INFORMATION TECHNOLOGY AND BUSINESS STRATEGIES ALIGNMENT
ABSTRACT
In the world we are in today, it has become a general belief that effective business strategies will always proffer business solutions in order to meet organisational objectives; however the advent of Information Technology (IT) being infused into business has made IT strategically important in business organisations. Lately, there has been a need for business organisations to make IT strategies translate well into business value.
This report will look critically into how to build the right alignment between IT and business strategies by developing a critique of a research work by Smith, H. et al.
To create an insight into the topic issue, a brief summary of the research work was reviewed.
Various literatures were reviewed and analysed so as to get historical enquiries and fundamental analysis; these reviewed literatures were then used to back up the exploration of the topic issue.
A critical review of the research were discussed accordingly in order to show the strengths and limitations of the research, recommendations were made based on earlier established literatures, personal opinions, experiences and ideas of other professionals.
Finally, major conclusions were drawn from all discussions to show what it requires to develop the right alignment between IT and business strategies.
INTRODUCTION
Business executives are becoming more appreciative of how information technology and systems are affecting their business organisation, which has made them focus more attention on achieving successful relationships between information technology and business strategies.
In this vein Smith et al (2007) gave their views and highlight them in a publication titled “Developing Information Technology Strategy for business value”
SUMMARY OF THE REPORT
The report started with a brief introduction on the need for IT and business strategies to support and complement each other in relative to business objectives. The findings of the study are based on focus group research methodology using senior IT managers from 15 different organisations.
The report looked critically into the position of IT strategies with business organisations over the years, how it is now and brief propositions for IT strategies in the future were also considered.
Furthermore, the study highlighted five critical success factors for developing IT strategies, their relative significant and consequence; also pointed out what organisations should concentrate on and how to do it in order to accomplish productive IT strategic practices that are dynamically linked with business strategies were also discussed using relevant responses from the focus group.
A set of challenges that can hinder proper alignment between IT and business strategies were identified.
Finally, conclusions were made based on the view of the focus group that IT and business alignments are still in the very early stages, with a lot of potentials to be derived if properly aligned.
LITERATURE REVIEW
BUSINESS AND INFORMATION TECHNOLOGY STRATEGIES
The increasing growth in information technology has offered business organisations limitless possibilities; therefore it is no surprise that the relationship between business and IT strategies has received a significant attention lately (Beats, 1992). Goldsmith (1991) also confirms that IT strategy cannot be formulated independently of business strategies; therefore any productive IT strategy must be developed in line with business strategy (Henderson & Venkatraman, 1993; Nugent, 2004).
Business strategies according to (Broadbent & Weill, 1993) “is an analytical management tool used for planning a future business path”; it addresses the internal and external business environment, the approach to competition, vision and allocation of company resources, which calls on strong commitment in its formulation. Also IT strategies are similar to business strategies but the concentration is particularly on technology.
ALIGNMENT BETWEEN BUSINESS AND IT STRATEGIES
In the past several years, weaving together business and information technology strategies has always been elusive (Broadbent & Kitzis, 2005) and has long been a critical issue for organisations (Kramer, 2005), which resulted in organisations trying to form a proper alignment between IT and business executives.
Today it has become evident that IT strategies have to be developed in the same process and at the same time as business strategies (Glaser, 1993) and consequently the issue of alignment is now discussed higher than ever.
There are various views through which different authors have described the alignment. Wikipedia (2007) defines Business and IT alignment as a “desired state in which organisation is able to use information technology effectively to achieve business objectives” and Broadbent and Kitzis (2005) defined it as a well-developed approach which helps business and IT executives to clarify, articulate and link their strategic context, business, initiatives and changes. And Beats (2007) also argues that alignment is the degree which business strategies induced, enabled and supported by IT strategies.
In general, alignment of business and IT strategies is all about united and simultaneous organisational processes and which are mutually executed.
NEED FOR ALIGNMENT
The main intention of developing alignment between IT and business strategies according to (Glaser 1993) is to ensure that there is a strong and clear relationship between the two to attain organisational goals, however Goldsmith (1991) in Linking IT Planning to Business Strategies argues that business strategic plans are widely accepted, but the use of IT is not so widely practice, hence, need for alignment.
