1.
Introduction to the Business Organisation
a) Organisation: can be defined as a socio‐technical system whereby people work coherently to accomplish
specific goals that evolve from the organisation’s purpose.
i. From a systems approach, organisations are Open Systems; they interact with the surrounding environment.
ii. An organisation’s Purpose leads logically to a vision and a mission statement of the way in which the
organisation plans to realise its stated purpose.
iii. For instance, the purpose underlying a software vending organisation is to sell software but the vision of the
software vendor may be to become the most profitable company in the software industry.
iv. Goals (or aims): are general statements that chart the course of a business organisation
v. Objectives: More specific statements, usually with quantifiable components and time scales that are derived
from the goals. Eg. To increase sales by 100% in the following year.
vi. Business Organisation has a set of goals and objectives to be achieved. Hence, a business organisation
should be structured in the most effective and efficient way to fully utilise its resources – capital, human
resources, knowledge in products and services, and both external and internal information – to achieve its
strategic goals.
vii. Organisations can be structured in many ways and there are many ways in which communication networks
can operate within them (and communication is the “Glue” that holds an organisation together).
viii. The Structure of an organisation is usually depicted by its organisation chart, which identifies its
management structure according to the organisational units, location, functions and their reporting
relationships.
1. Centralised Organisation (tall structure): Decision‐making authority is usually tightly controlled by top
management, but decision making itself is often delegated to middle or lower management who are
constrained by often exhaustive policy and procedure packages.
2. Decentralised Organisation (flat structure): Decision making is often delegated to middle‐level or
lower‐level management, but this does not mean that the top management does not make decisions. In
fact, coordinating decision making in flat organisations is essential, as no part can become “Greater”
than the whole. Decisions in the units of a decentralised organisation must be kept in line with the
purpose, vision, mission, goals and objectives of the organisation as a whole.
b) Business Function: Are the basic building blocks of a business enterprise and that they exist in various
organisational structures. A Business Function is a group of activities and processes for supporting a specific
part of the mission of the enterprise, and each activity or process is usually supported by a set of procedures.
i. Marketing is a functional area that performs marketing research to identify and determine what products
and services customers want.
ii. Human resources is a functional area that provides services in support of business functions such as
recruitment, selection, training, appraisal and promotion of staff.
iii. Finance is a functional area responsible for financial accounting, management accounting, corporate finance
and investment management.
1. Financial accounting section undertakes responsibilities in bookkeeping, maintenance of audit trails,
and preparation of trial balances, balance sheets and profit and loss statements.
2. Management Accounting undertakes all tasks relating to management reporting of labour and material
costing, allocation of overhead expenditure, job and process costing, cost‐volume‐profit analysis,
budgeting, variance analysis, capital investment decisions and organisation controls.
iv. MIS is a functional area responsible for the development, maintenance and smooth running of computer
systems that capitalise on information technology to achieve organizational objectives.
v. Sales department sells whatever products and services the business organisation offers.
vi. Production is a functional area responsible for production operations and quality assurance.
vii. Purchasing is a functional area responsible for the sourcing, supply and logistics of goods and raw materials
that meet the stipulated cost, quality and inventory policy requirements while matching the production
schedule.
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c) Management Process & Business Process Re‐Engineering:
i. Management Process: Procedures that make up the basic duties of a business manager. There are four basic
management process, namely,
1. Planning: The decision of who is going to do what by when, or what is going to be done when by whom,
depending on whether the management style is process‐oriented or product‐oriented. The resulting
business plan (or a draft) should include:
a. Plan objectives;
b. Core activities (tasks) and procedures;
c. Initiatives and requirements; and
d. Key performance indicators and appraisal methods.
2. Organising: Organising is deciding what task is to be achieved by when. This process includes obtaining
necessary resources like finance and equipment, and organising and scheduling each facet of the plan.
It is usually required to break tasks into smaller units (the sub‐tasks) and allocate sub‐tasks to capable
individuals with definite completion dates.
3. Directing: Following the organising stage, the activities of the plan are carried out in the directing
stage. The managers implement or execute the plan as it was organised, and resources and personnel
are deployed according to the pre‐determined time sequence. The process leader (who may not be the
functional manager) leads, motivates, delegates and coordinates in order to complete the process.
4. Controlling: The process of setting a standard, measuring the actual performance, and reviewing the
variance, which is the difference between the actual and the standard. If the variance is beyond the
pre‐defined tolerance level, some adjustments or remedial actions must be arranged. The standard
could be a capital budget, sales volume or defect level.
ii. Business Process: A set of logically related tasks performed to achieve a defined business outcome. We can
identify business processes in an organisation by using Value Chain Model. BP has two characteristics:
1. It has customers (internal or external); and
2. It crosses functional boundaries (it communicates between functions through its inputs and outputs).
d) Business Mission & Vision:
i. Purpose: a reason for being. Every organisation has a purpose.
ii. Mission: in an organisation can be viewed as how it will achieve its purpose or an overall statement of its
business direction. A mission is a broad “Philosophical” statement that ties an organisation to certain
activities and to economic, social, ethical or political ends. Eg. “To be the World’s Number One Airline.”
1. Business Strategy Model of Mission: is a strategic tool that defines the business’ commercial rationale
and target market.
