Information Systems Planning: Information Systems Management in Practice 7E Mcnurlin & Sprague

Information Systems Planning
Chapter 4
Information Systems Management In
Practice 7E
McNurlin & Sprague
PowerPoints prepared by Michael Matthew
Visiting Lecturer, GACC, Macquarie University – Sydney Australia
Chapter 4
• Systems planning, especially strategic systems planning, is
becoming more difficult and more important at the same time.
Technology is changing so fast that it is seems futile to plan
for it, yet the dependence on this technology makes planning
its effective use a matter of organizational life and death
• This lecture / chapter contrasts the traditional view of
planning with the sense-and-respond approach of strategy-
making, presenting seven IS planning techniques
• Case examples include Microsoft, Skandia Future Centers,
Shell Oil, an automobile manufacturer, Cisco Systems, and
Electric Power Research Institute
4-2
©2006 Barbara C. McNurlin. Published by Pearson Education.
Today’s Lecture
• Introduction
– Types of planning
– Why is planning so difficult?
• The Changing World of Planning

– Traditional Strategy-Making
– Today’s Sense-and-Respond Approach
4-3
Today’s Lecture cont.
• Seven Planning Techniques
– Stages of Growth
– Critical Success Factors
– Competitive Forces Model
• Five Forces Analysis of the Internet
– Value Chain Analysis
– E-Business Value Matrix
– Linkage Analysis Planning
– Scenario Planning
4-4
Introduction
• IS management is becoming more difficult
and more important at the same time:
– Technology changing so fast: “Why bother?”
Vs. Most organizations’ survival is dependant
on technology
– How to resolve this apparent paradox?
• Good News = variety of approaches, tools

and mechanisms available
• Bad News = no ‘best’ way to go about it
4-5
Introduction cont.
• It is important to establish the appropriate
mindset for planning:
– Some managers believe = “determining what
decisions to make in the future”
– Better view = developing a view of the future
that guides decision making today
– Subtle difference = ‘strategy making’
• Strategy = stating the direction in which you want to
go and how you intend to get there
– The result of strategy-making is a plan
4-6
Why Planning Is So Difficult
Types of Planning:
• Planning is usually defined in three forms,
which correspond to the three planning
‘horizons’. (Figure 4-1)
– Strategic = 3-5 years
– Tactical = 1-2 years
– Operational 6 months – 1 year
4-7
Types of Planning
4-8
Introduction cont.
• Why Planning Is So Difficult?:
– Business Goals and Systems Plans Need to Align
 Strategic systems plans need to align with business goals
and support those objectives
 Some believe = “too sensitive” = PROBLEMS
 Fortunately = trend for CIOs to be part of senior management
– Technologies Are Rapidly Changing
 How can you plan when information technologies are
changing so rapidly
– Continuous planning?
– Old days of planning at ‘start of year’ = gone
– Advanced technology groups
4-9
Introduction cont.
• Why Planning Is So Difficult cont.:
– Companies Need Portfolios Rather Than Projects
 Evaluation on more than their individual merit
– How they fit into other projects and how they balance the portfolio of
projects
– Infrastructure Development is Difficult to Fund
 Despite everyone “knowing infrastructure development is
crucial”, it is extremely difficult to get funding just to develop or
improve infrastructure
 Often done under the auspices of a large application project
– Challenge = develop improved applications and improve
infrastructure over time
– Responsibility Needs to be Joint
 Business planning, not just a technology issue
– Other planning issues
 Top-down Vs. bottom-up; radical change Vs. continuous
 Planning culture
4-10
The Changing World of Planning
• Internet etc. = ‘introduced’ speed into the business environment and
transformed how people think about time, how much time they have
to plan, react to competitors etc.
• Traditional Strategy-Making:
1. Business executives created a strategic business plan = where the
business wanted to go
2. IS executives created an IS strategic plan = how IT would support the
business plan
3. IT implementation plan created = describe exactly how the IS strategic
plan would be implemented
• Assumptions:
– The future can be predicted
– Time is available to do these 3 parts
– IS supports and follows the business
– Top management knows best (broadest view of firm)
– Company = like an ‘Army’
4-11
4-12
The Changing World of Planning cont.
• Today, due to the Internet and other
technological advances, these assumptions no
longer hold true:
– The future cannot be predicted
• Who predicted Internet, Amazon, eBay etc.?
– Time is not available for the sequence
– IS does not JUST support the business anymore
• Figure 2-8
– Top management may not know best
• Inside out Vs. outside in approach (Figure 4-3)
– An organization is not like an army
• Industrial era metaphor no longer always applies
4-13
4-14
4-15
Today’s Sense-and-Response Approach
• If yesterday’s assumptions no longer hold true, what is

taking the ‘old’ approach’s place?:
– Let Strategies Unfold Rather Than Plan Them:
• In times of fast paced change (like today!) this is risky
• When predictions are ‘risky’, the way to move into the future is step
by step using a sense-and-respond approach
– Sense a new opportunity and immediately respond via testing it via an
experiment
– Myriad of small experiments (Figure 4-6)
– Formulate strategy closest to the action:

