Ch. 4: Planning Types of planning: Strategic Tactical Operational planning Traditional planning ”Sense-and-Respond” Case studies 24.03.2016 1 3 planning horizons 24.03.2016 2 Traditional strategic planning Goals, where we want to go Business plan IS plan that support the business plan Plan for implementing this IS strategy 24.03.2016 3 Traditional planning based on: Foreseeing the future That we have time to perform the planning IS supports and follows the organization That management has the full overview Hierarchic structure Our textbook tells us that this is no longer possible because of the Internet. Do we agree? 24.03.2016 5 Can we foresee the future? ”Disruptive” changes can make this impossible: examples: Development of the microprocessor Internet/Web ADSL Is this the rule or the exception? Most areas enjoy stability 24.03.2016 6 Do we have time for planning? Internet demand frequent changes IT-implementation may be lagging behind the business ideas IT should be ahead One has to react fast to follow the dot-com development Is the textbook correct? Partly, less time for planning and implementation Do we need much time, with a good infrastructure development time can be reduced We can make an IT plan at the same time as we make the business plan 24.03.2016 7 Case: The financial crisis As huge as the 1930 crisis? Then, a lot of mistakes were made (protection, reduced spending) Today we know better However, today all systems are interconnected. The crisis spread faster. We may have less time to react. 24.03.2016 8 IT for the dot-com A platform to develop the business Makes eBusiness possible IT must be ahead Business ideas can be built on IT Is the textbook correct? Company dependent IT is important for many businesses, but not all will become dot-coms CIO as a part of the executive leadership 24.03.2016 9 Enterprise Information Management Model (Benson and Parker) 24.03.2016 10 Do management know everything? Management may be far from the front-line Big enterprises, many lines of business Trend towards niche markets Different strategy for each market Customers, suppliers and partners are important ”inside-out becomes ”outside-in” Textbook correct? Division leadership becomes important here In SME the top-management will have this role Management is always important in strategy work, however, we have to employ management at the right level knowledge workers are knowledgeable => flat structures 24.03.2016 11 Organizations are not an army! Modern organizations are flat, not hierarchical Many BPR projects showed that it was impossible to control big changes from the top. A new type of leadership: listen inspire make people work together common goals 24.03.2016 12 Case: Høyskolene Ledelse men ikke mulig å gi ordrer Vit. ansatte Hierarkisk struktur (styre, rektor, dekaner på toppen) Passer ikke for en kunnskapsbedrift Flat struktur bedre? A strategy for each line avoid one strategy for the whole enterprise Hydro, Statoil line-oriented strategies are required 24.03.2016 14 ”Sense-and-Respond” ”Sense-and-Respond”: find new possibilities experiment under an overall vision and strategy 24.03.2016 15 Case: Microsoft Sense-and-Respond to develop their Internet strategy Tried their own network as an alternative to AOL (gave up) Buying Internet companies Different business areas: Web-magazine (Slate) News channel (med NBC) Digital movies (Dreamworks) XBOX But their focus on Internet was a strategic decision 24.03.2016 16 Case: Shell Oil New leader – new ideas Direct contact with employees at gas stations Work with grass-root Action laboratories: Team from different countries One week camp 60 days to develop ideas to be used in their own stations Discussion, critique Bottom-up approach main idea: radical change based on ideas from below 24.03.2016 17 Case: Lotus Sport cars Nearly bankrupt in 1997 New leader Outside consultants Dramatic improvement in a short time 24.03.2016 18 Case: Lotus Big potential for savings Established teams, non hierarchic, participants from different divisions ”quick-wins” (big advantages, little complexity) Order-oriented production Pay on delivery Delivery according to plan Early successes made the team believe in what they were doing Improved stock handling more effective production processes (25% reduction) Saved $4.5 millions in 45 days! 24.03.2016 19 Case SAS Big problems in the eighties Janne Carlzon defined a new strategy An airline for business people On time Good service (Business class) Today SAS is in trouble again 24.03.2016 