Anda di halaman 1dari 17

Strategic Planning for Information Systems

John Ward and Joe Peppard


Wiley, 2002, 3rd edition
ISBN: 0470841478, 624 pages

Theme of the book

This book is concerned with information systems and information technology, and the
prioritisation of both areas on the management agenda, so that a cohesive strategy can be
formulated to add value and improve business performance.
The book presents a tool kit of techniques with which to identify and analyse the business
and its environment, and then appropriately devise strategies. It takes the reader through
the entire process of developing an IS/IT strategy, including all the elements that need to
be considered in an organisational context.

Strategic Planning for Information Systems

Key learning points

the conventional view that business strategy drives IS strategy, which in


turn drives IT strategy is not sufficient for the expanding role of IS/ITIf IS/IT is to make a
genuine contribution to business strategy, a different model and logic is required that allows
the capabilities of IS/IT to be an intrinsic component of strategy rather than one of its
consequences.
IS/IT strategy must be understood in terms of the organisations business strategy and its
internal and external environment.
If IS/IT strategy is not making a contribution to business value, it may be because there is
no alignment between business strategy and IS/IT strategy. This must be urgently
addressed.
An objective of IS/IT is developing a value added portfolio of applications that have a
strategic impact on the organisation to increase performance. This is achieved by aligning
IS/IT demand to business strategy, and exploring opportunities for IS/IT to shape business
strategy.
It is obviously important to devise appropriate business-driven IS strategies and then
appropriate IT-supply strategies. But having a strategy is not going to lead to business
success! Implementing and then updating that strategy as the business progresses is how
success will occur.
Following strategy implementation there must be a process of review; to identify what has
been achieved compared against what needed to be achieved. Processes need to be put in
place so that if mistakes have been made they are not repeated in the future.

Knowledge Interchange Book Summaries

Page 2

Strategic Planning for Information Systems

Contents of the book


1. The

evolving

role

of

information

systems

and

technology

in

organisations: A strategic perspective


2. An overview of business strategy concepts and the IS/IT strategy implications
3. Developing an IS/IT strategy: Establishing effective processes
4. IS/IT strategic analysis: Assessing and understanding the current situation
5. IS/IT strategic analysis: Determining the future potential
6. Determining the business information systems strategy
7. Managing the applications portfolio
8. Strategic management of IS/IT: Organising and resourcing
9. Managing investments in information systems and technology
10. Strategies for information management: Towards knowledge
11. Managing the supply of IT services, applications and infrastructure
12. Strategic planning for information systems: Quo vadis?

Knowledge Interchange Book Summaries

Page 3

Strategic Planning for Information Systems

The strategic role of information systems and information technology

The authors begin by explaining that every organisation is fundamentally dependent on its
information systems (IS) or the application of its information technology (IT). Over the
years this dependency has increased in light of e-commerce and globalisation. Although IS
and IT can be used simply to maintain business operations, significantly they can also be a
source of competitive advantage.
Although many people use the terms IS/IT interchangeably there are important differences
between them:

IS existed before IT, it is the means by which people and organisations gather,
process, store, use and disseminate information. It can be understood in terms of
language and communication.

IT is the actual technology, for example the hardware or software. It facilitates the
gathering, processing, storing, delivery and sharing of information.

the conventional view that business strategy drives IS strategy, which in turn drives IT strategy is not
sufficient for the expanding role of IS/ITIf IS/IT is to make a genuine contribution to business strategy, a
different model and logic is required that allows the capabilities of IS/IT to be an intrinsic component of
strategy rather than one of its consequences

Hence although in the past organisations may have dealt with IS/IT in a tactical short-term
manner, managers must understand that many advantages can stem from developing a
future-orientated strategic approach to IS/IT. If managers apply a different attitude to IS/IT
by viewing it strategically, they can uncover opportunities and develop a real competitive
advantage for the firm that cannot be easily replicated by competitors through simply
purchasing the same technology.
How can managers use IS/IT strategically?

