Aligning value for its customers. It is divided

Aligning
IT with business strategy

1.0  
Information
Technology

Information
technology (IT) is changing the way businesses operate, the process of creating
products and services for their customers, and the way in which they
compete  (Chebrolu & Ness,
2013).

IT strategy typically long term action plan for achieving a
goal, set in the context of a rapidly changing technology environment with contains
information on applications, and human resources. In addition, it also includes
the details about the way IT is to be organised and the technical infrastructure.
For any IT strategy to be effective it must have measureable links to a
business strategy.

IT
can provide sustainable competitive advantages that significantly influence
corporate success. 78% of US Chief Executive Officers (CEO) are concerned about
the rapid pace of technological change and 48% of Chief Information Officers
(CIO) still spend most of their time aligning IT operations with overall
corporate objectives (Kahre, Hoffmann, &
Ahlemann, 2017).

2.0  
Business
Strategy

A
business strategy deliberates the long-term business planning which organization
wants to take and how it can achieve its desired objectives. While all
department need to work independently and innovatively this is because to
ensure there is no conflict between each department is doing with the overall
direction of the organization.

It
is defined as an organizations plan to generate economic profits based on lower
cost, better quality, or new products. Strategies can succeed when they lead to
business growth, a strong competitive position, and strong financial performance. Strategies
will reflect the organization’s strengths, weaknesses, resources, opportunities,
competitors and its market (Graham, 2012).

A business strategy generally contains a number of key elements.

i)       
The mission of
an organization states what are the organizations activity and the reason for
its existence. A company’s vision sets out what the company wants to accomplish.
The objectives of an organization state the direction in which it
will be heading.

ii)     
The market
strategy of a company explains the areas that the organization will focus
on in term of the target market, market segments and products or services.

iii)   
Value
proposition of the organization is the unique set of benefits that they offer
to customers, is their advantage over competitors to create value for its
customers. It is divided to three comprise of value chain, value shop and value
network. The differentiation would be their competitive advantage towards their
rivals in the market.

3.0  
Aligning business and IT strategies

To align IT strategy with business strategy, every
aspect of the IT strategy should support the business goals of the
organization. In other words, all IT systems, applications, processes, and
budgets should agree with the overall corporate strategy and objectives. When a
company’s business strategy is properly aligned with its IT strategy, when it’s
IT-enabled, it can prove valuable in different ways and creates value for firm
through creativity and implementation of sound infrastructural services.

The partnership between the IT division and business
management can extend to fuse with the business and the IT strategy should be
developed at the same time as the business strategy as well, and integrated
into it in order to achieve strategic alignment.

An IT-enabled business strategy is more than just the
combination of an IT strategy and a business strategy in a single document. It
is the alignment of the two strategies in order to meet key business objectives
and goals. As such, it lays out several key aspects:

i)       
The organization’s
business strategy, generally includes the mission, vision, and objectives of
the organization, along with its market strategy, value proposition, and value
configuration.

ii)      The business expectations a company has of IT should be
included in an IT-enabled business strategy.

iii)    An IT-enabled business strategy should incorporate the company’s IT
strategy which contains information on IT applications and the future
competence of human resources. It also describes how IT is to be organized and
controlled within the company, as well as the technical infrastructure itself.

iv)     IT assessment is a comprehensive review of a company’s technology
systems and environment. The assessment should reveal how technology helps or
hinders the business, and should recommend how to use technology to meet the
business goals.

v)       An IT-enabled business strategy contains the company’s long-term IT
plans. IT plans are concerned with how IT should be deployed, managed, and
implemented in the future.

4.0 Benefits of aligning business and IT strategies

Since aligning business strategy with IT strategy
tends to have a positive impact on organizations, strategic alignment should be
a top priority for senior managers. They should regard IT as a way of meeting
business goals and providing value.

Overall organization’s performance can improve
generally by aligning an organization’s business strategy with its IT strategy.
It can lead to more efficient processes, the development of better products and
services, cost reductions, faster response times, standardize processes,
improve workflow and communications, gain competitive advantage by exploiting
new technology and more efficient supply chain management.

Research
has shown that the successful alignment of business and IT/IS strategy leads to
better firm performance. Strategic Alignment Model (SAM) by Henderson and
Venkatraman was widely recognized as the base for business-IT alignment
research, with several extensions and modifications over the past two decades.

