FB5003–7
Strategic IS Planning
“We don’t do IT projects at JetBlue. We do Business Projects” –
CIO Joseph Eng.
1
Story One

The CEO of an insurance company wonders
why a key competitor seems so much more
innovative and responsive to customer needs.
“How do they manage to initiate, customize, and
support such a variety of insurance products so
quickly?” she asks. “We could not cope with the
complex information processing that must be
required! What are they doing differently with
their people and technology? Our systems
personnel are always bogged down with last
year’s priorities…”
2
Chan, MISQE, 1, 2, 97-112.
Analysis

The competitor:
has developed core competence in the application of
IS to business needs.
 has developed the ability to respond to business
conditions effectively (business intelligence + KM)
 has employees who



can apply relevant knowledge efficiently & effectively.
are focused on today’s tasks
has identified information as a critical resource
 ensures that the IS fits and supports the business
 has, in consequence, a better Business-IS alignment

3
Story Two

A CIO wonders when he will be accepted at top
management meetings. Although he has won a
long, hard battle to be present at these
meetings, to understand new business
directions better, he senses that his presence is
merely tolerated. His ideas have little clout. His
colleagues acknowledge that IT is becoming
increasingly important to business operations,
but their thinking and behavior stifle innovation.
Chan, MISQE, 2, 1, 97-112.
4
Analysis
The organisation itself barely recognises
the importance of information
 The CIO is marginalised

 perhaps
useful as someone important for
operational support, but not strategic
planning.

The organisation is probably failing to
align its overall business direction with its
IS policies, skills, capabilities
5
Story Three

The CEO says to his board “we need a
new kind of CIO; someone who
understands our whole business, someone
whose career is *not* over [laughter],
someone who can help drive this company
in these turbulent times. Do people like
this exist?”.
6
Analysis
Several years ago, CIOs were expected
NOT to understand the business
 Today, if you don’t understand the
business, you can’t be a CIO.
 What kind of background would a CIO like
this have?
 What changes have occurred in the firm –
changes that inspire a CEO to talk like
this?

7
Story Four

Every time my colleagues have a bright
idea, an inspiration, an opportunity for
innovation, I take it to the CSO, but I can
always predict his reaction!
NO!

He has become the Chief No Officer!
8
Analysis
Why can CSOs be so negative to
innovation?
 Why do they always say No?

9
Questions to Ask about
Organisational IS
Does IS drive your organisation’s
competitiveness?
 What role does IS play in your corporate
strategy?



Mission critical, integrated?
Peripheral, supporting?

Now? Five years later?
Are significant resources devoted to IS, or just
a few $$ here and there?
 Are IS people deeply engaged in many aspects
of your business?

10
IS and Innovation
Does IS drive innovation in your
company?
 Does IS even support the innovations of
other departments?
 Or is IS the Department of No, the
antidote to good ideas?
 IBM reports that 80% of CIOs routinely
failed to pursue innovative business
opportunities.

11
Innovation, Bricolage and
Shadow Systems
If employees are a) innovative and b)
frustrated with the slow speed of change,
then they may develop their own ‘shadow’
or ‘feral’ systems, acting as bricoleurs
 These enable them to get work done by
working around formal corporate systems
 As examples of innovation, these can be
valuable, but the CSO won’t be happy
 So how far should innovation go?

12
Shadow Systems in Ravine
Ravine is a global hotel group, with very
conservative (No) values
 Ravine operates standardised systems
globally – no social media, no threats to
corporate integrity
 Employees and managers are unhappy,
and develop workarounds – which work
 But the No-Culture means inefficiency,
ineffectiveness and frustration

13
Shadow Systems in Your
Company?

Who uses Dropbox for work?
 Is
this allowed or not regulated or
encouraged? Company policy?
 Is it used for work/confidential files?
 Is Dropbox secure enough?

Who feels that the current corporate
systems don’t support the work that you
need to do?
 And
what can/do you do about it?
14
Innovative Companies

Which are the companies that exemplify:
 Innovative
Use of IS (The Yes Culture)
 Conservative
Use of IS (The No Culture)
15
Innovation at Haier
Haier prides itself on innovation and agility
 Each employee, individually, is
encouraged to be innovative, to be
responsible for a personal contribution to
the firm’s success
 This requires an organisational culture
that rewards individual initiative and
values agility

16
Enterprise Agility?
The ability to respond innovatively and
rapidly (a Yes Culture) to market
challenges and opportunities.
 Agile management is a critical part of an
agile enterprise.

