Shaping IT Capabilities to the Business Strategy

Capitalizing on Emerging Technologies and Trends

Ivan I. Ivanov

Empire State College of the State University of New York,

Hauppauge, NY 11788, U.S.A.

ivan.ivanov@esc.edu

Keywords: IT architecture, Enterprise architecture, IT governance, Socio-technical system, Systemic effect, Emerging

technologies, Cloud Computing, Mobile Computing, Consumerization of IT.

Abstract: IT progressively has evolved providing greater opportunities to optimizing business processes and to

enabling new business models and services. The fast pace of IT advancement drives considerable prospects

for business improvement and growth. The strategic alignment of IT capabilities to organizational business

strategy, as content and processes, ensures further IT governance to seize opportunities for improvements

and to maximize revenue. Utilizing a well deliberated framework -Operating model, Enterprise architecture,

and IT engagement model- the paper explores the impact of emerging technologies on the alignment

process. Currently, companies across the globe are going through a very disruptive technology

development: Consumerization of IT - when new technologies emerge first in the consumer market and

then, after mass acceptance, are employed largely by business organizations. Consumerization of IT, along

with workforce mobility, reliable, accessible and affordable remote computing, are forcefully reshaping the

corporate IT lanscape, affecting the relationship between enterprise IT, knowledge workers, corporate users,

and consumers. This paper confers the impact of these trends on the IT domain and specifically emphasizes

on the dynamic forces interlinking IT capabilities with the business agility, growth and asset utilization.

1 FRAMEWORK FOR ALIGNING

IT TO BUSINESS STRATEGY

Increasingly we have witnessed how business

success and economic opportunities steadily depend

on IT-enabled capabilities and IT-driven business

transformations. In today’s global digital economy,

the technology and business domains are colliding

forcefully than ever and new business models and

growing prospects emerge. The IT and especially

emerging technologies profoundly change how

companies create value both within specific

industries, and through industry boundaries.

In order to understand why corporations develop

IT architecture, it is important to know their business

mindset when doing so, which ultimately begins

with a discussion on strategy. Some authors state

that strategy cannot be planned, since doing so

would suggest a controlled environment. These

theorists state that strategy happens in an

uncontrolled environment, thus it is more useful to

consider it to be an art or tool over a plan.

1.1 Identifying Core Components of

Business Strategy

In the 1970s, the strong competition in several key

industries (appliances, automakers, and banking

sector) up surged a new concern about the business

operating environment. The traditional long range

planning lost its position to strategic planning, which

allowed businesses to consider changes to its

surroundings.

Strategic planning forced businesses to look

beyond its own walls into the greater fluidity of the

ever growing global marketplace. A holistic analysis

of the factors related to the external environment –

customers and competitors- and the internal

environment –the organization- is needed for

maintaining finest management practices. According

to the online business dictionary “…the objective of

strategic management is to achieve better alignment

of corporate policies and strategic priorities.” “A

brilliant strategy or breakthrough technology can put

any company on the competitive map, but only solid

execution can keep it there.” (Neilson, Martin and

117

Ivanov I.

Shaping IT Capabilities to the Business Strategy - Capitalizing on Emerging Technologies and Trends.

DOI: 10.5220/0005886101170128

In Proceedings of the Fifth International Symposium on Business Modeling and Software Design (BMSD 2015), pages 117-128

ISBN: 978-989-758-111-3

Powers, 2010). Through structural changes or efforts

focused on performance improvement produce

normally short-term gains. Instead, concentrating on

the three major sections formulating this process:

Strategic Thinking, Strategic Planning, and Strategic

Momentum is far more powerful and successful

(Swayne, Duncan and Ginter, 2006):

Strategic Thinking: This is a stage the

organization should grasp both the detailed view of

itself -what it does well, and what seems to be

lacking, and systematic picture of the external

environment.

Strategic Planning: First at this phase a

situational analysis, based on the first stage findings

a SWOT analysis -strengths, weaknesses,

opportunities, and possible threats- should be

performed. Next steps will include formulating a

strategy, and determining ways of its implemention.

Strategic Momentum: The final stage should

evolve the strategic plan implementation. The

organization needs to not only keep in mind who has

been working towards strategy implementation, but

must also keep in mind as well changes in the

external environment.

The essence of Strategy according to Harvard

Business School professor and one of the world’s

most advancing thinkers on strategy Michael Porter

is “about being different,” which means a company

to choose for their core business different and

unique set of activities or to perform already known

activities in a different way. With a set of activities,

different from those of the other competitors in an

industry a company winning strategy means creation

of “unique and valuable position” on the market.

Creating strategy also means making tradeoffs and

combing the unique activities to fit well together and

reinforce one other.

1.1.1 Industry Analysis

Referring again to Michael Porter, the structure of an

industry is embodied in five forces that collectively

determine industry profitability and should be

considered in strategic formulation: Rivalry among

Existing Competitors, Bargaining Power of Buyers,

Threat of Substitute Products or Services;

Bargaining Power of Suppliers; Threat of New

Entrants. The shared power of the five forces varies

for different industries as does the profitability

(Porter, 2008). The model exposes comprehensive

outer view of the organization with its traditional

direct competitors and the correlation with four other

forces within its market environment. The industry

analysis framework suggests that industry

differences can be analyzed a priori by managers

using the Porter’s analytical framework, and based

upon the results of this analysis, executives can

decide whether to enter an industry or forgo

investment.

