University of Oregon Applied Information Management Program. Information Systems and Management Fall 2015 Week 3 Lecture 1 Business Objectives

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1 University of Oregon Applied Information Management Program Information Systems and Management Fall 2015 Week 3 Lecture 1 Business Objectives Slide # Slide Text Audio Transcript 1 AIM 668. Week 3. Lecture 1. Business Objectives. Information Systems and Management Week 3 Lecture 1 Business Objectives 2 Business Objective. A business objective is a statement that specifies a practical course of conduct. Different from a strategy in that it is actionable. IT objectives build off of business objectives and are never developed independently. This lecture deals with business objectives and the IT objectives that support those IT objectives that support those business objectives. This originally comes from a text called the New CIO Leader where they call them business and IT maxims but I have taken this a little bit further for this course and put more into it so that we can understand how to derive or how to come up with business and IT objectives. A company may have a hundred things that they want to do but obviously they cannot do all of them so they need to prioritize them and get those down to maybe five or ten basic things that they want to do or directions that they want to go in. You can see here that a business objective really is a statement that specifies a practical course of conduct. You can only do so many because you do not want to stretch your resources too thin. A business object is different from a vision that we have already talked about or a strategy in that an objective is actionable. That is why you have only got a finite number because you can only have so many that are actionable. You only have a finite amount of resources to be able to work on these. Later in this lecture I will talk about IT objectives and IT objectives build off of business objectives and are never built independently. 3 Business Objective Questions. What business are we in? When developing business objectives it is often good to ask questions about the business that you are in. First and foremost, what business are we in? This may seem straightforward but not always. I am reading a book right now by Howard Schulz

2 What is our business model? What is our business vision? Where do we want to go? What state is our business in:! Struggling?! Remaining Competitive?! Breaking Out? called Onward. Howard Schulz is one of the early CEO s of Starbucks Coffee. He stepped up to chairman of the board and in 2007 he had to step back into the role of CEO but at that time he started to ask himself What business are we in?. To you and I that may seem like an absurd question, they are obviously in the business of coffee, but they had branched out into movie production and music production and to go along with the coffee they had started to make breakfast sandwiches. He asked himself Have we really go too far afield from our core passion which is coffee?. He started asking himself what business are we in?. Your business may be experiencing the same issues. What is our business model? How do we sell our product? Do we sell it online or in brick and mortar stores or through service representatives? How do we sell our product or service? What is our business model? What is our business vision? Where do we want to go from here. If we are local do we want to expand and go national or international? Do we want to stay about the way we are? Do we want to serve more customers, fewer customers? Do we want to expand our offering of products, have fewer products? Where do we want to go with our business vision? What state is our business in? We talked about this in an earlier slide. Are we struggling right now and do we want to change that? Are we remaining competitive and are we happy with that or do we want to break out from our competition and go further and do greater things. 4 Six Categories of Business Objectives. Cost focus. Value differentiation as perceived by customer. Flexibility and agility. Growth. Human resources. Management orientation. Here are six categories of potential business objectives. As we go through these I would like you to keep in mind, how can IT benefit or further these business objectives in these categories. Cost Focus pricing products and services potentially at a lower cost. Driving economies of scale driving the cost of goods sold down through shared best practices. This is something that IT can help with. Value differentiation how can you meet the client s expectations for quality at a reasonable cost? How can you make the customers product selection as easy as possible? If you offer a service as opposed a product, how can you make that service more available. How can you provide information needed to service any client from any service point. This is definitely something that IT can help with if there is a sales

