1. No category

Why Managers Must Understand the
Relationship Between Strategic
Planning and IT
• Alignment
– IT organization and resources work on projects that
support the key objectives of the business
• According to the 2007 State of the CIO Survey
conducted by CIO Magazine
– Four of five CIOs say they are not aligned with their
organization's strategic goals
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Why Managers Must Understand the
Relationship Between Strategic
Planning and IT (continued)
• IT people must:
– Recognize and understand business needs
– Develop effective solutions
• Business managers must communicate:
– Vision, objectives, and strategies of the organization
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What is Strategic Planning?
• Strategic planning
– Helps managers identify desired outcomes and
formulate feasible plans by using available
resources and capabilities
– Typically an annual process
• Variety of approaches
– Issues-based
– Organic
– Goals-based
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Defining Vision and Mission
• Vision/mission statement
– Communicates an organization’s overarching
aspirations
– Guides organization through changing objectives,
goals, and strategies
– Components
• Core ideology
• Mission statement
• Vision of a desirable future
– Inspires and requires employees to stretch to reach
its goals
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Conducting Internal Assessment
• Involve all levels and business units
• Prepare a historical perspective
• Gather data about internal processes and
operations
• Analyze data to identify and assess:
– How well the firm is meeting current objectives and
goals
– How well its current strategies are working
• Process identifies many of the strengths and
weaknesses of the firm
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Analyzing External Environment
• Examine the industry in which the organization
competes
• Collect and analyze facts about its key customers,
competitors, and suppliers
– Members of the organization should be prepared to
hear things they do not like
• Michael Porter’s Five Forces Model
– Most frequently used model for assessing the nature
of industry competition
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Analyzing External Environment
(continued)
• Competitive financial analysis
• Strengths, Weaknesses, Opportunities, Threats
(SWOT) matrix illustrates:
–
–
–
–
What the firm is doing well
Where it can improve
What opportunities are available
What environmental factors threaten the future of the
organization
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Defining Objectives
• Objective
– Statement of a compelling business need that an
organization must meet to achieve its vision and
mission
– Example
• Preserving consistency in revenue and earnings
growth
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Establishing Goals
• Goal
– Specific result that must be achieved to reach an
objective
• Several goals may be associated with a single
objective
• Short-term, medium-term, and long-term goals
• Big Hairy Audacious Goals (BHAGs)
• Recognize and drop goals that are no longer
relevant
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Setting Strategies
• Strategy
– Specific actions an organization will take to achieve
its vision/mission, objectives, and goals
• Managers should consider:
– Long-term impact of each strategy on revenue and
profit
– Degree of risk involved
– Amount and types of resources that will be required
– Potential competitive reaction
• Draw on the results of the SWOT analysis
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Setting Strategies (continued)
• Michael Porter’s three fundamental strategies
– Become the cost leader
– Provide goods and services for a set of customers
better than others
– Focus on a specific niche in the marketplace
• Market options matrix
– Identify an organization’s product and market
options
• Growth-share matrix
– Allocate resources among various business units
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Defining Measures
• Measures
– Metrics that track progress in executing chosen
strategies to attain an organization’s objectives and
goals
– Help managers determine if a strategy’s ultimate
purpose is being achieved
• Run the risk of “getting what they measure” without
accomplishing anything meaningful
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Deploying OGSM
• O
– The organization establishes numerical…
• G
– Goals that index each objective, sets…
• S
– Strategies on how to reach the goals, and defines…
• M
– Measures to assess how well the strategies are
being executed
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Deploying OGSM (continued)
• Highest-level OGSM
– Deployed to the organization’s business units and
functional units
– Managers translate the information into their own
unit’s objectives and goals as input to their own
OGSM processes
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Identifying Projects and Initiatives
• IT staff members pick up ideas for potential
projects
– Through interactions with various business
managers
– From observing other IT organizations and
competitors
• Can generate many ideas for IT projects that
support corporate objectives and goals
• Classify various potential projects by type
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Prioritizing Projects and Initiatives
• Combined process of setting and scheduling
priorities is needed
– To define which projects will be staffed and when
they will be executed
• Each viable project must relate to a specific
organizational goal
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Prioritizing Projects and Initiatives
(continued)
• Can the organization measure the business value
of the initiative?
– Tangible benefits
• Can be measured directly and assigned a monetary
value
– Intangible benefits
• Cannot directly be measured and cannot easily be
quantified in monetary terms
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Prioritizing Projects and Initiatives
(continued)
• What kinds of costs are associated with the project,
and what is the likely total cost of the effort over
multiple years?
