IS6600 – 8
Information, Knowledge
and Strategy
“We don’t do IT projects at JetBlue.
We do Business Projects” – CIO
Joseph Eng
1
Learning Objectives
•
•
•
•
What is the role of the CIO? CKO?
How can IS be strategised?
The value of alignment.
From alignment to agility and
accountability
• The Balanced Scorecard – a strategic tool
for action in organisations
2
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
Chan, MISQE, 1, 2, 97-112.
year’s priorities…”
3
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
4
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.
5
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
6
Story Three
• The CEO of a luxury goods retailer asks
you, the CKO, to propose a new KMS that
will will ‘grab’ knowledge from global
buyers about fashion trends to inform retail
sales staff who can then answer customer
queries better.
• The sales staff are not interested in using
such a boring and un-interactive KMS.
• How will you react to the CEO?
7
Story Four
• 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?”.
8
Analysis
• What do you think?
– Do these people exist?
– What kind of background would a person like this
have?
– What changes have occurred in the firm – changes
that inspire a CEO to talk like this?
9
CISCO’s CIO
• IT budget of US$1billion/year
• The CIO returns 50% to the business functions
– “Its really your money. Tell me how to spend it in a way that
helps you”
– But system integration and compatibility are important
•
•
•
•
•
Procurement process control
Business unit managers own their own projects
The CIO is the service provider but not the project owner
Users get more value from IT when they are responsible for it
Maturity of both IT and users is critical to develop trust
10
Questions to Ask about
Organisational IS & KM
• Does IS or KM drive an organisation’s
competitiveness?
• What role does IS/KM play in corporate strategy?
– Mission critical, integral?
– Peripheral, supporting?
• Now? Five years later?
• Are significant resources devoted to IS/KM, or just
a few $$ here and there?
• Are IS/KM people deeply engaged in many aspects
of the business?
11
The Consequences of Poor
Business-IS Alignment?
• IT Competencies are not developed, promoted or
managed.
• IT and Business risks are poorly assessed (if at all).
• Business executives cannot clearly articulate their IS
needs and don’t really understand what IS is for.
• IS people have limited business vision or knowledge.
• IS investments are expensive and yield low returns.
• Good ideas are not developed
12
Then What is (IS) Alignment?
• “the degree to which the IT mission, objectives
and plans support and are supported by the
business mission, objectives and plans”
» [Reich & Benbasat, MISQ, 24, 1, p.82]
• “fit” & “integration” among business strategy, IT
strategy, business infrastructure, and IT
infrastructure.
» [Henderson & Venkatraman, IBMSJ, 32, 1, 4-16]
• Effective IS management requires a both a balance
and effective alignment across four domains.
• Note: Its co-alignment, not one-way alignment
13
Henderson & Venkatraman’s
Strategic Alignment Model
IT Domain
External
Business Domain
Business Strategy
Internal
Business
Transformation
Organisational
Infrastructure
and Processes
Business Products
and Services
IS/IT Strategy
Strategy Alignment Process
(Linkage & Automation)
IS/IT
Transformation
IS/IT Products
and Services
IS/IT
Infrastructure
and Processes
14
Adapted from Henderson & Venkatraman, 1992
Problems and Possibilities
• How can we align IS, KM and the
Business?
• Should KM be on the right or the left of the
diagram?
• How can we balance and align these
different business and technical activities?
• Can we also be agile in reacting to
opportunities?
• How might the Balanced Scorecard help?
15
Beyond Alignment is Agility &
Innovation
• Strategic IT investments that will change the
enterprise
– Web 2.0 and Interactive platforms
• A climate of continuous change is more powerful
than globalisation
– Project requirements will change (long) before the
project is complete.
• Agile Enterprise Management is needed to thrive
in an environment of continuous change
16
What is Enterprise Agility?
• The ability to respond to market challenges
and opportunities fast enough so as to
enhance or maintain enterprise value.
– Is it better to focus on efficiency or valueadded?
• Rapid decision making is a key to agility
• Agile management is a critical part of an
agile enterprise.
17
Agile Management Structures
• Have highly distributed power coupled with
the authority (and willingness) to make
decisions
– Information must be readily available
– Clear rules and lines of responsibility
– Instant access to knowledge and communities
of experts
– When change is the competitive driver, nothing
is sacred
18
In an agile enterprise…
• Leadership must be collaborative
• Strategic planning and action are no longer solely
the prerogative of the CxOs
– Business unit managers and business developers must
be involved too
• Reliance on Web 2.0 social networking
applications will become commonplace
• The right IT must be in place (not just EIS) where
IT complexity is managed and Web 2.0 is
leveraged at the enterprise level.