Usually IS/IT is internally focused to address the organisations processes and issues.
Instead look externally to the customers, competitors, markets, and suppliers

Knowledge Interchange Book Summaries

Page 4

Strategic Planning for Information Systems

Share information via technologically based systems with customers and


suppliers. For example suppliers can use external linkage systems to
monitor sales and purchasing, or customers can track the progress of
their packages

Integrate information held throughout the organisation. Value can b

e added by aligning all the knowledge held on a customer or competitor in a system.

Develop, produce and market new or improved products and services based on
information. For example internet banking, or adding value to a tangible product,
such as on-line support.

Provide managers with quality and timely information about markets, customers,
technology, competitors etc. to support the development and implementation of
strategy.

Focus on the value added that can be generated from IS/IT, rather than viewing it as
a mechanism to reduce overheads.

Share benefits gained from systems throughout the organisation, and even with
customers and suppliers. This can be a strong advantage over competition as they
cannot re-create the relationships which the information has allowed to be built.

Understand what the customer wants and what value means to them, to match
products and services to the requirements of the marketplace.

Pursue business driven innovation, not technology driven. Do not simply follow the
most innovative technology, because there may not be a market for it. Ensure that
customers will buy it and that it fits with the purpose of the organisation.

Use information gained on customers to build the business, for example knowledge
of purchasing patterns can be used to develop targeted special offers.

What is an IS/IT strategy?

An IS/IT strategy is one that makes a contribution to business value. To do this there needs
to be an alignment between the business strategy and IS/IT strategy. The IS/IT managers
must understand the external environment (competition, customers, suppliers), and the
affect this has on the organisation. Developing a knowledge of the business is essential as
otherwise it will only be viewed from an IS/IT perspective, and this will limit the implications
of any strategy from being determined. Business strategies should be shaped on this
information, while also being driven by information from IS/IT. In tandem the IS/IT strategy
needs to develop from business strategy. From there the managers must evaluate what

Knowledge Interchange Book Summaries

Page 5

Strategic Planning for Information Systems

information, systems and technology are needed to enable delivery of the


strategies.
The authors explain IS/IT strategy as:

IS strategy deals with what to do with information, systems and technology and how to manage the
applications from a business point of view

It is therefore concerned with aligning information and systems to support business needs,
and identifying and exploiting competitive opportunities for IS/IT. It is based in the strategy
of the business and considers the competitive impact of IS/IT, by identifying the
investments needed to accomplish the organisations objectives, exploring what benefits will
be produced, and if any changes have to occur to make it fit current systems.

IT strategy designates how technology is to be applied in delivering information and how the technology
resources are managed to meet the range of business needs

This is how the organisations demand for information and systems is supported by
technology. It is understood by the provision of IT capabilities, resources and services.
The consequences of not having a IS/IT strategy may include:

Making investments that do not support business objectives

Having no integration, resulting in a duplication of effort

Poor information management, which is inconsistent and/or slow

Mis-understanding of purpose across users and IS/IT specialists

Ad-hoc redevelopment of systems that do not fulfil their original purpose

Potential business advantage from IS/IT are not identified and exploited

Strategies that are subject to business risk

Knowledge Interchange Book Summaries

Page 6

Strategic Planning for Information Systems

Using strategy concepts for IS/IT strategy formulation

Before developing an IS/IT strategy, managers should gain an understanding


of the internal and external environment. The importance of IS/IT in business
terms and the opportunities that exist need to be assessed. Managers must understand the
potential of IS/IT from a business perspective and align investments in IS/IT with the
objectives of the organisation.
This analysis and the associated tools that follow should be performed by both IS/IT
managers and business managers to ensure that a thorough understanding of the business
is used. The model (below) gives an overview of the IS/IT strategy formulation process.
From analysing the internal and external environment, to the development of the different
strategies, and the creation of an applications portfolio. This is a useful model because it
captures all the elements of building the IS/IT strategies and reminds managers of what
needs to be considered when constructing a strategy. The model shows all the elements
that impact on the creation of the IS/IT strategy process. The strategies would describe
policy, deployment and responsibility etc. and how the information will be developed or
managed. The current application portfolio feeds back to the internal environment.

