Strategic Management of Organization and ICT (SMOI) · John Ward and Joe Peppard: “Strategic Planning for Information Systems”, 3rd Edition, ISBN: 0-470-84147-8 Multiple choice

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Strategic Management of

Organization and ICT (SMOI)

W&P 1-2

February 8, 2017

Drs. N.A. Brand MMC

smoi_staff@lists.science.uu.nl

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The SMOI team

Lecturers

Nico Brand

Han Hoogeveen

Teaching assistants

Alexander Bestebreurtje

Roel Brouwer

Donatas Rasiukevicius

David van der Sluijs

Website: www.cs.uu.nl/docs/vakken/b3smi

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Learning objectives for the course

Acquire knowledge about the main models, theories and insights in Strategic Management and specifically the IS/IT Strategy Planning process

Apply acquired models, theories and insights in a case study setting and a business simulation setting

Practice team collaboration skills, presentation skills and business report writing skills

Managerial and practical insights in running a company from the perspective of different executive roles

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SMOI setup 2016-2017

Part I: Theory (first 3 weeks)

John Ward and Joe Peppard: “Strategic Planning for Information Systems”, 3rd Edition, ISBN: 0-470-84147-8

Multiple choice exam (re-exam in few days!)

Part II: Business game (remaining weeks)

Job application

Business game: running an international beer brewery and compete with other teams by developing a good strategy

Grade:

30% Multiple choice exam (Part I)

10% Job application form

60% Business game (Part II)

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Course overview (website)

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Deadlines (website)

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Working lecture: Friday February 10, 2017

9.00-10.45: Group A-K (last name) in Ruppert 0.40

13.15-15.00: Group L-Z (last name) in Ruppert 0.42

Subject

Ch1 & 2 of Ward & Peppard

Preparation

Make the assignment (see SMOI Tutorial 01 in Materials section of website)

Format

Presentation/Discussion of your answers

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On the waiting list?

Will sort it out in the break!!

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This lecture

Ward & Peppard

Chapter 2: “How do organizations develop their strategy?”

• Strategic management

• Business value

Chapter 1: “How do organizations develop their IS/IT?”

• Development of IS/IT in organizations

• IT value and IS/IT strategy

• Business-IT alignment

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Strategic decisions

VS.

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Strategic decisions

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Strategic decisions

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Strategic decisions

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But why?

But why would you call the previous examples strategic decisions?

In other words why would you call it strategic?

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Strategy

“an integrated set of actions aimed at increasing the long-term well-being and strength of the enterprise relative to its competitors” (Porter, 1985 in Ward & Peppard, p. 69)

Typical decisions include: (1) choice of industry, (2) firm configuration, (3) resource investments, (4) pricing tactics and (5) scope decisions

Requires: Strategic planning, Strategic thinking, Opportunistic decision making

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Strategic Framework

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Intended versus Unintended

Intended strategy

Emergent strategy

Unintended strategy

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Evolution of Strategic Management

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Elements of a Business Strategy

Mission

Vision

Business drivers/objectives

Values

Strategies

Critical Success Factors (CSF)

Business Area Plans

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Mission & Vision

Mission: Unambiguous statement of what the organization does and its long-term, overall purpose.

Set direction and must be inspirational

Often contain values the organization stands for

“Who we are and what we do”

Vision: What the business will be in the future and how it will operate.

Give the whole organization a destination

Should bring the strategy alive, shared picture of future aim

“Where are we going”

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Example Mission Statement

“Our mission is to be our customers’ favorite place and way to eat & drink. We’re dedicated to being a great place for our people to work; to being a strong, positive presence in your community; and to delivering the quality, service, cleanliness and value our customers have come to expect from the Golden Arches – a symbol that’s trusted around the world.”

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Example Mission Statement

“offer reasonably priced quality food, served quickly, in attractive, clean surroundings.”

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Example Vision Statement

“Our overall vision is for McDonald’s to become a modern, progressive burger company delivering a contemporary customer experience. Modern is about getting the brand to where we need to be today and progressive is about doing what it takes to be the McDonald’s our customers will expect tomorrow. To realize this commitment, we are focused on delivering great tasting, high-quality food to our customers and providing a world-class experience that makes them feel welcome and valued.”

