Study with the several resources on Docsity
Earn points by helping other students or get them with a premium plan
Prepare for your exams
Study with the several resources on Docsity
Earn points to download
Earn points by helping other students or get them with a premium plan
Community
Ask the community for help and clear up your study doubts
Discover the best universities in your country according to Docsity users
Free resources
Download our free guides on studying techniques, anxiety management strategies, and thesis advice from Docsity tutors
The development of a functional IT strategy for a case company, which evolved from a start-up strategy to a three-level strategy due to the company's IT legacy. the research scope, current state analysis, conceptual framework, strategy formation, and implementation plan, including IT strategy drivers, targets and drivers, strategy levels, and trends.
What you will learn
Typology: Lecture notes
1 / 41
This page cannot be seen from the preview
Don't miss anything!
Helsinki Metropolia University of Applied Sciences Master’s Degree Programme Business Informatics Development of a functional level IT strategy for the case company 27 .04.201 8
Abstract Author(s) Title Number of Pages Date Tiina Wright Development of a Functional IT Strategy for the Case Company 42 pages 27 April 2018 Degree Master of Business Administration Degree Programme Master’s Degree Programme in Business Informatics Specialisation option - Instructor(s) Antti Hovi, Senior Lecturer The purpose of the Master´s thesis was to develop a functional level IT strategy for a Finnish start- up company and propose an implementation plan and Key Performance Indicators to follow up the objectives of the strategy and unit performance. The case company operates in global environment marketing, selling and distributing branded mobile devices. The research was conducted as a case study and due to the lack of existing functional IT strategy, only qualitative research methods were used. They consisted of gaining understanding of the cur- rent state of the company, the Corporate level strategy, and the objectives of the IT unit. This infor- mation set the base for the functional strategy development. The Current State Analysis provided an understanding of the case company´s IT legacy, which changed the initial requirement of a pure start-up strategy development to a three-level functional IT strategy: short-term transformation strategy, mid-term strategy and long-term strategy. The busi- ness launch and growth targets were the foundation for the Corporate strategy, which in turn set the requirements for the functional level strategies, including IT. The researcher investigated strat- egy concepts, best practises and trends in the changing digital environment. As no standard IT strat- egy suitable for the case company was available, development of a custom made functional IT strat- egy was needed. Following the strategy creation, an implementation plan and Key Performance In- dicators were also developed and proposed. As a result, the author has created a strategy for the case company´s IT unit. The author has addi- tionally produced an implementation plan and suitable Key Performance Indicators with which the performance of the IT unit can be measured and leveraged with the Corporate objectives. Going forward, the author recommends regular reviews of the functional strategy and establishing agile ways of operating to remain competitive and responsive to the changing business requirements. Keywords Strategy, management, IT
Figure 1. Diagram of the research design Figure 2. Illustration of the Business transaction Figure 3. The three horizons of strategy Figure 4. The three levels of strategy Figure 5. The top IT trends for 2018 Figure 6. Management Meetings 101 (Kaplan and Norton 2008, p.73) Figure 7. Unit level strategy creation process in the case company Figure 8. Case company application of the three horizons Figure 9. SWOT analysis Figure 10. Strategy implementation process Figure 11. Strategy review cycle Figure 1 2. Strategy, KPI and objective annual cycle
AI Artificial Intelligence CEO Chief Executive Officer CDO Chief Digital Officer CFO Chief Financial Officer CIO Chief Information Officer CRM Customer Relationship Management DevOps Development-Operations. An Information Technology practise that unifies development and operations ERP Enterprise Resources Planning system HCM Human Capital Management HR Human Resources IT Information Technology ITIL Information Technology Infrastructure Library. A set of detailed practices for IT service management (ITSM) that focuses on aligning IT services with the needs of business KPI Key Performance Indicator(s) OEM Original Equipment Manufacturer RPA Robotic Process Automation SIAM Service Integration and Management VR Virtual Reality
1.2 Research scope In this research, the Business and Corporate level strategies are touched upon but the focus is on the unit level IT strategy. Corporate level strategy is explained as it is important to understand what the organisation long term targets are. The unit level IT strategy will be aligned to the Corporate strategy and the unit level strategy formation is covered in detail as well as the recommended implementation plan and KPIs. The case company’s IT unit works closely with the OEM partner’s subsidiary’s IT unit. The focus of the research is the strategy creation for the case company and the partner’s subsidiary, both of which the case company’s IT unit will serve. However, the manufacturing partner’s subsidi- ary’s IT unit is focusing on other activities and is a short-term setup and will thus be outside of the research scope. The OEM partner’s operations are not part of the research. The IT unit level KPIs are in scope, however the individual level employee objectives are ex- cluded. Risk Management is excluded from the research. 2 Research Design The research objective is to create a unit level IT strategy for a start-up company. Explaining how the functional IT strategy links to the Corporate strategy and why a functional level strategy is needed are explained in Chapter 3. The research starts with the Current State Analysis to clarify the position of the case company being a start-up, i.e. there is no existing IT strategy to improve. It is however important to explain in the beginning what the case company’s business model is to be able to investigate suitable strategy concepts in the Conceptual Framework part. Additionally, the legacy IT elements are covered. The Current State Analysis further covers the case company’s IT requirements and the drivers behind an IT strategy. The Conceptual Framework consists of a study on strategy concepts, exploring the best practises for start-up strategies and the IT trends which may impact the strategy creation. Following rapid global digitalisation phenomenon leaves the options for a standard IT strategy application short