3 organization. Flexibility and agility can you grow in cross selling capabilities? Can you develop new products and services rapidly? Can you create a capacity to manufacture in any location for a particular order? This is flexibility in manufacturing. Think about how IT can benefit that. Growth can you expand aggressively into underdeveloped or emerging markets? Can you grow internationally if you have such a product or service that would fit into that market. Can you target growth through specific product and customer niches. Is there something that you are not meeting right now. IT can help in all those areas. Human Resources taking care of your own people. Can you create an environment that maximizes intellectual productivity. Maintaining a high level of professional and technical expertise. Identifying and facilitating the movement of talented people. These are all things that IT can help with in terms of applications and infrastructure. Finally, management orientation maximizing independence in local operations. You have local stores or businesses. How can each of those operate independently? Create a management culture of information sharing. This is a big area where IT can benefit the business. 5 Limiting and Prioritizing Objectives. Business objectives must be limited to six to eight. Business must prioritize objectives based on their value to the business. IT can then develop IT objectives based on the prioritized list. It simplifies funding conversation if all IT projects can be linked to a prioritized set of business objectives. Finally, in terms of business objectives, the business needs to limit and prioritize those business objectives so that when they come to IT they have the final list of what they are supposed to be working on. They are not chasing everywhere trying to do every little project. They need to know, these are the projects that are funded and these are the projects we are going to work on. Ideally, if a business can come to IT with no more than six to eight business objectives that are prioritized based on their value to the business. You have probably been in the scenario where IT is working on a hundred different things and get stretched way too thin and can t finish projects and are running all over the place. This is a way to partner with the business to say that these are most important and these are the most value to our business. Once we understand what those business objectives are then IT can develop IT objectives based on that prioritized list. We will go over some specific examples in a couple of slides. It simplifies the funding conversation if all IT projects can be linked to a prioritized list of business objectives. This includes even

4 infrastructure or maintenance projects. If you can link that back to something that is needed or wanted by the business, it simplifies the conversation when it comes to funding. 6 IT Objectives. IT objectives build off of prioritized business objectives. IT objectives show how IT will build the capabilities needed to fulfill the business objectives. IT objectives must be aligned with the business strategy (i.e., IT as a percentage of revenue <=3%). I want to switch gears here and talk about IT objectives. At the risk of sounding redundant, I will say it again: IT objectives need to be built off of prioritized business objectives, just as we talked about in the last slide. IT objectives really show how IT will build the capabilities needed to fulfill those business objectives. Again, it all ties back to those business objectives. For example, there may be a business objective that says that we want to keep IT spend as a percentage of revenue for example at less than or equal to 3%. Depending on the industry, I have seen the goal as little as 1%. As an IT department, you definitely have a hand in how you can fulfill that business objective. That is just one example of a business objective. Let me just go through quickly some examples of IT objectives. For example, are you going to lead or follow in the deployment of IT in your industry? That is one of the decision that you need to make and how is that going to tie back to a business objective. Processing of transactions if you have a business objective that they want to increase transaction processing or increase customer flow, the IT objective would be to increase transactions or processing of transactions. Connecting and sharing data sources, information, and systems across your extended network. Include customers, suppliers, and regulators for example. How can you as IT work on that? Connecting and sharing data sources across the firm. You may be in a company that has gone through several mergers and acquisitions and there are silos in the company. How do you get information to those new members of your company. Maintaining common IT architectures you may be in a situation where you are dealing with multiple IT architectures which is costing the company money. In order to save money, you can land on one or a small set of IT architectures. These includes policies and standards as well. That is one way that IT can help save money in the business. Access use and standardize different types of data such as financial or customer data or product data. This could fill any number of business objectives. How can different constituents, whether it be

