Competency and Value of IT: The Second Dimension of the SAMM

The second of the six dimensions of the Strategic Alignment Maturity Model of Luftman (2000) is Competency and Value of IT. Too many IT organizations cannot demonstrate the value they deliver to the business. This dimension consists of 7 attributes.

The first three attributes all are related to Metrics. The first two are related to IT and to business, where the more formal metrics and surrounding processes (e.g. feedback-loops) are implemented, the more mature the alignment should be. The third attribute is about the level of integration of business and IT metrics.

The fourth attribute is about the availability of Service Level Agreements within the company. Not only the availability in itself is a measure for maturity, but also the orientation of the SLA. The more these SLA’s are written in business-terms, the more mature the relation will be.

The next three attributes are all related to mechanisms on learning and assessing investments. The level of using benchmarks, assessments and reviews, and continuous improvements all form a indication for the level of maturity of the alignment between business and IT.

In the questionnaire I’ve used, which was provided to me by Luftman, an eight attribute was mentioned. This was a question on the demonstrated contribution of IT in achieving the strategic goals within the company. I think this is an important question as well, because it illustrates the level of credibility of the IT organization within a company.

All these attributes are connected to the validation of the value and contribution of IT to the strategic goals. The more business and IT are working together in making this contribution explicit in dashboards or Business Balanced Scorecards, the more mature the alignment relation has to be.

Reference

Luftman, Jerry: Assessing Business-IT Alignment Maturity, Communications of AIS, Volume 4, Article 14, December 2000

Communication: The First Dimension of the SAMM

Image by Choconancy1 via Flickr

One of the six dimensions of the Strategic Alignment Maturity Model of Luftman (2000) is Communication. Communication is part of the social dimension of alignment. This dimension consists of 6 attributes, which all are important to achieve and sustain alignment. Let’s take a closer look at those attributes.

The first one is Understanding of Business by IT. To be effective, IT has to understand the business environment. Knowing about their processes, but almost more important, knowing the business’ customers, the products, competitors and so on. The second attribute is the other way around: Understanding of IT by the Business. Business should be aware of the capabilities of IT, but should also understand what needs to be done to develop and maintain information systems and technology. The better these understanding of business and IT of both worlds, the more mature alignment will be.

The third attribute is Inter/Intra-Organizational Learning. The better an organization is capable of learning (and educating) from opportunities like previous experiences, problems, and challenges, the more mature the alignment is.

Fourth, Protocol Rigidity has to do with the way how business and IT communicate with each other. Is it one-way or two-way? Is it only formal, or also informal? It may be clear that a two-way communication, with formal and informal characteristcs suits alignment best.

Next, Knowledge Sharing is also very important part. As I have introduced in the former post, knowledge sharing is an enabler for alignment. Shared domain knowledge is defined as the ability of IT and business executives, at a deep level, to understand and be able to participate in the others’ key processes and to respect each other’s unique contribution and challenges.

The last attribute in Communication is Liaison Breadth/Effectiveness. According to Luftman, many firms choose to draw on liaisons to facilitate. The key word here is facilitate. Facilitators whose role is to serve as the sole conduit of interaction among the different organizations are often seen. This approach tends to stifle rather than foster effective communications. Rigid protocols that impede discussions and the sharing of ideas should be avoided. I will come back to the role of liasons in a following post.

Reference

Luftman, Jerry: Assessing Business-IT Alignment Maturity, Communications of AIS, Volume 4, Article 14, December 2000

Managing the Information Technology Resource

Jerry N. Luftman, well known for his Strategic Alignment Maturity Model (SAMM), published a new book: Managing the Information Technology Resource. It’s worth the money!

Strategic Alignment Model Enhanced (SAME)

More or less in the same period as in which Maes (et al) developed the Amsterdam Information Model, a comparable model was developed by Van Bon and Hoving (2007), based on earlier work in 1998. They named their model the Strategic Alignment Model Enhanced (SAME). Both models look the same. Maybe, the scientific backgrounds are different, but from a practical point of view they appear similar. What the SAME model introduces is a nice definition of the different layers.

These three different layers (strategic, tactical, operational), combined with the three colomns (business, information, technology) form the SAME model.

Reference

Jan van Bon and Wim Hoving: SAME, Strategic Alignment Model Enhanced, BHVB bv, October 2007

Start the dialogue!

