INCLASS exam

Lecture03-IT_Strategy.pptx

ISDS 351 - Information Technology for Managers

Information Technology for Managers IT & Strategy

Learning Objectives

What is an effective strategic planning process, who needs to participate in it, and what are the deliverables of such a process?

How is IT planning tied to overall strategic planning, so that business objectives and IT activities are well aligned?

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Need for Managers to Understand the Relationship Between Strategic Planning and IT

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Understanding the Relationship Between Strategic Planning and IT

Improves alignment between business and IT

Alignment - IT organization and its resources are focused on actions that support the key objectives defined in the strategic plan of the business

Implies that the IT and business managers have a shared vision

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Understanding the Relationship Between Strategic Planning and IT (continued 1)

Shared vision helps an IT organization in:

Hiring the right people with the right skills and capabilities

Choosing the right technologies and vendors to explore and develop

Installing the right systems

Focusing on those projects that facilitate the organization to move toward achieving its vision and mission

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Strategic Planning

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Strategic Planning

Helps managers to:

Identify desired outcomes and formulate feasible plans

Achieve their objectives by using available resources and capabilities

Annual process

Approaches

Issues-based

Organic

Goals-based

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Figure 2.1 - Goals-Based Strategic Planning Process

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Analyze Situation

Assessing strengths and weaknesses across all the levels and business units of a firm

Preparing a historical perspective

Gathering data about internal processes and operations

Analyzing the collected data

Examining the industry in which the organization competes

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Analyze Situation (continued 1)

Collecting and analyzing facts about its key customers, competitors, and suppliers

Aiming to:

Identify strategically important issues that the organization must address

Reveal the firm’s competitive position against its rivals

Michael Porter’s Five Forces Model: Used for assessing the nature of industry competition

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Figure 2.2 - Porter’s Five Forces Model

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Analyze Situation (continued 2)

Competitive financial analysis helps in determining how key financial parameters match up against the competitors

Strengths, Weaknesses, Opportunities, Threats (SWOT) matrix

Illustrates that an effective strategy derives from:

Maximizing a firm’s strengths and opportunities

Minimizing its weaknesses and threats

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Set Direction

Vision/mission statement

Communicates an organization’s overarching aspirations

Guides organization through changing objectives, goals, and strategies

Components

Mission statement

Vision of a desirable future

Set of core values

Inspires and requires employees to stretch to reach its goals

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Set Direction (continued 1)

Objectives: Statement of a compelling business need that an organization must meet to achieve its vision and mission

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Set Direction (continued 2)

Goal: Specific result that must be achieved to reach an objective

Associated with a single objective

Tracks progress in meeting an organization's objective

Big Hairy Audacious Goals (BHAGs)

Need to be SMART (specific, measurable, achievable, relevant, time constrained)

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Strategies

Allow an organization to achieve its vision, mission, objectives, and goals

Require managers to 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

Results of the SWOT analysis

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Strategic Plan

Defines objectives, establishes SMART goals, and sets strategies

Objectives, goals, and strategies are communicated to business units and functional units

Depends on the autonomy granted at lower levels

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Figure 2.3 - Strategic Planning Pyramid

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Setting the IT Organizational Strategy

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Strategic Plan of an IT Organization

Required to identify technologies, vendors, competencies, people, systems, and projects

Needed to aid in investments that support the objectives, goals, and strategies

Depends on the way the rest of the organization perceives it

Perception can be as a cost center/service provider, a business partner/ business peer, or as a game changer

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Figure 2.4 - Drivers that Set IT Organizational Strategy and Determine IT Investments

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Identifying IT Projects and Initiatives

Require interacting with various business managers and observing other IT organizations and competitors

Need to support corporate objectives and goals

Classify various potential projects by type

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Table 2.5 - Project Classification Example

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Prioritizing IT Projects and Initiatives

Process of setting priorities and determining the resulting budget, staffing, and timing needs

Defines which projects will be initiated and when they will be executed

Involves reviewing and evaluating from different perspectives

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Figure 2.5 - Projects Must Relate to Goals and Objectives

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Effective Strategic Planning: Chevron

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Effective Strategic Planning: Chevron

Outline of a goals-based strategic planning process developed for Chevron

Involves:

Situational analysis

Set direction

Define strategies

Deploy plan

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Situation Analysis

Strengths

Financial strength

Presence in all phases of the energy industry

Broad geographic presence

High reserves ratio

Leading position in the United States

Weaknesses

Entanglement in environmental disaster in Ecuador

Strain on sales of refined products

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Situation Analysis (continued 1)

Opportunities

Planned investments for future development

Strategic acquisitions and agreements

Threats

Rising production costs and capital expenditures

Regulation of greenhouse gas emissions

Changing economic, regulatory, and political environments

Commodity prices risks

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Set Direction

Objectives

Increase revenue and profits

Estimate investments for future to increase production and revenue, to support objectives

Goals

Reduce time lag between initial exploration and start of production

Execute project start-ups with more than $1 billion Chevron investment

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Set Direction (continued 1)

Add to portfolio through exploration and targeted acquisitions

Maintain or improve the success rate of exploration wells

Sustain to be a leader in personal safety, measured by injuries requiring time away from work

Goal of zero-incidents

Achieving world-class performance in all measures of safety

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Define Strategies

Create shareholder value and achieve sustained financial returns from operations

Invest in people to strengthen organization capability and develop a talented global workforce

Execute with excellence through application of operational excellence and capital stewardship systems and disciplined cost management

Grow profitably by using competitive advantages

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Define Strategies

Attain world-class performance in operational excellence with a goal of zero safety and operating incidents

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Chevron Strategic Plan

Communicated to all business units worldwide

Each unit is encouraged to perform its own strategic planning process that can lead to accomplishment of corporate goals

Focuses on technologies that aids in finding, developing, and producing crude oil and natural gas

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Chevron Strategic Plan (continued 1)

Identifying projects and initiatives

Loulie Ehrlich was appointed CIO and President of the Chevron Information Technology Company

Focus on accelerating insights, automating operations, and connecting people

Hire IT professionals with bachelor’s or master’s degree in various fields

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Chevron Strategic Plan (continued 2)

Information Technology Company supports businesses by developing and supporting information technologies

Uses distributed sensors, high-speed communications, and data analysis techniques to monitor and fine-tune remote drilling operations

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Chevron Strategic Plan (continued 3)

Prioritizing projects and initiatives

To identify new oil deposits, the company uses sound waves to create images of the earth, deep below the ocean floor

Collaborates with oil service companies and top IT companies to obtain state-of-the-art solutions

Established eight global “mission control” centers to improve the performance of forty of the company’s biggest energy projects

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Chevron Strategic Plan (continued 4)

Focus on leak detection by using modeling technology in most of the company’s pipeline

IT operates through a network that connects more than 50,000 desktops around the world

Enables collaboration and communication

Digital imaging helps better manage an oil field once it is producing oil

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Chevron Strategic Plan (continued 5)

IT organization is responsible for:

Network operations and security

Purchasing and deploying hardware

Setting global technology standards and strategy

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Summary

Strategic planning

Helps managers identify desired outcomes and formulate feasible plans to achieve objectives

Requires analysis of internal and external environment

Set direction involves defining the mission, vision, values, objectives, and goals of the organization

Define strategies involves describing the way an organization will achieve its mission, vision, objectives, and goals

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Summary (continued 1)

Organization’s 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

IT strategy will set direction for the technologies, vendors, competencies, people, systems, and projects

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