Posts Tagged ‘Strategic management’

Organizations are dynamic systems, in which all parts should be aligned to get results. Tosti and Jackson [2003] of iChangeworld Consulting wrote an interesting whitepaper on Organizational Alignment. They introduced a framework which, in my opinion, illustrates an important view on alignment.

Figure: Organizational Alignment (Tosti and Jackson, 2003)

This model describes two interdependent paths for moving from a broad statement of organizational mission and vision to specific results:

Strategic: The left-hand path emphazises what needs to be done: the strategic goals the organization will work toward; the objectives that groups and individuals must accomplish to carry out those strategies; the activities that must be performed to meet goals and objectives.
Cultural: The right-hand path emphazises how things should be done: the values that will guide people in carrying out the mission and vision; the practices which reflect those values; the specific, day-to-day behaviors which will represent the values and practices to others as people go about their work.

Organizational alignment requires compatibility between the strategic and cultural “paths”, and consistency within them. Organizations have traditionally emphazised the strategic path. Most invest considerable effort in defining strategic goals and objectives. Fewer adress the cultural path with clearly defined statements of values (Tosti and Jackson, 2003).

In Business/IT Alignment literature alignment is divided in an intellectual dimension and a social dimension. One could easily see the analogy with the strategic and cultural dimension of Tosti and Jackson. Where in Business/IT Alignment, these two dimensions are often looked at in isolation, it’s better to follow the advice of Tosti and Jackson to consider both dimensions as interdependant.

Reference

Tosti, Donald T.; and Jackson, Stephanie F.: Organizational Alignment, iChangeWorld Consulting LLC, Novato, USA, 2001-2003

I’ve adressed many models and theories regarding Business/IT Alignment. I have read lots of literature on this topic, and still, as a practitioner I did not find a single one which helped me out in daily practice. For me enough reason to see if I can reconstruct a framework which gives some practical guidance. I do not have the intention to add a new alignment model, but like to combine what I’ve seen.

Many models simplify reality. This can be useful, but oversimplified models loose their practical use. Still, I’m convinced that we can look at the real world using the proper models or frameworks. I’m not the only one who tries to bring the different views together. I have found a thesis of Vargaz Chevez (2010), who constructed the Unified Strategic Alignment Model. The following figure is from his work. Hardly readable, but it consists of many elements of the different existing theories. I regret to say, but this doesn’t help very much in (at least my) daily practice.

Figure 1 Unified Strategic Alignment Model

More usefull, is the so-called 9-cells model (Maes, 1999; Maes et al, 2000; Bon and Hoving, 2007). It offers an interesting view on the domain we’re looking at. The models divide three colomns representing business, information and technology. The three rows are in the two models a little different, but essentially they introduce an intermediairy row between the strategic and operational level.

Figure 2 Nine-Cells Model

This model can be used to  understand where we are looking at. Talking about alignment, one should try to bring all these nine cells in alignment. Many definitions see this as a static situation, where often only the strategic level is considered. But, strategies are worthless untill they are adopted by the tactical and operational level. The tactical level needs to define which projects are needed to really execute the strategy. And on an operational level, the projects need to be implemented and included in daily operations. The tactical level translates goals and preconditions of the strategic domain into concrete, realizable objectives, responsibilities, authorizations, frameworks, and guidelines for the operational domain [Bon and Hoving, 2007].

So, even if on a strategic level, business and IT appear to be aligned, this doesn’t guarentee that it will lead to success. In fact, one should be concentrating on the way the different cells are connected. And here lies the complexity of Business/IT Alignment. To make it even more realistic, we should add more cells. Most larger enterprises are organized in different units. This can be functional or divisional. This will lead to additional 9-cells connected. In the following figure, I have constructed this 3 x 3 x 3 cube, which I call the Generic Alignment Framework©.

Figure 3 Generic Alignment Framework©

This Generic Alignment Framework© is called generic, because this isn’t only applicable for Business/IT Alignment. One could replace bu 1, bu 2 and bu 3 with Sales, Marketing and Operations. Or even, put these functional departments in the place of business, information and technology. The matrix could even be larger or smaller than 3x3x3, depending on the specific organisation. Larger organisations do exist of different units which depend more or less on each other. This also depend on the operating model an organisation chooses to have [Ross, Weill and Robertson, 2006]. But, why should Business and IT be different from other entities? If this isn’t the case, we certainly could learn more on alignment by looking at alignment topics in other areas. And if the Business and IT relationship really indeed is different from the rest, how can we make these differences more explicit?