In the past years I’ve executed some assessments on the business/IT alignment maturity of some organizations. I’ve used the assessment method of Luftman, the so-called Strategic Alignment Maturity Model (SAMM).

This model can be used in a survey to see where a company stands regarding maturity and once this maturity is understood, it can provide the organisation with a roadmap that identifies opportunities for enhancing the harmonious relationship of business and IT [Luftman, 2000]. The model consists of 6 alignment areas. Each area has multiple attributes. For each area there are clearly defined maturity levels. All areas should be given attention to mature the alignment between business and IT. With the help of a questionnaire, based on the SAMM elements, people from business and IT valued each question with a score between 1 and 5. These scores correspond with the maturity levels as defined by Luftman. One question per attribute of the model. The outcomes of the survey can be plotted in a graph.

It’s interesting to know where a company stands regarding the maturity level on business/IT alignment. But, that in itself doesn’t help very much. What does help, is using the outcomes to start an open dialogue with and between business and IT representatives. By looking at the outcomes, one can easily point at situations where business and IT disagree, or where the mean score is low. Luftman states that all elements of the model should be more or less on the same level to have good alignment. Such a survey facilitates an open discussion. And, in this dicussion you can find out why people valued certain elements the way they did. And this provides valuable insight into which areas improvements are possible and needed.

In some cases, the questionnaire was send to different levels of the organisation. On strategic, tactical and operational levels. This was useful as well, because this gives insight in differences between these levels.

From a practical perspective, this survey is easy to apply. It’s not the overall maturity score which is important. It’s the insights the individual scores provide. These scores enable the dialogue between business and IT. And, once this dialogue has started, it’s so much easier to start working on improvements.

References

Luftman, Jerry: Assessing Business-IT Alignment Maturity, Communications of AIS, Volume 4, Article 14, December 2000

Luftman, Jerry and Kempaiah, Rajkumar: An Update on Business-IT Alignment: “A Line” Has Been Drawn, MIS Quarterly Executive Vol.6 No. 3, September 2007.

IT Engagement Model

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In this post I will introduce the IT Engagement Model, developed by Nils O. Fonstad of CISR, MIT. In previous posts I already showed the importance of alignment on and between different layers in an organisation. In a study of the Center for Information Systems Research (CISR) this issue is adressed as well. Fonstad (2006) states that IT departments always struggle with the eternal dilemma how to achieve company-wide strategies while simultaneously responding to urgent requests from business units to implement dozens or even hundreds of solutions for local projects. Two different streams of research have attempted to adress this challenge.

Research on IT Governance has taken a top-down approach and specified how management allocate decisions. The other stream of research, with a more bottom-up approach, focuses on how projects can be coordinated and managed.  According to the CISR study, neither of these approaches is sufficient. Succesful approaches adress two fundamental goals – alignment between IT and the rest of the business and coordination across multiple organizational levels. In earlier post I mentioned horizontal and vertical alignment, to adress these different dimensions.

An IT engagement model has been introduced, which is defined as the system of governance mechanisms that brings together key stakeholders to ensure that projects achieve both local and company-wide objectives. This engagement model consists of three general components.

• Company-wide IT Governance – decision rights and accountability of comapny level and business unit level stakeholders to define company-wide objectives and encourage desirable behaviour in the use of IT
• Projectmanagement – a formalized project management process, with clear deliverables and regular well-defined checkpoints, that encourages disciplined, predicatable behaviour for project teams.
• Linking mechanisms – processes and decision-making bodies that connect project-level activities to the overall IT governance.

The first two are well recognized. What CISR has found to be the ‘missing link’ is the third element: Linking Mechanisms. Linking mechanisms are at the heart of a company’s IT engagement model. They enable ideas to flow back and forth between company-wide IT governance and project management. Linking mechanisms ensure that high-level governance decisions are understood and implemented by project teams, so that projects help to incrementally achieve the company’s objectives and the company learns from every project.

An effective IT engagement model enables traditionally independent stakeholders to negotiate between competing demands, influence one another, learn from each other, develop trust across the company, and work collectively on achieving local and company-wide objectives. It ensures that project solutions are not developed by any single stakeholder, but rather, result from multiple stakeholders working together to resolve competing interests (e.g. tactical versus strategic, local versus enterprise-wide, new versus reuse).

