Chapter 13 - The balanced scorecard and business value of information technology. After reading this chapter, you should be able to: Describe the Balanced Scorecard framework, explain the purpose of strategy maps, describe different types of IT and why IT initiatives can be difficult to evaluate, define the Balanced Scorecard management process.
Chapter 13 The Balanced Scorecard and Business Value of Information Technology Copyrightâ2014McGrawưHillEducation.Allrightsreserved.NoreproductionordistributionwithoutthepriorwrittenconsentofMcGrawưHillEducation Learning Objectives LO#1 Describe the balanced scorecard framework LO#2 Explain the purpose of strategy maps LO#3 Describe different types of IT and why IT initiatives can be difficult to evaluate LO#4 Define the balanced scorecard management process LO#5 Describe how an AIS system contributes to a balanced scorecard management process 13-2 LO# The Balanced Scorecard • • • • A strategic planning and management system Used extensively in business and industry, government, and nonprofit organizations worldwide Aligns business activities to the vision and strategy of the organization, Improves internal and external communications 13-3 LO# Four Perspectives F in a n c ia l P e rsp e c tive Lo w e r Co st s B u sin e ss P ro c e ss P e rs p e c tiv e G ro w Revenue En h a n ce C u st o m e r V a lu e C u sto m e r P e rsp e c tive Im p ro ve P r o c e sse s L e a rn in g & G ro w th P e rsp e c tive 13-4 LO# Learning & Growth Perspective • • Describes the firm’s objectives for improvements in tangible and intangible infrastructure Human Capital – investment in people – • Ensuring the right people with the right skills are available Information Capital – investment in information – Ensuring required access to information and 13-5 LO# Process Perspective Operations management processes, such as supply, production, distribution, and risk management Customer management processes, such as those involved with the selection, acquisition, and retention of customers, and growth of the firm’s market Innovation processes, such as identifying opportunities, research and 13-6 development, product design and LO# Customer Perspective • The value proposition differentiates from the competition – Product attributes • Price • Quality • Availability • Function – Service attributes – Brand image 13-7 LO# Financial Perspective • • • Confirms the success of the firm’s investments and its ability to deliver value to customers Overall objective is shareholder value (for-profit companies) Other objectives usually related to: – Long-term growth – Productivity 13-8 LO# Why a Balanced Scorecard Leading Indicators Internal Perspectives Lagging Indicators External Perspectives 13-9 LO# Strategy Maps • • • A one-page representation of the firm’s strategic priorities Shows the cause-and-effect linkages among strategic priorities Allows organizations to assess and prioritize gaps between current and desired performance levels 13-10 LO# Financial Perspective Productivity Strategies Growth Strategies Shareholder Value Product Attributes Relationship Customer Perspective Customer Value Service Attributes Internal Process Perspective Learning & Growth Perspective Operations Management Human Capital Image Customer Management Information Capital Innovation Regulatory & Social Organization Capital 13-11 LO# Roles of AIS/IT in Balanced Scorecard Framework • • Balanced scorecard recognizes the difference between – Investments in tangible information technology, and – The capabilities created by that technology Information Capital in the Learning & Growth Perspective is an intangible asset that reflects the readiness of the organization’s technology to support 13-12 business processes LO# Nature of Information Technology Investments • Function IT – • Network IT – • Performs a single function, such as enhancing worker productivity for standalone tasks Allows people to communicate with one another Enterprise IT – Restructures interactions within the organization as well as with external partners 13-13 LO# Summary of IT Investment Categories IT Categor y Description Characteristics Function Assists execution IT with discrete tasks Does not require complements but impact can increase with the users skill Network Facilitates Does not require complements IT interactions but impact increases with users’ skill and extent of teamwork Enterpris Specifies the nature Requires complements and e IT of business impact often depends on users’ processes and skills, teamwork, changes to the requires way work is performed, and interactions changes in the way decisions are made 13-14 LO# The Balanced Scorecard Management Process • The steps necessary to plan, implement, and monitor performance: Formulate The company examines its competitive environment and identifies ways in which it can best compete consistent with its mission, vision, and values Translate The company establishes specific objectives, measures, targets and initiatives, and develops capital, initiative, and other long-term budgets to guide resource allocation and action according to 13-15 its strategy LO# 13-16 LO# • Role of AIS/IT in Balanced Scorecard Management IT has an important role in implementing Process and managing the balanced scorecard management process • • • Provides information to support strategy formulation Provides processing to develop and distribute budgets for strategy execution Collects data and converts to information to assess performance against strategic 13-17 ... – Long-term growth – Productivity 1 3- 8 LO# Why a Balanced Scorecard Leading Indicators Internal Perspectives Lagging Indicators External Perspectives 1 3- 9 LO# Strategy Maps • • • A one-page representation... right people with the right skills are available Information Capital – investment in information – Ensuring required access to information and 1 3- 5 LO# Process Perspective Operations management... initiatives, and develops capital, initiative, and other long-term budgets to guide resource allocation and action according to 1 3- 15 its strategy LO# 1 3- 16 LO# • Role of AIS/IT in Balanced Scorecard Management