The need for alignment became something of significance in the early 1990s when there are greater infusion of IT responsibilities in business (Broadbent and Kitzis 2005) and being used for functional purposes and competitive edge (Lincoln, 1990). More so, in the early 2000s, the increasing use of Internet for e-business has made the relationship between IT and business strategies unclear (Goldsmith, 1991).
At large, IT and business executives according to Block & Gomez, 2009; Henderson & Venkatraman, 1993 and Nugent, 2004, find it difficult to bridge the gap due to differences in “objectives, culture, incentive and mutual ignorance for the other group’s body of knowledge” (Wikipedia, 2007), therefore to strike a right balance a proper alignment between the two is required.
MAJOR INFLUENCING FACTORS
While there are so many factors that can influence business and IT strategies alignment positively or negatively; previous studies identified three major factors that can influence alignment which are people, process and structure (organisational and external factor) (Broadbent & Weill, 1993; Kramer, 2005; Mathur & Kenyon, 1997)
According to Broadbent & Weill, (1993) the right people in the right place at the right time will always play a major role in business and IT alignment and Johnson & Scholes (2000) also supported it by saying it is people that communicate to make decisions, people are managers and people carry out the organisational activities. Also a goal relationship between business and IT executive is as a result of good organisational structure and work processes, which often lead to strategic alignment (Sawy, 2003; Broadbent & Weill, 1993; Lincoln, 1990).
BUILDING A SUCCESSFUL ALIGNMENT
While many factors contribute to well-integrated business and IT strategies it usually rests on few key principles (Lincoln, 1990; Henderson & Venkatraman, 1993). Beats (1992), in Aligning Information System with Business Strategies, saw a successful alignment as understanding business opportunities through IT by making sure IT strategies be in line and consistent with business needs (Nugent, 2004), while some much earlier reports (Goldsmith, 1991; Lincoln, 1990) understand successful alignment between business and IT as a way of having competitive edge.
Sawy (2003) thinks that to build a successful alignment means the ability to demonstrate positive relationship between information technology and the accepted measure of business performance. He also argues further that lack of mutual understanding will always lead to failure to produce the desired result.
In general, (Henderson & Venkatraman, 1993; Broadbent & Weill, 1993; Kramer, 2005) all concluded that successful IT and business alignment is as a result of a well-crafted and designed alliance, which is centred on business objectives.
CRITICAL REVIEW: DISCUSSIONS AND RECOMMENDATIONS
The report paid attention to developing proper IT strategies that support business goals, however since it has been established that “there is no well-developed IT strategy development process” (Smith et al 2007) therefore it is worthwhile to critique the report.
RESEARCH METHODOLOGY
It is very easy to ask why the authors chose focus group research methodology despite its numerous limitations. “Focus groups are group discussion organise to explore people’s views and experiences on a specific set of issues” (Fern, 2001), it entails a continuous communication between moderator and participants as well as amongst the participants.
The authors highlighted some good reasons for using focus groups, however having 15 IT managers in one day means the small number of people for the magnitude of the topic issue will limit significantly the generalisation to a larger population.
Again the live and immediate nature of the methodology may bias the result because of the differences that will be exhibited by dominant members and members that are hesitant to talk.
One last criticism on the research methodology is what is termed “missing links”; the implementation of information systems is not always by IT managers. Therefore not involving the middle men like technicians, technologists, supervisors to mention but a few of them, will definitely amount to missing vital information.
IT STRATEGIES: PAST, PRESENT AND FUTURE
To start with, the authors specified that the job of IT executives in the past was to understand the business strategies and figure out a plan to support it, which are often on short term basis. However this is difficult to demonstrate as it was not specified when precisely in the past, because information systems of the 1990s are totally different from that of the 1980s; it is also to be noted that in the past people tended to commit themselves to long term IT plan because of newness and opportunities perceived (Kramer, 2005), unlike these days when IT is changing fast and drastically, people only think about short term investment on IT, and some typical examples are mobile phones, computer systems and the CD-DVD-Blue ray transformation.
Again, the present description of IT strategy as flexibility, speedy and innovative are quite right but the fact, as described by the authors, that it causes competition by sabotage and harassment can slightly be argued. Take for instance, if Tesco should say they have products cheaper than Asda; it is simply a marketing strategy (advertisement). However, one can argue the media is through the use of IT but all these can still happen without proper information systems in place. Therefore it will be right to say IT only contributes but does not take the sole responsibilities of the unnecessary competitions.
