Aligning IT with Business Strategy
IT-Business Alignment Builds a Winning Culture and a Roadmap for Innovation and Digital Transformation
The above viewpoint has taken the center stage for many organizations while leveraging IT for transforming their business processes. The following success stories are witness enough to attest the same.
- A US-Based Leading Healthcare Provider Gains Momentum in the Drive for Business Partnership: Amitech, a leading healthcare provider, recently realized its dream of becoming an indispensable business partner by realigning IT to business, enhancing its customer value and profitability in the process. This alignment has facilitated enhanced business agility, strong IT leadership, technology-enabled competitive advantage, and better business value for the firm.
- Australian Bank’s IT-Business Alignment Leads to New Product & System Development Process:
Redundant and aging legacy systems were a major hurdle to the growth of BT Financial Group. Setting up a cross-functional team that incorporated new design processes, development tools, and reusable technology components steered a successful product launch.
The Crucial Verdicts
Over recent years, digital transformation and innovation have been the much-deliberated concepts that are embraced by multiple large enterprises. A 2014 edition of Capgemini’s Application Landscape Report highlights that over 1,100 CIOs and top-level IT decision-makers rely on IT to play a major role in achieving the above-mentioned goals. The CIOs have also shared their insights during the survey with certain key findings such as:
As evident from these findings, the alignment between the business and IT is a top priority for CIOs. Thus, the indispensable role of technology as an enabler for innovation, renewal, and business expansion takes center stage. Even according to Forrester data, more than two-thirds of IT leaders wait for business leaders to finalize their strategy before they formulate their own, in order to ensure perfect alignment and subsequent execution.
IT-business alignment is the dynamic state where business effectively uses IT to achieve its overall objectives. This alignment comprises coordination and correlation between the business objectives and IT requirements of an organization. This mutual understanding is likely to create a forward-looking, collaborative atmosphere between the business and IT that is needed to fuel real-time digital transformation.
Some recommended practices that foster synchronized IT-business alignment are as follows:
- Apply suitable facts and metrics to improve understanding between the business and IT.
- Industrialize and standardize.
- Contemplate more radical rationalization scenarios.
- Leverage the next generation of solutions.
- Embed innovation in the business processes.
The role of IT regarding business growth, profitability, and innovation is also illustrated by what the Capgemini survey respondents indicate as the most important strategic IT goals for their company—the ones that matter the most to CIOs.
The Impact of IT on Strategic Business Priorities
IT is right in the spotlight when it comes to growth, increased profitability, and innovation. Apart from traditional roles, there are certain different business priorities that rank highly for IT. Here is a list of the certain engaging priorities:
- The foremost priority would be gaining a competitive advantage by leveraging new technologies.
- The impact of IT on business becomes more clear and evident when “improving operational excellence” and “reducing time to market for new products and services” further rank high in the priority list.
- In addition to cost reduction, risk mitigation also surfaces as a potential contributing area for IT.
How IT Drives Business Priorities/Digital Transformation
IT investments must support business priorities and criticality. If any business transformation program is to be successful, it requires enhanced, mutual insight between business and IT as a crucial success factor. The starting point is a thorough assessment of the present state. To understand the value-adds better, CIOs were questioned during a survey about the strategies they follow to create value for the business. The key findings are depicted in the graph below:
As per the statistics above, three major ways CIOs strategize the use of IT for business benefits follow:
1. Introduction of New Technologies and Services
The next-generation technology drivers are often categorized with the acronym “SMAC”: social, mobility, analytics, and cloud. While focusing on the actual business impact of SMAC technologies, convincing three-quarters of survey respondents believe that these four technology areas have a medium or high impact on delivering value to the business.
- Cloud computing is considered as the highest-contributing area in terms of business value.
- Mobility ranks last in terms of high impact, probably because it does not fit well into every sector’s objectives.
- Energy, manufacturing, and public sectors indicate lower business value delivered by mobility, whereas retail, consumer products, healthcare, and technology score highly on the same.
2. Application Rationalization
From a business perspective, the prevailing economic uncertainty stands as the prime cause of stringent cost pressures on organizations across industries. To this end, several businesses are prioritizing their investments to drive operational efficiencies and minimize IT spend. Even from a CIO’s viewpoint, it is imperative that organizations concentrate their efforts on streamlining the application inventories for cost reduction (time and effort), productivity improvements, and better regulatory compliance in business.
Focusing further on the complexity of the application landscape, it is surprising to note that nearly half of survey respondents believe there are more applications in their portfolio than the business actually needs.
Thus, the need for consolidation, replacement, or retirement of applications is more urgent than ever. There has been a visible increase of 20% in the number of respondents who indicate that their current applications actually could be replaced or retired. A staggering 76% of survey respondents find modernization of application landscape instrumental to the business objectives of an organization.
3. Maximizing Infrastructure
Leveraging an existing infrastructure plays a crucial role in business transformation using IT. The majority of organizations have the best-in-class network infrastructures, but they fail to utilize them optimally. Productivity and profitability can be improved by modernizing infrastructure using evolved IT thinking. For instance, here is a case study of Groupe Adeo:
Key Features of the Organization:
- World’s fourth-largest home improvement retailer with an annual turnover of €12.8 million
- Headquartered in France with 24 companies across 11 countries, 62,400 employees
- Handles supply chain logistics for leading brands such as Leroy Merlin, Bricoman / Bricomart
Business Results Achieved through Infrastructure Optimization
- The provisioning time of IaaS services reduced from 2 weeks to less than 1 hour.
