Title: Why Managers Must Understand the Relationship Between Strategic Planning and IT
1Why Managers Must Understand the Relationship
Between Strategic Planning and IT
- Alignment
- IT organization and resources work on projects
that support the key objectives of the business - According to the 2007 State of the CIO Survey
conducted by CIO Magazine - Four of five CIOs say they are not aligned with
their organization's strategic goals
2Why Managers Must Understand the Relationship
Between Strategic Planning and IT (continued)
- IT people must
- Recognize and understand business needs
- Develop effective solutions
- Business managers must communicate
- Vision, objectives, and strategies of the
organization
3What is Strategic Planning?
- Strategic planning
- Helps managers identify desired outcomes and
formulate feasible plans by using available
resources and capabilities - Typically an annual process
- Variety of approaches
- Issues-based
- Organic
- Goals-based
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5Defining Vision and Mission
- Vision/mission statement
- Communicates an organizations overarching
aspirations - Guides organization through changing objectives,
goals, and strategies - Components
- Core ideology
- Mission statement
- Vision of a desirable future
- Inspires and requires employees to stretch to
reach its goals
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7Conducting Internal Assessment
- Involve all levels and business units
- Prepare a historical perspective
- Gather data about internal processes and
operations - Analyze data to identify and assess
- How well the firm is meeting current objectives
and goals - How well its current strategies are working
- Process identifies many of the strengths and
weaknesses of the firm
8Analyzing External Environment
- Examine the industry in which the organization
competes - Collect and analyze facts about its key
customers, competitors, and suppliers - Members of the organization should be prepared to
hear things they do not like - Michael Porters Five Forces Model
- Most frequently used model for assessing the
nature of industry competition
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10Analyzing External Environment (continued)
- Competitive financial analysis
- Strengths, Weaknesses, Opportunities, Threats
(SWOT) matrix illustrates - What the firm is doing well
- Where it can improve
- What opportunities are available
- What environmental factors threaten the future of
the organization
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12Defining Objectives
- Objective
- Statement of a compelling business need that an
organization must meet to achieve its vision and
mission - Example
- Preserving consistency in revenue and earnings
growth
13Establishing Goals
- Goal
- Specific result that must be achieved to reach an
objective - Several goals may be associated with a single
objective - Short-term, medium-term, and long-term goals
- Big Hairy Audacious Goals (BHAGs)
- Recognize and drop goals that are no longer
relevant
14Setting Strategies
- Strategy
- Specific actions an organization will take to
achieve its vision/mission, objectives, and goals - Managers should consider
- Long-term impact of each strategy on revenue and
profit - Degree of risk involved
- Amount and types of resources that will be
required - Potential competitive reaction
- Draw on the results of the SWOT analysis
15Setting Strategies (continued)
- Michael Porters three fundamental strategies
- Become the cost leader
- Provide goods and services for a set of customers
better than others - Focus on a specific niche in the marketplace
- Market options matrix
- Identify an organizations product and market
options - Growth-share matrix
- Allocate resources among various business units
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18Defining Measures
- Measures
- Metrics that track progress in executing chosen
strategies to attain an organizations objectives
and goals - Help managers determine if a strategys ultimate
purpose is being achieved - Run the risk of getting what they measure
without accomplishing anything meaningful
19Deploying OGSM
- O
- The organization establishes numerical
- G
- Goals that index each objective, sets
- S
- Strategies on how to reach the goals, and
defines - M
- Measures to assess how well the strategies are
being executed
20Deploying OGSM (continued)
- Highest-level OGSM
- Deployed to the organizations business units and
functional units - Managers translate the information into their own
units objectives and goals as input to their own
OGSM processes
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22Identifying Projects and Initiatives
- IT staff members pick up ideas for potential
projects - Through interactions with various business
managers - From observing other IT organizations and
competitors - Can generate many ideas for IT projects that
support corporate objectives and goals - Classify various potential projects by type
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24Prioritizing Projects and Initiatives
- Combined process of setting and scheduling
priorities is needed - To define which projects will be staffed and when
they will be executed - Each viable project must relate to a specific
organizational goal
25Prioritizing Projects and Initiatives (continued)
- Can the organization measure the business value
of the initiative? - Tangible benefits
- Can be measured directly and assigned a monetary
value - Intangible benefits
- Cannot directly be measured and cannot easily be
quantified in monetary terms
26Prioritizing Projects and Initiatives (continued)
- What kinds of costs are associated with the
project, and what is the likely total cost of the
effort over multiple years? - See if the project has an attractive rate of
return - Managers must consider risks
- Sequencing of projects must be considered
- Is the organization ready and capable of taking
on this project?
