Strategic Alignment, IT Value, and Organizational Analysis

Strategic Alignment, IT Value, and Organizational Analysis

Eng K. Chew (University of Technology, Australia) and Petter Gottschalk (Norwegian School of Management, Norway)
Copyright: © 2009 |Pages: 29
DOI: 10.4018/978-1-59904-802-4.ch003
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Abstract

Over the last several decades, strategy researchers have devoted attention to the question of how corporate elites (i.e., corporate executives and directors) affect corporate strategy. The CEO as a person in position shapes the scope of the firm, while the CIO as a person in another position shapes the scope of IT in the firm. Jensen and Zajac (2004) proposed and tested the notion that while differences in individual characteristics of corporate elites may imply different preferences for particular corporate strategies such as diversification and acquisitions, these basic preferences, when situated in different agency contexts (e.g., CIO, CEO) generate very different strategic outcomes. Strategy can simply be defined as principles, a broad based formula, to be applied in order to achieve a purpose. These principles are general guidelines guiding the daily work to reach business goals. Strategy is the pattern of resource allocation decisions made throughout the organization. These encapsulate both desired goals and beliefs about what are acceptable and, most critically, unacceptable means for achieving them. While the business strategy is the broadest pattern of resource allocation decisions, more specific decisions are related to information systems and information technology. How should IS/IT resources be allocated within business organizations? How can business ensure the IS/IT resources will deliver the desired business value? Hann and Weber (1996) see IS/IT strategic planning as a set of activities directed toward achieving the following objectives: 1. Recognizing organizational opportunities and problems where IS/IT might be applied successfully 2. Identifying the resources needed to allow IS/IT to be applied successfully to these opportunities and problems 3. Developing strategies and procedures to allow IS/IT to be applied successfully to these opportunities and problems 4. Establishing a basis for monitoring and bonding IT managers, so their actions are more likely to be congruent with the goals of their superiors 5. Resolving how the gains and losses from unforeseen circumstances will be distributed among senior management and the IT manager 6. Determining the level of decision rights to be delegated to the IT manager. Empirical studies of information systems/information technology planning practices in organizations indicate that wide variations exist. Hann and Weber (1996) found that organizations differ in terms of how much IS/IT planning they do, the planning methodologies they use, the personnel involved in planning, the strength of the linkage between IS/IT plans and corporate plans, the focus of IS/IT plans (e.g., strategic systems vs. resource needs), and the way in which IS/IT plans are implemented. In this chapter, we will review the principles of strategic alignment and discuss in detail the various methods for IT value and organizational maturity analysis.
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Introduction

Over the last several decades, strategy researchers have devoted attention to the question of how corporate elites (i.e., corporate executives and directors) affect corporate strategy. The CEO as a person in position shapes the scope of the firm, while the CIO as a person in another position shapes the scope of IT in the firm. Jensen and Zajac (2004) proposed and tested the notion that while differences in individual characteristics of corporate elites may imply different preferences for particular corporate strategies such as diversification and acquisitions, these basic preferences, when situated in different agency contexts (e.g., CIO, CEO) generate very different strategic outcomes.

Strategy can simply be defined as principles, a broad based formula, to be applied in order to achieve a purpose. These principles are general guidelines guiding the daily work to reach business goals. Strategy is the pattern of resource allocation decisions made throughout the organization. These encapsulate both desired goals and beliefs about what are acceptable and, most critically, unacceptable means for achieving them.

While the business strategy is the broadest pattern of resource allocation decisions, more specific decisions are related to information systems and information technology. How should IS/IT resources be allocated within business organizations? How can business ensure the IS/IT resources will deliver the desired business value? Hann and Weber (1996) see IS/IT strategic planning as a set of activities directed toward achieving the following objectives:

  • 1.

    Recognizing organizational opportunities and problems where IS/IT might be applied successfully

  • 2.

    Identifying the resources needed to allow IS/IT to be applied successfully to these opportunities and problems

  • 3.

    Developing strategies and procedures to allow IS/IT to be applied successfully to these opportunities and problems

  • 4.

    Establishing a basis for monitoring and bonding IT managers, so their actions are more likely to be congruent with the goals of their superiors

  • 5.

