Stage 4

Businesses have a strategy for achieving their objectives, and that strategy changes over time based on any number of variables that can affect their ability to achieve their objectives. The business objective is a "what" and does not deal with the strategy, or the "how-to" steps that will result in achieving the objective. The "how-to" road map is a strategic business plan (SBP), which is an approach that management believes will

· allow them to achieve their objectives

· defines the assets needed

· specifies how the assets will be used

So that we can better understand what this plan involves, we should use the following general business model. The model, shown in figure 2.1, depicts all of the areas that an SBP must address.

Figure 2.1 General Business Model

The center of the diagram shows that the business strategy is driving the business toward the business objective and is designed to consider and incorporate the variables, both direct and indirect, as needed. To implement the strategy, a plan is developed that addresses many areas of the business, how various available assets will be used, and the assumptions concerning these variables over a time period, which could be up to five years. Because of the speed with which changes are occurring in the worlds of both business and technology, the planning horizon is constantly shrinking.

Figure 2.2, below, suggests that the strategic business plan connects or enables a business to use its strategy to achieve its objective.

Figure 2.2 A Strategic Business Plan Connects Strategy to Objective

As variables change and the business objective is optimized, the business strategy must be modified to meet this changing situation. Business strategy is never constant, but always changes in response to changes in the variables that affect the business's ability to achieve its objective. Figure 2.3 suggests this response.

Figure 2.3 Feedback Leads to Strategy Changes

This means that as feedback is received, changes are made in the business strategy as necessary, and then the SBP must change. The SBP must be a living document that is constantly reviewed and modified to reflect changes in variables so that the business objective can be achieved; it cannot be locked away in a drawer until someone decides to review it.

Figure 2.4 Evolution of the Strategic Business Plan

Figure 2.4, above, shows what actually happens. Changes in variables affect a business's ability to achieve its objective with the current business strategy and, therefore, with the current SBP. The plan is modified based on changes made in the strategy, which should favorably affect the business's ability to achieve its objective. This is not meant to imply that the changes happen with any regularity. A good example is when a significant event occurs, affecting business strategy.

Most businesses review their SBPs annually in conjunction with their budget development. The two are naturally connected, because spending (budget allocation) must be available to support the plan. The strategic business plan review should consider all of the variables we have discussed, and it should define specific actions and budget commitments to those areas.

Figure 2.5 Strategic Business Planning Model

Figure 2.5, above, shows the SBP model and the possible changes to the variables that would be considered when making or modifying the SBP. You can see that some of the changes in variables may develop over time. When this happens, the SBP does not require immediate adjustment, but the potential impact must be noted for future action. Changes in other variables, however, require immediate attention and changes to the plan. For example, the poor customer service that has been identified as resulting in the loss of market share would require immediate action. If the reason is identified as poor employee performance when dealing with customers, an extensive training program or a drastic change in hiring practices may be planned. Poor product quality may require improving raw materials and workmanship.

Think about the changes that you could make to the SBP based on the issues shown above. As you do that, think about whether there would be a cost associated with your action. Remember that there is only so much money for investment and other resources available. The plan will direct allocation and scheduling based on some guideline. This should help explain why this review and adjustment process is tied to budgeting.

As we have said, the SBP is the "how to" of the business strategy. We have also said that IT is an enabler used to help achieve the business objective. As the SBP is developed or modified, then, it should be clear that the IT plan must be closely aligned with the SBP done at the same time. Some authors have indicated that the IT plan should actually be part of the SBP because of its close connection to the IT infrastructure. (IT infrastructure is made up of five major components—hardware, software, telecommunications, IT services, and facilities—all of which will be discussed in detail a little later in this module.)

Moreover, information systems (IS) and the organization's IT infrastructure have evolved into an 'IT fabric,' or 'nervous system,' inextricably entangled and intertwined with the business processes and information processing activities they support (Strnadl, 2001; Calvano and John, 2004; Field and Stoddard, 2004). Consequently, today's IT function is driven by the very same dynamics as the enterprise itself (Krafzig et al., 2004). (Strnadl, 2006, p. 67)

Management's concern must be how this is done and what makes it a success. Booth and Philip (2005) state:

Earl's (1993) research uncovered five factors that have an impact upon the 'success' of the [IT] planning effort. They are:

· top management involvement;

· top management support;

· existence/availability of a business strategy;

· study business before technology;

· good IS [IT] management.

