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Strategic Alignment

Business Dictionary defines Strategic Alignment as "the process of bringing the actions of an organization's business divisions and staff members into line with the organization's planned objectives." The ability of most businesses to achieve their strategic goals will benefit from performing a comprehensive strategic alignment to help assure that its divisions and employees are jointly working toward the company's stated goals.[1]


Strategic alignment enables higher performance by optimizing the contributions of people, processes, and inputs to the realization of measurable objectives and, thus, minimizing waste and misdirection of effort and resources to unintended or unspecified purposes. In the modern, global business environment, strategic alignment should be viewed broadly as encompassing not only the human and other resources within any particular organization but also across organizations with complementary objectives (i.e., performance/business partners).[2]


Strategic Alignment
Figure 1. source: KB Manage


There are many definitions of strategic alignment. In the article written by Tallon and Kraemer, 1998; they define strategic alignment as the extent to which the IS strategy supports and is supported by the business strategy. Silvius (2007) defines strategic alignment as the degree to which the IT applications, infrastructure and organization, the business strategy and processes enable and shape, as well as the process to realize this. Reich and Benbazat (1996) define strategic alignment as the degree to which the IT mission, objective and plans support and are supported by the business mission, objectives and plans. Maes et al (2000) define strategic alignment as the continuous process - involving management and design sub-processes—of consciously and coherently interrelating all components of the business-IT relationship in order to contribute to the organization’s performance over time. Luftman (2000) argues that strategic alignment refers to applying Information Technology in an appropriate and timely way, in harmony with business strategies, goals and needs. Henderson and Venkatraman (1993) state that strategic alignment is defined in terms of four fundamental domains of strategic choice: business strategy, information technology strategy, organizational infrastructure and processes, and information technology infrastructure and processes. Chan and Huff defined strategic alignment as the fit existing between business strategies and IS strategy. The difficulties in defining strategic alignment have also meant that it has been difficult to measure (Maes et al; 2000). Despite the existence of many definitions, a shared definition is lacking about strategic alignment. The lack of a shared definition does not mean that there is a lack of good knowledge within the strategic alignment area.[3]


Process-Driven Approach to Strategic Alignment[4]
One approach that provides an excellent framework for defining and establishing strategic alignment focuses on internal processes as the drivers for creating goals consonant with the corporate objectives. This approach – offered by Christoph Strnadl in a 2006 Information Systems Management article – works through four layers to achieve strategic alignment: process, information, services, and technology

  • Process: The first element of the approach works to optimize business processes
    • It ensures that all processes are clearly and comprehensively defined and documented, with all responsible parties identified and linked to specific processes
    • It couples all processes with performance indicators. Each process should have appropriate metrics linked to it so the managers and senior management can verify that the process is contributing to the ultimate goals.
    • It clearly specifies when each process should occur. This takes the defined and measured process and places it among the ongoing activities of the organization.
    • It monitors and audits the procedures over time to ensure that the desired results are achieved. Monitoring activity should occur on a regular quarterly or annual basis, and appraisals should be coupled with both the regular and exceptional audits performed by external or internal auditors.
  • Information: This process-driven approach focuses on the core element – information. Peter Drucker probably said it best when he defined information as “data endowed with relevance and purpose.” The information layer includes:
    • The assurance that all types of information are clearly defined and classified
    • Sufficient analysis and understanding to ensure that the flow of information is unimpeded. Special attention is required to ensure that transitions of information from external to internal sources are accomplished without delay and avoid errors or modification.
    • Information that is clearly and completely available for decision processes. A key element of strategic alignment is effective decision-making.
    • Preservation of key information that is important for the ongoing and historical management of the organization of business. The key focus will be to ensure that the preservation reflects corporate goals and is adjusted as strategies change.
  • Services: This element focuses on services – creating and managing them so they foster the organization’s goals and do not impede progress.
    • Demonstrated agreement between the content and aims of the services offered and relevant standards
    • Specifically defined quality assurance measures and (if appropriate) service-level agreements that clearly reflect the overall organization’s goals. These elements allow the manager to measure whether the programs and services require modification or improvement to meet service expectations.
    • Clearly defined service availability. Whether there is a single person running the program or a substantial complement, it is part of the customer-centric focus of strategic alignment to inform them of when and where the services can be requested and will be delivered. Service availability needs to be in line with corporate goals.
  • Technology: The final layer of the process driven approach to strategic alignment focuses on the technology available to support the overall goals. In particular, it frequently works to leverage existing resources in new ways to achieve specific objectives. This layer is probably the most important layer for the future of any organization. The components of this layer include:
    • Comprehensive specifications for using technology to manage the information under the custody of department management. Most importantly, it means the ability to define the software applications or the enterprise system that will augment the personal efforts of managers.
    • The deployment of technological resources is to reach all appropriate staff members. An organization cannot support the overall strategic alignment goals if its technological support is limited in activities to function and staff. In this computer-driven business world, all staff who create and use digital information must have adequate software support to be able to manage information in a structured and effective fashion.
    • Technology that is continuously updated. Senior management must understand that the strategic value of information requires that the software and hardware used by an organization cannot be allowed to become obsolete.