All three components of the IT engagement model are important sources of mechanisms. Engagement mechanisms take the form of roles, procedures, decision-making bodies and work-groups.

Engagement Mechanisms:

Linking mechanisms can be found in three categories: business linkage, architecture linkage,  and alignment linkage. Business linkage mechanisms link projects to company- and business-level strategies. Architecture linkage mechanisms link projects to enterprise and business unit architectures. Alignment linkage mechanisms link IT with the rest of the business, particularly at the business unit level. There are all kind of mechanisms possible. In the enclosed figures, some of the most prominent are shown.

CISR found out that firms with a stronger level of alignment distinguished themselves by engaging IT and non-IT stakeholders in three areas:

1. Establishing and maintaining a daily level of conversation between IT and non-IT peers
2. Ensuring that different projects link to corporate goals and shared resources, and
3. Asessing and learning from project performance.

These firms had a key mechanism in each of these three areas. These were:

1. Business-IT relationship managers:  A business-IT relationship manager is a formal role in which an individual engages with IT and a specified part of the business.
2. Program Management Office: this typically consist of a central group that coordinates resources across projects, ensuring they collectively contribute to corporate level objectives.
3. Post-implementation Reviews: PIRs typically consist of a group that essesses a project’s key targets and deliverables at the conclusion of a project or project cycle.

In following posts, I will dive deeper in the topic of IT engagement in relation to Alignment.

 

References

Fonstad, Nils, and Robertson, David: Engaging for Change: An Overview of the IT Engagement Model, CISR Research Briefing, Sloan School of Management, Massachusetts Institute of Technology (MIT), March 2005.

Fonstad, Nils, and Robertson, David: Transforming a company, Project by Project: The IT Engagement Model, CISR Working Paper 363, Sloan School of Management, Massachusetts Institute of Technology (MIT), September 2006.

Fonstad, Nils Olaya: Engaging Matters: Enhancing Alignment with Governance Mechanisms, CISR Research Briefing, Sloan School of Management, Massachusetts Institute of Technology (MIT), December 2006.

Strategic Alignment Maturity Model (Luftman)

There are numerous articles, studies and models to be found on the topic Business/IT-alignment. This makes it hard to define which model is most adequate to use. But some models are apparently much more accepted than others, although there seems to be no consensus on the best one. The basis of many models seems to be the Strategic Alignment Model (SAM) of Henderson and Venkatraman [Henderson and Venkatraman, 1999]. This model suggests that IT-business alignment can be achieved by building linkages among four strategic domains:

• Business Strategy
• IT Strategy
• Organisational and infrastructural processes
• Information Technology infrastructure and processes.

The dimension of strategic fit differentiates between external focus, directed towards the business environment, and internal focus, directed towards administrative structures. The other dimension of functional integration separates business and IT. According to the authors, Strategic Alignment can only occur, when three of the four domains are in alignment.

According to Leonard [Leonard, 2008] the SAM-model merely describes what needs to be aligned. In the same study, Leonard points out that there has been far less consensus regarding how alignment is to be achieved. The model which is seen by Leonard as the model which gives insight in the processs by which alignment can be improved is the model of Luftman. This is more about the question how alignment is achieved. The theory of Luftman is found in many articles as a framework for assessing Alignment within a company, and looks very useful.

Luftman developed a maturity assessment model, based on the 12 elements of Business/IT-Alignment, which can be recognized in the model of Henderson and Venkatraman. The components of this model, in concert with the earlier enables/inhibitors research [Luftman and Brier, 1999], form the building blocks for the strategic alignment maturity assessment method [Luftman, 2000].

This model can be used in a survey to see where a company stands regarding maturity and once this maturity is understood, it can provide the organisation with a roadmap that identifies opportunities for enhancing the harmonious relationship of business and IT [Luftman, 2000]. The model consists of 6 alignment areas. Each area has multiple attributes. For each area there are clearly defined maturity levels. All areas should be given attention to mature the alignment between business and IT.

The areas are:

Communications

How well does the technical and business staff understand each other? Do they connect easily and frequently? Does the company communicate effectively with consultants, vendors and partners? Does it disseminate organizational learning internally?

Competency/Value Measurement

How well does the company measure its own performance and the value of its projects? After projects are completed, do they evaluate what went right and what went wrong? Do they improve the internal processes so that the next project will be better?