The Threat of New Entrants force represents the

extent to which the industry is open to entry by new

competitors, or whether significant barriers to entry

make it creates comfortable shelter so the existing

firms need not to worry about competition from

outside. The Threat of Substitute Products or

Services force denotes the extent to which the

products or services marketed by the company are

subject to potential substitution by different products

or services that fulfill the same customer needs and

expectations. The Bargaining Power of Buyers

force signifies the extent to which customers of

those organizations in the industry have the ability to

put downward pressure on prices, highly

concentrated buyers (such as Wal-Mart) and low

switching costs typically conspire to increase the

bargaining power of buyers. The Bargaining Power

of Suppliers force represents the magnitude to which

the firms or individuals who sell production input to

the organizations in the industry have the ability to

maintain high prices. The Rivalry among Existing

Competitors force represents the magnitude to which

fierce battling for position and aggressive

competition occur in the industry. The term

hypercompetition refers to industries characterized

by fierce rivalry among existing firms and very rapid

pace of innovations leading to fast obsolescence of

any competitive advantage and a consequent need

for a fast cycle of innovations. The consumer

electronic industry -mobile smart devices in

particular- is the most current example, as is the ICT

industry in general.

1.1.2 Industry Analysis and the Role of IT

Scholars and experts who have embraced industry

analysis to search and identify IT-dependent

strategic initiatives and opportunities advise to

consider information systems effects on one or more

of the industry forces, thereby tipping it to the

company’s advantage or preventing foreseeable

losses.

Investment in and the use of specialized

emerging technologies and/or applications could

raise or increase barriers to entry in the industry. In

so doing the existing firms would reduce the threat

of new entrants. This particular option is most likely

applicable in IT intense and highly regulated

industries such as Healthcare, Banking, and Finance.

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The widely adoption of Internet technologies,

and more specifically products and services

searches, e-commerce and online transactions

utilization contribute steady to dynamically shifting

power away from suppliers, so toward buyers. As

much as the Internet based systems and applications

help firms strengthen their bargaining position

toward either suppliers or buyers, they also could

reduce their bargaining power just before either one.

Innovative emerging technology executions by

creative companies, whether incumbents or new

entrants, could speed up immediate changes into the

basic of industry competition. A glaring example of

this dynamic was presented by the advent of online

retailing in the late 90-ties and early 2000, and later

with the individualized entertaining industry.

Essentially advances in the IT are transforming

the industry structure and alter each of the five

competitive forces, create the need and opportunity

for change, hence, industry attractiveness as well.

While Porter’s five competitive forces model is

truly important when strategic planning and

managerial decisions are taken, the impact of the key

internal forces clearly associated with the

information technology are particularly critical to

the operational effectiveness and shapes the

organizational business strategy and benefits.

1.2 The Sociotechnical Systems Model

Technology has become the heart and soul of every

business and it has a powerful effect on competitive

advantage in costs optimization, enhancing product

and services differentiation, or spawning new

business options. Every product on the market has

physical and information content and the tendency

today is towards increasing the information

component of products. Naturally, IT is deeply

involved in all aspects of the information

component, and yet IT is increasingly involved in

the physical component likewise – manufacturing

processes become automated, faster, more efficient

and precise with IT. The IT transforms the products

and affects the overall value activities of an industry.

Starting from traditionally information intensive

accounting, and continuing to performing

optimization and control functions, and furthermore

- judgmental, executive decision functions, the

significance of IT is becoming ever more strategic

for companies’ competitive advantage. How to align

the IT to the business strategy and to gain value

turning the great strategy into a great performance is

a “mature way of doing business” in the information

age.

To explore the complexity of the problems inside

organizations, and to avoid unrealistic expectations

when aligning the IT to the business strategy, a

formal methodology of examining and evaluating IT

capabilities in the organizational context should be

applied. In IT, “capability is the ability to marshal

resources to affect a predetermined outcome”

(McKeen, Smith and Singh, 2005). The core IT

capabilities are discussed later in the paper and they

are critical to meet the enduring challenges of

uniting business strategy and IT vision, delivering IT

services, and designing an IT architecture.

The contemporary Information Systems

approaches incorporate multidisciplinary theories

and perspectives with no dominance of a single

discipline or model. Gabriele Picolli in his

Information Systems for Managers text features IT

as a critical component of a formal, sociotechnical

information system designed to collect, process,

store, and distribute information (Picolli, 2012).

Kenneth and Jane Laudon in Managing the Digital

Firm, define Information Systems as Sociotechnical

Systems incorporating two approaches: Technical

and Behavioural, with several major disciplines that

contribute expertise and solutions in the study of

Information systems (Laudon and Laudon, 2014).