The emphasis here is obviously on facilitating an environment where business drives technological innovations, and management is fully committed to using IT to support business goals. (p. 394)

It is well-understood that if business efforts are to be successful, the first three items in the above list are essential. The fourth item, studying the business before technology, reinforces what we have been saying about the necessity of a close tie between the SBP and the IT plan, with the SBP driving both efforts. The last item, good IS or IT management, must be committed to a long-term systems architectural approach in which, as Strnadl (2006) said, IT infrastructure has evolved into an "IT fabric," or "nervous system," that provides the framework into which new systems and hardware can be fitted as they are needed.

Further, IT management must be sensitive to the business and its needs, rather than being in awe of or driven by technology. Kroenke (2007) indicates:

Technology is seductive, particularly to IS professionals. The CTO (Chief Technical Officer) may enthusiastically claim, "With XML Web Services we can do this and this and this." Although true, the question that the CIO must continually ask is whether those new possibilities are consistent with the organization's strategy and direction (p. 310).

The technology must also be consistent with the IT infrastructure. Management has a responsibility to ensure that they are not buying a Rolls-Royce when a Toyota Prius will meet all of their objectives. The Rolls-Royce will meet the objectives, but it could create extra costs without any gain in benefits other than status for the owner.

Conversely, business managers must be aware that systems can and should be used in the business to solve problems and improve the various functions, and that the advice of IT management is essential to their success. This also implies that business managers should be conversant with IT terminology and its possible uses if they are going to achieve the maximum benefits of IT systems. It is in the best interests of the organization that both business managers and IT managers recognize each other's importance and strengths in maximizing systems' effectiveness in solving problems. This will ultimately lead to better business solutions enabled by IT that will lead to achievement of business goals and strategic objectives.

Figure 2.6 illustrates an IT plan and its integrated relationship with the organization's strategic business plan.

Figure 2.6 IT Plan's Relationship to Strategic Business Plan

Figure 2.6 illustrates the close connection between the SBP and the IT plan, and how business solutions can be produced or enhanced through the introduction of technology to the business. It should also be noted that these new systems can have ramifications for the infrastructure that may, in addition to the items noted, require increases in infrastructure capacity or structure. Clearly, not all eventualities can be predicted in the SBP or IT plan, but both must be flexible and responsive enough to respond to changes in the variables.

During the planning cycle, potential projects are identified to address business problems or opportunities. This is done at a high level at which not every detail is available or known well enough to support the decision to select one project over another or to commit resources. These potential projects, whether they involve IT or are related to other business functions, are assigned to cross-functional teams for detailed study. An outcome of that study could include business process reengineering (BPR) and, ultimately, documentation in a business case, a tool used to document the benefits and costs of a business decision.

References

Booth, M. E., & Philip, G. (2005, September). Information systems management: Role of planning, alignment and leadership. Behaviour & Information Technology, 24(5), 391-404.

Cisco Systems, Inc. (2007). Linksys connected home solutions. Retrieved March 18, 2007, from http://www.linksys.com/servlet/Satellite?c=L_Promotion_C1&childpagename=US%2FLayout&cid=1156806458184&packedargs=site%3DUS&pagename=Linksys%2FCommon%2FVisitorWrapper

Intellichoice (2007). 2007 Toyota Prius. Retrieved March 16, 2007, from http://www.intellichoice.com/reports/vehicleReport/vehicle_nmb/19453/section/ownership/type/new/year/2007/make/Toyota/model/Prius

Kroenke, David M. (2007). Using MIS. Upper Saddle River, NJ: Pearson Prentice Hall.

Scholtes, P., Joiner, B., & Streibel, B. (2003). The team handbook (3rd ed.). Waunakee, WI: Oriel.

Strnadl, Christoph F. (2006, Fall). Aligning business and IT: The process-driven architecture model. Information Systems Management, 23(4), 67-77.