27A Manager Takes Action
- Lowes IT Portfolio Management Process
- Steady stream of IT-related efforts in its
project pipeline - CIO Larry Stone and Stephen Boerst, Lowes
manager of IT strategy and planning - Upgraded the firms process for prioritizing IT
initiatives - Established an IT steering committee
- Used portfolio management software
28Executing Projects and Initiatives
- Business managers have a key role in ensuring
good results that meet business needs - Success rate for IT projects is not high
- Standish Group
- Estimated in a 2004 report that the IT project
success rate is only about 34 percent
29Measuring and Evaluating Results
- Actual results of a project must be compared with
the goals it expected to achieve - Comparison may indicate that a change is needed
- Managers must be flexible and willing to
reevaluate their positions
30Effective Strategic Planning United Parcel
Service (UPS)
- Outline of a strategic plan developed for United
Parcel Service - Define mission/vision
- OGSM
31Defining Vision and Mission
- Vision
- To bring the worlds businesses together through
synchronized commerce by coordinating their
distribution systems, supply chains, and order
management systems, helping them to compete
better in an expanding global economy - Mission
- To develop business solutions that create value
and competitive advantages for customers of all
sizes through product differentiation, market
penetration, better customer service, and
improved cash flow
32Conducting Internal Assessment
- Example UPS
- Historical perspective
- Two teenagers started the service in 1907
- Claude Ryan and Jim Casey
- Expanded its Next Day Air service to all 50
states and Puerto Rico by 1985 - Began tracking with Delivery Information
Acquisition Devices (DIADs) - Captured major shipping associated with
e-commerce - Rebranded Mail Boxes, Etc. to The UPS Store
33Conducting Internal Assessment (continued)
- Current strategies
- Global expansion
- Provide all modes of service
- Identification of strengths
- Financial strength
- Makes effective use of technology
- Identification of weaknesses
- Thin operating margin
- Identification of threats
- Union contracts
34Conducting External Assessment
- Examining industry
- UPS competes in the package delivery industry
- Identification of strengths
- Dominant market share
- Global reach
- Strong brand image
- Identification of opportunities
- Acquisitions
- Growth in e-commerce
- International growth
35Conducting External Assessment (continued)
- Identification of threats
- Rising oil prices
- Terrorism
- Competitive analysis
36Defining Objectives
- Key objective
- Future profitability
- Revenues of 43 billion and operating income of
6 billion in 2005 - Growth from 2002 2005
- Revenue 10.8 percent
- Profit 14.5 percent
- Preserve this consistency in revenue and earnings
growth
37Establishing Goals
- Increase operating profits in all three business
segments - Domestic delivery
- International delivery
- Supply chain and freight
38Setting Strategies
- Primary strategy
- Take advantage of UPSs competitive strengths
- Maintain the firms focus on meeting or exceeding
customer requirements
39Defining Measures
40Deploying OGSM to IT
- Dave Barnes
- Promoted to senior vice president and CIO of UPS
in 2005 - Responsible for ensuring that IT organization
understands the corporate OGSM - Define, execute, and measure projects that are
consistent with the firms mission, objectives,
goals, and strategies
41Identifying and Prioritizing Projects and
Initiatives
- Breakthrough
- UPS Package Flow Technology
- Designed to support growth, improve productivity,
reduce costs, and provide the platform for new
services - Savings from this project are estimated to be
750 million per year starting in 2008 - Growth
- Expanding Worldport hub
- Increase sorting capacity over the next five
years by 60 percent to 487,000 packages per hour
42Identifying and Prioritizing Projects and
Initiatives (continued)
- Innovation
- Continues to monitor RFID advances closely
- Enhancement
- EDD (Enhanced DIAD Download) is UPS-developed
software that downloads an electronic manifest to
the drivers DIAD at the start of each workday - Maintenance
- Continually evaluating and upgrading the DIAD
device
43Identifying and Prioritizing Projects and
Initiatives (continued)
- Mandatory
- Target Search
- Enables U.S. Customs and Border Protection agents
to inspect packages that pass through the
Worldport international hub
44Executing Project, Then Measuring and Evaluating
Results
- During project execution
- Actual results are compared to expected results
- Some approved projects even may be cancelled
based on negative results
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46Summary
- Strategic planning
- Helps managers identify desired outcomes and
formulate feasible plans - Requires analysis of internal and external
environment - Management defines
- Objectives
- Strategies
47Summary (continued)
- Organizations objectives, goals, strategies, and
measures (OGSM) - Must be deployed to its various business units
and functional units so that everyone knows what
is expected and how to achieve it