Developing Strategic Planning, Business Strategy and Their Implication to IS/IT Strategy Session Review • The changing roles of IS/IT from support to enabler • The strategic context of Information systems • Exploring IS/IT demand • IS/IT plan in the Indonesian context, where are we? Session Objectives • Understand how to formulate strategic plan • Understand how to formulate business strategy • Understand how to formulate business objectives • Understand the implication of strategic plan to IS/IT plan Agenda I. What is Strategic Planning? II. Strategic Planning Model III.Evolution of Strategic Planning IV. Strategic Planning and Business Strategy V. Technique to Develop Business Strategy: Competitive Forces in Industry (Porter, 1980) VI. Generic Competitive Strategy I. What is Strategic Planning (source: Matt H. Evans, firstname.lastname@example.org) • Process to establish priorities on what you will accomplish in the future • Forces you to make choices on what you will do and what you will not do • Pulls the entire organization together around a single game plan for execution • Broad outline on where resources will get allocated Fundamental Questions to Ask • Where are we now? (Assessment) • Where do we need to be? (Gap / Future End State) • How will we close the gap (Strategic Plan) • How will we monitor our progress (Balanced Scorecard) Another Model of Strategic Planning Establish Define Achieve strategic strategies strategies direction feedback Strategic planning of •Define mission and objectives options selected Implement strategies •Assess situation and options •Select options Strategic thinking and opportunistic decision making III. Evolution of Strategic Planning Effectiveness of strategic decision making Well defined strategic framework Strategically focused organization Multi-year budgets Situation analysis and Widespread strategic Gap analysis competitive assessments thinking capability Static allocation of Evaluation of strategic Reinforcing management resources options processes Annual budgets Dynamic allocation of Supportive value system Functional focus resources and climate Stage 1 Stage 2 Stage 3 Stage 4 Financial Forecast-based Externally Strategic planning planning oriented management (meet budget) (predict the (think (create the future) strategically) future) Discussion and Explanation…. Does focus of each stage bring specific characteristics and determine an appropriate business strategy? Developing from one stage to another stage, most likely in sequence, but with “special” treatment, “leapfrog” is possible. What do you think? The role of “business manager” change over time, so does “ICT manager”. Hence, the way they interact must be adapted accordingly. How this interaction should take place? Strategic Framework for Strategic Planning External Environments Economic Political Ecological Technological Social Legal Pressure Values Customers Groups Suppliers Objectives Identify current Identify future Threats and Competitors Shareholders strategies strategies opportunities Customers Employees Suppliers Evaluate Analyze Evaluate Shareholders Unions feedback internal strategies Employees Government resources Public Unions Monitor Implement Select Public Stake Strategies Strategies Strategies Media Holder Financial Ins. Input to Strategic Planning • External environments - sources of important signals to organizations • Pressure groups - demand recognition and rapid management response • Stakeholders - demand fair share of created wealth • Business planning is usually carried out for each strategic business unit – A unit that sells a distinct set of products or services, serve a specific set of customers, and competes with a well- defined set of competitors IV. Strategic Planning and Business Strategy Definition of Business Strategy • Definition of business strategy: An integrated set of actions aimed at increasing the long-term well-being and strength of the organization relative to its competitors. • Definition of business strategy:An integrated set of actions aimed at increasing the long-term well-being and strength of the organization relative to its competitors • The definition of business strategy is a long term plan of action designed to achieve a particular goal or set of goals or objectives. • Business Strategy is a term used in business planning that implies a careful selection and application of resources to obtain a competitive advantage in anticipation of future events or trends. • Business Strategy is concerned more with how a business competes successfully in a particular market. It concerns strategic decisions about choice of products, meeting needs of customers, gaining advantage over competitors, exploiting or creating new opportunities etc. Business Plan A business plan is a document that summarizes the operational and financial objectives of a business and contains the detailed plans and budgets showing how the objectives are to be realized. A business plan is a formal statement of a set of business goals, the reasons why they are believed attainable, and the plan for reaching those goals. It may also contain background information about the organization or team attempting to reach those goals. Business plans may also target changes in perception and branding by the customer, client, tax-payer, or larger community V. Technique to Develop Business Strategy: Competitive Forces in Industry (Porter, 1980) Threat of new entrants Bargaining Rivalry among Bargaining power of existing power of suppliers competitors buyers Threat of substitute product Factors Affecting The Impact of Competitive Forces • New entrants – Capital requirements – Patents and specialists skill required – Distribution channels available – Achieved/required economies of scale and resultant cost advantages – Number and size of existing rivals and intensity of competition – Differentiation and brand establishment/loyalty – Access to raw materials/critical resources etc. Business strategy: “how to discourage new entrants to come into the business” Strategic Choices: Factors Affecting The Impact of Competitive Forces • Substitute products/services – Customer awareness of needs and means of satisfaction – Customer sensitivity to value for money and ability to compare – Existing loyalty of customer—impact of “industry” promotion – Ability to differentiate products etc. Business strategy: “how to create a loyal customers?” Strategic Choices: Factors Affecting The Impact of Competitive Forces • Competitive rivalry will be intensified by: – Market growth slow (or in decline) – Small number of similar sized competitors dominate – High fixed costs and/or high exit barriers for all rivals – Overcapacity and/or capacity increments are large units – Commodity-like, undifferentiated products. Business strategy: “how to differentiate your products?” Strategic Choices: Factors Affecting The Impact of Competitive Forces • Buyers’ power will be increased by: – Concentrated/few buyers making high volume and/or high value of purchases – Low switching costs across suppliers – Price sensitive and many alternative sources of supply – Weak brand identities, products not differentiated – Buyers capable of backward integration due to low entry cost. Business strategy: “how to make the buyers depend on your business” Strategic Choices: Factors Affecting The Impact of Competitive Forces • Suppliers’ power will be increased by: – Few suppliers—high switching costs for rivals and suppliers deal with many small customers – Potential substitute supplier/resources not easily available – Supplied goods make up large part of firm’s costs – Suppliers capable of forward integration or bypass to customers Business strategy: “how to make the suppliers depend on your business” VI. Generic Competitive Strategy Low Cost Competitive Advantage Differen- tiation Characteristics of Generic Strategies Generic Commonly Required Commonly Organizational Strategies Skills and Resources Requirements Overall cost Sustained capital investment and access to Tight cost control, frequent, detailed control capital reports. leadership Process engineering skills Structured organization and responsibilities. Intense supervision of labor Incentives based on meeting strict quantitative targets Differentiation Strong marketing abilities and creative Strong coordination among functions in flair. R&D, product development, and marketing. Product engineering skills. Subjective measurement and incentives Strong capability in basic research. instead of quantitative measures (market based incentives). Corporate reputation for quality or technological leadership. Amenities to attract highly skilled labor or creative people. Strong cooperation from distribution channels. Looser, more trusting organizational relationships. Focus Combination of the above policies Combination of the above policies directed directed at the particular strategic target. at the particular strategic target. Exercise Your Thought Explain the development processes of strategic planning? What are the components of strategic planning? How to develop business strategy? How external forces influence business strategy and IS/IT strategies? What are the implications of strategic plan to IS/IT plan? Group assignment and the answers of the exercise are sent to email@example.com, the latest at april, 15 2011 23.59 pm Jelaskan perkembangan proses perencanaan strategis? Apa saja komponen dari perencanaan strategis? Bagaimana mengembangkan strategi bisnis? Bagaimana pengaruh kekuatan eksternal strategi bisnis / TI dan strategi? Apa implikasi dari rencana strategis untuk IS / TI rencana?