Using the framework

This framework has value in understanding the complexity of the domain of alignment. Which elements have to be taken into account when a company is looking for alignment. This model also shows the difference between the elements (whether departments or roles) and the linkages.

Many models and definitions adress the state of alignment an organisation has achieved. In fact, they take a picture of the organisation and measure if the elements are aligned at that very moment. Which, in a complex organisation, like illustrated in the framework, is a huge challenge. Anyhow, to achieve alignment, communication between the elements is required, which means that all information should pass all these linkages without any bias. That’s the process of alignment.

The most widespread theories on alignment approach this topic from a strategic point of view.  That in itself isn’t wrong, but they also restrict their theory to the strategic level. That’s wrong. Because an important problem area is excluded (or taken for granted), which is related to a proper translation of strategy into action, through the tactical level onto the operational level.

To be continued (also on page Howe To…)

The third of the six dimensions of the Strategic Alignment Maturity Model of Luftman (2000) is Governance. Ensuring that the appropriate business and IT participants formally discuss and review the priorities and allocation of IT resources is among the most important enablers/inhibitors of alignment. The decision-making authority needs to be clearly defined. IT Governance is a topic in itself, and widely studied. Sometimes, alignment is presented as part of good governance. Luftman adresses this as one of the six dimensions in his model. In this post I limit myself to Luftman’s description of governance. In later posts I will expand the view on alignment.

This dimension consists of 7 attributes. Comparing the questionnaire I’ve used with Luftman (2000), one dimension has been changed. Or, in fact, one has been replaced by another one.

The first two attributes are about participation of business and IT in the strategic planning of business and strategic planning of IT. If these processes are isolated, you cannot expect alignment to be mature. The more integrated they are, the better the alignment maturity will be.

The third (original) attribute was about the reporting structure of the CIO. He should report to the CEO to enhance alignment. As said, this attribute didn’t appear in the survey. The new attribute is about the ability of the IT organization to react/resond quickly to changing business needs.

The fourth attribute relates to the way the IT organization is seen, how IT is budgetted. Is IT seen as a cost center, an investment center or even better, a profit center.

The following, fifth, attribute is about how IT investment decisions are made. The more IT investments are seen as value driver, the better it is. The last two attributes are related to this. Number six is about the usage of steering committees. Does your company use steeringcommittees or not, and are the formal and regular or not. The last attribute has to do with the way projects are prioritized. It should be clear by now, that mature alignment consists of a shared prioritization process by business and IT.

As I mentioned earlier, IT Governance, is a topic in itself. Methodologies are provided by several authors and institutions. I will come back to this topic later on.

Reference

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

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

Most common models focus on the strategic dimension of alignment. Chan and Reich (2007) defined several dimensions on alignment. The strategic or intellectual dimension, the structural dimension, the social dimension, and the cultural dimension. A well known study by Reich and Benbasat (2000) defines only two dimensions. The first (intellectual dimension) concentrates on examining the strategies, structure, and planning methodologies in organizations. The second (social dimension) investigates the actors in organizations, examining their values, communications with each other, and ultimately their understanding of each others’ domains.

The intellectual dimension of alignment is defined as “the state in which a high-quality set of interrelated IT and business plans exists.” The social dimension of alignment is defined as “the state in which business and IT executives within an organizational unit understand and are committed to the business and IT mission, objectives, and plans”.

The study included four factors that would potentially influence alignment:

1. Shared domain knowledge between business and IT executives: the better IT and business executives understand and participate in each others’ key processes the better the alignment will be. Shared domain knowledge is defined here 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.

2. Successful IT history: the more successful the previous IT implementation the more trust business executives have in IT and the more motivation to communicate with the IT department, which leads to better alignment.

3. Communication between business and IT executives: the communication between business and IT executives can positively affect the level of mutual understanding and alignment.

4. Connections between business and IT planning processes: the more IT executives are involved in business planning the more they can understand and support the business objectives, leading to better alignment.

All four factors in the model (shared domain knowledge, IT implementation success, communication between business and IT executives, and connections between business and IT planning) were found to influence short-term alignment (the degree of mutual understanding of current objectives). Only shared domain knowledge was found to influence long-term alignment (the congruence of IT vision between business and IT executives).

References

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

Reich, Blaize Horner and Benbasat, Izak: Factors that influence the social dimension of alignment between business and information technology objectives, MIS Quarterly, Vol.24, No.1. March 2000.

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.

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:

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, 19th 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