Aligning about the rapid pace of technological change
Aligning IT with business strategy1.0 Information Technology Information technology (IT) is changing the way businesses operate, the process of creating products and services for their customers, and the way in which they compete (Chebrolu & Ness, 2013). IT strategy typically long term action plan for achieving a goal, set in the context of a rapidly changing technology environment with contains information on applications, and human resources. In addition, it also includes the details about the way IT is to be organised and the technical infrastructure. For any IT strategy to be effective it must have measureable links to a business strategy.IT can provide sustainable competitive advantages that significantly influence corporate success. 78% of US Chief Executive Officers (CEO) are concerned about the rapid pace of technological change and 48% of Chief Information Officers (CIO) still spend most of their time aligning IT operations with overall corporate objectives (Kahre, Hoffmann, & Ahlemann, 2017). 2.0 Business StrategyA business strategy deliberates the long-term business planning which organization wants to take and how it can achieve its desired objectives. While all department need to work independently and innovatively this is because to ensure there is no conflict between each department is doing with the overall direction of the organization. It is defined as an organizations plan to generate economic profits based on lower cost, better quality, or new products. Strategies can succeed when they lead to business growth, a strong competitive position, and strong financial performance. Strategies will reflect the organization’s strengths, weaknesses, resources, opportunities, competitors and its market (Graham, 2012).A business strategy generally contains a number of key elements.i) The mission of an organization states what are the organizations activity and the reason for its existence. A company’s vision sets out what the company wants to accomplish. The objectives of an organization state the direction in which it will be heading.ii) The market strategy of a company explains the areas that the organization will focus on in term of the target market, market segments and products or services.iii) Value proposition of the organization is the unique set of benefits that they offer to customers, is their advantage over competitors to create value for its customers. It is divided to three comprise of value chain, value shop and value network. The differentiation would be their competitive advantage towards their rivals in the market.3.0 Aligning business and IT strategiesTo align IT strategy with business strategy, every aspect of the IT strategy should support the business goals of the organization. In other words, all IT systems, applications, processes, and budgets should agree with the overall corporate strategy and objectives. When a company’s business strategy is properly aligned with its IT strategy, when it’s IT-enabled, it can prove valuable in different ways and creates value for firm through creativity and implementation of sound infrastructural services.The partnership between the IT division and business management can extend to fuse with the business and the IT strategy should be developed at the same time as the business strategy as well, and integrated into it in order to achieve strategic alignment.An IT-enabled business strategy is more than just the combination of an IT strategy and a business strategy in a single document. It is the alignment of the two strategies in order to meet key business objectives and goals. As such, it lays out several key aspects:i) The organization’s business strategy, generally includes the mission, vision, and objectives of the organization, along with its market strategy, value proposition, and value configuration.ii) The business expectations a company has of IT should be included in an IT-enabled business strategy.iii) An IT-enabled business strategy should incorporate the company’s IT strategy which contains information on IT applications and the future competence of human resources. It also describes how IT is to be organized and controlled within the company, as well as the technical infrastructure itself.iv) IT assessment is a comprehensive review of a company’s technology systems and environment. The assessment should reveal how technology helps or hinders the business, and should recommend how to use technology to meet the business goals.v) An IT-enabled business strategy contains the company’s long-term IT plans. IT plans are concerned with how IT should be deployed, managed, and implemented in the future.4.0 Benefits of aligning business and IT strategiesSince aligning business strategy with IT strategy tends to have a positive impact on organizations, strategic alignment should be a top priority for senior managers. They should regard IT as a way of meeting business goals and providing value.Overall organization’s performance can improve generally by aligning an organization’s business strategy with its IT strategy. It can lead to more efficient processes, the development of better products and services, cost reductions, faster response times, standardize processes, improve workflow and communications, gain competitive advantage by exploiting new technology and more efficient supply chain management. Research has shown that the successful alignment of business and IT/IS strategy leads to better firm