• Close contact with the market
• Employees who interact daily with customers, suppliers and
partners
• Employees who are closest to the future should become prime
strategists. In the ‘Internet Age’ = younger employees
4-16
4-17
MICROSOFT
Case example: Sense and Respond Strategy-Making
• Abandoned proprietary network despite big $
when it did not capture enough customers
• Moved on to buying Internet Companies as well as
aligning with Sun to promote Java
• Over time = moved into a variety of technologies:
– Web, Cable news, Digital movies, Cable modems, Handheld
OS, Video server, Music, Multiplayer gaming
• Not all came from ‘top management’ e.g. first

server came from a ‘rebel’ project
• Getting its fingers into every pie that might
become important
– Missed some – paid $$$ later
4-18
SKANDIA FUTURE CENTERS
Case example: Formulate Strategy Closest to the Action
• Incubator for testing ideas on IT, social
relationships, and networking for Skandia, the
large Swedish insurance company
• Different generations (3G: 25+, 35+, 45+)
collaborate on ‘on-the-edge’ projects
– In order to talk = focus on questions (= dialog) rather than
answers (= debate)
– Presented as ‘plays’ (Vs. Report)
• “Garden” = some of the projects are growing;

others = not
• Combining senior wisdom with young people’s
entrepreneurship leads to a real powerhouse
4-19
Today’s Sense-and-Response Approach cont.
If yesterday’s assumptions no longer hold true, what is

taking the ‘old’ approach’s place? cont.:
• Guide Strategy-Making with a ‘Strategic Envelope’:

– Having a myriad of potential corporate strategies being tested in
parallel could lead to anarchy without a central guiding
mechanism
– Top management set the parameters for the experiments (= a
‘strategic envelope’), and then continually manage that context
– Need to meet often to discuss:
• Shifts in the marketplace
• How well each of the experiments is proceeding
• Gaining ‘followership’ or showing waning interest?
4-20
SHELL OIL
Case example: Guide Strategy-Making with a
‘Strategic Envelope’
• New GM believed change would only occur if he went
directly to his ‘front lines’ (gas station employees). Set aside
50% of his time
• Goal = not to drive strategy from ‘Corporate’ (tried and failed
dismally) but to interact directly with the grass roots and
support their initiatives
• Technique = use of action labs (6 to 8 people):
– Week long retailing ‘boot camp’, peer challenges, ‘hot seats’, 60 day
plan implementations, report back etc.
– Projects spawned many more projects
• Guidance and nurturing came from the top, so that there

was not complete chaos
4-21
• Be at the Table :
– IS executives have not always been involved in business
strategising
– This situation is untenable in today’s ‘Internet-driven’ world.
– Note: first = need to make department credible
• Test the Future

– Need to test potential futures before the business is ready for
them (thinking ahead of the business)
– Provide funding for experiments
– Have an emerging technologies group
4-22

• Put the Infrastructure in Place:

– Moving quickly in Internet commerce means having the right IT
infrastructure in place.
– The most critical IT decisions are infrastructure.
– Recommended that IT ‘experiments’ include those that test
‘painful’ infrastructure issues such as how to:
 Create and maintain common, consistent data definitions
 Create and instil mobile commercial standards among handheld
devices
 Implement e-commerce security and privacy measures
 Determine operational platforms (ERP, Supply Chain Management
…)
4-23
Seven Planning Techniques
1. Stages of Growth
2. Critical Success Factors
3. Competitive Forces Model
4. Value Chain Analysis
5. E-business Value Matrix
6. Linkage Analysis Planning
7. Scenario Planning
4-24
1. Stages of Growth
• Stage One: Early Successes: Increased interest and
experimentation
• Stage Two: Contagion: Interest grows rapidly; learning
period for the field
• Stage Three: Control: Efforts begun toward standardization
• Stage Four: Integration: Pattern is repeated
• Example (Figure 4-5):