TechTarget (2007). Business process reengineering. Search CIO.com: CIO Definitions. Retrieved January 10, 2007, from http://searchcio.techtarget.com/sDefinition/0,,sid19_gci536451,00.html

Tyner Blain (2006, February 3). Definition of expected value. Retrieved April 4, 2007, from http://tynerblain.com/blog/2006/02/03/definition-of-expected-value/

In its simplest form, information systems are all about getting the right information in the most usable format to the right people at the right time and place. Advances in integrated software applications, the Internet, and better data management practices provide businesses with better tools to support this goal.

A key competitive advantage of an organization is the ability to react to changes quickly. As we saw in module 1, the environment affects organizations from a variety of aspects (government, competition, suppliers, and so on). Being able to make the right decision to address a potential threat or seize an opportunity could make the difference in whether or not the company stays in business or continues to increase profits. The key to making good decisions is having the relevant information readily available in the form that is needed.

There are three levels of decision making in an organization: operational, managerial, and strategic, as illustrated in figure 2.1.

Figure 2.1 Levels of Decision Making

Source: Based on Laudon & Laudon (2006, p. 17)

Let's look at the process of creating an invoice. An invoice contains several pieces of data, such as customer name, number, address, shipping method, items ordered, and quantities. These data are required at an operational level to update inventories, handle logistics, add to accounts receivable, and so forth. At the midlevel of our pyramid, the management level, the data from each individual invoice are not as important as the cumulative information that many invoices can provide. For example, sales have increased 25 percent on product A, orders for product B are shipping consistently behind schedule, and shipping costs with shipper X are increasing more than with other shippers. With this information on trends or patterns, management can investigate further and make decisions on production schedules, supplier relationships, or preferred shipping vendors.

At the senior or executive level of an organization, the company leadership is less concerned than middle management about the trends or patterns—their concerns are strategic. Senior management looks at information, both from within the organization and external. For example, suppose a key component needed in the manufacturing process is petroleum-based. Rising oil prices, coupled with industry forecasts that prices will continue to rise, call for addressing this situation at a strategic level. For example, they might consider whether a price increase can be justified, how much of an increase the market can bear, or whether there are alternatives that would not degrade the product.

So we can see that information moves through the organization and is viewed for different purposes by different levels within the organization. However, the data are captured at the operational level (transaction-processing systems) and made available in appropriate forms (summary of product, customer, geographic distribution differences, and so on) at the various managerial levels.

It is important to note that information can flow both up and down the levels within an organization. Information that is useful for monitoring ("How are we doing?") typically flows from the operational level upward. Control information ("Is business going as planned?") typically flows from the top level downward. A senior manager notes that sales figures are declining. She queries down through the organization to find more information to control the declining sales. From midlevel management, she may learn that only the Midwest region is experiencing a decline. From the operational level, she may learn that the sales force in that region has had significant turnover and that 40 percent of its sales representatives have fewer than six months of experience.

Figure 2.2 Examples of Information Levels

Mouseover each section of the figure to see examples of what each level would be concerned with in relation to the information that could stem from the invoice creation process.

Source: Laudon & Laudon (2006)

The concept of sharing information throughout the organization is increasingly at the forefront of organizations' strategic planning, in addition to the more traditional information systems we have just described.

E-Business

In today’s world, almost all of you will have conducted some aspect of e-business

using the World Wide Web on the Internet. If you have placed an order from

Amazon, bought something on e-Bay, or paid your phone bill online, you have been

part of the e-business world. E-business is an all-encompassing term that covers

the electronic conduct of business including serving customers, and collaborating

with suppliers and partners. A subset of e-business is e-commerce, which has to

do with electronic buying and selling only. While these terms are often used

interchangeably, they have different and distinct meanings, as you will see in the

readings that follow. First you will read about why the Internet is so attractive to

businesses. Then, you will view a short presentation on E-Business Models that was

developed by a group of undergraduate students like you.

https://www.networkworld.com/article/2178140/tech-primers/selecting-metrics-to-demonstrate-it-value.html