In my opinion, there is no the best or the worst alignment perspective. Each alignment perspective has their own performance criteria which is adoptable to different scenarios, background and future roadmap of the firms. Management even sometimes should shift across different alignment perspective in different stages in evolution or I.T generation changes. In addition, management would consider multiple perspectives when the performance criteria are involved multiple goals.
Management should understand the needs of internal and external domain and two strategies as the driver to make the right choices of strategic alignment. Besides, both strategies derive two alignments perspective. Management should conduct the due consideration to two alignments perspective to apply the best possible link between business strategy and IT infrastructure.
Firstly we need to understand what the cause of making the I.T strategy alignment was. In traditional and historical views, people had realized that I.T. is the back office which is a support function but not essential to the business. The general feeling of I.T is that it has slight influence to the business strategy. However to date, I.T is the core part of business strategy as I.T is considerable factor to differentiate the products from competitive markets, increasing the service efficiency, making the process is effective and secure, and lowering the cost, etc. I.T. has been transforming from its traditional role to a strategic role that not only supports chosen business strategies, but also to shape new business strategies and cater for the future changes. It is necessary of strategy alignment between I.T and the business in order to realize the value from I.T. investment. In order to reflect the value of I.T. strategy, the alignment perspective must align external domains and internal domains. External domain is the strategy attribute that differentiate the products/services from the competitive markets or the decision of acquiring competitors as well as aligning vendors. Internal domain is the strategy against internal organization structure and the specific critical business processes. It is failure to derive benefits from I.T. investments if there is inadequate fit between external and internal domains.
Henderson and Venkatraman proposed Strategic Alignment Model (SAM). SAM consists of four fundamental domains – “Business Strategy”, “I.T. Strategy”, “Business Infrastructure” and “I.T. Infrastructure”. The concept of strategy alignment is based on two components – “strategy fit” and “functional integration”. Strategic fit is the process to identify the needs for any strategy to address both external and internal domains. Functional integration is the link between business and I.T. strategy reflecting external components as well as the link between organizational infrastructure and IT infrastructure reflecting internal components that deal with the capability of IT functionality.
Strategy alignment and functional integration has lined up the relationship across the four domains in SAM which forms 4 cross-domain relationship of alignment. The first 2 are driven by Business Strategy and the other 2 are driven by I.T. Strategy. In addition, it is important to assign the specific role of management to make the perspective successful.
Business Strategy driven:
Perspective 1 is “Strategy execution”
A business strategy is the driver of both organizational design choices and the design of I.T. infrastructure. It’s the most common alignment perspective.
Top management is the strategy formulator to articulate the logic and choices from business strategy perspective.
I.T. manager is strategy implementer who implements the infrastructure and process that support the chosen business strategy.
This perspective bases on the financial parameter to assess the performance of IT function, hence it is mainly cost center focus.
The performance criteria are based on the financial parameters to reflect the cost center focus.
Perspective 2 is “Technology transformation”
Business strategy is the driver of this alignment perspective that uses the appropriate I.T. strategy to assess the implementation of the chosen business strategy. This alignment is to identify the best possible IT competencies through appropriate positioning in the IT marketplace.
Top management is the technology visionary that endorse the technology that would best support the chosen business strategy.
IT manager is the technology architect who designs and implements the infrastructure that is consistent with IT vision.
The performance criteria are based on technology leadership to access the position in the marketplace by using benchmarking approach.
I.T. Strategy driven:
Perspective 3 is “Competitive Potential”
I.T. strategy is the driver of this alignment perspective that allows the adaption of business strategy via IT capabilities; this seeks to identify the best set of strategic options for business strategy and the corresponding decision for organizational infrastructure. This perspective aims to deliver value added service to customers as well as the consequent implications to the internal organization processes.
Top management is the business visionary who articulate how the IT competencies and functionality would impact business strategy
I.T. management is the catalyst who provides the futures trends in I.T. environment to business management to understand the potential opportunities and threats.
The performance criteria are based on business leadership corresponding measuring to the product leadership in terms of market share, growth or new product.
Perspective 4 is “Service Level”
I.T. strategy is the driver of this alignment perspective that ensures the effective use of IT and focus on how to build up the world class IT service organization. The role of business strategy is indirectly providing the direction to stimulate customer demand. Performance Analytical methodologies are user survey, service level agreement and infrastructure planning.
Top management is to prioritize how to allocate the resources within organizational and in the IT marketplace.
The performance criteria are based on customer satisfaction using internal and external benchmarking.
Nowadays strategic alignment is apparently necessary between business and I.T, especially strategic fit is important. The research was showing that inadequate fit alignment between external and internal would lead to failure of to derive benefits from IT investments. However there is no straight forward way to tell the firm to adopt with which strategy as the driver at the beginning.
Strategy execution translate the implications of business strategy for the organizational infrastructure with subsequent demands for IT products and services.
Technology transformation is achieved through the effective positing of the firm in the market places. Manager should consider both perspectives to obtain the best linking between business strategy and IT infrastructure.
Competitive potential identifies the potential impact of IT strategy on business strategy with consequent implications for the organizational infrastructure.
Service Level provides the best possible service to the internal client by developing the appropriate basis for the redesign of the IT infrastructure.
Furthermore, management should always conceptualize to evaluate the IT performance by using four criteria: as cost center, as service center, as profit center and as investment center. Then management should shift in the criteria to assess the performance of the IT function and assign appropriate criteria to the alignment perspectives.
Moreover, manager must recognize that the needs to evolve from one perspective to another base on fast changing business environment in both internal and external. Management should always consider different perspective as alternative conceptual lenses and be well prepared to adopt the different. Management should understand strategy alignment is a continuous process and adoption.
In conclusion, Henderson and Venkatraman stated that “there is no universally superior mode to formulate and implement strategy; it would not be strategic because all firms would adopt it.” This statement is true that it will be no longer a strategic if all the firms adopt the same strategy.