5 employees or customers or suppliers, access the data that they need. 7 Five Major Areas of IT Objectives. The role of IT. IT architecture and standards. Information and data. Communications. IT assets. Here are some areas to explore in terms of IT objectives. Think about the role of IT in your organization. Is IT there really just to keep the lights on or are they seen as more strategic. What are the expectations for IT investments in the enterprise. Then, there are IT architectures and standards. This really goes along the level of enforcement of IT architectural guidelines and the standards that flow from those guidelines. How strict or how much do you adhere to architectural standards. Think of an area such as PC s. Do you allow only one or two PC models to be used in your organization? This helps in keeping a limited number of images and is an example of architecture. Information and data think about the information that flows through IT. Can you enhance that? Are there areas that you can clean it up? If there are multiple silos of information, can you consolidate those? In terms of communications, what are the extent of the communication capabilities and services that your IT organization offers. How does that benefit the business and how does that benefit the business objectives? Finally, IT assets what kind of IT assets do you hold? Do you outsource a lot of activities or do you hold everything in house? How are those assets made available to the business? 8 Examples of Business and IT Objectives.!! Service the client from any service point.!! Drive economies of scale through shared business practice.!! Customer service representatives must have access to a complete file of each customer s relationship with the firm.!! We enforce These next three slides are examples of business objectives and their corresponding IT objectives. This will give you a feel for some areas where you can develop your own objectives. For example, service a client from any service point. This could be salespeople trying to get information for customers from their smartphone. Can they access that information? Or can the helpdesk easily access historical customer information when assisting that customer? From either of these areas, is there an opportunity to upsell a customer by knowing their customer history and suggesting other products or services that they may want to purchase. The corresponding IT objective to this might be that customer service representatives have access to customer information from any system or device. Based on this IT objective, what capabilities or technologies do we need to have that we do not possess

6 standards of hardware and software selection to reduce costs and streamline resource requirements. already. Another example of a business objective is to drive economies of scale through shared business practices. From an IT perspective we enforce standards of hardware and software selection in order to reduce costs and streamline resource requirements. This is a specific way that IT can help meet that particular business objective. 9 Examples of Business and IT Objectives (cont.).!! Be able to detect and respond to subtle shifts in the marketplace.!! We have a management culture of information sharing to generate new business.!! Centrally coordinated information flow should allow all parts of the firm to more easily and quickly spot trends and use these to the firms advantage.!! The usefulness of data must be recognized beyond the area immediately responsible for its capture. Some more examples of business and IT objectives. For example, a business might say, we want to concentrate on being able to detect and respond to shifts in the marketplace, no matter how subtle. An IT response or an IT objective might be that we will have centrally coordinated information flows throughout all parts of the organization and we will guarantee data integrity so that everyone is looking at the most up to date information and the most accurate information. As an IT person, you can start to think about what applications and infrastructure you need if you don t have it already. Another example of a business objective is we have a management culture of information sharing to generate new business. In other words, no information silos which often happens in business today. The IT response or the IT objective would be that we will have datamarts, data warehouses and databases and they will all be coordinated so that everyone can share information back and forth and they will have interfaces or appropriate interfaces that will allow them to easily share information with each other. 10 Examples of Business and IT Objectives (cont.). Finally, one last example of a business and IT objective. The business objective might be to be able to develop resources for new products

7 ! Be able to develop resources for new products quickly and judiciously. New systems must provide a foundation on which products and services can be added without major modifications. quickly. In the past you may have had problems with it being slow, not being coordinated and not having the right resources. Being able to develop these quickly. The IT response or the IT objective to this might be to make sure that any new systems that come on line provide a foundation for which new products and services can easily be coordinated and can easily be rolled out. 11 A CIO Should Be Able To Lead. Know the fundamentals of the enterprise. Create a vision for both the company/enterprise and also for the IT organization.! What are our current capabilities?! What does the future look like? Shape expectations for IT use through IT objectives. Finally, let me bring this all back around to leadership. These are some of the things that a good CIO or a good IT leader needs to be able to do. First and foremost, they need to be able to lead. Whether this is ingrained in them already or if they need to learn it somewhere along to way, they really need to be able to lead. This is the same for the head of any organization in the business, whether it be marketing or finance or supply chain, they all need to be able to lead first and foremost. Then, an IT leader needs to understand the fundamentals of the business or the enterprise. They need to know the lay of the land. They need to know what business they are in and where they are going. They need to be able create a vision, particularly for the IT organization but also to help to create a vision for the business overall. They bring to bear the mindset of what are our current capabilities?. If we are going somewhere in the business that the IT organization cannot take them we either need to change the IT organization or need to change the expectation of the business. We need to help the IT organization understand what the future looks like. A good leader is able to do this. Finally, a good IT leader needs to be able to shape expectations of IT through the use of IT objectives. This goes right back to our assignment for this week of marrying up those IT objectives with the business objectives. We need to understand how we can bring these business objectives to bear.

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