– DP Era 1960 – early ’80s
– Micro era early ’80s – late ’90s
– Network era late’90s – 2010?
4-25
4-26
1. Stages of Growth cont.
• The eras overlap each other slightly at points of “technology
discontinuity”
– Proponents of he proven old dominant design struggle with proponents
of the new and unproven designs
• ‘Inevitably’ the new (proven) win out
• Importance of the theory is understanding where a technology

or company resides on the organizational learning curve
– e.g. too much control at the learning and experimentation stage can kill
of new uses of technology
• Management principles differ from stage to stage

• Different technologies are in different stages at any point in time
4-27
2. Critical Success Factors
• Popular planning approach that can be used to help
companies identify information systems they need to
develop / improve
• For each executive, CSFs are the few key areas of the job
where things must go right for the organization to flourish
• Suggested fewer than 10 per executive
• Time dependent (must be re-examined)
• Four sources:
– industry the business is in,
– company itself and situation within industry,
– environment (consumer trends), and
– temporal organizational factors (inventory)
• Monitoring Vs. building CSFs
4-28
2. Critical Success Factors cont.
• Used to determine factors critical to
accomplish corporate objectives and
corresponding measures
• Can be used to identify IS plans that
need to be developed
4-29
3. Competitive Forces Model
Companies must contend with five
competitive forces which you need to
analyse (Figure 4-6):
1 Threat of new entrants
2 Bargaining power of customers and buyers
3 Bargaining power of suppliers
4 Substitute products or services
5 The intensity of rivalry among competitors
4-30
4-31
3. Competitive Forces Model cont.
• Three strategies for dealing with these
competitive forces:
1. Differentiate product and services - make
them “better” in the eyes of the consumer
 Probably the most popular of the 3 strategies
2. Be the lowest-cost producer - not just a low-
cost producer
3. Find a niche - e.g.: geographical market
4-32
Framework Example
Five Forces Analysis of the Internet
• The Internet tends to dampen the profitability of

industries and reduce firms’ ability to create
sustainable operational advantages because:
– It increases the bargaining power of buyers
– Decreases barriers to entry
– Increases the bargaining power of suppliers
– Increases the threat of substitute products and services,
and
– Intensifies rivalry among competitors
• Recommend = focus on your strategic position in
an industry and how you will maintain profitability
– Not growth, market share or revenue
4-33
4. Value Chain Analysis
• Five primary activities that form the sequence of
the value chain:
1 Inbound logistics: receiving and handling inputs
2 Operations: converting inputs to the product/service
3 Outbound logistics: collect, store, and distribute the
product/service to buyers
4 Marketing and sales: the means/incentives for buyers
to buy the product/service
5 Service: enhancements/maintenance of the value of
the product/service
4-34
4. Value Chain Analysis cont.
• Four supporting activities that underlie the entire value

chain:
1 Organizational infrastructure
2 Human resources management
3 Technology development
4 Procurement
• Figure 4-7
• Virtual Value Chains?
– Marketspaces where information substitutes for physical
 Can also use Porter’s Value chain analysis
4-35
4-36
AN AUTOMOBILE MANUFACTURER
Case Example – Virtual Value Chain
• The rental car subsidiary turned to auctioning

off clean used cars to dealers to sell, via
marketspace
• Dealers can view the cars (and their stats) to
be auctioned from a screen in their
dealership, and then place bids during the
online auction, held once or twice a month
• The auction saves them time and effort, and
the cars are guaranteed
4-37
5. E-Business Value Matrix
• It can be difficult for executives to prioritise projects, therefore a ‘portfolio’
management approach is valuable.
• Tool used by Cisco to ensure they are developing a well-rounded

portfolio of IT projects.
• Every IT project is meant to be placed into one of four categories to

assess its value to the company (Figure 4-8):
– New fundamentals: Low-Low=provide a fundamentally new way of working in
overhead areas, not business-critical areas
– Operational excellence: High in criticality to business-Low in newness of
idea=medium risk because they may involve reengineering work processes
– Rational experimentation: Low in criticality to business-High in newness of
idea=test new technologies and ideas
– Breakthrough strategy: High-High=potentially have a huge impact on the
company
4-38
4-39
CISCO SYSTEMS
Case Example – E-Business Value Matrix
• Cisco’s expense reporting system fits in its