2. Philosophy & Ethics Model of Mission: the cultural “Glue” enabling an organisation to function as a
collective unit. This cultural glue includes strong norms and values that influence the way in which
people behave, how they work together and how they pursue the goals of the organisation
3. Holistic Model of Mission: Has four elements
a. Purpose: Addresses why an organisation exists. For whose
benefit is all this effort being put in?
b. Strategy: Provides the commercial logic for the organisation.
c. Behaviour Standards: Thus, behaviour standards are the norms
and rules of “The way we do things around here”
d. Values: Beliefs and moral principles that lie behind the
Holistic Model
behaviour standards or the organisation’s culture.
iii. Vision: Required when an organisation wants to change itself in some radical way. A vision statement
describes the image of an organisation’s possible and desirable future state. It represents a view of a
realistic, credible, attractive future for the organisation – a condition that is better in some important ways
than what exists at present. Vision refers to a future state while mission normally refers to the present.
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e) Business Objectives and Goals:
i. Objectives: Are precise, well‐specified targets that are measureable and a business enterprise intends to
achieve them by a given time. One target (goal) may give rise to several objectives. Eg. “Increase sales by
40% per year”
ii. Goals: Are general statements about the direction in which a business enterprise intends to go, without
stating specific targets to be reached by particular times. Mission of an enterprise is the highest level
statement of goals (and objectives). Eg. A vague statement such as “Be a market leader”
1. Long‐term goals: relate to extended periods, usually five years or more into the future.
2. Intermediate goals deal with one to five years.
3. Short‐term goals: (likely objectives) deal with period of less than or up to a year.
2. Strategic Planning
a) Planning: An analytical process which involves an assessment of the future, the determination of desired goals
and objectives in the context of that future, the development of alternative courses of action to achieve such
objectives and the selection of courses of action among those alternatives.
b) Strategy: The determination of the basic long‐term goals of an enterprise and the adoption of courses of
actions and the allocation of resources necessary to achieve these goals. It is presented as policies whereby the
organisation elaborates its goals and objectives.
i. Corporate strategy is concerned with what businesses a corporation does and does not, wish to enter.
ii. Business strategy is concerned with achieving the goals of a particular business within a corporation. It is the
determination of how a company will compete in a given business and position itself among its competitors.
iii. Functional strategies deal with major aspects of the business’ functional operations: marketing, production,
finance, human resources and research and development (R&D).
c) Policy: An elaboration of strategy so as to apply effectively internal resources and thereby achieve strategic
objectives and goals. While policy is a guide to action, strategy is the action itself.
d) Strategic Planning: The process of planning the future strategy of an organisation and documenting the
strategy in an implementation plan.
i. Effective strategic planning deals with two relevant dimensions:
1. Responding to changes in the external environment and
2. Creatively deploying internal resources to improve the competitive position of the enterprise.
ii. Advantages of Strategic Planning (Benefits of, Needs for Strategic Planning):
1. It is a communication process and so improves the coordination in every organisation practising it
2. It motivates managers.
3. It leads to better organisational decisions.
4. It provides a way of controlling a business.
iii. Strategic Plan: This document is the outcome of the strategy planning process. A mechanism for putting into
effect strategic decisions. Reflects the contingencies of the business as defined by realistic business
scenarios and is articulated by senior management. Four components:
1. A definition of the desired future scope of the organisation, including a statement of its business and
what kind of company it is and it should be.
2. A definition of the competitive advantage of the company, including its distinctive competence in
relation to its competitors and the market niche it intends to occupy.
3. A statement of mission, goals and objectives and the measures to evaluate performance.
4. A statement of how resources that are needed to implement and execute the plan will be allocated.
iv. Strategic Planning Process analyses and determines where the organisation intends to be in the long term,
usually three or more years in the future. Three key tasks:
1. Identify a distinctive competence (something the organisation do really well) for the organisation.
2. Find a niche (social and economic situation org is well suited) in the organisation’s environment.
3. Find the best match between the organisation’s distinctive competencies and its available niches.
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v. SWOT Analysis: (Strength, Weakness, Opportunities, Threats)
Popular Method of business strategy planning. It has four steps:
1. Setting Strategic Goals (long‐term goals derived directly from
org’s mission statement)
2. Environmental Analysis: Involves scanning the environment for
threats and opportunities. BCG Matrix and Industry Attractiveness‐ Process of SWOT Analysis
Business Strength Matrix can be used here.
3. Organisational Analysis: to better understand their own company’s strengths and weaknesses.
4. Formulating Business Strategy
a. Business Strategy consists of a set of well‐coordinated action programmes and policies aimed at
securing a long‐term sustainable competitive advantage. These programmes are defined at two
different levels of specificity:
b. Formulation of business strategy is accomplished by matching environmental threats and
opportunities with organisational strengths and weaknesses. Most important part.
vi. Strategic Planning Tools: There are two:
1. Boston Consulting Group (BCG) Matrix: a tool based on
business portfolio analysis.
a. Assume that there is a company with multiple
( Cash Use‐up )
product lines. Such companies have products at
virtually every point in the product life cycle. For
example, the management of a firm may use the
BCG matrix to evaluate the market growth rate and
relative market shares for each of their products.
b. There are three basic insights from the BCG matrix:
i. The graphical matrix representation provides a ( Cash Generation )
powerful and compact visualisation of the strengths of the firm’s portfolio of businesses, or a
whole business.
ii. It helps identify the ability for cash generation as well as the needs of cash for each business.
iii. Because of the distinct quality of each business, it can suggest unique strategic directions.
