Business Strategy Aligning it and Business Strategy

¶ … Business Strategy Aligning IT and Business Strategy An IT strategy focused on maintaining a cutting edge technology position is not the most effective way to support any kind of overall business strategy. To refute this argument, this essay examines other IT strategies. Many IT organizations struggle to develop an effective IT strategy. Typically, businesses exhibit confusion about what goals and components make up an IT strategy, and about the process of obtaining business input and developing a long-term strategy that serves the business' planning needs (Gartner, 2011).

According to Gartner's research, most IT organizations are unable to develop a business-strategy-driven IT strategic plan because they use a bottom-up planning process, asking business units what projects they need. Instead, a more effective approach would be integrating the IT team into the organization's upfront, top-down business planning processes (2011). Gartner argues that IT strategy is effective when it is directly linked to how the organization makes day-to-day investment and prioritization processes. Moreover, IT strategy initiatives are effective only when business input is included.

In the absence of a clearly articulated business strategy, or when the CIO does not know how to plan for and respond to multiple business requirements from multiple shared-service business customers, IT strategy is less effective (2011). Glaser argues that developing an IT strategy using a dogmatic approach is dangerous and results in an incomplete or misaligned IT strategy. The basic purpose in developing an IT strategy is to insure that there is a well-defined relationship between IT investment decisions and the organization's overall strategies, goals, and objectives.

When an organization defines the IT agenda incorrectly or partially correctly, such as happens by focusing on a cutting edge technology approach to the exclusion of all others, it runs the risk that significant resources will be misdirected. Glaser notes that "Being on time, on budget, and on specification is of diminished utility if the wrong thing is being done" (p. 1). Numerous studies have researched the alignment of business and IT strategy. Gartlan and Shanks (2007) conducted a survey of 69 CIOs and CEOs from large and medium-sized Australian organizations.

For the purposes of their research, they defined successful alignment as evidenced by both IT and business strategy demonstrating "a planned alliance, which then leads to tangible, successful, business-focused outcomes" (p. 117). Their definition clearly relies on the premise that IT delivers business value, independent of a specific technology position. Gartlan and Shanks' research identified ten factors that promote business and IT strategy alignment.

Their analysis indicated that, of the various factors which contribute to successful alignment, the most important process factors were "having a process that promotes clarity and consistency and a process that ensures IT goals are linked with business goals" (p. 131). Their conclusion is technology-neutral. Other processes must combine to make IT strategy and business strategy alignment successful. The IT strategy process must be purposefully designed and it must also have an owner or sponsor.

It must also be integrated with other processes, such as budget, portfolio rationalization, and enterprise architecture planning and systems implementation. IT strategy must also be managed using clearly defined metrics and mechanisms (Hajela, 2005). Study after study shows that the alignment of business and IT continues to be a top priority for CIOs. Better service management has been proposed to remedy business/IT alignment issues. Successful alignment begins with effective collaboration, which in turn requires adherence to three primary principles: trust, communication, and context.

According to Mangold, trust between IT and business units is based on having no hidden agendas, and having full disclosure of issues. Effective communication requires that all parties have the same understanding of the terminology used in discussions. A shared context means that while IT and the business units may not have the same understanding of the components in a project, they must have identical understanding of the components for which IT and the business units have shared responsibilities (Mangold, 2011).

Once business units and IT achieve collaboration, business requirements should be translated into services that meet business expectations. Mangold argues that defining business process requirements should be facilitated by a robust set of processes, frameworks and reference models. This approach achieves business and IT alignment. It does this by reducing the risks associated with business and technology change, as well as by increasing the ROI attained by both process improvement and technology projects (2011).

An additional problem with focusing an IT / business alignment strategy on maintaining a cutting-edge technology position is that it casts technology in the role of business enabler rather than transformational agent, the latter delivering more value to the business. A more dynamic and successful approach involves business and technology strategy co-development. With shared ownership by business and technology leaders, the enterprise vision and mission are better able to be implemented (Strohlein, 2011).

A survey by Bain and Company makes the case that companies grew faster and lowered costs more dramatically by first focusing on making their IT departments effective and then pursuing alignment, suggesting that sequencing may be a factor. Aligning IT strategy and business strategy is the ultimate goal, but there are also consequences to over alignment. Unintended consequences result when technology and business executives misunderstand the concept of alignment. Rather than synchronizing strategies, companies tend to allot IT resources to different business units and consider that allotment.

That process in turn leads to increased complexity fraught with fragmentation, redundancy and subscale operations. Almost inevitably that complexity drives up spending (Watson, 2007). Bain polled technology and business executives at 450 publicly-traded companies, asking if their IT operations were aligned with the business organization and how effective those IT departments had been. Of the 15% who characterized their IT operations as effective, those firms who achieved effectiveness and alignment saw their three-year compound annual growth rate jump 37%, while IT spending dropped more than 10%.

Firms that achieved effectiveness but not alignment cut IT spending by more than 17% and achieved growth of more than 10% (Watson, 2007). By contrast, firms that considered themselves ineffective in IT and not aligned with business -- 74% of all.