Aligning
business and IT strategies not only unite corporate and IT/IS strategies but
integrates the whole business ecosystem. In this sense, scale, i.e. leveraging network
effects, becomes increasingly important due to the more connectivity between
partners and competitors. Besides connectivity, digitalization also leads to a
higher speed of business activities. The sources of value creation are expanded
as digital technologies allow for new business models, extending traditional
chains of supply and delivery.

In
terms of non-financial improvements, faster and better adoption to changing
environmental conditions and customer needs can be achieved, enabling a higher
differentiation from competitors and extended sustainability. While constantly
changing environmental conditions strategic advantages, organizations
leveraging business and IT strategies can enhance their flexibility and respond
to new opportunities and threats more easily through infrastructural changes
and innovations in their value propositions.

Based
on the research done by Chebrolu and Ness (2013), strategic alignment between
IT and business works better in the case of larger IT organizations than in the
case of smaller and medium-scale IT organizations. IT executives and IT
managers within smaller and medium-scale IT organizations should not allocate
more financial resources to improve their IT effectiveness toward strategic
alignment with business. If they plan to align strategically with business,
they should do so by prioritizing other elements like cloud adoption or IT
flexibility, which seems to have positive and stronger impact on IT
effectiveness.

5.0 Challenges of
aligning business strategy and IT

The
findings of the annual survey of Society for Information Management on IT
issues and trends that was done in 2015 by Kappelman et al., 785 responding
organizations has ranked business-IT alignment as the first one in the top-ten
most important IT management issues for IT leaders in organizations. Between
the years 2005 till 2015 business IT alignment was ranked as the first most important
IT management issue.

A
study was done by Gbangou & Rusu (2016), to provide insights about the
factors capable of hindering business-IT alignment in the banking sector of a
developing country. Due to the continuously changing banking environment and
technological advances, banks are required to display high agility and
willingness to invest in latest technology and infrastructure. IT managers must
remain up to date with banks’ infrastructures and technological innovation.
Since most of commercial banks have up to date applications, they need to
invest in infrastructures to avoid incompatibility issues. Some equipment such
as satellite network communications are expensive for a single local bank to
own, operate, manage and maintain. However, a full dependency on external
providers implies that a failure from the provider’s infrastructure system is
likely to cost considerable damage to the banks. Hence, business-IT alignment
requires continuous adjustment to IT innovation and both internal and external
business environmental factors.

Most
of the selected companies in Kuwait use the IT department as a technical
support department, and it is not treated as a strategic partner to the
business departments. Due to the lack of communication, and lack of integration
between IT/business departments and these barriers remains as unsolved issued.
In addition, most of the companies participated claimed that there is no
proactive dialogue between IT and business departments at the administration
level. When they do communicate, it is always difficult for the business
managers to understand the IT Jargon. This issue made the business executives
to have no interest in listening to the IT problems and therefore they do not
call them to participate in formulating a business strategy (Alraggas
& Alzayed, 2014).

6.0 Ways to align
business strategy and IT

CIOs
certainly need to increase their own accountability for IT results from the IT
activities, projects or services, they also must help hold the business
accountable for IT as well in creating business value.

Integrating
the strategic planning process into the IT Management Systems, the primary
activities used to manage the organization inclusive of planning, decision-making,
and evaluation activities would flow naturally from one-step to the next. The
short-term plan (2 to 5 years) to be communicated throughout IT to provide an
understanding of the environment and enlist support for the strategic
directions.

The
leading companies follow a five-step process for unlocking IT’s full potential
to deliver business value. First, they define business imperatives and the
capabilities that underpin them, followed by Identifying IT capabilities that
support business capabilities and plug gaps. Third is to design the operations
and technology architecture and then develop the IT-strategy roadmap. Aligning
IT with business strategies would needs a commitment and a roadmap. Managers
must identify key IT investment needs that will close the alignment gaps, then
group them into IT investment themes, and finally, to reallocate IT capital
expenditure as business priorities evolve. Periodically, companies need to
re-apply a business lens to IT costs to ensure alignment (Elmorshidy,
2013).

According
to Fenwick (2012), IT must be an integral part of the business by co-create a
business strategy with a technology component. In order to do that, he
suggested a framework that involves several steps, which are to tackle goals,
and objectives first, follow with model business differentiators, feed strategy
discussions with data-driven insights, develop multiple business technology strategies,
develop a living technology road map, and create IT to support the business strategic
plans.

7.0
One success case study – DOMINO’S The Turnaround

In
2009, the financial position of Domino’s Pizza, Inc. is not performing well.
The sales growth had been declining for three years consecutively and the
market share is shrinking as they lost to their competitors, Papa John’s and
Pizza Hut.  