Therefore, the strategy creation in the Strategy Formation section is based on the research car- ried out, and the IT strategy is custom created on top of certain strategical concepts yet consid- ering the requirements as explained in the Current State Analysis. The Strategy Formation section additionally presents the implementation plan including com- munication suggestions, and the recommended Key Performance Indicators and their imple- mentation and follow up processes. The research design is illustrated in Figure 1 below. Figure 1. Diagram of the research design
customers, create new, diverse, opportunities in global communication and bring the people of this big planet just a little closer together. Corporate strategy statement sets the starting point for IT unit level functional strategy plan- ning. As noted by Catlin, a functional strategy can only be successful if it is fully integrated with the overall corporate strategy, as without this deep alignment, any subsequent intervention is bound to fall short (Catlin et al., 2015, p.10). The position of Information Technology in the case company is to be part of planning, decision making and monitoring of the ongoing activities at the Leadership level. This way, the options of technology utilisation would be included in the daily operations of running the company. A separate unit level IT strategy is seen necessary as IT is recognized of potentially increasing the company value with technological choices and the operating model it will create. IT is considered as a separate functional area with its own goal of being a technology frontrunner in the industry. For this setup to work it would be important to align IT strategy tightly with the corporate level strategy from the start. 3.2 Case company background and the business model The case company was established with an aim to acquire assets and licenses and to partner with the chosen OEM company to operate a new business model in a global environment. In December 2016 a Business transaction took place where a large international manufacturing company (“Buyer 1“) acquired technology product related assets and a production factory from a large technology company (“Seller”), and made an OEM agreement with the case company (“Buyer 3”). The case company made an exclusive distribution agreement with the OEM com- pany’s subsidiary (“Buyer 2”). In addition, the case company acquired patents and other Intel- lectual Property from the Seller and entered a brand licensing agreement with another known technology company (“Brand owner”). These transactions disrupted a traditional business model, where everything from manufactur- ing to sales, marketing and distribution is handled in-house by a single company, by introducing a new model based on several partnerships.
Figure 2. Illustration of the Business transaction While the partnership model is a new way of operating in mobile technology business, some strategic advantages can be identified which support the new business model. These advantages are supported by Barney’s (2013) statement: “the competitive advantage and superior performance of an organisation are explained by the distinctiveness of its capabilities” (Johnson et al., 2013 , p.49). The combination of carefully selected partnerships, as well as the internal assets, are believed to offer capabilities which in turn will result in competitive and distinct market advantages. During the autumn of 2016 the company registrations had taken place in the countries where the case company intended to operate, assets had been evaluated and the business model as well as company policies had started to form. The company’s physical assets are office spaces in a few locations (otherwise rented), a data centre for hosting the acquired IT systems and applications, and patents. The financial asset is private funding until the business starts to operate and generates profits. The human assets are the Board, management, employees, partners, suppliers and customers. Additionally, the ac- quired sales, marketing and logistics channels, and the customer base are important assets. In order to create an efficient, profitable and hard to imitate operating model, it is important to recognise that the efficiency of physical and financial resources, as well as the people, depend
The data centre hosts company owned servers where all the legacy tools and applications are installed. Most of the data centre related maintenance activities are outsourced and this setup carries a high cost for which other alternative and lower cost operations need to be identified and implemented. The employee related operational expenditure is relative high considering the low number of employees. The employees are highly experienced and compentent, and therefore earn high salaries. This competence is needed for setting up the operations. Additionally, there is a need for a high number of consultants with specialist skills during the first year. The software licenses of the transferred and operational systems had been re-negotiated for short term use, however they set dependencies for the transformation schedule. Short-term contracts are typically more expensive than long-term contracts. It is the aim of the case com- pany to discontinue majority of the contracts and implement replacement tools as quickly as possible. People The personnel who transferred as part of the asset deal to Buyer 2 have thorough system and process understanding and their role is to ramp up the legacy system environment for the case company and the OEM’s subsidiary so that in the customers’ eyes the business would continue without disruption. As stated earlier, the employees are highly skilled and their role is to ensure the IT transfor- mation. They are responsible for contracting consultants and supervise their work. Therefore it is important that the IT employees understand the IT strategy as it sets objectives for the IT unit to fulfil the business expectations. The newly hired IT employees possess similar skills, although focusing on Cloud technology. 4 Conceptual framework Chapter 4 begins with a discussion about strategy concepts and their characteristics. The Chap- ter further progresses to assess the drivers for a unit level IT strategy and goes deeper into the examination of different levels of strategies in organisations, before analysing the available trends and best practise models. The challenges and opportunities of digitalisation are also cov- ered in this Chapter.
