Aligning Business strategy and IT strategy

Tutorial 1 – 

Questioni : Why is such alignment important?

Answer:    Business strategy is an analytical tool for designing of future strategy. IT strategy is the strategic business tool used for paving future path with IT resources. Alignment of business and IT is required to change the structure of the organization economically, create competitive advantage in all aspects of value chain, competitive positioning, online processing, imaging technology, building business relations and gaining location independence and creation of better business strategy (Tallon & Pinsonneault,  2011).

Question ii: Is the strategic alignment model still relevant?

Answer:     IT capabilities are the driver of business strategy which is first created and aligned with the company’s IT capabilities. A business acquires competitive edge with the four perspective of the strategic alignment. Strategic execution leads to the technology transformation. Alignment of the business strategy and information technology helps in the accomplishment of competitive edge leading to service level alignment. The model is considered relevant and practiced by most of the organizations (Grant, 2010).

Question iii: How is alignment achieved? The critical factors in achieving alignment?

Answer:     

Alignment of the business and the IT strategy is achieved through a ten point plan which includes understanding the business, culture acknowledgement, value chain discovery, context interpretation, locating change agenda, choosing technology, planning and resourcing the program and achievement of business benefits (Prasad et al., 2010).

 The factors responsible for achieving of alignment are as follows –

  • Active involvement.
  • Long term focus.
  • Consistency and clarity.
  • Capabilities and managerial skills.
  • Alignment facilitating processes.
  • Matching thoughts.
  • Structure and culture of the organization.
  • Proper communication.
  • Usage of IT as organizational tool

(Grant, 2010). 

Question iv: Is there a significance difference with aligning IT and business strategy in a business where IT has a supporting role, vs where it is a primary enabler?

Answer:  The business and IT alignment with IT as supporting role will focus on strategies for achieving the company’s mission and vision and analysis of future business needs and opportunities (Velcu, 2010). Alignment where IT is the primary enabler the focus will be on management of hardware and software resources of the organization and use of technology to achieve business strategy (Van Grembergen & De Haes, 2009).

Tutorial 2: Value Chain Analysis

i) Accuracy and effectiveness of the value chain and value network diagram.

Answer: Value chain analysis is a tool used to add value to the products offered to the customers (Mindtool, 2013). Business is regarded as a process where raw material is taken as input and is converted into end products by adding value to it. This makes the product more demanding among the takers. Creating value is related to the accuracy with which the product is made. Accuracy along with the choice of the features that the customer prefers is what makes a product valuable. Hence accuracy is an integral part of value chain, which in turn makes the product effective. The effectiveness of the product is proved by the amount of product sold and the customers preferring to buy the product again (Velcu, 2010).

Value chain network is the association between the organization and the individuals acting together in the value chain analysis for the benefit of the organization (Watson et al., 2012). Value network is a forum where buying and selling of the product among the members is conducted, along with sharing information regarding the product. The diagrammatic representation of the value chain network includes a mapping tool represented by members and relationships.

Value chain network

Fig.1. Source: (Agranoff, 2007)

ii) Analysis of data.

Answer: The organization focuses on the customer’s needs and demands which are taken as the centric point. As per the analysis, the need value is added to the product which has direct and indirect effect on the other elements associated with the value chain. Advertising for the customers has significant cost associated to value chain process but is of little effect as the customer values the quality and not the way in which the product is advertised. New market player and alternative sales along with product quality, cost and features can add competitive advantage for the organization. The point of uniqueness in a value chain network is the use of innovation to channel the marketing and sales of the product, which involves making the product reachable to all the customers which also adds to a different way of marketing of the product (Agranoff, 2007).

Tutorial 3: Balanced Scorecard

1. Awareness of BSC method. How it evolved over time, benefits and issues.

Answer: BSC is a strategic performance management tool with design methods and automation tools to track the activity of the staff and the outcome of the activity (Gia, 2009). The tool is mostly used by the manager to forma semi structured report. Awareness about BSC is created through comprehensive communication and highlighting the critical success factor of the tool among the managers.

The emergence of BSC was done by Dr. Robert Kaplan and David Norton as a support for performance management. The tool was named balanced scorecard in 1990. The concept evolved from the performance measurement reporting work by General Electric in 1950 and French process engineer in the 20th century (Paul, 2011).

Vision and Strategy of Balanced Scorecard

Fig.2. Source: (Paul, 2011)

Benefits of BSC

  • Tracking the achievement of strategic goal.
  • Method of strategy implementation, making the managers aware of success factor and starting a reward system.
  • Means of implementing organizational change and making clear communication.
  • Determination of compensation and advancement of managers.
  • Synchronize efforts to achieve critical success factor.

Balanced scorecard is a costly and time consuming tool. Input of the information drives the tool. Input of less data leads to incomplete information. Employees are sometimes against the implementation of the tool due to reasons like undergoing training about the usage of the tool. These are the issues with BSC (Paul,  2011).

2. Analysis of adaptation of balanced scorecard to at least one different context.

Answer: The best example of the use of balanced scorecard is in the supply chain management for attaining balance of financial and the non financial sector. Correct implementation of balanced scorecard boosts revenue, cost to the company and usage of company properties along with improving customer experience. A balances scorecard helps the organization to measure the efficiency and the effectiveness of the various functions through the utilization of data analysis (Gia, 2009).

Tutorial 4:  IT governance arrangements, Case Studies: Du Pont, DBS Bank, Motorola

  1. i) Effectiveness of the summary of similarities and difference in IT governance arrangements of the three companies, for both input and decision for the 5 decision domain. Also differences with the most common pattern for all firms.