2. Porters Competitive Strategy Framework (Porters 5 Forces
Model): in the fight for market share, competition does not
come only from the other players. Rather, competition in an
industry is rooted in the underlying economics and
competitive forces exerted from beyond the established
combatants in a particular industry.
a. McFarlan proposed five questions for assessing the
strategic impact of IT on a firm: If the answer to a particular Porters Five Forces Model
question is “Yes,” a strategic opportunity exists that requires the attention of top management.
i. Threat of new entrants: Can IT be used to build barriers against new entrants?
ii. Customers: Can IT be used to build switching costs (increase customer reliance on systems)?
iii. Competitors: Can IT change the basis of competition?
iv. Suppliers: Can IT change the balance of power in supplier relationships?
v. Substitutes: Can IT be used to generate new products?
b. Porter shows three potentially successful generic approaches for competing:
i. Cost leadership: A firm has many avenues for pursuing this strategy, including economies of
scale, using or developing new technology and developing preferential access to raw
materials. Where competition has been sluggish, becoming a cost leader may revolutionise
the entire business
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ii. Differentiation: Requires the organisation to seek uniqueness in the eyes of the customers,
which justifies their paying a premium price for the product.
iii. Focus: or niche strategy requires a narrow competitive scope. The organisation focuses on a
small target group and services this group or segment to the exclusion of others.
3. Strategic Use of Information Technology
a) Strategic Information Systems (SIS): enable a firm to gain a competitive edge or to undermine its rival’s
advantages.
b) Information System & Information Technology:
i. Information System (IS): can be defined as a set of procedures that collects or retrieves, processes, stores
and disseminates information to support organisational decision making and control.
ii. Information Technology (IT): can be defined as a powerful collection of elements which include computer
hardware, software, telecommunication networks and related technologies.
c) IS & IT Strategy:
i. IS strategy refers to what an organisation should do with the technology; and
ii. IT strategy: how they do it.
d) Evolution of Information Systems: Can be seen in four eras, which are:
i. Centralised Era (Data Processing Era): This era is dominated by information systems that function primarily
as the processing of predefined (business) transactions to produce fixed‐format reports on schedule.
1. Technologically speaking, the era is marked by the development of Direct Access Storage Devices
(DASD) and Database Management Systems (DBMS), and Management Information Systems (MIS).
2. But these systems, apart from processing the transaction data, did not meet the information needs of
managers and professionals as organisations began to flatten and globalisation began to take shape in
the late 1970s.
ii. Decentralised Era: It was the emergence of personal computers and low‐cost software around 1980 that
opened the era of decentralisation.
1. People with abundant supplies of user‐friendly software tools found themselves able to develop
applications (small information systems) for their own use even without the leadership of skilful
technicians or formal methodologies for software development.
2. The control of development and application was decentralised to individual managers who were able to
solve their ad hoc problems by building simple but useful software solutions with little effort on their
PCs or mainframes.
3. Decision Support Systems (DSS): These systems were not simply to provide higher quality information
from the use of decision models and databases; rather, they were meant to improve the quality of the
managerial decision process itself.
4. Executive Information Systems (EIS): Systems that were specifically designed for top management.
iii. Architecture Era: The continued proliferation of PC and communications technologies, including the Internet
technology in the period of 1985 to 1996, offered corporations a chance to re‐adjust the role played by IT.
1. In the early years of this era, SIS might have just been a Management Information System (MIS).
2. It was distinguished from the other MIS in the way that it directly supported or shaped the competitive
strategy of the organisation.
3. With the introduction of Business Process Re‐engineering (BPR), management started to realise that
simply focusing on the strategic advantages brought about by an MIS was not sufficient.
iv. Internet Era: The Internet arrived long before 1997, which is the beginning of the Internet era. However, it
didn’t receive as much attention as it does today when every organisation (business, government or
otherwise) tries to get the benefit out of the Internet.
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e) IT as a Strategic Resource: The emerging new role of IT within organisations is the result of two concurrent and
perhaps equally powerful forces:
i. Technology push: force has emerged partly due to significant improvement in the price‐performance ratio
of IT and partly due to increased connectivity capabilities over time.
ii. Competitive pull: has emerged because markets are becoming highly competitive and the traditional
sources of competitive advantages are diminishing as competitors strive to attain parity with one another.
f) IT & Competitive Strategy: IT exerts a strong influence on organisations.
i. It changes the way work is done, whether it is production, coordination or managerial work.
ii. It integrates business functions at all levels and gives rise to organisational teams, electronic alliances and
electronic markets.
iii. It permits a high degree of simultaneous collaboration and competition in the industry.
iv. It presents new strategic opportunities and changes organisational structure.
v. It, therefore, poses a major challenge for management today to catalyse the necessary transformation of
their organisation.
g) Competitive Advantage & Competitive Necessity:
i. Competitive Advantage: To gain competitive advantage or beat the other competitors.
ii. Competitive Necessity: To stay in the business or maintain competition
iii. Sustainable Advantage: One competitive advantage that makes its possessor immune from attack by
competitors attempting to duplicate, emulate or copy it
h) Risks of Using IT Strategically: Even though IT can provide competitive advantage when it is appropriately
applied, it can also cause disasters when it is misapplied, neglected or ignored. Some are:
i. Its failure to meet real customer needs,
ii. Its failure to be defensible,
iii. It may wake a sleeping giant,
iv. It may trigger litigation or regulation, and
v. It may be rejected by customer or organisational culture.
i) Inter‐Organisational System (IOS): A special type of communication‐intensive information system whose
development, operation and use are shared by two or more organisations. These organisations may be part of a
cooperative (like a banking network) or may be in a customer‐supplier relationship.
i. IOS has eight characteristics:
1. They require “Partners.” Thus, at least two parties are needed to create an IOS.
2. Standards have a major role in IOS development
3. Education of potential “Partners” is very important to overcome ignorance and political issues.
4. Third parties are often required, either to educate people; or to develop and maintain the standards; or
often to provide links between the separate systems of the partners.