4.1 Strategy concepts The word “strategy” comes from two Greek words: Stratus (Army) and Agein (to lead). Strategy is described by many with military terms, including Sun Tzu, believed to be a military strategist (Sun Tzu, 1988). Strategy can also be defined as “a plan of action designed to achieve a long- term or overall aim”, “the art of planning and directing overall military operations and move- ments in a war or battle” and “a plan for directing overall military operations and movements” (Oxford University Press, 2018). There are different schools in strategical analysis and the definitions have different focus areas. However, three common factors can be identified in different strategical views (Johnson et al., 2013, page 5). Long term expectations The first one states that strategy is considered as having a long-term nature. The three-horizons framework suggests that companies should comprise three types of business or activity, defined by their ‘horizons’ in terms of years: Horizon 1 consists of the current core activities, extending and defending them. Horizon 2 concentrates on building new and emerging businesses and Hori- zon 3 focuses on creating new viable options for the future (Johnson et al., 2013, page 5). The Horizon view is demonstrated in Figure 3. Figure 3: The three horizons of strategy (Johnson, G., et al. 2015, p. 5) Direction The second uniting view is that strategy should provide direction for the activities. The outcome of the horizon definitions sets the direction for the company and it can then be converted into
4.2 Targets and drivers of an IT strategy The case company’s IT unit wants to stand out and compete with their chosen technology, per- sonnel and operative model. The long-term objective is to be able to act so fast that the com- petitors will not be able to compete against them. The case company’s IT strategy has to be so unique that it is difficult to copy and too fast in its actions to be challenged. The competitive advantages do not only arise from agility, but also from the way data is handled. Collecting and analysing customer related data provides opportunities to identify new trends and target customer groups. Additionally, the behaviour of the customers can provide valuable insight which can be utilized in many ways. In today’s digital world the amount of data is enor- mous and intelligent ways of handling it can provide companies opportunities which are yet to be discovered. Digitalisation acts as an enabler. Additionally, it is necessary to understand the purpose of the unit level strategy and its depend- encies to the corporate level strategy. Understanding the organization and its targets is the key. The Corporate level strategy sets the goals and targets for the company and as a sub-function IT strategy needs to be aligned with it. The IT strategy should be used to assist the organization to reach its goals, but at the same time IT should be looked at as an investment. Technology enables organizations’ functions with speed, and it provides opportunities for acting in agile manner in responding to market condi- tions. Strategy drivers Corporate strategy sets drivers for the functions and company performance. The drivers can be considered as catalysts that make things happen, and they need to be clearly defined and com- municated. The main strategy drivers are (Ducoff, 2014):
The success of the drivers can be measured, and they require united leadership and communi- cation to function as intended. It is particularly important to consider the drivers in the case company’s start-up environment, as the foundation for the operations can make or break the company’s future. The core of the short term strategy is formed around the two most important Corporate objectives: successful setup of the new business model and sales enablement. 4.3 Strategy levels and trends Strategy is typically seen as consisting of three levels in the organizational hierarchy: Corporate, Business and Functional. The Corporate level strategy involves the entire organization, the Busi- ness level strategy concerns different divisions or centres of activities, and the Functional level refers to organizational departments such as IT, HR and Marketing (Johnson et al., 2013, p.6-7). The fundamental difference between these levels is the leadership they involve. Corporate strat- egy requires Executives or Advisory Boards and Top Management involvement whilst Functional strategy involves persons within specific functions, as demonstrated in Figure 4. Corporate strat- egy serves as a guide for both Business and Functional strategies and they should be tightly aligned. Figure 4: The three levels of strategy Since strategies are created for achieving objectives, Corporate, Business and Functional strate- gies differ in the types of objectives they target. Corporate objectives typically focus on bottom line results such as revenue, profits and customer satisfaction. Functional strategies typically align with narrower functional objectives. IT, for example, aims to support the business and its Corporate level strategy, and also utilises technology to gain competitive advantages on the market.