 Distributed
and collaborative power structures
 Responsibility,
 Easily
accessible resources
 People,

accountability, appreciation
knowledge, social media …
When change is the competitive driver, nothing
is sacred
17
What about Risks?
Risks are involved in different aspects of
an IS portfolio.
 The level of the risk depends on the
importance of the IS to the organisation
 Risks apply to software & applications,
hardware, networks, procedures, … and …
people & culture.
 Each element in an IS portfolio needs to
be risk-assessed.

18
The Risk of Not Innovating

CIOs and CSOs are often risk-focused
 They
don’t want all their regular systems to
be disrupted / damaged by malware, viruses,
bugs. So it is easier to say ‘No’ to new ideas.
New ideas mean more work and more risk
 But failing to innovate is
counterproductive in the long run.

 Another
compete
firm will take the risk so as to
19
Innovation is Key to Success
We should encourage new ideas, and find
ways for them not to harm security
 This means that the CIO/CSO has to take
a security / risk perspective when helping
business units to develop their ideas

 But

not just to say ‘No’ every time.
This will be a radical change for the NoBrigade. They need to change to become
a Department of Yes.
20
Business-Defined IS
All IS functions should reflect and satisfy a
business need
 IS Success = Business Success
 But this means dragging IS out of the
corner, embedding IS into each business
unit.
 Business people need to understand IS
opportunities, capabilities, constraints

21
Business-IS Interactions

Achieving that shared Business & IS
success requires excellent
 Communication,
Collaboration, Cooperation
 Cross learning/training
 Shared and aligned goals (no more silos)
 Trust, Transparency
 Internal spaces for interaction
 People – with both business & technical skills
22
Business-IS Alignment

“the degree to which the IS mission, objectives
and plans support and are supported by the
business mission, objectives and plans”


“fit” & “integration” among business strategy, IS
strategy, business infrastructure, and IS
infrastructure.


[Reich & Benbasat, MISQ, 24, 1, p.82]
[Henderson & Venkatraman, IBMSJ, 32, 1, 4-16]
Effective IS management requires a both a
balance and effective alignment across four
domains.
23
Henderson & Venkatraman’s
Strategic Alignment Model
IS Domain
External
Business Domain
Business Strategy
Internal
Business
Transformation
Organisational
Infrastructure
and Processes
Business Products
and Services
IS Strategy
Strategy Alignment Process
(Linkage & Automation)
IS
Transformation
IS Products
and Services
IS
Infrastructure
and Processes
24
Adapted from Henderson & Venkatraman, 1992
Practical Issues



How can we align IS and the Business?
How can we balance the different activities?
How can we remain agile to emerging
opportunities?
By not looking solely at profit, but also at other
legitimate stakeholders
 By looking at the business, and its operating
context as a whole
 By changing internal processes

25
The Balanced Scorecard
One way to achieve alignment, accountability,
agility and innovation is to use the Balanced
Scorecard (BSC)
 The BSC was designed, in recognition of the
limitations of financial accounting measures:
 They provide a narrow and incomplete
picture of business performance
 They hinder the creation of future
business value
 They are lagging not leading measures

26
Perspectives & Relationships in
the Balanced Scorecard
Financial Perspective
Are we meeting the
expectations of shareholders?
Customer Perspective
Are we delighting (or at least
satisfying) our customers?
Internal Process
Perspective
Are we doing the right things?
Are we doing things right?
Learning and Growth
Perspective
Are we prepared for the future?
27
Adapted from Kaplan & Norton (1992)
Translating the Vision into Desired
Outcomes
VISION
Intended Direction/Destination
STRATEGY
How will we achieve “success”?
Balanced Scorecard
What do we want to achieve?
Strategic Initiatives
What do we need to do?
Personal Initiatives
What do I need to do?
Martinsons, 2005
DESIRED
OUTCOMES
Satisfied
Shareholders
Delighted
Customers
Effective &
Efficient
Processes
Motivated &
Prepared
Workforce
28
From Desired Outcomes
to Initiatives
Motivated &
Prepared
Workforce
Motivation
Preparation
What initiatives will
• improve employee motivation?
• better prepare employees to be innovative?
but also what initiatives will
• create more efficient / effective processes?
• delight customers?
Martinsons, 2005
29
MTR Corporate Strategy Map
Shareholder
Value
Financial
Market
Share
Customer
Processes
Learning
& Growth
Operating
Cost
Revenue
Satisfaction
Index
Patronage
Safety Index
Talent
Leadership
Strategic
Alignment
Organisational
Capability
Service Pledge
Employee
Satisfaction
Culture
Manpower &
Succession
Partnering &
Teamwork
30
© MTR, 2005
Southwest Airlines
Southwest uses a different balanced
scorecard layout to achieve the same kind
of planning objective.
 Note the detailed objectives, measures,
targets, and initiatives.
 This is a general BSC – not IS specific –
but note that IS will play a critical support
role, e.g. in data collection/analysis.

