The need for firms to align business and IT is more pressing than ever.

First, firms must constantly adapt both to an ever-changing business landscape and to emerging digital technologies that enable new ways of working. To stay ahead of this change, firms continue to increase spending on IT solutions every year.

However, unless their business and IT strategies are aligned, firms may also waste precious time and money on IT. Research shows that firms achieve better business performance, when key IT resources are aligned with business strategy 1.

However, strategic alignment between business and IT continues to be elusive. CIO surveys show that proper alignment remains a pressing priority for top management.

Therefore, a comprehensive approach to alignment is critical for both strategy and operations. This is the essence of digital strategy. What we need is a comprehensive approach to manage alignment between:

  • Business strategy
  • IT strategy
  • Organizational infrastructure & processes
  • IT infrastructure & processes

Through the allocation of:

  • Financial resources
  • Implementation projects

In order to improve:

  • Financial performance
  • Productivity
  • Customer benefits

What’s the best way to align business and IT?

Given the challenges in achieving proper alignment coupled with the potentially large payoffs in business improvement, a firm that is serious about alignment should adopt a proven framework, such as the strategic alignment model.

Backed by 30 years of research and with over 5,000 academic citations, the strategic alignment model (SAM) has stood the test of time2. The framework consists of four domains (two business and two IT), and 12 dimensions.

Strategic alignment model
The Strategic Alignment Model

Using the Strategic Alignment Model to Align Business and IT

We can use the framework to align a firm’s business and IT in three steps3:

  1. Assess current state and select an alignment strategy
  2. Compile a catalog of current and proposed IT projects
  3. Reconcile the alignment strategy and project catalog

So let’s walk through a practical example.

1. Assess current state and select an alignment strategy

First, using the SAM, develop a catalog of the firm’s capabilities. For example:

DomainCapabilities
Business strategyproduct offerings, market selection, outsourcing strategy
IT strategy
buy vs build, cloud strategy, joint partnerships
Org infra & procs
admin structure, business processes
IT infra & procs
enterprise architectures, analytics skills

Then, select an alignment strategy across those domains:

  1. The first domain anchors the alignment strategy and receives the most management attention
  2. The second domain serves as the pivot for the strategy
  3. The third domain is the most impacted and involves the greatest change

For example, the following alignment strategy starts with business strategy:

Proposed approach to align business and IT
Proposed Alignment Strategy

2. Compile a catalog of current and proposed IT projects

Next, we categorize the list of all digital projects involving IT resources that are in-flight or proposed, according to:

  • Domain: business strategy, IT strategy, org infra & procs, or IT infra & procs
  • Priority: High, medium, low

Mapped onto the SAM, the catalog defines the implicit alignment strategy.

For example, the following project catalog indicates an implicit alignment strategy that begins with IT strategy, crosses IT infra & processes, and impacts org infra & processes.

ProjectDomainPriority
IT outsourcingIT strategyHigh
Cloud consolidationIT strategyHigh
New data centerIT infra & procsHigh
New CRMIT infra & procsMed
BPO projectOrg infra & procsMed
Call center trainingOrg infra & procsMed

This actually implies the following alignment strategy:

Implicit approach to align business and IT
Implicit alignment strategy

3. Reconcile the alignment strategy and project catalog

Finally, compare the desired alignment strategy with the implicit alignment strategy  in the project catalog.

Management can then either:

  • Reprioritize digital projects to achieve the desired alignment strategy; or
  • Shift managerial focus to execute the implicit alignment strategy

In this example, suppose the firm decides to shift to the implicit alignment strategy. With this new strategy, the firm should shift from business identifying new growth opportunities to IT identifying new opportunities to provide customer value.

Shifting to the new approach to align business and IT
Shifting to the new alignment strategy

Conclusions

Determining proper alignment between business and IT, using the Strategic Alignment Model, is a necessary first step on the long, rewarding journey to digital transformation. Firms that maintain the necessary rigor to see this through ultimately enjoy better business outcomes and better success on IT endeavors.

Footnotes

  1. Luftman, J., Lyytinen, K., & Zvi, T. B. (2017). Enhancing the measurement of information technology (IT) business alignment and its influence on company performance. Journal of Information Technology32(1), 26-46.
  2. Henderson, J. C., & Venkatraman, H. (1993). Strategic alignment: Leveraging information technology for transforming organizations. IBM systems journal32(1), 4-16.
  3. Avison, D., Jones, J., Powell, P., & Wilson, D. (2004). Using and validating the strategic alignment model. The Journal of Strategic Information Systems13(3), 223-246.

David Zhao

David Zhao is an independent digital expert. He works with digitally savvy executives to identify IT solutions to execute their business vision. David specializes in digital strategy, advanced analytics, and intelligent automation. He is a hands-on, former leader at Deloitte Digital with 16 years of experience through 30+ projects.

1 Comment

A New Digital Operating Model Can Take Three Forms · April 18, 2021 at 5:18 pm

[…] many firms, there is a separation of duties between business and IT. Thus, business-IT alignment is important. In this case, the firm’s IT strategy must be capable of supporting and […]

Leave a Reply

Avatar placeholder

Your email address will not be published. Required fields are marked *