5. Work must be synchronised, otherwise these systems cannot be maintained or upgraded.
6. Work procedures need re‐evaluation after IOS is in use. As IOS may change the way business is done.
7. Technology is not a major hurdle compared to the relationship issues.
8. IOS development requires more openness, especially when industry standards are being employed.
ii. Technological, economic and organisational changes leading to growth of IOSs:
1. Need for fast, reliable information exchange in response to rapid changing markets, products & services
2. Evolution of guidelines, standards and protocols.
3. Penetration of IT into internal business processes.
4. Technical quality and capability of IT.
5. Use of IT to distinguish product and/or organisation.
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j) Information Partnerships: Through such a partnership, diverse companies can offer novel incentives and
services or participate in joint marketing programmes. They can make small companies look, feel and act big,
reaching for customers once beyond their grasp.
k) IOS and Competitive Advantage: The proliferation of IOS suggests that many organisations are finding it to be
an important source of competitive advantage. The competitive advantage stems fundamentally from two
factors:
i. Comparative efficiency: Allows an organisation to produce its products or services more cheaply than its
competitors; and
ii. Bargaining power: Allows a firm to resolve bargaining situations with its customers and suppliers to its own
advantage.
l) Strategic Grid: Identifies the role of IT in an organisation. Help to position an organisation appropriately
i. At the beginning of an analysis, specific IT applications or business units are positioned within different
quadrants on the strategic grid.
ii. The axis Operational Dependence mean to measure the negative consequence resulted as a failure of an
existing IT application; while we mean to measure the competitive advantages or new opportunities created
if a new IT system is developed.
iii. Strategic grid can also be used to evaluate IT portfolios and IT development plans. IT applications in each of
the four quadrants bear certain specific characteristics.
iv. The four Quadrants:
1. Strategic: These systems are designed to make the business
stand out from its competitors. Eg. banking business
2. Factory: These systems are what an organisation is relying on in
its daily operation of business and customer services. Eg. mining
industry
3. Support: They are usually systems that handle routine administrative McFarlan‐McKenny's Strategy Grid
tasks such as accounting and personnel. Eg. paper manufacturing
4. Turnaround: These are usually implementations of new concepts,
perhaps resulting from a R&D proposal. Eg retailing
m) Value Chain Analysis (Value Added Model): A systematic way of analysing and
evaluating the process of creating goods or services. A generic model for
business activity analysis. There are two classes of activities:
i. Primary Activities: Porters Value Chain Analysis
1. Inbound logistics include the receiving, warehousing, and inventory control of input materials.
2. Operations are the value‐creating activities that transform the inputs into the final product.
3. Outbound logistics are the activities required to get the finished product to the customer, including
warehousing, order fulfillment, etc.
4. Marketing & Sales are those activities associated with getting buyers to purchase the product, including
channel selection, advertising, pricing, etc.
5. Service activities are those that maintain and enhance the product's value including customer support,
repair services, etc.
ii. Support Activities:
1. Procurement ‐ purchasing the raw materials and other inputs used in the value‐creating activities.
2. Technology Development ‐ includes research and development, process automation, and other
technology development used to support the value‐chain activities.
3. Human Resource Management ‐ the activities associated with recruiting, development, and
compensation of employees.
4. Firm Infrastructure ‐ includes activities such as finance, legal, quality management, etc.
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n) Customer Resource Life Cycle: can be used to identify and implement SIS by focusing on how to help customers
acquire and use a product or service. The customer resource life cycle model provides a much more detailed
analysis for identifying and categorising SIS in comparison with other tools. From the customer’s point of view
the life of a product can be divided into four phases:
i. Determine need:
1. Establish requirements: An SIS can explain product(s) to customers to help them assess their
requirements.
2. Determine characteristics of product needed: An SIS can help customers choose product features and
then configure a product for them.
ii. Acquire product:
1. Locate supplier: An SIS from an intermediary, like publishers of guides, may be useful.
2. Order product: Many SIS provide this service, such as airline reservation systems, American Hospital
Supply’s ASAP system, etc.
3. Authorise and pay for product: An SIS may be a credit card verification system, or a debit card
processing system.
4. Acquire product: An example is ATMs which can also deliver airline tickets.
5. Test and accept product: An example is a pharmacist who checks a new prescription against other
drugs a customer is taking for possible drug interaction problems.
iii. Manage its use:
1. Maintain needed inventory: Example: A supplier keeping track of shipments for JIT systems.
2. Monitor product: Example: Monitoring purchases and returns of unsold magazines by magazine
publishers.
3. Upgrade product: Example: Sending automatically latest volumes in a book series by book publishers
such as Reader’s Digest.
