1 Aligning IS with Business Strategy Presented by: Natalie Campbell March 8, 2005.
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Transcript of 1 Aligning IS with Business Strategy Presented by: Natalie Campbell March 8, 2005.
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Overview
Key concepts of strategic IS alignment Evolution of strategic IS alignment Key researchers IS alignment models Challenges of today Recommendations for further research
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Strategy Exercise
Define strategy Long range planning Business guidance Business plan Identifying goals and determining plans to
meet goals over a long time period Operationalizing the mission
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Strategy
Greek translation - the art of the general Luftman
Business decisions taken at particular points in time by different people in response to sets of perceived environmental factors.
Strategy is about making choices that include:1. Selection of business goals2. Choice of products and services to offer3. Design and configuration of policies that determine how the firm
positions itself to compete in its markets4. Appropriate level of scope and diversity5. Design of organization structure, administrative systems, and
policies used to define and coordinate work
Luftman et al, 2004
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Alignment
Consequence of sound practices and evolving human relationships that have mutual understandings of goals, values, culture and capabilities that leverage the development of strategies that can ultimately co-adapt
Luftman et al., 2004
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Strategic IS Alignment - Exercise
Define strategic IS alignment Mutual understanding between IS and
business To achieve goals in long-term for companies
overall objectives Matching processes for achieving goals
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Strategic IS Alignment Describes an environment in which the business strategy
and business infrastructure of an organization are aligned with the Information Technology strategy and infrastructures
Stresses harmonization of goals and implementation plans of IT with goals and organizational structure of business
Refers specifically to coordination of an organization’s external business and IT goals and its internal business as IT organizational infrastructures
Luftman et al., 2004
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Competitive Goals
Competitive advantage – Luftman et al., 2004 Unsurpassed relationships with one’s customers and suppliers Unique and adaptable business processes Ability to harness information and knowledge of firm’s employees
to continuously create new, hard to duplicate products and services
King, 1978 Talks about controversy of firms using IT as a comparative
advantage American and United Airlines – reservation system Merrill Lynch – cash management account Foremost-McKesson –processing insurance payments
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Enablers and Inhibitors
Enablers Senior executive support
for IT IT involved in strategy
development IT understand the
business Business – IT partnership Well-prioritized IT projects IT demonstrates
leadership
Inhibitors IT/business lack close
relationships IT does not prioritize well IT fails to meet
commitments IT does not understand
business Senior executives do not
support IT IT management lacks
leadership
Luftman & Brier, 1999
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Formulation of IS Strategy
3 key elements Vision
Where do we want to go? Big Hairy Audacious Goals (BHAG)
Strategy How will we achieve this vision? Aligned with company mission and core values
Mission What are we? Purpose and function of IT
Luftman et al., 2004
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IT Roles in Strategy
Transformation driver Create and exploit new markets Link customers to firm
Enabler of transformation Interconnect people and processes Span organization boundaries Bridge geographical distances
IT as inhibitor IT strategy not aligned with business strategy Over-emphasis on technology
Luftman et al., 2004
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William R. King University of Pittsburg Founding president of AIS President of TIMS (INFORMS) – 1989-90 Chair of ICIS – 1988, 2005 Editor-in-chief of MIS Quarterly One of the founders of ISR -1989 Editorial roles
ISR Journal of MIS OMEGA: The International Journal of Management
Science
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MIS Strategic Planning
Strategic planning Feasible and necessary
Efficiency verses effectiveness Efficiency – often shown through cost savings Effectiveness – must be of paramount importance
in design of MIS MIS strategic planning
Transforms an organizational strategy set into an MIS strategy set
Focuses on the direct relationship
King, 1978
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MIS
Strategic
Planning
Process
System ObjectivesSystem ConstraintsSystem Design Strategies
MISStrategySet
MissionObjectivesStrategyOther Strategic Organizational Attributes
OrganizationalStrategySet
King, 1978
Overall MIS Strategic Planning Process
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Information as a Strategic Resource
Information as a strategic resource IRM views information as a resource to be “well-managed”
– inadequate Sole IM role to satisfy end users – inadequate SPIS process that closely ties in IS strategy with business
strategy – inadequate “Information and IS has the potential to be a primary
source of comparative business advantage in the marketplace, rather than merely a resource to be efficiently managed, or a service that is periodically turned on and off as needed.”
