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Creating Value through IT and Business Alignment: How does IS Research Inform Practice? Vallabh Sambamurthy Eli Broad Professor of Information Technology Michigan State University The Promise of Information Technologies Enabler of superior performance Productivity Consumer welfare

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creating value through it and business alignment how does is research inform practice

Creating Value through IT and Business Alignment: How does IS Research Inform Practice?

Vallabh Sambamurthy

Eli Broad Professor of Information Technology

Michigan State University

the promise of information technologies
The Promise of Information Technologies
  • Enabler of superior performance
    • Productivity
    • Consumer welfare
    • Profitability
  • Digital Options Platform
    • Transaction capital
    • Decision capital
    • Intellectual capital
    • Relational capital

© Vallabh Sambamurthy, 2008

yet dispersion in success across firms
Yet, Dispersion in Success Across Firms
  • Significant differences across firms and industries
  • Exemplars in different industries
    • Success with IT innovation
    • Repeat experiences of success
  • Frustration with IT investments
    • Failed projects
    • Poor alignment

© Vallabh Sambamurthy, 2008

organizational leverage of it value
Organizational Leverage of IT Value
  • Three significant challenges
    • Building the right alignment model
    • Implementing the appropriate governance model
    • Developing enterprise-wide IT savviness

© Vallabh Sambamurthy, 2008

what is alignment
The ability of a firm to convert its IT spending into business value and competitive advantage

Results from the planned, ongoing use of a set of interlocking business practices that collectively derive superior value from IT investments

An outcome of alignment is portfolios of IT investments, projects, and installed information systems that reflects a firm’s strategic priorities of the firm

What is Alignment?

Competitive Strategies

IT Assets and Investments

Business Processes

© Vallabh Sambamurthy, 2008

three modes of alignment support
Three Modes of Alignment: Support
  • Business strategy drives IT strategy
  • Current business strategies and capabilities drive IT priorities, investments and capabilities
  • Tools for specific business processes
  • Measures
    • Extent to which IT capabilities have enhanced the efficiency of existing business processes (e.g., customer service, manufacturing)
    • Extent to which IT capabilities have enhanced the effectiveness of existing business processes (e.g., improving the visibility of the logistics process, improving the accuracy and accessibility of customer information)

Business

Strategy

Targeting of IT priorities

Driving

IT

Strategy

© Vallabh Sambamurthy, 2008

three modes of alignment synchronization
Three Modes of Alignment: Synchronization
  • IT strategy enables execution of current business strategy, but also anticipates and shapes future business models.
  • IT investments are platforms for business process integration
  • IT leadership, thinking and investments are active in seeding new business opportunities
  • As firms become aware of the capabilities of their IT investments, assets, and applications, they focus on discovering new business strategies

Business

Strategy

Targeting of IT priorities

Enablement of Businessby IT

Enabling

Driving

IT

Strategy

© Vallabh Sambamurthy, 2008

three modes of alignment convergence
Three Modes of Alignment: Convergence
  • Business strategy is shaped through digitized products, services, processes, and relationships
  • IT strategy is embedded in the business strategy
  • Processes are created through digital solutions (e.g., online auctions, keyword search)
  • A single leadership team operates across business and IT
  • Appropriate for media, banking, financial services, and entertainment industries

Business

Strategy

IT

Strategy

© Vallabh Sambamurthy, 2008

the three modes of alignment
The Three Modes of Alignment

© Vallabh Sambamurthy, 2008

facilitating alignment through it portfolios
Facilitating Alignment through IT Portfolios

Adapted from Weill and Aral, 2006

implications for practice
Implications for Practice
  • Choose the appropriate mode of alignment for your firm
    • What view do the senior business executives have about the mode of alignment?
    • Is there consensus about the alignment mode?
  • Examine the portfolio of IT applications and investments
    • Does it reflect the alignment priorities?
  • What will be the alignment mode in the future?
    • How is the business likely to change?
    • How is the industry likely to change?
    • What will be the likely business strategy?

© Vallabh Sambamurthy, 2008

the differentiating role of it governance
The Differentiating Role of IT Governance
  • Allocation of decision rights
  • Good governance enhances the leverage of IT value
  • Poor governance dissipates organizational resources and energy

© Vallabh Sambamurthy, 2008

designing it governance

What are the critical governance decisions?

