Alignment
• Alignment between the business and IT strategies
• Alignment between strategy and capabilities
Business
IT
Strategy
Strategy
Value
Capabilities
Including infrastructure
Capabilities
Including infrastructure
R. Ching, Ph.D. • MIS Area • California State University, Sacramento
IT infrastructure
• Technology IT
infrastructure
• Human IT
infrastructure
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Porter’s Five Forces Model
Forces that Shape Strategy

How will the business
Potential
react to threats (and
Entrants
opportunities)?
Threat of new entrants
Industry
Competitors
Bargaining power of
suppliers
Customers and
Buyers
Suppliers



Bargaining power of buyers
Rivalry among
existing firms
Substitutes
R. Ching, Ph.D. • MIS Area • California State University, Sacramento

Threat of substitute products or
services
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Strategy and Threats
Threats
Opportunities
Strategy
How does the business capitalize on its threats?
R. Ching, Ph.D. • MIS Area • California State University, Sacramento
4
Strategic Information Systems Planning
(SISP)
• Definition
... a process conducted within the contexts of scope,
perspective, time frame, and level of abstraction, with
any or all of the following agenda: (1) supporting and
influencing the strategic direction of the firm through
identification of value-adding computerized information
systems, (2) integrating and coordinating various
organizational technologies through development of
holistic information architectures, and (3) developing
general strategies for successful systems
implementation.
Segars, Grover and Teng.1998
R. Ching, Ph.D. • MIS Area • California State University, Sacramento
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SISP Progression
Alignment of
IS strategy
with corporate
strategy
Enabling
initiatives for
gaining
competitive
advantage
Architectures for
sharing
organizational and
interorganizational
data and
integration
technologies
IS viewed as
strategic
resource
R. Ching, Ph.D. • MIS Area • California State University, Sacramento
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Context Characteristics of SISP
Scope (broad)
Perspective
(upper management)
Time Frame
(long range)
Level of Abstraction
(conceptual)
Strategic
Information
Systems
Planning
• Supporting and influencing the strategic direction
of the firm through identification of value-adding
computerized information systems
• Integrating and coordinating various
organizational technologies through development
of holistic information architectures
• Developing general strategies for successful
systems development
R. Ching, Ph.D. • MIS Area • California State University, Sacramento
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Six Process Dimensions
Comprehensiveness
Formalization
Focus
Coalignment*
Flow
Participation
Consistency
R. Ching, Ph.D. • MIS Area • California State University, Sacramento
Planning
Effectiveness
Favorable coalignment will
lead to effective planning
*Alignment of dimensions
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1. Comprehensiveness
• Thoroughly canvassing a wide range of alternatives
• Surveying a full range of objectives
• Carefully weighing the costs and risks of various
consequences
• Intensively searching for information to evaluate
alternative actions
• Objectively evaluating information or expert judgment
regarding alternative actions
• Re-examining the positive and negative consequences
of all known alternatives
• Making detailed plans, including consideration of
contingencies, for implementing a chosen action
R. Ching, Ph.D. • MIS Area • California State University, Sacramento
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2. Formalization
• Existence of structures, techniques, written procedures
and policies that guide the planning process
– Written policies that structure the process of planning
– Formalized techniques adopted for the purpose of
conducting strategic planning
– Known procedures for initiating the planning process
• Processes systemize information collection and
dissemination
Formalization vs. Flexibility
R. Ching, Ph.D. • MIS Area • California State University, Sacramento
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3. Focus
• The balance between creativity and control orientations
inherent within the strategic planning system
Innovation vs. Integration
– Innovative orientation nurtures creativity (innovative,
