Strategic Alignment of Organizational Strategies

INTRODUCTION

Alignment is important to all organizations. This is confirmed by King (1995) but it is not yet clear how to achieve harmony between business strategy, information technology (IT) and e-commerce and what the impact of this alignment would be on an organization. In the past, the IT department was responsible for planning, development and management of information systems (IS). With the convergence of e-commerce, gaining an understanding of how e-commerce and IT may be jointly employed to support organizational strategies is important for managers (it is acknowledged that some organizations place e-commerce in the IT department, while others have it as a separate department). Good practice will ensure that the organization will find the best place for it. It is, however, good policy to split e-commerce and IT staff while aligning strategies. It is necessary to align the strategy for the e-commerce department as well. This alignment could be either “lawful” (wishes to create and protect) or chaotic (wishes to destroy).
Strategic alignment is defined by Papp and Fox (2002) as the use of IT in the integration and development of business strategies and corporate goals. Alignment is a dynamic process that requires close, continual assessment (because the goals keep on moving) and cooperation between achieving competitive advantage and surviving.
This article therefore discusses the changing environment of the organization in terms of strategic planning. Managers of tomorrow must understand what e-commerce is, how the approach to this concept will be, and how it will affect the leverage of the organization. The article will briefly provide a discussion of the topic and a perspective on the issues and problems as they relate to alignment. It will also briefly look at future trends and will end with a definition of some terms.


BACKGROUND

The establishment of alignment between IT and organizational objectives has consistently been reported as one of the key concerns of IS managers (Lubbe, 2001; Reich & Benbasat, 2000; Rodgers, 1997). Findings by authors (e.g., Dhillon & Orton, 2001; Hamilton & Chervany, 1981; Henderson & Sifonis, 1988; Moad, 1994; Papp, 1997; Reich & Benbasat, 2000) suggest that both practitioners and researchers should direct their efforts toward understanding of domain knowledge. On the other hand, Venkatraman (2000) argues that managers must also align their vision to dotcom to ensure that the leaders of the Industrial Age do not become the dinosaurs of the dotcom era.
Alignment should be based on different levels; that is, it can be based on the shared domain knowledge between business and IT executives, IT implementation success, communication between business and IT executives and connections between business, IT and e-commerce planning processes (Reich & Benbasat, 2000; Papp et al., 1996). Venkatraman (2000) argues that the Internet changes everything – particularly for brick and mortar organizations, branded products and services, and traditional supplier and customer relationships.
Papp (1997) argues that executives rarely agree and that they normally oppose each other while meeting to discuss alignment. These executives, however, acknowledge that there are different approaches to alignment, but are not willing to give any leeway. Each industry will also have a different type of dimension to its alignment that impacts its architecture through changes in e-commerce, IT and the business infrastructure. Therefore, with the advent of e-commerce another level had been added that impacts on effective planning of strategies.
Amadi (1998) and Cerpa and Verner (1998) state that strategic alignment and all its dimensions give value to the business on all levels of the business. Bildfell (2003) also noted that many planes or dimensions should be kept in mind while aligning strategies. These dimensions could be architectural alignment, cultural alignment, customer alignment, and so forth. Dhillon and Orton (2001) argue that strategic options such as cost leadership, differentiation, strategic alliances and globalization could further add on dimensions to the strategic alignment of the organization. They added that there will be some schizoid incoherence and that management should pay attention.
The relationship between peers inside the organization helps management visualize how alignment has been achieved within the organization. Enns et al. (2003) argue that the relationship between CIOs and their peers should successfully affect the visualization. The degree of mutual understanding of current objectives (short-term alignment) and the congruence of IT and e-commerce vision (long-term alignment) between IT, e-commerce and IT executives affects alignment as well. Alignment as a key should maximize the value and impact of the organization’s IT and e-commerce investments and be flexible enough to allow the organization to act quickly to ensure that changes are taken into account.
Chan (2000) also argues that communication and understanding are factors that should be kept in mind on a business level. There should also be linked executive commitment to IS and e-commerce issues and initiatives. These links contribute to missions and dimensions for e-commerce, IT and the organization.

