Impact of Aligning Business - Case Study Example

Impact of Aligning Business Table of Contents Introduction 3 Overview 3 Alignment Model – Jerry Luftman 4 Analysis 7 Comparative Study 9 Challenges 10 Change Management 11 Conclusions and Recommendations 12 References 12 Bibliography 15 Introduction The only thing constant in today’s business environment is ‘change’. The constantly changing scenario of the business process and environment has contributed to enourmous competition in almost all the business sectors. To cope with the changing scenario, business organisations through out the world are deeply involved on constant research, development and innovation. With the improvement in communication and information technology in modern times, the business organisations and firms have thought of integrating their business processes. The integration of the various processes with in the business organisation undoubtedly contributes to the increased efficiency. Also integration reduces wastage of resources and plays important role in determining and assigning clear chain of authority and responsibility. Overview In recent times with the boom in the service industry, business firms are observed to spend heavily on integration of various processes and strategy alignment. But in order to have the benefits of integrating mechanism, the firms generally face two hindrances namely technological shortfall and strategic shortfall. Technological shortfall refers to a situation when information technology framework of the organization is unable to meet the requirements and support the strategies of the firm. The strategic shortfall is the reverse of the technological shortfall. It arises when the there exists an information technology framework with the organization but the business strategies fail to take the benefit of it (Tallon, P. P. & Kraemer, K. L., 1999). The strategic alignment is basically the integration of the information technology with the business strategy. The information technological framework of the organisation should successfully contribute towards the achievement of organisational goals. If not, the entire investment for research and implementation of the information technology set-up goes for a toss. Therefore, today with the usage of more information technology in the day-to-day as well as at the strategic level of business organisation, the alignment is becoming increasingly important. Alignment Model – Jerry Luftman As the alignment of the information technology with the business strategy has been studied, the essence of the successful integration can be assessed. In the segment of alignment with in the business organisations, model prescribed by Jerry Luftman is highly regarded by the experts. Jerry Luftman has been a noted specialist of business and information technology alignment. He had a notable career of twenty-two tears with the multi national giant IBM. He has in depth experience and research in the fields of information system, management consulting and education. Also, he has the credit of varied publications in these fields and is often referred as executive mentor and coach (Howe School of Technology and Management, No Date). Jerry Luftman has long ago identified the requirement of the information technology implementation in formulation of strategy of the business organisation. But in order to do this, he found certain gaps with in the process popularly known as ‘convergence of strategic alliance gaps’. The understanding of alignment convergence can be understood with the help of five steps namely initial process (it is the step where the business managers do not possesses and knowledge about the information technology), committed process (in this step the firm implements the framework and there is limited understanding of information technology), established process (here the managers have considerable grasp over the subject and has bridged the major gap), improved process (when in this step, it is assumed that information technology has proved its worth and there is increased encouragement to learn the subject among staffs) and optimised process (here the firm has bridged the entire gap and has completed the alignment) (Luftman, J., 2000). According to Jerry Luftman, there does not exist any hard and fast rule for the success of alignment in a business organisation. Dr Luftman believes there are six alignment criteria which have to be implied in the business organisations. They are also known as maturity categories and are as follows: Communication Maturity – Communication technology deals with proper understanding of information technology by the organisation. Dr Luftman presses the fact that even organisation has to understand the information technology. Competence or Value Measurement Maturity – Competence maturity measures basically the information technology metrics, business metrics and the balanced metrics. The business organisation must take initiative to have formal review of the situation after deploying the information technology structure and not just be contended with the fact that they are implementing it. Also, the organisation must take steps to improve it on continuous basis. Governance Maturity – The governance maturity deals with the planning in both the segments i.e. business strategy and information technology. It also includes the controlling techniques like budget and considers the structure of the organisation. This level of maturity even deals with the prioritisation of the organisation and formation of steering committees accordingly. Partnership Maturity – Partnership maturity talks about the relationship in between the information technology organisation and the business firm. The partnership criteria essentially involve the shared goals and knowledge. In addition to it, the partnership criteria helps in enhancing the trust in among the business organisations and the business and make way for long term relationship. Technological Scope Maturity – Technological scope maturity calls for flexible infrastructure with in the business organisation. This level of maturity also intends transparency among external parties i.e. business partners and customers. Technology scope maturity or simply scope maturity seeks to standardise the business processes and also longs for customisable solutions for the consumers. Skills Maturity – Skill maturity comprises the issues related with human resources with in the organisation. It deals with the hiring and retaining of the employees. The skill maturity also contemplates on career development and training. The factors like locus of power and readiness to change are also with in the spectrum of skills maturity (Luftman, J.N., n.d.). Analysis Metalco has been a leading producer of metal products with operations in more than 30 countries and with direct employee force of more than 30,000. Also many were involved with the company as external parties. The company was facing challenges because of globalisation and the economic crisis of Asia in the mid nineties. The company tried to align its business organisation with the information technology by the following ways: Communication Maturity – To have proper communication in a decentralised organisation like Metalco, the emphasis was laid to develop a frame work of information technology so that communication becomes smooth and fast. Competence Maturity – The company was decentralised in nature like most of the multinational companies. But with the project on financial re-engineering, Metalco decided to implement a sort of federal and centralised information system architecture. Governance Maturity – Metalco was committed to implement information technology framework with in the company. To go with the idea, the company even generated a new post with in the hierarchy named vice-president of information technology. Altogether the company tried to develop a new governance model. Partnership Maturity – The global finance project undertaken by this giant producer of metal products had intended to enhance shared vision by investment in information