performance. Strategic Alignment Model (SAM) by Henderson and Venkatraman was widely recognized as the base for business-IT alignment research, with several extensions and modifications over the past two decades. Aligning business and IT strategies not only unite corporate and IT/IS strategies but integrates the whole business ecosystem. In this sense, scale, i.e. leveraging network effects, becomes increasingly important due to the more connectivity between partners and competitors. Besides connectivity, digitalization also leads to a higher speed of business activities. The sources of value creation are expanded as digital technologies allow for new business models, extending traditional chains of supply and delivery. In terms of nonfinancial improvements, faster and better adoption to changing environmental conditions and customer needs can be achieved, enabling a higher differentiation from competitors and extended sustainability. While constantly changing environmental conditions strategic advantages, organizations leveraging business and IT strategies can enhance their flexibility and respond to new opportunities and threats more easily through infrastructural changes and innovations in their value propositions.Based on the research done by Chebrolu and Ness (2013), strategic alignment between IT and business works better in the case of larger IT organizations than in the case of smaller and medium-scale IT organizations. IT executives and IT managers within smaller and medium-scale IT organizations should not allocate more financial resources to improve their IT effectiveness toward strategic alignment with business. If they plan to align strategically with business, they should do so by prioritizing other elements like cloud adoption or IT flexibility, which seems to have positive and stronger impact on IT effectiveness.5.0 Challenges of aligning business strategy and ITThe findings of the annual survey of Society for Information Management on IT issues and trends that was done in 2015 by Kappelman et al., 785 responding organizations has ranked business-IT alignment as the first one in the top-ten most important IT management issues for IT leaders in organizations. Between the years 2005 till 2015 business IT alignment was ranked as the first most important IT management issue. A study was done by Gbangou & Rusu (2016), to provide insights about the factors capable of hindering business-IT alignment in the banking sector of a developing country. Due to the continuously changing banking environment and technological advances, banks are required to display high agility and willingness to invest in latest technology and infrastructure. IT managers must remain up to date with banks’ infrastructures and technological innovation. Since most of commercial banks have up to date applications, they need to invest in infrastructures to avoid incompatibility issues. Some equipment such as satellite network communications are expensive for a single local bank to own, operate, manage and maintain. However, a full dependency on external providers implies that a failure from the provider’s infrastructure system is likely to cost considerable damage to the banks. Hence, business-IT alignment requires continuous adjustment to IT innovation and both internal and external business environmental factors. Most of the selected companies in Kuwait use the IT department as a technical support department, and it is not treated as a strategic partner to the business departments. Due to the lack of communication, and lack of integration between IT/business departments and these barriers remains as unsolved issued. In addition, most of the companies participated claimed that there is no proactive dialogue between IT and business departments at the administration level. When they do communicate, it is always difficult for the business managers to understand the IT Jargon. This issue made the business executives to have no interest in listening to the IT problems and therefore they do not call them to participate in formulating a business strategy (Alraggas & Alzayed, 2014).6.0 Ways to align business strategy and ITCIOs certainly need to increase their own accountability for IT results from the IT activities, projects or services, they also must help hold the business accountable for IT as well in creating business value.Integrating the strategic planning process into the IT Management Systems, the primary activities used to manage the organization inclusive of planning, decision-making, and evaluation activities would flow naturally from one-step to the next. The short-term plan (2 to 5 years) to be communicated throughout IT to provide an understanding of the environment and enlist support for the strategic directions.The leading companies follow a five-step process for unlocking IT’s full potential to deliver business value. First, they define business imperatives and the capabilities that underpin them, followed by Identifying IT capabilities that support business capabilities and plug gaps. Third is to design the operations and technology architecture and then develop the IT-strategy roadmap. Aligning IT with business strategies would needs a commitment and a roadmap. Managers must identify key IT investment needs that will close the alignment gaps, then group them into IT investment themes, and finally, to reallocate IT capital expenditure as business priorities evolve. Periodically, companies need to re-apply a business lens to IT costs to ensure