and consolidation across the whole organization. In addition, there is no ‘ideal’ approach to IS/IT strategy formulation and planning, but there are a number of factors that could be considered critical for its success: . Using the ‘best’ people available from the business, IS function, external advisers—they provide the invaluable knowledge of the industry and the business, the IS/IT relevance and, above all, the creativity, none of whi ch can be derived from a methodology. . Gaining the enthusiasm, commitment and involvement of top man- agement. . Getting a thorough understanding of the internal and external business and IS/IT environments, the business imper atives and culture and the real stimuli driving strategy and planning. . Setting objectives consistent with experience and maturity, and tailoring the approach to meet them, employing a mixture of analytical and creative techniques. However, it should be remembered that having a good strategy is only a means to an end—its implementation is when the value of the strategy is actually realized. A key aspect of the formulation process is ensuring the organization is both willing and able to implement its chosen strategy. This will depend as much on how the strategy was derived, and who was involved, as it will on the actual content of the strategy. ENDNOTES 1. A.L. Lederer and V. Sethi, ‘The implementation of strategic information systems planning methodologies’, MIS Quarterly, Vol. 12, No. 3, 1988, 445–461. 2. T.D. Wilson, ‘The implementation of information systems strategies in UK companies: Aims and barriers to success’, International Journal of Information Management, Vol. 9, 1989. 3. N.F. Doherty, C.G. Marples and A. Suhaimi, ‘The relative success of alternative approaches to strategic information systems planning: An empirical analysis’, Journal of Strategic Information Systems, Vol. 8, 1999, 262–283. 4. Business Systems Planning, Planning Guide, GE20-0527, IBM Corporation, White Plains, New York, 1981. 5. The unit providing direct support to end-users has evolved over the years from an informa- tion centre concept to more latterly a help desk or service centre. The original concept of the information centre referred to the facility and dedicated staff, generally within an IS function, devoted to helping users develop and maintain their own applications. 6. C. Ciborra, ‘The grassroots of IT and strategy’, in C. Ciborra and T. Jelessi, eds, Strategic Information Systems: A European Perspective, John Wiley & Sons, Chichester, UK, 1994, pp. 3–24. 7. M.J. Earl, Management Strategies for Information Technology, Prentice-Hall, Englewood Cliffs, New Jersey, 1989; M.J. Earl, ‘Experiences in strategic information systems planning’, MIS Quarterly, Vol. 17, No. 1, 1993, 1–24; M.J. Earl, ‘Information systems strategy why planning techniques are not the answer’, Business Strategy Review, Vol. 7, No. 1, 1996, 54–67. 8. The work of Zackman is influential here. See J.A. Zackman, ‘A framework for informati on Endnotes 177 systems architecture’, IBM Systems Journal, Vol. 26, No. 3, 1987, 276–292; J.F. Sowa and J.A. Zackman, ‘Extending and formalizing the framework for information systems archi- tecture’, IBM Systems Journal, Vol. 31, No. 3, 1992, 590–617. 9. N.F. Doherty, C.G. Marples and A. Suhaimi, ‘The relative success of alternative approaches to strategic information systems planning: An empirical analysis’, Journal of Strategic Information Systems, Vol. 8, 1999, 262–283. 10. A. Segars, V. Grover and J. Teng, ‘SISP: Planning system dimension, internal coalignment and implementations for planning effectiveness’, Decision Sciences, Vol. 29, No. 2, 1998, 303–341. 11. A.L. Lederer and A.L. Mendelow, ‘Information resource planning: Overcoming difficulties in identifying top management’s objectives’, MIS Quarterly, Vol. 11, No. 3, 1987, 389–399. 12. T.D. Wilson, ‘The implementation of information systems strategies in UK companies: Aims and barriers to success’, International Journal of Information Management, Vol. 9, 1989. 13. T.S.H. Teo and J.S.K. Ang, ‘An examination of major IS planning problems’, International Journal of Information Management, Vol. 21, 2001, 457–470. 14. J. Luftman and T. Brier, ‘Achieving and sustaining business-IT alignment’, California Management Review, Fall, 1999, 109–122. 15. J.W. Peppard and J.M. Ward, ‘Mind the gap: Diagnosing the relationship between the IT organization and the rest of the business’, The Journal of Strategic Information Systems, Vol. 8, 1999, 29–60. 16. A.L. Lederer and V. Sethi, ‘The implementation of strategic information systems planning methodologies’, MIS Quarterly, Vol. 12, No. 3, 1988, 445–461; ‘Critical dimensions of strategic information systems planning’, Decision Science, Vol. 22, No. 1, 1991, 104–119. 17. G. Johnson and K. Scholes, Exploring Corporate Strategy, Prentice-Hall, Englewood Cliffs, New Jersey, 2002. 