new fundamentals category
• Its executive dashboards are an example of
operational excellence projects
• Multicast streaming video used for company
meetings is a rational experiment, and
• Its development of a virtual supply chain is
seen as a breakthrough strategy
4-40
6. Linkage Analysis Planning
• Examines the links organizations have with
one another with the goal of creating a
strategy for utilizing electronic channels
• Methodology includes the following steps:
– Define power relationships among the
various players and stakeholders:
– Identify who has the power
– Determine future threats and
opportunities for the company
4-41
6. Linkage Analysis Planning cont.
• Map out your extended enterprise (Figure 4-9)
to include suppliers, buyers, and strategic
partners
– The enterprise’s success depends on the relationships among
everyone involved
– Some 70% of the final cost of goods and services is in their
information content
• Plan your electronic channels to deliver the

information component of products and
services
– Create, distribute, and present information and knowledge as
part of a product or service or as an ancillary good
4-42
4-43
Electric Power Research Institute
Case example: Linkage Analysis Planning
• EPRI’s challenge - compress “information

float” - elapsed time from availability research
findings to the use of those results in industry
• Answer: EPRINET - a natural language front

end for accessing
– Online information
– Expert system-based products
– e-mail facilities, and
– video conferencing
4-44
4-45
7. Scenario Planning
• Scenarios are stories about the way the
world might be in the future
• The goal of scenario planning is not to
predict the future (= hard to do!), but to
explore the forces that could cause
different futures to take place
• Then decide on actions to take if those

forces begin to materialize
4-46
7. Scenario Planning cont.
• Long-term planning has traditionally
extrapolated from the past and has not
factored in low-probability events that could
significantly alter trends
– Straight-line projections have provided little
help!
• Four steps in Scenario Planning:
1. Define a decision problem and time frame to
bound the analysis
2. Identify the major known trends that will affect the
decision problem
3. Identify just a few driving uncertainties
4. Construct the scenarios
4-47
CASE EXAMPLE
Scenarios on the Future of IS Management
• What will IS management look like in 10 years?
• Four potential futures are presented:

1. The Firewall scenario could occur if companies use
traditional forms of management and see their data as
proprietary
2. The Worknet Enterprise scenario could occur if companies
outsource management of their data and share it
extensively with specific partners
3. The Body Electric scenario could occur if new
organizational forms flower (such as people owning parts of
work cells in which they work) and obtain all their IT from
interconnected service providers
4. The ‘Tecknowledgy’ scenario could occur if there is an open
information society where any kind of information is
available for a price. The main job of IS could be facilitation
of knowledge processes across organizations
4-48
Scenario Planning
4-49
Conclusion
• Based on the successes and failures of past
information systems planning efforts, we see
two necessary ingredients to a good
strategic planning effort:
1. IS plans must look towards the future
 Future is not likely to be an extrapolation of the past
 Successful planning needs to support “peering into
the future” – most likely in a sense-and-respond
fashion
2. IS planning must be intrinsic to business
planning
4-50
Conclusion cont.
• IS plans typically use a combination of
planning techniques presented
– No single technique is best and no single one is
the most widely used in business
• Sense-and-respond is the new strategy-

making mode
– Creating an overall strategic envelope and
conducting short experiments within that
envelope, moving quickly to broaden an
experiment that proves successful
4-51
Conclusion
“Peering into an
unknown future”
4-52
PART I Discussion Case
IT Strategy
for
Royal Dutch/Shell Group
4-53
4-54

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Information Systems Planning

• The Changing World of Planning

• Good News = variety of approaches, tools

• If yesterday’s assumptions no longer hold true, what is

– Formulate strategy closest to the action:

• Not all came from ‘top management’ e.g. first

• “Garden” = some of the projects are growing;

If yesterday’s assumptions no longer hold true, what is

• Guide Strategy-Making with a ‘Strategic Envelope’:

• Guidance and nurturing came from the top, so that there

• Test the Future

If yesterday’s assumptions no longer hold true, what is

• Put the Infrastructure in Place:

• Example (Figure 4-5):

• Importance of the theory is understanding where a technology

• Management principles differ from stage to stage

• The Internet tends to dampen the profitability of

• Four supporting activities that underlie the entire value

• The rental car subsidiary turned to auctioning

• Tool used by Cisco to ensure they are developing a well-rounded

• Every IT project is meant to be placed into one of four categories to

• Cisco’s expense reporting system fits in its

• Plan your electronic channels to deliver the

• EPRI’s challenge - compress “information

• Answer: EPRINET - a natural language front

• Then decide on actions to take if those

• Four potential futures are presented:

• Sense-and-respond is the new strategy-

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