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Summary Business Architecture & Transformation.
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Summary Business Architecture & TransformationArticles
Lesson 1
Continuous strategic alignment: Exploiting information technology
capabilities for competitive success
In this article, it is argued that the inability to realize value from IT investments is due to:
The lack of alignment between the business and IT strategies of the organizations that are
making the investments.
The organization’s ability to leverage IT functionality to obtain differential advantage in the
marketplace requires a dynamic administrative process to ensure continuous alignment
between the business and IT domains.
Accordingly, a two-pronged framework of continuous strategic alignment is developed. This
framework has an analytical component that we term as strategic alignment and an administrative
component that we term as achieving alignment. Neither component alone is sufficient as both are
required to create and sustain the dynamic link between business and IT domains.
Strategic alignment
We contend that an internally-oriented view of IS is restrictive, myopic and potentially dysfunctional
as it does not deal with critical and emerging sources of capabilities in the IT marketplace. We urge
managers to articulate their IT strategy along an external orientation with a particular focus on their
position in the IT marketplace.
There are three important dimensions of IT strategy:
Information Technology Scope: those specific information technologies (examples:
electronic imaging, local- and wide-area networks, expert systems and robotics) that support
current business strategy initiatives or could shape new business strategy initiatives for the
firm; this is analogous to business scope which deals with choices pertaining to product-
market offerings in the output market.
Systemic Competences: those attributes of IT strategy (examples: system reliability, cost-
performance levels, interconnectivity, flexibility) that could contribute positively to the
creation of new business strategies or better support existing business strategy.
IT Governance: selection and use of mechanisms (examples: joint ventures with vendors,
strategic alliances, joint R&D for new IT capabilities) for obtaining the required IT
competences.
,The strategic alignment model is based on four basic concepts:
Business strategy and organizational infrastructure representing the business domain;
IT strategy and IT infrastructure and processes representing the IT domain.
Within this representation, we specify the link between business strategy and IT strategy as reflecting
the capability to leverage IT strategy to both shape and support business strategy. Correspondingly,
the link between Organizational Infrastructure and Processes, and IT Infrastructure and Processes
reflects the need to ensure internal coherence between the organizational requirements and
expectations and the delivery capability within the IS function.
There are four dominant alignment perspectives – each representing a triangle of three concepts
covering both business and IT domains, as well as internal and external domains.
Perspective 1: Strategy execution
This perspective reflects a notion that the business strategy is the driver of both organization design
choices and the logic of IS infrastructure. This is, perhaps, the most common and widely understood
alignment perspective as it corresponds to the classic, hierarchical view of strategic management.
Perspective 2: Technology potential
This alignment perspective involves the articulation of IT strategy to support the chosen business
strategy and the corresponding specification of the required IS infrastructure and processes. In
contrast to the strategy execution logic, this perspective is not constrained by the current
organization design, but instead seeks to identify the best possible IT competences through
appropriate positioning in the IT marketplace as well as identifying the corresponding internal IS
architecture.
Perspective 3: Competitive potential
Is concerned with the exploitation of emerging IT capabilities to impact new products and services
(i.e., business scope), influence the key attributes of strategy (distinctive competences), as well as
develop new forms of relationships (i.e., business governance). Unlike the two previous perspectives
that considered business strategy as given (or a constraint for organizational transformation), this
perspective allows the modification of business strategy via emerging IT capabilities.
,Perspective 4: Service level
This alignment perspective focuses on how to build a world class IT/IS organization within an
organization. This requires the articulation of the external dimensions of IT strategy with
corresponding internal logic for the IS infrastructure and processes, with appropriate implications for
the organizational infrastructure and processes.
Achieving strategic alignment
The second component deals with the management challenge of translating the strategic choices
made with reference to the four concepts of the strategic alignment model into administrative
practice and operational decision-making.
To ensure adequate attention to the administrative practice of achieving alignment, we introduce
four alignment mechanisms:
, Governance: By governance we refer to the policies, procedures and systems for the allocation of
design-rights to the key decision makers both within the organization as well as external vendors
and/or partners responsible for IT management.
Technological capability: This alignment mechanism deals with the administrative process for
creating the required IT capability for supporting and shaping the business strategy. This involves
three important and interconnected activities:
Definition of IT products and services that collectively define the capability;
Development of IT products and services to harness the capability for business purposes;
Adaptation of IT products and services to dynamically evolve the capabilities to the changing
requirements.
Human capability: This alignment mechanism deals with the administrative process for creating the
required human skills and capability for supporting and shaping the business strategy. This involves
three important and interconnected activities:
Definition of human skills and capability;
Development of these skills and capability within the specific organizational context;
Adaptation of these capabilities to cater to the changing requirements.
Value management: This mechanism deals with those actions taken to (1) establish the means to
select IT investments, (2) define the performance management system that will maximize the
likelihood that these investments will achieve desired benefits, and (3) learn how to adapt this
performance management over time.
Beyond strategic information systems: towards an IS capability
Drawing on resource-based theory, this paper proposes a perspective on the management of IT in
organizations that specifically considers how organizations can continuously derive and leverage
value through IT. The analysis moves beyond a focus on identifying ‘strategic systems’ and develops
the concept of an IS capability, suggesting that it heralds the arrival of a new era. The paper presents
a model of an IS capability, outlines its core components and illustrates its application.
It is widely accepted that the evolution of IT in organizations to date can be captured in three ‘eras’:
data processing (DP), management information systems (MIS), and strategic information systems
(SIS).
Each era displays distinct characteristics regarding the application of IT and has different objectives—
although the objectives of the DP and MIS eras are, strictly speaking, a subset of the SIS objective to
improve competitiveness.
A central message from the research literature, and one that is universally accepted, is that
technology itself has no inherent value and that IT alone is unlikely to be a source of sustainable
competitive advantage. The business value derived from IT investments only emerges through
business changes and innovations.
In particular, we want to move on, away from the focus on ‘strategic information systems’, and
concentrate on the issue of sustainability and the attainment of continuous value through IT. We
introduce the concept of an IS capability and argue for organizations to understand, develop and
nurture this capacity if they are to deliver value from investments made in IT on an ongoing basis.
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