Strategic Information Systems Knowledge – IST and Business Alignment
Author: Acumen Insights Version: 0.1 Date Published: 11-Jan-2009 http://www.acumen-insights.com
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Strategic Information Systems Knowledge – IST and Business Alignment
Introduction
The Information Systems and Technology (IST) and business alignment knowledge developed out of the need to ensure that IST capabilities were being developed to meet the business processes of the organisation. This paper addresses some of the issues surrounding the alignment of business and IST capabilities.
Discussion
For the first 20 years of computing in business the focus was mainly concerned with utilising early computer capabilities to improve business calculations – such as accountancy capabilities. Following the advent of desktop computing and its distribution within organisations, the early 1990’s were characterised by the need for functional alignment – i.e. making sure the IST capabilities meet functional needs. Following this, the focus then moved onto ensuring that the alignment not only occurred at the functional level but also at the strategic level: “…we argue that the inability to realise value from IST investments is, in part, due to the lack of alignment between business and IST strategies of organizations.” Henderson & Venkatraman (1993: 4) “…alignment is based on two building blocks: strategic fit and functional integration. The former recognises the need for any strategy to address both external and internal domains. The external domain is the business arena in which the firm competes and is concerned with decisions such as product-market offering and the distinctive strategy attributes that differentiate the firm from its competitors…In contrast, the internal domain is concerned with choices pertaining to the logic of the administrative structure (functional or divisional or matrix organisation) and the specific rationale for the design and redesign of critical business processes.” Henderson & Venkatraman (1993: 4) IST strategies must therefore be articulated in terms of an internal and external domain – both IST and business (Scott-Morton, 1991) – illustrated diagrammatically in Figure 1. This is the simplest illustration of alignment as it merely presents the domains at the highest abstract level.
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…alignment is based on two building blocks: strategic fit and functional integration.
Internal Business
External Business
Internal IST
External IST
Figure 1: IST and Business Alignment (Henderson and Venkatraman, 1993)
This change in focus can be characterised by the evolving capabilities of IST, including the ability of IST to deliver a competitive advantage
The incorporation of a more strategic alignment debate is characteristic of the general evolution of IST adoption within organisations. This change in focus can be characterised by the evolving capabilities of IST, including the ability of IST to deliver a competitive advantage; the extension of the value chain outside the organisations created by network capabilities; and the continued support and implementation of business processes through IST. Scott Morton (1991) also concluded that alignment is not a one-time solution but requires constant proactive management from both the IST and business areas of the organisation. Therefore, at the next level of appreciation we
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Strategic Information Systems Knowledge – IST and Business Alignment
can express IST and business alignment in more detail, covering both the strategic and functional alignment concerns – as illustrated in figure 2.7.
Business Strategy Business Scope IST Strategy Technology Scope
External
Distinctive Competencies
Business Governance
Systemic Competencies
IST Governance
Strategic Alignment Organisational Infrastructure Administrative Infrastructure IST Infrastructure
Architectures
Internal
Processes
Skills
Processes
Skills
Business Functional Alignment
IST
Figure 2: Strategic Alignment (Henderson and Venkatraman, 1993 p 8)
From the alignment perspective, the IST strategy incorporates a fit between the business and IST strategic domains by acknowledging that IST capabilities can both shape or support the business strategy. Additionally, the functional alignment is concerned with the integration of the internal business and IST domains. Additionally, Jeffrey and Leliveld (2004) argue for the need to align the IST portfolio with the IST strategy so that costs can be controlled, a disciplined approach to expenditure exists and the synchronisation of initiative is managed. The effective development of IST capabilities therefore requires a balance to be achieved across all four IST and business domains. To enable this balance, Henderson and Venkatraman (1993) presented four alignment perspectives, presented in Table 1.
Perspective Strategy Execution Driver Business Strategy Characteristics The business strategy is the sole driver of all domains – adopting the more classical view of IST strategy development discussed earlier. The strategy is formulated by senior business managers and implemented by IST senior management. Assessment of implementing the chosen business strategy through the appropriate IST strategy. This perspective seeks to identify the best possible IST competences. Senior business managers devise the vision whilst the senior IST management provide the technical architecture services.
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Technology Transformation
Business Strategy
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Strategic Information Systems Knowledge – IST and Business Alignment
Perspective Competitive Potential
Driver IST Strategy
Characteristics This perspective is concerned with the exploitation of IST to deliver strategic capabilities. It allows for the adaptation of the business strategy through IST capabilities. Senior business managers devise the vision whilst senior IST managers act as catalysts. Focus here is on how to build a world class IST service organisation. The business strategy is viewed as being indirect and is to stipulate customer demand only. The role of senior business management is to prioritise whilst the senior IST management is one of leadership.
Service Level
IST Strategy
Table 1: Alignment Perspectives (Adapted from Henderson and Venkatraman, 1993)
As the organisation becomes more experienced with its IST capabilities it will mature and be able to exploit more value from them.
Clearly, the perspectives presented above are grounded in the formal, rational model of IST strategy development, which provides useful insights into some of the key enablers of IST and business alignment. However, one aspect not considered in these perspectives is the organisation’s ability to embrace/exploit IST. It is feasible that an organisation’s ability to conduct IST and business alignment could be dependent on their IST maturity (Ward and Peppard, 2002).