31
Airline Scorecard Parameters
Strategy Map
Strategic Theme:
Operating Efficiency
Financial
Profits and
RONA
Grow
Revenues
Customer
Fewer planes
Objectives:
What the
strategy is
trying to
achieve
Measures:
How
success or
failure is
monitored
Attract &
Retain More
Customers
On-time
Service
Targets:
The level of
performance
or rate of
improvement
needed
Initiatives:
Key action
programs
required to
achieve
targets
Lowest
prices
Objectives
Internal
Fast ground
turnaround
• Fast ground
turnaround
Measures
Targets
• On Ground Time
• On-Time
• 30 Minutes
• 90%
Initiatives
• Cycle time
optimization
Departure
Learning
Ground crew
alignment
32
Wagner, 2003
The Scorecard is a Programme
for Action
Strategy Map
Strategic Theme:
Strategic
Theme:
Operations
Excellence
Operating Efficiency
Profits and
RONA
Financial
Grow
Revenues
Customer
Fewer planes
Attract &
Retain More
Customers
On-time
Service
Lowest
prices
Objectives
Fast ground
turnaround
• More Customers • # Customers
• Flight is on-time • FAA On Time
Arrival Rating
• Lowest prices
• Market Survey
turnaround
alignment
Ground crew
alignment
Wagner, 2003
Initiatives
• 12% growth •
• Ranked #1
• Ranked #1
•
Customer
loyalty
program
Quality
management
• On Ground Time • 30 Minutes • Cycle time
• On-Time
• 90%
optimization
Departure
• Ground crew
Learning
Targets
• 30% CAGR
• Profitability
• Grow Revenues • 20% CAGR
• Fewer planes • 5% CAGR
• Fast ground
Internal
Measures
• % Ground crew • yr. 1
trained
• yr. 3
• % Ground crew • yr. 5
stockholders
70%
90%
100%
• Ground crew
training
• ESOP
33
What About a Balanced IS
Scorecard?
 IS
dept is an internal service
supplier
 IS projects are carried out for endusers and the organisation
 Four Perspectives for IS
 business value
 internal processes
 user orientation
 future readiness
34
The Balanced IS Scorecard
Business Value
Perspective
Are we satisfying management?
Are we adding value?
User Perspective
Are we delighting (or at least
satisfying) our users?
Internal Process
Perspective
Are we doing the right things?
Are we doing things right?
Future Readiness
Perspective
Are we ready for the emerging
technologies & practices?
35
Measuring and Evaluating IS (1)


Extension to the BSC

innovation and learning (future readiness)

the specifics of monitoring and control (key measures)
Measuring and evaluating business value

short-term cost-benefit evaluation


cost control, selling to third parties
long-term perspective (based on information economics)


business value of IT project, strategic options and risks
business value of IT department/functional area
36
Measuring and Evaluating IS (2)

Measuring and evaluating user
orientation
 metrics
for being the preferred
supplier of applications and operations
 metrics for building and maintaining
relationships with users
 metrics for satisfying end-user needs
37
Measuring and Evaluating IS (3)

Measuring and evaluating internal
processes
The planning and prioritization of IS projects
 The development of new IT applications
 The operation and maintenance of current IT
applications


Measuring and evaluating future
readiness
Improving the skill set of IS specialists
 Updating the applications portfolio
 Putting effort into researching emerging technologies

38
Building a Balanced IS Scorecard (1)
Develop awareness of the BSC/IS concept
 Collect and analyse data
 Define company-specific objectives & goals
 Develop preliminary BSC/IS
 Solicit stakeholder comments and feedback
 Reach a consensus on BSC/IS
 Communicate both BSC/IS and its
underlying rationale to all stakeholders
 Gain employee buy-in and innovation

