Strategic Alignment Model Revisited

Considerations of Business-IT Alignment Formative Factors

Shuhei Kudo

, Kayo Iizuka

and Michiko Miyamoto

Department of Management Science and Engineering, Akita Prefectural University, Akita, Japan

School of Network and Information, Senshu University, Kanagawa, Japan

Keywords: Business-IT Alignment, Strategic Alignment Model (SAM), Alignment Option Generator

Abstract: The purpose of this study is to propose a framework for business-IT alignment implementation based on

Strategic Alignment Model (SAM) suggested by Henderson and Venkatraman. Since IT use is a

precondition for business operation, business is no longer distinguishable from IT. While the importance of

business-IT alignment has been growing, the alignment concept is still ambiguous. SAM, which was

suggested in 1989, has been a seminal model representing business-IT alignment structure. Alignment

research has been conducted from various viewpoints based on SAM. This study reinterprets SAM in the

light of results of prior alignment research and proposes a more practical model. Each component of

business-IT alignment model is specifically explained. Furthermore, “alignment option generator”, which

can be used as a guideline for business-IT alignment implementation, is also proposed. Alignment between

business and IT can be efficiently and effectively achieved by using the alignment option generator.

1 INTRODUCTION

Effective IT (information technology) use is a

critical issue for a company to improve business

performance. The importance of achieving alignment

between business and IT is widely recognized by

many researchers and practitioners. Achieving

business-IT alignment more successfully than

competitors is one of the keys to gaining competitive

advantage.

A lot of alignment research has been conducted

in the context of growing importance of alignment

for a company. Business-IT alignment is defined as

“balancing among the choices made across all four

domains: business strategy, IT strategy,

organizational infrastructure, and IT infrastructure”

(Henderson and Venkatraman, 1993, p.9).

In spite of the vigorous alignment research, the

concept of alignment has been vague. Specific

alignment contents and an implementation guideline

have not been sufficiently suggested in the prior

research. A more practical alignment model is

required for alignment implementation.

This study reinterprets Strategic Alignment

Model (SAM) suggested by Henderson and

Venkatraman (1993) in the light of the relevant

literature of alignment research. SAM is a seminal

alignment model that has been the foundation of

alignment research to date. Each component of

business-IT alignment model is expounded. In

addition, this study also proposes “alignment option

generator” as a guideline for aligment

implementation. Business and IT managers can

understand the current alignment status and address

future alignment implementation issues via the

framework.

2 RELATED WORKS

Business-IT alignment research has been conducted

from various viewpoints since the late 1980’s. Eight

alignment research perspectives are identified: (1)

alignment model, (2) alignment content, (3)

alignment process, (4) critical success factors for

alignment, (5) alignment maturity, (6) alignment

measurement, (7) alignment adjustment, and (8)

alignment enhancement (Kudo and Yasuda, 2009).

This study focuses on the alignment model

research perspective and revises SAM based on the

results of these eight alignment research perspectives.

The advantage of SAM is that alignment

structure can be understood. Alignment components

that should be considered can be also identified. In

283

Kudo S., Iizuka K. and Miyamoto M..

Strategic Alignment Model Revisited - Considerations of Business-IT Alignment Formative Factors.

DOI: 10.5220/0004096502830286

In Proceedings of the 14th International Conference on Enterprise Information Systems (ICEIS-2012), pages 283-286

ISBN: 978-989-8565-12-9

 2012 SCITEPRESS (Science and Technology Publications, Lda.)

contrast, it is not clear how SAM is applied to real

alignment practices. It is difficult to understand how

each component of SAM should be developed

because each component of SAM is not specifically

explained. Moreover, while the alignment

infrastructure is included in SAM, an alignment

execution domain including business and IT

operations is not well explained (Maes, 1999). This

study proposes a more implementation-oriented

alignment model by extending and revising SAM.

3 ALIGNMENT MODEL FOR

IMPLEMENTATION

Figure 1 shows the generic business-IT alignment

model for implementation.

Figure 1: Generic business-IT alignment model for

implementation.

The generic business-IT alignment model is

developed by drawing upon some frameworks

suggested in the prior alignment research (Walton,

1989; Henderson and Venkatraman, 1993; Keen,

1993; McGee, et al., 1993; Maes, 1999; Ross, et al.,

2006).