novel solutions)
– Integrative orientation focuses more on control
(budgetary, cost performance, controlled diffusion of
assets within the organization)
R. Ching, Ph.D. • MIS Area • California State University, Sacramento
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4. Flow
• Locus of authority or devolution of responsibilities for
strategic planning
– Roles played by corporate and divisional managers in
the initiation of the planning process (vertical
orientation)
Top-down vs. Bottom-up
– Top-down: limited participation of lower level
managers in the initiation of the strategic planning
process
– Bottom-up: functional management involvement in
the initiation of strategic planning
R. Ching, Ph.D. • MIS Area • California State University, Sacramento
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5. Participation
• Breadth of organizational involvement in strategic
planning
– Representation from the functional areas
Narrow vs. Broad
– Narrow: fosters an isolated approach to plan
formulation with little involvement or interaction
among various functional or operational managers
– Broad: a variety of functional and operational areas
help offset “bounded rationality” of top managers
R. Ching, Ph.D. • MIS Area • California State University, Sacramento
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6. Consistency
• Concerned with the frequency of planning activities or
cycles, and evaluation /revision of strategic choices
Frequent vs. Infrequent
– Infrequent: time frame longer, face-to-face meetings
tend to be ad hoc or sporadic, planning cycles may be
year-to-year (vs. continuous or consistent process)
– Frequent high levels on consistency characterized by
continuous planning process with frequent meetings,
constant communication among planning participants,
and frequent assessment and revision of strategic
direction
R. Ching, Ph.D. • MIS Area • California State University, Sacramento
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Proposition
• Strategic IS planning systems that reflect a profile of
rational adaptation will be positively associated with
planning effectiveness. The structure or internal
coalignment of a rational adaptive planning system
includes:
– higher levels of comprehensiveness
– higher levels of formalization
– a focus on control vs. creativity
– a top-down vs. bottom-up planning flow
– higher levels of participation
– higher levels on consistency
Segars, Grover and Teng.1998
R. Ching, Ph.D. • MIS Area • California State University, Sacramento
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Coalignment
• Coalignment strongly associated with planning
effectiveness
– If dimensions of strategic planning systems favorably
align, the planning system as a structure should be
more successful than its individual dimensions
– Effectiveness may be beyond performance
measurement (e.g., ROI, ROE)
– Alternative: value-added approach
• Improved management making
• Lower costs of development
• Plans that are actionable and implemented
R. Ching, Ph.D. • MIS Area • California State University, Sacramento
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Internal Planning System Coalignment
• The planning system should be structured process of
opportunity search that “adapts” through consistent
feedback and wide participation
– Rational planning tendencies of extensive alternative
generation and solution search, formalized procedures
and policies for planning, a focus on control, and topdown planning flow
– Adaptive tendencies of wide participation profiles and
high levels of planning consistency
Rational adaptation
R. Ching, Ph.D. • MIS Area • California State University, Sacramento
Planning effectiveness
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Implications for Strategic IS Planning
• Planning must be designed, evaluated, and refined such
that the overall activity of planning does not become
dysfunctional
• Emergent systems of planning should reflect the
environmental and organizational context within which
they function
R. Ching, Ph.D. • MIS Area • California State University, Sacramento
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Source: “Strategic Information Systems Planning: Planning
System Dimensions, Internal Coalignment and Implications
for Planning Effectiveness,” Albert H. Segars, Varun Grover,
and James T. Teng. Decision Sciences (journal), vol. 29, no. 2
(Spring 1998).