19
Imagine…
• That you are the CKO in QR, a local logistics firm. The CMkO
has identified a major new customer who needs guaranteed
capacity, minimal bureaucracy, tight deadlines, and offers small
profit margins. Gaining this contract will cause QR to expand
20% with up to 35% more profit.
• The CMkO will make the decision, but needs your support in
determining if QR can do it. Moreover, there is little time – the
decision must be reached in 6 hours.
• Who do you need to talk to? Where are these people located?
Can you collect the information needed and satisfy the CMkO
that QR should or should not work with the new customer? You
need to be certain that you are correct – if you argue in favour
but later the details are shown to be false, you will be fired.
20
Alignment and Accountability
• Ten years ago, CIOs were expected NOT to
understand the business
• Today, if you don’t understand the business, you
can’t be a CIO/CKO.
• If a new system/product that the CIO delivers does
not achieve the expected business value, it is the
CIO’s fault (no one else’s).
• The CKO is accountable for knowledge-related
decisions in the firm.
• IT-KM-Business Alignment also means IT-KMBusiness Accountability
21
Innovation at Haier
• Haier prides itself on innovation
• Each employee, individually, is encouraged to
be innovative, to be responsible for a personal
contribution to the firm’s success
• This requires a very special organisational
culture
– That rewards individual initiative
22
The Balanced Scorecard
• One way to achieve alignment, accountability
and agility is to use the Balanced Scorecard
(BSC) (Kaplan & Norton, 1996).
• 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
23
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?
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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?
DESIRED
OUTCOMES
Satisfied
Shareholders
Delighted
Customers
Effective &
Efficient
Processes
Motivated &
Prepared
Workforce
25
Martinsons, 2005
From Desired Outcomes
to Initiatives
Motivated &
Prepared
Workforce
Motivation
Preparation
What initiatives will
• improve employee motivation?
• better prepare employees?
but also what initiatives will
• create more efficient / effective processes?
• delight customers?
26
Martinsons, 2005
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
27
© 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.
28
Airline Scorecard Parameters
Strategy Map
Strategic Theme:
Operating Efficiency
Profits and
RONA
Financial
Grow
Revenues
Fewer planes
Objectives:
What the
strategy is
trying to
achieve
Measures:
How
success or
failure is
monitored
Attract &
Retain More
Customers
Customer
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
Wagner, 2003
29
The Scorecard is a Programme
Strategy Map for Action
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
30
What About a Balanced IS (or
KM) 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
31
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?
32
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
33
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
34
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
Ensuring knowledge is central to future work
35
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
36
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
37
BSC for the IS Support Unit of a Global Airline
Perspectives Objectives
Measures
Targets
Initiatives
Business Value
Increase
profit
$
10% CAGR
User
Delighted
users from
other
departments
User satisfaction index
95% satisfied
by 2010; 99%
by 2011
Involve users
in systems
design
Internal
Process
?
?
?
?
Future
Readiness
Highly
Skilled IT
staff
Professional &
Academic
Qualifications
100% with
MSc by 2009;
75% with PhD
by 2012
Unlimited
training
budget
38
Activity Questions for Slide 38
• 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. Why is it so critical that the IS support unit
establish relationships between initiatives and
objectives in its BSC?
• 4. How should this BSC/IS be aligned with the
corporate BSC?
39
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
40
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.
– Think about the impact of cultural and institutional
factors
41
And Now…
– Time for you to create a BSC for the IS or KM
function of a company with which you are
familiar
• It could be a company from your project
• In fact, you could use the BSC in your project!
– 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.
42
References
• Chan, Y.E. (2002) Why Haven’t We Mastered Alignment? The Importance of the
Information Organizational Structure, MIS Quarterly Executive, 2, 1, 97-112.
• Davis, G.B. and Davis, M. (1984) Management Information Systems, McGraw Hill.
• Henderson, J.C. & Venkatraman, N. (1993) Strategic Alignment: Leveraging Information
Technology for Transforming Organizations, IBM Systems Journal, 32, 1, 4-16.
• 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.
• 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.
• McFarlan, F.W., McKenney, J.L., Pyburn, P. (1983) Information Archipelago: Plotting a
Course, Harvard Business Review, 61, 1, 145-156.
• 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.
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