Future propositions of IT strategies are to be devised in such a way that business strategies must become evolutionary and interactive with IT, but the biggest question here is whether business strategies can move as fast and as drastic as IT strategies.
SUCCESS FACTORS FOR DEVELOPING IT STRATEGIES
REVIST A BUSINESS MODEL
The authors describes business models as different pieces of business fit together to ensure everyone in an organisation is focused on business processes, however revisiting a business model cannot solve the differences in business focus and IT idea. A professor once asked his secretary to distribute examination papers to his students, the secretary later discovered the questions were the same as that of the previous year; she asked “won’t the students know the answers already” the professor replied “the questions are the same but the answers are different”. The same is true of IT strategies and business value because IT managers have ideas and innovation that changes rapidly, and business managers have their business focus, which remains the same. Therefore understanding business models may not be sufficient enough, like understanding the business model and its useful contemporary information systems.
ADOPTING STRATEGIC THEMES
Adopting strategic themes is described by the authors as a carefully crafted programs that focuses on developing business capacity, however different literatures have revealed that this should be more than a mere adoption and focus, but also linking IT strategic planning to business goals.
GET THE RIGHT PEOPLE
A perfect IT strategy with business objectives can be ruined through haphazard execution, therefore I agree with the authors about getting the right people involved, the result of which leads to good alignment.
WORK IN PARTNERSHIP WITH BUSINESS
It is generally thought that when IT managers work hand in hand with business managers it is resulted in an effective strategising (Broadbent and Kitzis 2005; Nugent, 2004); the authors equally agreed with the idea, nevertheless, they failed to mention how to work in partnership with business. A few of the ways to achieve this is by having an effective communication, alignment facilitating systems, a consensus between CEO and CIO, to mention but a few.
BALANCING IT INVESTMENT OPPORTUNITIES
The authors mentioned business improvements, business enabling, business opportunities, opportunity leverage and infrastructures as ways of balancing IT investments. While I agree with each of these points to a degree, from my point of view workers resistance to IT, difficulties in decoding secured codes by IT specialists and so on will still play vital roles in achieving all opportunities mentioned.
BRIDGING THE GAP BETWEEN IT AND BUSINESS STRATEGIES
The authors suggested five practices in order to ensure a properly developed IT strategy.
The first practices as proposed by the authors from the focus group research methodology is to have a frequent review of planning and budget; experiences have pointed out that frequent review of planning and budget means frequent changes in organisation systems and invariably, their goals.
Another point mentioned was getting the right architecture, there are many methods the authors proposed but there is only one viable practice, which is Business/IT initiated and Business/IT validated architecture.
It is undeniably a very good option to have reasonable spending that is focused on discretionary and strategic funding.
Having IT/Account managers to synchronise IT and business strategies will be a good idea, however it leads to power tussle with business manager and in a case where the sole responsibilities is on the IT/Account manager, it leads to monopoly of power. I would like to think on this practice that IT managers should be allowed a proper training, focused on business area so as to have a clear idea of the business goals.
Lastly on this section, it is worth agreeing with the authors that it is important to set the right priorities in order to achieve good practices.
CHALLENGES
Five challenges which includes Governance structure; clarity and consistency about who takes decision; planning and budgetary; Business and IT managers knowledge of strategising and getting the right people, but in retrospect, challenges like risk anticipation, constraints, etc from IT’s point of view can generally be summarised into the following:
- Technical challenge: will the system function as it should?
- Organisational challenge: will individual within the organisation use the system as they should?
- Business challenge: will the implementation and adoption of the system translate into business value. (Henderson & Venkatraman, 1993)
CONCLUSION
It can be established from review of the report and other related literatures that many organisations experience difficulties in linking business and IT strategies, the result of which may either enhance or hinder business goals. However, the most essential thing is not the technology but how business and IT executives work together at all level of the organisation to implement a proper alignment between IT and business strategies.
In summary, achieving a proper alignment between business and IT strategies is all about good organisational governance with vision, motivation, effective relationship, goodwill and process capabilities that strikes the right balance between IT and business strategies.
REFERENCES
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