Lecture 6 Strategic Alignment Techniques


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Lecture 6 Strategic Alignment Techniques

  1. 1. BIS3000 Information Systems and Strategic Management <ul><li>Dr Matthew Montebello </li></ul><ul><li>[email_address] </li></ul>
  2. 2. Lecture Schedule <ul><li>Lecture </li></ul><ul><li>Strategic Alignment Techniques 2 nd June 09 </li></ul><ul><li>eBusiness 9 th June 09 </li></ul><ul><li>Knowledge Management 16 th June 09 </li></ul><ul><li> CW1 Deadline - Presentations </li></ul><ul><li>Change Management 23 rd June 09 </li></ul><ul><li> CW2 Deadline - Report </li></ul><ul><li>Protecting IT Assets (Wed)1 st July 09 </li></ul><ul><li>Review 7 th July 09 </li></ul>
  3. 3. Lecture 6 Strategic Alignment Techniques <ul><li>What is Strategic Alignment </li></ul><ul><li>Important of Alignment </li></ul><ul><li>Strategic Alignment Maturity Levels (5) </li></ul><ul><li>Maturity Level Criteria </li></ul><ul><li>Strategic Alignment Model </li></ul><ul><li>Alignment Interaction Process (6) </li></ul><ul><li>Execution / Assessment </li></ul> Business Strategy Choices  Role of IT Managers in Strategy  Business Environment  Balanced Scorecard
  4. 4. 1. What is Strategic Alignment <ul><li>The matching up of two or more organisational strategies in order to ensure the overall objectives of the organisation are met. </li></ul><ul><li>Example: </li></ul><ul><ul><li>If a systems administrator is providing a given manager with the information they need in order that they can take the decisions they have to take then the two are aligned in terms of information delivery </li></ul></ul><ul><li>What brought about the need for Strategic Alignment? </li></ul><ul><ul><li>At strategic level the linkages can appear very complicated </li></ul></ul><ul><ul><li>Importance of IT and Business Environment </li></ul></ul>
  5. 5. Two Meanings of ‘Alignment’ <ul><li>Making sure that : </li></ul><ul><li>1. The IS is a good fit for the business strategy </li></ul><ul><ul><li>(i.e. business strategy leads IS strategy) </li></ul></ul><ul><li>2. The different functional elements (i.e. separate departments) are each integrated with each other - including their individual IS - and jointly serving the overall business needs. </li></ul><ul><li>Note that some organisations may have developed separate IS strategies for each department </li></ul>
  6. 6. Information Strategy Alignment Information Strategy Business Strategy Organizational Strategy
  7. 7. Strategy Alignment Teaser …
  8. 8. Today’s Business Environment <ul><li>Increased globalization </li></ul><ul><li>Increased competitive pressure </li></ul><ul><li>Frequent mergers </li></ul><ul><li>Rapidly changing technology </li></ul><ul><li>Evolving patterns of consumer demand </li></ul>
  9. 9. Competitive Advantage Today <ul><li>Unsurpassed relationships with one’s customers and suppliers </li></ul><ul><li>Unique and adaptable business processes </li></ul><ul><li>Ability to harness information and knowledge of employees </li></ul><ul><li>Must become “Change Leaders” </li></ul>
  10. 10. IT Management Should: <ul><li>Be knowledgeable about how new IT technologies can be integrated into business </li></ul><ul><li>Be privy to senior management's tactical and strategic plans </li></ul><ul><li>Be present when corporate strategies are discussed </li></ul><ul><li>Understand strengths and weaknesses of technologies and implications </li></ul><ul><li>So what is Alignment so important? </li></ul>
  11. 11. 2. Importance of Alignment <ul><li>Effectiveness </li></ul><ul><li>Efficiency </li></ul><ul><li>Link Technology and Business </li></ul><ul><li>Optimise the Business model </li></ul><ul><li>Ensure success </li></ul><ul><li>There exist different levels of Strategic Alignment … different maturity levels … </li></ul>