King, 1983
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Assessing IT Need to assess the role of strategic technology, the
impact of IT on competitive advantage Develop a set of measures for the construct CAPITA
– key dimensions Efficiency Functionality Threat Preemptiveness Synergy
Divide efficiency: primary and support activity efficiency
Divide functionality: resource management and acquisition
Sethi & King, 1994
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Facilitators and Inhibitors Identify a set of parsimonious factors use to strategically employ IT Surveys and factor analysis IT application defined as strategic:
One that has a profound effect on a company’s success and destiny, by (a) influencing or shaping the company’s strategy, or (b) playing a direct role in the implementation or support of the company’s strategy – (Sabherwal & King, 1991)
Organizational facilitators Factors that positively influence the ability of an organization to exploit
information resources Factors that positively influence an organization’s decision to use IT
applications for strategic purposes Organizational inhibitors
Factors that negatively influence the ability of an organization to exploit information resources
Factors that negatively influence an organization’s decision to use IT applications for strategic purposes
King & Teo, 1996
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Robert W. Zmud Professor, University of Oklahoma PhD, University of Arizona Research interests
Organizational impacts of information technology Management, implementation and diffusion of information
technology Senior editor with
Information Systems Research Journal of AIS MISQ Executive
Executive board Management Science Academy of Management Review Information and Organization
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Information Economy
Information business Any business unit that produces a deliverable information
product or service in which the unit itself owns and manages the information resources required to produce the product or service
IS department is one of many information businesses Successful IS management
Ensure integration of IT deployed throughout enterprise Design new applications within constraints that exist due to
current portfolio of application systems Plan for an influx of successive generations of new
technologies
Zmud et al., 1986
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Strategic Variables
Data ArchitectureTransportation
Architecture
IS ManagementProcess Architecture
CoalitionArchitecture
InformationTechnology
Vision
Application Map
Investment Architecture
Zmud et al., 1986
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Varun Grover Professor Clemson University PhD University of Pittsburgh, 1990 Ranked 1st, 2nd, 3rd in research productivity in past decade Published over 130 publications Board of Editors/Associate Editor for
Journal of MIS MIS Quarterly MISQ Executive Journal of Information Technology Management International Journal of Electronic Commerce Journal of Strategic IS Journal of Operations Management Decision Sciences Journal of Market Focused Management Business Process Management Journal
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Sustainability and Performance Identify factors important to establishing a
competitive advantage Competitive advantage – dependent upon unique
characteristics that enable a firm to maintain a dominant position within its respective industry
Sustainability factors Content Process
Factors observed Environmental strategies Foundation strategies Action strategies
Kettinger et al., 1994
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FIRM
•Size•Geographical scope•Product scope•Organizational base•Learning Curve•Technological resources•Information resources
•Preempting•Creating switching costs•Exploiting flexibility•Developing response strategies•Managing risk
FoundationFactors
ActionStrategies
PERFORMANCE
Sustainability
•Industry
•Competitor
Restrictions
•Unique Situations
ENVIRONMENT
Model of Sustainability
Kettinger et al., 1994
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Grover S. Kearns Professor, University of South Florida PhD, University of Kentucky Research interests
MIS strategic planning Electronic and global commerce
Presentations Decision Sciences Institute Conference International Conference on Information Systems
Publications Decision Sciences Journal of Strategic Information Systems Computer Personnel
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Albert L. Lederer
Professor, University of Kentucky PhD, Ohio State University Research interests
