STRATEGICSTRATEGIC

ALIGNMENT ALIGNMENT

MATURITYMATURITY

DR. JERRY LUFTMANDR. JERRY LUFTMANSTEVENS INSTITUTE OF TECHNOLOGYJLUFTMAN@STEVENS-TECH.EDU2/20/03

SIM FAIRFIELD-WESTCHESTERSIM FAIRFIELD-WESTCHESTER

1.1. WHAT IS STRATEGIC ALIGNMENT?WHAT IS STRATEGIC ALIGNMENT?

2. WHY IS IT TAKING SO LONG TO 2. WHY IS IT TAKING SO LONG TO ADDRESS?ADDRESS?

3.3. HOW MATURE IS YOUR IT-BUSINESS HOW MATURE IS YOUR IT-BUSINESS

ALIGNMENT?ALIGNMENT?

AGENDAAGENDA

Which technology issues will be of greatest Which technology issues will be of greatest concern to you and your company in the next concern to you and your company in the next

year?year?

Ref : Conference Board

168 Better links to customers and suppliersBetter links to customers and suppliers 163 Enhancing corporate-wide processesEnhancing corporate-wide processes151 Aligning IT and business goalsAligning IT and business goals 126 Lowering costs of technology 72 Increasing user competence 70 Enabling/enhancing e-business and e-commerce 61 Data security / privacy 56 Implementing new technologies (e.g., wireless)

* CEO Responses

TOP 3 ARE IT BUSINESS ALIGNMENT ISSUESTOP 3 ARE IT BUSINESS ALIGNMENT ISSUES

Organization Concerns RankingsRank Issues

11 Aligning IS and Corporate GoalsAligning IS and Corporate Goals

2 Connecting to Customers, Suppliers and/or Partners Electronically

3 Using IT for Competitive Breakthroughs

4 Creating an Information Architecture

5 Improving the IS Human Resource

6 Integrating Systems

7 Developing an IS Strategic Plan

7 Implementing Business Reengineering

9 Cross-Functional Information Systems

9 Enabling Change and Nimbleness

11 Capitalizing on Advances in IT

11 Developing a Digital/E – Commerce Strategy

11 Organizing and Utilizing Data

14 Software Development Quality

15 Developing Executive Information Systems

16 Determining the value of IS

16 Restructuring the IS Function

18 Improving the Systems Development Process

18 Cutting IS Costs

Ref: Robert Gray, Anil Gulati - Western New England College

Top 10 IS Management Priorities, 2002

Strategizing for IS/business linkage

Providing leadership and guidance for the board/executive

Demonstrating business value of IS

Developing leadership and behavioral competencies in the IS senior mgmt. team

Reducing total IT costs

Strengthening program/project prioritization and management

Tightening security and privacy safeguards

Developing e-enabling IT architectures

Attracting, nurturing and sustaining IS resources

Reducing IT complexity

1 2 3 4 5 6 7 8 9 10Average weighted score (10 = max)

Key Findings

Improve synchronizationImprove synchronization

• During tough times, strategizing and executive leadership are more important than ever, as is e-enabling the enterprise

Delivering value, cut costs

• Now is the time to demonstrate value for IS investments and to focus on better IS management

Fix security and business continuity

• Privacy and security concerns top the IS management agenda

• The scope of security includes business continuity

Gartner

CSC Survey RankingsTop IS/IT Issues ’01 ‘00 ‘99 ‘98 ‘97 ‘96 ‘95 ‘94 ‘93 ‘92 ‘91 ‘90 ‘89

Aligning IS and Corporate GoalsAligning IS and Corporate Goals 2 5 3 1 1 1 1 2 2 1 2 4 2

