Course : 7143M - Corporate Information Technology Strategy

Business and IT: Business

Strategy, Challenges and
Opportunities for IT, and IT
Alignment
Session 01
 REFERENCES
Chapter 1: Business Strategy: Challenges and
Opportunity for IT, Sanjiva Shankar Dubey, 2nd
Ed.;
 Session Outline

Business and Strategy Introduction

IT Strategy and Developing IT Strategy for Competitive
Advantage
Stages of IT Strategy Development and
Implementation
Business and IT Alignment and its Challenges
Three-D Framework for Business and IT Alignment
Achieving Business and IT Alignment using its Tools,
Tips and Traps

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 Business Strategy

5 Ps to define Strategy (introduced by Mintzberg first wrote

about it in1987).
They are:
Plan
Pattern
Position
Perspective
Ploy
To develop a robust business strategy and takes full
advantage of organization's strengths and capabilities we
need to understand each P
 Business Strategy

Michael Porter has defined business strategies such as cost

leadership, differentiations, niche focus or innovation which
a firm can adopt

He also refers to competitive strategy as a set of differenct

activities that is chosen by an organization to deliver a
unique mix of values to its customers

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 Business Strategy

Strategic planning is the systematic examination of

opportunities and threats in the business environment
so that you are in the position to identify those
opportunities that should be exploited and the threats
that should should be avoided (George Steiner)

Strategic planning is to create opportunities that can be

leveraged to create diffrential advantage in the
marketplace (N. Les Clark)

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 Business Strategy

To summarize, strategy is a set of objectives, plans, and

policies for the organization to successfully complete in its
markets.

Some of its characteristics are:

It is long term (3-5 years) in nature.
It specifies what the organizations competitive advantage
will be.
It focuses on a few areas.
The pattern of decisions made over time is, in fact, an
organizations business strategy.

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 Challenges and Opportunities

IT has become important in supporting and executing

strategy at least by seeing following conditions:
Global competition and connectivity urge a company to
survive to serve the customer with good level of efficiency
and quality at an accceptable price
IT helps to cut cost, increase speed, and support business
process application, communication and technology
It is not enough to survive but an organization needs to be
competitive as well.
In this case IT should be used to make organization to run
organization activities differently from comptetitors to deliver
unique values as well
In order to grow and sustainable, an organization need to be
innovative and ready for business
changes/transformations.
Int this case, IT should support organization to be able to
expand the scope as well as the reach of business so that IT can
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 Challenges and Opportunities

These complicated challenges and opportunities need

organization to:

Know principles how to use and manage IT before

practice so that the technology is put in the right
perspective for effective execution

Formulate and constantly maintain IT strategy that is

aligned with its business stragy

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 IT Strategy

The formulation of IT strategy is required for two

reasons:
Competitive necessity
Competitive advantage
The role of IT Strategy is to provide effective, efficient,
responsive and flexible systems to meet the currrent and
future business as well as legislative requirements

IT strategy should be cost-effective to enable business

strategy achievement rather than just information
keeping

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 IT Strategy

IT Strategy is subdivided into three subcomponents/

constituents (that will be discussed in this course) :
IT application strategy
Technology management strategy for IT
IT management strategy

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 IT Strategy

IT Application Strategy

Answering which all application for which all the bsuiness areas
and for what benefits and at what cost

Select, prioritize and decide about investment and approach

for implementation for IT applications

See following IT Strategic Grid to know categories of IT

applications in terms of current as well as future business
scenarios

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 IT Strategy
Investment
Investment in IS/IT
in IS/IT applications
applications which are
which the critical to
organization sustaining
currently future
depends for business
success strategy

Investment Investment
in IS/IT in IS/IT
applications applications
which are which may
valuable but be
not critical important in
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achieving
 IT Strategy

Technology Strategy for IT

It is about long-term approach for planning and
selection of IT components and tools, availability of
skills, cost effectiveness consideration, time and
resource availability to the organization

It also maintain the sustainability and reusablity, in

addition to availability, of technology in long-term
view

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 IT Strategy

IT Management Strategy
It includes managing:
IT Project Delivery
IT Outsourcing
IT Service Delivery
IT Measurement and Investment
IT Change Management

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 Developing IT Strategy for
Competitive Advantage