4. Repair product: Example: Sending reminders to customers whose maintenance contracts of electric
appliances are about to expire.
iv. Dispose of product:
1. Dispose or transfer product: Example: Self‐service checkout in some hotels.
2. Account for product: Example: Travel agents maintaining travel records of large corporate clients to
describe how travel money is being spent.
o) Strategic Options Generator: This model reduces the multiplicity of strategic actions undertaken by
organisations, to only five generic thrusts – differentiation, cost, innovation, growth and alliance.
i. Strategic thrust: A major move that an enterprise undertakes in its search for advantage, Is a critical
interface joining competitive strategy with IT.
ii. Three basic classes of strategic targets: suppliers, customers, and competitors.
4. Nature of Information Systems Strategy
a) Stages of growth model: Nolan and Gibson presented a way of understanding the developing sophistication of
IT use and management, which is based on the premise that any organisation will move through various stages
of maturity with respect to the use and management of IT.
i. Initial growth model consisted:
1. Initiation, when computers were first introduced to business organizations to help with tedious work.
Management saw IS as a means to make cost savings, no attention given.
2. Expansion, when IS enjoyed a sudden, uncontrolled rise in many business functions. Management
didn’t see the problems of over‐ambitious projects, thus resulted in large IT expenditure
3. Formalisation, Concerned senior management wished to justify IS spending and staff are trimmed
down and IS budgets are centralised, IS development becomes difficult.
4. Maturity, senior management learns to leverage between stability and innovation. IS development has
reached a stage of balance.
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ii. After stage 4, Nolan found that putting together all growth experience as one stage was inadequate and he
divided this into three stages.
1. Integration, the control levels of Stage 3 are lowered to encourage innovation, reorganised to allow IS
staff to become more involved in the organisation.
2. Data administration, which identifies the business value of cross‐function database access. IS strategies
includes IS architecture that makes up intra‐ and/or inter‐organisational Systems.
3. Maturity, aims at planning and developing IT in coordination with business development
iii. Advantages of Nolan’s stage Model
It is simple.
It is easy to understand, to use, and to see that some natural development is to be expected.
It is relevant to acknowledge the past in the present.
It acknowledges that different IT can be in different developmental stages and hence need different
management treatment..
iv. Points to consider Nolan’s stage Model
Modelling the development of IT is a very useful exercise, whether the model is a simple or complex
one.
Stages‐of‐growth approach is a simple way of modelling IT maturity as the basis for IS planning.
Nolan’ss stage model was proposed at the time when was no Internet.
Organisations are going into business operations over the Web.
The Internet is a convenient place to restructure the relationships between customers, suppliers,
partners and internal activities of an enterprise.
Corporate information systems are connected to form cross‐organisational or inter‐organisational
systems.
b) IS planning is a broadly based management activity that provides direction within an organisational setting for
the development and use of information systems and technology.( Finnegan and Fahy, 1993). IS planning is the
process to make and integrate decisions with respect to IT support throughout the organisation, using formal
procedures and producing articulate results. (O’Connor, 1993)
i. IS strategic planning is a long‐term and usually covers the next 3‐5 years or more, although the exact
timeframe is dependent upon the volatility (Frequency of change) of the organisation and its environment.
ii. The evolution of IS planning can be divided into six stages:
0. No IS planning: main goal of management when introducing computers into their business was to
reduce the cost of processing information, mainly in areas of payroll and accounting. Business
introduces Electronic Data Processing (EDP) department which would simply receive IT requests.
1. First generation ‐> Demand‐driven IS planning: As more apps grew, to handle it, EDP focused on the
efficient allocation of resources, with return on investment used as a priority ranking methodology.
(Characteristics: Demand‐driven, Return‐on‐investment, Efficient allocation of resources)
2. Second generation ‐> Methodological IS planning: some methodologies were developed that were
specifically aimed at the phase prior to system development. IBM’s Business Systems Planning (BSP),
and Critical Success Factors (CSF). These methodologies took the view that information is a corporate
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resource and should be planned on a corporation‐wide basis. It stressed top‐down planning of data and
localized design of systems in different user areas, as well as top management’s involvement in IS
planning. Senior positions such as Chief Information Officer(CIO) is made.
(Characteristics: Organisation‐wide planning methodologies, Data modelling approach, Response to
business strategy, efficient allocation of resources, Business Systems Planning (BSP), Critical Success
Factors (CSF))
3. Third generation ‐> Organisation‐wide IS planning: organisational IS progress map (in terms of IS
growth stages) was used to analyse opportunities for improved IS support and growth as well as the
quality of the IT infrastructure.(Characteristics: Long‐term IS planning, IT infrastructure, IS progress
map, Improved IS support and growth Stages theory of IS development)
4. Fourth generation ‐> IS and business strategy interaction: IS and business strategies had higher level of
interaction, it had to recognise the explicit potential for IT to shape and support the organisation’s
competitive strategy, such as using competitive analysis.
(Characteristics: Externally oriented planning methodologies, Competitive analysis, IS and business
strategy interaction, Support and strategic approach to IS)
5. Fifth generation ‐> integrated methodologies: the use of integrated methodologies, where planning
reflects the joint IT possibilities of strategic support and strategic weapons.
