Strategic Alignment Model

• Venkatraman in 1993 argued that the reason that firms often fail to see value from IT investment is due to – lack of alignment between the business and IT strategy in the firm, and

furthermore– a lack of a dynamic alignment process that ensures continuing alignment in

strategy and implementation between the business and IT organizations.

• Strategic alignment between IT and business occurs when IT is used to dynamically create and exploit business opportunities. It can be used then to transform business processes and also to create business dislocations in the market place.

• Proper alignment will allow an organization to use information technology efficiently to achieve its business objectives.

Strategic Alignment Model

Framework for:– Aligning IT with business strategy– Conceptualizing and directing strategic

role/management of IT– Leveraging IT on a continuous basis to achieve

sustainable competitive advantage

SAM is based on the concept of strategic fit between external and internal views and the functional integration between organizational and technology views.

Two building blocks: Strategic fit – refers to the use of strategy to determine

the infrastructure of the business. Functional integration – related to the information technology and the alignment of business.

There are 4 domains: 2 internal and 2 external External – business strategy and IT strategy Internal – business infrastructure and IT infrastructure

Strategic alignment at an organizational level can only

occur when three of the four domains are in alignment. 

The implication is that change cannot happen in one domain without impacting at least two other domains. 

To understand the perspectives, we will define some terms.

The anchor domain is the strongest domain for the firm, and will have the most representation at the executive level or will be where the core of the business lies. This domain in which changes are most often made.

The pivot domain is the weakest domain for the firm. This is a “pointer” domain in a C programming language sense in that it indicates which other domain will be most affected by the change in the anchor domain.

The impacted domain is the domain which will feel the greatest amount of impact from the change in the anchor domain.

Four perspectives of SAM

Strategy execution Traditional perspective in which business strategy

drives organizational design, and organizational design determines what IT infrastructure and processes will be needed.

• Business management makes strategy, and IT management implements it. 

• This is the CIO as CTO.• IT focus is on application development, driven by need

to support business infrastructure.

Case study – Wolf Organization Inc.

• A manufacturing company located in Pennsylvania.

• As competitors threatened, Wolf built an enterprise resource planning platform for growth, efficiency

• Conclusion –– reduced customer and financial fees.– Built entry barriers to competitors.– Enhanced customer loyalty.

Technology potential

Business strategy is still the driver, but it involves the articulation of an IT strategy to support the chosen business strategy and the corresponding specification of the required IS infrastructure and processes.

• This is the CIO as reactive leader perspective, in some sense.  • The business executives drive technology vision and indicate the

strategy that the IT group should use to achieve it, and • The CIO architects a solution in strategic and infrastructural

terms.

Top management – technology visionaryIS manager – technology architect

Case study – Seagate & Samsung

Conclusions –– Enabled both companies to better align their

current and future product– Accelerate time-to-product for new products– This alignment significantly expanded Seagate’s

customer access in China and South Asia

Competitive Potential The IT executives must be able to be the catalyst for

business change, identifying upcoming technology trends and options and understanding them as opportunities or threats/risks. 

The business executives must be visionaries, able to take the offerings that the IT exec gives and see how to transform the business to exploit them to gain competitive advantage.

Case study - Flextronics

• Producer of components, circuit boards based in Hollyhill, Cork.

• Conclusion – more detailed overview of production

Service level Anchored on the notion that IT strategy is the driver of

the perspective and it focuses on how to build world class IT/IS organization within a business.

Role of Top management – prioritizerIS management – executive leadership

The role of the CIO is to make the business succeed,in light of operating guidelines from the businessexecutives.  In this way, the CIO acts as the businessleader in this perspective.

Case study - UPS

• Conclusion –– First postage service to provide the customer with

technology experience.– Gain competitive advantage over rivals on basis of

the best service for best value.– Progressive and becoming leaders in European

and Asian market.