Strategic Alignment and IT-Enabled Value Creation

Introduction

As introduced in chapters 2 and 3, 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 a service business ensure the IS/IT resources will deliver the desired business value and value co-creation with the customers? Hann and Weber (1996) see IS/IT strategic planning as a set of activities directed toward achieving the following strategic business alignment 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 versus resource needs), and the way in which IS/IT plans are implemented.

Strategic business-IT alignment remains a top priority for CEOs and CIOs alike, despite being a subject of intensive study for over 20 years (Luftman, et al., 2011). There is also a paucity of practical approach (Avison, et al., 2004; Chan, 2002) to guide practitioners in developing a business-aligned IT strategy, which will deliver the planned strategic business outcomes.

This chapter will describe the principles and method for producing a business-aligned IT strategy to enable value co-creation with customers. In particular, we will detail the alignment method and the underlying dynamic process of alignment as they form the critical disciplines that practitioners must master. The chapter also describes the Strategic Alignment Maturity (SAM) model by which management can gauge and continuously improve their organization’s strategic alignment capabilities. Finally, the authors discuss in detail the various methods for IT-enabled value creation.

Strategic Alignment Toward Customer Value Co-Creation

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.