Slide 06.1
Chapter 06 Information Systems
Strategy
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Slide 06.2
Learning outcomes
After this lecture, you should be able to:
• Describe approaches for developing IS strategy;
• Assess the suitability of tools for selection and
generation of IS strategy;
• Evaluate approaches by which IS can support and
impact business strategy;
• Explain how IS strategy can support information
management and knowledge management
strategies.
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Slide 06.3
Management issues
Typical questions facing managers related to this topic:
• How should we align IS strategy with business
strategy?
• How can Information and Knowledge management
strategies be integrated with IS strategy?
• Who should be responsible for IS strategy within an
organization?
• How can organizations evaluate and control the
effectiveness of IS strategy?
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Slide 06.4
What is IS Strategy
Doherty et al. (1999), describe IS strategy
development as:
‘the process of identifying a portfolio of
computer-based applications to be
implemented, which is both highly aligned with
corporate strategy and has the ability to create
an advantage over competitors’.
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Slide 06.5
A more information-centric definition
Wilson (1989) :
‘An information systems strategy brings together the
business aims of the company, an understanding of
the information needed to support those aims, and
the implementation of computer systems to provide
that information. It is a plan for the development of
systems towards some future vision of the role of
information systems in the organization.’
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Slide 06.6
Chapter structure
1. Strategic evaluation. What is the current status of IS
Strategy and implementation within the organization
and the use of information systems within the broader
competitive environment?
2. Strategic objectives. What specifically is an
organization seeking to achieve through IS strategy
development?
3. Strategy definition. Which strategic approaches and
analytical tools are available to help us formulate the
IS strategy?
4. Strategy implementation. How should the strategy
best be executed through IS projects to help achieve
objectives? This is covered in Chapter 7 (and 8 to 12)
of Business Information Management.
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Slide 06.7
Elements of an effective IS strategy – a reminder
1. Help support the future direction of an organization.
2. Achieve advantage for the organization (strategic
objectives).
3. Define the allocation of resources to achieve this
advantage.
4. Be primarily driven by the needs of the organization,
but also by the needs of stakeholders such as
shareholders, customers, suppliers or employees.
5. Be responsive to the dynamic environment in which
an organization operates.
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Slide 06.8
Outputs of an IS Strategy process
Ward and Peppard (2002) identify the following as key outputs of the
IS Strategy process:
1. IS/IT management strategy. An overall IS strategy for the
organization describing the current situation, vision and rationale
for IS-related change and plans.
2. Business IS Strategies. In larger organizations, these specify how
each business unit will use IS/IT to deliver its business objectives.
This will be defined at the level of applications portfolios for the
business and relevant information architectures.
3. IT Strategy. Policies for the management of specific hardware and
software resources comprising the IT infrastructure. This usually
also includes the provision of end-user support services such as
the IT help-desk.
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Slide 06.9
Strategic Information Systems Planning (SISP)
Earl (1995) in a review of the SISP literature,
suggests that SISP should target the following
areas:
1. Aligning investment in IS with business goals;
2. Exploiting IT for competitive advantage;
3. Directing efficient and effective management
of IS resources;
4. Developing technology policies and
architectures.
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Slide 06.10
IT Governance
COBIT defines IT governance as:
‘a structure of relationships and processes to
direct and control the enterprise [use of IT] in
order to achieve the enterprise’s goals by
adding value while balancing risk versus
return over IT and its processes’
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Slide 06.11
COBIT IT Governance framework
Figure 6.1 COBIT IT governance framework
Source: COBIT (2000)
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COBIT example - Philips
Philips used COBIT to establish organizational capabilities on a
maturity level basis, giving a clear indication of where
improvement is possible and how to effect improvement. To
maintain its proactive approach to IT, Philips continues to focus
on:
• Assessing actual outcomes of the process (based on key goal
indicators and maturity levels)
• Identifying problem areas (for IT processes with low maturity
scores)
• Defining best practices (defined process maturity level and higher)
• Improving management processes and actions
• Benchmarking scores
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Slide 06.13
IS control model
Figure 6.2 A model for controlling the contribution of information systems to an
organization
Source: BIM
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Slide 06.14
Information systems services and activities
Figure 6.3 Information systems services and activities
Source: BIM
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Slide 06.15
IS activities examples – the UK NHS
Figure 6.4 Information systems activities for the National Health Service
Information Authority
Source: www.nhsia.nhs.gov.uk
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Requirements of IS Strategy
• Achieves alignment of IS strategy with business strategy while
identifying competitive opportunities available through IS. These
are the two core goals of any IS strategy as explained at the start
of this chapter.
