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Ch. 4: Planning

Types of planning: Strategic Tactical Operational planning

Traditional planning ”Sense-and-Respond” Case studies

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3 planning horizons

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Traditional strategic planning Goals, where we want to go Business plan IS plan that support the business plan Plan for implementing this IS strategy

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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?

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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

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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

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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.

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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

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Enterprise Information Management Model (Benson and Parker)

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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

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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

Case: Høyskolene Hierarkisk

struktur (styre, rektor, dekaner på toppen)

Passer ikke for en kunnskapsbedrift

Flat struktur bedre?

Ledelse

Vit. ansatte

men ikke mulig å gi ordrer

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A strategy for each line

avoid one strategy for the whole enterprise Hydro, Statoil

line-oriented strategies are required

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”Sense-and-Respond”

”Sense-and-Respond”: find new possibilities experiment under an overall vision and strategy

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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

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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

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Case: Lotus Sport cars Nearly bankrupt in

1997 New leader Outside

consultants Dramatic

improvement in a short time

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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!

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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

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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

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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

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Stages of growth

1. Early successes New technology, try and fail, experimentation

2. Contagion (“infection”) New products, rapid growth, many

applications… 3. Control

Proliferation must be controlled, standardization.

4. Integration Use of technology has reached a mature level

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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?

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Competing forces

Michael Porter Potential entrants Bargaining power of buyers Bargaining power of suppliers Substitute products and services Rivalry among existing firms

How the Internet Influences Industry Structure

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Mini exercise: SAS

Discuss the competitive situation for SAS today based on Porter’s ideas

Can IT help SAS?

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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

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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)

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Value chain analysis

E-commerce and Industry Value Chains

E-commerce and Firm Value Chains

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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

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Virtual assembly line

Production data

Specifications

Finished product

New Virtualproduct

“as built”description

Refined virtualproduct

Virtual “assembly line”

Physical assembly line

Production data Service data

Virtual Product

Virtual product

Virtual product

Internet-Enabled Value Web

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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

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Case: Cisco Components for data networks New Fundamentals:

reporting system, e.g., travel expenses, Web-based, routed to manager

Operational Excellence: Web based information system (”dashboard”) for management

Rational Experimentation: 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

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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

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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:

Expert system with a natural language interface Email and Video-conference system

Linkage analysis: Partners (universities, …) Customers (members, …) Possible changes (partners becoming competitors)

System to handle all parts