In the case company, the initial thoughts are adopting a Cloud First approach and therefore the digital system selection is already in a good position. It will enable adaptation to more digitali- sation in the form of intelligent things and integrations with third parties. Events will become more important in the intelligent digital mesh, which will set new type of requirements in the system monitoring operations (Cearley et al., 2017). It must be understood that creating a whole new IT operative environment in the case company will carry a new type of risk for the business operations. Firstly the set up of new digital system is a risk in itself in IT, and secondly the adaptation could impose a risk to the business operations. The question the IT unit should ask when evaluating the digital trends is how to identify, cate- gorise and analyse the trends that will affect the organisation most, and then carefully plan how to implement them. Blue Ocean strategy Blue Ocean idea is based on the thought that benefits are generated through new ways of uti- lising existing assets. There does not need to be any new technological innovations, however the Blue Ocean strategy combined with Cloud First methodology has elements of both. Utilising Blue Ocean thinking in the Cloud environment opens opportunities in creating new ways of working, resulting in increased value, good profits and increase in brand equity (Kim and Mauborgne, 2004). Thiel’s vision supports the recognition of new opportunities, as covered earlier. This is what the case company’s IT should aim for; creating an operating environment so radically new and effi- cient, with which competitors could not compete (Thiel, 2014). The Blue Ocean strategy differs from traditional thinking in that in traditional model the bound- aries are defined and accepted. This leaves very little room for agility. If the case company’s IT unit adapts traditional ways of working, they are trying to compete with a lean organisation and modern tools but slow and bureaucratic processes against large competitors with out-dated tools and slow and bureaucratic processes. In this model the competition is lost. Digitalisation Balis, a Global Advisory Services Leader for Media & Entertainment at EY, takes a human ap- proach by claiming that it is humans that make technology and thus it is humans the technology should serve (Balis, 2017). Digitalisation is an opportunity for creating new interfaces, enables, connections and accountability to better serve humans across the business. In the case company, the adaptation of digital tools means adapting new ways of working. The transferred employees are used to working with a set of traditional IT tools at the Seller’s and now they are faced with a transformation to digital system environment. Although not part of this research, the adaptation requires an advanced level of change management.
McDonald, a Managing Director at Accenture, on the other hand focuses on making a point of separating a Digital strategy from IT strategy. Digital strategy is a lot like IT strategy, a process of selecting which technologies to invest in, and this approach should result in a plan, but a digital strategy requires a different approach (McDonald, 2015). There are two options for a Digital plan, the first one being a traditional system focused ap- proach where digitalisation starts with digital tool selections and then spreads across organisa- tions. The second option is the business transformation option, meaning what kind of impacts digitalisation would bring to the whole organisation, but the challenge is how to make the trans- formation a company-driven exercise instead of IT driven activity as the IT driven change has been noticed not to be very successful (McDonald, 2015). In the case company, digitalisation is already recognised as being part of the Corporate level strategy. The CIO is involved in business planning and implementation, which will make the split between Digital strategy and IT strategy clear. Digital implementation is part of the company agenda and supported across the organisation, however IT will be the driving force in imple- menting it. Therefore, the Digital strategy is part of the Corporate strategy and it is embedded into the IT strategy. Ways of operating The case company’s IT unit aims to build an agile working culture. The company’s business model requires agility, the technology trends require quick adaptation and the employees need to have flexible ways of operating. A fast agile company culture can be described the following way: “While strong skills are crucial, companies can to some degree compensate for missing ones by infusing their traditional cultures with velocity, flexibility, an external orientation, and the ability to learn” (Catlin et al., 2015 , p. 14). There are many opportunities for learning new ways of working when the company employees are a mix of internal employees and external consultants. Another remark from Catlin is the utilisation of DevOps, agility and continuous delivery cultures: ”While there is more than one way to build such a culture, many companies with high scores on the Digital Quotient diagnostic have succeeded by adopting test-and-learn approaches drawn from software-development movements such as DevOps, continuous delivery, and agile. Once, these were confined to the periphery of the business environment. Now they bring a coopera- tive, collaborative disposition to interactions between talented workers at its core. Previously siloed functions, departments, and business units can learn a new spirit of cohesiveness” (Catlin et al., 2015, p.14). Service Management model
