Alignment of Business and IT Strategy - Essay Example

Alignment of Business and IT Strategy; Rathman, Johnsen, & Wen (2004-2005 0 Recent advances in technology have made it a necessity to aid business strategy in the 21st century. It is recognized that IT strategy aids in the development, or drives, business strategy and its implementation. Current understanding of the issue is that business strategy plus IT strategy is critical to the effective and efficient functioning of an organization. It is important to identify how to control for those factors which directly affect the alignment of business strategy and IT. The present study took a case study approach of a Fortune 50 financial company. Using an interview method, the participants were senior executives of the company. However, it is yet to be determined that alignment issues exist, and if they do how to control for these gaps. The results showed that to enhance business strategy there must be a focus on the organizational vision and improvement of communication of business strategy and vision. The alignment of the two organizational elements, were concluded to be directly affected by the coherence of a business department. Overall, it was recommended that a robust business architecture be developed, and that the organization create a separate and centralized IT department. 2.0 Introduction During the past three decades IT ahs become essential to business operations. Initially IT was distributed over departments; decentralized; specialized; and limited in application. However, the authors do not provide insights as to why IT "increased and spread"; only examples of how. A common solution in the past was to have a separate IT department; however this was found to limit effective communication between IT department and other departments. The suggestion of IT departments reporting directly to management can create internal "politics". Management often prioritizes the issues and this can lead to resentment of IT staff by the end users in other parts of the organization. The isolation of IT strategy can also draw a significant amount of resources away from the overall business strategy. As a consequence, non-alignment increases costs in time, money and organizational harmony. 3.0 Literature Review Since the early 1980s alignment of IT and business strategy has been realized as a critical need. The primary inhibitors identified over time have included; the IT department not prioritizing efficiently; and IT management lacking leadership. Models have been developed such as; 1) Strategic Integration Systems Planning (SISP); and 2) strategic integration across the entire organization. Solutions to date for effective alignment are; 1) communication and understanding; 2) business ownership and accountability for return on IT investments; 3) rapid strategy development driven by climatic business changes; and 4) enhance the internal competencies of the business. 4.0 Method The method used to include the Alignment of Business and IT (ABIT) department of the Fortune 50 company to aid in the coordination of the project. The ABIT department created a list of potential employees who were considered to have a "balanced perspective". This is a limitation isn't that a random sample was not selected, and so the results cannot be generalized to other organizations, as the sample is not representative of the wider population. Instead, selection criteria could have been used to operationalize what a "balanced perspective" was. Three groups were created; 1) one having a business perspective; 2) one having an IT perspective; and 3) one having a "balanced" perspective. However, a pre-test could have been done first to identify a priori knowledge and to place people in groups based on their current knowledge. The questions for the interviews were developed with the aid of ABIT to identify gaps, however no information is given as to how these items were selected and if they were tested for their reliability and validity. Each group was interviewed with questions thought to be relevant to their knowledge. This makes comparisons across groups very difficult. Further it lowers the confidence in the results as the same questions were not provided to each group. Each interview took on average 90 minutes; all the participants who were invited to take part did so, and the interviews were recorded and transcribed for analysis. Unfortunately the method of analysis was not mentioned. Content analysis would have been appropriate, providing that intercorrelation of assessor categorizations was done and found to be moderate to strong. 5.0 Results In summary, it was found that almost all participants agreed that alignment gaps exist and that the IT department currently has little input to business strategy decision-making. Many participants noted that IT tends to be an afterthought within the organization, and that its consideration tends to be brought in after the strategy is determined. Some consider IT inclusiveness in strategy development as not being ideal as it would drive the strategy. Methods identified to improve alignment included IT project prioritization. It was also thought that the lack of business strategy was thought to be a dominant barrier. 6.0 Conclusions In conclusion, alignment gaps appear to exist within the organization of the case study. These are thought to be predominantly due to a lack of business strategy and communication of this strategy to other sectors of the organization. This reflects a lack of integration across the organizations departments. The dominant solutions appear to be; 1) articulated vision and strategy; and 2) create business architecture; 3) enhance business strategy development processes; 4) enhance collaboration. The authors recommend that more case studies be done using this method to be able to generalize the results. And they note that the nature of the business, organization size and organizational culture can affect executive perceptions of IT-business strategy integration. 