1 Strategic Management of Organization and ICT (SMOI) W&P 1-2 February 8, 2017 Drs. N.A. Brand MMC [email protected]
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1
Strategic Management of
Organization and ICT (SMOI)
W&P 1-2
February 8, 2017
Drs. N.A. Brand MMC
2
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
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