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Example Vision Statement

“to be the most profitable QSR business, through a strong franchise system and great people, serving the best burgers in the world.”

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Communication, Communication, Communication

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Objectives

Goals that are set for achieving the vision

Objectives at several levels, cascaded from corporate to business unit to business functions

Example of higher level goals by Heineken:

Grow the Heineken brand

Top 3 in every market

Capture opportunities in emerging markets

Drive personal leadership

The examples in the W&P book are already detailed (so lower level goals)

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Example

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Strategic Models

Source: Alice in Wonderland

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Famous models for strategic analysis

Porter’s – Competitive strategies

strategic positioning

Treacy & Wiersma’s - Value disciplines model

strategic positioning

Christensen – SWOT

Company/environmental analysis

PEST(EL) Analysis

Environmental analysis

Porter’s - Five Forces

industry analysis

BCG and Higgins matrix

Company/product analysis

De Ruijter - Scenario thinking

Strategic options

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Porters’ Generic Strategies

Competitive advantage

Strategic goal

Low price Perceived added

value

Complete

industry

Cost leadership Differentiation

Specific

segments

Focused cost

leadership

Focused

differentiation

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Porters’ Generic Strategies

Competitive advantage

Strategic goal Low price Perceived added

value

Complete

industry

Cost leadership Differentiation

Specific

segments

Focused cost

leadership

Focused

differentiation

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Positioning School

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Positioning School

Current state Current state

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Positioning School

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Design School

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PEST(EL) Analysis

Political

Economical

Social

Technological

Ecological

Legal

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PEST(EL) Analysis

Political: stability production countries of coffee beans;

Economical: price of coffee beans; price pressure of ‘coffee to go’

Social: people like drinking coffee together

Technological: coffee home machines become better and cheaper

Ecological: sustainable bean production, sustainable coffee cups

Legal: opening hours

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Low entry, Branding

important, Technology

Low switching costs,

Customer loyalty, Buyer

has not much power

Tea, Juices, Soft

drinks, Smoothies

Low bargaining

power, World

wide production

Coffee bike; McDonalds

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BCG Matrix

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Example

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Portfolio Analysis

BCG - Matrix Higgins - Matrix

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Scenario Thinking

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What is scenario thinking?

A process of structured iterative dialogues to anticipate

future opportunities and threats by collectively creating

images of the future and thinking through their

consequences.

✔ mutually differing stories about future situations

✔ sensitivity analyses & shared sense making devices

✖ not predictions

✖ not desired outcomes

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Dealing with uncertainty in planning

Traditional

Procedure

Finance oriented

Linear

Forecast/premisses

One future

Uncertainty implicit

Drive for consistency

Single line plan

Enhanced possibility of being “precisely wrong”

Scenario-based

Process

Multi-functional

Dynamic

Scenarios

Multiple futures

Uncertainty explicit

Room for intuition

Range of outcomes

Enhanced possibility of being “imprecisely right”

Link

A budget is not a strategy!

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Scenario planning steps (short version)

1. Determine major external trends

2. Draw up the most likely scenarios

3. Make for one scenario a story-line

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1. Major external trends

Social: Popularity and diversity are both signs of social force.

Technological: “Technology may be the greatest single category of

change drivers that we will cope with over the next millennium.”

Economy: The global economy remains a headlining issue. Will current

crisis continue? Upcoming markets? Will China shape the future?

Environmental Forces: A stronger driver than climate change is the

fear of limited oil reserves. The energy that runs most of the technology

we take for granted is derived from oil. The oil shock of the 70s

spawned most of the scenario planning we see today.

Political: Continuation of the social-liberal political coalition, or change

to left or right wing coalition. Role EU?

Focus on horizon of 20 years!

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2. Draw up most likely scenarios

Determine the 2 most important trends. Determine their opposite forces/drivers. Give each scenario (quadrant) a catching name!

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Na in de jaren negentig op krediet te

hebben geleefd volgt de rekening.

De overheid staat rood en het

bedrijfsleven stoot massaal

werkgelegenheid af.