The notion of above definitions is based on the

Sociotechnical theory work developed by Tavistock

Institute in London in mid-50s and 60-ties. The IT

Sociotechnical approach not only visualizes the

concept, but reveals the impact of new technologies

and processes –the technical subsystem- on the

entire work system, and the dependencies and

interactions between all other facets and components

of the sociotechnical system. According to Picolli

any organizational Information System can be

represented as a Sociotechnical system which

comprises four primary components that must be

balanced and work together to deliver the

information processing functionalities required by

the organization to fulfill its information needs. The

IS Sociotechnical model validates the most

important components, and at the same time

illustrates primary driving forces, within

organizations: structure, people, process, and

technology. The first two – people and structure –

shape the social subsystem, and represent the human

element of the IS. The latter two – process and

technology (more specifically IT) – contour the

technical subsystem of the IS and relate to a wide

range of IT resources and services intertwined with a

series of steps to complete required business

activities.

Shaping IT Capabilities to the Business Strategy : Capitalizing on Emerging Technologies and Trends

119

The sociotechnical system approach is

instrumental in helping policy and decision makers

to strategize and manage organizational change

particularly by the introduction of a new IT. The

easiest to envision, justify and manage change is

automation. It occurs when an IT innovation

modifies existing processes without affecting the

social subsystem sphere. Thus, this change requires

little executive sponsorship and involvement, while

the financial benefits can be estimated with some

precision. The further change impacts primarily on

the people component of the sociotechnical model. It

takes place when the information intensity of the

processes being performed is substantially changed

due to introduction of new IT. This level of change –

informate - affects mainly employees and most

likely the customers, and would require executive

sponsorship and greater management involvement to

provide appropriate training and overcoming the

human tendency to resist changes while at the same

time seeking to take advantage of available market

opportunities.

The advanced change incorporates the previously

described changes, while also causes organizational

structure disruptions. The magnitude of this –

transform – change shakes all dimensions of inner

components interactions: it transforms the way how

organization selects, utilizes and manages IT; it

results in a change in the reporting and authority

structure of the organization; it manifests a novel

way of tasks’ accomplishment or/and a new set of

tasks or processes. The later change requires

significant managerial and executive involvement

with a steady championship by the top management

team for both signaling purposes and to provide the

necessary political impetus to complete the

transition.

The Sociotechnical system approach not only

validates the four critical components of the

Information system interdependency, but proves that

none of them works in isolation. They all interact,

are mutually dependent, and consequently are

subject to “systemic effects” - defined as any change

in one component affecting all other components of

the system. “Every business decision triggers an IT

event,” this quote from 2003 by Bob Napier, former

HP’s CIO is still valid: when addressing business

issues like productivity, service quality, cost control,

risk management, and ROI the decision-makers have

to consider the appropriate corresponding

modifications in the IT domain.

The process of changes and reciprocal

adjustment of both technical and social subsystems

should continue to interplay and growing closer until

a mutually satisfying results are reached. However,

the model in reality could not be with equal

subsystems’ changes. It should grow from micro to

macro level to reflect crucial influences of the

external environment, including regulatory

requirements, social and business trends,

competitive pressures, interoperability with

partnering institutions, especially when we analyze

the role of the IT systems.

1.3 Unfolding the notions of Operating

Models and Digitized Platform

The process of enterprise architecture design

requires a holistic view of the organization.

Following such approach makes possible to explore

how business processes, information flow, systems,

technology and predominantly business strategies

and priorities interact and contribute value to the

organization. Hence, understanding the

organizational synergy in detail provides the means

to define two important choices related to the

organization’s business operations:

• How standardized its business should be

across operational units?

• How integrated its business processes should

be across those units?

Any organization operates in one of the four

possible operating models, based on the business

processes selection as illustrated by Weill and Ross

from MIT Center for Information Systems Research

in their IT Savvy textbook (Weill and Ross, 2009).

Which one is considered as “the right one” depends

on the organization executives’ strategic decision:

• In the diversification model - low

standardization and low integration -

organizations operate in a decentralized mode

with independent transactions, unique units

with few data standards across local

autonomies, most IT decisions are made

within the units;

• The coordination model - low

standardization, high integration - is used by

organizations that deliver customized

services and solutions by unique business

units, while accumulating and providing

access to integrated data across the divisions.

The decisions should be made in consensus

for designing IT infrastructure and integrated

services, while IT applications decisions are

processed within individual units;

• Organizations implementing the replication

model - high standardization, low integration

- typically provide high operational autonomy

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to their business units while requiring highly

structured and standardized business

processes. All decisions related to IT

infrastructure, applications and services are

centrally mandated;

• Organizations operating in the unification

model - high standardization, high integration

- are centralized managed with highly

integrated and standardized business

processes. The Enterprise IT is highly

centralized and all decisions are made

centrally.

In the information age, when the business

decisions and success depend on the quickly

delivered precise information, IT unquestionably

needs to serve as a platform for the business

operations. For that reason, the Weill and Ross

describe the cocept of Digitized Platform (DP) as an

“integrated set of electronic business processes and

the technologies, applications and data supporting

the processes.” Therefore the DP becomes a

prerequisite to compete in the digital economy and it

should be used for achieving growth and

profitability.