20 Lotus Both definition and implementation of a strategy is important Traditionally a ”command and control” firma, with many failed top-projects Competence at the bottom level (marketing, sales, engineering) Small teams with many ”action labs” Non-bureaucratic examples: development of models for small niches, new service programs New organizational structure became necessary 24.03.2016 22 Seven techniques for the introduction of new technology Growth analysis CSF – Critical Success Factors Analyzing competitive forces Value chain analysis Internet value matrix Linkage analysis Scenario planning 24.03.2016 23 Stages of growth 1. Early successes 2. Contagion (“infection”) New products, rapid growth, many applications… 3. Control New technology, try and fail, experimentation Proliferation must be controlled, standardization. 4. Integration Use of technology has reached a mature level 24.03.2016 24 CSF (Critical Success Factors) Focus on management and their information needs Can help organizations to find the IS systems they need CSF let each manager define 10 critical factors Sources: Industry The company Environment (market trends, economy, regulations,…) Temporal organizational factors (too much, too little inventory) Men er disse stabile? 24.03.2016 26 Competing forces Michael Porter Potential entrants Bargaining power of buyers Bargaining power of suppliers Substitute products and services Rivalry among existing firms 24.03.2016 27 How the Internet Influences Industry Structure Mini exercise: SAS Discuss the competitive situation for SAS today based on Porter’s ideas Can IT help SAS? 24.03.2016 30 Strategies to meet competition Porter: Specialization Cheapest producer (Ryan Air, Norwegian) Find a niche However: It is always possible to improve the situation by forcing competitors out of the market. Many huge companies use this strategy. We see often that a market with just a few competitors does not work 24.03.2016 31 Value chain analysis (just a superficial view here, this is covered in other courses) Inbound logistics Operations (converts inputs to products and services) Outbound logistics Marketing and sales Service 4 supporting activities (next page) 24.03.2016 32 Value chain analysis 24.03.2016 33 E-commerce and Industry Value Chains E-commerce and Firm Value Chains Virtual value chains Marketplaces: (physical products) Marketspaces: (virtual products) Both: Brick & click Information can be a product in itself (account information, insurance, whereabouts of packets in the postal system) Virtual value chain where information is flowing through the chain 24.03.2016 36 Virtual assembly line Virtual Product Specifications Virtual product Virtual product Virtual “assembly line” New Virtual product Production data Physical assembly line 24.03.2016 Refined virtual product Production data “as built” description Service data Finished product 37 Internet-Enabled Value Web eBusiness value matrix Used by Cisco and others to prioritize projects (”portfolio management”) Look at: ”Fundamentals” – Internal, new ways of performing processes, 3-6 months perspective ”Operational Excellence” - reengineering, improved quality, more satisfied customers. ”Rational Experimentation” ”Breakthrough Strategy”, potential huge effects, established as a separate unit/company, venture capital, big risks 24.03.2016 39 Case: Cisco Components for data networks New Fundamentals: Operational Excellence: Web based information system (”dashboard”) for management Rational Experimentation: reporting system, e.g., travel expenses, Web-based, routed to manager continuous experimentation ”streaming video”, on-line meetings, etc. Breakthrough Strategy: virtual value chain Only 5 of 26 factories are owned by Cisco an effective value chain necessary to adjust to market demands 24.03.2016 40 Linkage analysis planning Linkage to other organizations Strategy to use electronic channels Steps: Define linkage to all important actors Include customers, partners, etc Plan for use of eChannels 24.03.2016 41 Case: Electric Power Research Institute Consultant and research organization, 700 customers (power plants), 350 employees, 1600 projects) Task: Present research results for the 400.000 member employees Problem: Costly, to long time to reach customers eChannel: Linkage analysis: Expert system with a natural language interface Email and Video-conference system Partners (universities, …) Customers (members, …) Possible changes (partners becoming competitors) System to handle all parts 24.03.2016 42