Governance

Do the projects that are undertaken flow from an understanding of the business strategy? Do they support that strategy?

Partnership

To what extend have business and IT departments forged true partnerships based on mutual trust and sharing risks and rewards?

Scope & Architecture

To what extend has technology evolved to become more than just business support? How has it helped the business to grow, compete and profit?

Skills

Does the staff have the skills needed to be effective? How well does the technical staff understand business drivers and speak the language of the business? How well does the business staff understand relevant technology concepts?

In my experience, the assessment-method of Luftman really provides enterprises and organisations with a tool which gives insights in the business/it-relationship. It is very useful in defining improvement areas, and even more important, it facilitates an open discussion with executives from business and IT. What it doesn’t, is providing guidelines how to improve the alignment between business and IT. But, the six dimensions cover, in my experience, quite nice on which elements attention should be given. Not at one specific, but all dimensions should be in harmony. I will come back to these dimensions in following posts.

References

Henderson, J.C. and Venkatraman, N.:Strategic Alignment: Leveraging Information Technology for Transforming Organizations, IBM Systems Journal, 1999

Leonard, Jenny: What are we aligning? Implications of a Dynamic Approach to Alignment, 19^th Australian Conference on Information Systems, Christchurch, 2008

Luftman, Jerry and Brier, Tom: Achieving and Sustaining Business-IT Alignment, Calirfornia Management Review, Fal 1999

Luftman, Jerry: Assessing Business-IT Alignment Maturity, Communications of AIS, Volume 4, Article 14, December 2000

Alignment – Also on tactical and operational levels!

Alignment is expected to improve business performance, by aligning Business and IT Strategy. But, that’s not enough. According to Boar [1994, in Grant, 2003], effective alignment is predicated on the combination of prescient planning and the effective execution of those plans. The execution of a strategy is almost always realized via the tactical and operational levels of an organization. This means, that alignment must be realized, not only horizontally, but also vertically.

One definition on these two types of organizational alignment – vertical and horizontal – is found in [Kathuria et al, 2007]. Vertical alignment refers to the configuration of strategies, objectives, action plans, and decisions throughout the various levels of the organization. Horizontal alignment refers to coordination of efforts across the organization and is primarily relevant to the lower levels in the strategy hierarchy.

Alignment on different organizational levels

While IT-business alignment at the strategic level has been extensively studied (Chan and Reich 2007), there has been little study of how IT and business can align at the tactical level.

Tactical IT-business alignment is necessary for making sure that IT projects are implemented on time and the implemented applications deliver the planned and desired business benefits. Alignment at the operational or tactical level is required for ensuring that planned applications are successfully implemented, maintained and used, that applications and systems irrelevant to the business plan are not implemented, and that implemented IT delivers envisaged business benefits [Tarafdar and Qrunfleh, 2009].

The importance of alignment on a operational level is also adressed by Guldentops in [Grembergen et al, 2004]. He makes a distinction between vertical and horizontal alignment. Vertical alignment is primarily driven by repeatedly communicating an integrated Business and IT strategy down into the organisation, and translating it at each organisational layer into the language, responsibilities, values and challenges at that level. Horizontal alignment is primarily driven by cooperation between Business and IT on integrating the strategy, on developing and agreeing on performance measures and on sharing responsibilities.

Benbya and McKelvey came up with a model which highlights the relevance of analysing the relationship between Business and IT (Horizontal Alignment) but also the need to reconcile the views at different levels of analysis (Vertical Alignment). This model is shown in the enclosed.  Further, they redefine alignment as follows: “Alignment is a continous coevulutionary process that reconciles top-down ‘rational designs’ and bottom-up ‘emergent processes’ of consiously and coherently interrelating all components of Business/IS relationships at three levels of analysis (strategic, operational and individual) in order to contribute to an organisation’s performance over time”. [Benbya and McKelvey, 2006].

 

Coevolutionary IS Alignment [Benbya and McKelvey, 2006]

Gutierrez et al [2008] confirm the need for expanding research to the tactical and operational level. Based on findings from their literature review they state:

1. Business-IS alignment and assessment approaches are mainly focused on the strategic level
2. There is a lack of connection between strategies and IT projects implementation.