Considerations related to IT strategy development for CA

Evaluate how organizations can use IT to gain CA
Decide the purpose of IT and its management approach
(whether corporate strategy should drive IT or vice versa or both)
Setting periodic direction for IT
Clear for each IT development project
Getting support from business managers and how IT can help
them
Justifying requisite funding for developing and implementing IT
applications
Fitting into business context and business needs

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 Stages of IT Strategy Development
and Impelementation

1. Understanding the strategy of business

2. Aligning business and IT strategy
3. Developing strategic IT plan
4. Developing enterprise architecture
5. Developing IT application strategy
6. Developing technology strategy for IT
7. IT strategy implementation and management
8. Measure IT benefits
9. IT change management issues
These steps will be covered in next sessions

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 Business and IT Alignment

The alignment between IT and business means that IT

delivers what business needs to their satisfaction and
also able to play a strategic role in shaping new business
strategy that can be achieved in a cost effective manner
Business and IT alignment can be understood by
following framework

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 Definiton of Alignment

Alignment = joining as ally = equal

Business and IT are so interdependent
Misalignment will lead to decreased payoff form IT
investment as well as decreased competitive capabilities
for the organization
It needs long-term and strategic view to keep future
growth
Alignment is a priority action both from theoretical and
practical perspective

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 Challenges of IT and Business Strategy
Alignment

There are three challenges :

1. Lack of alignment between strategic objectives and the
deployment of IT
2. Incompleteness, uncomprehensiveness, and low speed
with chich end-users requirements can be captured
3. Not uniform and not seamless communciation of
strategy, objectives, and CSF to organization and staff to
prepare for IT initiatives

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 Inhibitors of Business and
IT Strategy Alignment

Three factors that may inhibit the alignment process

Leadership level congruence
ITs ability to identify and partner with business
ITs ability to deliver
Business and IT alignment have to be achieved at three
levels:
Functional management or business needs
Application development processes and
Management of IT infrastructure

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 Three-D Framework for
Business and IT Alignment

DISCIPLINE to have IT plan and guidelines for

organization

DESIGN a process to make IT and business future-

oriented and aim to present a larget picture,
accommodating future needs as well

DRIVE FOR RESULTS to have both busienss and IT aim to

exploit IT infrastructure for enhancing business strategy
and scope to gain competitive advantage

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 Achieving Business and
IT Alignment

Business and IT alginement can be measured in three

prescriptive frameworks:
Communication
Architecture
Technology
People

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 Communication

Good communication between the CEO and CIO

ITs strategically positioning within organization that lead
to synergize goal between IT and business
Business drives IT and IT opportunities open business
opportunities as well

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 Architecture

Define busienss arcitecture and superimpose IT

architecture to achieve the alignment between the
two
Business Information Technology
strategy Strategy strategy

Organization Organization
structure structure

Supporting
Business Information
technology &
process requirement
tool

Other approaches: QFD; DEMO; IE; SOA; SAAS

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 Technology

It refers to the operational alignment at the user level

covering business role, information role, function of IT,
as well as of IT infrastructure

It addresses IT infrastructure management issues such

as service level management, data storage, data
reporting and modelling

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 People

IT team and IT professionals roles

The team player uses IT governance as mechanism for
systematic interaction between the business and IT

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 Business and IT Alignment
Framework

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 Business and IT Alignement
Tools, Tips and Traps

The tools for helping business and IT alignment are:

1. Steering committee
2. Joint task force group
3. Appointing IT champion in the user department
4. Appointing function wise user advocate or SME in IT department
5. Sabbatical to IT or business user function
6. Joint projects for innovation
7. Making IT members part of executive committee, strategy group
8. Co-authoring papers and seminar presentations by user and IT on
its achievements
9. Team developments, joint training of user and IT professionals
10. Encourage cross transfer of IT and business users at mangerial level

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 IT Strategy and Business Maturity

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 Additional Readings

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 The Dynamic Synchronization of
Strategy and Information
Technology

C.K. Prahalad & M.S. Krishnan

MIT Sloan Management Review, 2002

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 Introduction

A rigid information technology infrastructure will stymie

even the best strategic initiatives, making it difficult to
introduce change in cost and time efficient ways. An
applications infrastructure scorecard can help managers
consistently recognize inherent trade-offs between efficiency
and innovation and create a more flexible application-
portfolio framework - C.K.Prahalad & M.S.Krishnan