    Resolving how the gains and losses from unforeseen circumstances will be distributed among senior management and the IT manager

  • 6.

    Determining the level of decision rights to be delegated to the IT manager.

Empirical studies of information systems/information technology planning practices in organizations indicate that wide variations exist. Hann and Weber (1996) found that organizations differ in terms of how much IS/IT planning they do, the planning methodologies they use, the personnel involved in planning, the strength of the linkage between IS/IT plans and corporate plans, the focus of IS/IT plans (e.g., strategic systems vs. resource needs), and the way in which IS/IT plans are implemented.

In this chapter, we will review the principles of strategic alignment and discuss in detail the various methods for IT value and organizational maturity analysis.

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Strategic Alignment

Alignment between business strategy and IT strategy is widely believed to improve business performance (Sabherwal & Chan, 2001). Therefore, strategic alignment is both a top management concern and also an important characteristic of the attributes of effective CIOs. While the business strategy is the broadest pattern of resource allocation decisions, more specific decisions are related to information systems and technology platforms. IS must be seen both in a business and a technology context. IS is in the middle because IS supports the business while using technology platforms.

Complete Chapter List

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Table of Contents
Foreword
Michael K. M. Leung
Acknowledgment
Eng K. Chew
Chapter 1
Eng K. Chew, Petter Gottschalk
A general understanding of business firms is required in order to be able to develop business and IT strategies. This chapter will present the... Sample PDF
Theories and Models of Business Firms
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Chapter 2
Eng K. Chew, Petter Gottschalk
Building on the understanding of the theories and models of firms, this chapter reviews the basic principles of strategic management of business... Sample PDF
Strategic Management Principles
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Chapter 3
Eng K. Chew, Petter Gottschalk
Over the last several decades, strategy researchers have devoted attention to the question of how corporate elites (i.e., corporate executives and... Sample PDF
Strategic Alignment, IT Value, and Organizational Analysis
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Chapter 4
Eng K. Chew, Petter Gottschalk
As discussed in Chapter III, a successful IT strategy must align with the business, fully at every stage of the end-to-end strategic management... Sample PDF
Critical Success Factors of IT Strategy
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Chapter 5
Eng K. Chew, Petter Gottschalk
Chapter IV defines the macromodel for achieving business/IT alignment. This chapter defines the detailed methodology for each step of the IT... Sample PDF
Strategic Alignment for Business Value Creation
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Chapter 6
Eng K. Chew, Petter Gottschalk
The role of integrated enterprise architecture in IT strategy and strategic alignment is explained in Chapter V. This chapter describes in detail... Sample PDF
Enterprise and Technology Architectures
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Chapter 7
Eng K. Chew, Petter Gottschalk
The previous chapters describe how IT strategy and enterprise architecture can be defined in line with business strategy. The success of business... Sample PDF
Strategic Programs: Planning and Execution
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Chapter 8
Eng K. Chew, Petter Gottschalk
As introduced in Chapter II and Chapter V, performance differences across firms can be attributed to the variance in firms’ resources and... Sample PDF
Strategic IT Resources and Sourcing Strategy
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Chapter 9
Eng K. Chew, Petter Gottschalk
In many organizations, information technology has become crucial in the support, sustainability, and growth of the business. This pervasive use of... Sample PDF
The CIO Enabling IT Governance
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Chapter 10
Eng K. Chew, Petter Gottschalk
The Global CEO Survey by IBM (2006) shows that two thirds of the CEOs anticipate significant change to their companies over the next two years. The... Sample PDF
Business Innovation and Information Management
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Chapter 11
Eng K. Chew, Petter Gottschalk
As described in Chapter X, fundamental to the company’s innovation capabilities is the level of collaboration and knowledge management capabilities... Sample PDF
Innovation and Driven Knowledge Management
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Chapter 12
Eng K. Chew, Petter Gottschalk
This chapter is about the “know-how” part of IT strategy and management best practices. This case example aims to illustrate a successful practical... Sample PDF
Business-Aligned IT Strategy Case Example: CLP Group, Hong Kong
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About the Authors