Connecting to Customers, Suppliers Electronically

6 1 1 4 5 7 7 16 16 20 15 19 NR

Organizing & utilizing data 4 5 2 3 2 2 3 3 4 4 5 7 6

Developing an E-Business Strategy 13 4 4 19 NR NR NR NR NR NR NR NR NR

Integrating systems 10 7 5 6 6 5 16 8 11 13 9 16 12

Optimizing Enterprise-Wide Systems 1 2 5 NR NR NR NR NR NR NR NR NR NR

Instituting cross-functional IS 7 9 7 6 9 3 2 4 4 6 3 3 7

Capitalizing on Advances in IT 14 12 8 5 3 5 15 13 14 19 20 NR 17

Improving the IS Human Resource 20 15 9 2 7 11 5 9 12 5 13 11 8

Educating management on I/T 12 13 9 11 13 13 11 18 18 16 14 2 3

Using IT for Competitive Breakthroughs

16 7 11 10 3 4 13 15 15 14 12 8 1

Creating an Information Architecture 18 16 12 8 8 9 8 5 7 3 8 9 5

Cutting IS Costs 15 14 13 12 12 15 17 12 6 11 11 10 14

Improving the Systems Development Process

11 11 14 13 11 12 10 6 3 9 4 6 13

Updating Obsolete Systems 9 10 15 9 10 8 9 7 8 18 NR 13 NR

Changing technology platforms NR 18 16 17 16 14 12 9 10 NR NR NR NR

Restructuring the IS Function 19 17 17 13 17 17 NR NR NR NR NR NR NR

Managing Dispersed Computing NR 20 18 20 15 16 NR NR NR NR NR NR NR

Determining IS value NR 19 19 16 19 19 NR NR NR NR NR NR NR

Implementing Business Reengineering (Transformation ’01)

8 18 20 13 14 10 4 1 1 2 1 1 ‘89

Protecting and Securing IS 2 NR NR NR NR NR NR NR NR NR NR NR NR

Optimizing Org. Effectiveness 5 3 NR NR NR NR NR NR NR NR NR NR NR

7%

20%

28%27%

18%

IT is an equal agenda item in your company’s strategy and planning sessions

STRONGLY STRONGLY AGREEAGREE

STRONGLY DISAGREE

DISAGREE

AGREEAGREE

NEUTRAL

Ref : CIO and Boston-based consultancy ICEX

SOURCE: CUTTER CONSORTIUM, ARLINGTON, MASS.

Product strategy

E-business strategy

Sales/marketing

Customer service

Competitive position

IT’s RoleIT’s Role

Manufacturing

35%35%

8%

38%

43%

43%

49%

51%

Corporate executives were asked:

Which subjects are included in your formal business strategy?Which subjects are included in your formal business strategy?

10 20 30 40 50 60

Profit Center

Responsible primarily for technology maintenance

Core part of decision-making Core part of decision-making team that sets overall strategyteam that sets overall strategy

Instrument for cutting costs within the company

Resource for creating new business processes

Ref: Optimize Research

What is the role of IT at

your company ?

% of respondents

Cost Center and drain on corporate resources

70

Tool for improving business-process efficiency

Vital utility, like electricity

Manager of key data, communications, hardware, and software

Note: Multiple responses allowed

WHAT IS STRATEGIC WHAT IS STRATEGIC

ALIGNMENT???ALIGNMENT???

Where is the Value From IT Investments?

ITInvestments

StrategicBenefits

BusinessTransformation

External

Internal

Every business is an information business.

Information is the glue that holds value chains & organizations together.

A New PerspectiveA New Perspective

Investments in Business Change!!!Investments in Business Change!!!

IT InvestmentsIT Investments

Business Business Outcome:Outcome:

Business Business Process:Process:

IT IT Enabler:Enabler:

Value Management Framework

Portfolio ManagementOptionsIT-Business Process

Functional Integration

Business Scope

Distinctivecompetencie

s

Business Governance

Administrative Structure

Processes Skills

Technology Scope

Systemic competencie

s

IT Governance

IT Architecture

Processes Skills

BUSINESS Business Strategy

IT IT Strategy

IT Infrastructure

Strategic Fit

Organizational Infrastructure

The Strategic Alignment Model

Symptoms of Strategic Alignment Problems

LONG LIST ABOUT SYMPTOMS OF ALIGNMENT PROBLEMSLONG LIST ABOUT SYMPTOMS OF ALIGNMENT PROBLEMS

WHY IS IT TAKING SO WHY IS IT TAKING SO

LONG TO ADDRESS???LONG TO ADDRESS???

