Summary and Outcome Checklist
This topic has introduced and explored the concepts of using Information Technology as a strategic tool and the 3-era model of IT.
It provides a basis for considering and determining the appropriate level of IT systems requirements in an organisation. It has also introduced the concept of Strategic Information Systems (SIS) as a powerful tool in contemporary commercial/industrial organisations.
Tick the box for each statement with which you agree:
I can
Identify, list and discuss the functions performed by IT in a modern organisation.
Identify and discuss the key benefits that IT can offer organisation
Identify, list and describe the key characteristics of IT applications as identified in the 3-era model.
Identify, analyse and differentiate the various mechanisms that characterise effective IT systems in an organisational context.
If you can not tick all of the above, you need to revise the relevant sections and/or contact your tutor for clarification.
Topic 6: Strategic Planning as a Management Tool in Industry
Introduction to the Topic
The generalised constructs of strategic planning and strategic management have been progressively developed over the past 40 years, primarily to provide corporate organisations with effective planning and management tools, focused on achieving and maintaining competitive advantage. This topic explores the background to strategic planning and the development of strategic management approaches.
Learning Outcomes
Upon successful completion of this topic you will be able to:
Identify and explain the background to the development of strategic planning concepts and the key driving influences on the continuing evolution of strategic planning and strategic management.
Describe the key characteristics of strategic thinking and strategic decision making.
Define what is meant by “strategy” and “strategic management”.
Identify and explain the key elements of strategic management models and their application in engineering and technology based organisations
Activity 6A Strategic Planning as a Management Tool in Industry
First, read and reflect on Ward and Peppard (2002) chapter 2.Then work through this Independent learning guide and the power point presentation materials at the end of the topic.Also work through the recommended readings listed at the end of the topic.
Session 6.1 Development of strategic planning concepts
As a precursor to examining the strategic planning for and management of information technology and its associated systems, products and services, we will first explore the underlying principles of strategic planning and its impact on the way organisations evolve and operate, particularly in relation to engagement in competitive environments.
In developing a view of strategic thinking and the role of strategic decision making, it is necessary to be clear about what constitutes ‘strategy’ and the subsequent concept of what is meant by the term ‘strategic’ and in turn ‘strategic management’.
Hitt, Ireland & Hoskisson (2005) provide the following definition for ‘strategy’ within the context of strategic management:
“Strategy is an integrated and coordinated set of commitments and actions designed to exploit core competencies and gain a competitive advantage.” (Hitt et al, 2005)
Hubbard (2004) directs his definition of ‘strategy’ at creating value for customers as well as addressing issues raised by competitors:
“Those decisions which have high medium-term to long-term impact on the activities of the organisation, including the implementation of those decisions, to create value for customers and key stakeholders and to outperform competitors.” (Hubbard, 2004)
Johnson & Scholes (2002) in turn give the following definition for the term ‘strategy’ in the context of business planning processes:
“Strategy is the direction and scope of an organisation over the long term: which achieves advantage for the organisation through its configuration of resources within a changing environment, to meet the needs of the markets and to fulfil stakeholder expectations.” (Johnson & Scholes, 2002)
Ward & Peppard (2002) also offer a remarkably similar version:
“Strategy can be defined as: An integrated set of actions aimed at increasing the long-term well-being and strength of the enterprise relative to competitors.” (Ward & Peppard,2002)
Each of such definitions clearly lead towards the joint notions of ‘advantage’ and ‘competition’. Indeed, strategic planning as an outcome of strategic thinking and a precursor to the development and taking of strategic decisions, is most commonly associated with the very powerful construct of setting as a core business objective the task of achieving ‘sustainable competitive advantage’.