- Empowered developers reduced workload on system administrators.
- Productivity increased.
“75% of our servers are currently virtualized which will shortly grow to 80% by the end of the year. With [this solution], this virtualization helps us not only to reduce the infrastructure costs but also to optimize the use of our computing capacity.”
- Beniot Mailliet, Production Management, and Support, ADEO Services
An optimized infrastructure framework is likely to contribute better business benefits as compared to industry standards. Here is a pictorial depiction of some statistics to illustrate the point.
[Statistics Credit: http://h20195.www2.hp.com/v2/getpdf.aspx/4AA5-6394ENW.pdf?ver=1.0]
IT-Business Alignment Model
The ever-changing business dynamics make it more difficult for organizations to drive a perfect alignment between the business and IT. Every organization operates in an ecosystem that is affected by the forces at play in it. To remain competitive and maintain differentiation, every organization must adapt itself to the actions of its ecosystem. This necessitates the implementation of a suitable process with a series of incremental steps to achieve the end goal of IT-business alignment. The below model is an illustration of this alignment process.
- Identify the business drivers: Here is the chance to explore what those business needs are that require IT enablement. For instance, it could be a new product launch by the company that requires a new fulfillment system.
- Create IT vision: This step identifies the IT capability—strategy, process, infrastructure, and organization—required to meet business priorities.
- Assess current alignment: Organizations need to evaluate the difference between the state of current and envisioned IT capability. There are three dimensions of alignment: investment, asset, and organization.
- 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.
- Prioritize IT initiatives: Based on the previous step, organizations can identify the areas that require immediate fixes. Once done, this list must be prioritized.
- 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.
- Create a migration plan: This step creates a migration plan for the IT roadmap entailing steps, deliverables, responsibility, timing, etc.
- Adjust IT strategy: Ensure the connection between the changing business needs while implementing IT solutions in response.
Challenges Faced during IT-Business Alignment
Aligning IT with business strategy is nothing new, but case studies are rife with organizations that have struggled to use IT to achieve business objectives.
Some potential challenges faced by large MNCs are the following:
- Differences in departmental goals and culture
- Differences of expectations between business units and the failure of these units to work as partners towards common goals
- Communication breakdown, resulting in misalignment
- Mutual ignorance of each other’s methods, resulting in ineffectual products and systems that fail to provide an effective return on investment
- Most organizations have technology-focused metrics that do not fulfill the customer needs. For instance, IT focuses on the availability of components like servers, networks, and applications, and not the end-to-end delivery of IT services.
- Many IT decisions are driven by business executives who might hold a limited understanding of IT.
- Preconceived notions that technology will enhance revenue certainly can lead to a gap in assessing alignment breach and offset the gains.
- IT and business are never simultaneously involved throughout the development life cycle of the projects.
Critical Success Factors
The major problem IT leaders face is to transform the concept of business-IT alignment from an academic conversation to a meaningful practice that has the ability to contribute positive outcomes to the business. Below are some key best practices that are likely to help in this regard:
- The best and the most practiced theory is to have a strong partnership between IT and business customers, with shared knowledge of how IT services and technologies will contribute to business objectives.
- The next phase is to establish a service portfolio management process that ensures the right mix of IT services to enable business outcomes and authorize and prioritize IT investments.
- Implement a defined and documented business relationship management process and Business Relationship Manager role, to develop and maintain a credible working relationship and drive communication between IT and the business.
- Use firm management processes to ensure the following:
- There is a clear understanding of what the business requires and what IT is willing to provide.
- Agreed-upon targets on service level agreements are met.
- Corrective actions are implemented when deficiencies occur.
The alignment of IT strategy and business services is likely to deliver numerous non-conventional benefits that could steer an organization towards innovative and transformative approaches. Here are some potential paybacks of driving IT-business alignment from an organizational point of view:
- There are better collaboration and integration between users and departments regardless of the location. People are empowered with access to information, whenever they need it.
- Automated workstreams are aligned to business goals. Additional investments in technology harvest specific, quick, and measurable benefits to the company.
- The business gets the control to manage risk and compliance issues. Likable benefits are data retention, improved reliability, lowered costs, and increased service levels.
- There is enhanced awareness among people regarding the strategic value of information flow in running business operations efficiently and staying ahead of its competitors.
With the increasing trust in IT and the necessity of IT services, IT-business alignment is now an essential outlook of successful IT companies. However, for IT-business alignment to succeed in any organization, it should be considered as not only a strategy and set of best practices but also as a company mandate that fosters a partnership within IT and the business.
The alliance of IT and business strategy is arduous to create for many organizations, particularly considering the instant performance that is often expected of professionals. There is no denying that IT-business alignment has been capitalized on by organizations to create and improve efficiencies, reduce costs, and ultimately create value to the business. While accepting the challenge of alignment, organizations must remember that IT-business alignment needs to be reevaluated and reviewed annually and specifically during modifications in the corporate vision. For this alignment to function smoothly, an organization’s culture must embrace IT as an enabler and an integral part of the long-term success of an organization.