IT-Business Alignment: A Two-Level Analysis

PITEO Article Review

IT-Business Alignment: A Two-Level Analysis

Section X | Group 2 Student IDAbhishek Agrawal U113003Gaurav Panda U113018Chinmay Mohapatra U113080Gyanbitt Kar U113086Saswat Mohapatra U113106Sweta Rath U113117Bibhu Prasad Nayak U113196


Alignment at Strategic/Planning Level• Synchronization of IT and Business Plans• Adaptation of applications that support strategic goals

Alignment at Operational/Tactical Level• Successful implementation of planned applications• Maintenance and usage of applications• Avoiding applications irrelevant to business plan• Deliverance of envisaged business benefits from IT

DIFFICULTY IN ACHIEVING ALIGNMENT

IT strategy is often modified mid-year

Senior business executives are often

unaware of the IT related cost and resource

implications of strategic business decisions

C-level forum.

Possible gaps between IT strategy and IT execution

Disconnects between IT-related expected

outcomes of plant-level or division-level

functional managers and those of IT managers.


CONTENTS OF THE ARTICLE

Identification of processes associated with “Tactical IT-Business Alignment”

Illustration of four types of alignment states resulting from “strategic” and

“tactical” alignment levels

alignment levels,

Proposal of alignment-related managerial actions appropriate for each

type.

Based on:

40 hours of interviews with about 30 senior, middle and junior managers from IS and other functions

Company records, in an investigation of four organizations.

Prior Research Findings

Segars and Grover in 1999 found that three of the four types of firms in the Miles and Snow typology -Prospectors, Defenders, and Analyzers were able to appropriate strategic benefits from IT, provided they aligned their organizational strategies and objectives with the opportunities provided by IT.

Sabherwal and Chan in 2001 measured alignment between information systems strategy and business strategy and found that alignment between Prospectors and the use of information systems is for flexibility, and that between Analyzers and the use of IS for comprehensiveness was positively associated with business performance.

Premkumar in 2005 showed that fit between information processing needs and information processing capabilities leads to improved supply chain performance and Weiss etal in 2006 suggested that depending on the extent of IT involvement in internal integration and external market engagement, the role of IT can be appropriately aligned as a “Technical Resource,” a “Business Enabler,” or a “Strategic Weapon.”

In the context of alignment at the tactical level, Henderson & Venkatraman, in 1993 recognized the importance of “functional integration” between the business side (administrative infrastructure, processes and skills) and the IT side (IT architecture, IT management processes, and IT skill), for effective deployment of IT applications.

Keen in 1993 said about the “fusion” between the deployment of IT (vision and strategic intent) and the management of IT (sourcing strategiesand delivery mechanisms) suggesting that such fusion isnecessary for organizations to appropriate competitivebenefits from IT.

Boynton et al. in 1994 and Chan in 2002 suggestedthat formal and informal contact between the IS functionand line divisions is essential to appropriating strategicbenefits from IT. Luftman in 2003 suggested that maturity in partnership, knowledge sharing, and communicationbetween IT and business managers are enablers to alignment.

TACTIC LEVEL

STRATEGIC LEVEL

Research Method and Study Details

Objective of the Study : To explore and identify the aspects and processes associated with tactical IT-business alignment

Method Adopted : Case Study. The case study method enabled to investigate and observe how tactical alignment was achieved in the chosen sample of firms.

The firms chosen were : state-funded university, a healthcare company, a tableware glass manufacturing company, and a diversified industrial engineering company .

STUDY FINDINGS As per University CIO ,IT was a support department whose primary function was to implement a chosen application at the lowest

possible cost. The IT department in healthcare company was known as the “Information and Process Management” department. The department

was divided into two groups , Applications and Technology, and was responsible for executing projects relating to implementation of applications at the minimum possible cost. Its perceived role was that of a service department, with the functional departments being its customers.

The IT department in Table Glass Manufacturing company was divided into three groups, Applications, Project Management, and Technology Support and as per their CIO performance of the IT function was measured in terms of operational efficiency – primarily cost and help-desk performance.

As per the CIO of Industrial Engineering firm ,they were following Strategic planning of IT but no such implementation had happened yet.

Brief Firm Descriptions

Results and Findings

Descriptive information about

each firm, such as the IS organization,

reporting structure and perceived role of

IS.