          • Demand side
          • Supply side
  • How are the
  • decisions made?
  • Unilaterally
  • Shared
  • Who makes the decisions?
  • Senior management
  • Business management
  • IT management
  • External partners
Designing IT Governance
building the right governance model
Building the Right Governance Model

Innovation leadership

Operational Excellence

Customer Intimacy

Source: Gartner, 2006

© Vallabh Sambamurthy, 2008

emerging is roles
Emerging IS Roles
  • Infrastructure architect
  • Vendor relationship manager
  • Portfolio manager
  • Innovation catalyst

Innovation leadership

Operational Excellence

  • Technology advisor
  • Project lead

Customer Intimacy

  • Services liaison

Source: Gartner, 2006

© Vallabh Sambamurthy, 2008

changing face of the is organization
Changing Face of the IS Organization

1

IT leadership

Architecture development

Business enhancement

Technology enhancement

Vendor management

2

Increasingly driven by IT savvy Business leaders

Enabled by Business savvy IS leaders

3

1

4

Driving innovation

5

2

3

Delivering change

4

Supporting infrastructure

5

Business aligned

Outsourced to external services providers

Source: Broadbent and Kitzis, 2005

© Vallabh Sambamurthy, 2008

an emerging organizational model for it governance
An Emerging Organizational Model for IT Governance

IT Investment Board

Business TechnologyCouncil

Divisional Project Approval Committee

Corporate Project Approval Committee

  • Head of IT Finance(e.g. CFO of IT)
  • CIO
  • CFO
  • Selected Business SVPs
  • Head of IT Strategy
  • CIO
  • Selected Business SVPs
  • Head of IT Applications
  • Functional Area Leads
  • Client Relationship Managers
  • Divisional Functional Heads
  • Divisional CFO
  • Divisional PMO and Finance rep.
  • Divisional CIO, Divisional CTO
  • Enterprise Functional Leads
  • IT Directors
  • Head of Portfolio &Program Mgt.
  • Head of EnterpriseArchitecture
  • Head of IT Strategy
  • Business Strategy Analyst
  • Finance Representative

Office of Architecture& Standards

Office of the CIO

  • Head of Enterprise Architecture
  • Business Architects
  • Technical Architects
  • CIO
  • CTO
  • Chief Information Officer (CIO)
  • Chief Technology Officer (CTO)
  • Head of IT Security
  • Head of IT Risk
  • Head of IT Finance
  • Head of IT Strategy
  • Head of IT HR
  • Head of Vendor Management
  • Head of IT Application Areas
  • Head of Portfolio & Program Mgt.
  • Head of Enterprise Architecture
  • Head of IT Communications

Functional Groups

Project Teams

  • Project Managers
  • Business Analysts
  • Technical Analysts
  • Developers
  • Trainers
  • IT Director
  • IT Strategists
  • Business Analysts

© Vallabh Sambamurthy, 2008

implications for practice18
Implications for Practice
  • Organizational governance is less likely to be centralized or decentralized
    • Hybrid, federal, or dispersed allocation of decision rights
    • Focus on demand side and supply side governance
    • Management of risk, finance, and outsourcing will become significant
  • Emerging models for governance
    • Emergence/proliferation of new organizational roles
  • CIOs will have to balance their roles between
    • Managing the “IT business of the business”
    • Seeding, stimulating, influencing, and driving IT-enabled business innovation

© Vallabh Sambamurthy, 2008

building enterprise wide it savviness
Building Enterprise-wide IT Savviness
  • Digitizing internal and external communication
  • Extensive internet use
  • Digitized routine transactions
  • Enterprise-wide IT skills
  • Senior management commitment to IT Investment and use
  • Enable IT Potential & Options
  • Relationship Building
  • Change mindsets
  • Human Assets
  • Senior Management Leadership

Source, Weill and Aral, 2006

© Vallabh Sambamurthy, 2008

savviness in business executives
Savviness in Business Executives
  • T-shaped business managers
    • Grounded in processes
    • Thinking of services
    • Conceptualizing as systems thinkers
    • Driven by metrics and analytics
    • Fearless about change
    • Quest for globalization
    • Diligent about governance
    • Savvy about the role and value of information technologies

© Vallabh Sambamurthy, 2008

savviness in is executives
Savviness in IS Executives
  • IS managers
    • Technically knowledgeable
    • Business savvy (process, strategy)
    • Articulate, persuasive, influence builders
    • Innovation catalysts
    • Change agents
    • Relationship managers (business partners, external vendors)
    • Financially astute
    • Diligent about governance

© Vallabh Sambamurthy, 2008

conclusion
Conclusion
  • Consistent success in leveraging IT value is achievable!
  • Requires attention to effective approaches to IT management
    • Alignment
    • Governance
    • Building of enterprise-wide savviness
  • IT management practice is in a state of transformation
    • Building applications to managing services delivery
    • Buying technologies to multi-capability integration
    • One-off outsourcing to multivendor strategic partnerships
    • Cost-benefit justification to astute financial and risk management
  • IS research and educational programs have an important role to play in assisting this transformation

© Vallabh Sambamurthy, 2008

further interest
Further Interest?

www.btminstitute.org

© Vallabh Sambamurthy, 2006

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