External
business
environment

External
IS/IT
environment

Internal
IS/IT
environment

Internal
business
environment

IS/IT
STRATEGY
PROCESS

Business
IS
strategies

IS/IT
management
strategies

Current
application
portfolio

IT
strategies

Future
application
portfolio

Knowledge Interchange Book Summaries

Page 7

Strategic Planning for Information Systems

One way of understanding the environment is by performing a situational


analysis

to

understand

its

current

situation,

strengths,

weaknesses,

opportunities and threats. From an external perspective identify, analyse or


consider:
What market segments the organisation operates in and if there are
options to increase the market shares held
Are the organisation's products new, mature or declining
The current and potential competitors, to understand their strengths and weaknesses
The authors also advocate performing Porter's five forces to gain a deeper understanding of
how the organisation operates in its industry, and how it interacts with customers,
suppliers, competitors, new entrants and product and service substitutes. Understanding
these areas helps managers position the organisation so as to gain a better place than
competitors, identify what threats may arise and what opportunities to exploit. This can be
achieved by analysing the industry in light of the five forces, and then determining the
impact this has on IS/IT or the effect IS/IT could have on them, and then develop
appropriate strategies. Questions can be asked such as:

Competitors: how can IS/IT change basis of competition

Buyers: how will IS/IT increase the power of customer, will this change relationships
with the customers

New entrants: how new entrants enter the industry based on IS/IT, or can IS/IT
build a barrier to their entry

Suppliers: how can IS/IT change the balance of power and relationships with
suppliers

Substitutions: how can IS/IT generate new products and services

As well as undertaking an analysis of the external environment a review of the internal


environment is advantageous. In continuing the situational analysis, from an internal
perspective identify, analyse or consider:

The financial position of the organisation

What skills and training the employees have and how this relates to the
organisations purpose

The usefulness of the physical assets

R&D ability

The organisation's structure, relationships and culture, and its effectiveness in


changing circumstances

Knowledge Interchange Book Summaries

Page 8

Strategic Planning for Information Systems

If this information is not documented, it should be discussed with business


managers; specifically concentrating on the success factors that are imperative
to the organisation. In considering the purpose and operations of the
organisation IS/IT managers need to specifically determine what information is
needed and how it should move around to fulfil the different tasks in the
organisation:

How critical is the information in the systems, how can it be used, obtained, altered

Understand the role of information in the value chain, and what it needs to do, for
example exploit opportunities or decrease complexity

There will also need to be a review of the current and future IS/IT situations. IS/IT
managers and business managers should perform this together because their perception on
the role and effectiveness of IS/IT will be different and useful, for example determining if
the organisation has a negative perception of them that would need to be altered before any
commitment would be given to a IS/IT strategy. The trends and opportunities that are
emerging from new technology should be assessed, as should how and whether competitors
will apply it in their organisations. A managerial awareness of the position the organisation
is at regarding IS/IT will show how far it needs to move to get to IS/IT being integrated
with business strategy.
The internal IS/IT environment should also be assessed to evaluate if the infrastructure,
devises etc., work effectively enough to respond to the way things are needed to be done in
the IS/IT strategy. The fitness of the IS/IT team should also be assessed to determine if it
can properly implement the strategies. Therefore it needs to be considered how effective it
was in the past and currently, what weaknesses or strengths the team has, what managers
and general employees think of IS/IT. To improve performance and the perception of the
role of IS/IT in the business, authors recommend:
1. Get basics right: ensure can deliver basic IT services. Get commitment from all IS/IT
employees to understand the importance of the business focus; move the team from
thinking in terms of tactical work and towards improving customer service or
increasing productivity and how IS/IT can answer these issues.
2. Enlist key influencers: key individuals in the organisation who can act as advocates
for IS/IT or who need persuading to smooth issues later.
3. Build credibility: build a dialogue with the rest of the organisation, earn trust and
respect, and demonstrate the business value of IS/IT.