technology among the various layers of the organisation. Technological Scope Maturity – In the wake of prolonged recession, Metalco had a series of new priorities. They decided to reduce production cost further. More emphasis was laid on the research and development. The company also planned to generate more value for the shareholder. Metalco decided to reduce the overhead cost and undertook major divestment drive. Skills Maturity – The company though tried to develop a broad spectrum of information technology architecture, still it was found that most of its senior employees failed to grasp the implications and essence of the initiative. To resolve the issues, company tried to meet its target with priority in training and development and creating new posts of vice-president. Semi Corp is a semiconductor producing company headquartered at Taiwan and with its branches at United States, China, Europe and Taiwan. The company deals with integrated packaging service like tap carrier packing, chip on glass and water bumping. The company tried to align the information technology with the business organisation, which can be understood with the model prescribed by Dr Luftman as follows: Communication Maturity – At the outset i.e. at the start up phase, the company had an enterprise resource planning architecture which was not apt. But in the diversification stage, after merging with other companies, the company had thirty professionals from different sites serving the purpose. There was regular communication with users and vendors. Competence Maturity – Steps were taken to enhance the level of competency of the members of the organisation. The previous ERP framework was replaced by new integrated ERP framework. The staffs were also involved in developing themselves as they learn from the external consultants. Governance Maturity – The governance was in a new mode. More emphasis was laid on understanding business with the help of information technology. Technical skills were given priority and effort was on to build problem-solving attitude. Partnership Maturity – The knowledge of new integrated ERP framework learnt from the consultants was shared among the employees who resulted in shared values. Even the new MES framework contributed towards the advanced knowledge and application of manufacturing process. Technological scope Maturity – The number of mergers through which the company underwent resulted in complex and stiff applications. The Skill Maturity – Requisite steps were taken by the Semi Corp to have required skills in place. Primarily, the number of information technology professionals were increased from thirteen to thirty and then most importantly, new director was recruited for information and technology who was authorised due power and he changed the ongoing applications of reliability and flexibility. Comparative Study Metalco tried to implement an IT structure so that there is proper communication among various levels. Semi Corp, thought of the architecture to align the communication in among the vendors and users from different sites. The Metalco decided to enhance the competency by opting for centralised architecture where as employees of the Taiwanese company upgraded themselves in association with the external consultants. Both the companies thought of implementing new governance model as Metalco hired at new positions of IT and Semi Corp implemented problem solving approach. The UK based company had shared vision of IT investment with different levels with in the organisation where as at Semi Corp, newly learnt techniques of IT were shared among different layers as a component of partnership maturity. Metalco had a different set of priorities for the criterion of scope maturity triggered by the global recession. At Semi Corp it was presumed that the scope maturity criteria could be fulfilled with business understanding, information system planning and continuous architecture planning. Metalco, in order to meet the skill criterion, initiated training and development programmes and recruited new members. Semi Corp also recruited at the position of Director who changed certain procedures to enhance skill. Challenges To have successful alignment of information structure and business organisation, Metalco faced certain problems. In the first place the company lacked corporate IT vision. The lack in clear-cut vision resulted sponsors to back out. As there was no such vision, the top management viewed implementation of information technology as the functional process and did not pay much attention. In addition to it, communication in between various vertical and horizontal were weak. The alignment was also hampered as the business model intended at decentralised structure where as the applied technology architecture had more centralised features. Alignment of information technology framework with the business model in Semi Corp faced major hindrance as the changing nature of the business strategies. The IT professionals prepared business plans but to cope with the changing environment, the business plans often changed. Non-involvement of IT managers in the strategy formulation also slowed the pace of successful alignment. To ease the learning and fast integration, the concerned managers opted for inferior quality application that was compatible with the ERP system of the company which in turn affected in the long term. It can be assessed from the case that there was lack of integration in between business and IT which in turn hampered alignment. Change Management Change manage can be defined as the set of procedures inculcated with in the business organisation to make sure that major changes are implemented in an orderly and planned way to give effect to the organisational change. I is often with the ADKAR (Awareness Desire Knowledge Awareness Reinforcement) model (tech-faq, n.d.). As Metalco faced with number of problems like prolonged economic recession and the threats of globalisation, change management was the need of the hour for the giant. In addition to that the company was also looking for newer markets in the global scenario. The Semi Corp, was facing from poor standard of enterprise resource planning architecture and inappropriate MES.Along with that the company faced intense competition with the ever increasing competitors and the customers retained with the company wanted to have high quality at the lowest possible price, Therefore, change management was must for the Semi Corp. Conclusions and Recommendations Today it has been beyond doubt that the alignment of information technology is must for the business organisation. With the rising competition, the business organisations are to be integrated with the information technology for efficient performance. Metalco, in order to achieve proper information system framework, should have had proper vision at the corporate level. All levels of employees should have shared the idea and there should be clear line of distinction in terms of flow of information in between operational and the managerial level. Also, adequate amount of should have been invested and there should be proper commitments towards information technology from the point of view of the management. On the other hand, Semi Corp, tried with easy and cheap information technologies. It served the purpose of the company in the short run but in the longer period the company had to replace it continuously. To reap the benefits of proper alignment, it is important that the managers of the company understand the underlying benefit of alignment and take honest initiatives towards alignment. There should be clear understanding of the business vision and apt decisions should be taken in all the life cycle stages. References Howe School of Technology and Management, No Date. Experience and Service. [Online] Howe School Faculty. Available at: http://howe.stevens.edu/people/full-time-faculty/?no_cache=1&faculty=663 [Accessed June 8 2009] Luftman, J., 2000. Addressing Business – IT Alignment Maturity. 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