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 Shifting Cultural Gears in Technology-
Driven Industries
Paul J.Kampas, MIT Sloan Management Review, 2003

Alert executives are learning to orchestrate the difficult

transition from a product-innovation culture to a
process-innovation culture that can transform successful
startups into enduring industry leaders Paul
J.Kampas

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 Introduction

In technology-driven industries, the primary source of

customer value inevitably shifts from product-innovation
to business-innovation, which focuses on processes
(product development, procurement, manufacturing,
sales, distribution or services) and marketing (partnering,
segmenting, positioning, packaging or branding).
Many senior managers avoid addressing cultural
transformation because of cultures invisible, difficult-to-
measure nature and its stubborn resistance to quick
fixes.

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 How Culture Shapes the Company

Employees at all levels become so completely imprinted

with the assumptions that their perceptions and
judgments become unconsciously biased toward a
certain world view and certain courses of action.
Kampas addresses several important contexts to
monitor:
External Context: context of customers, competitors,
partners, suppliers, technologies and regulations.
Outer Company: focuses on execution and results,
such as: engineering, production, marketing, sales
and service. Other activities include revenue, growth,
profit, market share, company valuation and
customer satisfaction.

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 Middle Company, comprises the organizations
mechanism of motivation, coordination, and control.
It includes strategy development, role definition, goal
setting and resource allocation.
Inner Company, tacit code (DNA of company) that
shapes how the middle company and outer company
operate.

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 Model of the Company

Kampas (2003) addresses that companies are systems

comprise of multiple layers of capabilities. He states the
success in producing desired results flows from bottom
to top, where as success in adapting to a changing
context flows from top to bottom.
Business-innovation companies believe that customers,
not engineers, are best at specifying new products

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 Model of the Company (Kampas, 2003)

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 Mapping the Two Cultural Biases

Kampas differentiates the product-innovation bias from

the genes in the business-innovation cultural bias as
follows:
Gene definition
Product-innovation genes
Business-innovation genes
And how genes shape behavior of company

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 Mapping the Two Cultural Biases

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 The Inevitable Challenge of Cultural
Change

1. What is the essence of a winning product?

In product-innovation companies, winning
products are state-of-the art and sell themselves;
in business innovation companies, winning
products are reliable, affordable and able to
project a powerful brand.
2. Who should specify new product?
In product-innovation companies, new products
are specified by engineers;
In business-innovation companies, by customers.
3. What do employees need to perform well?
Product Innovators encourage autonomy and
debate among employees;
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 3. What do employees need to perform well?
Business innovators emphasize collaboration and
lean processes.
4. What characterizes good leadership?
In product-innovation companies, leadership is
parental, forgiving and inwardly focused;
In business-innovation companies, it is disciplined,
professional and outwardly focused.
5. What is the root source of success?
In product-innovation companies, success is
technical genius and vision;
In business-innovation companies, its aggressive
deal making.

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 6. What do we strive for?
Companies with a product-innovation bias strive to
change the world;
those with a business-innovation bias strive for
exceptional market share, growth, profits and
evaluation.

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 The Right Cultural Bias for the
Situation

In technology-driven industries, the necessary mix of

product and business innovation shifts over time. It
includes five categories of innovation: base product,
human factors, styling and packaging, marketing and
base process.

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 Innovation Mix Shifts as Technology
Matures

Kampas states the five categories of innovation

contribute to customer value over the life-time of a
technology. He addresses the three stages of
development:
Enabled by a business-innovation cultural bias
Enabled by both cultural biases
Enabled by a product innovation cultural bias

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 Innovation Mix

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 Orchestrating the Cultural-Bias Shift

Ideally, as industry transitions from creation to

commoditization, a vendors balancing of the product-
innovation emphasis with the business-innovation
should be smooth and painless.
Kampas suggests:
Begin with a hybrid culture (both product and
business innovation).
Change with a Jolt.
Create linked Subcultures.
Possibility replace the founders.
Use Technological Seduction.
Preparing for the Inevitable.

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 The Cultural-Bias Landscape

Kampas states the optimal balance of the product-

innovation vs. the business-innovation cultural bias
depends on the technological maturity of the
products and services in an industry.

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 Business-Innovation Cultural Bias

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 END

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