The model is based on some assumptions: One,

the boundary between business and IT is

increasingly obscure. Decisions pertaining to

business and IT choices in strategy, infrastructure,

and operation domains need to be made in parallel.

Two, as with the assumption of SAM, a company

needs to achieve a fit between external and internal

domains. The external domain means the

organization’s positioning in the competitive arena.

The strategic integration in the model corresponds to

the external domain. The infrastructural integration

and operational fusion are categorized into the

internal domain, which means the design of an

appropriate administrative structure to support its

execution. Three, business-IT alignment is driven by

“value discipline”. The value discipline framework

is suggested by Treacy and Wiersema (1995). The

consistency among strategic, infrastructural, and

operational domains is achieved driven by

company’s value discipline. Four, alignment

implementation consists of three phases. Value

proposition vision is developed via business-IT

strategic integration in phase one. Based on the value

proposition vision, value creation foundation is

developed through business-IT infrastructural

integration in phase two. Observed value is proposed

to customers in phase three. Business-IT alignment

implementation model includes 11 components:

(1)value discipline, (2) business scope, (3)

distinctive competencies, (4) business governance,

(5) IT scope, (6) systemic competencies, (7) IT

governance, (8) enterprise architecture, (9) structure,

(10) skill, and (11) operation.

4 ACHIEVING BUSINESS-IT

ALIGNMENT

As shown in Figure 1, alignment implementation

consists of three phases. This study proposes

“alignment option generator (AOG)” for alignment

implementation. AOG is a guideline for business-IT

alignment implementation. A company chooses

specific alignment options in AOG, and realizes the

logical consistency among components. The

alignment options are drawn upon the prior

alignment research (Weill and Broadbent, 1998;

Luftman, 2000; Reich and Benbasat, 2000;

Hirschheim and Sabherwal, 2001; Chan, et al., 2006;

Kearns and Sabherwal, 2006-7; Tallon, 2007-8;

Iizuka and Iizuka, 2010).

4.1 Phase One: Developing Alignment

Vision

First of all, a company must develop vision for

alignment. Table 1 shows AOG in phase one.

Value Discipline

Business

Infrastructure

Business

Strategy

drive

embody

fit

Strategic integration

Infrastructural integration

Operational fusion

Alignment

Implementation

Phase

One

Phase

Two

Phase

Three

business

Business

Operation

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Table 1: AOG in phase one.

(1) value discipline

1.price 2.speed 3.premium 4.quality

5.performance 6.selection 7.convenience

(2) business scope

1.cost leadership 2.balancing cost and differentiation

3.differentiation

(3) distinctive competencies

1.supplier relations 2.production and operations

3.product and service enhancement 4.marketing and sales

5.customer relations

(4)-1 business governance: term

1.long-term 2.short-term

(4)-2 business governance: interaction

1.facilitator 2.participant

(5) IT scope

1.efficiency 2.effectiveness 3.transformation

(6)-1 systemic competencies: data access

1.business unit level 2.enterprise level 3.inter-enterprise level

(6)-2 systemic competencies: communication

1.below average 2.average 3.above average

(6)-3 systemic competencies: hardware and software

1.below average 2.average 3.above average

(6)-4 systemic competencies: system reliability

1.below average 2.average 3.above average

(7)-1 IT governance: sourcing

1.insourcing 2.selective sourcing 3.outsourcing

(7)-2 IT governance: structure

1.centralized 2.shared 3.decentralized

(7)-3 IT governance: benefits

1.cost 2.balancing cost and value 3.business value

A company selects appropriate strategic options

and coordinates among the choices. Value

discipline-driven integration between business and

IT strategies is achieved through these processes in

phase one. The outcome of phase one is to clarify a

direction of alignment implementation.

4.2 Phase Two: Designing Alignment

Foundation

Table 2 shows the three components and

infrastructural options in phase two. In phase two, a

critical success factors for business-IT alignment

needs to be achieved.

The effectiveness of alignment foundation

determines the effectiveness of business-IT strategic

integration and of business-IT operational fusion.

Each choice is made in the light of their own

business context. The purpose of this phase is to

develop foundation for business operation and IT use.

