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Business Analysis: A Guide to Aligning IT & Business Strategy

by Stephan Streitberger
Published: April 1, 2007

Published in TDAN.com April 2007

Introduction

Begin with the end in mind...

Typically information systems are identified and delivered on an incremental basis. A business unit identifies a problem that they feel would benefit from a technology solution. A business case is raised and the project is funded and implemented according to that business unit's requirements. This approach works well in the early stages of establishing an applications portfolio. But as time progresses, this development approach presents major problems for the organisation trying to manage their business processes end to end and in providing access to information to measure progress towards corporate goals and objectives.

The Proposal

These problems have become more visible in recent times as organisations focus on improving their processes by reducing process cycle times, reducing cost and achieving service excellence (process re-engineering). For example, reducing the cost of inventory in a company that has 23 material catalogues and inventory management systems is extremely difficult. Especially when current inventory is not visible to the whole organisation and each regional store uses different material classifications to describe and manage the same material. This situation can lead to one department ordering materials in short supply, whilst another department has excess of the same stock that they are about to write off to save on inventory, storage and insurance costs.

A Strategic Information Systems Plan (SISP) helps resolve these issues by describing a target architecture that is not affected by any political, financial or technical constraints.

This architecture is a point of reference by which everything is measured. It identifies and describes the fundamental points where integration must be achieved in order to deliver smooth end-to-end business process and the information necessary to measure performance against plan, such as minimising the cost of inventory.

Business Strategy

The secret to achieving a successful architecture delivery is to make certain that what you do on any given day does not violate the vital principles and design criteria defined in the plan, i.e. protect the crown jewels at all costs. Decisions can be still made for short-term or opportunistic gains when taking this approach. The difference is that these decisions will be made knowing the consequences. If the organisation can live with the consequences, then the expediency may be warranted.

Competitive analysis

The purpose of conducting a strategic information systems planning project is to develop a target architecture that will support the organisation in managing the delivery of its system solutions with the end in mind. This architecture will cover process, application, data and technology. The framework will be used to;

  • Identify common requirements that would benefit from a joint business unit venture to reduce the cost of ownership.
  • Identify where harmony and integration must occur to support good decision-making and process design.
  • Identify and source technology infrastructure that will enable the delivery of the preferred business architecture at an optimised cost, such as database, workflow and integration tools (middleware).
  • Develop a migration strategy for realising the benefits of the information systems plan.
  • Establish an ongoing process for initiating, reviewing and authorising system proposals that feeds into the IT business plan (governance).

Using this approach for managing the systems portfolio will help move independent operating business units into interdependent ones, where business units combine their respective talents and abilities to design business process and solutions that create greater value for shareholders or citizens.

Project Benefits

The challenge for management when investing in technology infrastructure is to decide which programmes of work will deliver the best value for the organisation.

Three Horizon Product Growth Strategy

Establishing an enterprise architecture will provide management with a framework for making these decisions, in addition to the standard financial analysis conducted to evaluate return on investment. The primary benefits expected from an information systems strategy include:

1.   Aligning IT strategy with business strategy

The IT programme of work will be developed from the business model, with priorities set according to strategy and other important business drivers.

2. Improving business process integration

Identify the critical integration points where;

  • Process steps must be cohesive from first contact with the end customer to reaching a satisfactory outcome and
  • Information must be shared to provide a feedback loop for monitoring and assessing how well business unit programmes are working towards the organisation's goals, e.g. balanced score card reporting.

3. Minimising the total cost of ownership

Identify common requirements where infrastructure costs can be shared across business units to minimise the cost of ownership. The cost of ownership covers the opportunity to remove functional duplication, optimise the best choice of infrastructure tools by defining a Standard Operating Environment (SOE) and minimising the cost of change by optimising your application portfolio.

4. Consensus on initiative priority

A common architectural framework provides the transparency required for comparing system proposals. The data and functions derived from the applications and data architectures are used to classify business system proposals so they can be compared and business priorities set in accordance with the organisation's budgetary and resource constraints.

The overall architecture helps identify existing applications that can be re-used or opportunities to establish critical infrastructure within a project context.

5. Defined IT work priorities.

These system project descriptions and dependencies will form the basis of recommendations presented to management for approval. The business stakeholders determine project priorities for new application requirements and enhancements identified during this project. Once approved, the projects will be incorporated in the Information Services Department business plans and budgets for implementation.

