IT and Strategic Planning and Control

ACCA P5 Advance Performance Management

The role of IT in strategy planning and control:

Rapid innovation in information and technology sector has changed the way of operation of businesses. Every process/functional area within organisation has integrated technology and information systems. However, the impact of information technology to all functions (Check the example table of Porters Value Chain from the article) is not even. Inappropriate use of IT could harm a company’s prospect. E.g. there is little point in automating production if what your customers cherish are hand-made, individualized products. This triggers the need to understand the role of IT in business strategy.

IT and Value Chain Analysis:

IT and SWOT analysis: Understanding possible present and future impact of IT in the business helps addressing needs when defining business strategy. IT is key resource for many of present day organisations and proper management creates competitive advantage for the businesses. Therefore, organisations should identify their internal position (strength and weakness) in integrated IT system and the possible changes that they may face (opportunity and threats) because of changes in IT. There is threshold requirement of IT for every business to keep running or to enter into the business. The threshold keeps changing as IT system advances with time. Therefore, organisation should have a peer review of system changes from time to time.

IT and Porter’s Five Forces:

IT and Porter’s Generic Strategy:

6I’s of business:

Ø  Intelligence- track all activities of customer

Ø  Individualisation – opportunity of online access individually to goods and services

Ø  Interactivity – assist detailed comparison of products

Ø  Integration – easy add marketing and promotional messages

Ø  Independence – possibility to reach customers from any location

Ø  Industry –  change brought to every industrial sector

The criticality of IT – McFarlan’s Grid illustrates current and future dependence on information system

	Strategic impact of future systems
Strategic impact of current system		Low	High
	Low	Support Application that improve management and performance but are not critical to the business	Turnaround Applications that may be of future strategic importance
	High	Factory Applications that are critical to sustaining existing business	Strategic Application that are critical for future success

ACCA Article: The strategic use of IT

Business Process Change

ACCA P5 Advance Performance Management

Levels of process:

There are three levels at which a process perspective can be used to analyse a business:

Strategic level – looking at the business, or its supply chain, as a whole

Operational functions of the business – for example, looking at purchasing, marketing, or manufacturing operations

Sub-operational processes – looking at individual processes within the operation’s functions; for example, placing television advertising within the marketing operation

Business Process Redesign: Redesign focus on simplifying process (increases flexibility and reduces time), cost effectiveness and quality improvement with utilizing the concept of business integration, lean management and benchmarking (best practice). Best practices are used in redesigning process under the umbrella of diverse management approaches such as Total Cycle Time compression, Lean Enterprise and Constraints Management. Implementation of redesigned process imposes socio-cultural challenge to an organisation.

Refer to the link for a comprehensive table of:

Survey of best practices in business process redesign – From page3

Business Process Reengineering: Reengineering means viewing things from a different perspective (ie. Reinventing the wheel/process).

Synopsis from the article “Business Process Re-engineering”

BPR promised a novel approach to corporate change, and was described by its inventors as a “fundamental rethinking and radical redesign of business processes to achieve dramatic improvements in critical measures of performance such as cost, quality, service and speed”.

The technique involved analyzing a company's central processes and reassembling them in a more efficient fashion and in a way that rode roughshod over long-established (but frequently irrelevant) functional distinctions. Functional silos were often protective of information, for instance, and of their own position in the scheme of things. At best, this was inefficient. Slicing the silos into their different processes and re-assembling them in a less vertical fashion exposed excess fat and forced corporations to look at new ways to streamline themselves.

Best practices in business process redesign: an overview and qualitative evaluation of successful redesign heuristics

Business Process Re-engineering

ACCA Article: Business Process Change

Business Integration

ACCA P5 Advance Performance Management

Distinguish:

Business Activity: Single task – E.g. Raising purchase requisition, receiving order

Business Process: Series of tasks which turns input into output – Purchase of materials (Includes activities from raising purchase requisition to receiving order and settlement of payment)

Business Function: Set of similar tasks – Procurement function (Includes purchase of raw materials, machinery, vehicles, land and buildings.

Integration: the act or process of combining two or more things so that they work together. Oxford Dictionary

Integration is the need of changing environment and growth of organisation. Simply, business integration is not a new practice. The invention of electricity, plastic, chemicals and information technology and its integration into business has changed the way of operation of business.

Activity integration – E.g. integration of technology into calculation (i.e. using calculators which replaces manual calculation) Use of new tools like electric saw which replace handsaw,

Process integration – E.g. introduction of new automated processing line which replaces old practice

Functional integration – E.g. integration of information technology into supply chain

Business integration – E.g. E-business

Synopsys from the article:

Process integration:

A business process consists of related sets of activities that are performed by human and software actors according to business rules that may be more or less stringently applied. The connection between the software and human agents that perform a process is well integrated or coordinated when the process is efficient, accurate, and appropriate to the task at hand from a mechanistic, human, and organizational viewpoint. Moreover, the process goals must align with those of the organization as a whole. This is called within-process integration

Processes often cross departmental boundaries and can therefore provide a coordination mechanism in the organization layer as discussed below. This is called cross-functional coordination. Processes must also be integrated / coordinated with each other. For example, the order entry process needs to be integrated with accounts receivable and with the back end processes that produce the product or service desired by the customer. This form of integration is called internal process-to-process integration.

Finally, e-business demands that the internal processes of the firm be integrated with those of its trading partners and customers. External process integration means that the organization is able to connect its internal processes seamlessly with those of its suppliers, intermediaries, and customers. This is the basis of e-commerce.

Intra Enterprise Integration

Business Structure Part2

ACCA P5 Advance Performance Management

Business Structure: Business Structure means positioning of human resource (i.e. the employee) that controls and makes use of other resources of business. Positioning of manpower depends on the size, type, activity, nature and strategy of business. Thus, business structure formally outlines strategic, tactical and operating styles of business.

From CIMA Article (Inter-relationship between strategy and structure)
It has often been written that structure follows strategy. Given the need to change strategy regularly it follows that the structure of organisations should also be under constant review.

For understanding different types of organisational structures (Functional, Divisional and Matrix) their strength and weakness visit the link provided for CIMA Article.

Organisational Culture

Ø  Power culture: Arrogant bossy director or Board with splitting role of CEO and Chair

Ø  Role culture: Seniority or Equality and freedom as in W. L. Gore and Associate

Ø  Task culture: Focus on getting work done

Ø  Person culture:

The Cultural Web:

Cultural web	Example	Schein
Symbols and titles	How people dress and how they are addressed	Artifacts: Current practice – influences on culture
Power relations	Autocratic or participative
Organisational structure	Tall-narrow or wide flat
Control systems	Highly centralized or decentralized
Rituals and routines	Regular start of week meeting	Espouse values : Believe over a period of time – focus strategic, goal of organisation
Myths and stories	Story about how organisation tackle challenges and conflicting situations
Organisational assumption (Paradigm)	Organisational existence to fulfill stakeholders objectives	Basic assumptions and values – taken for granted

Changing the paradigm: As business grows the strategy and structure and culture that fostered over the period demands paradigm shift. E.g. As a small entrepreneur grows to functional structure, the title of employee, power distribution, control mechanism, routines changes in line with stakeholders objectives. Or a shift of production organisation (machine bureaucratic) to service organisation (professional bureaucratic) needs adjustable paradigm shift.

ACCA Article: Accounting and organisational cultures

CIMA Article: Organisational Structures An Explanation

ACCA Article: Culture and Configuration