R. Ching, Ph.D. • MIS Area • California State University, Sacramento
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IT and Organizations
Control
Organizational Redesign
R. Ching, Ph.D. • MIS Area • California State University, Sacramento
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Control
• Ensures the organization’s goal and objectives are met
– Mechanisms for monitoring the differences between
desired and actual performance (i.e., checks and
balances)
• Types of controls
– Action controls – operational control level
– Result controls – toward the strategic
planning level
Design
– Personnel controls – Recruiting, hiring and
into the
retaining the right people with the right skills Organiza– Transaction controls – accurate and complete tion
documentation of financial and legal
transactions with regular review to ensure
risk and asset management
R. Ching, Ph.D. • MIS Area • California State University, Sacramento
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Ad Hoc Planning and
Organizational Redesign
Longer tongue
Longer bill
Strengthened neck
Volume increases by its
cube (v3), area by its
square (a2)
Counterbalance
weight
Larger wings
Strengthen legs
Duck Tongues: A Tale of Redesigning the Duck
R. Ching, Ph.D. • MIS Area • California State University, Sacramento
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Common Problems
With Organizational Redesign
• Failure to redesign end-to-end
processes
• Failure to realign operations
with other components of the
organizational redesign
Business cycle
Piece-meal approach
• Operating processes – activities that define how a firm
designs, produces, distributes, markets, sells and
supports its products and services
• Management processes – activities that define strategic
direction and coordinate and control operations
R. Ching, Ph.D. • MIS Area • California State University, Sacramento
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MIT90 Framework
Five Inter-Related Components
Structure
Vision and
direction
Strategy
Organization and coordination
Planning and control
Management
Processes
Individuals
and Roles
Information
Technology
Technology
Human resources
Dynamic Equilibrium: Any change to a component requires an
adjustment to the others
R. Ching, Ph.D. • MIS Area • California State University, Sacramento
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MIT90 Framework
• Strategy - pattern of missions, objectives, policies, and
significant resource utilization plans stated in such a way
as to define what business the company is in (or is to be
in) and the kind of company it is or is to be. It defines
– The product line, markets and market segments for which
products are to be designed
– The channels through which these markets will be reached
– The means by which the operation is to be financed
– The profit objectives
– The size of the organization
– The image which it will project to employees, suppliers and
customers
Bullen and Rockart, 1981
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MIT90 Framework
• Technology - encompasses all of the factors that
directly enter into the transformation of organizational
inputs into organizational outputs
– Tools, equipment and machinery used in the
transformation process
– Technical procedures and systems
Porras and Robertson (1990)
R. Ching, Ph.D. • MIS Area • California State University, Sacramento
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MIT90 Framework
• Information Technology - “comprises those
technologies engaged in the operation, collection,
transport, retrieval, storage, access presentation, and
transformation of information in all its forms”
Boar (1997)
R. Ching, Ph.D. • MIS Area • California State University, Sacramento
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IT and the Organization
Technology
Push
• Cost
performance
trends
• Connectivity
capabilities
Competitive
Pull
IT as a
Strategic
Resource
Enhancing Productivity
R. Ching, Ph.D. • MIS Area • California State University, Sacramento
Innovative ITenabled
applications to
obtain
differential
benefits in the
marketplace to
stay competitive
Leveraging IT
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IT Application Framework
IT to differentiate the organization from others
Strategic
Application of
IT
Basic IT to remain competitive in industry
Reengineering
Business
Processes
Basic IT to do business
IT
Infrastructure
R. Ching, Ph.D. • MIS Area • California State University, Sacramento
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MIT90 Framework
• Management Processes - Ensure the orderly
production of goods and services
– Planning is the process of deciding on objectives,
on changes in these objectives, on the resources
used to attain these objectives, and on the policies
that are to govern the acquisition, use, and
disposition of these resources.
– Control is the process by which managers assure
that
• Resources are obtained and used effectively and
efficiently in the accomplishment of the
organization's objectives
• Specific tasks are carried out effectively and
efficiently
R. Ching, Ph.D. • MIS Area • California State University, Sacramento
Anthony (1965)
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MIT90 Framework
• Structure - organization and coordination
– Communication
– Authority
– Workflow
Leavit (1965)
R. Ching, Ph.D. • MIS Area • California State University, Sacramento
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MIT90 Framework
• Individuals and Roles - people and skills necessary
to utilize the technology
– Designs of jobs required to use the technology
– Technical expertise of organizational members
Porras and Robertson (1990)
R. Ching, Ph.D. • MIS Area • California State University, Sacramento
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IT Infrastructure
• Technology IT infrastructure – Hardware and software
• Human IT infrastructure – People to make the IT work
– Without the right people, an organization would not
benefit from the most advanced IT
R. Ching, Ph.D. • MIS Area • California State University, Sacramento
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Influence of IT on Organizational Resign
Structure
Technology
Management
Processes
Successful
Business
Model
Strategy
Strategy incorporates a
vision of technology
Individuals
and Roles
R. Ching, Ph.D. • MIS Area • California State University, Sacramento
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Extending the Enterprise
Role of IT in Integrating the Business
R. Ching, Ph.D. • MIS Area • California State University, Sacramento
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Inputs
Processes
Outputs
What does it take to get
groceries into a home?