Afnemers van financiële diensten

willen met name overleven.

Overleven

In reactie op wanprestaties van de

markt neemt de overheid het

voortouw. Veiligheid, zorg, onderwijs

en pensioen worden collectief

geregeld. Er is behoefte aan

solidariteit.

Steun

De economie veert terug en

wordt gedreven door

liberalisering en nieuwe

technologie. De individualisering

zet door en consumentisme

viert hoogtij. Er is behoefte aan

status en maatwerk.

Groei

De maatschappij bezint zich op

de verloedering van de jaren

negentig en er volgt een ethisch

reveille. Gemeenschapzin en

welzijn worden belangrijker dan

geld en status. Er is behoefte

aan kwaliteit en zingeving.

Zingeving

Bad

years

G

oo

d y

ea

rs

Together Individuals

Economic wealth

Social

system

Survival Support

Society+ Moneymakers

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3. Make for 1 scenario a story-line

Elaborate one of the four scenario spaces into a story-

line that shows how that specific scenario could

plausibly emerge from the present.

Describe possible actions to take. What can happen,

and how did we prepare for this.

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IT/ICT/IS

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Let’s get this straight: IT, ICT, IS?

Information Technology (IT)

Information and Communication Technologies (ICT)

Information System (IS)

Note that information systems

already existed before IT!

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How many IS in this

Organization?

What kind of IS?

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Successful use of IS/IT grows: Application Portfolio model Gibson

Strategic Planning - Planning systems

Sales forecasting, manpower planning, financial modeling etc.

Management Control - Control systems

Inventory management, requirements planning, supplier analysis, management accounting etc.

Operational Control - Operational systems

Order entry and processing, invoicing, payroll, word processing etc.

But also: ERP systems

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Nolan stage model

1. Data Processing era

Efficiency: Monitoring and exception

2. Management Information Systems era

Mngt effectiveness: Enquiry and analysis

The era’s do not exclude each other but are complimentary!

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Nolan model: Pro’s and Con’s

Pro’s

Simple and easy to understand

Professionals liked the model

Easy assessment of IS/IT organization

Con’s

Complexity of real world did not match with simplicity of model

Lack of empirical evidence or at least inconsistent

Nevertheless huge impact on IS management thinking

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A third ERA: Strategic Information Systems

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More recent development in airline industry

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Other examples of disruptive innovators through IS/IT

Uber and AirBnB – Taxi and hotels

Amazon – Books

Netflix – Films

Nu.nl and @BreakingNews – News

Booking.com – Travel bookings

TripAdvisor – Travel books (Lonely planet)

Alex and Binck – Stock investments

Many more …

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Three stages compared

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A fourth era? Getting a sustainable IS advantage

Kettinger et al. (30 cases/examples):

40% had above average performance for few years

20% had sustained advantage over a decade

Organization’s ability to continually deliver explicit business value from IS/IT

The process of organizing and managing IS/IT becomes key

Adaptive Enterprise

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IS/IT strategy

IS Strategy (demand): Defines and prioritizes the investments required to achieve the ‘ideal’ application portfolio, the nature of the benefits expected and the changes required to deliver those benefits, within the constraints of resources and system interdependencies.

IT strategy (supply): Vision of how the organization’s demand for systems and information will be supported by technology. The infrastructure on which all information systems run.

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Business-IT Alignment different approaches

Henderson & Venkatraman model

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Business-IT Alignment different approaches

Henderson & Venkatraman model

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To summarize

Development of IS/IT (3 or 4? era’s)

From a stand alone department developing data processing applications

To a department at management level that supports every aspect of the business

Strategic IS/IT result in a competitive advantage

Strategic Planning of IS

Business/IT alignment

Application portfolio

Organizational capability to have sustainable advantage

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Working lecture: Friday February 10, 2017

9.00-10.45: Group A-K in Ruppert 0.40

13.15-15.00: Group L-Z in Ruppert 0.42

Subject

Ch1 & 2 of Ward & Peppard

Preparation

Make the assignment (see SMOI Tutorial 01 in Materials section of website)

Format

Discussion on your answers