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EXHIBIT 9.4 Strategic Demand/Supply Planning in the Value Chain

Strategic
Demand/Supply Planning




Strategic IT Planning Annual IT Planning
Business The Business Enterprise: Lines of Business, Departments
Strategic
Business
Intentions
Plan Projects
Strategic
(Strategic Budget
IT Agenda Strategic
Business Plan)
Proj- Projects
Action
IT Require-
ects Plan
ments
Assessed Strategic Lights-On
Portfolios IT Plan Budget
IT Plan
(Alignment,
Service/Quality,
The IT Enterprise: Four “Lights-On” Asset Pools
Technology)
Performance Measurement Metrics




In Right Decisions/Right Results, the point of high-level strategic planning
is to translate the company™s business strategic intentions into actionable IT
strategies and, thereby, create the actions and produce the desired business
results. The Strategic Demand/Supply Planning practice starts with high-level
business intentions and creates strategies and action plans to drive the IT activ-
ities needed to address them.
173
The Strategic Demand/Supply Planning Practice


What Does a Strategic Demand/Supply Plan Look Like?
Properly establishing the IT strategic plan requires a clear definition of the busi-
ness strategies, as expressed through its strategic intentions, and the relation-
ship between those strategies and what we expect IT to do about them.
Like all such planning descriptions, this should be looked at as a template.
Every company is different, and every organizational/political setting is differ-
ent. Numerous issues such as participants, process, timing, and planning respon-
sibility come into play in approaching the planning process. Nevertheless, the
basic concepts are central to addressing the business/IT planning disconnect.
The ideal planning process, shown in Exhibit 9.5, deals with these elements:

Inputs
1. The business™s strategic intentions
2. Portfolios and their strategic management
3. Performance management and measurement

Outputs
1. A business strategic agenda for the use of technology
2. An IT (organizational) strategic plan
3. Strategic IT requirements ” the programs and projects needed to meet the
business strategic agenda

Connections between the Plan and the processes that will implement it
1. Direct connection to the business and IT processes for developing projects
2. Direct connection to the business and IT annual planning
3. Direct connection to the company™s and IT annual budgets


EXHIBIT 9.5 Planning Inputs and Outputs in the Value Chain
Strategic IT Planning Annual IT Planning
Business The Business Enterprise: Lines of Business, Departments
Strategic
Business
Intentions
Plan Projects
Inputs Strategic
(Strategic Budget
IT Agenda Strategic
Business Plan)
Proj- Projects
Action
IT Require-
ects Plan
ments
Assessed Strategic Lights-On
Portfolios IT Plan Budget
IT Plan
(Alignment,
Service/Quality,
The IT Enterprise: Four “Lights-On” Asset Pools
Technology)
Performance Measurement Metrics


Outputs
174 PLAN FOR THE RIGHT RESULTS


The results are the basic table of contents of a company™s strategic plan for
information technology. The first, the Strategic Agenda for the Use of IT, defines
the strategic intentions of the company and management for applying IT to
carry out the company™s strategy and goals. This Strategic Agenda, together with
the company™s business strategic intentions, is the first part of the Strategic
IT Plan. It expresses the “demand” for IT” the business strategic intentions
together with requirements for technology applications that will address those
strategic intentions. This “demand” also defines management™s intention to
apply IT in the organization, which establishes the business process changes to
accommodate and apply IT. The second part of the Strategic IT Plan describes
the IT organization™s strategies and plans for fulfilling the requirements for IT
established in the Strategic Agenda. It expresses the “supply” for IT, including
organization, development, and delivery.
Portfolios and their strategic management comprise the critical connecting
element among all the pieces. As introduced in Chapter 4, four basic portfolios
describe and contain IT organization resources and responsibilities. The appli-
cation portfolio defines existing and future IT applications. The infrastructure
portfolio defines the elements of the supporting technologies. The services port-
folio defines the IT organization™s interactions with internal company customers
and external customers. The management portfolio defines how the internal IT
organization manages itself and its portfolios. The planning processes address
each portfolio.

What Role Does Enterprise Architecture Play?
For many companies, Enterprise Architecture (EA) is a major part of IT strate-
gic planning. The actual practices followed, however, differ widely from com-
pany to company. For some, EA is essentially a standards and to-be definition
for IT infrastructure. For these, EA is a major player in constructing and review-
ing business projects for compliance with the to-be architecture and in propos-
ing infrastructure development projects. For others, EA also is a major player
in defining the to-be for business process and enterprise information. For these,
EA also contributes significantly to the business content of projects and, in many
cases, the definition of the projects themselves.
For purposes of defining the Strategic Demand/Supply Planning and Inno-
vation Planning practices, we do not explicitly describe a role for Enterprise
Architecture. We expect that, in a given company situation, EA will be one
of the participants and, in some cases, may be a driver of the management
processes described in these practices. Our purpose is to describe the practice,
not to specify the specific roles of EA for any participant or, for that matter, any
specific part of the IT organization. For example, in the description of portfo-
lio assessment in the previous chapter, much of the technology assessment likely
would be done by the EA staff in many companies. This assessment is an impor-
tant input into the Strategic Demand/Supply Planning practice, but we do not
specify precisely who, within IT, would perform it.2
175
The Strategic Demand/Supply Planning Practice