The Digitized Platform and the Operating Model

are multi facets interrelated. First a company needs

to have a vision what they want to do (business

strategy), and then to think over how IT can help to

create a platform to accomplish their vision for

progress and profit. Weill and Ross exemplify the IT

role in this process “IT can do two things very well

– integration and standardization.” Integration –

delivers data access across a business, while the

standardization – reduces variation in business

processes and increases quality, efficiency, and

predictability in the operations (Ross and Beath,

2011). By identifying what the company wants to

integrate and standardize, actually defines its

Operating Model. In fact, the Operating Model

establishes the objectives and the requirements for

the specific company’s Digitized Platform.

Let makes this real by illustrating with two

examples how two different well-defined operating

models bring together specific requirements to

companies’ Digitized Platforms and benefit them to

achieve remarcable success.

In order to support its business strategies to

innovate and remain on leading position in the

industry, Procter & Gamble (P&G) not only spends

3.4 percent of revenue, more than twice the industry

average on innovation, but has created the most

efficient and effective utilization of IT by employing

a “Diversification” operating model. To accomplish

that feat, P&G created Global Business Services

(GBS), an internal shared services organization, to

provide a base of over seventy common, repetitive,

non-unique services for of the company’s 250

world-wide units. GBS delivers shared services

ranging from core IT systems to advanced

collaborative tools that allow researchers, marketers,

and managers to gather, store, and share knowledge

and information, such as:

• Web 2.0 based social networking and

collaborative tools such as PeopleConnect

and ConnectBeam allow over 8000

researchers and scientists from inside and

outside the company to work together while

reducing research and development costs.

• Microsoft integrated services that include

instant messaging, unified communications,

Microsoft Live Communications, Web

conferencing with Live Meeting, and content

management with SharePoint. The integrated

services help P&G to reduce the time and

effort necessary to share data and information

between employees and others involved in

the company's R&D activities.

• Cisco Systems’ TelePresence technologies

have revolutionized the company

collaborations throughout all 70 major global

locations. P&G required Cisco to build

individual video studios to particular

specifications that portrayed the distinct

characteristics of each location, to make users

more comfortable and more accurately to

reflect the diversity of employees at each

location. The TelePresence system helps

P&G to accelerate the decision making and

faster speed to market, while reduce business

travel costs and increase resource utilization.

Obviously, P&G business success is derived

from its efforts in product innovation and

collaboration, developed and supported by

company’s constantly evolving digitized platform.

The listed above collaborative systems illustrate how

well-planned advanced technologies stimulate

sharing knowledge, ideas, innovations and support

teamwork across company’s world-wide spread

autonomous businesses.

A further example of a different operating model

is the ING DIRECT Bank replication operating

model. ING DIRECT operates internationally, and it

does not offer any tangible product, but

predominantly on-line or phone bank products and

services. Although the business processes / services

in the bank’s branches world-wide are the same,

there is no need of interaction between the separate

offices as they serve primarily local clients. So there

Shaping IT Capabilities to the Business Strategy : Capitalizing on Emerging Technologies and Trends

121

is low need of business processes integration.

However, the offered services in all counties are

identical and by standardizing the core business

activities, ING DIRECT establishes a Digitized

Platform that includes standard systems and

processes which are very easy to replicate. As a

result, ING DIRECT implements its systems for

weeks only, avoiding any risks and downtime

caused by untested and unknown applications, and

thus significantly reduces bank’s implementation

costs, increases its business efficiency and

outcomes.

2 THE KEY DOMAINS OF AN

ALIGNED ENTERPRISE

ARCHITECTURE

In general, “… enterprise architecture (EA) is a

holistic design for an organization, aligning the

current state of IT capabilities, processes, and

resources to enable business strategy” (High, 2014).

In the Federal Enterprise Architecture document, the

CIO Council refers to the EA as the “glue’ that ties

business and IT strategy together and that allows

them to drive each other. The best practice to

conceive and manage EA function is by identifying

the key domains, specific for every company.

At times, these key architectural domains are

shaped with a broader vision in mind and consist of

different sub-fields. Randy Heffner from Forrester

Research in his report depicted four interrelated

facets of EA that provide short- and long-term

effectiveness of delivering business technology

solutions: business architecture, information

architecture, application architecture, and

infrastructure architecture (Heffner, 2010 ). In the

Common Approach to Federal EA, six sub-

architectural domains delineate the types of analysis

and modeling that is necessary for an EA to meet

stakeholders’ requirements: strategic, business

services, data and information, enabling

applications, host infrastructure, and security (EO of

the US, 2012). Peter High in his World Class IT

Strategy book illustrates seven facets in cascading

logic from strategy to technology: strategic

intentions, business context, business value, business

process, data architecture, application architecture,

systems (IT) architecture (High, 2014). In all three

previously described models, and likewise in other

not specified here, the two key EA domains are

actually: the Business architecture and the IT

architecture. And for each of them we may add

particular sub-domains reflecting organization’s or

industry’s specifics. Such approach will simplify and

will provide better alignment of different

architecture life-cycles in some of these domains as

well will reflect more precisely diverse business

requirements.

