Business To IT Alignment

TOPIC 4: Business/IT Alignment
Alignment
• It is the capacity to demonstrate a positive
relationship between technologies and the
accepted financial measures of performance
• It is the dynamic state in which a business is
able to use IT effectively to achieve business
objectives – typically improved financial
performance or market competitiveness
• Is an ongoing process.
• Has remained a major issue for over a decade.
• Does not have a single answer or strategy for
everyone.
• Focuses on improving the relationships between
the business and IT functional areas.
• Works toward mutual cooperation and
participation in strategy development
How to achieve alignment?
• Integrating facets of their business into each
other.
• Organisations must rotate both IT and
business professionals across different
departments and job functions.
• Organisation must provide clear and specific
goals to both IT and business employees
• The business must ensure that IT and business
employees understand how the company
makes or looses money
• An organisations culture must embrace IT as
an enabler and integral part of the long term
success
Hindrances to BUS/IT Alignment?

Strategic Alignment Model
• By Venkatraman, Henderson and Oldach
• It focuses on improving the relationship between
the business and the IT functional areas.
• A framework for achieving alignment of IT with a
defined business strategy
• Framework for positioning and directing strategic
role/ management of IT
• Framework for leveraging IT on a continous basis
to achieve sustainable competitive advantage
• BUSINESS STRATEGY
• Business Scope – Includes the markets, products, services, groups of
customers/clients, and locations where an enterprise competes as well as
the buyers, competitors, suppliers and potential competitors that affect
the competitive business environment.
• Distinctive Competencies – The critical success factors and core
competencies that provide a firm with a potential competitive edge. This
includes brand, research, manufacturing and product development, cost
and pricing structure, and sales and distribution channels.
• Business Governance – How companies set the relationship between
management stockholders and the board of directors. Also included are
how the company is affected by government regulations, and how the firm
manages their relationships and alliances with strategic partners.
• ORGANIZATION INFRASTRUCTURE
• Administrative Structure – The way the firm organizes
its businesses. Examples include central, decentral,
matrix, horizontal, vertical, geographic, and functional.
• Processes - How the firm’s business activities (the work
performed by employees) operate or flow. Major
issues include value added activities and process
improvement.
• Skills – H/R considerations such as how to hire/fire,
motivate, train/educate, and culture.
• IT STRATEGY
• Technology Scope - The important information applications
and technologies.
• Systemic Competencies - Those capabilities (e.g., access to

information that is important to the creation/achievement
of a company’s strategies) that distinguishes the IT services.
• IT Governance - How the authority for resources, risk, and

responsibility for IT is shared between business partners, IT
management and service providers. Project selection and
prioritization issues are included here.
• IT INFRASTRUCTURE
• Architecture -The technology priorities, policies, and
choices that allow applications, software, networks,
hardware, and data management to be integrated into
a cohesive platform.
• Processes - Those practices and activities carried out to

develop and maintain applications and manage IT
infrastructure.
• Skills - IT human resource considerations (e.g. hire/fire,

