IT Strategy Essentials: A Practical Guide

IT Strategy Essentials: Business and IT Strategy Alignment

Information technology – or IT – has come to be regarded as a critical component of an organization's business strategy. In fact, companies may not reach their potential if their IT strategy isn't closely integrated with other business strategies. By collaborating with the business leaders in their organizations, IT managers can create technical solutions that support business objectives and add value to the organization.

In companies where IT and business leaders work together successfully, IT can be used to improve business processes and to drive innovation and change. This often results in new products and capabilities that give the company a competitive edge. So to get the most value from technology, leaders should take an integrated view of IT in their organizations. They can do this by ensuring their business and IT strategies are aligned.

This course can help you evaluate how well your company's IT and business strategies are aligned. It begins by describing the elements that an IT-influenced business strategy typically contains.

You'll find out how you can analyze the current IT situation in your own organization to determine at which stage of strategic alignment your company is.

You'll also learn to assess how your organization currently uses IT – and the value your organization hopes to gain from its IT systems.

Finally, you'll explore some strategies you can use to improve alignment between the activities of the IT Department and the business goals of your organization.

By learning how well the IT and business strategies are aligned in your own organization – and how to improve strategic alignment if necessary – you can help ensure that IT fully supports your business and plays a key role in its future success.

Business and IT Strategy Alignment

1. Aligning IT and Business Strategies

2. Levels of IT and Business Integration

3. Assessing the Value of IT in Your Organization

4. Improving IT Strategic Alignment with Business

Aligning IT and Business Strategies

A business strategy contains the mission, vision, and objectives of an organization. It also contains the organization's market strategy, unique value proposition, and distinctive value configuration.

An IT strategy contains information on applications and human resources. Details about the way IT is to be organized and the technical infrastructure itself are also included.

By aligning their business and IT strategies, organizations can achieve the best return on their IT investment. 

An IT-enabled business strategy contains the business expectations the company has of IT. It also includes the company's future IT plans.

Elements of business and IT strategies

Information technology – or IT – has been traditionally regarded as an entity separate from the main functional areas of a business. As a result, IT was often overlooked when an organization's strategic plans were being developed. However, as IT has evolved, it has come to be regarded as a critical component of an organization's business strategy. When an organization's IT strategy is developed to align and support its business strategy, the organization is best positioned to succeed.

A strategy is not simply a to-do list. Rather, it's a carefully designed plan of action that can help you achieve important goals. A business strategy describes the long-term direction an organization wants to take and how it can get there.

A business strategy generally contains a number of key elements, including the mission, vision, and objectives of the organization. It also typically includes the market strategy the organization plans to adopt, and the unique value proposition it intends to offer customers. Business strategies usually also contain a distinctive value configuration, which outlines how the organization aims to conduct its business.

Mission, vision, and objectives

The mission of an organization states what the organization does and the reason for its existence. For example, the mission of a software firm could be to provide software solutions to customers.

A company's vision sets out what the company wants to achieve. For example, the software firm's vision could be to become the leading provider of software solutions in Europe.

The objectives of an organization state the direction in which the firm is heading. For example, an objective of the software firm could be to merge with another company to become the leading software provider in Europe.

Market strategy

The market strategy of a company describes the market segments and products or services the company wants to focus on.

For example, a software firm could focus on providing financial software to small- and medium-sized corporate clients.

A pie chart, labeled Market segments. The largest segment is labeled Corporate clients.

Value proposition

A company's value proposition is the unique set of benefits it offers to customers. This set of benefits is different from those offered by the company's competitors.

For example, a company that sells financial software online could have a unique value proposition saying it has the lowest prices and is easiest to use.

Value configuration

The value configuration of an organization describes how the company can establish an advantage over competitors to create value for its customers. One value configuration is the value chain, where value is created by efficiently conducting a chain of activities. For example, an automobile manufacturer may use parts that were manufactured by other companies. It can add value to its manufacturing process by offering superior quality control and incorporating additional features.

Value can also be created in a value shop, where value is created by solving customer problems. For example, an IT company creates value by providing services to clients such as network monitoring and project management.

A third value configuration is the value network, where companies create value by connecting interdependent customers. For example, a telecommunications company creates value by providing cable for telephone, Internet, and television services simultaneously.

An IT strategy also contains a number of key elements. It contains information on any new applications the company requires. It also contains plans to develop the competencies of the people who work in the IT division, as well as details about the way the IT organization is to be structured within the company and the technical infrastructure itself.

The first element in an IT strategy is information about any new applications that are required by the company – for example knowledge management systems. Details such as whether the applications are to be developed or purchased, and how they meet user requirements, should be contained in the IT strategy.

A second necessary element of an IT strategy is a plan that ensures the future effectiveness of the people who work in the IT division. Such a plan typically includes the types of human resources needed – for example IT professionals, managers, and developers. It should also include the specific skills required and the salary levels that are forecast to be paid.

The third key element is a description of how IT will be organized and controlled. This part of the strategy defines the various tasks and roles within the IT division – for example managing data, installing applications, and designing and maintaining networks. It also establishes the IT division's management structure. This section should also include details about any IT services, including whether they are to be provided internally or outsourced.

A fourth important element of an IT strategy is choosing the future technical infrastructure. This includes selecting hardware, software, and network configuration; deciding how the various components will interact with one another; and determining how security is to be implemented.

Question

Based on what you've just learned, is the following statement true or false?

An IT strategy should be focused on hardware, software, and future IT applications, rather than on people or human resources.

Options:

True

False

Answer

The statement isn't true. An IT strategy should contain a plan to develop the future competence of human resources, as well as information on the technical infrastructure and applications.

Value of aligning strategies

Aligning an organization's business strategy with its IT strategy generally improves the company's overall performance. It can lead to more efficient processes, the development of better products and services, cost reductions, faster response times, and more efficient supply chain management. To achieve strategic alignment, the IT strategy should be developed at the same time as the business strategy, and integrated into it.

Because aligning business strategy with IT strategy tends to have a positive impact on organizations, strategic alignment should be a top priority for senior managers. They should regard IT as a way of meeting business goals and providing value.

To align IT strategy with business strategy, every aspect of the IT strategy should support the business goals of the organization.

In other words, all IT systems, applications, processes, and budgets should agree with the overall corporate strategy and objectives.

When a company's business strategy is properly aligned with its IT strategy – that is, when it's IT-enabled – it can prove valuable in different ways.

Consider this situation. Graham is the chief information officer of a large insurance company. Last year, he worked closely with senior management to align the company's IT strategy with its overall business goals and objectives.

The company's key goals this year are to increase revenues and to make it easier for customers to initiate claims. So as part of its IT-enabled business strategy, the company has upgraded its web site so customers can make claims online and then track the progress of the claims as they're being processed. This sets the company apart from its competitors and has resulted in an increase in the number of new policies being purchased.

The increase in revenue means the company has already recouped more than it invested in upgrading the web site. Senior management hopes to use the web site to market new insurance products in the coming months.

Question

In what ways has Graham's company benefited by aligning its business and IT strategies?

Options:

The overall performance of the company has