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Anatomy of Agile Enterprise

Janne J. Korhonen

Don't Fall in the Alignment Trap

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"The alignment prescription could be worse than the disease."

This was the conclusion by Shpilberg et al. who surveyed more than 500 senior business and technology executives worldwide on IT effectiveness and Business-IT alignment. They published their results in MIT Sloan Management Review article "Avoiding the Alignment Trap in Information Technology" (2007).

Their startling finding was that companies in which IT was highly aligned with business but not effective were considerably worse off than companies in which IT was less aligned and merely kept the systems running. Companies in this "Alignment Trap" spent 13 % more than the overall average on IT spending, but recorded a compound annual growth rate over three years that was 14 % lower than the survey average.

Only 15 % of the respondents placed themselves on the highly effective side. Even companies that did not consider themselves as highly aligned with business were spending 15 % less on IT than average, and their growth rates were 11 % higher. In other words, high effectiveness of delivering IT alone made a substantial difference. But the companies that viewed themselves as both highly aligned and highly effective exhibited growth rate that was 35 % higher than the survey average, while they were spending 6 % less on IT than other respondents.

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Figure 1. Effectiveness is more decisive than business-IT alignment (Shpilberg et al. 2007).

At the outset, these survey findings appear to be somewhat at odds with the classical article "Strategic alignment: Leveraging information technology for transforming organizations" (1993), in which Henderson and Venkatraman argue that the inability to realize value from IT investments is due to the lack of alignment between business and IT strategies of organizations. However, in closer scrutiny, the Strategic Alignment Model (SAM) seems to be in perfect line with the idea of "Alignment Trap".

SAM makes distinction between business and IT domains on one dimension, and between external positioning and internal arrangement of both domains on the other. The model specifies two types of functional integration between business and IT domains: strategic integration that links business strategy and IT strategy reflecting the external component, and operational integration that links organizational infrastructure and processes to IS infrastructure and processes. Also, they specify strategic fit between external and internal components of both business and IT.

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Figure 2. Strategic Alignment Model by Henderson and Venkatraman (1993).

By alignment, Shpilberg et al. mean "the degree to which the IT group understands the priorities of the business and expends its resources, pursues projects and provides information consistent with them". This is about functional integration in SAM lingo and essentially at the operational level. However, SAM suggests that holistic business-IT alignment calls for both functional integration (integration between business and IT at strategic and operational level), and strategic fit (the interrelationships between external and internal components) within business strategy as well as that of IT.

Business and IT may be functionally integrated at both levels, but if the external and internal components of IT strategy are out of sync, investments in IT do not bring about the intended results. IT may satisfy all the idiosyncratic and sometimes conflicting business requirements, but extensive customization, patched legacy systems and one-off integrations eventually erode the infrastructure and render IT prohibitively complex, slow and expensive -- hardly any strategic goal.

Shpilberg et al. concluded that the position of both high business-IT alignment and high effectiveness -- "IT-Enabled Growth" -- can be best achieved by focusing on increasing the effectiveness of the IT organization and temporarily forgetting about enhancing alignment (i.e. functional integration).

Don't fall in the alignment trap! If IT seems to be a bottleneck for growth in your company, try to change the alignment perspective from that of traditional strategy execution (formulation of business strategy and subsequent implementation of organizational and IS infrastructure) to an appropriate alternative perspective, e.g. service level perspective that takes IT strategy as the starting point. This may call for clearer articulation of the external domain of IT strategy -- how the company is positioned in the IT marketplace in terms of technology scope, systemic competencies and IT governance. If you see your IT function as a mere cost center, you may also want to broaden your vision on its role and scope.

References

Shpilberg, D., S. Berez, R. Puryear & S. Shah (2007). "Avoiding the Alignment Trap in Information Technology", MIT Sloan Management Review, Vol. 49, No. 1.

Henderson, J.C. & N. Venkatraman (1993). "Strategic alignment: Leveraging information technology for transforming organizations", IBM Systems Journal, Vol. 32, No. 1.

Janne J. Korhonen provides insights into how information technology can be applied strategically to catalyze organizational change and responsiveness. Drawing from both theory and practice, he discusses agile enterprise and its governance.

Janne J. Korhonen

Janne J. Korhonen is an independent business and IT consultant,specializing in enterprise architecture, business process management,service-oriented architecture and pertinent governance models. He has over ten years of experience as an architect and consultant in a variety of extensive and mission-critical IT projects. With strong theoretical underpinnings, his consulting encompasses systemic co-development of business, organization and information technology.

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