Business-IT Alignment Definition
Business-IT Alignment is a discipline that matches IT strategy with business strategy with the goal of maximizing value created by the enterprise:
- Business-IT Alignment is a process, not a point in time event
- Business-IT Alignment gap is the degree to which IT initiatives deviate from business requirements
- The aim of Business-IT Alignment is to reduce this gap, and eliminate it over time. Business-IT Alignment is achieved when this gap is completely eliminated
- Business-IT Alignment happens in stages, or phases with each increment resulting in higher value generated by the company
- An enterprise that achieves Business IT Alignment is generating the maximum value from its IT investments aka “getting the biggest bang for the IT buck”
An enterprise has achieved Business-IT Alignment when all its IT initiatives are completely in line with the requirements set by its business functions. Business-IT Alignment results in every penny spent on IT is in support of a business objective.
Even though common literature implies that Business-IT Alignment concerns itself with strategy, the following is a more accurate definition of the term:
Business-IT Alignment matches IT vision, mission, goals, objectives, and capability (strategy, process, organization, and infrastructure) with business vision, mission, goals, objectives, and capability (strategy, process, organization, and infrastructure)
Business-IT Alignment Assumptions
1. Business functions create value with the help of support functions
2. IT function does not create value it supports value creation
3. Therefore, every IT investment must be in support of business objective(s)
Primacy of Business
The underlying premise is that value is created by business functions in the enterprise. IT Function, in and of itself, does not create value but supports the business functions in their value creating initiatives. In other words, IT is a support function that exists to enable the business functions in the organization. Consequently, everything that IT does must be in line with the initiatives of one or more business function.
Business Drives IT
Business create a strategy whose requirements set the agenda for IT actions. Business strategy drives IT Strategy. This model provides for adjustments based upon IT limitations such as, lack of IT capability, and/or delay in IT project implementation. Business strategy is adjusted to account for IT to the extent of these limitations. However, IT capability does not drive business strategy. The sequential origin of the IT function has a lot to do with this mindset - IT came after business so IT must follow the business!
Business IT Alignment Implications
The key implication of business IT alignment is that there is a hierarchical relationship in the enterprise - business functions are superior to the IT function which is subordinate to them. "IT exists to support the business" is a euphemism that clearly establishes this hierarchy, and all that it implies, without spelling it out explicitly.
Primacy of business functions
Business drives IT
IT function supports the business functions
IT function must cooperate with the business functions
IT function must arrange its activities to adjust to changing business requirements
IT organization must line up behind the business functions
IT function follows the business functions
IT Organization's position is inferior to that the business functions' organization
Business IT Alignment Issues
This hierarchical positioning of the IT functions with respect to the business functions has limited, not enhanced the value delivered by the enterprise using its information technology assets, and capability. Over time, business IT alignment is being replaced with business IT fusion - a model where the IT function allies with the business functions are united in purpose and have a working relationship based upon collaboration, cooperation, and team-work.
IT Drives Business
The advent of the internet and the subsequent sidelining of businesses demonstrated the severe limitations in this model which is being corrected to have IT drive the business using an e-strategy
Other Definitions of Business-IT Alignment
Business-IT alignment is a dynamic state in which a business organization is able to use information technology (IT) effectively to achieve business objectives - typically improved financial performance or marketplace competitiveness. Some definitions focus more on outcomes (the ability of IT to produce business value) than means (the harmony between IT and business decision-makers within the organizations) 1
Steps to Business-IT Alignment
The fact that business and IT alignment is a process is often ignored. This process does not have a starting point nor does it have an end. It is a series of “learn and do” cycles that incrementally get towards alignment.
source: CIO Index
Step 1: Identify Business Drivers
In this step, we identify the business needs that are driving IT. In other words, what are the business needs that require IT enablement? Is the company launching a new product that requires, say, a new fulfillment system? Is the company acquiring another company that requires rationalizing the systems of the two?
These business needs are continuously changing. Periodically, they should be identified so action can be taken in response.
Step 2: Create IT Vision
Now that we know our business’ needs, how can IT help? This step identifies the IT Capability – strategy, process, infrastructure and organization – required to meet business priorities.
The starting point? A vision for IT. This vision lays the general guidelines or policy that drive the creation of this IT Capability. Remember, two people might react differently to the same requirements depending on their underlying beliefs. It is very important to articulate these underlying attitudes and beliefs into a vision before attempting to answer the IT Capability question.
Step 3: Assess Current Alignment
This step answers the question: How does the current IT Capability compare to the envisioned IT Capability?
There are three dimensions of alignment – investment, asset and organization. By answering this question for all three, this step assesses the alignment along these three dimensions.
Step 4: Identify Alignment Gaps
Comparing the desired or “to-be” IT Capability with the current or “as is” IT Capability, one can identify gaps that are causing misalignment.
Again, this comparison is made along the three dimensions – investment, asset and organization to precisely identify the root cause of misalignment.
Once we have the root causes, we can identify the potential fixes. One “fix” can potentially address multiple gaps!
Step 5: Prioritize IT Initiatives
The previous step gives us a list of “fixes” that can get business and IT aligned. However, we might not be able to act on them – all organizations are capacity constrained. More importantly, we should not act on all of them. Some fixes are easier than others. Some provide a bigger “bang for the buck”. There are other reasons why we should not attack the entire list all at once.
Consequently, this list must be prioritized. Step 5 does just that.
Step 6: Evaluate Implementation Options
A prioritized list of “fixes” or IT Initiatives is the starting point for implementation planning. This is a critical step to ensure success. Often, organizations forget to plan for implementation and pay the price in terms of over budget or delayed or failed projects.
This step takes the list of initiatives and creates a roadmap for IT. This roadmap is a result of careful planning that takes is driven by one primary consideration - risk.
Step 7: Create Migration Plan
This step creates a migration plan for the IT roadmap – steps, deliverables, responsibility, timing etc.
This is a plan. It needs these key elements in some detail. However, trying to button this down beyond a certain point is an exercise in futility. No plan stands the test of time. Hence, this plan should also be modified as we learn new things after implementation begins.
Step 8: Adjust IT Strategy
This is the key step to ensure connection between the changing business needs while we are implementing IT solutions in response. If we keep going without looking back, by the time we are done the world might have moved away and made our solution irrelevant!
It is essential that we keep track of the changing business world – both internal and external – and make sure our solutions are in line. If they are not, then senior leadership has the responsibility to ensure that we do not continue those initiatives that are not. Putting good money after bad is never a good idea. CIOs are paid to make these tough decisions.
This is the science of IT Strategy. However, there is also an art of IT Strategy that comes from doing it a few times. This art or instinct plays an equally important role in getting business and IT aligned as these 8 steps.2
Business-IT Alignment Maturity Model
Business-IT Alignment Framework
Business-IT Alignment Issues
Business-IT Alignment Example
Business-IT Alignment Benefits
CIO Desk Reference
(Relevant content on this topic in the CIO Toolkit on CIO Index)