motivate, train/educate, culture)
They are four different perspectives of bus/IT
alignment which can be classified into two
categories
1. Business strategy as the driver
a. Strategy execution perspective
b. Technology potential perspective
2. IT strategy as the enabler
a. Competitive potential perspective
b. Service level perspective
• Each perspective consists of three
components which show an interplay among
three key domains i.e anchor, pivot, and area
of impact
a. Anchor – it is the strongest area of the
business. It directs the change that business
goes through based on the perspective
b. Pivot – the weak area that is subject to
change through the realignment
c. Area of impact – represent the area that will
be directly affected through the changes made
in the pivot area through realignment
Business Strategy as the Driver(anchor domain)
• When the business strategy drives the change
forces in the SAM model, it serves as the
business driver applied to the domain.
a. Strategy execution perspective
Business I/T Strategy
Strategy
Organization
Infrastructure I/T Infrastructure
• The IT project portfolio directly meets the
wants and needs of the business community.
• IT projects and budgets can be directly tied
to the company strategy
• The interrelationships between business
strategy(anchor), the organisational
infrastructure and processes(pivot) and the
IS/IT infrastructure and processes(impacted)
• It means the business strategy is the driver of
both organisational infrastructure and
processes
• Most common and widely known perspective
for management that addresses how
strategic advantage can be attained
• It corresponds to the classical/hierachical
view management strategy
• The impacted domain i.e IT infrastructure and
processes is going to undergo changes that that
must happen due tochanges in the business
process.
Driver: Business Strategy
Role of top mgt: business strategy formulation
Role of IS/IT mgt: strategy implementation i.e
efficiently and effectively designs and
implementation of the required IS/IT
infrastructure and processes that support the
chosen business strategy
• Perfomance measurement criteria:
cost/service centred i.e assess the IS function
based on financial parameters e.g ROI
• E.g. some companies can reduce the time
required to do the processing of orders by
the use of IS after employing the Strategy
Execution perspective
• It can directly reduce the operational cost for
the entire process.
Technology potential/transformational perspective
Strategy
Organization
Technology potential perspective
• The interelationship between business
strategy(anchor), the IT strategy(pivot), and the
IS/IT infrastructure and processes(impacted)
• The approach involves the assessment of the
implementation of the chosen business strategy
through the appropriate IT strategy and the
articulation of the required IS/IT infrastructure
and processes.
• The role of IS/IT manager in this perspective is the
technology achitect, who efficiently and effectively
makes plans and implements the required IS/IT
infrastructure that is consistent with the IT
vision(scope, competencies, governance)
• The role of top mgt is to provide technology vision
that would best support the chosen business strategy.
• The performance measurement criteria is technology
leadership – the benchmaking approach can be used
IT Strategy as an enabler( anchor domain)
• When the IT strategy provides the change
forces in the SAM model, it saves as the IT
enabler applied to the domain to enable new
or enhance business strategies with
organisational implications
Competitive potential perspective

Strategy
Organization
• The interrelationship between IS strategy
(anchor), business strategy(pivot) and
organisational infrastructure and
processes(impacted)
• It concerns the development and use of
emerging IT capabilities to influence/ or
enable new business strategies, thus creating
competitive advantage to the business
• This perspective explicitly weighs how
emerging IT capabilities may be applied to
enhance the business strategy
• The executive mgt considers how to leverage
the emerging technology to achieve major
change (that may lead to business
transformation) by clearly stating the
emerging IT competencies and functionality.
• IS manager identifies and interpretes the
development and change process in the IT
environment to help the business managers
to be clearly aware and weigh the potential
opportunities and threats from an IT
perspective
• The performance criteria are based on
business leadership e.g market share,
growth, or new product introduction.
Service level perspective
Business
Strategy
Organization
• This alignment perspective represents the
interrelationship between IT
strategy(anchor), IS/IT infrastructure and
processes(pivot) and organisational
infrastructure and processes(impacted)
• It focuses on how to build and sustain a
world class information technology products
and services to the org
• This requires the executive and IT
management to understand the external
dimensions of the IT strategy with
corresponding to internal design of the IS/IT
infrastructure and processes, where the role
of the business strategy in this perspective is
an indirect process which is considered as
guiding to stimulate customer demand
• It aims to deliver the best value to satisfy the
customer demands by the alignment of IT
infrastructure
• It is appropriate to the service industry.
• The performance criteria are the degree of
the customers’ satisfaction
Strategic Technology Competitive Service
Execution Potential Potential Level
Nature of
Domain
Relationships
Role of Top Technological Business

Management Leader Prioritizer
Visionary Visionary
Role of I/T Functional Technology Business Service