There is no “silver bullet”…

It takes a combination of “things” to make it a success!!!

New Org.Structures,

X-engineering, Business Partnership Mgt

New Org.Structures,

X-engineering, Business Partnership Mgt

Wireless PDAsvia Semantic Web

Wireless PDAsvia Semantic Web

Customercentric, IT enabled/driven

differentiation

Customercentric, IT enabled/driven

differentiation

ValueDemonstration

ValueDemonstration

Leverage Core CSFsLeverage Core CSFs

Enterprise Application

Integration: CRM, SCM, & K

Enterprise Application

Integration: CRM, SCM, & K

Disintermediation,Reintermediation,Hypermediation,Infomediation,Aggregation

Disintermediation,Reintermediation,Hypermediation,Infomediation,Aggregation

Incremental vs Radical Innovation

Incremental vs Radical Innovation

Revenue vs Earnings Growth

Revenue vs Earnings Growth

Multiple careers.Rightsizing, Skills

Shortage

Multiple careers.Rightsizing, Skills

Shortage

Leadership Skills:Agility, Experimentation

& Learning Hierarchy of Imagination

Leadership Skills:Agility, Experimentation

& Learning Hierarchy of Imagination

Secure, Integrated

Infrastructure

Secure, Integrated

Infrastructure

E-NOUGH E-NOUGH

KnowledgeEconomy

internal/external

KnowledgeEconomy

internal/external

BUSINESSBUSINESSTRANSFORMATIONTRANSFORMATION IT can:IT can: - Enable - Enable - Drive- Drive - Inhibit- Inhibit

BUSINESSBUSINESSTRANSFORMATIONTRANSFORMATION IT can:IT can: - Enable - Enable - Drive- Drive - Inhibit- Inhibit

Global Community& Economy;

Enronitis

Global Community& Economy;

Enronitis

HOW MATURE IS YOUR HOW MATURE IS YOUR

IT-BUSINESS IT-BUSINESS

ALIGNMENT???ALIGNMENT???

Climbing the Strategic Alignment Maturity Model

BusinessStrategy

IT Strategy

LEVEL 1 Initial Process

LEVEL 2 Committed Process

LEVEL 3 Established process

LEVEL 4 Improved Process

LEVEL 5OptimizedProcess

Alignment Gap

· ·

·

· · ·

-

·

- - - Inter -

-

IT BUSINESS ALIGNMENT MATURITY CRITERIA

PARTNERSHIP

•Business Perception of IT Value•Role of IT in Strategicc Business

Planning•Shared Goals, Risk,

Rewards/Penalties•IT Program Management•Relationship/Trust Style•Business Sponsor/Champion

SCOPE & ARCHITECTURE•Traditional, Enabler/Driver,

External•Standards Articulation•Architectural Integration: - Functional Organization -Enterprise-Inter enterprise

•Architectural Transparency, Agility, Flexibility

•Manage Emerging Tech.