Business Strategic Intentions
We defined business strategic intentions as the basic driver for Prioritization and
Alignment in Chapter 8, having defined them in Chapter 3. We also described
methods for establishing strategic intentions in Chapter 8, as well as in Appen-
dix C, “The Development of Strategic Intentions, with Examples.”
In summary, our purpose is not to establish what a company™s strategic
intentions should be; rather, we use a straightforward framework to document
what they are.

The Strategic Agenda for the Use of IT
A critical middle step is required between business strategy (as a source of
demand) and IT strategies and actions (as the supply). This middle step is the
Strategic Agenda for the Use of IT in the business. This establishes a clear link-
age between business strategic intentions and the IT activities the company will
undertake to support them.
The Strategic Agenda states what the business expects to do with IT. For
example, if a business™s strategic intention is to “reduce the cost of logistics
between company and customer” (distribution, etc.), then a strategic agenda for
the use of IT would state exactly how IT will contribute to that logistics cost
reduction. In this case, the Strategic Agenda could be to “apply customer and
route data to optimize delivery routes.” That™s what IT has to deliver ” both the
data itself and the means for using it in optimizing routes. How IT delivers it is
based on a separate statement of IT strategy. See Exhibit 9.6.



EXHIBIT 9.6 Elements of Demand/Supply Strategic Plan

Business Demand for IT Supply of IT



Corporate
Strategic
Intentions
Strategic
Agenda for
IT Strategic
the Use of IT
Plan
in the
Business
Business
Unit
Strategic
Intentions
176 PLAN FOR THE RIGHT RESULTS


A Strategic Demand/Supply Plan, therefore, has three basic elements at the
highest level: (1) the business context via its strategic intentions; (2) the strate-
gic intention for the use of IT to enable the business strategic intentions; and
(3) IT™s strategic intentions for the means to deliver IT. This is a core idea in
the structure of the demand/supply plan. The important NIE innovation is the
establishment of the middle ground, the Strategic Agenda for the Use of IT.
Of course, this is no different from saying that there are “requirements” for
IT in the business. However, it makes the requirements clear in two ways. First,
the use of IT is not, in itself, a business strategy. The business strategy might be
to create a close relationship between the customer and the business, or to man-
age the relationship with the customer (CRM), or to massively adopt supply
chain management and reduce supply cost and time. The strategy for the use of
IT might be to put database capabilities in the hands of every salesman (e.g.,
through a sales force automation initiative), or to employ CRM software through-
out the company, or to employ an ERP throughout the purchasing and logistics
components of the company.
The difference is important. The business strategy establishes the means for
improving competitiveness or financial performance. The strategy for the use
of IT establishes the means for accomplishing the improved competitiveness ”
in particular, identifying the specific obligations business management has to use
IT for the specific purpose. Saying it another way, Strategic Planning establishes
the base strategy and the strategy for using IT to achieve the base strategy.

Strategic Demand/Supply Plan
Our experience at a large financial services institutions was that senior man-
agement was willing to define business strategic objectives (e.g., add new prod-
ucts and services, in order to make the bank a dominant part of the customer™s
financial life) and to define strategies for IT (e.g., to outsource, install inter-
net capabilities, etc.). But the managers failed to take responsibility for the
business strategies to actually use IT, to make the necessary changes in business
processes and business organization that would take advantage of what IT
could do.
This structure of Business Strategy ” Business Strategy for the Use of IT”
IT Delivery Strategy directly addresses this problem. It clearly identifies the obli-
gations of business management to make the necessary commitments, process
changes, and organizational changes that will accomplish the required result.
This structure is a specific example of what we mean by cause and effect. In the
first instance, a business strategy™s cause and effect is to improve the company™s
performance. In the second, the strategy for the use of IT™s cause-and-effect is
to make the business strategy successful. In the third instance, the IT strategy
for the delivery of IT is to make the use of IT successful, which in turn makes
the business strategy successful, which then achieves the goal of improved busi-
ness performance. See Exhibit 9.7.
177
The Strategic Demand/Supply Planning Practice


EXHIBIT 9.7 Strategic IT Demand/Supply Plan

IT DEMAND IT SUPPLY
Strategic Agenda for IT:
The Business Strategy for
the Use of IT
(Alignment) (Alignment)
Strategic Intentions
Strategic Objectives
Strategic IT Requirements



Strategic IT Plan:
Context:
The IT Delivery
The Strategic
Strategy
Business Plan (Innovation)
Strategic Intentions
Strategic Intentions

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