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Aligning Business Objectives & IT Strategy

Aligning Business Objectives & IT Strategy. Day Two – Deutsche Telekom. Aligning Business and IT. Business/IT Alignment: What is it? Why is it important? Why is it hard to get? If you haven’t got it – how do you get it?. Aligning Business and IT. Question

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Aligning Business Objectives & IT Strategy

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  1. Aligning Business Objectives & IT Strategy Day Two – Deutsche Telekom

  2. Aligning Business and IT • Business/IT Alignment: • What is it? • Why is it important? • Why is it hard to get? • If you haven’t got it – how do you get it?

  3. Aligning Business and IT Question What is YOUR definition of Business/IT alignment?

  4. Some Definitions of Business/IT Alignment from Research Reich & Benbasat (1996) Zani & McFarlan (1970) Two dimensions – intellectual & social “Intellectual – the degree to which the information technology mission, objectives & plans support and are supported by the business mission objectives & plans Social - the level of mutual understanding of, and commitment to the business and IT mission, objectives & plan by managers” “the degree to which managers feel that the systems that they are provided with support them in the pursuit of their business objectives” Luftman & Briar & Venkatraman (1999) “alignment of business and IT Must cover the business strategy, organisational infrastructure & processes, IT strategy and IT infrastructure & processes” Quantitative Approaches Chan (1997) and Hussin, King & Cragg (2002) Measure the organisation against a set of ‘strategic traits’ such as aggressiveness, innovativeness & risk aversion using questionnaires with a numeric scale. Measure how well systems in use support these strategic traits using a similar questionnaire. Calculate the difference.

  5. Why is Business/IT Alignment Important? • A good alignment leads to greater organisational effectiveness • (King 1978) • Misalignments undermine strategy and decrease organisational • performance (Floyd & Woodbridge 1990, Goldsmith 1991) • A good degree of alignment is associated with greater organisational • success (Sabherwal & Kirs 1994, Chan 1997) A poor degree of alignment at Gartner in the late 1990s led to costs of millions of dollars each year due to missed opportunities, poor prioritisation of work and duplicated work (Gartner 2001)

  6. What Makes Business/IT AlignmentHard to Achieve in Practice? Exercise Divide into four groups. Two groups are to take the part of the Marketing Director of a fast-moving consumer goods company. The other two groups are to take the part of the IT Director. Marketing Director You have seen a good opportunity for marketing a new product, but need information about your current customer base that your systems do not provide. You want the IT department to develop a system that will give you this information quickly and easily. You don’t know anything about technology and don’t want to. You need the system NOW to get you into the market before a competitor does. IT Director You are working to a tight budget which is already fully committed. This is a more difficult development than the marketing director realises and has a number of implications for other systems in your organisation that will take time to consider.

  7. What Makes Business/IT Alignment Hard to Achieve in Practice? Exercise Think yourself into the part you have been given and how you will see the situation. Think about all the possible issues from your point of view. Nominate one person who would be willing to come to the front and act out the part in a short role-play of the meeting between the two directors.

  8. Why Is Business/IT Alignment Hard to Achieve in Practice? Some views from research: • Poor communication and relationships between business functions • and IT staff (Chan 2002, Boynton 1994, Luftman 1997) • Business objectives and information technologies that change • constantly (Agarwal & Sambamurthy 2002, Hirscheim & Saberwhal (2001) • Business and IT staff don’t share a ‘common understanding’ of business • objectives and information technologies (Reich & Benbasat 2000, • Hirscheim & Saberwhal 2001)

  9. Two Case-Studies • These are 2 real companies that I studied • All the quotes are real and taken verbatim from what managers said to me • The definition of ‘business/IT alignment’ used in the research is: “the degree to which managers feel that the systems that they are provided with support them in the pursuit of their business objectives” It took me a year to analyse the data so I am sure you can do it in an hour or so………

  10. Research Summary

  11. Research Summary cont ….

  12. Research Summary cont ….

  13. A Set of Organisational Factors to Promote Business/IT Alignment Outcome Good informal communications which may be sufficient alone, or a strong adjunct to formal relationships Diagnosis 1 Strong and Warm Factor Business/IT Relationship Strength Outcome Poor or non-existent informal communication, formal communication mechanisms become vital Diagnosis 2 Poor and Distant Outcome IT constantly playing ’catch-up’ with the business Diagnosis 1 Dynamic Factor Dynamism of the Business Environment Outcome Business and IT can be harmonised Diagnosis 2 Static Outcome Innovative use of technologies which make the organisation a market leader Diagnosis 1 Good Factor Level of understanding among business users of Technical project management processes Diagnosis 2 Poor Outcome Business missing opportunities for innovative use of IT to improve business or competitive performance

  14. A Set of Organisational Factors to Promote Business/IT Alignment/cont… Outcome Greater alignment between business user needs and systems provided Diagnosis 1 High Factor Level of understanding among business users of technical project management processes Outcome Generally improved relationships with IT function Outcome Difficulties with formulating precise requirements for new systems Diagnosis 2 Low Outcome Difficulties with system implementation as project management discipline is not well understood

  15. A Set of Organisational Factors to Promote Business/IT Alignment/ cont… Outcome Development of systems to give the greatest payback for the money spent Diagnosis 1 Strong and well understood Factor Financial Processes for managing IT Investment Value of IT investments Outcome Systems developed that are not best aligned with business needs or give greatest payback Diagnosis 2 Poorly understood Outcome Ability to take decisions on the value or otherwise of IT systems to the business and the ability to tailor IT support to the resources available Diagnosis 1 Well understood Diagnosis 2 Not well understood Outcome Unwise decisions being made on the basis only of expenditure on IT, without understanding the value or importance of the investment to the business

  16. A Set of Organisational Factors to Promote Business/IT Alignment /cont… Outcome Acceptance by users of systems designed centrally and imposed from above Diagnosis 1 Matched Factor Organisational Structure and IT Structure Outcome Resistance from users to centrally- imposed systems which do not meet local requirements Diagnosis 2 Unmatched

  17. Promoting good business/IT alignment using the diagnosis of organisational factors Business/IT Relationship Strength Diagnosis – Relationship characterised as poor and distant Outcome – Poor or non-existent informal communication. This inhibits the interplay of requirements and technical possibilities that is a vital part of developing systems that fully support business requirements, and use of technology to extend business opportunities Recommendations – Appoint IT Staff from Within the Business Co-locate business and IT staff in mixed project teams Plan formal communication mechanisms Note -The full set of recommendations are in the handouts

  18. In Summary • Aligning business objectives and IT support for those objectives • - vital but difficult for most organisations • With a fast-changing business and technology environment, • alignment will always be dynamic • The right processes need to be in place to promote alignment, • good communication between business and IT staff is probably • the most important

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