• Simplicity through well-defined stages. The process should
possess clearly defined, repeatable steps or stages that can be
performed in a logical order. Such simplicity can help senior
business managers work together with technical IT managers to
develop the strategy.
• Continuous process with evaluation and improvement built-in. It
should be recognised that the strategy development process is a
repeatable process that will have strengths and weaknesses which
should be evaluated at the end of each planning cycle and
adjustments made accordingly.
• Flexibility. The process should enable changes within the business
environment to be reflected in updated IS plans.
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Slide 06.17
Scope of IS Strategy
• Timescale:
– Relatively long-term (2–5 years)
– Relatively short-term (6 months to 1 year)
• Orientation:
– Top-down
– Bottom-up
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Slide 06.18
Example of long-term IS Strategy
Phase
Business application(s)
Year 1. Basic internal and external
communications
Simple company intranet, Internet email and customer-facing web site
Year 2. Buy-side e-commerce – main
suppliers
E-procurement system with top 10
suppliers
Year 3. Sell-side e-commerce – smaller Introduce simple transactional site for
customers and buy-side e-commerce – smaller customers
smaller suppliers
Roll-out e-procurement to smaller
suppliers
Year 4. Sell-side e-commerce – larger
customers
New customer relationship
management system
Year 5. Mobile commerce
Online orders from mobile platforms.
Alerts from suppliers
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Slide 06.19
Top-down method of IS strategy definition
Starts with the business objectives and then
assesses which information systems can be used to
help achieve these objectives.
For example, if the Lo-cost Airline Company has a
business objective of increasing the volume of repeat
business through developing or enhancing a
customer loyalty scheme, then IS such as customer
relationship management systems can be developed
or enhanced to help create this.
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Slide 06.20
Bottom-up method of IS strategy definition
• Here the selection of the IS applications portfolio
partially or completely determines the emphasis of IS
strategy and how it impacts corporate objectives.
• For example, different managers in the Lo-cost Airline
Company such as the marketing manager, HR
manager and E-commerce manager request different
systems according to their own departmental or
functional needs, then this helps determine IS
strategy.
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Slide 06.21
Mini-case study – Test Valley 1
The need for the IS strategy is explained as follows:
‘An I.S. strategy is a way of smoothly directing the
decisions that the Council makes in its use of new
technology. This will improve the services that we
provide to our customers; the public, the Councillors
and each other. The strategy has to address the
present position and problems, the increasing
dependence on IT by services, plan for the
“foreseeable” technology, and allow for developments
that may have not been thought of yet. There is
certainty that change and new developments will take
place. A function of the I.S. Strategy is to apply
controls that will facilitate the management of these
changes.’
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Mini-case study – Test Valley 2
a. The Executive.
b. The Information & Communications Board.
c. The Management Team.
d. The User Advisory Group (UAG).
e. IS Working Groups.
f. The IT Service management and staff.
g. Internal Audit Section.
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Mini-case study – Test Valley 3
The I.S. strategy has three major components:
1. Technology – Including operating systems,
network and mobile technology.
2. Standards – standards that are driven by
legislation, working trends or best practice.
These include applications.
3. Security – To ensure information is safe,
accurate and recoverable.