Knowledge Interchange Book Summaries

Page 9

Strategic Planning for Information Systems

4. Seek early involvement in projects: actively seek involvement and focus


on benefits and delivery.
5. Place IS/IT in a business context: reframe IS/IT, so that IS/IT decisions
are also the concern of business managers.
6. Cultivate and maintain partnership: emphasise continual communication
and revisit all previous stages.

Developing IS/IT strategies

Once information on the external and internal environment has been analysed, creative
thinking as a brainstorming exercise can be performed to develop strategies that can exploit
opportunities, use strengths, address weaknesses and defend against threats. The authors
suggest posing a series of questions as a basis for creative thinking:

How can IS/IT affect the nature and value of the products and services

Can IS/IT add a new line of business or increase a product's value

How can IS/IT affect the demand for products and services, segment markets more
effectively, extend them geographically or provide new distribution channels to reach
the market

Can IS/IT let us reach more customers or get closer to the marketplace

How can IS/IT affect the cost base of the key processes in the industry

Can IS/IT enable products and services to be produced more economically, or at a


higher quality than normal

In building strategies the authors recommend following one specific focus of either:

Low cost: identify the lowest-cost approach to the activities of the business, and
minimise all expenses, to drive down the cost charged to customers. IS/IT can help
bring in efficiency and the flexibility and integration of systems. For example Airlines
have tickets booked via the internet and self-service check in.

Differentiation: employ innovation and creativity via customer driven strategies to


create, for example a strong brand. IS/IT is used to focus on enabling new ideas and
improving existing processes, such as creating databases to understand customers.

Niche: low cost or differentiation strategies are followed in a market niche. IS/IT is
predominantly used in identifying, understanding and holding on to customers.

Knowledge Interchange Book Summaries

Page 10

Strategic Planning for Information Systems

It is useful to have a business level person and IS/IT person creating the
strategy, as this ensures it makes sense from both perspectives. It also makes it
more relevant and allows swifter adoption.
From here future strategies can be planned and should be assessed on:

The management and financial risks

Potential responses from competitors

Degree new capabilities of the organisation and employees are needed to fulfil them

Whether the structure is right to achieve it or does there need to be a reorganisation

Ability to implement regarding competencies, resources, processes and culture

Implications for customers and suppliers

Prioritise strategies to decide which to implement, for example some may be too ambitious.
Often the IS/IT strategy will be depicted as an architectural model (below), this helps:

As an aid to clearly understand what is happening in the business and showing


business processes and information flows

As a communication mechanism to show how IS/IT works to a business audience

To highlight important flows or where opportunities or problems will occur

To map what already exists with what is needed

To consolidate understanding across organisation, as it can map all perspectives, for


example marketing and production

The architectural model shows the business processes, and inter-linked activities and roles.
Key entities are the areas of importance to a business process, which could include people,
places or events. Once created the models can be discussed to see how far they can go to
achieve meeting business needs. It helps in understanding the organisation in terms of
structure, relationships, and people, pertinent to the IS/IT strategy and business strategy.

Knowledge Interchange Book Summaries

Page 11

Strategic Planning for Information Systems

Architecture model
Business model
Business data model

Business process model


Process/Entity
matrix

R
C

IS model
Entity life history

IS process model
App 1

IS/Entity
matrix
App 2

IS data model

IS functional
model
App 1

App 2

Advancing the strategy

It must be assessed whether the current culture, management style, and values of the
organisation are in line with the direction of the IS/IT strategy. This is especially critical if
there has never been an IS/IT strategy linked to business strategy before, as it needs to be
determined if any of the elements should be altered to fit the strategy or vice versa. This is
important because if there is not harmony between the two then it will hinder the strategies
successful implementation.
A common problem many organisations face in pursuing IS/IT strategy is that there is not
enough management commitment behind IS/IT strategy plans or implementation. One way
to overcome this is through building strong relationships between IS/IT managers and
business managers. It may also be useful to have an executive management level sponsor
of the IS/IT strategy as this reinforces commitment and reinforces the allocation of
resources etc. Even if buy-in is gained from business managers to develop the strategies, it
cannot just be left to IS/IT to implement the plans, there needs to be commitment in order
for it to work and activities be supported throughout the organisation. This commitment is
difficult to get if top management do not understand the impact IS/IT can have or how it

