Copyright © 2006, The McGraw­Hill Companies, Inc. All rights reserved.

11 - 1


Chapter

11
Developing Business/IT
Strategies

Copyright © 2006, The McGraw­Hill Companies, Inc. All rights reserved.

11 - 2


Learning Objectives
1. Discuss the role of planning in the
business use of information technology,
using the scenario approach and
planning for competitive advantage as
examples.
2. Discuss the role of planning and
business models in the development of
business/IT strategies, architectures,
and applications.
Copyright © 2006, The McGraw­Hill Companies, Inc. All rights reserved.

11 - 3

Learning Objectives
3. Identify several change management
solutions for end user resistance to the
implementation of new IT-based
business strategies and applications.

Copyright © 2006, The McGraw­Hill Companies, Inc. All rights reserved.

11 - 4


Why Study Planning Fundamentals?
• Information technology has created a
seismic shift in the way companies do
business. Just knowing the importance
and structure of e-business is not enough.
You need to create and implement an
action plan that allows you to make the
transition from an old business design to
a new e-business design.

Copyright © 2006, The McGraw­Hill Companies, Inc. All rights reserved.

11 - 5


Case #1: ROI in Business/IT Planning
The Rowe Companies’ ROI Process
• Use simple ROI calculations to help
prioritize IT projects for planning purposes

• Also use economic value added (EVA)
analysis which takes into consideration
the cost of capital for a project, risk
factors associated with the project, and a
targeted value return percentage
Copyright © 2006, The McGraw­Hill Companies, Inc. All rights reserved.

11 - 6


Case #1: ROI in Business/IT Planning
The Rowe Companies’ ROI Process
• Return on opportunity (ROO) is also used
because it combines more than a dozen
factors to assess the rate of change in the
business environment, the rate of change
in business processes and IT
infrastructure, the competitive
environment, and the value of intangible
assets.
Copyright © 2006, The McGraw­Hill Companies, Inc. All rights reserved.

11 - 7


Case #1: ROI in Business/IT Planning
Merrill Lynch ROI Process:
• Risk-and-payback analysis required for
every costly technology initiative
• Single standard six-page template used

that poses yes-or-no questions to
evaluate project success factors coupled
with a five-page financial report

Copyright © 2006, The McGraw­Hill Companies, Inc. All rights reserved.

11 - 8


Case #1: ROI in Business/IT Planning
1. What are the benefits and limitations of
Rowe Companies’ ROI methods for IT
project planning?
2. What is the business value of the ROI
methodology required for project
planning by Merrill Lynch?

Copyright © 2006, The McGraw­Hill Companies, Inc. All rights reserved.

11 - 9


Case #1: ROI in Business/IT Planning
3. Do you agree with the IT investment
decision being made by the Rowe
Companies in response to changing
economic conditions? Why or why not?
4. How can a company identify, measure,
and compare the business/IT innovation
as well as the profitability of IT projects

in their planning process?
Copyright © 2006, The McGraw­Hill Companies, Inc. All rights reserved.

11 - 10


IT as a Revenue-Producing Asset

Copyright © 2006, The McGraw­Hill Companies, Inc. All rights reserved.

11 - 11


Organizational Planning Process
• Team building, modeling and consensus
• Evaluating what an organization has
accomplished and the resources they
have acquired
• Analyzing their business, economic,
political and societal environments

Copyright © 2006, The McGraw­Hill Companies, Inc. All rights reserved.

11 - 12


Organizational Planning Process
• Anticipating and evaluating the impact of
future developments
• Building a shared vision and deciding on

what goals they want to achieve
• Deciding what actions to take to achieve
their goals

Copyright © 2006, The McGraw­Hill Companies, Inc. All rights reserved.

11 - 13


Organizational Planning Process

Copyright © 2006, The McGraw­Hill Companies, Inc. All rights reserved.

11 - 14


Strategic Planning
Definition:
• Development of an organization’s
mission, goals, strategies, and policies

Copyright © 2006, The McGraw­Hill Companies, Inc. All rights reserved.

11 - 15


Operational Planning
Definition:
• Planning done on a short-term basis to
implement and control day-to-day

operations

Copyright © 2006, The McGraw­Hill Companies, Inc. All rights reserved.

11 - 16


Scenario Approach
Definition:
• Teams of managers and other planners
participate in what management author
Peter Senge calls microworld, or virtual
world, exercises
• Microworld - simulation exercise that is a
microcosm of the real world

Copyright © 2006, The McGraw­Hill Companies, Inc. All rights reserved.

11 - 17


Trends Shaping Strategic Planning

Copyright © 2006, The McGraw­Hill Companies, Inc. All rights reserved.

11 - 18


Why Plan for Competitive Advantage?
• Betting on new IT innovations can mean betting

the future of the company.
• Leading-edge firms are sometimes said to be on
the “bleeding edge”.
• Almost any business executive is aware of
disastrous projects that had to be written off,
often after large cost overruns, because the
promised new systems simply did not work.
Copyright © 2006, The McGraw­Hill Companies, Inc. All rights reserved.

11 - 19


Strategic Opportunities Matrix

Copyright © 2006, The McGraw­Hill Companies, Inc. All rights reserved.

11 - 20


What is SWOT Analysis?
• SWOT analysis is used to evaluate the impact
that each possible strategic opportunity can
have on a company and its use of information
technology
• Strengths – core competencies
• Weaknesses – substandard business
performance
• Opportunities – potential for new markets or
innovative breakthroughs
• Threats – potential for losses posed by

competitive forces
Copyright © 2006, The McGraw­Hill Companies, Inc. All rights reserved.

11 - 21


Business Model
Definition:
• A conceptual framework that expresses
the underlying economic logic and system
that prove how a business can deliver
value to customers at an appropriate cost
and make money

Copyright © 2006, The McGraw­Hill Companies, Inc. All rights reserved.

11 - 22


Business Model Components
• Customer Value – Is the firm offering its customers
something distinctive or at a lower cost than its
competitors?
• Scope – To which customers is the firm offering this
value? What is the range of products/services offered
that embody this value?
• Pricing – How does the firm price the value?
• Revenue Source – Where do the dollars come from?
Who pays for what value and when? What are the
margins in each market and what drives them? What

drives value in each source?
Copyright © 2006, The McGraw­Hill Companies, Inc. All rights reserved.

11 - 23


Business Model Components
• Connected Activities – What set of
activities does the firm have to perform to
offer this value and when? How
connected are these activities?
• Implementation – What organizational
structure, systems, people, and
environment does the firm need to carry
out these activities? What is the fit
between them?
Copyright © 2006, The McGraw­Hill Companies, Inc. All rights reserved.

11 - 24


Business Model Components
• Capabilities – What are the firm’s capabilities
and capabilities gaps that need to be filled?
How does a firm fill these capabilities gaps? Is
there something distinctive about these
capabilities that allows the firm to offer the value
better than other firms and that makes them
difficult to imitate? What are the sources of
these capabilities?

• Sustainability – What is it about the firm that
makes it difficult for other firms to imitate it?
How does the firm keep making money? How
does the firm sustain its competitive advantage?
Copyright © 2006, The McGraw­Hill Companies, Inc. All rights reserved.

11 - 25