Later on, the business of IT will be discussed

with emphasis how IT architecture could be

designed, built, and utilized more efficient and with

greater value for the company. With escalating IT

operational costs and the inability to get adequate

value from the IT investments, firms are striving to

convert their IT from a strategic liability to strategic

asset. According many recent surveys from Gardner,

Forrester, and CISR most of the IT budgets are spent

for keeping the existing applications and

infrastructure running. Many firms typically spend

over 80% of their IT budget for supporting the

existing systems, and the budget for renovation or

new systems, if exists, is below 20%. The widely

adopted piecemeal approach results in set of isolated

systems wired together to meet the next immediate

need. And while there are some valuable IT-based

products and services in the company IS

environment, the organizations find that it takes

longer and longer to test and integrate the new

patches with the existing systems, increases

vulnerability to systems outages, and makes more

difficult to respond to changing business conditions.

Reversing such company’s IT fortunes requires

different thinking from the type that “helped” the

organization to create its messy legacy.

The current digital economy has introduced

urgency around the need to plan and manage IT

strategicaly. To succeed in this approach and with

the needed business transformations, the

management must pursue four activities to ensure

that the company generates stratigic business value

from IT. These four activities – Commit, Build,

Run, and Exploit - constitute the “IT value creation

cycle.” (Ross, Beath and Quaadgras, 2011).

In recent years, the IT units have

professionalized their Build and Run IT activities by

developing service catalogs, calculating and

monitoring unit costs, standardizing project

methodologies, defining and implementing

technology standards, and working with business

partners to manage demands. While improved IT

Build and Run activities generate measurable

business benefits, they are just the first step in

producing sustained business success. Companies

that have achieved a reasonable level of maturity in

their Build and Run activities can greatly enhance

the strategic value of IT by developing more

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effective Commit and Exploit activities and as a

result to excel at all four by implementing seamless

handoffs from one activity to the next.

Commit involves allocating business and IT

resources to enact the company’s strategic priorities.

This requires the firm to articulate its stratigic

priorities in terms of its operational requirements

and to direct resources accordingly. This activitiy

actually demostrates how well the Business – IT

alignment works in every company. At the

enterprise level, Commit can be political challenging

as the senior executives have to fix what is broken in

their management and the use of IT. In a nutshell, IT

and business leaders have to introduce new ways of

thinking about and funding IT that would later lead

to building a digitized platform. As previously has

been difined the IT architecture domain could be

consider interchangeable as Digitalized Platform

(DP). Exploit involes driving additional benefits

from existing business architecture and technology

capabilities. Effective Exploit leverages digitized

platforms to continuously improve corporate

performance, profitable growth and business

opportunities.

The IT unit of the future will not own all

Commit, Build, Run, and Exploit activities, but IT

and business leaders will need to coordinate and

balance well all four activities to ensure that the

company generates strategic business value from IT.

Every company can decide which accountabilities

belong inside the IT unit, and which can best be

enacted outside IT. Maturing the four IT value

creation activities will demand development and

coordination of new capabilities, not only in IT but

throughout the enterprise. However the firms are not

equally successful in harvesting dividends from the

advanced IT capabilities, or driving benefits from

their digitized platforms.

2.1 Directing IT Funding to Strategic

Business Needs

The IT funding and investment decisions are

important and challenging part of the previously

discussed Commit activities since the systems are

implemented, they become part of the firm’s legacy:

their ongoing support requires time and money, their

influence and constrains dictate how business

processes are performed. IT funding decisions are

long-term strategic decisions that implement the

company’s operating model.

Weill and Ross intense research on multiple IT

successful or failed firms’ shows that three

important factors are affecting the IT funding and

investments in any IT-savvy firms:

• Defining clear priorities and criteria for IT

investments - the operating model of the

company defines the business priorities and

how it will deliver products and services. The

top executives and IT leaders respectively

must clarify the IT investments priorities. All

companies are different, but what the IT

savvy have in common is that they “create a

central point for business change efforts” -

and this central point helps them to prioritize

the IT investments on high-value projects.

• Establishing transparent process of project

prioritization and resource provisioning - in

IT well-advancing companies the senior

management is responsible for strategic

business initiatives and respectivelly for

project prioritization. The prioritization

criteria must be clear and must specify how

the IT project team will be held responsible

for the project outcomes and deliverables.

The transparency in project approval will

guarantee that not individual or political

decisions would influence project’s approval,

but pure economic and business efficiency.

• Monitoring the projects through the phase of

implementation and afterwards - only a few

companies track their IT projects from the

idea –all through putting into practice,

including post-implementation. By applying

post-implementation projects’ review (PIR),

companies can obtain valuable information

about accomplished outcomes, further to

study and improve their IT funding cycle.

There is a splendid example of how British

Telecom revamped its IT funding model based on

the newly developed business strategy around three

lines of business: retail, wholesale, and global

services. At that time (2004), BT was running above

4000 systems, and over 6000 IT employees were

working on more then 4300 projects world-wide.