  12. 12. IT as Architects of Alignment <ul><li>Knowledgeable about new technologies </li></ul><ul><li>Privy to tactical and strategical plans </li></ul><ul><li>Be present in corporate strategy discussions </li></ul><ul><li>Understand technology strengths and weaknesses </li></ul>
  13. 13. Six Key Enablers to Alignment <ul><li>Senior executive support for IT </li></ul><ul><li>IT involved in strategy development </li></ul><ul><li>IT understands the business </li></ul><ul><li>Business-IT partnership </li></ul><ul><li>Well-prioritized IT projects </li></ul><ul><li>IT demonstrated leadership </li></ul>
  14. 14. Six Inhibitors to Alignment <ul><li>IT/business lack close relationships </li></ul><ul><li>IT does not prioritize well </li></ul><ul><li>IT fails to meet commitments </li></ul><ul><li>IT does not understand business </li></ul><ul><li>Senior executives do not support IT </li></ul><ul><li>IT management lacks leadership </li></ul>
  15. 15. Business Strategy Choices <ul><li>Selection of business goals </li></ul><ul><li>Choice of products and services to offer </li></ul><ul><li>Design and configuration of policies </li></ul><ul><li>Appropriate level of scope and diversity </li></ul><ul><li>Design and organization structure and administrative systems </li></ul>
  16. 16. Three Business Strategy Elements
  17. 17. Business Strategy Elements : Vision <ul><li>Where the company wants to go </li></ul><ul><li>What the company aspires to be </li></ul><ul><li>Clear, compelling, exciting </li></ul><ul><li>Big Hairy Audacious Goals (BHAG) </li></ul>
  18. 18. Business Strategy Elements : Strategy <ul><li>How vision will be accomplished over specified time period </li></ul><ul><li>Use of checkpoints </li></ul><ul><li>Benchmarks to check strategy effectiveness </li></ul><ul><li>Aligned with company mission and core values </li></ul><ul><li>Provides architectural bridge between mission and vision </li></ul>
  19. 19. Business Strategy Elements : Mission <ul><li>Reasons the IT function exists </li></ul><ul><li>Concise statement of what business the group is in </li></ul><ul><li>Purpose and function of IT </li></ul><ul><li>Review to identify for themes and ideas </li></ul><ul><li>Identify core values </li></ul>
  20. 20. 3. Strategic Alignment Maturity Levels <ul><li>Initial/Ad Hoc Process </li></ul><ul><ul><li>Business and IT not aligned </li></ul></ul><ul><li>Committed Process </li></ul><ul><ul><li>Organization commits to becoming aligned </li></ul></ul><ul><li>Established Focused Process </li></ul><ul><ul><li>Established and Focused on business objectives </li></ul></ul><ul><li>Improved/Managed Process </li></ul><ul><ul><li>Reinforcing concept of IT as “Value Center” </li></ul></ul><ul><li>Optimized Process </li></ul><ul><ul><li>Integrated/Co-adaptive business and IT strategic planning </li></ul></ul>
  21. 22. Level 1 – Initial/Ad Hoc Process <ul><li>Lowest level of strategic alignment </li></ul><ul><li>Understanding of IT by business is low </li></ul><ul><li>Investment in IT is underleveraged </li></ul>
  22. 23. Level 1
  23. 24. Level 1
  24. 25. Level 1
  25. 26. Level 2 – Committed Process <ul><li>Committed to begin process for Strategic Alignment Maturity </li></ul><ul><li>View IT as an asset to the organization </li></ul><ul><li>Directed at local situations or functional organizations </li></ul><ul><li>Alignment at the level is difficult to achieve </li></ul><ul><li>Potential opportunities are recognized </li></ul>
  26. 27. Level 2
  27. 28. Level 2
  28. 29. Level 2