Alignment processes at the strategic level along with the sub-

categories

Alignment processes at the tactical levels, with sub-categories (specific aspects of

each type of alignment)

Extent to which a particular

kind of alignment was perceived to be

present. Annual Revenue: 13 Million $ Responsible for applications, network and audits

Industrial Engineering

Firm

Brief Firm Descriptions

CFO“Information and Process Management” Department

(CIO)

Applications Department

Technology Department

Healthcare Firm

Annual revenue: 3-4 Billion $

Plans to install electronic health records and electronic order entry applications

•Perceived as a service department; serving the various functional departments•Execution of projects dealing with the implementation of applications at minimum possible costs

Functions

Tableware Glass Manufacturing Firm

Annual Revenue: 400-500 Million$

Functions:

•Looking into processes that translated business plan into corresponding IT requirements

•Monitoring the operational efficiency: cost and help-desk performance

VP (Administration)

HR Head

CIO

Senior Mgr.(Tech. Support)

Middle Level Mgr.1 J11

Senior Mgr. (Applications)


Senior Mgr. (Project Mgmt.)


Strategic IT—Business Alignment

Proactive influence of the CIO in strategic

planning

Exploiting IT-basedstrategic opportunities

Linking business

planning

and IT planning

such that

strategic IT plans

support

business plans

•Building informal relationshipswith other C-level officers• Conceptualizing andcommunicating the value androle of IT to other C-level officers• Emphasizing the role ofsenior functional managersas IT customersScanning emerging

technologies for newproduct/market opportunities

•Aligning the content of IT and business plans•Meetings and interaction among the CEO, CFO, COO and CIO

Tactical IT—Business Alignment

Integration of New medical imaging system

Clinical advisory committeethat has doctors, residents and

nurses.

Merger resulting in single standardized email and network

platforms.

Changes to ERP system reviewed by Executive committee first and then

given to project teams.

Learning Cisco equipment usage after merger with Cisco

• Project prioritization and monitoring

• Functional sponsorship of projects

• Resource allocation and dynamic re-allocation

• Operational and IT metrics for project success

Alignment at the level of projects

• Liaison roles for IT professionals that situate them in user departments

• Senior functional managers as project champions, project sponsors or project team leads

• IT-business cross-functional project execution and management teams

Aligning decision-makingprocesses of the IT function

and other departments

• Standardization to reduce redundancy and competition for resources

• Customize process-specific applications that could enhance competitive advantage

Balancing firm-wide technologystandardization with process

specific customization

• Regular and planned meetings between IT and business managers

• Informal and impromptu walk-arounds by IT managers.

• End user support mechanisms

Formal and informal IT-businesscommunication

• Acquiring skills for implementing and maintaining new applications as a result of new product or customer initiatives, and mergers or acquisitions

• Acquiring language and culture related “soft” skills for maintaining worldwide IT operations in the case of global firms

Alignment at the level of IT skills

Processes ExamplesDescription

Discussions : IT- Business Alignment and Firm Classification

Desirable Managerial Actions

Managerial Implications

IT-Business Alignment

Firm Classification

IT-Business Alignment (Both Strategic and Tactical )

Strategic IT-business alignment processes are needed for identifying applications important for supporting and enabling business strategiesTactical IT-business alignment processes are necessary for ensuring that envisioned applications are implemented and deployed

Firm Classification

2 level alignment => 4 stage firm classification : Unaligned, Tactically Aligned, Strategically Aligned, Completely Aligned

• Most evolved and effective alignment state• Organizations plan for strategically important applications, and are

able to execute and implement IT projects successfully Aligned

• No systematic planning or execution with respect to IT• Given current business context, no many firms in this quadrantUn Aligned

• Systematic IT plans that are closely linked with the business plan• Lack of “connectedness” at the operational and tactical levelsStrategically Aligned

• Efficient IT resource-allocation and implementation mechanisms• May not always choose the “right” IT applications in terms of

strategic importanceTactically Aligned

Some presence of both kind of alignment

Presence of aspects of one kind of alignment, Need for improvement in the other kind of alignment

Firm Transition towards Aligned State

Tactically Aligned -> Aligned

Low Strategic Alignment -> institute formal IT planning that follows, the strategic planning processDevelop mechanisms for interaction at the senior levels, between IT and other functionsSignificant value added by educating IT Dept about the firm’s business strategy and its processes, and then use tactical linkages to steer the functional managers towards strategically important IT applications

Strategically Aligned -> Aligned

Institute roles and governance structures that facilitate business-IT communication and collaboration at the middle and junior management levels, leading to regular and easy back-and-forth of business requirements, technical constraints, and possibilitiesCross-functional project teams that have members from IT, as well as the functionsIT strategy should be communicated to the middle and junior IT managers such that they can contribute to building linkages by guiding functional managers in their choice of technology.