The new appointed company management examined

the existing IT environment and concluded it is not

designed for integration or low cost. To endorse IT

to be a critical tool for enabling BT’s business

transformation, the top management established

“One IT for One BT” to consolidate the systems

environment and to reduce the project portfolio.

Actually BT rebuilt the company’s project portfolio

by targeting the three core business processes: lead-

to-cash (“selling stuff”), trouble-to-resolve (“fixing

stuff”), and concept-to-market (“innovating stuff”).

These three processes defined the key elements of

Shaping IT Capabilities to the Business Strategy : Capitalizing on Emerging Technologies and Trends

123

BT’s unification operating model and provided the

management focus and clear methodology for IT

spending and resource allocation. The process for

project approval was established very clear: the

business unit prepares project case with expected

specific benefits, and then the IT unit provides costs,

technologies that can be used, and time frame for

execution. Special established requirements and

options for the level of ROI were adopted.

Furthermore, the projects were monitored following

approved metrics periodically in ninety-day cycle,

and beyond the implementation phase if they

generate the expected business ROI. The company

succeeded to reduce its total IT costs by 14 percent

and to cut the unit cost of IT services while tripling

output and doubling delivery speed. The new IT

funding processes, aligned well to the company

business strategy, helped BT to be transformed from

a very traditional and conservative telecom company

to a competitive and innovative firm.

Two additional lessons from the BT case could

be summarized in:

• the positive effect of the PIR process helps

companies to lower the risks of investments

by learning from mistakes and best practices

from previous projects and to stimulate

employees to explore options to maximaze

project’s profits;

• to create and manage IT project portfolios in

order to be able to estimate and allocate

properly the company’s IT expenditures. The

IT Portfolio combines the IT investments (or

costs) for existing systems, which cannot be

left without maintenance and support and the

IT investments for new projects.

The objectives of the IT advancing companies

should be to change the ratio new projects vs

existing systems to 40%:60% and to force the

company to a new more competitive level.

2.2 Building IT Architecture

Once the company takes charge of directing IT

funding to the strategic business needs, it is ready

for the second component of the Commit activities:

to build a digitized platform for enhanced business

performance.

The IT architecture or the Digitized Platform of a

company is the computer hardware and

infrastructure, software applications and data which

all together provide and support the core business

processes of the firm. In today’s highly

technological world, the DP is a company

instrument to achieve an efficient operating model

which will guarantee the company long term

prosperity and success. According Weill and Ross

from MIT CISR based on their extended research

around the globe the companies’ IT experience of

building their DP as a “journey” that can be divided

into four stages:

• Stage 1 - Localizing – this stage illustarates

the dynamic, energetic and innovative

approach of any new company or IT unit,

when the firm’s priority is rapidly grow of

new systems or customized solutions as they

respond to customer demands and seek to

establish their unique proposition. Localizing

benefits/concerns analysis: the stage helps in

local and functional optimization, however it

raises complexity and expensive localized IT

solutions that respond to instant business

needs, and soon alter the stage name as

Business silos where business processes lack

consistency and costs/performance gaps

become commonplace.

• Stage 2 - Standardizing – firms retreat from

the rapid-fire responces and focus on IT

efficiencies through technology

standardizations and shared infrastructure and

resources. Standardizing benefits/concerns

analysis: the stage succeeds to discipline

processes in IT service delivery and

investment prioritization, and to achieve IT

functional efficiency as to low OpEx and

high reliability, however soon after its

adoption it limits opportunities and become

incapable to meet new strategic needs.

• Stage 3 - Optimizing – firms implement

disciplined enterprise processes and share

data as required by their operating model.

Optimizing benefits/concerns analysis: in the

stage firms define enterprise priorities, invest

in core packaged or customized integrated

platforms and systems, and most likely

accomplish high operational efficiency. In

general IT spending is increasing, but not the

IT unit costs, the project priorities are

established based on enterprise requirements,

rather than isolated ROI estimates, however

focusing on standardization and integration

provides little if any opportunity for

innovations.

• Stage 4 - Reusing – firms exploring the

opportunities to utilize their business

processes as reusable components that they

customize for new, but related, business

prospects. Reusing benefits/concerns

analysis: in the stage firms achieve Business

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modularity based on synchronized strategic

and operational decisions with clear rules,

reliable data, and business intelligence tools,

these all result in gaining the most of IT

capabilities towards assets utilization, new

business opportunities and growth.

The successful DP creates a set of reusable IT

modules, and the business agility allows the IT

advanced companies promptly to address the

following four business opportunities:

• empowering the employees with information

they need, and optimizing the processes for

maximum performance;

• speeding up product/services innovations;

• reorganizing the business processes to meet

better the customers and business needs;

• improving merging and acquisition processes

for business growth.

If the company strategy to growth is by

acquisitioning businesses, the process of integrating

the IT infrastructures and information systems of the

new and the old structures is often extremely

challenging task. That is why many companies

choose “rip and replace” strategy to completely

change the old IT infrastructure in the acquired firm

with their existing DP which already has been

proven success.