  29. 30. Level 3 – Established Focused Process <ul><li>Concentrates on governance, processes, and communications toward specific business objectives </li></ul><ul><li>Needs better governance to invest in IT </li></ul><ul><li>Focus on business processes that generate long-lasting competitive advantage </li></ul><ul><li>Effectively communicate its vision and get “buy-in” from employees and management </li></ul>
  30. 31. Level 3
  31. 32. Level 3
  32. 33. Level 3
  33. 34. Level 4 – Improved/Managed Process <ul><li>Leverage IT assets on an enterprise-wide basis </li></ul><ul><li>Focus on driving business process enhancements to gain competitive advantage </li></ul><ul><li>Views IT as an innovative and imaginative strategic contributor </li></ul><ul><li>Capitalize on information and knowledge </li></ul><ul><li>Utilize IT assets by deploying enterprise-wide architecture </li></ul>
  34. 35. Level 4
  35. 36. Level 4
  36. 37. Level 4
  37. 38. Level 5
  38. 39. Level 5
  39. 40. Level 5
  40. 41. Balanced Scorecard <ul><li>A strategic planning and management system that is used extensively in business and industry, government, and nonprofit organizations worldwide. </li></ul><ul><li>Employed to align business activities to the: </li></ul><ul><li>vision and strategy of the organization, </li></ul><ul><li>improve internal and external communications, </li></ul><ul><li>and monitor organization performance against strategic goals </li></ul>
  41. 42. Visual of Balanced Scorecard Adapted from The Balanced Scorecard by Kaplan & Norton
  42. 43. Why a Balanced Scorecard ? <ul><li>Increase focus on strategy and results </li></ul><ul><li>Improve organizational performance by measuring what matters </li></ul><ul><li>Align organization strategy with the work people do on a day-to-day basis </li></ul><ul><li>Focus on the drivers of future performance </li></ul><ul><li>Improve communication of the organization’s Vision and Strategy </li></ul><ul><li>Prioritize Projects / Initiatives </li></ul>
  43. 44. The Balanced Scorecard by K2 Performance Group
  44. 45. 4. Strategic Alignment Maturity Criteria <ul><li>Communications </li></ul><ul><li>Competency/value measurements </li></ul><ul><li>Governance </li></ul><ul><li>Partnerships </li></ul><ul><li>Scope and Architecture </li></ul><ul><li>Skills </li></ul>
  45. 47. a) Communications <ul><li>Ensure ongoing knowledge sharing </li></ul><ul><li>Use people in formal inter-unit liaison roles </li></ul><ul><li>Cooperation among business-IT partners </li></ul><ul><li>Trust and openness between units and IT </li></ul>
  46. 48. b) Competency/Value Measurements <ul><li>Service levels that assess commitment of IT </li></ul><ul><li>Tie service levels to criteria </li></ul><ul><li>Take action based on measurements of performance factors </li></ul><ul><li>Understand factors that lead to missing criteria </li></ul><ul><li>Understand what can be learned to improve the environment continuously </li></ul>
  47. 49. c) Governance <ul><li>Clearly defined decision-making authority </li></ul><ul><li>Integrated enterprise-wide strategic business plan </li></ul>
  48. 50. d) Partnership <ul><li>Relationship between business and IT organizations </li></ul><ul><li>Give IT function equal role in defining business strategy </li></ul><ul><li>Perception of contributions </li></ul><ul><li>Partnership should enable and drive change </li></ul>
  49. 51. e) Scope and Architecture <ul><li>Go beyond back office and into front office </li></ul><ul><li>Assume role supporting flexible infrastructure </li></ul><ul><li>Evaluate and apply emerging technologies effectively </li></ul><ul><li>Enable or drive business processes and strategies </li></ul><ul><li>Provide solutions customizable to customer needs </li></ul>