Infrastructural choices pertaining to business and IT

are simultaneously made in each component. A

company can understand current status of business

and IT infrastructures, and define to-be foundation

for value proposition by using AOG in phase two.

Table 2: AOG in phase two.

(8)-1 enterprise architecture:

the scope of business process standardization and integration

1.not defined 2.partly defined 3.fully defined

(8)-2 enterprise architecture: the type of operating model

1.diversification 2.coordination 3.replication 4.unification

(8)-3 enterprise architecture:

the scope of IT architecture standardization and integration

1.not defined 2.partly defined 3.fully defined

(8)-4 enterprise architecture: data standardization and

integration

1.not defined 2.partly defined 3.fully defined

(8)-5 enterprise architecture:

communication standardization and integration

1.not defined 2.partly defined 3.fully defined

(8)-6 enterprise architecture:

technology standardization and integration

1.not defined 2.partly defined 3.fully defined

(8)-7 enterprise architecture:

application standardization and integration

1.not defined 2.partly defined 3.fully defined

(9)-1 structure: business managers’ participation in IT

planning

1.inadequate 2.moderate 3.adequate

(9)-2 structure: IT managers’ participation in business

planning

1.inadequate 2.moderate 3.adequate

(9)-3 structure:

setting up the steering committees including users and IT staff

1.inadequate 2.moderate 3.adequate

(9)-4 structure: formal communication between business and

IT units

1.inadequate 2.moderate 3.adequate

(9)-5 structure:informal communication between business and

IT units

1.inadequate 2.moderate 3.adequate

(9)-6 structure: the relationship between business planning

section and IT unit

1.independent relations

2.belonging to the same higher level organization

3.IT section is located under business planning section

(10)-1 skill: senior executive support for IT

1.inadequate 2.moderate 3.adequate

(10)-2 skill: top managers’ knowledge of IT

1.inadequate 2.moderate 3.adequate

(10)-3 skill: IT managers’ knowledge of business

1.inadequate 2.moderate 3.adequate

(10)-4 skill: IT unit’s ability to offer reliable IT services

1.inadequate 2.moderate 3.adequate

(10)-5 skill: IT unit’s ability to keep up with IT progress

1.inadequate 2.moderate 3.adequate

(10)-6 skill: IT unit’s ability to respond to business needs

1.inadequate 2.moderate 3.adequate

(10)-7 skill: IT success experience in the company

1.inadequate 2.moderate 3.adequate

(10)-8 skill: senior executive’s ability to prioritize IT projects

1.inadequate 2.moderate 3.adequate

4.3 Phase Three: Fusing Business

Operation with it Utilization

Operational alignment options are shown in Table 3.

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Table 3: AOG in phase three.

(11)-1 operation: the optimized IT portfolio for value

discipline realization

1.not optimized 2.partly optimized 3.well-optimized

(11)-2 operation: the users’ skill acquisition for IT use

in core business processes

1.inadequate 2.moderate 3.adequate

(11)-3 operation: business metrics are related to IT

1.not related 2.partly related 3.well-related

(11)-4 operation: IT metrics are related to business

1.not related 2.partly related 3.well-related

(11)-5 operation: risk and rewards are shared between

business and IT units

1.not shared 2.partly shared 3.well-shared

A company needs to ascertain suitability of IT

portfolio for core business processes. Users in core

business processes need to acquire an appropriate IT

utilization skill. Alignment implementation in phase

three includes the options relevant to evaluation.

Risk and rewards need to be shared between

business and IT units.

5 CONCLUSIONS AND FUTURE

RESEARCH

This study revisits SAM of Henderson and

Venkatraman and proposes a new framework for

alignment implementation. SAM is reinterpreted and

extended by introducing the results of the prior

alignment research. This study also offers

“Alignment Option Generator (AOG)” as a guideline

for supporting alignment practices.

Actual alignment implementation is more

complicated. Alignment implementation involves IT

projects prioritization, coordination between

corporate and business-unit management, and

choices for the scope of standardization and

integration pertaining to business and IT. It is

necessary to clarify methodologies for addressing

effectively these issues. In addition, business-IT

alignment profiles and differences of alignment

implementation among companies also need to be

empirically examined.

ACKNOWLEDGEMENTS

This work was supported in part by Japan Society

for the Promotion of Science (JSPS) Scientific

Research (C) No. 24530425.

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