One great example of a company that has

reached the fourth stage of its journey to build

advanced DP and successfully reusing it in many

differnet ways is Amazon. Initially Amazon business

strarted in dot com era as online C2C bookstore.

Their strategically evolving IT architecture well

aligned to agile business strategy created a

successful and growing business. Soon after the

beginning, Amazon has expanded the range of

selling goods far beyond books, and proffered its

advanced wide-spread digital platform to large

number of businesses and independent retailers. At

present, over 2.5 million retailers are using the

Amazon DP and are part of its enormous

marketplace with over 150 million global customers

Amazon did not stop with the first previously

described transformation from direct sales business

model to sales-and-service model. The company has

capatalized on its advanced IT capabilities and

succeeded to build one of the largest in the world

cloud computing platform, creating and launching

the Amazon Web Services in late 2006. In short,

with this new business model, based on innovative

utilization of existing DP and enhancing it with new

applications and higher computing performance,

Amazon targets and serves new customers and

different business processes, providing computing

resources on demand, and applying diverse profit

formula. AWS is an explicit example of IT advanced

firm where the investments in IT are used for

building digital platform that can be used and reused

multiple times by the company itself, its direct

customers or resellers to reap the benefits and to

enhance the growth.

Evolving through the four stages of building DP

is a challenging experience for organizations and

their IT units. As it has been said at the beginning -

the radical changes impact the organizational

mindsets in rethinking and reengineering the

traditional IT resources. Indicators for such

transformations can be seen analyzing the latest

Gartner CIO Agenda Report from 2015. It is based

on survey gathered data from over 2500 CIOs from

84 countries across the globe. The results represent

how IT domain is moving beyond IT craftsmanship

(focusing on technology) and IT industrialization

(focusing on process efficiency and effectiveness)

into a third era of enterprise IT, where digitalization

is transforming business models and provides

continual opportunities for growth, innovation and

differentiation - Figure 1. (Gartner, 2014).

Figure 1: New IT domain - “Digital first” (Gartner, 2014).

As one CIO is cited “we stopped thinking of the

IT as a bad, and started thinking of it as what keeps

the business running.” And this is the pivot point for

the modern organizations how to plan and manage

IT stratigically – by closing the loop with the Exploit

activities in the “value creation cycle” the companies

would maximaze the gain from reusing ingredients,

will steady advancing performance and profitable

growth, at the same time chasing new business

opportunities – see Figure 2.

Figure 2: The IT Value Creation Cycle (Ross, Beath and

Quaadgras, 2011).

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125

3 INSIGHTS ON ALIGNED IT

CAPABILITIES TO BUSINESS

STRATEGY

For the benefit of any company it is most important

to define and establish the IT architecture

underneath the organization’s business strategy. A

well-formulated IT architecture typically consists of

content and processes and describes the following

key components of the enterprise IT architecture:

• Technology planning and management:

strategy, governance and operations aligned

to business processes

• Information and data flow architecture

• Applications architecture and functional

systems, including correlated interfaces

• IT infrastructure: existing platforms, services,

and adopted standards.

The “IT/Business Alignment Cycle” is a

frequently used methodology which introduces a set

of well-planned process improvement programs that

systematically address a broad range of activities to

permeate the entire IT organization and its culture.

The four phases of the alignment cycle are (Nugent,

2004):

• The Plan phase translates business objectives

into measurable IT services and helps close

the gap between what business needs and

expects and what IT delivers;

• The Model phase designs infrastructure to

optimize business value and involves

mapping IT assets, process, and resources ,

then prioritizing and planning to support

business critical services;

• The Manage phase drives results through

consolidated service support and enables the

IT to deliver promised levels of service based

on pre-defined business priorities;

• The Measure phase verifies IT commitments

and improves its cross-organization visibility

into operations.

Following the above IT/Business alignment

cycle fosters organization-wide shared IT

expectations and defines a common framework for a

broad range of activities forcing alignment of IT and

business objectives. This simple framework should

be revisited periodically when there is a significant

course correction in corporate directions or in the

key components of the IT architecture.

In the evolving IT/Business alignment process

several significant points should be considered.

The first finding reflects the lead on driving

value from IT and the following critical steps should

be executed:

• Set the directions for the IT-Business

alignment process – define the company

operating model, identify the key components

of the IT architecture, articulate the strategic

vision that the OM and IT is intended to

realize;

• Lead the IT-business transformations –

straight the activities to build the DP,

complete the organizational changes needed

to execute the vision;

• Preserve technology, data, and process

standards – supervise the technology

implementations conforming to the operating

model, the platform enabling it, and adopted

standards;

•

Exploit the value – gain the advantage of the

business agility provided by the adopted IT

platform, reuse and innovate constantly to

achieve sustaining technology S-curve.

