Week 4: Sustainable Strategic Alignment Model(COMPLUSORY)

With the proliferation of Information Technology, IT is no longer an afterthought in forming business strategy. It has evolved from traditional orientation of administrative support towards the actual cause and driver of macro business strategy. The Strategic Alignment Model (SAM) tries to answer the question of how to strategically align the business goals and the IT, which is a headache of every corporate.  

The 4 fundamental domains of strategic choice,  

Business strategy,
IT strategy,
Business Infrastructure and
IT Infrastructure, 

form 4 cross-domain and multivariate relationships, they are:

Strategic Execution,
Technology Transformation,
Competitive Potential and
Service Level.

This article I will concentrate on a question: Which alignment perspective is the best?
The answer in my opinion should be: There does not exist a universal superior perspective at all.

Stance

Henderson and Venkatraman, scholars first discussed the SAM, defined IT strategy within SAM as involving choices that position the firm in the global information technology market (Henderson and Venkatraman, 1991, p.74). In an era with rapid economic change, both IT strategy or business strategy are constructed in accordance with the market trend, the IT development and macro-economy. Hence so-called ‘superior’ or ‘universal’ business strategy and alignment perspective does not exist for sure.

Instead, choosing the most appropriate strategic alignment perspective in respect to the recent situation and constraints is told to the best solution. Companies or industries which are suited to the relative alignment perspective are discussed with reasons in the followings.

Strategy Execution

            This alignment perspective perhaps is the most common and widely understood perspective corresponding to the classical strategy management (Henderson and Venkatraman, 1993). As organizations assessed IT performance by cost-centered financial parameters, the common strategy is to integrate internal IS strategies, infrastructure and processes with internal organizational requirement as a response to business strategies, which is a old-fashion business philosophy. This alignment perspective is still used by industry with stable structure and less competitive market environment.

For example, the characteristics of high barriers to entry (sophisticated and expensive machinery are always needed) and unique competitive criteria (possessing latest chemical formula) lead pharmaceutical industry treat IT as tools to improve efficiency of routine work only.

Technology Transformation

            Companies adapted this alignment perspective perceive IT strategy as a tool to enhance competitive advantage in the industry. As a result, top managers would always think in this way: with the given business strategies, how the recent IT strategy of our company achieves those strategies?  A precise IT strategy could reduce TRANSACTION COSTS of the company and customers, and eventually increase the competitiveness.

            For example, UPS has used the same strategy, providing ‘best service with lowest rates’, for 90 years. One of the most visible aspects of technology is the customer’s ability to track his/her package via the UPS Web site. To maintain the best service with lowest rates, UPS invest heavily in advanced information technology to maintain leadership in small-package delivery services.  In short conclusion, added value provided by the advanced information technology system of UPS integrates closely with the basic business processes. Thanks to the synergy effects, UPS could provide instant information to customers with relative low prices.

Service level

            Companies with IT-driven business model are suited to apply this alignment perspective as IT strategy is of fundamental importance for these companies to give directions for business strategy.

            For example, Facebook’s theory is that people have real connections in the world.To achieve, Zuckerberg and his team force provide new functions for users so as to broaden the user base. The launch of ‘News Feed’ in 2006 and the launch of ‘Time Line’ in 2011 are the examples. In the foreseeable future Facebook would focus on realizing its utility components and make something new for internet to provide efficient communication for mankind.

Competitive potential

“IT needs to become part of the business rather than passively aligned with business… defining business opportunities and not simply the builders of other managers’ solution…”   (Sauer and Yetton, 1997). Companies that emphasize on the relationship between IT strategies and business opportunities are suited to this alignment perspective.

Conclusion

Choosing the most appropriate strategic alignment perspective in respect to the recent situation, business model and constraints is told to the best solution. With different internal factors (organizational culture, resources allocated to IT development and emphasis on IT) and external factors (industry structure, market demand and trend, macro economy) could affect the adpotion of differnet strategic alignments.

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Reference

Henderson J.C and Venkatraman, N. (1991),

“Understanding strategic alignment”,

Business Quarterly, Vol. 55 No. 33, pp.72-9.

Henderson J.C and Venkatraman, N. (1993),

“Strategic alignment: Leveraging information technology for transforming organization”,

Sauer, Cand Yetton, P. (1997), Steps to the Future.

            Fresh Thinking on the Management of IT-based Organizational 
           Transformation.

            Josset-bass Publishers, San Francisco, CA.