18. M. Hammer, ‘Reengineering work: Don’t automate—obliterate’, Harvard Business Review, July–August, 1991, 104–112. 19. C.H Sullivan, ‘An evolutionary new logic redefines strategic systems planning’, Information Strategy: The Executive’s Journal, 1986. 20. It is worth pointing out that research exploring the relationship between IT investment and organizational performance has highlighted one that of the major problems in assessing performance improvements is due to the time lag between making the investment and the actual realization of benefits. See E. Brynjolfsson, ‘The productivity paradox of information technology: Review and assessment’, Communications of the ACM, Vol. 36, No. 12, 1993, 67–77; E. Brynjolfsson and L. Hitt, ‘Paradox lost? Firm level evidence on the returns to information systems spending’, Management Science, Vol. 42, No. 4, 1996, 541–558; S. Devaraj and R. Kohli, ‘Information technology payoff in the health-care industry: A long- itudional study’, Journal of Management Information Systems, Vol. 16, No. 4, 2000, 41–67. 21. This section draws on work undertaken by Mohdzaher Mohdzain at Cranfield School of Management, UK. 22. W.R. King, ‘How effective is your information systems planning’, Long Range Planning, Vol. 21, No. 5, 1988, 103–112. 23. V. Ramanujam and N. Venkatraman, ‘Planning system characteristics and planning effec- tiveness’, Strategic Management Journal, Vol. 8, 1987, 453–468. 24. A.H. Segars and V. Grover, ‘Strategic information systems planning: An investigation of the construct and its measurement’, MIS Quarterly, Vol. 22, No. 2, 139–163. 25. N.F. Doherty, C.G. Marples and A. Suhaimi, ‘The relative success of alternative approaches to strategic information systems planning: An empirical analysis’, Journal of Strategic Information Systems, Vol. 8, 1999, 262–283; A.L. Lederer and V. Sethi, ‘Key prescriptions for strategic information systems planning’, Journal of Management Information Systems, Vol. 13, No. 1, 35–62; A.H. Segars, V. Grover and J.T-C. Teng, ‘Strategic information systems planning: Planning system dimensions, internal coalignment, and implications for planning effectiveness ’, Decision Science, Vol. 29, No. 2, 1998, 303–345; R. Sabherwal, ‘The relationship between information systems planning sophistication and information systems success: An empirical assessment’, Decision Science, Vol. 30, No. 1, 1999, 137–167; B.H. Reich and I. Benbasat, ‘Measuring the linkage between business and information technology objectives’, MIS Quarterly, Vol. 20, No. 1, 1996, 55–81. 26. Management Productivity and Information Technology, Overview report, Strategic Planning Institute, 1984. 178 Developing an IS/IT Strategy: Establishing Effective Processes 4 IS/IT Strategic Analysis: Assessing and Understanding the Current Situation The first three chapters have considered the evolution of IS/IT in organizations from a strategic perspective and outlined approaches to developing business and IS/IT strategies that can enable the required improvement in the integration of both. More specifically, in Chapter 3, ‘what is involved’ in establishing an IS/IT strategy process and its deliverables were examined against a background of the various issues affecting the process. This and the following chapter concentrate on determining the content and main deliverables of the IS strategy, comprising: . analysis of the existing and expected future business and IS/IT en- vironments and strategies; . the organization’s IS requirements arising out of the current business strategy, by aligning these requirements with stated business needs and initiatives; . the future potential from IS/IT through identifying opportunities to impact the business strategy and significantly raise its competitive performance. If both strategic alignment and competitive impact are being pursued, then, in practice, there will be considerable overlapping of the two threads of analysis. However, for ease of exposition, they are treated separately in this book. The derivation of the IS strategy by alignment with the business strategy is covered in this chapter. This is established through a combination of analytical and evaluative methods, although it should be remembered that creative ideas can arise at any time in the strategic analysis. Chapter 5 will introduce concepts for the more creative dimension, by exploring external IS/IT opportunities, the competitive environment and the industry ‘value system’. The techniques used in these analyses may in turn provide new insight into results from the more internally-focused analysis presented in this chapter. In pursuing both alignment and impact, a thorough understanding of the business and technology environments, and of the apparent and expected opportunities and threats, is required, as well as a sound knowl- edge of how IS/IT may be applied innovatively to change the business along any one of a number of dimensions—strategy, structure, processes, culture, etc. It is