Information systems planning
Publications Decision Sciences MIS Quarterly Journal of MIS Information Systems Research Communications of the ACM
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Alignment that Leads to Competitive Advantage Strategic applications
Applications which change a firm’s product or the way itcompetes in its industry – (King, 1978)
Strategic alignmentNecessary for superior financial performance – (Das et al., 1991)
Value chainA series of activities used by the firm in the process of acquiring raw materials, and processing delivering orservices to the customer – (Porter, 1985)
Competitive advantage Use of IS to leverage core resources – (Clemons, 1991) Ability of IS to add economic value – (McFarlon, 1984)
Kearns & Lederer, 1997
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Causal Relationships between Constructs of Interest
ISPART ISALIGN
BPALIGNCEOPART
COMPADVVCHAIN
.350
.342
.506.615
.141
.385
.158
.335
Kearns & Lederer, 1997
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Strategic IT Alignment and Competitive Advantage
Strategic IT alignment An organizational learning process that combines business
and IT knowledge in order to support business objectives (Reich and Benbasat, 1996)
Defined as two sets of outcomes: Alignment of IT plan with business plan Alignment of Business plan with IT plan
Organizational knowledge Allows firms to achieve competitive advantage Explains why firms treat organizational learning processes
as valuable assets (Hunt, 1999, 2000)
Kearns & Lederer, 2001
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Model of Strategic IS Alignment
Kearns & Lederer, 2001
F1Information
Intensity of theValue Chain
F3The CEO
Participates in ITPlanning
F2CIO participates in Business Planning
F5Alignment of the
Business Plan withthe IT Plan
F4Alignment of theIT Plan with theBusiness Plan
F6IT is Used forCompetitiveAdvantage
HI:.35
H2:.34
H3: .51
H4:.34
H5: .158
H6: .39
H7: .62
H8:.14
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Alignment between Business and IS Strategies Content - What strategy is the organization
pursuing? Important to distinguish between three strategies
IS strategy – business applications IT strategy – technology policies IM strategy – structures and roles for management
IS strategy – should be aligned with business strategy (Das et al., 1991)
Process -How does the organization develop its strategy?
Business strategy types (Miles and Snow, 1978) Defenders Analyzers Prospectors
Sabherwal and Chan
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Sabherwal and Chan, 2001
Business Strategy AttributesDefensivenessRisk aversionAggressivenessProactivenessAnalysisFuturity
Business Strategy
Business Strategy TypesDefendersAnalyzersProspectors
IS Strategy TypesIS for efficiencyIS for flexibilityIS for comprehensiveness
IS Strategy AttributesOperational support systemsMarket information systemsInterorganizational systemsStrategic decision support systems
IS Strategy
AlignmentBusiness
Performance
Hypotheses 1-4
Perceived business performance
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Jerry Luftman Professor, Stevens Institute of Technology PhD, Stevens Institute of Technology Research interests
Information Technology Strategy Alignment of Business and Information Technology Emerging Technologies Value of Information Technology Information Technology Governance
Published books including Managing the Information Technology Resource: Leadership in the Information Age
Published articles in SLOAN Management Review, California Management Review, Computer World, InfoWeek, CIO, MISQ, CAIS
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Strategic Alignment Model Business strategy
Business Scope Distinctive competencies Business governance
Organizational infrastructure and processes Administrative Processes Skills
IT strategy Technology scope Systemic competencies IT governance
IT infrastucture and processes Architecture Processes Skills
Luftman et al., 2004
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Challenges Senior executive support CIO chain of command Common goals between IT and business How IT is viewed
Cost Enabler Driver
Shared domain knowledge IT understands business Business understands IT
IT/business relationships Alignment sustainability
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Future Research
Still in search of the “silver bullet” Role of CIO in alignment process Interaction of CIO and senior business
executives Relationship management and successful IT
history Relationship management and the Balanced
Scorecard