References

Benbya, Hind, and McKelvey, Bill: Using coevolutionary and complexity theories to improve IS alignment: a multi-level approach, Journal of Information Technology, No 21, 2006

Chan, Yolande E and Reich, Blaize Horner: IT Alignment: what have we learned, Journal of Information Technology (2007) 22, 2007

Grembergen, Wim van, and Haes, Steven de, and Guldentops, Erik: Structures, Processes and Relational Mechanisms for IT Governance, Idea Group, 2004.

Grant. Gerarld G.: Strategic Alignment and Enterprise Systems Implementation: the case of Metalco, Journal of Information Technology, No 18, September 2003

Gutierrez, Anabel, and Orozco, Jorge, and Mylonadis, Charalampos, and Serrano, Alan: Business-IS alignment: assessment process to align IT projects with business strategy, AMCIS 2008 Proceedings, 2008.

Kathuria, Ravi, and Joshi, Makeshkumar, P., and Porth, Stephen J.: Organizational alignment and performance: past, present and future, Management Decision, Vol. 45 No 3, 2007.

Tarafdar, Monideepa, and Qrunfleh, Sufian: IT-Business Aligment: A Two-Level Analysis, Information Systems Management, No 26, 2009

Amsterdam Information Model (AIM) – 9 Cells Model

The next model, I like to introduce is the Amsterdam Information Model (AIM), also known as the so-called 9-cells-framework (in dutch: negenvlaksmodel). This model was developed by Maes, Truijens and Abcouwer. They extended the original SAM model with an extra row and an extra column. By splitting the internal domain, in a structural and operational level, they introduced a central role where the design and managing of a company is adressed. The extra column is introduced to split the use of information from the technology side. In later work Maes extended this model to a so-called Unified Framework [Maes et al, 2000]. This is called an attempt to transform the concept of alignment into a practical method, incorporating both management and design components. This model can help in understanding the complex world of business and IT, and more specific, to understand the role of informationmanagement. According to a recent publication of Abcouwer and Goense, this model is often used in a different and wrong way. In a descriptive way, where it’s not meant for. This model enables discussions on the topic of business and IT alignment, but it doesn’t provide information on how organisations can actually improve the way they cooperate.

References

Abcouwer, A.W., Maes, R., Truijens, J.: Contouren van een generiek model voor informatiemanagement, Primavera Working Paper 97-07, 1997.

Abcouwer, A.W., Gels, H., Truijens, J.: Informatiemanagement en Informatiebeleid, SDU, 2006.

Maes, R.: A Generic Framework for Information Management, PrimaVera Working Paper 99-02, 1999.

Maes, Rik, Rijsenbrij, Daan, Truijens, Otto, Goedvolk, Hans: Redefining business-IT alignment through a unified framework, PrimaVera Working Paper 200-19, 2000.

The Strategic Alignment Model of Henderson and Venkatraman

The Strategic Alignment Model (SAM) of Henderson and Venkatraman [1999] is widely used as the base of Business/IT Alignment theories. The key message of this model, as well as that of many other studies, is that to become a successfull company, one should make sure that the IT strategy is fully aligned with business strategy.

Figure: Strategic Alignment Model [Henderson and Venkatraman, 1999]

The Strategic Alignment Model is composed of four quadrants that consist of three components each. All of the components working together determine the extent of alignment. At least as important are the linkages between the quadrants. The first linkage is that of strategic fit. This is the vertical linkage and refers to the use of strategy to determine the infrastructure of the business. The second linkage is functional integration. This (horizontal) linkage is most directly related to the alignment of business and IT.

Based on this model different perspectives are mentioned, which are shown in the next figure. These perspectives are constructed in a type of triangular format, and can be used to assess the alignment within a company.

Figure: Eight Strategic Alignment Perspectives [Coleman and Papp, 2006]

In addition to these eight perspectives, there are also four fusion perspectives described, that are formed from the combination of two of the individual perspectives. [Luftman, 1996; Coleman and Papp, 2006].

Figure: Fusion Perspectives

Although these different perspectives can be used to gain insights in the way the business and IT are aligned, they provide little guidance on the question how companies can achieve good alignment.

References

Coleman, Preston and Papp, Raymond: Strategic Alignment: Analysis of Perspectives, Proceedings of the 2006 Southern Association for Information Systems Conference, 2006.

Henderson, J.C. and Venkatraman, N.: Strategic Alignment: Leveraging Information Technology for Transforming Organizations, IBM Systems Journal, 1999