Download - 1B IT Alignment
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California Management Review
Rudy Hirschheim and Rajiv Sabherwal
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Strategic Alignment Attaining the appropriate structure and capabilities to
execute strategic decisions OrganizationalPerformance
IT-Business Alignment is a two-way street
Business Strategy Drives IT Strategy
IT Strategy Drives Business Strategy
IT-Business Alignment is:
NOT an event
A process of continuous adaptation and change
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Why Is Strategic IS Alignment Important?
Alignment Information systems are targeted on areas
that are critical to successful business performance
Alignment A firm can better use IS towards realizing its
business objectives
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The Proposed Framework for
Alignment
Business Strategy Lens
Defenders, Prospectors, and Analyzers
IS Strategy Lens
IS Role
Efficient, Comprehensive, Opportunistic
IS Sourcing
Outsourcing, In-sourcing, Selective Sourcing
IS Structure
Centralized, Shared, Decentralized
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Strategic IS Alignment Profiles Utility Profile
Alignment through Low-Cost Delivery
Alliance Profile
Alignment through Partnering
Infusion Profile
Alignment through Business Leadership
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The Three Strategic IS Alignment Profiles
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Trajectories of Strategic IS Alignment
Paradoxical decisions
Excessive transformations
Uncertain turnarounds
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Alpha Started in 1976 as an equipment sales company
Became independent equipment leaser in 1983
Net worth: $25 Million (1986) to $100 Million (1996)
Low level of Alignment to start with
Trajectories:
Prospector Defender (Paradoxical Decision)
Defender Prospector (Uncertain Turnaround)
Consequence:
Still groping (at the time of the case); senior managers seriously
worried!
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Alpha - Analysis Operated in a decentralized fashion
IS personnel isolated from the business functions
Ignored the impact of the Tax Reform Act Failed to recognize the decline in mainframes
Conclusions:
Failed due to oscillating IS strategies
Partial alignment achieved over years
Still Struggling (at the time of the case)
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Beta Diversified Australian company
Annual Revenue: $2 Billion, After-tax Profits: $250 Million
Business: Financial services, property services, capital services
and investments, group services
Started as prospector
Grew considerably from 1980 – 1993
Reasonable alignment to start with
Trajectories: Prospector Analyzer (Excessive Transformation)
Realigned IS strategy to Analyzer
Consequence:
Net Earnings Per Share increased by 20% from 1996 to 1997
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Beta - Analysis Recognized the competitive threats and switched the business
strategy
Aimed at:
Global competitiveness, a 35 to 40 percent reduction in businessexpenses and entry into the high-growth IS industry (comprehensive IS
Role)
Corrected the IS Strategy by:
Acquiring 35% stake in an IS company (selective sourcing)
Sharing IS decisions between CEO and CIO
Business divisions starting to manage their own vendors and contracts
(shared structure)
Conclusion: Started winning major outsourcing deals in Australia!
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Gamma US subsidiary of a multinational corporation
Business: Petroleum Products
Revenue > $20 B, Net Income > $1 B, Employment > 15000
Started as Defender, Efficient, in-sourced, centralized IS
1980s –
1990s:
Industry became more competitive
Financial performance dipped
Trajectories:
Defender Analyzer (Paradoxical Decision and Excessive Transform.)
Realigned IS strategy to Analyzer
Consequence:
Uncertain turnaround in Period 3 towards the IS strategy of Period 1 caused
perfect alignment with the Analyzer strategy!
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Gamma - Analysis Increased competition and dipping financials led to hiring a
new CEO
Shifting to analyzer in early part of 1990s :
Greater attention paid to markets and growth opportunities
Major corporate transformations in 1995
Each subsidiary became independent and made their own decisions
A CIO was appointed to each business unit
Business units started following IS outsourcing
Continuing onto the latter part of 1990s:
IS became more important than just an opportunistic tool
Business units gravitated towards a balanced in- and outsourcing
Consequently, the IS structure became more shared
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Pragmatics of Alignment