Developing Strategic Plan, Business Strategy and Their Impact to IS/IT Strategy Development

By: Yudha SaintikaFaculty of Industry and Information Technology

Telkom Institute of Technology Purwokerto, October 2018

Review of Previous Session

The changing roles of IS/IT from support to enabler

The strategic context of Information systems

IS/IT plan in the Indonesian context, where are we?

Today’s Session Objectives

Understand how to formulate strategicplan

Understand how to formulate business strategy

Understand how to formulate business objectives

Agenda

I. What is Strategic Planning?II. Strategic Planning ModelIII. Strategic Planning and Business

StrategyIV. Technique to Develop Business

Strategy: Competitive Forces in Industry (Porter, 1980)

V. Generic Competitive Strategy

I. What is Strategic Planning(source: Matt H. Evans, matt@exinfm.com)

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)

II. Strategic Planning Model A B C D E

• Environmental Scan

Assessment

• Background

Information

• Situational Analysis

• SWOT – Strength’s,

Weaknesses,

Opportunities, Threats

• Situation – Past,

Present and Future

• Significant Issues

• Align / Fit with

Capabilities

• Mission & Vision

• Values / Guiding

Principles

• Major Goals

• Specific Objectives

• Performance

Measurement

• Targets / Standards of

Performance

• Initiatives and

Projects

Baseline Components

• Performance

Management

• Review Progress –

Balanced Scorecard

• Take Corrective

Actions

Down to

Specifics

Evaluate

Where we are Where we want to be How we will do it How are we doing

• Gaps • Action Plans • Feedback upstream –

revise plans

Pay attention to each step and analyze activities, techniques,

etc used in each step

Assessment Model:S W O T Assessment

External Assessment: Marketplace,

competitor’s, social trends, technology,

regulatory environment, economic cycles .

Internal Assessment: Organizational

assets, resources, people, culture,

systems, partnerships, suppliers, . . .

• Easy to Understand

• Apply at any

organizational level

• Needs to be

Analytical and

Specific

• Be honest about your

weaknesses

Good Points Possible Pitfalls

SWOT SWOT

Apa yang bisa dihasilkan dari analisis SWOT

Why create a baseline?

Baseline

Puts everything about the organization into a

single context for comparability and planning

Descriptive about the company as well as the

overall environment

Include information about relationships –

customers, suppliers, partners, . . .

Preferred format is the Organizational

Profile

-Indonesia e-Government Master Plan- 10

Peringkat e-Government Indonesia

Peringkat e-Gov Indonesia berada di urutan ke-109 dari 167 negara. Dibandingkan dengan negara tetangga (seperti : Malaysia, Brunei, Thailan, Filipina), Indonesia masih tertinggal jauh.

-Indonesia e-Government Master Plan- 11

Pem

erin

gkat

an e

-Gov

ber

das

arkan

kem

ente

rian

Organizational Profile1. Operating Environment

Baseline

Products and Services – Suppliers, Delivery

Channels, Contracts, Arrangements, . . .

Organizational Culture – Barriers, Leadership,

Communication, Cohesiveness . . . .

Workforce Productivity – Skill levels, diversity,

contractor’s, aging workforce, . . .

Infrastructure – Systems, technology, facilities, . .

Regulatory – Product / Service Regulation, ISO

Quality Standards, Safety, Environmental, . .

Organizational Profile2. Business Relationships

Baseline

Organizational Structure – Business Units,

Functions, Board, Management Layers, . . .

Customer Relationships – Requirements,

Satisfaction, Loyalty, Expectations, . . .

Value Chain – Relationship between everyone

in the value chain . . . .

Partner Relationships – Alliances, long-term

suppliers, customer partnerships, . . .

Organizational Profile3. Key Performance Categories

Baseline

Customer

Products and Services

Financial

Human Capital

Operational

External (Regulatory Compliance, Social

Responsibility, . . . )

Gap AnalysisBaseline

Baseline / Org Profile Challenges / SWOT

Gap = Basis for Long-

Term Strategic Plan

Major Components of theStrategic Plan / Down to Action

Components

Mission

Vision

Goals

Objectives

Measures

Why we exist

What we want to be

Indicators and

Monitors of success

Desired level of

performance and

timelines

Planned Actions to

Achieve Objectives

O1 O2

AI1 AI2 AI3

M1 M2 M3

T1 T1 T1

Specific outcomes expressed in

measurable terms (NOT activities)

Strategic Plan

Action Plans

Evaluate Progress

Targets

Initiatives

What we must achieve to be successful

Mission Statement

Components

Captures the essence of why the organization

exists – Who we are, what we do

Explains the basic needs that you fulfill

Expresses the core values of the organization

Should be brief and to the point

Easy to understand

If possible, try to convey the unique nature of

your organization and the role it plays that

differentiates it from others

Examples – Good and BadMission Statements

Components

To Make People Happy

To Explore the

Universe and Search

for Life and to

Inspire the Next

Generation of

Explorers

NASA

Walt Disney

Does a good job of expressing the core

values of the organization. Also conveys

unique qualities about the organization.

Too vague and unclear. Need more

descriptive information about what makes

the organization special.

Vision

Components

How the organization wants to be perceived

in the future – what success looks like

An expression of the desired end state

Challenges everyone to reach for something

significant – inspires a compelling future

Provides a long-term focus for the entire

organization

GoalsComponents

Describes a future end-state – desired outcome

that is supportive of the mission and vision.