1.0 Abstract Information systems (IS) and Information technology (IT) has rapidly increased in need in the business world globally. As such strategic planning of IS/IT is seen as essential to e-strategy. And although many models and strategies exist to guide decision-making, there appears to be ongoing problems with implementation. It needs to be more widely recognized that IS/IT issues are due to more than technological factors. A factor often ignored is the interrelationship between IS/IT and the organizational context. The present article reviewed secondary data to identify organizational mechanisms having a direct effect on IS/IT strategy planning, and consequently the effective and efficient application of that strategy. It was anticipated that this research would contribute to better planning and e-strategy implementation. 2.0 Introduction The integration of IT, SP and ISSP is conducive to organizational integration as a whole, increased effectiveness. The rapid growth of e-business and e-commerce has had a large impact on the growing importance and reliance on IS/IT, this is particularly so in the case of ISSP. ISSP requires long-range planning to ensure; continuous funding; adequate and reliable human resources; efficient and effective technical expertise; optimum and cost-effective hardware and software. Improvement of strategic planning of IS/IT has been thus been identified as a priority issue in the business community. There are various to suggest improvements, including; the use of surveys to identify strategic issues (e.g., effectiveness of IT planning); noting ISSP prescriptions and profiles; the identification of alignment factors between business and IT; and the use of case studies (e.g., IS maturity and effect on ISSP; opportunistic strategy formation; IS planning practices in a strained environment). Yet, despite the number of strategies that exist, organizations continue to fail in the implementation of IS/IT strategy. Failure may be linked to a lack of alignment of IS/IT strategy and overall organizational structure. A review of literature to date on the subject was considered appropriate to identify the actual organizational mechanisms that are mediating the success of IS/IT strategy. 3.0 Literature Review Organizational environments of the 21st century have, and continue to, rapidly change. Over the past two decades especially, dramatic IS/IT changes have occurred as strategies shift to fit the mode of implementation; 1) technology-led align mode; 2) align mode impact mode; 3) impact mode fit mode. With regard to point one, technology was initially focused upon; and so technological development was oriented toward improvements of computer systems, and management of those systems. However, this bottom up approach of production enhancement did not clearly identify its strategy, and this is attributed to a lack of knowledge about what the organization needed, and available information resources at the time. With the growth and development of IS management, business-driven ISSP applications were focused on. Although, these business strategies tended to be uni-directional, as an align mode of strategic planning for IS/IT strategies focuses on information systems to achieve business outcomes. Turning now to the second shift, critics pointed to the unnecessary emphasis of relying on the quality of any given business plan, were reactive and took too much time to analyse and process a data model. This was contended to negate the concept of strategic planning. During the 1980s IS/IT applications and opportunities were recognized as providing competitive edge. As it became clear that these factors interacted with business strategy, it was obvious that IS/IT was not unidirectional. As such, an impact approach saw IS/IT strategy as business analysis. It aimed to develop and provide support for novel applications of IT. The third shift is grounded in the understanding that IS/IT -business strategy interaction affects all aspects of an organization. And that failure can be attributed to a lack of insight into contextually dependant factors that influence this interaction. To fit the mode approach understands that the integrated strategy must align with organizational culture, and the skills and competencies of employees. Now looking at the organizational mechanisms that allow alignment to fit the mode; the authors of the article identified; 1) group interaction mechanisms; 2) knowledge management mechanisms; 3) organizational learning mechanisms; and 4) change management mechanisms. Point one advocates that group interaction can develop and expand on the skills of the members within the organization, especially in regards to identifying alternate solutions to problems. As IS/IT-business strategy integration is a problem solving process this mechanism is important. It is critical that all stakeholders be involved in the decision-making process. Knowledge management systems include the systematic and active management and leverage of organizational information resources. Business knowledge, organizational-specific knowledge, IS/IT knowledge and management competencies. The organizational learning mechanism comprises organizational theory; business; management; and innovation. Learning processes can integrate all levels of a business. Knowledge is stored in an organizations policies, procedures and protocols. And the formation of a strategy is a learning process in itself. Finally, change management mechanisms. Change is inclusive of behavioural, processes, and the values of an organization. Both internal and external factors are involved, and change may be positive or negative. A systems approach is required that involves management support, preparation for change, the encouragement of participation, and the provision of rewards to support change and enhance communication. Education and inclusive participation are recognized as critical to ensure that change occurs optimally. 3.0 Implications Ultimately, the innovative approach to IS/IT-business strategy provides businesses with a competitive edge. This article has extended knowledge and understandings of the organizational elements that have been neglected in the past. Alternative perspectives focus especially on organizational mechanisms. However, it remains clear that no best method exists (i.e., because the process is complex and each organization are unique). This is mainly due to the diversity in strategic planning that exists between manufacturing and service. The identified organizational mechanisms are able to act as a reference guide when strategic planning takes place. Read More