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Mini-case study – Test Valley 4
Figure 6.5 Online payment services at Test Valley Borough Council
Source: www.testvalley.gov.uk
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Slide 06.25
Mini-case study – Test Valley 5
Figure 6.6 Components of Test Valley Council IS Strategy
Source: www.testvalley.gov.uk
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Slide 06.26
Approaches to strategy development
Business led
Method
driven
Administrative
Technological
organizational
Emphasis
The business
Technique
Resources
Models
Learning
Basis
Business
plans
Best practice
Procedure
Rigour
Partnership
Ends
Plan
Strategy
Portfolio
Methods
Ours
Best
None
Engineering
Any way
Nature
Business
Top-down
Bottom-up
Blueprints
Interactive
Influencer
IS planner
Consultants
Committees
Method
Teams
Relation to
business
strategy
Fix points
Derive
Criteria
Objectives
Look at
business
Priority
setting
The board
Method
recommends
Central
committee
Compromise
Emerge
IS role
Driver
Initiator
Bureaucrat
Architect
Team member
Themes
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Slide 06.27
A generic IS Strategy development process model
Figure 6.7 A generic IS strategy development process model
Source: Chaffey (2002)
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Options for control of IT
1. Appointing IS/IT Director to the board.
2. Other board member ultimately responsible
for IS/IT (Sponsor).
3. Steering committee or special working group.
4. Business unit leader.
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Slide 06.29
Research Insight
• How company directors perceive IT managers
– The research suggested that company directors see IT directors
as ‘advisory figures, rather than people who are qualified to make
important decisions on spending, according to recent research.’
• How IT managers perceive company attitudes to IT
– The survey found that IT-related issues were a low priority (80%
agreed) and this was attributed to senior managers not being able
to comprehend the long-term implications of technology issues
(41%) agreed.
• IT Managers as board members
– IT managers were unlikely to become board members. Less than
a third of UK companies had an IT director on the board. Of the IT
managers surveyed, only 5% thought that they had a very good
chance of being promoted to the board within the next couple of
years.
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Slide 06.30
Situation analysis for IS
1. Internal organizational environment.
2. Internal IS environment.
3. External micro-environment (IS perspective).
4. External macro-environment (IS perspective).
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Slide 06.31
Nolan’s stages of growth model
Figure 6.8 Nolan’s stages of growth model
Source: Galliers and Sutherland (1991)
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Characteristics of stages of growth model
1. Initiation. The first use of applications within an organization. Characterised by
lack of senior management interest, operational or simple office systems and
transactional systems to reduce costs.
2. Contagion. Widespread use of applications as benefits are sought from
automation and information management. Characterized by rapid growth in use of
application with enthusiasm from departmental managers, overall control is
limited.
3 Control. This stage is a reaction against excessive and uncontrolled expenditures
of time and money on computer systems from the contagion stage. It is
characterized by introduction of plans, methodologies and expenditure controls,
often resulting in an applications backlog.
4 Integration. This is a reaction against the use of departmental applications and
data silos arising from earlier poor control. Traditionally characterized by use of
databases, today the use of middleware and enterprise resource planning
systems. Control continues to improve at this stage.
5 Data administration. A change of emphasis to information management rather
than focus on technology and applications. Databases and document / content
management systems introduced to help achieve this.
6 Maturity. Information systems are put in place that reflect the real information
needs of the organization. Characterized by planning and development of IS
closely linked to business strategy.
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Slide 06.33
Stages in adoption of different models
Figure 6.9 Stages in adoption of different models
Source: Galliers and Sutherland (1991)
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COBIT maturity model
Level 0 Non-existent. There is a complete lack of any recognisable IT governance
process.
Level 1 Initial /Ad Hoc. There is evidence that the organization has recognised that IT
governance issues exist and need to be addressed. No standardized processes.
Level 2 Repeatable but Intuitive. There is global awareness of IT governance issues.
IT governance activities and performance indicators are under development.
Level 3 Defined Process. The need to act with respect to IT governance is
understood and accepted. A baseline set of IT governance indicators is
developed, where linkages between outcome measures and performance drivers
are defined, documented and integrated into strategic and operational planning
and monitoring processes.
Level 4 Managed and Measurable. There is full understanding of IT governance
issues at all levels, supported by formal training. There is a clear understanding of
who the customer is and responsibilities are defined and monitored through
service level agreements. Responsibilities are clear and process ownership is
established. IT processes are aligned with the business and with the IT strategy.
Level 5 Optimised. There is advanced and forward-looking understanding of IT
governance issues and solutions. Training and communication is supported by
leading edge concepts and techniques. Processes have been refined to a level of
external best practice, based on results of continuous improvement and maturity
modeling with other organizations.
