Strategic alignment is the process and the result of linking organizational groups together through organizational objectives and the people and projects accountable to achieve them. Strategy alignment is the realization of achieving business strategy through people and project contribution. This definition expresses a broad view of strategic alignment inclusive of alignment between organizations within a company or between companies. It can be described as an organizations ability to determine an IT Strategy that optimally and flexibly supports the business strategy whilst maximizing the value of the investment in IT.
The Strategic Alignment model of Venkatraman, Henderson and Oldach seeks to enable a clear view of the organizational drivers which affect organizational decision making with regards to the alignment between the Business and IT Strategy of an enterprise.
Venkatraman and his colleagues argue in 1993 that the difficulty experienced by firms in realizing value from IT investments is primarily caused by the difficulties inherent in achieving an optimal alignment between the business strategy and the IT strategy of the organization. Secondly it is caused by the lack of a dynamic, self corrective administrative process that ensures continuous alignment and re-alignment between the business and IT domains whilst making efficient use of finite resources.
They describe four dominant alignment perspectives relating to the organizational and political strategic drivers for IT development. These views are intended to aid the analysis of the dominant forces within the organization that potentially impact the effective alignment of Business and IT Strategy.
Four Alignment Perspectives
- Strategy Execution. This perspective views the business strategy as the primary driver of both organization design choices and the logic of the IT infrastructure (the classic, hierarchical view of strategic management). Top Management formulates the strategic objectives for IT based on the business strategy; IT Management is only strategy implementer. IT Management will seek to provide IT capabilities that will support the business strategy through the achievement of key performance indicators as determined by top management and defined within the business/marketing strategy.
- Technology Potential. This perspective also views the business strategy as the primary driver. However it involves the formulation of an IT strategy to support the chosen business strategy and the corresponding specification of the required IT infrastructure and processes. The top management should provide the technology vision to articulate the logic and guide the choices pertaining to an IT strategy that would best support the chosen business strategy. The role of the IT manager should be that of the technology architect. He designs and implements efficiently and effectively the required IT infrastructure that is consistent with and allows strong control over the external components of IT strategy (scope, competences and governance).
- Competitive Potential. This alignment perspective is concerned with the exploitation of emerging IT capabilities to:
- impact new products and services (i.e. the business scope),
- influence the key attributes of strategy (i.e. distinctive competences), as well as
- develop new forms of relationships (i.e. business governance).
Unlike the two previous perspectives, which considered business strategy as pre-defined and fixed and a constraint for organizational transformation, this perspective allows feedback into the modification of the business strategy via emerging IT capabilities. The specific role of the top management to help this perspective succeed is that of the hybrid IT/ business visionary, who advocates how the emerging IT competences and functionality as well as changing governance patterns in the IT marketplace would impact positively the business strategy. The role of the IT manager is to act as a catalyst and advisor. He identifies and interprets the trends in the IT environment. In doing so he assists the business managers to understand the potential opportunities and threats from an IT perspective.
- Service Level. This alignment perspective focuses on how to build world class IT organization within an organization. In this perspective, the role of business strategy is indirect. This perspective is often viewed as being necessary in early stages of IT maturity, but not being sufficient, to ensure the effective use of IT resources and to be responsive to the growing and fast-changing demands of the end-user population. The specific role of the top management to make this perspective succeed is that of the prioritizer. They decide how the scarce resources should be allocated, both within the organization as well as in the IT marketplace (in terms of joint ventures, licensing, minority equity investments, etc.). The role of the IT manager is one of business leadership, with the specific tasks of ensuring that the internal business succeeds within the operating guidelines issued from top management.