Testing a Company’s Strategic Alignment (Figure 2.)[5]
One of the challenges for corporate leaders is how to make sense of strategic alignment at both the team / business unit level (or division or department, however it is classified) and at the enterprise level. There is a simple test you can perform to start an honest conversation about strategy and organizational effectiveness where you work. Think of your company in its entirety, or perhaps select a strategically important element of it, such as a growth area upon which future success depends or its primary source of income, and consider the following two questions:

  • How well does your business strategy support the fulfillment of your company’s purpose? Purpose is what the business is trying to achieve. Strategy is how the business will achieve it. Purpose is enduring – it is the north star towards which the company should point. Strategy involves choices about what products and services to offer, which markets to serve, and how the company should best set itself apart from rivals for competitive advantage. Think of your own business and ask yourself, using a scale of 1 – 100, How well does our strategy support the fulfillment of our purpose? (If you are unclear on your company’s strategic priorities, or its purpose, then the likelihood is that it does not.)
  • How well does your organization support the achievement of your business strategy? “Organization,” as we’re using it here, includes all of the required capabilities, resources (including human), and management systems necessary to implement your strategy. For instance, if your company seeks to beat competitors through superior customer service, is this reflected in the day-to-day behavior of staff and their interactions with customers? If innovation is a key strategic priority, does your organizational structure enable creative collaboration, risk-taking, and knowledge sharing? To maintain strategic alignment, a company’s people, culture, structure and processes have to flex and change as the strategy itself shifts. The symptoms of poor alignment are often obvious, especially to those who work in the company, but also to customers who do not experience the service they expect from a company’s branding and advertising. Using the same 1 – 100 scale ask yourself: How well does our organization support the achievement of our strategy? If your organization is incapable of delivering its strategy, the strategy is effectively worthless and your company’s purpose will go more or less unfulfilled.


How Aligned is Your Company's Strategy
Figure 2. source: HBR


Your answers to both questions can be plotted on the matrix above (Figure 2.). Each state poses a different leadership challenge. (Across all four, however, we’re assuming that the purpose itself is viable and has the potential to be successful.)

  • Very Best Chance of Winning: Companies that score highly on both scales stand the very best chance of winning in their competitive field. But alignment manifests itself in more than just superior financial performance. It also leads to a more positive work climate, above-average staff engagement, a strong commitment to values and few(er) energy-sapping turf wars and in-fighting. There is a buzz, no matter what the type of business, because people value being part of an company that is winning.
  • Best of Intentions, But Incapable: Companies that score highly on the purpose and strategy alignment scale, but low on the strategy and organization scale, are more or less incapable of implementing their strategy as intended. The performance penalty may be manifest in poor customer attraction and retention, higher-than-expected costs, organizational dysfunctions, or simple financial under performance.
  • Boldly Going Nowhere: Businesses that have strong alignment between their strategy and organization, but weak alignment between strategy and purpose are classed as “boldly going nowhere.” There are many capable businesses with great people that lack a coherent, overarching purpose that helps guide shifts in strategy. The result is a company that becomes less and less capable over time as customers move on and talented employees depart for new pastures.
  • Not Long for This World: Companies that score low on both scales are in crisis, even if it isn’t immediately obvious. Their strategies do not – cannot – fulfill their larger purpose, because they fail to effectively address customer preference, market conditions, and competitor capability. Equally significant, their organization is incapable of delivering against strategic priorities.


The Benefits of Strategic Alignment[6]
Lacking strategic alignment, well-meaning managers may spend countless hours pursuing initiatives that, while they may be good ideas, aren’t the right things to focus on at the time. Even worse, if the strategy of the organization is unclear to employees at the operational level, they may lose faith in the vision, mission, and value proposition of the organization. This loss of connection can squelch their morale and willingness to offer their best to the company, which not only hurts the company culture—it hurts the bottom line. By ensuring that there is strategic alignment in your organization, you can be certain that limited resources won’t go to waste:

  • Focus energy in the right areas at the right times
  • Reduce or abolish workplace redundancies
  • Eliminate conflicting priorities
  • Increase team-member coordination, communication, and buy-in
  • Clarify the capabilities and competitive advantages of the organization
  • Provide structure and clarity of purpose for employees
  • Empower all team members to shape the future of the organization
  • Support market maneuverability, a must in a rapidly changing global economy


The Impact of Strategic (Mis)Alignment[7]
Good strategic alignment has an amazing effect on organizational performance. People perform better when they fully understand and accept the purpose and goals of their organization, and they develop a better sense of ownership when they understand what difference they make in achieving those goals. On the other hand, lack of strategic alignment is one of the major causes for organizations to fail. Many organizations over time lose track of their key business purpose; they find it hard to answer the question: "Why are we in business?". This seems like a simple question with a simple answer; in reality however all too many businesses have lost sight of their key business purpose. Often this is caused by growth and diversification, often by shareholder centered rather than customer centered behavior, often because the self centered rather than customer centered objectives of top management blur the focus. As a result of this the strategic goals, business processes and organizational culture become misaligned, employees lose their focus, and customers lose their faith.


See Also

Strategic Management
Strategic Alignment Model
Strategic Alignment Maturity Model
IT Value Mapping
Strategic Planning Cycle
Strategic Vision
Strategy
Business IT Alignment
Business Strategy
corporate strategy
IT Strategy Framework
IT Capability
Business Capability
IT Vision
e-Business Strategy
IT Governance
Enterprise Architecture
Business IT Alignment
IT Strategy

References

  1. What is the meaning of Strategic Alignment? Business Dictionary
  2. Explaining Strategic Alignment Wikipedia
  3. Different definitions of Strategic Alignment Royal Institute of Technology, KTH
  4. A Process-Driven Approach to Strategic Alignment Alan A. Andolsen, CMC, CRM
  5. A Simple Way to Test Your Company’s Strategic Alignment Jonathan Trevor, Barry Varcoe
  6. The Benefits of Being Strategically Aligned CMOE
  7. The Impact of Strategic (Mis)Alignment AdvancedBusinessConsulting


Further Reading