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Slide 06.35
Figure 6.10 Adoption steps of e-business services
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The Wayback machine
Figure 6.11 The Wayback machine
Source: www.archive.org
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Two alternative models of the value chain:
(a) traditional value chain model
(b) revised value chain model
Figure 6.12 Two alternative models of the value chain: (a) traditional value chain
model (b) revised value chain model
Source: Chaffey (2004)
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Figure 6.13 Five forces model with questions that can be asked to assess the
impact of information systems or e-commerce
Source: BIM
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Enhancements to Sainsbury supply chain
Figure 6.14 Enhancements to Sainsbury supply chain
Source: BIM
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Changes in adoption of Mobile phone, Internet and
digital TV services in the United Kingdom 1997-2004
Figure 6.15 Changes in adoption of mobile phone, Internet and digital TV services
in the United Kingdom 1997-2004
Source: E-MORI Technology tracker, www.mori.com/emori/tracker.shtml
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Slide 06.41
Snapshot example of the adoption of the Internet
for different uses across different social groups
Figure 6.16 Snapshot example of the adoption of the Internet for different uses
across different social groups
Source: BIM
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Slide 06.42
CSFs and KPIs
The use of critical success factors (CSFs) is
valuable in helping to align new systems with
business objectives.
Critical success factors are those factors that
determine whether business objectives will be
achieved. Key performance indicators (KPIs) are
then used to set targets for CSFs and assess
whether these have been achieved.
COBIT defines KPIs as ‘the lead indicators that
define measures of how well the IT process is
performing in enabling the goal to be reached’.
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Slide 06.43
Example
Business objective
Critical success factor and KPI.
1. Improve order fulfilment
Ship to target.
KPI: % systems that ship on time
exactly as the customer specified.
2. Increase product performance
Initial field incident rate.
KPI: frequency of problems
experienced by customers.
3. Enhance post sale service and
support
On-time, first-time fix.
KPI: percentage of problems fixed
on the first visit by a service
representative who arrives at the
time promised.
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Slide 06.44
Sample COBIT KPIs
1. Improved cost-efficiency of IT processes (for example, cost per
head of delivering IS applications and the return on investment of
individual applications).
2. Increased utilization of IT infrastructure (for example, proportion of
staff using applications).
3. Increased satisfaction of stakeholders (through surveys of
satisfaction levels and number of complaints).
4. Improved productivity of staff (this includes both IS staff, e.g.
number of support calls answered and business staff, e.g. call
resolution times in a call centre).
5. Increased availability of knowledge and information for managing
the enterprise (this tends to be an intangible measure, i.e. types
of information available, but COBIT recommends assessing
standard attributes of information quality i.e. effectiveness,
efficiency, confidentiality, integrity, availability, compliance,
reliability).
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Slide 06.45
The balanced scorecard
Balanced scorecard
A framework for setting and monitoring business performance. Metrics
are structured according to customer issues, internal efficiency
measures, financial measures and innovation
1. Customer concerns. These include time (lead time, time to quote etc.),
quality, performance, service and cost.
2. Internal measures. Internal measures should be based on the business
processes that have the greatest impact on customer satisfaction: cycle
time, quality, employee skills, productivity. Companies should also
identify critical core competencies and try to guarantee market
leadership.
3. Financial measures. Traditional measures such as turnover, costs,
profitability and return on capital employed. For publicly quoted
companies this measure is key to shareholder value.
4. Learning and growth: innovation and staff development. Innovation can
be measured by change in value through time (employee value,
shareholder value, percentage and value of sales from new products).
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Slide 06.46
IT Scorecard case study – Booz Allen Hamilton 1
• Booz Allen Hamilton created an IT scorecard with metrics relevant
to different audiences such as corporate and business unit
management and both senior and junior IT staff. He describes the
resulting scorecard as:
‘multi-layered; the top layers have relatively few items and are
focused on service offerings – the services users want and are
willing to pay for. Examples are collaboration and communication,
telephones, order processing and financial accounting. Business
users find the highest levels of the scorecard most useful.
Technology staff use the scorecard’s lower layers to track the
status and performance of each service offering and technology
components, such as e-mail applications, directory services,
WANS, LANS, servers, storage systems and so on.’