(Characteristics; Integrated planning methodologies,Dynamic business strategy,Strategic possibility
frameworks, Need for IS staff development plans,Extended enterprise)
iii. Why IS planning necessary: Rapid changes in technology, Scarcity of human and other organisational
resources, Competitive pressure to use as competitive advantage, Integrated IS applications such as data
networks & video conferencing, Validation of corporate plans such as limitation in IT support programmes
will make CP unfeasible, Senior management involvement for better communication and control, Delivered
systems quality, Inability to maintain delivered systems, Lack of standards, Lack of system/data integrity,
Cost and time overruns in IS development projects
iv. Objectives of IS planning
To ensure that all IS efforts are consistent with, contribute towards and eventually influence
organisational strategies.
To ensure that IS applications address critical organisational information processing needs in terms of
both opportunities and problems.
To define and communicate the role of the IS function throughout the organisation.
To convey to the organisation the extent of current and future IS resourcecommitments.
To enhance communication between the IS function, top management and users.
To ensure that a solid systems foundation or IT architecture is built, on which more sophisticated IS
applications can be based.
To cultivate a core group of organisational proponents: i.e. users and top management.
To control and direct the acquisition and deployment of IS resources.
To ensure that the IS staff remains technologically current.
v. Levels of IS planning
1. IS Strategic Planning: The process of ensuring alignment between business plans and objectives and IS
plans and objectives, and/or the process of identifying IS applications that will provide the organisation
with a competitive edge. IS strategic planning has, as its focus, effectiveness and efficiency
2. IS Tactical Planning: Focuses on prioritising and scheduling IS development efforts, establishing action
plans for development and performance
measures to be used during operational
planning.
3. IS Operational Planning: Involves the
development of specific detailed plans for each
IS project. It entails the selection and approval
of IS projects to commence within the next
planning year, and the actual planning,
monitoring and control of specific systems
development efforts.
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4. IS Planning Cycle: In most organisations, planning
activity is regularly scheduled and is seasonal (Frenzel
1992, 103). Generally the tactical plans are developed
first so they can be approved just prior to the Revision cycle of IS plans
beginning of the tactical period. Thus, the tactical plan
for the next two years is developed and approved during the few months prior to the beginning of the
new year.
vi. Benefits of IS planning
Provide a means of control over a growing expense.
helps to ensure that the information needs of the organisation are considered during the course of
normal business planning
The integration of the IS plan and the overall business plan allows the organisation to ensure that the IS
plan supports the business direction of the firm.
allows IS management to focus on key business results rather than just on completing projects.
provides a sound base for IS project selection and prioritisation, and facilitates effective IS resource
allocation
Helps in the IS control process.
provides a basis for performance assessment
Raise the awareness of IS potential throughout the organisation, and also increase IS staff awareness of
the business.
provide financial benefits to the organisation and improve its performance
vii. What makes good IS planning: The success of an IS planning exercise very much depends upon the quality
of IS planners within the planning team.
Affinity for strategic thinking
Company loyalty
Self‐starting ability
Communications skills and “salesmanship”
Background in accounting, forecasting and quantitative methods
IS background
5. Information System Strategic Planning
a) Why strategic planning fails:
i. Failure to tie technology to institutional mission and priorities
ii. Failure to get the right people on board
iii. Excessive focus on technical details Industry Examples of CSFs
iv. Lack of suitable leadership Automobile Fuel economy
industry Image
b) Critical Success Factors Analysis: Can be applied to Efficient dealer network
support both IS planning and requirements analysis. Manufacturing cost control
Designed to provide a structured method to help Food processing Effective advertising
Good distribution
managers determine their CSFs and thus identify their
New product development
information needs. Life insurance Development of agency
company personnel
c) Critical Success Factors (CSF): The limited number of Advertising effectiveness
areas in which satisfactory results will ensure Productivity of clerical operations
competitive performance for the individual, Marketing strategy
department or organisation. These are the few key Software house Product innovation
Quality of sales and user
areas where “Things must go right” for the business
literature
to flourish and the manager’s goals to be attained.
Worldwide marketing and service
CSFs are time dependent. Ease of use of products
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i. Five primary sources of CSF:
1. Industry‐based factors,
2. Competitive strategy, industry position and geographic location,
3. Environmental factors,
4. Temporal factors and
5. Managerial position.
ii. There are three major uses of the CSF: Hierarchy of CSF’s
1. To help an individual manager determine his or her
information needs.
2. To aid an organisation in its IS planning process.
3. To aid an organisation in its organisational strategic planning
process.
iii. The main strengths of CSF analysis: are that it provides effective
support to planning since the consideration of critical activities
develops management insights and CSF analysis may serve as the
effective top level for a subsequent structured analysis.
iv. Extended CSF Analysis: method uses the CSF analysis to provide
the planning context in three critical domains: information, decision Extended CSF analysis
and assumption.
v. Critical Information Set (CIS): defines those measures and associated data necessary to monitor, analyse
and control the CSFs.
vi. Critical Decision Set (CDS): defines those decision processes that will most affect the successful achievement
of a CSF.
d) Business Systems Planning (BSP): is an IBM proprietary technique devised initially for IBM internal use; later, it
was sold as a service to its customers in the mid‐1970s. Earliest formal IS planning method and is now the most
widely known. BSP offers a structured approach to IS planning via a number of fairly rigorously defined stages
that lead from the identification of business processes to a definition of required data structures. Data are
tracked as they flow throughout the organisation by the business activity support or from which they result.
i. The objectives of BSP are to:
1. Translate business strategy into IS strategy (as shown in Figure 5.3).
2. Impartially determine IS priorities.
3. Plan long‐life information systems based on enduring business processes.
4. Manage IT resources to support business goals.
5. Assign IT resources to high‐return projects.
6. Improve relationships between the IS department and users by providing
systems that meet their requirements.
