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1)Discuss the four critical success factors for developing IT strategy.2)linking IT to business metrics.Discuss the key business metrics for IT.
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Chapter 2
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2-1
New technologies
co-evolve with new
business strategies
and changes to the
business
environment.
IT and business
strategies must be
complimentary.
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2-2
Historical View – IT strategy should
support the business strategy.
IT’s contribution was inhibited by a limited
understanding of the business strategy.
IT’s contribution was inhibited by a limited
understanding of IT’s potential by the
business managers.
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Current View – IT strategy should be
integrated with the business strategy.
IT must be positioned for flexibility, speed
and innovation to support rapidly
changing business environment.
Technology investments should
compliment business strategy.
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Future View – IT strategy must become
more dynamic and focus on developing
strategic capabilities that support a variety
of changing business objectives.
IT and business alignment will not be
point-in-time planning; it will support
evolutionary change.
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1.
Revisit your business model.
2.
Have strategic themes.
3.
Get the right people involved.
4.
Work in partnership with the business.
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A business model explains how the
different pieces of the business fit
together.
The business model should be clear and
describe the unique value that the
organization can deliver.
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IT strategy is about carefully crafted
programs that focus on developing
specific business capabilities.
IT and business programs that are
grouped in strategic themes are easier to
track and support interdependencies.
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Senior management should take an active
role in IT decision making.
Key stakeholders should be involved in
determining technology opportunities.
Some companies have accomplished this
through account manager positions.
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Business and IT must both have input into
the strategy.
IT projects should be synchronized with
business objectives.
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Business Improvement – stress
relatively low-risk investments with shortto medium-term payback. Focus is on
streamlining business processes.
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Business Enabling – transforms or
extends how a company does business.
–Typically focused on revenue growth.
— Cost-benefit is usually not as
clearly established.
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Business Opportunities – small-scale
experimental initiatives designed to test
the viability of new concepts or
technologies. High risk projects that
typically do not have well-defined,
expected returns. These typically have a
much lower success rate so funding is
sometimes difficult to obtain.
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Opportunity Leverage – leverages
successful experiments or prototypes.
Technology is easy to imitate; some
initiatives may leverage the results of
other companies.
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Infrastructure – Operating level
hardware and software must be
maintained. Typically not well understood
by business managers.
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Rolling Planning and Budget Cycles –
plans and budgets should be updated
more than once per year.
An Enterprise Architecture – consisting
of an integrated business and IT
blueprint. It should assist in identifying
duplicate solutions.
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Different Funding Buckets – allocate
funding for all five types of IT projects.
Account or Relationship Managers –
IT account managers to identify synergies
and interdependencies among lines of
business and opportunities for technology
to improve the business.
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A Prioritization Rubric – Adopt multiple
approaches to justify project funding
decisions to account for the differences in
return on IT investment.
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A governance structure for enterpisewide
projects
Enterprisewide funding models
Parallel and linked resources for
developing IT and business strategies
Traditional budget cycles
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2-19
Balancing strategic and tactical initiatives
Skills in strategizing
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IT strategy is gaining attention by
businesses.
Most organizations are still at the early
stages of integrating IT strategy with
business strategy.
Balancing IT solutions with business
strategy will position organizations to
respond to rapidly changing business
environments.
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Chapter 3
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3-1
The Goal of IT Metrics are to
demonstrate that what a company
spends on IT has a DIRECT IMPACT
on the performance of the firm.
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“Peel the Onion” – attempt to show
how IT adds value on a project-by-project
basis.
“Put the Onion Back Together” –
employees who truly understand what
their business is trying to achieve can
sense the right ways to personally
improve performance that will show up at
a business unit and organizational level.
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The key to linking IT to business
performance is to create an
environment where everyone
understands what measures are
important to the business and are
accountable for them.
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Enterprise Measures – Tie the work of
IT directly to the performance of the
organization (e.g., external customer
satisfaction, corporate financial
performance).
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Functional Measures – Assess the
internal work of the IT organization as a
whole (e.g., IT employee satisfaction,
internal customer satisfaction, operational
performance, development productivity).
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Project Measures – Assess the
performance of a particular project team
in delivering specific value to the
organization (e.g., business case benefits,
delivery on time).
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Balanced Scorecard – Uses measures
from four dimensions (Customer
perspective, Financial perspective,
Internal Operations perspective, and
Learning & Growth perspective). Each
metric measures progress against the
enterprise business plan. IT is treated as
a separate business unit with its own
scorecard.
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Source: Balanced Scorecard Institute, www.balancedscorecard.org
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Shareholder Value
(financial)
Expense Management
(financial)
Customer/Client Focus
(customer)
Customer Loyalty
(customer)
Customercentric
organization (customer)
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Effectiveness and
Efficiency of Business
Operations (operations)
Risk Management
(operations)
Contribution to Firmwide
Priorities and Business
Initiatives (growth)
3-11
Modified Scorecard – Five key metrics
that are linked to the company’s vision
statement. Complimented by IT specific
metrics. Results are communicated on a
quarterly basis. This approach orients the
employees to the company mission and
vision.
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3-12
Customer Loyalty Index – the percent
of customers who said they were very
satisfied with the company and would
recommend it to others.
Associate Loyalty Index – employees’
perception of the company as a great
place to work.
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3-13
Revenue Growth – the percentage of this
year’s total revenues with last year’s total
revenues.
Operating Margin – the operating income
earned before interest and taxes for every
dollar of revenue.
Return on Capital Employed – earnings
before interest and tax divided by the
capital used to generate the earnings.
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Strategic Imperatives – company
identifies a number of strategic
imperatives each year. Each area of the
business identifies initiatives that support
these imperatives and determines which
metrics to use. IT identifies key projects
and measures that will help the business
achieve these imperatives.
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3-15
Strategic imperatives Initiatives are integrated into Variable Pay
Program.
Variable Pay Program links a percentage
of an individual’s pay to business results
and overall business unit performance.
Metrics can change from year to year.
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Figure 3.1 Percentage weightings assigned to IT Variable Pay Components for a Particular Year
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Focus on Overall Business
Performance – focus employees on
financial and nonfinancial enterprise
performance.
Understanding is a Critical Success
Factor – ensure employees understand
their objectives and how they tie to
company performance.
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Simplicity – metrics should be simple
and easy to use.
Visibility – encourages employee buy-in
and accountability.
Links to Incentive Systems –
distinguish between fair compensation for
the individual and reward for successfully
achieving corporate goals.
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Results will take time.
Have common goals.
Follow-up on problem areas.
Be careful what you measure.
Don’t use measurement as a method of
control.
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3-20
There are significant benefits to be
realized by holding IT accountable for key
business metrics.
Business performance will become part of
the mindset of IT staff if the business
measurement program is properly
defined.
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5 Pearson Education, Inc.. Publishing as Prentice Hall
3-21

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