  50. 52. f) Skills <ul><li>Include all human resource considerations for organization </li></ul><ul><li>Consider cultural and social environment </li></ul>
  51. 53. Role of IT Managers <ul><li>Set of decisions made by IT and senior management </li></ul><ul><li>Deployment of technology infrastructures </li></ul><ul><li>Relationship of technology choices to business choices </li></ul><ul><li>These involve: </li></ul><ul><ul><li>Strategic (Develoment Policy) </li></ul></ul><ul><ul><li>Tactical (Control Policy) </li></ul></ul><ul><ul><li>Operational (Implementation Policy) </li></ul></ul>
  52. 54. Aligned IT Strategy <ul><li>Intimate understanding of customers and evolving needs </li></ul><ul><li>Managing knowledge- and information-based asset management </li></ul><ul><li>Continuously innovate strategically relevant new processes </li></ul><ul><li>Coordination of activities involving people, procedures, and technology </li></ul>
  53. 55. IT Roles in Strategy <ul><li>Transformation driver </li></ul><ul><ul><li>Create and exploit new markets </li></ul></ul><ul><ul><li>Link customers to firm </li></ul></ul><ul><ul><li>Define new standards of excellence </li></ul></ul><ul><li>Enabler of transformation </li></ul><ul><ul><li>Interconnect people and processes </li></ul></ul><ul><ul><li>Span organization boundaries </li></ul></ul><ul><ul><li>Bridge geographical distances </li></ul></ul>
  54. 56. IT as Inhibitor <ul><li>IT strategy not aligned with business strategy </li></ul><ul><li>Over-emphasis on technology </li></ul><ul><li>Failure to recognize effective use of IT requires business process change </li></ul>
  55. 57. Three Management Subcultures <ul><li>Executive </li></ul><ul><ul><li>Focused on maintaining financial health </li></ul></ul><ul><li>Engineering </li></ul><ul><ul><li>Focus is outside organization </li></ul></ul><ul><ul><li>Views humans as source of potential error </li></ul></ul><ul><li>Operator </li></ul><ul><ul><li>Based on human interaction </li></ul></ul><ul><ul><li>Frequently operate at cross-purposes </li></ul></ul>
  56. 58. 5. Strategic Alignment Model
  57. 59. Internal Business Domain <ul><li>Administrative Structure </li></ul><ul><ul><li>Functional, matrix, decentralized, process-based, geographic, or hybrid </li></ul></ul><ul><li>Critical Business Processes </li></ul><ul><ul><li>Identification of salient processes </li></ul></ul><ul><li>Human Resource Skills </li></ul><ul><ul><li>Acquisition and development of people skills </li></ul></ul>
  58. 60. Strategic Fit <ul><li>Scope of Firm’s Business </li></ul><ul><ul><li>Customers, products, markets, and competitors </li></ul></ul><ul><li>Distinctive Competencies </li></ul><ul><ul><li>Core competencies </li></ul></ul><ul><ul><li>Critical success factors that provide competitive advantage </li></ul></ul><ul><li>Governance of the Firm </li></ul><ul><ul><li>Impact of regulatory agencies </li></ul></ul>
  59. 61. Strategic Alignment Variables <ul><li>Scope of Firm’s Technology </li></ul><ul><ul><li>Impact and support business strategy decisions and initiatives </li></ul></ul><ul><li>Systemic Competencies </li></ul><ul><ul><li>Technology capabilities </li></ul></ul><ul><li>IT Governance </li></ul><ul><ul><li>Pursue relationships and alliances to obtain IT competencies </li></ul></ul>
  60. 62. Internal IT Strategy Domain <ul><li>IT Architecture </li></ul><ul><ul><li>Selection of technology and infrastructure </li></ul></ul><ul><ul><li>Models used to define data, information, networks, applications, and systems </li></ul></ul><ul><li>IT Organizational Processes </li></ul><ul><ul><li>Critical to operation of IT organization </li></ul></ul><ul><ul><li>Systems development, IT operations </li></ul></ul><ul><li>IT Skills </li></ul><ul><ul><li>Acquisition and development of people </li></ul></ul>