7. Improve understanding of the need for IS planning.
ii. Four major activities of BSP:
1. Documenting the business activities
2. Defining the business processes
3. Defining the data necessary to support the business processes
4. Defining the information architecture
iii. 13 Major steps to perform in carrying out a BSP study:
1. Gaining executive commitment
2. Preparing for the study
3. Starting the study
4. Defining business processes
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5. Defining business entities and data classes
6. Analysing current IS support
7. Determining the executive perspective
8. Defining findings and conclusions
9. Defining the information architecture
10. Determining architectural priorities
11. Reviewing information resource management
12. Developing recommendations and an action plan
13. Reporting results
e) Earls Multiple Methodology: Earl realized the complexity of the
Top‐down planning with bottom‐up implementation.
problem the same way that contemporary IS practitioners did, and he
proposed a very comprehensive methodology that provides a basis for analysing all IS planning. Earl’s multiple
methodology is top‐down clarification, bottom‐
up evaluation and inside‐out innovation.
i. He highlighted three issues:
1. Clarification of the business needs and
strategy in IS terms ‐ What is the
business strategy and IS strategy;
2. Evaluation of current IS provision and
use ‐ How to integrate legacy systems;
and
3. Innovation of new strategic
opportunities afforded by IT ‐ What are
the operational goals.
ii. Top Down Classification: Four step Process
1. Identification of corporate objectives –
Earl’s multiple methodology
Objectives of all business units should be
solicited, agreed upon and clearly stated;
2. Determination of critical success factors – CSFs that are needed to achieve the agreed business
objectives are suggested and determined after resolving conflicts among different business units;
3. Decomposition to critical business processes – The CSFs that were identified are transformed into
business processes that can be improved by IS;
4. Identification of IS and IT – Details of the IS to support those business processes and the underlying IT
infrastructure are analysed and a development plan is decided.
iii. Bottom‐up Evaluation: Essential for the following reasons:
1. To find out the quality and capacity of the IS applications
(legacy systems) currently being used in the organisation.
2. To demonstrate to top management (the strength and the
weakness of) the current IS status of the organisation.
3. To identify components of the current IS that can be
improved for better strategic advantage by simple add‐ons
rather than a total renovation.
f) Common Weaknesses of IS Planning Methodologies: The evaluation process could lead to a systems
i. Poor integration of business and IS planning audit grid
ii. Lack of planning for IS ongoing maintenance requirements
iii. Focus on tools and techniques instead of on real business needs
iv. Inability to handle change or uncertainty
v. Vision or architecture is too narrow and short‐ranged
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vi. Obscure or complex planning processes
vii. Problems without solutions in any current planning approach
viii. Failure to deal effectively with applications integration;
ix. Insufficient evaluation of applications package options and tradeoffs;
x. Lack of effective risk assessment and management; and
xi. Failure to make use of existing Best practices already proven and public knowledge from other firms in the
industry.
6. Implementing Information System Strategic Plan
a) IS strategic plan is the outcome of an IS strategic planning study. The plan is basically a statement of the major
initiatives that must be accomplished over a certain period of time in order to move the organisation and its IS
department towards a long‐term goal.
b) IS vision statement is a written expression of the desired future for information use and management in an
organisation.
c) IT sourcing is defined as a significant contribution by external vendors to the physical and/or human resources
associated with the entire or specific components of the IT infrastructure in the user organisation.
d) Earl’s framework for IS strategic planning success can be grouped into three distinct categories which is
method, process and implementation.
e) IS Department Responsibilities
i. Provides a secure location for housing and accessing the company’s official
ii. electronic data records;
iii. Maintains computer processing capacity and support for file maintenance and information reporting;
iv. Manages a corporate data network that delivers services to departmental and individual workstations linked
to its data centre;
v. Provides integrated IS development for departments in order to advance organisational strategies
vi. IS portfolios and those IS that are central to knowledge management and e‐commerce operations would be
elaborated with sufficient details on their purposes, functionalities and acquisition.
f) Documentation of IS Strategic Plan:
i. No standard format for documenting IS strategic plans.
ii. Should include an “executive summary” as it should be understood by senior
managers
iii. Should include minimum technical jargon, specialised terminology should be
clearly explained
g) IBM’s Business Systems Planning (BSP) Study Reports:
i. Recommends that the final study report be separated into two main sections
ii. The most significant findings, conclusions and recommendations should be summarised in the first few
pages of the report for the use of the top management.
iii. Supporting details should be included later and in the appendixes for other
members of the organisation and for team members who will participate in
follow‐up activities.
The conclusions, recommendations and action plan should be reviewed with the
executive sponsor before the team drafts the final report.