Management Manager Architect Architect Manager
Enable Value-Add Business

I/T Focus Reactive/ Drive Value-Add
to within a
Responsive to Business
Business Business
I/T
Performance I/T Value to Product/Service Customer
Financial
Criteria Product/Service Value from I/T Satisfaction
Practitioners challenges in bus/IT alignment
Business context
• the first step in aligning IT with a business is to
understand that business. There will be a
range of business and technological contexts
to take into account i.e goals, systems and
processes of the target organisation need to
be researched, and strategies of competitors
• Further impacts/considerations must be given
to the possible impact of new technologies
• Alignment need to be forward-looking, rather
than being based on historical structures and
trends
Scope
• The scope and boundaries of the organisation
and IT under consideration must be clearly
defined
• Many organisations have complex, functional
and geographical boundaries that have
different stakeholder groups with conflicting
commercial and technological interests thus
alignment need to take account of the needs
of the wider organisation
Level of depth
• Another key consideration is the level of depth
to which business and IT alignment will be
addressed e.g when an organisation is
considering its IS strategy, a high level and
holistic view is needed across all business
activities
Hypothesis and Anticipation
• the route to business and IT alignment is
frequently unclear, with multiple options and
possible approaches that might achieve
alignment in relatively different ways
• To identify the optimal path, practitioners
should explore and test possible options at an
early stage as possible
• With early hypothesizing and visioning of the
future state, analysis and research can be
focused on validating or disproving key
candidate options, resulting in a more robust
and supportable outcome
The human dimension
• They are many factors that may cause people to
behave in ways that are seemingly dysfunctional
to the needs of business/IT alignment e.g
organisational politics, reputation protection and
conflicting budgetary priorities
• Practitioners need to be alert to these factors and
recognise when they threaten wider alignment
objectives
Flexibility
• They are many techniques for achieving
alignment with different strengths and
disadvantages.
• Practitioners must be flexible as to which
techniques are applied and be ready to adapt
to suit the needs of the organisation
concerned e.g SAM, SWOT, CSFs
Business exploitation of ICTs
Importance of ICT in contemporary
organisations
• Integration of information by working from a
centralized database
• ERPs improve efficiency of workflow by
reducing costly duplication of data
• Improve quality by having a full record of a
transaction available
• Provide opportunity for innovation based on
exploiting the integrated data that is made
available
Importance of ICT in contemporary
organisations
• Flatter, less hierarchical structures
• Cross-functional project teams
• Inter-organizational networking
• Globalization of business
Challenges associated with exploiting
ICT
• Orgs fail to realise benefits on ES because an ES is
not just a technical system but rather a socio-
technical system
• Orgs focus on design and implementation while
putting little effort and resources into post-
implementation exploitation through practise-led
learning.
• Maintenance of critical success factors:
 Project factors- ES projects often take several
years
ICT
Technical factors- inaccurate resource
planning
Organizational change factors- organizational
change resources are often reallocated to
technical problems that are almost inevitable
but not budgeted for.
• User Participation- it is not easy to get them
engaged:
ICT
Legacy thinking- it is difficult for users to think
outside the box and anticipate how they might
do things differently when they do not really
understand the technology
Vanilla implementation
Motivation- difficult to involve users in the
design stage as users are busy with their
ongoing work
.
ICT
• Unknown Benefits – an ES may have
affordances that can not be anticipated in
advance.
• .
Understanding ICT implementation
and use
This can be understood through some practise
perspectives
1. The first practise perspective emphasize that a
practise change each time it is enacted
2. Second practise perspective emphasize how
practises are socio-material i.e human
activities are entangled with material objects
3. ES can disrupt boundaries between
communities of practise
ICT
4. Emphasize how practise is heavily tied to our
sense of identity
5. Emphasize how people are ‘invested’ in their
practises- a community of practise takes time
to establish and once established, will be
reinforced.
.
Improving the exploitation of ICT
• See implementation as an ongoing and
iterative prosecc of design, implemenetation,
use, design, implementation, use and so on
rather than a single cycle
• Try to initially configure and customize the sw
so that it allows users to do what they could
do in their legacy system environment
• Recognise that it is difficult and problematic
to engage users in the initial design and
implementation phases of an ES project
• Encourage the emergence of communities-
of-practise where users share experiences
and stories about their ES use can be a
powerful mechanism to stimulate learning
• Provide users with an opportunity to
experiment with the ES system so that they
can begin to understand the system and its
potential
• See resistance as a source of ideas not
merely as a source of irritation.
• Compromise is necessary since it is not going
to be possible to create a unified system that
is best for everyone
Business Strategy for the Digital
World
Business Strategy for the Digital World
• New technologies have contributed to the
emergency of the digital economy based on
global networks of communications
• The digital economy is characterised by the
use of ICTs to undertake business processes
• The business strategies of firms have changed
to take advantage of the opportunities
presented by the digital economy
Attributes of the Internet in the
Business World
• Increasing efficiency in the processing of
transactions between buyers and sellers
• Give customers access to information
• Increasing collaboration between parties
along the supply chain
• Offering constant availability so that
transactions can occur at any time in the
connected world
Attributes of the Internet in the
Business World
• The removal of traditional boundaries i.e time
and distance
• The automation of internal processes to
increase efficiency and speed
• Building of in-depth and longer lasting
relationships with customers through
personalisation and customization of products
Traditional vs Digital Economy
• Organisational structures have evolved from
being hierarchical to networked or virtual
• Many employees work remotely from their
centres of business
• New technologies have brought change to the
productive process as emphasis swings from
reliance on heavy machinery towards
knowledge and creativity
Traditional vs Digital Economy
• Growth is highly dependent on innovation,
knowledge, creativity as firms seek continually
to add value to customers
• The production process in many modern
businesses need to be agile and flexible
enough to adapt to the demand of constant
change
The Positioning Approach
• It presents the generic strategies, five forces
and the value chain models as a basis for
analyzing the external and internal
environment of firms that engage e-business
activities as a means of creating a competitive
advantage
The generic strategies for e-business
• Developed by Michael Porter 1980
• It was created to help firms overcome
constraints that emerge because of external
environmental analysis
• The model feature strategies of cost
leadership, differentiation, and focus.
1. Cost leadership
• Refers to firms who are able to produce and
sell products or services at lower costs
compared to rivals
• In e-business there is the opportunity of
lowering transaction costs associated with
buying and selling process.
2. Differentiation
• It is a strategy for competitive advantage
based on a firm’s ability to make the product
or service different from that produced by
rivals – the difference must add value to the
customer
3. Focus
• It is the choice of market segment that firms
aim their products and services at.
• Customization and personalisation helps firm
design and produce products and services to
match the needs of target individual or group
• You also do not spread resources on alarge
market
E- business Value Chain
• Porter 1985 proposed the value chain model
as a means of identifying those activities that
form the basis of a firms strategy for
achieving competitive advantage by driving
down costs or differentiating the product or
service
The Competitive Environment
• Porters 5 forces framework helps to inform strategy
as managers can decide whether to stay in the
industry and where best to deploy their resources
• Helps in analyzing where a firm can improve its
current competitive position, therefore contribute
towards achieving a competitive advantage
• Internet has brought a number of challenges and
opportunities for firms since it first became a tool
for commercial use in the mid 90s
Some challenges
• Challenges faced by management in dealing
with rapidly changing business environment
• Technological development
• Changes to demand patterns
• Increasing customer expectations
• Effects of global connectivity are just some of
the challenges presented by the e-business
environment
• The e-business competitive environment is