External Environment

Political Economic

Social Technological

Environmental

Legal

Internal Environment

Org. Culture Stakeholders’ needs

Org. History Resources

Existing Processes

Existing capabilities

External Environment

New IT trends

Costs

New Standards

Resource shortage

Competition Industry trends

Internal Environment

Org. Culture Legacy System

Org. Maturity Stakeholders’ needs

Existing Processes

Existing capabilities

Business Drivers

Meeting stakeholders’ needs

Growth and continuity

Changing industry structures

Profitability

Increasing competition Increased global trade

IT Drivers

Meeting stakeholders’ needs

Changing Standards

Digital 5 forces Availability & Performance

Knowledge Sharing needs

Reliability

Business Strategy Attributes

Defensiveness Risk Aversion

Aggressiveness Analyze

Proactive Futuristic

IT Strategy Attributes

IT for Operational support IT for consistency

IT for Competitive advantage

IT for agility

Types of Business StrategyDefender

Prospector

Analyzer

Types of IT StrategyIT for efficiency

IT for flexibility

IT for comprehensibility

Interact with

Define

IT/BS Alignment Framewor

k

Critical Success Factors

Increased Revenue

Reduced cost

Improved customer satisfaction

Critical Success Factors

Resource Utilization

Process Improvement

Process Effectiveness

Business Performan

ce

IT Performance Measurements and KPIs

Business Performance Measurements and KPIs

Define

Define

Framework adapted from Miles and Snow Strategies and Butto and Swain alignment model

Further Research : 12 Components of Alignment

Business StrategyOrganizational

Infrastructure and Processes

IT Strategy IT Infrastructure and Process

Business Scope :Includes markets, products/services and customers as well as competitors which affect business environment

Distinctive Competencies :CSFs and Core Competencies which provide a firm with competitive advantage

Business Governance :Roles and Relationship between management, stockholders and board of directors

Administrative Structure:The way the firm organizes its business.

Processes:How the firm’s business activities operate. Value added vs Non- Value added

Skills:HR considerations such as how to hire/fire, motivate, train/educate and culture

Technology Scope :Important information application and technologies

Systematic Competencies :Those capabilities that distinguish the IT services

IT Governance :How authority over resources, risk, conflict resolution, and responsibility is shared among business partners, IT managers, functional managers, etc

Architecture:Technology priorities, processes, policies and choices that allow integration

Processes :Activities carried out to develop and maintain IT infrastructure

Skills:IT HR considerations such as how to hire/fire, motivate, train/educate and culture

Source: J Lufthan’s –Competing in Information Age, Strategic alignment in Practice

Further Research : Major Research Paradigms

IT- Business Alignment Area

Positive Relationship Contingent Relationship Contradictory Evidence

Environmental Turbulence

Environmental turbulence is positively associated with alignment (Chan et al. 2006; Choe 2003; Gottschalk and SolliSaether 2001; Kearns and Lederer 2004; Taipala 2008; Wang and Tai 2003)

The relationship between environmental turbulence and alignment depends on the type of environmental turbulence or alignment (it can be positive, negative, or insignificant) (Ling et al. 2009; Rivard et al. 2006)

Environmental turbulence is not related to alignment (Teo and King 1997; Yayla 2008

IT Investment IT investment is an antecedent to alignment (Lee et al. 2004)

Alignment is a positive moderator or mediator of the IT investment-firm performance relationship (Byrd et al. 2006; Celuch et al. 2007)

Firm Size Large firms need more formal and comprehensive strategy-formulation and planning processes than small firms and have the resources to invest in IT (Armstrong and Sambamurthy 1999; Chan et al. 2006; Cragg et al. 2002; Powell 1992)

Small firms don't often pursue alignment, but they can obtain the same benefits as large firms when they do (Cragg et al. 2002; Hussin et al. 2002)

Strategic Orientation

Firms with different strategic orientations do not all align and perform to the same level (Chan et al. 2006; Raymond and Croteau 2006)

Governance Structure

Decentralization can lead to redundant and/or misaligned processes whereas centralization inspires communication among the business and IT to improve alignment (Brown 1999; Kearns and Sabherwal 2006)

Decentralized environments provide agility so firms can establish more dynamic alignment (Fink and Neumann 2009; Grant 2003)

Thank You!

Documents

IT-Business Alignment: A Two-Level Analysis