Based on the market
research, they have very bad reputation in the eyes of the customers. They rated
Domino’s pizza taste like a cardboard. Initially, they portray how poor the
taste is. Hence, the CEO, J. Patrick Doyle decided to realign their strategy
and focus on the pizza quality.

Domino’s Pizza increased
the pizza recipe and add-on other menus in order to attract the customers. This
marketing program launched by end of 2009, bring the news to market.  

The
vision are to be number one in pizza and number one in people, whereas the
mission are to sell more pizza and have more fun.

Domino
Pizza chain was already popular with the fast and easy delivery mechanism in
the eyes of the customers. The effective delivery service is one of the
competitive advantage that Dominos have compare to other players in the market.
As a leader in the fast delivery service, the CEO knew that it still required staying
ahead of the rest and creating new things to make it difficult the competitors
to imitate quickly and easily.

Domino’s
Chief Information Officer (CIO) Christopher McGlothlin understand that the IT
related matters bring significant impact to the company and the technology is
very important towards the company’s success. Hence, the management decided to
change their organization structure by hiring 30 tech workers. They will be
responsible to restructure Domino’s entire information technology operation and
reconfigure its online ordering system. Out of 800 people working at Domino’s headquarters, 50% of them
consisting 400 of employees are working in software and analytics. Prior than
this, most of the IT work is outsource to third party. All software
engineering, consolidating various data and Web operations and other works
related to IT is then conducted in-house.

As
the customers that purchased the items through online is more loyal and they
often more items per transaction compare to the offline purchasers, they are
very valuable to the business. In addition, focusing on online consumers helps
to increase the traffic in the market although the market condition is not so
well as the economy facing downturn.

With
IT intervention in the operations and system, this would fasten up the process;
have more user-friendly interface and customization. The customers can make
their own pizza through selecting the crusts, and toppings from various
selections. The advanced tracking system that allowed customers to see starting
the dough to pizza until the delivery process.

To
order from Domino’s, customers can have a standard pre-set order in a single
click. They can order via emoji, on various social media platforms and app, such
as Twitter, Xbox, Website. In the end, the customer will get the best pizza a
good enough pizza without having to do very much and will be delivered to the
doorstop within short period.

As
the top market leader in online business, Domino’s is in a prime position to
improve the existing advanced and efficient IT setup to meet the growing demand
and customers in the market.

On
October 8, 2011, Domino Pizza marked its record day of sales online, roping in
more than $1million in sales through its online portals alone. 13% of online
sales from ordering applications through mobile phones and tablets.

In
the last seven years, the share price growth has been outperforming leading tech
companies such as Amazon, Apple, Facebook and Google with its stock going from
$9 a share to over $180 today in 2017 (Behind Domino’s Pizza’s recipe
for success, 2017).

It
is very clear that today’s society is rapidly moving towards technological
expansion, and the majority of sales will occur via e-commerce. Thus, by anticipating
this transition amongst consumers and continuously cope and improve the
technology, Domino’s Pizza will get and engage more of their customers.

Domino’s
Pizza could focus enhance the marketing initiative especially on the mobile
application. They could send push-updates of advertisements and coupons to
people with the application installed.  Domino’s
Pizza could also integrate Facebook Connect, which would make consumers’
purchases of pizza online part of their news feed on their Facebook profiles.
This could encourage those connected with the customers to also order from Domino’s
Pizza. Improving the Pizza Tracker system even further to increase efficiency
and user acquisition could drive online sales to be a bigger contribution of the
total company revenue (Wilson, 2016)

 

8.0
Conclusion

Many companies struggle to maintain a tight
relationship between their business and IT functions. But creating an
IT-enabled business strategy is worth the effort. IT alignment has been
recognized to be critical for firms that are desiring to build strategic
competitive advantage, increase their visibility, efficiency and have high
profitability

By integrating their business and IT strategies,
organizations tend to perform better, increase revenues, and gain a competitive
edge. A business strategy contains the mission, vision, and objectives of an
organization. It also contains the organization’s market strategy, unique value
proposition, and distinctive value configuration.

An IT strategy contains information on applications
and human resources. Details about the way IT is to be organized and the
technical infrastructure itself are also included. By aligning their business
and IT strategies, organizations can achieve the best return on their IT
investment. On top of that, firms are able to perform at a high level due to
the close cooperation between business and IT departments and their mutual
understanding.

An IT-enabled business strategy contains the business
expectations the company has of IT. It also includes the company’s future IT
plans.