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Why Managers Must Understand the Relationship Between Strategic Planning and IT

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Created Date: 9/27/2002 11:29:22 PM Document presentation format: On-screen Show (4:3) Other titles: Times New Roman Arial Default Design 1_Default Design 2_Default ... – PowerPoint PPT presentation

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Title: Why Managers Must Understand the Relationship Between Strategic Planning and IT


1
Why 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

2
Why 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

3
What 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

4
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5
Defining 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

6
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7
Conducting 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

8
Analyzing 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

9
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10
Analyzing 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

11
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12
Defining 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

13
Establishing 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

14
Setting 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

15
Setting 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

16
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17
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18
Defining 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

19
Deploying 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

20
Deploying 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

21
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22
Identifying 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

23
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24
Prioritizing 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

25
Prioritizing 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

26
Prioritizing 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?

27
A 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

28
Executing 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

29
Measuring 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

30
Effective Strategic Planning United Parcel
Service (UPS)
  • Outline of a strategic plan developed for United
    Parcel Service
  • Define mission/vision
  • OGSM

31
Defining 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

32
Conducting 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

33
Conducting 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

34
Conducting 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

35
Conducting External Assessment (continued)
  • Identification of threats
  • Rising oil prices
  • Terrorism
  • Competitive analysis

36
Defining 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

37
Establishing Goals
  • Increase operating profits in all three business
    segments
  • Domestic delivery
  • International delivery
  • Supply chain and freight

38
Setting Strategies
  • Primary strategy
  • Take advantage of UPSs competitive strengths
  • Maintain the firms focus on meeting or exceeding
    customer requirements

39
Defining Measures
40
Deploying 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

41
Identifying 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

42
Identifying 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

43
Identifying 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

44
Executing 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

45
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46
Summary
  • Strategic planning
  • Helps managers identify desired outcomes and
    formulate feasible plans
  • Requires analysis of internal and external
    environment
  • Management defines
  • Objectives
  • Strategies

47
Summary (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
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