Critical Success Factors

The primary factors that lead to the successful delivery of a systems strategy include:

1. Active support and buy-in from business leaders, i.e. at the CEO and Director level.

2. Participants have the appropriate qualities to undertake the project, i.e. each participant;

  • Has the relevant business knowledge to contribute to solving the business problem.
  • Is motivated to find a practical solution to the business problems.
  • Has the authority to design the architecture.
  • Can act as change agents to build support for the initiation and implementation of the final agreed IT work programme.

3. Availability of external research material that can be used to challenge the project participants thinking on best practice, e.g. industry benchmarks.

4. Clearly defined business unit plans that maintain sufficient detail to identify where IT solutions can benefit the organisation in achieving its strategy.

Process Approach

Tell me, I forget

Show me, I remember

Involve me, I understand

This proposal centres on creating a partnership between the business units and IS, so both parties understand the business priorities and the proposed architecture sufficiently to support the initiation and delivery of the IT work plan. The key phrase is Involve me, I understand. As a result, a workshop approach is taken between the stakeholders to develop the information systems plan and the relevant underlying process, application, data and technology architectures.

The planning process typically undertaken during a strategic information system planning project is illustrated in the following diagram.

SISP Process

The work products produced for each process activity are described in the following table.

The Illustrated Example

By drawing together the threads of the illustrations presented in this article along with the following trends, it is apparent a compelling business case can be prepared to justify the purchase and integration of a software delivery platform for provisioning a publisher's digital products.

Digital technologies open the way for many more competitors to enter publishing, threatening existing companies and potentially damaging margins across the industry.

Innovation in the publishing industry has been incremental rather than radical or disrupting and tends to be supplier led.

Book project do or die authority is in the hands of a few select retails chains and book stores.

30-40% of Amazon book sales are in books that would not normally be found in a bricks and mortar store.

The internet has huge potential to target special interest segments; either directed by online marketing or distributed digital content.

67% of travel purchases first become aware of travel promotions via the internet.

Travel, financial services and consumer packaged goods are amongst the biggest sectors using online advertising volume in 2004.

Rising competition for readership from online media with similar demographic profile.

Many publishers believe success is linked to the quality of the tactile experience of a reader holding an appealing work in their hands, looking at pictures, and reading attractively presented text.

The book is still the primary income of most traditional publishers.

The importance of conducting a strategic information systems plan is to develop architecture roadmaps that show how the organisation can control its own destiny in a digital age.

The key element in designing a solutions architecture is to identify the core operational support systems necessary to provision all digital services. A blueprint that can be incrementally extended by adding components that allow content to be supplied to different target devices in the appropriate format, from a single source.

Solution Architecture Blueprint

The business case and system portfolio investment plan can be further tested against various business scenarios to ensure the strategy will succeed in all business environments. Scenario based strategic planning will help plan a staged investment that mitigates the risk of betting the bank on a single strategy.

The question is whether you want to lead your own destiny or allow the Googles or Amazons of the world to aggregate publishing industry content, so they can leverage a digital retail stranglehold between the publishing industry and their customers.

References

  1. Brynjolfsson E, Hu Y & Simester D (2006) From Niches to Riches: Anatomy of the Long Tail. SMR, Vol. 47, No. 4, pp. 67-71.
  2. Covey, S.R. (1999) The 7 Habits of Highly Effective People. London: Simon & Schuster Inc.
  3. Doublclick, The Internet's Role in the Modern Purchase Process (July 2005).
  4. Ellis, S. & Cook, P. (2003) Introduction to Organisational Behavour. Second Edition London: McGraw Hill
  5. European Commission (2005) Special issues paper 3: Innovation. Publishing Market Watch.
  6. Have S ten etal Key Management Models. Great Britain: Pearson Education, 2003.
  7. Porter, M.E. (1985) Competitive Advantage. New York: The Free Press.

For further information about business analysis best practice and our consulting services visit our website; www.designerdata.com.au

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Stephan Streitberger - Stephan Streitberger is Managing Director of designer DATA, he is a business strategist and specialises in facilitating cross functional system solutions. designer DATA offers business planning, workshop facilitation, information systems planning, business analysis, data management and corporate information systems design services.