FUNCTIONAL INTEGRATION

Some of the functions that should be paid attention to while attempting to align strategies are the shared domain knowledge between business, IT and e-commerce executives; IT and e-commerce implementation success; communication between business, e-commerce and IT planning process; and connections between business, e-commerce and the IT planning process. All the factors mentioned in this instance were found to influence short-term alignment, while only shared domain knowledge was found to influence long-term alignment. Reich and Benbasat (2000) established that a new factor, strategic business plans, affects both short-term and long-term alignment (supported by Dhillon & Orton, 2001).
All management functions must be aligned - especially for organizations that run e-commerce operations. If there is no alignment, then the dotcom strategy may be “hijacked” by staff members for their own purpose (Venkatraman, 2000). The functional areas will influence the ranking of enablers and inhibitors of strategic planning (Papp & Fox, 2002). The type ofbusiness (brick-and-mortar and/or e-commerce) will have a bearing on the alignment perspective ofthe organization. Bildfell (2003), on the other hand, argues that there are three functional areas that should be kept in mind while aligning strategies. These are relationships that accelerate the strategy; relationships that help penetrate new markets and relationships that improve competitiveness and solution capabilities.

INSTRUMENTS TO MEASURE ALIGNMENT

The Gartner Group had designed an instrument that could be used for measurement of assignment called Alignment Strategy Assessment (Business Wire, 1998). The instrument analyzes five key areas: IT application alignment with business goals; IT application alignment with business operations; IT infrastructure alignment with business goals; IT infrastructure alignment with business operations; and IT infrastructure alignment with IT applications. There are also other instruments (e.g., questionnaires, spreadsheets, etc.) as explained by Lubbe (2001). The instrument by the Gartner Group enables the CIOs to assess the effectiveness of IT support for key areas of business and to prioritize IT resources and applications so that they are in alignment with the organization’s business goals and operations. The problem is to align e-commerce goals with IT and the organization still a concern for CIOs.

Figure 1. The strategic alignment model

The strategic alignment model
Amadi (1997) states that BPAR is a tool that can help with the visualization of alignment. Segars and Grover (1999) argue that instruments measuring alignment should take into account the different dimensions of alignment. These dimensions, according to them, include comprehensiveness, leverage, formalization, focus, and consistency. Any e-commerce or IT person needs to understand the leverage points of the industry, the history and current issues of the leverage effect, and to learn to apply “common sense” of the business units in the application of technology to business problems. Venkatraman (2000) argues that organizations should enter into alliances to explore a wide range of opportunities and leverage those that succeed. This is confirmed by Lubbe (2001). Papp and Fox (2002) support the importance of the strategic alignment by asking: Are the business strategies and plans leveraging IT?

ISSUES TO BE KEPT IN MIND

Organizations should identify strengths and weaknesses that affect alignment. Some organizations do believe that their strategies are aligned (50%) and 42% said that they were not aligned. This is a problem and could affect the flashes of commercial insight (gut feeling) that some managers exhibit. Some of the enablers and inhibitors of alignment are listed next. These were also listed and demonstrated by Moad (1994). Bildfell (2003) argues that successful alignment, keeping problems and success stories in mind, ensures that organizations will be competitive. Some enablers to alignment are important.


FUTURE TRENDS

Because e-commerce is evolving rapidly, organizations must continuously expand current business models (e.g., improve marketing) while experimenting to create new ones (Venkatraman, 2000). These new business modules will ensure that the goal posts for competitors keep on changing and ensure that the organizations stay competitive. Papp and Fox (2002) argue that there could be differences between the strategies of brick-and-mortar operations and normal business operations but that it has not been defined as yet.

Table 1. A summary of enablers and inhibitors of alignment of strategies

Some Enablers to Alignment
Executive support for IT and e-commerce Strategy developed in tandem Leadership shown by IT and e-commerce E-commerce and firm’s resources are shared Close relationship between firm, e-commerce and IT Some Inhibitors to Alignment Prioritize work poorly
No close relationship with e-commerce and IT IT and e-commerce do not know their customers No executive support for IT and e-commerce Strategic goals not achieved by IT and e-commerce No communication

CONCLUSION

IT and e-commerce groups have to earn the right to play a meaningful role in management forums. One important factor that the theory suggested is that IT and e-commerce people should devote the time necessary to develop shared domain knowledge, and thereby be able to provide some input on alignment. The organization should try to be “lawful” and not chaotic and will survive. Managers should remember that there could be alignment but still be problems preventing proper alignment.

KEY TERMS

Alignment: A dynamic process that requires close, continual assessment (because the goals keep on moving) and cooperation between achieving competitive advantage and surviving.
Competitive Advantage: Usually refers to characteristics that permit a firm to compete effectively with other firms due to low cost or superior technology, perhaps internationally.
Enablers: A factor that makes something possible (e.g., Alignment is an enabler for organizations to cut production costs by half).
Inhibitors: A factor that can stop an activity.
Leverage: Investing with borrowed money as a way to amplify potential gains (at the risk of greater losses).
Strategic Alignment: As the appropriate use of IT in the integration and development of business strategies and corporate goals.
Strategy: A detailed plan for achieving success in situations such as war, politics, business, industry or sport, or the skill of planning for such situations.

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