R. Ching, Ph.D. • MIS Area • California State University, Sacramento
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Business Network
Manufacturers
Distributors
Peapod
Delivery
Consumer
How does IT provide a competitive advantage?
R. Ching, Ph.D. • MIS Area • California State University, Sacramento
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Business Networks
Differentiation vs. Integration
• Design of business network
– Differentiation – defines how individuals, groups and
organizations are subdivided into specialized work
units
• Horizontal, vertical and spatial networks
– Integration – defines the relationships and links
between units that are required to unite specialized
individuals, units and organizations to enable them to
achieve a common purpose and create shared value
• Task-based relationships, information- or expertisebased relationships, or social relationships
R. Ching, Ph.D. • MIS Area • California State University, Sacramento
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Differentiation and Integration
Strategic
Vertical division
Tactical
Power authority
levels
Operational
Integration
Networks
Social
Task-based
Horizontal division
Specialization
R. Ching, Ph.D. • MIS Area • California State University, Sacramento
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Network Relationships
• Required in environments characterized by increased
complexity, uncertainty and turbulence, especially when
the network contains a large number of highly
differentiated nodes (units) that must work closely
together to achieve a common goal
• Environments that require
– Innovative and creative thinking
– Information sharing and decision making
– Coordination and cooperation
R. Ching, Ph.D. • MIS Area • California State University, Sacramento
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Designing High-Performance Inter-Firm
Business Networks
•
Decisions considering…
1. Network differentiation and unit groupings
2. Network integration and interdependencies
3. Network ownership
R. Ching, Ph.D. • MIS Area • California State University, Sacramento
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1. Network Differentiation and Unit Groups
• Capabilities and resources to execute strategy and
achieve the business’ goals
• Activities required to acquire these capabilities and
resources
• Grouping activities in specialized units to focus on
developing the best in class capabilities, and efficiently
and effectively achieving the goals
R. Ching, Ph.D. • MIS Area • California State University, Sacramento
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2. Network Integration and
Interdependencies
• Managing specialized units internal or external to the
organization
• Organizational solutions to coordinate and control
interdependencies among specialized units (in the
network)
• Alignment between business environment and strategy
to enable network to achieve goals and create value
R. Ching, Ph.D. • MIS Area • California State University, Sacramento
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Interorganizational Governance Models
• Market models – transaction based (exchange of goods
and services for payment)
• Hierarchical models – formal contracts and authority
govern the activities to be performed, products or
services to be provided, price to be paid, and length of
the relationship
• Partnerships – complex, uncertain and
critical interdependencies to the success Supply chain
management
of the partners (businesses)
R. Ching, Ph.D. • MIS Area • California State University, Sacramento
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3. Network Ownership
• Within the corporation or
organization
• Alliance between two members
(businesses)
• Ecosystem – community of
diverse members, each working
together toward achieving a
common goal (collaborative
community)
R. Ching, Ph.D. • MIS Area • California State University, Sacramento
Pre-1980s
1980s and early 1990s
(Unknown)
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Hybrid Governance Models:
Collaborative Communities
• IT opens new opportunities for collaboration among
businesses
– Enable coordinating and controlling inter- and intrafirm interdependencies
• Distinguishing features:
– Shared purpose and values stress an ethic
contribution
– Organizational configurations and solutions support
horizontal relationships (and vertical, authority-based
and market-based relationships)
– Development of interdependent form of identity that
motivates and engages active participation and
affiliation
R. Ching, Ph.D. • MIS Area • California State University, Sacramento
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Business Network
Manufacturers
Distributors
Peapod
Delivery
Consumer
How does IT provide a competitive advantage?
R. Ching, Ph.D. • MIS Area • California State University, Sacramento
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R. Ching, Ph.D. • MIS Area • California State University, Sacramento
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