39
Building a Balanced IS Scorecard (2)

Three principles for BSC




Cause-and-effect
Performance drivers
Linkage to financial measures
Three criteria for BSC/IS metrics
quantifiable
 easy to understand
 cost-effective to measure


One over-riding concern

Ensure that the BSC/IS is aligned with the
corporate BSC
40
Scorecard Details

For each of the four perspectives in a scorecard
there are four items to identify:
The objective is what you want to achieve
 The initiative is the action to take to achieve the
objective
 The measure is the thing that you are measuring so
as to assess if you have achieved the objective – it
must be quantitative or quantifiable
 The target is the precise amount of the measure at a
certain point in time.

41
BSC for the IS Support Unit of a Global Shipping Firm
Perspectives Objectives Initiatives Measures
Business Value
Increase
profit
$
User
Delighted
users
Involve
users in
sys-tems
design
procedures
Internal
Process
?
?
Future
Readiness
Skilled IT
staff
Focused
training
budget
Targets
10% CAGR
User satisf- 95% satisfied
action index
by 2015;
99% by 2018
?
?
Prof & Acad
100% with
Quals
MSc by 2015;
75% with
PhD by 2018
42
Questions for Slide 42





1. Suggest suitable internal process objectives,
measures, targets and initiatives.
2. Explain why the user perspective initiative
may not result in the the intended objectives
being achieved.
3. How does the label “user perspective”
constrain the work that the IS support unit does?
4. Why is it so critical that the IS support unit
establish relationships between initiatives and
objectives in its BSC?
5. How should this BSC/IS be aligned with the
corporate BSC?
43
Lessons 1

Errors to Avoid
failure to include specific long-term objectives
 failure to relate key measures to performance
drivers by means of cause-and-effect relationships
 failure to communicate the contents of, and
rationale for the BSC/IS
 failure to integrate the BSC/IS with a corporate BSC

 All
employees should be encouraged to use the BSC
to gain a holistic understanding of the organisation
44
Lessons 2

Critical Success Factors

Identify key cause-effect relationships,
performance drivers and measures
 This
is very hard for non-financial/quantifiable
measures

Make measures simple and measurable
 Very
hard to collect reliable data, but IS can help
Maintain intra-organisational communication
 Link BSC/IS to performance appraisal criteria for
individual IS specialists
 Ensure staff awareness of the BSC and its value.

45
What Else?
 Are
the perspectives and measures
necessary and sufficient?
 How do cultural and institutional factors
affect the BSC/IS?
 Can we create BSCs at the level of the
individual employee?
 What are the experiences of your
companies?
46
And Now…
 Time
for you to create a BSC for the IS
function of a company with which you
are familiar
 Use the blank sheet available from the
course web page – and when you are
done, email it to me.
 Feel free to adapt the blank sheet to
your own needs, design, etc.
47
References










Reich, B. & Benbasat, I. (2000) Factors that influence the social dimention of alignment
between business and information technology objectives, MIS Quarterly, 24, 1, 81-113.
Henderson, J.C. & Venkatraman, N. (1993) Strategic Alignment: Leveraging Information
Technology for Transforming Organizations, IBM Systems Journal, 32, 1, 4-16.
Chan, Y.E. (2002) Why Haven’t We Mastered Alignment? The Importance of the
Information Organizational Structure, MIS Quarterly Executive, 2, 1, 97-112.
Martinsons, M.G., Davison, R.M. and Tse, D. (1999) A Foundation for the Strategic
Management of Information Systems, Decision Support Systems, 25, 71-88.
Kaplan, R. and Norton, D. (1992) The balanced scorecard - measures that drive
performance, Harvard Business Review, 70, 1, 71-79.
Kaplan, R. and Norton, D. (1993) Putting the Balanced Scorecard to Work, Harvard
Business Review, 71, 5, 134-142.
Kaplan, R. and Norton, D. (1996) Using the Balanced Scorecard as a Strategic Management
System, Harvard Business Review, 74, 1, 75-85.
Kaplan, R. and Norton, D. (1996) The Balanced Scorecard: Translating Strategy into Action,
Boston: Harvard Business School Press.
McFarlan, F.W., McKenney, J.L., Pyburn, P. (1983) Information Archipelago: Plotting a
Course, Harvard Business Review, 61, 1, 145-156.
Davis, G.B. and Davis, M. (1984) Management Information Systems, McGraw Hill.
48