  61. 63. Components of Strategic Alignment Model (Henderson & Venkatraman) <ul><li>Business Strategy </li></ul><ul><ul><li>Business Scope </li></ul></ul><ul><ul><li>Distinctive Competencies </li></ul></ul><ul><ul><li>Business Governance </li></ul></ul><ul><li>Organization Infrastructure and Processes </li></ul><ul><ul><li>Administrative Structure </li></ul></ul><ul><ul><li>Processes </li></ul></ul><ul><ul><li>Skills </li></ul></ul><ul><li>Strategy </li></ul><ul><ul><li>Technology Scope </li></ul></ul><ul><ul><li>Systemic Competencies </li></ul></ul><ul><ul><li>IT Governance </li></ul></ul><ul><li>IT Infrastructure and Processes </li></ul><ul><ul><li>Architecture </li></ul></ul><ul><ul><li>Processes </li></ul></ul><ul><ul><li>Skills </li></ul></ul>
  62. 64. Components of Strategic Alignment Model (Henderson & Venkatraman)
  63. 65. Components of Strategic Alignment Model (Henderson & Venkatraman)
  64. 66. Functional Integration <ul><li>Linkage between the IT strategy domain and business strategy domain </li></ul><ul><li>Support requirements and expectations of business’ organizational structure and processes </li></ul>
  65. 67. Planning IT Strategy <ul><li>Sequence of activities that transforms current alignment state to future alignment state </li></ul><ul><li>Actively involve IT staff in development of vision and strategies </li></ul><ul><li>Strengthen degree of strategic alignment </li></ul>
  66. 69. Forming the Team <ul><li>Senior decision makers from corporate IT, business IT, and senior business management </li></ul><ul><li>Include systems architect and CIO </li></ul><ul><li>Establish join understanding </li></ul><ul><li>Commitment to goals and objectives </li></ul>
  67. 70. “ As-Is” State Description <ul><li>Specify both business strategy and organizational infrastructure </li></ul><ul><li>Baseline for senior management and IT </li></ul><ul><li>Understand firm’s strategic positioning in IT marketplace </li></ul><ul><li>IT governance </li></ul><ul><li>Facilitated interactive workshop sessions </li></ul><ul><li>10-12 participants </li></ul>
  68. 71. SWOT Analysis <ul><li>Strengths </li></ul><ul><li>Weaknesses </li></ul><ul><li>Opportunities </li></ul><ul><li>Threats </li></ul><ul><li>Recommend strategies that ensure best alignment between external and internal environments </li></ul>
  69. 72. Strengths <ul><li>Distinctive Competencies </li></ul><ul><ul><li>Critical success factors </li></ul></ul><ul><ul><li>Core competencies </li></ul></ul><ul><ul><li>Brand, research, manufacturing, product development, cost and pricing structure, sales and distribution channels </li></ul></ul><ul><li>Systemic Competencies </li></ul><ul><ul><li>Capabilities and success factors important to strategies </li></ul></ul>
  70. 73. Weaknesses <ul><li>Observation of existing business and IT problems </li></ul><ul><li>Weaknesses will emerge from observation </li></ul><ul><li>Effect on firm’s strategic positioning </li></ul>
  71. 74. Opportunities – Ansoff Matrix
  72. 75. Ansoff Matrix Positioning Strategies
  73. 76. Delta Model
  74. 77. Threats <ul><li>Rivalry Between Existing Firms </li></ul><ul><li>Risk of New Entrants </li></ul><ul><li>Power of Buyers </li></ul><ul><li>Power of Suppliers </li></ul><ul><li>Threat of Substitutes </li></ul>
  75. 78. Environmental Factors <ul><li>Political and Legal Environment </li></ul><ul><li>Macroeconomic Environment </li></ul><ul><li>Social Environment </li></ul><ul><li>Technical Environment </li></ul><ul><li>Demographic Environment </li></ul>
  76. 79. Strategy Alternatives Analysis
  77. 80. Scenario Planning Grid