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h) Project Management: A strategic IS plan does not stop after WHY IS FAILS
the plan itself is compiled. The implementation phase of the
Issues approaches “Impact” “Align”
strategic plan should be more important; although strategic
LEADERSHIP Critical Important
management does not always get involved in tedious IS • Difficult to secure top management
implementation details. commitment for implementation
i. Steering Committee: A number of senior managers • Success dependent on team leader
• Difficult to find team leader meeting criteria
responsible for overseeing projects that are
• Difficult to obtain top management approval
recommended by the strategic IS plan. These senior IMPLEMENTATION Very Very
managers will probably be led by the organisation’s CIO. important important
• Requires further analysis
1. Tasks of the Steering Committee:
• Ignores plan implementation issues
a. Mutual coordination of individual projects and • Documentation is inadequate for
linking of these projects with the organisation’s implementation
strategic policy; and • No priorities for developing databases
• No overall data architecture is determined
b. Coordination of activities of the project groups
• No data administration needs addressed
by RESOURCES Important Critical
i. Functioning as a forum for exchanging the • Methodology lacks sufficient computer support
experiences of the project teams so that they • Planning exercise takes a long time
• No training plan for IS department
can learn from each other; and • Difficult to find team members meeting criteria
ii. Making shifts between current projects • No financial plan for IS department
occasionally to cater for relocating people • Very expensive
and resources where necessary • No permanent IS planning group
• Many support personnel required
ii. Project Team: A team of experts, internal or external to
the organisation, form a project team to take care of a project identified in the strategic IS plan. Usually
composed of IS experts and staff members from the accounting and administrative functions, the project
team is responsible for developing the IT infrastructure or information systems as recommended.
1. Skills of Project Team:
a. Technical or functional skills
b. Cross‐training skills
c. Interpersonal and conflict resolution skills
d. Decision‐making skills
e. Learning skills
f. Leadership skills.
2. Team leader: is selected to report to the steering committee (in most cases)
iii. Assessment: Implementation is successful if the resultant IS or IT infrastructure is capable of producing the
expected effect.
1. The effectiveness of individual projects can be
measured against the objectives which were spelt
out in their action plans as parts of the strategic IS
plan.
2. Utility approach: techniques of assessment using
such as the which evaluates an IS from six utilities:
a. Possession: Who receives output?
b. Form: What form (format) of the information is useful to the end users?
c. Place: Where is the information distributed?
d. Time: When is the information delivered?
e. Actualisation: How is the information produced and used? Production of the information is related
to system development and maintenance.
f. Goal: Does the output have value in helping the organisation obtain its objectives?
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i) Out Sourcing: A significant contribution by external vendors to the physical and/or human resources associated
with the entire or specific components of the IT infrastructure in the user organisation.
i. What Drives Out Sourcing? :
1. Management’s concern about costs and quality
2. Breakdown in it performance
3. Intense supplier pressures
4. Simplified general management agenda
5. Financial factors
6. Corporate culture
7. Eliminating an internal irritant
8. Other factors.
ii. Serious Problems in Our Sourcing:
1. Companies that outsource may become too reliant upon the vendor for information services
2. Trade secrets or proprietary information may leak out to competitors because an organisation’s IS s are
being run or developed by outsiders.
3. The organisation is dependent on the viability of the vendor. A vendor with financial problems or
deteriorating services may create severe problems for the client.
iii. Key factors that should be considered in selecting an outsourcing vendor :
1. Vendor reputation: which includes understanding your business and market, and high technology
standards
2. Quality of service: which means a clear comparative advantage over in‐house service
3. Pricing: (Cost effectiveness) Costs can escalate as processing volume increases or services are added.
j) Problems in IS strategic planning:
i. Leadership issues
1. Securing a commitment from top management to implement the IS strategic plan is difficult.
2. The success of the IS strategic planning methodology is greatly dependent on the team leader.
3. It is difficult to find a team leader who meets the criteria specified by the IS planning methodology.
4. It is difficult to convince top management to approve the IS planning methodology.
ii. Implementation issues
1. Implementing the IS applications and IT architecture identified in the IS plan requires substantial further
analysis.
2. The planning methodology fails to take into account issues related to IS strategic plan implementation.
iii. Resource Issues
1. The IS planning methodology lacks sufficient automated support.
2. The IS planning study takes too long.
3. The IS strategic plan fails to include an overall personnel and training plan for the IS department.
4. It is difficult to find team members who meet the criteria specified by the planning methodology.
k) Reasons for Top Management’s Disbelief in IT’s strategic impact potential:
i. Top management lacks awareness.
ii. Top management sees use of computers as strictly operational.
iii. Top management perceives a credibility gap.
iv. Top management doesn’t view information as a resource.
v. Top management demands financial justification.
vi. Top management may be interested in short‐term benefits.
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l) How to Successfully Convince top management:
i. Educate top management.
ii. Market IS management’s accomplishments to top management.
iii. Let the user do the selling.
iv. Promote a “Business image” for the IS department.
v. Perform strategic IS planning.
m) Chief Information Officer (CIO): Someone in the IS strategy team capable of liaison with senior management.
n) Earls Framework for IS Strategic Planning Success:
i. Survey of IS strategic planning experiences in 27 companies in the UK (Earl 1993) the major issues relating to
failure of IS strategic planning were identified and grouped into three categories:
1. Resource constraints;
2. Lack of full implementation of plan;
3. Lack of top management acceptance;
4. Length of time involved; and
5. Poor user‐IS management relationships. Necessary conditions for successful IS strategic planning
ii. They are grouped into three categories:
1. Method: Issues related to method focus on the IS strategic planning technique, procedure or
methodology employed.
2. Process: Issues related to the IS strategic planning process included:
a. Lack of line management participation
b. Poor user‐IS management relationships
c. Inadequate user awareness and education
d. Low management ownership of the philosophy and practice of IS strategic planning
3. Implementation: The main issues related to implementation were found to be:
a. Lack of resource availability
b. Management was hesitant
c. Technological constraints
d. Organisational resistance.
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