Johnson & Scholes (2002) then go on to express the notion that strategy exists at various levels within an organisation, reflecting, addressing, and meeting differing needs and expectations of the various elements of the organisation. In particular they distinguish between three different levels of organisational strategy as follows:
Corporate Strategy
“Concerned with the overall purpose and scope of the organisation to meet the expectations of owners or major stakeholders and add value to the different parts of the enterprise”
Business Unit Strategy
“About how to compete successfully in a particular market”
Operational Strategy
“Concerned with how the component parts of the organisation in terms of resources, processes, people and their skills, effectively deliver the corporate and business-level strategic direction”
Figure 6.1 Three levels of Organisational Strategy
Derived from Johnson & Scholes (2002)
Much unique vocabulary and apparent mysticism commonly surrounds the concept of what is ‘strategic’. For example, central to the development of an appreciation of what is strategic are the ideas of ‘vision’ and ‘strategic intent’.
The following table identifies a number of key items in the ‘strategic planning’ vocabulary:
TERM
DEFINITION
Mission
Overriding purpose in line with the values or expectations of stakeholders
Vision or Strategic Intent
Desired future state: the aspiration of the organisation
Goal
General statement of aim or purpose
Objective
Quantification (if possible) or more precise statement of the goal
Core competencies
Resources, processes or skills which provide ‘competitive advantage’
Strategies
Long-term direction
Strategic architecture
Combination of resources, processes and competences to put strategy into effect
Control
The monitoring of action steps to: Assess effectiveness of strategies and actions Modify strategies and/or actions as necessary
Figure 6.2 The Vocabulary of Strategy.
Adapted from Johnson & Scholes (2002)
In determining the scope of IT related products and services as a strategic resource within an organisation, it is essential to understand the concept of ‘strategic decision making’ and the impact of ‘strategic thinking’ on the direction that the organisation sees itself going in and the economic and technological nature of the environment that it operates in, or which it intends to operate in.
These concepts are discussed in some detail in Ward & Peppard (2002) and Johnson & Scholes (2002) Betz (1993) and Hitt et al (2005).
In the related area of developing corporate strategic approaches and a ‘strategic attitude’, Betz (1993 and 2001) and Hitt et al (2005) discuss the development of ‘Core Corporate Competencies’ as essential to the success of organisations operating in the economic context of global competition. Certainly, the nature and technical characteristics of contemporary IT and its strategic application in 21st century organisations, is clearly one that can be a catalyst for the development of core corporate competencies, particularly in the area of information services.
“Let us remind ourselves that in a general concept of strategy there is an important distinction between a strategic plan and a strategic attitude. A strategic plan is preparatory to a specific action, but a strategic attitude is preparatory to all action.
A strategic plan identifies specific goals over a specific time horizon for a specific set of actions.
A strategic attitude prepares in general for any action by formulating a perception about the nature of action, by commitment to types of action, and by preparation and training for action.”
(Betz, 1993)
“Core competencies are resources and capabilities that serve as a source of a firm’s competitive advantage over rivals. Core competencies distinguish a company competitively and reflect its personality. Core competencies emerge over time through an organisational process of accumulating and learning how to deploy different resources and capabilities. As the capacity to take action, core competencies are “crown jewels of a company,” the activities the company performs especially well compared to competitors and through which the firm adds unique value to its goods or services over a long period of time.”
(Hitt, Ireland & Hoskisson, 2005)
Just as the evolution of IT systems has been described as going through 3 ‘eras’ or periods of development, each characterised by a specific emphasis, eg. operational efficiency, management effectiveness and competitive advantage, so also has strategic planning developed through a number of stages.
The following diagram adapted from Ward & Peppard (2002) illustrates this:
Figure 6.3 Stages of development in Strategic Planning
Adapted from Ward & Peppard (2002)
The progression implicit in the above model is that of an evolving maturity in planning and strategic thinking approaches, leading eventually to a mature condition of ‘managing strategically’, ie. to achieve some strategically focused purpose or intent.
Typically this may involve a progressive shift from:
planning at the level of annual budgeting;
setting extended time-frame budgeting and planning horizons;
determination and evaluation of more strategically positioned organisational objectives that specifically impact on developing competitive advantage;
through to establishing a strategically focused management framework and organisation-wide development of innovation, creativity and strategic thinking, to develop and sustain market leadership.
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