  78. 81. 6. Strategic Alignment Process <ul><li>This ‘good fit’ does not happen automatically. Alignment is hard work and requires systematic evaluation. In this lecture we look at two different approaches that can help: </li></ul><ul><li>Customer Orientation </li></ul><ul><li>Contingency Approach </li></ul><ul><li>Such a process requires initial assessment </li></ul>
  79. 82. Customer Orientation <ul><li>Lockamy and Smith (1997) advise managers to ensure that: </li></ul><ul><li>Strategy is driven by customer needs and expectations; </li></ul><ul><li>Processes selected for redesign by IS create value for the customer; </li></ul><ul><li>IS supports those processes in a way that supports the strategy. </li></ul>
  80. 83. Contingency Approach <ul><ul><li>This is based on the idea that information systems should reflect the organisation characteristics and business type in which they are used. The variables are : </li></ul></ul><ul><li>primary tasks of the organisation </li></ul><ul><ul><li>routine or non-routine </li></ul></ul><ul><li>degree of interdependency between those doing the tasks </li></ul><ul><ul><li>high or low </li></ul></ul><ul><li>environment of the organisation </li></ul><ul><ul><li>stable or unstable </li></ul></ul>
  81. 84. Primary Objective of Assessment: <ul><li>Agree that criterion needs to be improved </li></ul><ul><li>Agree that a criterion is good, but can be better </li></ul><ul><li>Disagree with how good/bad a criterion is </li></ul>
  82. 85. Six Step Process <ul><li>Set the Goals and Establish a Team </li></ul><ul><li>Understand the Business-IT Logic </li></ul><ul><li>Analyze and Prioritize Gaps </li></ul><ul><li>Specify the Actions (Project Management) </li></ul><ul><li>Choose and Evaluate Success Criteria </li></ul><ul><li>Sustain Alignment </li></ul>
  83. 87. 7. Execution / Assessment <ul><li>Execute the strategy </li></ul><ul><li>Commitment and engagement of senior business management </li></ul><ul><ul><li>Must occur prior to implementation planning </li></ul></ul><ul><li>Strategic Alignment Maturity </li></ul><ul><ul><li>Ability to adapt in harmonious fashion </li></ul></ul><ul><li>Adoption of Measurement Criteria </li></ul><ul><ul><li>Measure effects in several different dimensions </li></ul></ul>
  84. 88. Periodic Review <ul><li>Ensure initial assumptions are correct </li></ul><ul><li>Ensure implementation of plans are on schedule </li></ul><ul><li>Measurements are captured and reported </li></ul>
  85. 89. Identifying Industry Key Success Factors <ul><li>Answers to three questions pinpoint KSF’s </li></ul><ul><ul><li>On what basis do customers choose between competing brands of sellers? </li></ul></ul><ul><ul><li>What resources and competitive capabilities does a seller need to have to be competitively successful? </li></ul></ul><ul><ul><li>What does it take for sellers to achieve a sustainable competitive advantage? </li></ul></ul><ul><li>KSF’s consist of the 3 - 5 really major determinants of financial and competitive success in an industry </li></ul>
  86. 90. Examples of Key Success Factors <ul><li>Design talent </li></ul><ul><li>Fast concept-to-production cycle </li></ul><ul><li>Low-cost manufacturing efficiency </li></ul>
  87. 91. Assessing Strategic Alignment Maturity <ul><li>This does not fit the organization, or the organization is not very effective </li></ul><ul><li>Low level of fit for the organization </li></ul><ul><li>Moderate fit for the organization, or the organization is moderately effective </li></ul><ul><li>Fits most of the organization </li></ul><ul><li>Strong level of fit throughout the organization, or the organization is effective </li></ul>
  88. 92. Next Lecture eBusiness impact on strategy In preparation you should all read…… Chaffey & Wood pages 93-103