• See if the project has an attractive rate of return
• Managers must consider risks
• Sequencing of projects must be considered
• Is the organization ready and capable of taking on
this project?
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A Manager Takes Action
• Lowe’s IT Portfolio Management Process
• Steady stream of IT-related efforts in its project
pipeline
• CIO Larry Stone and Stephen Boerst, Lowe’s
manager of IT strategy and planning
– Upgraded the firm’s process for prioritizing IT
initiatives
– Established an IT steering committee
– Used portfolio management software
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Executing Projects and Initiatives
• Business managers have a key role in ensuring
good results that meet business needs
• Success rate for IT projects is not high
• Standish Group
– Estimated in a 2004 report that the IT project
success rate is only about 34 percent
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Measuring and Evaluating Results
• Actual results of a project must be compared with
the goals it expected to achieve
– Comparison may indicate that a change is needed
• Managers must be flexible and willing to reevaluate
their positions
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Effective Strategic Planning:
United Parcel Service (UPS)
• Outline of a strategic plan developed for United
Parcel Service
• Define mission/vision
• OGSM
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Defining Vision and Mission
• Vision
– To bring the world’s businesses together through
synchronized commerce by coordinating their
distribution systems, supply chains, and order
management systems, helping them to compete
better in an expanding global economy
• Mission
– To develop business solutions that create value and
competitive advantages for customers of all sizes
through product differentiation, market penetration,
better customer service, and improved cash flow
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Conducting Internal Assessment
• Example: UPS
• Historical perspective
– Two teenagers started the service in 1907
• Claude Ryan and Jim Casey
– Expanded its Next Day Air service to all 50 states
and Puerto Rico by 1985
– Began tracking with Delivery Information Acquisition
Devices (DIADs)
– Captured major shipping associated with ecommerce
– Rebranded Mail Boxes, Etc. to The UPS Store
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Conducting Internal Assessment
(continued)
• Current strategies
– Global expansion
– Provide all modes of service
• Identification of strengths
– Financial strength
– Makes effective use of technology
• Identification of weaknesses
– Thin operating margin
• Identification of threats
– Union contracts
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Conducting External Assessment
• Examining industry
– UPS competes in the package delivery industry
• Identification of strengths
– Dominant market share
– Global reach
– Strong brand image
• Identification of opportunities
– Acquisitions
– Growth in e-commerce
– International growth
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Conducting External Assessment
(continued)
• Identification of threats
– Rising oil prices
– Terrorism
• Competitive analysis
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Defining Objectives
• Key objective
– Future profitability
• Revenues of $43 billion and operating income of $6
billion in 2005
• Growth from 2002 – 2005
– Revenue 10.8 percent
– Profit 14.5 percent
• Preserve this consistency in revenue and earnings
growth
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Establishing Goals
• Increase operating profits in all three business
segments
– Domestic delivery
– International delivery
– Supply chain and freight
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Setting Strategies
• Primary strategy
– Take advantage of UPS’s competitive strengths
– Maintain the firm’s focus on meeting or exceeding
customer requirements
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Defining Measures
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Deploying OGSM to IT
• Dave Barnes
– Promoted to senior vice president and CIO of UPS in
2005
– Responsible for ensuring that IT organization
understands the corporate OGSM
• Define, execute, and measure projects that are
consistent with the firm’s mission, objectives, goals,
and strategies
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Identifying and Prioritizing Projects
and Initiatives
• Breakthrough
– UPS Package Flow Technology
– Designed to support growth, improve productivity,
reduce costs, and provide the platform for new
services
– Savings from this project are estimated to be $750
million per year starting in 2008
• Growth
– Expanding Worldport hub
– Increase sorting capacity over the next five years by
60 percent to 487,000 packages per hour
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Identifying and Prioritizing Projects
and Initiatives (continued)
• Innovation
– Continues to monitor RFID advances closely
• Enhancement
– EDD (Enhanced DIAD Download) is UPS-developed
software that downloads an electronic manifest to
the driver’s DIAD at the start of each workday
• Maintenance
– Continually evaluating and upgrading the DIAD
device
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Identifying and Prioritizing Projects
and Initiatives (continued)
• Mandatory
– Target Search
– Enables U.S. Customs and Border Protection agents
to inspect packages that pass through the Worldport
international hub
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Executing Project, Then Measuring
and Evaluating Results
• During project execution
– Actual results are compared to expected results
• Some approved projects even may be cancelled
based on negative results
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Summary
• Strategic planning
– Helps managers identify desired outcomes and
formulate feasible plans
– Requires analysis of internal and external
environment
• Management defines:
– Objectives
– Strategies
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Summary (continued)
• 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
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