Traditionally, stages of growth models have been used to illustrate levels of IST maturity. It is believed that as organisations embrace IST they go through various stages of growth/evolution, which affect its ability to utilise that IST. There are a variety of models available that focus on different areas of IST maturity. In these models an evolutionary curve represents an organisation’s experience of IST. As the organisation becomes more experienced with its IST capabilities it will mature and be able to exploit more value from them. The essence of most evolutionary models is one that acknowledges that the early data processing stage had no real alignment, but as management become aware of IST potential, they start to conduct top-down reviews, which eventually lead to management introducing IST planning processes. The business now becomes heavily involved in IST exploitation and leads the strategy development activities. At maturity, IST and business are integrated to deliver a sustainable competitive advantage. Clearly, the movements along the evolutionary curve illustrate a greater awareness of IST and therefore a potential need to consider strategic and functional alignment. Research conducted by Reich and Benbasat (1996 and 2000) highlighted the need to not only consider the high-level alignment issues (as discussed above) but also the changing characteristics of alignment throughout time. These changing characteristics cover long-term and short-term alignment and also the intellectual and social aspects of alignment. Table 2 presents critical insights into the detail of alignment undertaken by management during IST strategy development. What is noticeable is that short-term alignment has more detail and support whilst the long-term alignment tends not to be supported in as much detail.
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Strategic Information Systems Knowledge – IST and Business Alignment
Focus Level of communication between Business and IST Executives Level of connection between business and IST plans Level of shared knowledge influencing business and IST personnel communications Level of shared knowledge that influences the connection between business and IST plans Success in IST implementation that will influence communications between business and IST Success in IST implementation that will directly influence the connection between business and IST plans
Short-Term Evidence Supported
Long-Term Evidence Not Supported
Supported
Not Supported
Supported
Weak Support
Not Supported
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Not Supported
Supported
Not Supported
Not Supported
Not Supported
Table 2: Long and Short-Term Alignment (Adapted from Reich and Benbasat, 2000)
Reich and Benbasat (2000) also highlighted the need to consider the intellectual and social alignment between business and IST areas of an organisation. The intellectual aspect focuses on the methodologies, business objectives, plans and planning activities utilised throughout the alignment processes. Whilst the social alignment – that has been neglected in the majority of the IST strategy literature – focuses on the actors, timings, decisions and communications throughout the alignment activities. This stream of research extends the more formal insights into business and IST alignment by providing a ‘softer’ perspective of the situation. In fact, a more sociointellectual framework of alignment can help explain how business and IST alignment can be accomplished. This stream of research extends the more formal insights into business and IST alignment by providing a ‘softer’ perspective of the situation. In fact, a more sociointellectual framework of alignment can help explain how business and IST alignment can be accomplished (Kim, 2003).
It could be argued that a number of sociointellectual factors potentially affect the alignment of IST and business, including: top management support, shared domain knowledge (i.e. synergies between groups involved in the processes) and market trust (expectations shared by IST and business individuals).
IST alignment can impact on business performance depending on the success of social and intellectual alignment issues (Kim, 2003).
The importance of social alignment is clearly argued by Enns et al: “In order to develop and bring to fruition strategic information systems projects, chief information officers (CIOs) must be able to effectively influence their peers.” Enns et al (2003: 155) Alignment of business and IST activity must therefore occur at every stage of strategic development for which IST executives have a major role to play. The research by Enns et al (2003) argues for a new proactive role for senior IST executives, in that they need to be able to influence the business audience in a number of areas, including: providing compelling, rationally argued cases for new proposals, not to be too pressurising with ideas, be careful with coalition tactics, use personal appeal and provide a consultative role to the business. Key strategic decisions need to be made by both business and IST executives covering areas such as IST spend, critical business processes, service levels and accountability (Ross and Weill, 2002).
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Strategic Information Systems Knowledge – IST and Business Alignment
References
Enns, H., Huff, S. and Higgins, C., 2003, CIO Lateral Influence Behaviours: Gaining Peers Commitment to Strateigc Information Systems, MIS Quarterly, pp 155-175, Vol 27 No 1. Jeffery, M. and Leliveld, I., 2004, Best Practice in IT Portfolio Management, MIT Sloan Management Review, Spring, pp 41-49. Kim, K., 2003, A Socio-Intellectual Framework Empirically Testing The Factors Affecting The Alignment Between Business and IS Strategies, pp 2795 – 2800, AMCIS 2003, US. Scott-Morton, M, 1991, The corporation of the 1990’s: Information Technology and Organisational Transformation, Oxford University Press, New York. Henderson, J. and Venkatraman, N., 1993, Strategic Alignment: leveraging IT for Transforming Organisations, IBM Systems Journal, Vol 32 No 1. Reich, B. and Benbasat, I., 1996, Measuring the linkage between business and Information Technology, MIS Quarterly, pp 55-82, 20(1) March. Reich, B. and Benbasat, I., 2000, Factors that Influence The Social Dimension of Alignment between Business and Information Technology Objectives, MIS Quarterly, pp 81-113, 24:1. Ross, J. and Weill, P., 2002, Six Decisions Your IT People Shouldn’t Make, Harvard Business Review, pp 85-91, November Ward, J. and Peppard, J., 2002, Strategic Planning for Information System, 3rd Edition, John Wiley, UK.
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