Strategic Alignment: Leveraging Information Technology for transforming Organizations
Based on the paper of J.C. Henderson, N. Venkatraman (1993)
by
Philipp Maderthaner
A. Summary
Henderson and Venkatraman proposed a model for business – IT alignment; it was intended to support the integration of information technology (IT) into business strategy by advocating alignment between and within four domains (see figure 1). The inter-domain alignment is pursued along two dimensions: strategic fit (between the external and internal domain) and functional integration (between the business domain and the IT domain). The objective of this model was to provide a way to align information technology with business objectives in order to realise value from IT investments. The authors argued that the potential strategic impact of information technology requires both an understanding of the critical components of IT strategy and its role in supporting and shaping business strategy decisions and a process of continuous adaptation and change. Hence, they presented a model that defines the range of strategic choices facing managers.
Figure 1 Strategic Alignment Model
Two main imperatives for managers are pointed out by Venkatraman and Henderson: First, similar to business strategy, IT strategy has to consider both internal as well as external aspects. Second, both internal/external alignment as well as functional integration must be taken into account. Only one of them is not sufficient.
Overview about the four dominant alignment perspectives:
1. Strategy execution
This strategy assumes that an articulated business strategy is the driver of both organizational design choices and the design of IT infrastructure. The alignment is said to be the most common and widely understood perspective, as it corresponds to the classic, hierarchical view of strategic management.
Driver: Business Strategy
Role of Top Management: Strategy Formulator
Role of IT Management: Strategy Implementer
Performance Criteria: Cost/Service Center
2. Technology transformation
This alignment involves the assessment of implementing the chosen business strategy through appropriate IT strategy and the articulation of the required IT infrastructure and processes. This strategy is not constrained by the current organization design, but instead seeks to identify the best possible IT competencies through appropriate positioning in IT marketplaces.
Driver: Business Strategy
Role of Top Management: Technology Visionary
Role of IT Management: Technology Architect
Performance Criteria: Technology Leadership
3. Competitive Potential
This perspective is concerned with the exploitation of emerging IT capabilities to impact new products and services (business scope), influence the key attributes of strategy (distinctive competencies) and develop new forms of relationships (business governance).
Driver: IT Strategy
Role of Top Management: Business Visionary
Role of IT Management: Catalyst
Performance Criteria: Business Leadership
4. Service Level
The service level alignment perspective focuses – as the name shows – on how to build a world-class IT service organization.
The biggest challenge for IT transformation of WestJet is the low-efficient communication, and it is difficult for CIO and IT staff to achieve a alignment. The objective of new IT transformation is IT-business alignment, which serves for the core competency (customer-centered services).
A great deal of information was covered this week such as, the necessity in which businesses need to effectively plan and set objectives, the strategies utilized and how they are executed to obtains results, and how managements decisions can potentially affect those results. Although each topic covered was found to be interesting and informational, there was something in particular that struck a chord, which was how business establishments have to be flexible and adaptable and in many instances plan and change their strategies of today, in order to keep up with the evolving technology of tomorrow. Something that one often thinks about is how individuals use technology today and how companies that provide that technology are adapting. For instance, author Richard Daft of the textbook, Management, 12th ed. brings to light the potential issues that Intel is facing explaining “As another example of an external threat, Intel, whose microprocessors power most PCs, is being hurt by the decline in demand for personal computers as more people turn to tablets and smartphones.” (Daft, 2016, pg. 259). After reading this, one wanted to take a deep look into what it is exactly that Intel intends to do to overcome this obstacle and found some
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IBM System Journal. "Strategic Alignment: Leveraging Information Technology for Transforming Organizations." Last accessed April 14, 2007. http://researchweb.watson.ibm.com/journal/sj/382/henderson.pdf
The successful execution of strategy critically depends on the alignment of these 4 elements with the strategy. What is sometimes overlooked, however, is that whenever a strategy is changed, it is almost always the case that the existing organizational alignment will also need to be changed. Unless management actively realigns their business to reflect the new strategy, execution will suffer.
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