also essential to build up a picture of the expected outcome, both in terms of the changes to be brought about through business and IS/IT initiatives, and the required changes to the IS/IT environment, both the application portfolio and the supporting IT infra- structure. An objective assessment of the strengths and weaknesses of the business overall and its IS/IT capability is also required. Based on a clear understanding of the starting position, the future business perspective and the IS strategy, the gap in terms of IS/IT requirements can be analysed and an achievable migration plan con- structed. This point is picked up in Chapter 6, where we bring together the various approaches considered in both this chapter and the next into an overall framework to determine the prioritized information systems requirements for the organization. It must be remembered that the focus at this stage is primarily on the business IS strategy (i.e. what is required—the needs and priorities from a business perspective). Later, the IT strategy (i.e. how to deliver it) will be addressed. Nevertheless, as the requirements are identified, the current ability of the organization to ‘supply’ or satisfy those requirements will inevitably be assessed. Hence, this part of the analysis will also focus on the capability of IT resources as reflected in the existing organization and practices, and in the current applications and information resources of the organization. The result of the IS strategy formulation is a target application portfolio that meets corporate and business needs and can be sustained in terms of tech- nologies and resources. Various techniques can be used to achieve the mixture of fact finding and analysis that goes into determining the IS demand, and several of them are described in this chapter. BUSINESS RE-ENGINEERING AND IS STRATEGY One of the hottest concepts to arrive on the management agenda in recent years is that which has been labelled business process re-engineering or 180 IS/IT Strategic Analysis BPR for short. 1 First articulated in the late 1980s as a result of research at the Massachusetts Institute of Technology, 2 it has become the means by which many organizations are seeking to emulate the transformations achieved by the early pioneers. Companies such as Ford, Hewlett Packard, First Mutual, Taco Bell, Hallmark Cards were shown to have achieved significant improvement in the performance of selected areas of their business by redesigning the processes through which work in organ- izations is performed. 3 The redesign of business processes continues to be a popular approach taken by organizations to improve performance. While the concept has attracted negative press over the years, some of it warranted, 4 we find today that it often appears under a number of guises such as customer service initiative, e-procurement project or major cost reduction—all demanding significant redesign of business processes. While this book is not setting out to cover re-engineering approaches in any depth, 5 it is nevertheless pertinent to consider the subject alongside the develop- ment of an IS strategy, for a number of reasons: . In developing the IS strategy, a thorough understanding of the business strategy is essential. Most re-engineering initiat ives will spring from, and be part of, the business strategy. . In many instances, the early work in developing an IS strategy is first to flesh out the details behind the headlines in the business strategy, and this means working with the business areas to help determine what those business initiatives will be and their expected contribution to business objectives. These could include re-engineer- ing initiatives. . Most, if not all, re-engineering initiatives have a significant IS/IT element, which will be accommodated in the IS strategy, and need to be allocated the same priority that the business places on the change program. . There is a common need in both IS strategy development and business re-engineering to build up a model of the business as it currently exists and other potential models of how it will look follow- ing transformation or evolutionary change. . Success in re-engineering, as with the development and implementa- tion of an IS/IT strategy, demands a strong business–IS function partnership. 