Knowledge Interchange Book Summaries

Page 12

Strategic Planning for Information Systems

can create competitive advantage. Some of them may not be able to see past
computers; this needs to be addressed or the organisation will never move
forward.
One way of achieving buy-in is to communicate the IS/IT strategy. This gives
a clear sign of commitment across the organisation, and highlights what changes will be
made and what resources utilised. Communication of the strategy also stops rumours about
what is happening; especially if the message is reinforced in a consistent manner.
Furthermore in presenting the strategy across the organisation, problems that were not
originally identified can be highlighted by those individuals who were not involved in any of
the planning stages, they may also have ideas as to how to develop the strategy further.

The application portfolio

Once the IS/IT strategy has been built managers will need to use it to develop the
applications portfolio. The applications portfolio brings together the existing, planned and
potential IS/IT strategies and assesses their business contributions, and the role and value
of the set of applications. Much of this information will have been generated to develop the
IS/IT strategy. This includes:

Existing applications: those in place and for the near future. Assesses their
contributions to existing business and how well they support future requirements.
Are they strengths or weaknesses in current and future scenarios

Required applications: these are necessary to achieve business objectives and


strategies and what the contribution will be

Potential application: what might be valuable in future, if feasible to deliver and give
some benefits

Potential applications can be separated into four types in order to gauge which to support:

High potential: applications that may be important in achieving future success: new
business ideas and technical opportunities

Strategic: applications that are critical to sustaining future business strategies:


market requirements, competitive pressures, business objectives, obtain advantage
and then sustain it

Knowledge Interchange Book Summaries

Page 13

Strategic Planning for Information Systems

Key operations: applications on which the organisation currently


depends for success: improve performance of existing activities,
integrate systems to avoid duplication and inconsistencies, avoid
disadvantages

Support: applications that are valuable but not critical to success:


improve productivity, efficiency. Cost efficient use of IS/IT funds and resources

There needs to be a balance between these types of application. The portfolio cannot just be
full of high potential applications because they are often the most costly and risky, in both
finances and resources, which could damage the organisation if they do not succeed.
Instead time and money need to be invested in resources that generate the best business
results in achieving organisational aims. The different types of application will need,
different processes and development tools, different degrees of involvement from
executives, line managers and IS/IT, and different IS/IT organisational structures and
therefore justification. All the users, i.e. strategic, IS/IT business, line managers, need to
discuss the portfolio to reconcile differences and understand which applications to prioritise
so as to get maximum benefits.
Every application should be assessed on a number of key questions:

Why: is the investment being made, what contribution is needed, how does it tie in
with the business strategy and IS/IT strategy

How: to implement systems, is it a standard or bespoke solution

What: is required

The business and IS/IT implications of these should be considered. The authors also suggest
evaluating the applications in terms of their benefits:

Traditional cost-benefit: efficiency improvements in organisation processes

Value link: estimates improvements in business performance from improving


linkages between processes and activities

Value acceleration: consider time dependence of benefits and costs, as a knock-on


effect in other areas of the business

Value restructuring: productivity from processes and organisational change, as a


result of improving systems

Innovation evaluation: estimating the value to business of new business or new


practices levered from IS/IT, e.g. change to organisational image

Knowledge Interchange Book Summaries

Page 14

Strategic Planning for Information Systems

Analysing these costs and benefits gives an overall worth of each


application. This can then compared against the prioritised strategies to
determine which are feasible to pursue. The application should be judged on
the overall contribution they are expected to deliver to the business. Hence
the contribution needs to be weighed against taking the business where it
needs to go and fulfilling the objectives. A decision has to be made as to
whether the risks and costs are worth potential benefits. It cannot only come down to cost,
consider instead:

