Ch 4 Planning n Types of planning n

Ch. 4: Planning n Types of planning: n n n Strategic Tactical Operational planning Traditional planning ”Sense-and-Respond” Case studies 9/29/2020 1

3 planning horizons 9/29/2020 2

Traditional strategic planning n n n Goals, where we want to go IS plan that support the business plan Plan for implementing this IS strategy 9/29/2020 3

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Traditional planning based on: n n n 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? 9/29/2020 5

Can we foresee the future? n ”Disruptive” changes can make this impossible: n examples: n n n Development of the micro processor Internet/Web ADSL Is this the rule or the exception? Most areas enjoy stability 9/29/2020 6

Do we have time for planning? n n n 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? n n n 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 9/29/2020 7

IT for the dot-com n n n A platform to develop the business Makes e. Business possible IT must be ahead Business ideas can be built on IT Is the textbook correct? n n n Company dependent IT is important for many businesses, but not all will become dot-coms CIO as a part of the executive leadership 9/29/2020 8

Enterprise Information Management Model (Benson and Parker) 9/29/2020 9

Do management know everything? n n n n 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? n n n Division leadership becomes important here In SME the top-management will have this role But management is always important in strategy work, but we have to employ management at the right level 9/29/2020 10

Organizations are not an army! n n n 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: n listen n inspire n make people work together n common goals 9/29/2020 11

”Sense-and-Respond” n avoid one strategy for the whole enterprise n n Hydro, Statoil ”Sense-and-Respond”: n n n find new possibilities experiment under an overall vision and strategy 9/29/2020 12

Case: Microsoft n Sense-and-Respond to develop their Internet strategy n n n Tried their own network as an alternative to AOL (gave up) Buy Internet companies Different business areas: n n n Web-magazine (Slate) News channel (med NBC) Digital movies (Dreamworks) XBOX But their focus on Internet was a strategic decision 9/29/2020 13

Case: Shell Oil n n New leader – new ideas Direct contact with employees at gas stations Work with grass-root Action laboratories: n n n 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 9/29/2020 14

Case: Lotus n n n Sport cars Nearly broke in 1997 New leader Outside consultants Dramatic improvement in a short time 9/29/2020 15

Case: Lotus n n n n n 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! 9/29/2020 16

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Lotus n n n Both definition and implementation of a strategy is important Traditionally a ”command control” firma, with many failed top-projects Competence at the bottom level (marketing, sales, engineering) Small teams with many ”action labs” n Non-bureaucratic n examples: development of models for small niches, new service programs New organizational structure became necessary 9/29/2020 18

Seven techniques for the introduction of new technology n n n n Growth analysis CSF – critical success factors Analyzing competitive forces Value chain analysis Internet value matrix Linkage analysis Scenario planning 9/29/2020 19

Stages of growth n 1. Early successes n n 2. Contagion (“infection”) n n New products, rapid growth, many applications… 3. Control n n New technology, try and fail, experimentation Proliferation must be controlled, standardization. 4. Integration n Use of technology has reached a mature level 9/29/2020 20

CSF (Critical Success Factors) n n 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: n n Industry The company Environment (market trends, economy, regulations, …) Temporal organizational factors (too much, too little inventory) 9/29/2020 21

Competing forces n Michael Porter n n n Potential entrants Bargaining power of buyers Bargaining power of suppliers Substitute products and services Rivalry among existing firms 9/29/2020 22

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Mini exercise: SAS n Discuss the competitive situation for SAS based on Porter’s ideas 9/29/2020 24

Strategies to meet competition n Porter: n n Specialization Cheapest producer (Ryan Air) Find a niche However: n Improve the situation by forcing competitors out of the market 9/29/2020 25

Value chain analysis n n n Inbound logistics Operations (converts inputs to products and services) Outbound logistics Marketing and sales Service 4 supporting activities (next page) 9/29/2020 26

Value chain analysis 9/29/2020 27

Virtual value chains n n n 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 9/29/2020 28

Virtual assembly line Virtual Product Specifications Virtual product Virtual “assembly line” New Virtual product Production data Physical assembly line 9/29/2020 Refined virtual product Production data “as built” description Service data Finished product 29

e. Business value matrix n n Used by Cisco and others to prioritize projects (”portfolio management”) Look at: n n ”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 9/29/2020 30

Case: Cisco n n Components for data networks New Fundamentals: n n Operational Excellence: n n Web based information system (”dashboard”) for management Rational Experimentation: n n n reporting system, e. g. , travel expenses, Web-based, routed to manager continuous experimentation ”streaming video”, on-line meetings, etc. Breakthrough Strategy: n n n virtual value chain Only 5 of 26 factories are owned by Cisco an effective value chain necessary to adjust to market demands 9/29/2020 31

Linkage analysis planning n n n Linkage to other organizations Strategy to use electronic channels Steps: n n n Define linkage to all important actors Include customers, partners, etc Plan for use of e. Channels 9/29/2020 32

Case: Electric Power Research Institute n n 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 e. Channel: n n n Linkage analysis: n n 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 9/29/2020 33