Shapes the way ahead in actionable terms.

Best applied where there are clear choices about

the future.

Puts strategic focus into the organization – specific

ownership of the goal should be assigned to

someone within the organization.

May not work well where things are changing fast

– goals tend to be long-term for environments that

have limited choices about the future.

Developing GoalsComponents

Cascade from the top of the Strategic Plan –

Mission, Vision, Guiding Principles.

Look at your strategic analysis – SWOT,

Environmental Scan, Past Performance, Gaps . .

Limit to a critical few – such as five to eight goals.

Broad participation in the development of goals:

Consensus from above – buy-in at the execution

level.

Should drive higher levels of performance

and close a critical performance gap.

Examples of GoalsComponents

Reorganize the entire organization for better responsiveness to customers

We will partner with other businesses, industry leaders, and government agencies in

order to better meet the needs of stakeholders across the entire value stream.

Manage our resources with fiscal responsibility and efficiency through a single

comprehensive process that is aligned to our strategic plan.

Improve the quality and accuracy of service support information provided to our

internal customers.

Establish a means by which our decision making process is market and customer

focus.

Maintain and enhance the physical conditions of our public facilities.

Objectives

Relevant - directly supports the goal Compels the organization into

action Specific enough so we can quantify

and measure the results Simple and easy to understand Realistic and attainable Conveys responsibility and

ownership Acceptable to those who must

execute May need several objectives to meet

a goal

Components

Goals vs. Objectives

GOALS OBJECTIVES

Very short statement, few

words

Longer statement, more

descriptive

Broad in scope Narrow in scope

Directly relates to the

Mission Statement

Indirectly relates to the Mission

Statement

Covers long time period

(such as 10 years)

Covers short time period (such 1

year budget cycle)

Components

Examples of Objectives

Develop a customer intelligence database system to capture and analyze patterns in

purchasing behavior across our product line.

Launch at least three value stream pilot projects to kick-off our transformation to a

leaner organization.

Centralize the procurement process for improvements in enterprise-wide purchasing

power.

Consolidate payable processing through a P-Card System over the next two years.

Monitor and address employee morale issues through an annual employee satisfaction

survey across all business functions.

Components

What are Action Plans?

Objectives

Initiatives

Action

Plans

The Action Plan identifies the specific steps that will be taken to achieve

the initiatives and strategic objectives – where the rubber meets the road

Each Initiative has a supporting Action Plan(s) attached to it

Action Plans are geared toward operations, procedures, and processes

They describe who does what, when it will be completed, and how the

organization knows when steps are completed

Like Initiatives, Action Plans require the monitoring of progress on

Objectives, for which measures are needed

Down to

Specifics

-Indonesia e-Government Master Plan- 28

Visi

Aksi

Integrity – Complete; useful; inclusive of several types of

measure; designed to measure the most important activities

of the organization

Reliable: Consistent

Accurate - Correct

Timely – Available when needed: designed to use and report

data in a usable timeframe

Confidential and Secure: Free from inappropriate release or

attack

Criteria for Good MeasuresDown to

Specifics

Examples of MeasurementsLead Indicators Average time to initiate customer

contact => shorter time should lead to better customer service

Average response time to incident => below average response times should lead to increased effectiveness in dealing with incident

Facilities that meet facility quality A1 rating => should lead to improved operational readiness for meeting customer needs

Down to

Specifics

Targets

For each measurement, you should have at least one target

Targets should stretch the organization to higher levels of performance

Incremental improvements over current performance can be used to establish your targets

Targets put focus on your strategy When you reach your targets, you

have successfully executed your strategy

Down to

Specifics

Examples of TargetsAverage Time to Process New

Employee Setups in DB

65 days Year

2007

60 days Year

2008

55 days Year

2009

Utilization Rate for Rental

Housing Units

90% for

Year 2007

92% for

Year 2008

95% for

Year 2009

Toxic Sites meeting in-service

compliance

55% for

Year 2007

70% for

Year 2008

95% for

Year 2009

Personnel Fully Trained in

Safety and Emergency

65% by 2rd

Quarter

75% by 3th

Quarter

90% by 4th

Quarter

Open Positions Filled after 30

day promotion period

75 positions

Sept 2007

100

positions

Jan 2008

135

positions

July 2008

% Reduction in Orders Filled

Short in 1st Cycle

50% by Year

2008

65% by Year

2009

85% by

Year 2010

Down to

Specifics

Strategic Framework for Strategic Planning

External Environments Economic Political Ecological

Technological Social Legal

Customers

Suppliers

Shareholders

Employees

Unions

Government

Public

Stake

Holder

Pressure

GroupsCompetitors

Customers

Suppliers

Shareholders

Employees

Unions

Public

Media

Financial Ins.

Values

Objectives Identify current Identify future Threats and

strategies strategies opportunities

Evaluate Analyze Evaluate

feedback internal strategies

resources

Monitor Implement Select

Strategies Strategies Strategies

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

power of

suppliers

Rivalry among

existing

competitors

Threat of

substitute

product

Bargaining

power of

buyers

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

Differen-

tiation

Competitive

Advantage

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?

Business strategy imply IS/IT strategy?