alignment (Elmorshidy, 2013).According to Fenwick (2012), IT must be an integral part of the business by co-create a business strategy with a technology component. In order to do that, he suggested a framework that involves several steps, which are to tackle goals, and objectives first, follow with model business differentiators, feed strategy discussions with data-driven insights, develop multiple business technology strategies, develop a living technology road map, and create IT to support the business strategic plans.7.0 One success case study – DOMINO’S The TurnaroundIn 2009, for instance, managers and owners of Domino’s Pizza, Inc. were seriously concerned because the firm had just had 3 years of negative sales growth and shrinking market share. The firm was, in particular, losing market share to two major competitors, Papa John’s and Pizza Hut.In late 2009, therefore, the firm’s new CEO chose to “re-center” strategy on pizza quality. Market research showed that customers rated Domino’s pizza taste as very poor (“like cardboard”). As a result, by the end of 2009, the firm had substantially improved the pizza recipe and launched a marketing program to bring this news to the market.In addition to its new recipe, Domino’s also made an effort to upgrade the one aspect it was already good at – its delivery service. Though the pizza chain was already popular for its fast and easy delivery options and was already a leader in the space, Doyle knew that it still needed to stay ahead of the curve and create something bold and new that would make it difficult for competitors to mimic quickly. In December of 2009, Domino’s hired 30 tech workers to reconfigure its online ordering system and restructure its entire information technology operation.23 The company, which used to outsource most of its IT work, decided to change things up and move operations in-house by conducting its own software engineering and consolidating various data and Web operations within its own operation. “We thought the importance to our business and the criticality of the technology was too great to continue to outsource it,” Domino’s Chief Information Officer Christopher McGlothlin said. The mindset here is that online customers are often more loyal and often order more items per transaction, so they are a very valuable part of the business. Additionally, focusing on online consumers helps to combat the industry’s struggle to increase foot traffic in the poor economy. The new system included a faster, more user-friendly interface and allowed more options for order customization (consumers could essentially “make their own pizzas” from a variety of options). It also had an advanced tracking system that allowed customers to see every step of the pizza-making and delivery process, right down to seeing the name of the person who was putting their pizza in the oven.As the clear market leader when it comes to sales online, Domino’s is in a prime position to improve upon its already advanced and efficient IT infrastructure to meet growing consumer demand in the tech space. On October 8, 2011, the company reached its record day of sales online, roping in more than $1million in sales through its online portals alone.36 Some 13% of those sales were taken from ordering applications that were available through mobile phones and tablets. It is very clear that today’s society is rapidly moving towards technological expansion, and ecommerce is will most likely be where the majority of sales occur in the future. Thus, Domino’s should anticipate this transition amongst consumers and try to continue improving its technology to get and engage more of their customers. Possible ways to do this can include focusing more on the mobile application to send push-updates of advertisements and coupons to people with the app installed. Domino’s Pizza could also integrate Facebook Connect, which would make consumers’ purchases of pizza online part of their news feed on their Facebook profiles. This could encourage friends of those consumers to also order Domino’s. Improving the Pizza Tracker system even further to increase efficiency and user acquisition could propel online sales to be a bigger percentage of overall company sales (Wilson, 2016)8.0 ConclusionMany companies struggle to maintain a tight relationship between their business and IT functions. But creating an IT-enabled business strategy is worth the effort. IT alignment has been recognized to be critical for firms that are desiring to build strategic competitive advantage, increase their visibility, efficiency and have high profitabilityBy integrating their business and IT strategies, organizations tend to perform better, increase revenues, and gain a competitive edge. A business strategy contains the mission, vision, and objectives of an organization. It also contains the organization’s market strategy, unique value proposition, and distinctive value configuration.An IT strategy contains information on applications and human resources. Details about the way IT is to be organized and the technical infrastructure itself are also included. By aligning their business and IT strategies, organizations can achieve the best return on their IT investment. On top of that, firms are able to perform at a high level due to the close cooperation between business and IT departments and their mutual understanding.An IT-enabled business strategy contains the business expectations the company has of IT. It also includes the company’s future IT plans.