6 . Designing or redesigning business processes to take advantage of IS/ IT capabilities is essential if the traditional problems of automating poorly-designed processes or inefficient work practices through IT are to be avoided. Business Re-engineering and IS Strategy 181 Much has been written about the role of IS/IT in busines s re-engineering. In particular, there are conflicting views as to whether IT is the driver for re-engineering, or an enabler or one of the means of implementation. Davenport and Short 7 argued for the first of these, although they recog- nize its role in the other two, insisting that two key questions must be asked: . How can business processes be transformed using IT (based on a full understanding of the capabilities of IT)? . How can IT support business processes? Many organizations have not adequately or systematically addressed the first question, such that IT has barely been exploited at all in such situa- tions. Teng and colleagues 8 suggest that IT is an enabler, but that its potential role should be overtly recognized and incorporated in an ‘in- tegrated business process redesign planning model’. This they describe as a ‘policy loop’, which combines business strategy and IS/IT strategy. Within this overall process are two subsidiary ‘loops’, one concerning business innovation (with little IS/IT involvement), the other dealing with implementation, where IS/IT becomes critical for achieving the benefits of change. The relationship between IS/IT and BPR can be summed up as shown in Figure 4.1, whereby IS/IT has to be considered in different ways at the different stages of identifying, evaluating and implementing ‘radical’ process change. This enables a reconciliation of the fundamental ques- tions of impact and alignment of IS/IT strategy development with the rationale for ‘re-engineering’ initiatives. Table 4.1 summarizes these ques- tions. In the past, the most effective IS strategies have assiduously sought to be developed in line with the business strategy, so that change initiatives could be worked out on as broad a basis as possible, and certainly not confined to IT development work. The main difference between these and current business re-engineering schemes is often in the name applied to the program. UNDERSTANDING THE CURRENT SITUATION Understanding the current situation involves obtaining an in-depth understanding of the business strategy, the business and technology en- vironments and the current status of IS/IT in the business. This makes it possible to determine the opportunities, threats and requirements inherent in the business strategy, and to recognize the strengths and 182 IS/IT Strategic Analysis weaknesses of the business and its IS/IT operations. This is vital, because the current situation represents the starting point from which any change programs begin. Determining the IS/IT Requirements: The IS Demand One way of determining the IS strategy is to ask each area of the business what their requirements are. This is likely to deliver a comprehensive Understanding the Current Situation 183 Develop options for radical change Evaluation of options Implementation of chosen options Identify need for change in development of business strategy Capabilities of IT as an enabler of change IT can be used to model / simulate / prototype options for change IS and IT as a key component of achieving change Figure 4.1 The role of IS/IT in business process re-engineering Table 4.1 Reconciling IS/IT and BPR Business process IS/IT strategy formulation Questions re-engineering and planning Formulation 1. How can we re-engineer 1. How can IS/IT be exploited our business to provide to provide business advantage? advantage? (impact) Implementation 2. How can we improve our 2. How can IS/IT ensure the processes to ensure success of the business success of the strategy? strategy? (alignment) ‘wish list’, but would result in no insight into the relevance, or genuine priorities, and little knowledge of the inherent IS/IT requirement in the strategy of the business. Another way is for a group, charged with defining or updating the IS/ IT strategy, to absorb every written strategy statement and interpret them into relevant IS/IT principles and critical success factors (CSFs), applica- tion requirements associated with major planned initiatives, and a set of supply criteria to deliver the service demanded by the business. This would be possible if the strategy were documented in sufficient detail and the business strategy documents contained comprehensive descrip- tions of the current and planned business activities and environments. Its main defect would be in the inability to feed into the development of the strategy and initiatives the opportunities for exploiting IS/IT to its full est potential. In practice, this level of documentation rarely exists, unless it was built up in an earlier business or IS strategy cycle and has been updated to reflect the current situation and requirements. Undoubtedly, the best course is for the IS strategy to be developed in parallel with the business strategy, feeding trends, opportunities and ideas into the business strategy process, and then working closely with all areas of the business in building up a set of achievable business and associated IS/IT initiatives that will deliver the targeted performance. The IT strategy—supply—can follow directly from this analysis. To achieve the desired results, it is necessary to obtain a complete understanding of the drivers for change and the current situation (‘where we are’) and then to articulate the situation being sought (‘where we want to be’) and start to propose how the gaps might be closed (‘how to get there’). This will include both business and IS/IT initiatives. These are identified through a mixture of fact finding and analysis focused on the elements of the business and technical environ- ments. This is illustrated in Figure 4.2. Tabl e 4.2 contains an extensive list of fact-finding and analysis tasks that could be undertaken, and the purpose or deliverables associated with each of these. Gathering the Relevant Data The quality and value of any IS/IT strategy that is ultimately developed is dependent upon the depth of understanding of the business and its needs, and the constructive interpretation of these needs into appropriate in- formation, systems and IT services. To this end, if the information is not readily available and accessible to address the areas in Table 4.2, some or all the tasks in this table should be undertaken. Whatever techniques and approaches are used, the results are more useful if they are recorded in a 184 IS/IT Strategic Analysis TEAMFLY Team-Fly ® manner that facilitates analysis. The approach described here relies on constructing a clear, structured set of information, and, where appropri- ate, constructing models showing the organizational, business and infor- mation requirements. A potentially significant problem with IS strategy development is of being engulfed by a surfeit of data. What is required is sufficient understanding of the business and information environments to be able to develop sensible and realistic strategies—but not the type of exhaustive analysis associated with detailed design and development of systems. Much of the key information required is often in the heads of employ- ees at all levels in the organization and needs to be elicited through discussion. However, discussions and workshops will be wasted effort and frustrating for business people if used to establish facts that can be obtained from available documentation. Not only does it waste time but it also means that important opinions expressed will not be seen in a factual context. Such problems can be avoided by reviewing as much available documentation as can be found ahead of any discussions. These may include business strategy documents, or at least formal state- ments of objectives and key performance indicators (KPIs). Other useful documents are likely to include annual plans, budgets and forecasts. Understanding the Current Situation 185 Determine the IS demand SWOT CSFs value chain business model Current and expected business and technical environments Potential status of IS/IT Current status of IS/IT Proposed IS/IT investments Proposed business initiatives Business strategy Opportunities for IS/IT innovation Impact and role of IS/IT Figure 4.2 Determine the IS demand 186 IS/IT Strategic Analysis Table 4.2 Fact finding and analysis tasks and deliverables Task Purpose or deliverable Analysis of the business strategy Identify its components and the associated information needs derived from it Analysis of the current and expected Determine how IS/IT can contribute to future external business environment, strengthening the business’s and analysis of the current and competitive positioning future portfolio of the business, and its competitive strategy Analysis of the internal business Understand the relevant organizational environment characteristics, SWOTs and other factors Identification of the critical success Crystallize the essential characteristics of factors of the business. These are success in meeting the objectives stated frequently the drivers for change in the strategy Information analysis Model the logical activities and inherent information elements of the business Evaluation of the effectiveness of the Identify where changes need to occur, current processes and how IS/IT can improve the performance of the processes Identification and analysis of the Identify the most important information internal and external value chain flows through the business and across its value chain partners Further value chain analysis Bring into focus potential opportunities for improving the value delivered by information, or identify potential hazards, where success may be jeopardized by poor interfaces Creation of a conceptual architecture Ensure maximum contribution to showing how the enterprise’s performance targets. Modelling future information and processes might be processes is a key element in business restructured process redesign if it is being undertaken as part of re-engineering the business Compilation of a catalogue of all the An input into migration planning hardware and software being used by the organization, and the principal functions performed by each of the systems Evaluation of the current application Determine the inventory of information portfolio systems in use and in development, and assess their contribution and potential Evaluation of current IS/IT policies, Assess their applicability to meet current organization, processes, services, and future business needs capabilities, etc. [...]