The second finding reinforces Structure

rationalization to transform IT from a costs center

to strategic assets with business intelligence

capabilities. The Gartner analysis on Future

Directions of the IT industry from 2011, exemplifies

where the transformations are the most appropriate –

from lessening the After the Sale IT spending to

substantial increase the investments in Before the

Sale and in The Sale sectors – see Figure 3 (McGee,

2011). The process requires significant alternations

in the enterprise requirements to support

transformational initiatives such as: content-aware

computing, social and semantic computing,

information-enabled pattern-based strategy.

Figure 3: The IT Money Spending Model (McGee, 2011).

Only few years later, the current Gartner analysis

shows a new Nexus of Forces – BI/analytics (social

and information), cloud and mobile- as leading CIOs

investment priorities forcing transformations in the

traditional IT money spending model targeting

Before the Sales and the Sales sectors– see Figure 4

(Gartner, 2015).

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Based on the CIOs strategies reported in the

table, IT and business leaders transform profoundly

the role of IT from a strategic liability to strategic

asset strengthening the customer experience and

pursuing new channels of growth.

Figure 4: The CIOs priorities 2014/2015 (Gartner, 2015).

The third finding suggests modifying the Latin

philosophy “Ex Chaos Facultas” (“From Chaos

comes Opportunity”) to “From Consumerization

comes Opportunity” to reflect the current technology

trends. Recent tendencies in IT utilization show that

new technologies emerge first in the consumer

market and then, after mass acceptance, are

employed largely by business organizations. The

expected consequence of this pattern is that across

the globe companies are experiencing the most

disruptive new technology trend of this decade:

Consumerization.

Enterprises are capitalizing on the

consumerization of IT and proliferation of mobile

devises by developing applications aimed at

improving employee productivity and customer

satisfaction – see Figure 5. (Columbus, 2014).

Figure 5: Consumer Tools into enterprise (Columbus,

2014).

Consumerization of IT, along with workforce

mobility, and flexible, reliable, accessible and

affordable remote computing, change forcefully the

corporate IT lanscape affecting the relationship

between enterprise IT, corporate users, and

consumers. For organizational IT management,

consumerization exemplifies the convergence of a

demanding set of challenges such as information and

infrastructure security, technology policy, data

protection, and end-user technology. A new

tendency -BYOD (Bring Your Own Device) and

COPE (Company-owned, Employee-enabled)-

driven mostly by current Consumerization of IT in

the enterpise, is forcing companies to redesign or

create their policy and rules on how smart portable

devices can be used for both corporate and private

purposes, and how the related expenditures should

be covered.

For corporate management, consumerization of

IT signifies a new strategy which supports business

models and process innovations, talent strategy and

customers’ satisfaction, as well as corporate brand

and identity. Consumerization of IT blurs the line

between personal and work life, especially for

mobile workers. Mobile workers make up about

39% of the employees in North America, 25% in

Europe, and 42% in Asia, according to Forrester’s

analysis (Forrester Consulting, 2013). Their cohort

benefits the business immensely by increasing

productivity, and advancing collaboration and

business agility, thereby improving customer

satisfaction and climbing the rate of talent retention.

Consumerized employees spread the boundaries of

the workday and workplace, and it is fair to name

them “anytime, anywhere workers.”

The fourth finding is that in a digital economy

every organization is challenged by IT constant

innovations, and it should take a look again on the

pivotal question: “What comes first: IT architecture

or Business strategy?” The IT rapid advancement is

spawning completely new industries in several

different ways:

• IT makes new businesses technologically

feasible – advances in nano-technologies

made today’s mobile industry possible. If we

think about Apple’s i-products – they came as

of technological advancements and

miniaturization, however Apple did

something unique and far more smarter

making not only a great technological

product, but wrapped it in a superb business

model. The Apple’s true innovation was to

enter and gain a substantial slice of the

personalized entertainment industry –

utilizing the technology innovations and

make it easy, customers’ friendly and

demanding the control of all i-products and

services.

• IT can spawn new businesses by creating

demand on new products such as customized

Shaping IT Capabilities to the Business Strategy : Capitalizing on Emerging Technologies and Trends

127

financial services (mortgage, brokerage, and

investment) there were not optional nor

needed before the spread of IT caused a

demand for them. Web 2.0 technologies help

social networking and Big Data to flourish as

multibillion dollar business, the new coming

Web 3.0 with the next digital inspiration:

semantic technologies, Internet of Things,

M2M would make even beyond the current

experience.

• IT creates new businesses within old ones.

Many companies take advantage of excess

capacity and skill of its advanced IT value

chain and provide products and services to

others based on them.

4 CONCLUSIONS

There are many other considerations and challenging

implications in the IT-Business alignment process:

asymmetric competition, speed of innovations, speed

to the market, speed of organizational model’s

evolution. All these specifics require yet more

efforts and analyses on how to integrate technology

into the strategic business objectives and to excel on

IT-enabled capabilities. The suggested simplified

EA framework and findings for consideration have

to provide a consistent, predictable, and agile

experience when mapping and executing

IT/Business alignment.

Further work is planned in two directions: how

consumerization of IT adoption to the dynamic

business objectives and current operating models

can be evaluated and measured, and how Web 3.0

technologies would impact the business of IT at the

enterprise level.

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