What is most important to do, based on identified benefits

What is capable of being done, based on available resources

What is likely to succeed, based on risk of failure of each investment

Monitoring and reviewing

It is obviously important to devise appropriate business-driven IS strategies and then appropriate ITsupply strategies. But having a strategy is not going to lead to business success! Implementing and then
updating that strategy as the business progresses is how success will occur

Therefore whatever processes managers use to analyse situations and assess opportunities
must be periodically reviewed to readdress and change the IS/IT strategy. If there is no
review then the strategy being implemented may not fit with the actual environment. To do
this the strategy must be flexible enough to cope with change, this could be external
business factors or external technological factors, either as opportunities or threats, new
products in IS/IT, or a regulations change. Internal business factors can also alter, for
example a takeover, new CEO or staff restructuring. Or it could be if the implementation
does not work in reality. Business and IS/IT strategies have to be re-aligned when new
opportunities or constraints are identified, otherwise finances, time and resources will be
wasted in pursing strategies that are redundant. In such cases it is better to stop and
redirect strategies and implementation than follow a course that cannot succeed. This
means that all elements of the strategy must be understood so that if anything which
impacts upon them alters, it can be addressed. This means that the external environment,
business needs, opportunities and benefits accrued from the strategy need to be monitored.

Knowledge Interchange Book Summaries

Page 15

Strategic Planning for Information Systems

To support this knowledge there has to be strong co-ordination and


communication between IS/IT and business, or else IS/IT will continue
implementing while business managers know a change has happened.
Furthermore a monitoring processes needs to be established so if the strategy
or its implementation are off track the situation can be rectified or if not
consideration can be given to shutting it down to save wasting further resources, money or
time.
Finally there should be a formal review and evaluation of the results. Here what was and
was not accomplished is determined so as to maximise the benefits of the particular
investment and learn how to improve benefits from future investment. The evaluation
should involve key stakeholders. If the expected benefits have not been achieved, measures
should be taken to ensure the same thing will not happen in the future. The review should
also consider potential further benefits, and what improvements might now be possible as a
result of implementation; otherwise many available benefits could be overlooked.

Outsourcing

Some organisations may choose to outsource some or all of their IS/IT provision. Care must
be taken if following this path as:

It can lead to a lack of knowledge, especially if the outsourcing provider changes

May be inflexible if contracted to do one thing and then want to make changes
following strategic decisions

Can lose innovative capacity because of missed opportunities

Different culture and values of the organisation and the outsourcer

Gain IS/IT knowledge, but have difficultly integrating it with the system

Although it can lead to advantages such as:

Access to specialist knowledge, that would take years for employees to learn

Cost savings, not just staff but access to latest technology

Quicker results, especially if they are under pressure to fulfil contractual deadlines

IS/IT may fluctuate in demand, therefore only have outsourcing when you need it

Using multiple vendors for outsourcing can minimise risks and maximise benefits, however
it increases the time and resources needed to manage them all. There needs to be a person

Knowledge Interchange Book Summaries

Page 16

Strategic Planning for Information Systems

in the organisation who has the knowledge of IS/IT and business to track,
assess and interpret changing IS/IT capabilities and relate to organisational
needs, work with business managers to define IT requirements over time,
and monitor and manage contractual relationships. These elements cannot be
outsourced. Further consideration has to be made as to whether it is worth
skilling up the gap in employees knowledge that is making the organisation
use outsourcers.

About the Authors

John Ward is Professor of Strategic Information Systems at Cranfield School of


Management. His main areas of interest are the strategic uses of IS/IT, the integration of
IS/IT strategies with business strategies, the development of organisational IS capabilities
and the management of IS/IT investments. He has published many papers in leading
journals and co-authored several books. John also acts as a consultant to a number of
major international and public sector organisations.
Joe Peppard is Professor of Information Systems at Cranfield School of Management and
Adjunct Professor at the University of South Australia. Joes research and teaching
predominantly focuses on information systems and technology strategy and management.
He has published widely in academic and general business journals and books. His
consulting work is focused on advising organisations on IT and strategy and how to unlock
business value from their IT investments.

Knowledge Interchange Book Summaries

Page 17