... which the systems integrate or interoperate Assessment of the effectiveness and robustness, and the unrealized potential in current systems, and of the enhancement required to increase contribution Common elements and differences between current portfolio and required information and systems architecture Supporting information to enable estimates of potential improvement projects Supporting information. .. and user orientated, for each system from two main sources: The users of the information systems and databases—to gain information about how the system supports business objectives and processes; the functionality and business information in its scope; users’ views on system quality and the usability of the application; dependence on the application; documentation, training and systems support quality;... potential 200 IS/IT Strategic Analysis Table 4. 4 Sample questions for evaluating the current portfolio (source: adapted from a questionnaire developed by T Osborne, ‘Current portfolio questionnaire’, working papers, Glaxo Wellcome Operations, 19 94) 1 What business activities are ‘contained’ within the system? 2 What information (automated and manual) flows through the system and how is the information accessed... the portfolio The information may be collected by discussion or questionnaire, or by a mixture of both A questionnaire may be the only practical method, because there are often multiple users for major business systems and databases A selection of the type of questions that might be asked is given in Table 4. 4 Current/Previous Strategy and Policies If IS/IT strategic formulation and planning is a continuous... training, documentation and usability? 8 How useful, accurate and timely is the information put into and taken out of the system? 9 Are there any better ways of using the system? 10 How flexible is the system for making changes? The IT development and technical staff—to gain information about the structure and interfaces of information systems and databases: their technical characteristics, quality, age and... competitive 210 IS/IT Strategic Analysis Figure 4. 6 Objectives and CSFs performance for the organization.’ They are the few key areas where ‘things must go right’ for the business to flourish As a result, the CSFs are areas of activity that should receive constant and careful attention from management The current status of performance in each area should be continually measured, and that information should... success (or failure) factors (CSFs, CFFs) Information needs may arise from all the elements in the business strategy and they are a significant source of requirements in the compilation of the IS strategy For example: The mission, vision, strategic and tactical objectives and key performance indicators set the targets for defining or assessing current 192 IS/IT Strategic Analysis initiatives; the external... and main information elements, and how they relate to one another These models make up the business model and, together with supporting IS models, comprise an IS architecture for the business (see Figure 4. 3) These models offer a number of benefits They provide: A valuable aid to understanding what is happening in the organization and for clearly visualizing the business processes and information. .. of information By categorizing the portfolio into strategic, high potential, key operational or support systems, it can indicate how well current and future business strategy is supported This is also a key indicator in assessing how IS/IT is perceived by business people If, for example, there are no strategic or high-potential applications, this suggests that management consider IS/IT of little strategic. .. Scorecard, it is useful to develop the link between data, information and business results Figure 4. 4 illustrates such a model, the DIKAR model (Data, Information, Knowledge, Action, Results), derived from the work of Venkatraman 15 Viewing the model from left Team-Fly® Information Requirements 205 Table 4. 5 Techniques used in creating the IS demand statement Technique Deliverables Business strategy . approaches to strategic information systems planning: An empirical analysis’, Journal of Strategic Information Systems, Vol. 8, 1999, 262–283; A.L. Lederer and V. Sethi, ‘Key prescriptions for strategic information. strategic information systems planning , Journal of Management Information Systems, Vol. 13, No. 1, 35–62; A.H. Segars, V. Grover and J.T-C. Teng, Strategic information systems planning: Planning. ‘The implementation of strategic information systems planning methodologies’, MIS Quarterly, Vol. 12, No. 3, 1988, 44 5 46 1. 2. T.D. Wilson, ‘The implementation of information systems strategies in