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Slide 06.47
IT Scorecard case study – Booz Allen Hamilton 2
• Within each layer of the scorecard, Booz Allen Hamilton
distinguishes between key performance indicators (KPIs) which
give an indication of effective or efficient delivery of IT services
and performance measures (PMs) which are the reporting
measures used to assess progress to delivery of KPIs.
• KPIs include sales growth, customer satisfaction and e-mail
availability. The corresponding PMs are sales order totals, the
percentage of survey respondents who were favourable about the
service and the percentage availability of e-mail services.
• There are 14 indicators at Level 1, with more detail of 140
measures at level 2; around 10 measures for each of the level 1
indicators. Levels 1 and 2 are circulated to the business unit
managers each month. Levels 3 and 4 focus on the technology
components and there can be hundreds of data points managed
through one IT manager and reviewed more frequently.
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Slide 06.48
IS Strategy defined
• The IS strategy involves setting relative
investment priorities for applications, support
services and infrastructure. The infrastructure
includes both hardware and network
architecture, but also information architecture
(and information management).
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Slide 06.49
Business alignment
With the business alignment approach to IS
strategy definition, the selection of the
application portfolio is driven primarily by the
business objectives and information needs.
Enterprise resource planning to support, for
example financial applications is an example
of this approach.
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Slide 06.50
A problem with the alignment mindset?
Computer Weekly (2003) reported the comments of Jean-Louis Previdi, director of
research at analyst group Meta which suggests the danger of this approach. He
said:
‘IT directors need to change business perceptions of IT as a cost
centre or face having their IT departments outsourced.’
He told IT directors to manage the expectations of the whole enterprise and stop
trying to align IT with the business, adding:
‘A chief financial officer will never say he is aligning finance with the
business
IT is the business.’
‘CIOs are change agents for the enterprise and should speak in
terms of value, accountability, finance and return on investment
across the whole business.’
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Slide 06.51
Techniques for integration of IS with business
1. Direct communication using regular or ad-hoc
meetings and e-mailed reports and memos.
2. Liaison roles such as when an IS person is co-opted
into the line-of-business operation.
3. Temporary task forces such as an IS project team.
4. Permanent teams such as an IT Steering committee.
5. Integrating roles where the IT person may lead a
business process innovation team for example.
6. Managerial linking roles such as product
management involving both a marketer and an IT
person.
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Slide 06.52
Business impacting
• The business impacting approach involves
identification of innovative applications for information
systems which can potentially deliver competitive
advantage since other competitors in the sector are
less likely to use them.
• This often implies the early adoption of relatively new
technologies. The identification and adoption of
Internet technologies for customer relationship
management in the late 1990s is an example of the
type of applications that can be selected through an
impacting approach.
• Driven by value creation.
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Slide 06.53
Applications portfolio
Figure 6.18 Applications portfolio
Source: Ward and Peppard (2002)
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Slide 06.54
Applications portfolio analysis
• Strategic. Applications that are critical to sustaining future
business strategy.
Test: Results in a clear competitive advantage for the business?
Enables the achievement of specific business objectives and/or
critical success factors?
• Key operational. The organization currently depends on these
applications for success (mission critical).
Test: Overcomes known business inefficiencies?
• Support. These applications are valuable to the organization but
not critical to its success.
Test: Does it improve the productivity of the business and so
reduce long-term business costs?
Does it enable the organization to meet statutory requirements?
• High potential. These applications may be important to the future
success of the organization.
Test: Likely to provide future benefits, not yet quantified.
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Slide 06.55
Example of a prioritized portfolio from Prosight
Portfolio management software
Figure 6.17 Example of a prioritized portfolio from Prosight Portfolio management
software
Source: ProSight
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Slide 06.56
Managing the applications portfolio
• IS Portfolio management is a relatively new concept
in the IS world, although IS managers have talked
about the mix of applications in their portfolio for some
time.
• Information Week (2003) defines it as ‘ensuring that
the right projects are done and that projects are done
right’.
• This shows the dual meaning of this term. First it refers
to the selection of appropriate IS projects, namely
those that are likely to deliver the best return on
investment and support the organizational needs.
Secondly, it refers to managing a range of IS
development projects during implementation.
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