SKILLS

by Business

•Liaison(

COMMUNICATIONS

•Understanding of Business by IT

•Understanding of IT

•Inter/Intra organizational Learning/Education

•Protocol Rigidity•Knowledge Sharing

s) effectiveness

COMPETENCY/VALUEMEASUREMENTS

•IT Metrics•Business Metrics•Balanced Metrics•Service Level Agreements•Benchmarking

•Formal Assessments/Reviews•Continuous Improvement

GOVERNANCE

•Organization Structure

•IT Investment Management

•Prioritization Process

•Business Strategic Planning•IT Strategic Planning

•Budgetary Control

•Steering Committee(s)

•Cultural Locus of Power

•Change Readiness

•Innovation, Entrepreneurship

•Management Style

•Career crossover; training/education

•Hiring and retaining

Interpersonal Environment•Social, Political, Trusting

•Improved/ managed process

•COMMUNICATIONS: Bonding, unified•COMPETENCY/VALUE: Cost effective;Some partner value;Dashboard managed•GOVERNANCE: Managed across the organization•PARTNERSHIP: IT enables/drives business strategy•SCOPE & ARCHITECTURE: Integrated with partners•SKILLS: Shared risk & rewards

•Established focused process

Strategic AlignmentMaturitySummary

•Initial/Ad-Hoc process

•Committed process

•Optimized process

Level 2

Level 1

Level 3

Level 4

Level 5

•COMMUNICATIONS: Good understanding; Emerging relaxed•COMPETENCY/VALUE: Some cost effectiveness; Dashboard established•GOVERNANCE: Relevant process across the organization•PARTNERSHIP: IT seen as an asset; Process driver;Conflict seen as creative•SCOPE & ARCHITECTURE: Integrated across the organization •SKILLS: Emerging value service provider;Balanced tech & business hiring

•COMMUNICATIONS: Business/IT lack understanding•COMPETENCY/VALUE: Some technical measurements•GOVERNANCE: No formal process,cost center, reactive priorities •PARTNERSHIP: Conflict; IT a cost of doing business•SCOPE & ARCHITECTURE: Traditional (e.g., acctng, email)•SKILLS: IT takes risk, little reward; Technical training

•COMMUNICATIONS: Limited business/IT understanding •COMPETENCY/VALUE: Functional cost efficiency•GOVERNANCE: Tactical at Functional level,occasional responsive•PARTNERSHIP: IT emerging as an asset; Process enabler•SCOPE & ARCHITECTURE: Transaction (e.g., ESS, DSS)•SKILLS: Differs across functional organizations

•COMMUNICATIONS: Informal, pervasive•COMPETENCY/VALUE: Extended to external partners•GOVERNANCE: Integrated across the org & partners•PARTNERSHIP: IT-business co-adaptive/improvisational•SCOPE & ARCHITECTURE: Evolve with partners•SKILLS: Education/careers/rewards across the organization

Strategic AlignmentMaturitySummary

•Initial/Ad-Hoc process

Level 1

•COMMUNICATIONSCOMMUNICATIONS: Business/IT lack understanding

•COMPETENCY/VALUECOMPETENCY/VALUE: Some technical measurements

•GOVERNANCEGOVERNANCE: No formal process,cost center, reactive priorities

•PARTNERSHIPPARTNERSHIP: Conflict; IT a cost of doing business

•SCOPE & ARCHITECTURESCOPE & ARCHITECTURE: Traditional (e.g., acctng, email)

•SKILLSSKILLS: IT takes risk, little reward; Technical training

•Optimized processLevel 5

•COMMUNICATIONSCOMMUNICATIONS: Informal, pervasive

•COMPETENCY/VALUECOMPETENCY/VALUE: Extended to external partners

•GOVERNANCEGOVERNANCE: Integrated across the org & partners

•PARTNERSHIPPARTNERSHIP: IT-business co-adaptive/improvisational

•SCOPE & ARCHITECTURESCOPE & ARCHITECTURE: Evolve with partners

•SKILLSSKILLS: Education/careers/rewards across the organization

WHERE IS THE ORGANIZATION STRONG/WEAK?

WHERE IS THERE DISAGREEMENT?

WHAT ARE THE IMPLICATIONS?

WHAT CAN BE DONE TO IMPROVE THE MATURITY LEVEL?

IT OPENS THE DOOR TO DISCUSSING ALIGNMENT

IT IS NOT JUST THE LEVEL OF IT IS NOT JUST THE LEVEL OF MATURITYMATURITY