Answer:

  1. a) IT Principles

At Du Pont IT principles has “one Dupont” vision and it follow feudal business application governance. Governance, data ownership and architecture form the IT principle of DBS bank. At Motorola the CIO along with the executive team is a part of the decision making for the IT principles (Van Grembergen & De Haes, 2009).

  1. b) IT Infrastructure

The senior executive team and IT leaders are responsible for deciding on the IT infrastructure strategy. BBS bank has fifteen infrastructures comprising of the leaders from IT for infrastructure service. The CIO leadership team at Motorola is involved in IT infrastructure decision.

  1. c) IT architecture

IT architecture decisions are taken by a team of 40 IT professionals from various regions, IT competencies and business units all over the world at Dupont. Business leaders are made apart of every IT architectural decision of DBS bank. The development team and the architecture case workers take care of the formation of sound system for the organizations architecture. The CIO leadership team is a part of the decision maker of Motorola’s It architecture (Tallon & Pinsonneault, 2011).

  1. d) Business application

Business application needs are decided upon negotiation between the local and the corporate IT staff at Dupont. Business unit head is the responsible authority for making business application decisions. Business application at Motorola involves negotiation between the corporate IT leaders, sector IT leaders and business unit heads (Prasad et al., 2010).

  1. e) IT Investment

Dupont controls the infrastructure through IT monarchies for decision and input. The negotiation among the corporate and the business units results in the IT investment decision at DBS bank. The business unit head, business manager and the corporate office are responsible for IT investment decision depending on the capital amount at Motorola (Watson et al., 2012).

Comparison of DuPont, DBS bank and Motorola’s process of governing IT

DuPont’s IT governing

DBS bank IT governance

Motorola’s IT governance

Fig.3. Source: (Watkins and Calder, 2012)

  1. ii) Degree of insight shown in analyzing likely reasons for these similarities and differences.

Answer: The similarities and differences of the three organizations are analyzed based on the region and the industry of operation (Grant, 2010). .

iii) Evaluating how well these governance arrangements support each firm’s business strategy.

Answer: Implementation of IT governance has helped DuPont create a position in the world market using innovative technology in meeting the growing food demand. In case of DBS bank IT governance helped them to achieve their strategy to become the banking leader of greater China, South Asia and Southeast Asia. With the help of IT governance Motorola has become a leader in communication and embedded electronic solution along with keeping its security intact.

Tutorial 5: IT governance design for different strategic and structural drivers

  1. i) Review of the key differences in IT governance design for companies pursuing the 3 different business strategies/value disciplines.

Answer: Dupont has a three level IT governance design. The levels are enterprise, group of business and business unit. The enterprise architect group of Dupont consist of representatives from every region, strategic business unit and competency centre. The architect group design and make proposal to corporate CIO which align with the business and the architectural standard (Watkins & Calder, 2012).

In case of the DBS bank the development team, the case leaders group constituting of members from all the locations designs the IT governance and presents it to the COI, who in turn takes the final decision. At Motorola there are three levels of IT governance namely enterprise, division and business unit. The mechanism at the higher level influence the governance of the lower level as there is a demand for synergy at lower level whereas the higher level has a demand for autonomy. This describes the difference in the IT governance design of the three companies (Watson et al., 2012).

  1. ii) How are the structural drivers of BU autonomy (decentralization) and BU synergies (centralization) impact on IT governance design? And how can these opposing pulls be reconciled in practice?

Answer: Decentralization of business unit impacts the IT governance design by providing a business solution which is more inclined towards local customers. The decentralization also facilitates a system that is capable of providing quick and flexible response to the customer and also to the competitors. Decentralization is capable of providing business solution and IT service along with large cost of operation.

Centralization of business unit IT governance response provides enterprise wide infrastructure which helps in cost control. It also gives priority to enterprise wise project along with abolition of redundant functions. Centralization also leads to local autonomy loss and reduction of response time  (Rosemann & Brocke, 2010).

Reference

Agranoff, R. (2007) Managing Within Networks: Adding Value to Public Organizations, Georgetown: Georgetown University Press.

Gia, K. (2009) Balanced Scorecard – Solving All Problems of Traditional Accounting Systems, Norderstedt: GRIN Verlag.

Grant, R. M. (2010). Contemporary strategy analysis and cases: text and cases. New York : Wiley. com.

Paul, N. (2011) Balanced Scorecard: Step-by-Step for Government and Nonprofit Agencies, Melbourne: John Wiley & Sons.

Prasad, A., Heales, J., & Green, P. (2010). A capabilities-based approach to obtaining a deeper understanding of information technology governance effectiveness: Evidence from IT steering committees. international Journal of Accounting information Systems, 11(3), 214-232.

Rosemann, M. and Brocke, J. (2010) Handbook on Business Process Management 2: Strategic Alignment, Governance, People and Culture, Hamburg: Springer.

Tallon, P. P., & Pinsonneault, A. (2011). Competing perspectives on the link between strategic information technology alignment and organizational agility: Insights from a mediation model. Mis Quarterly, 35(2), 463-484.

Van Grembergen, W., & De Haes, S. (2009). Enterprise governance of information technology: achieving strategic alignment and value. Norfolk : Springer.

Velcu, O. (2010). Strategic alignment of ERP implementation stages: An empirical investigation. Information & Management, 47(3), 158-166.

Watkins, S. and Calder, A. (2012) IT Governance: An International Guide to Data Security and ISO, London: Kogan Page Publishers.

Watson, M., Lewis, S., Ccioppi, P. and Jayaraman, J. (2012) Supply Chain Network Design: Applying Optimization and Analytics to the Global Supply Chain, Munich: FT Press.