characterised by a large number of
competitors as the costs associated with entry
are relatively low. However, actually providing
a service or product that adds value to
consumers above that which is already
provided by pioneers determines the success
or otherwise of new entrants
• The existing firms need to create entry barriers to

reduce the threat of potential entrants e.g
switching costs, economies of scale, and access to
distribution channels
• Ease of entry to e-business attracts many
competitors and raises the likelihood of
substitute products and services being made
available by rivals – customers benefit from the
increased competition and availability of
substitutes as it offers more choice and
competitive prices
• It is important to the competitors to ensure that

products or services deliver greater satisfaction to
consumers than that of rivals in order to achieve
brand loyalty and competitive advantage
• Although the internet can provide suppliers with
access to a greater number of buyers, the power
they wield is relatively low due to the ease of
entry into the industry, and the empowerment of
customers through easy access to market
information(price comparison, information on
quality, delivery, availability, discount etc)
• Suppliers can increase their bargaining powers by

differentiating – technology can be used as a
means of improving logistics, procurement and
delivery times, all of which may add value to
customers and ensure their brand loyalty
• Intense rivalry is one of the key characteristics of
the internet economy as firms take advantage of
ease of entry, minimal overhead costs, access to a
wider customer base, and cost savings in the
operational and functional activities of the
business, thus need for a viable business model
• Note : any advantage gained using a new

technology quickly erodes as that technology
is diffused throughout the industry thus the
need to be constantly innovative
E- business challenges
• Challenges faced by management in dealing
with a rapidly changing business environment.
• Changes to demand patterns
• Increasing customer expectations
• Effects of global connectivity are justsome of
the challenges presented by the e-business
environment

Business To IT Alignment

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TOPIC 4: Business/IT Alignment

Hindrances to BUS/IT Alignment?

• Systemic Competencies - Those capabilities (e.g., access to

• IT Governance - How the authority for resources, risk, and

• Processes - Those practices and activities carried out to

• Skills - IT human resource considerations (e.g. hire/fire,

Business I/T Strategy

Role of Top Technological Business

Role of I/T Functional Technology Business Service

Enable Value-Add Business

• The e-business competitive environment is

• The existing firms need to create entry barriers to

• It is important to the competitors to ensure that

• Suppliers can increase their bargaining powers by

• Note : any advantage gained using a new

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