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Creating Value through IT and Business Alignment: How does IS Research Inform Practice?

Creating Value through IT and Business Alignment: How does IS Research Inform Practice? Vallabh Sambamurthy Eli Broad Professor of Information Technology Michigan State University The Promise of Information Technologies Enabler of superior performance Productivity Consumer welfare

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Creating Value through IT and Business Alignment: How does IS Research Inform Practice?

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  1. Creating Value through IT and Business Alignment: How does IS Research Inform Practice? Vallabh Sambamurthy Eli Broad Professor of Information Technology Michigan State University

  2. The Promise of Information Technologies • Enabler of superior performance • Productivity • Consumer welfare • Profitability • Digital Options Platform • Transaction capital • Decision capital • Intellectual capital • Relational capital © Vallabh Sambamurthy, 2008

  3. Yet, Dispersion in Success Across Firms • Significant differences across firms and industries • Exemplars in different industries • Success with IT innovation • Repeat experiences of success • Frustration with IT investments • Failed projects • Poor alignment © Vallabh Sambamurthy, 2008

  4. Organizational Leverage of IT Value • Three significant challenges • Building the right alignment model • Implementing the appropriate governance model • Developing enterprise-wide IT savviness © Vallabh Sambamurthy, 2008

  5. The ability of a firm to convert its IT spending into business value and competitive advantage Results from the planned, ongoing use of a set of interlocking business practices that collectively derive superior value from IT investments An outcome of alignment is portfolios of IT investments, projects, and installed information systems that reflects a firm’s strategic priorities of the firm What is Alignment? Competitive Strategies IT Assets and Investments Business Processes © Vallabh Sambamurthy, 2008

  6. Three Modes of Alignment: Support • Business strategy drives IT strategy • Current business strategies and capabilities drive IT priorities, investments and capabilities • Tools for specific business processes • Measures • Extent to which IT capabilities have enhanced the efficiency of existing business processes (e.g., customer service, manufacturing) • Extent to which IT capabilities have enhanced the effectiveness of existing business processes (e.g., improving the visibility of the logistics process, improving the accuracy and accessibility of customer information) Business Strategy Targeting of IT priorities Driving IT Strategy © Vallabh Sambamurthy, 2008

  7. Three Modes of Alignment: Synchronization • IT strategy enables execution of current business strategy, but also anticipates and shapes future business models. • IT investments are platforms for business process integration • IT leadership, thinking and investments are active in seeding new business opportunities • As firms become aware of the capabilities of their IT investments, assets, and applications, they focus on discovering new business strategies Business Strategy Targeting of IT priorities Enablement of Businessby IT Enabling Driving IT Strategy © Vallabh Sambamurthy, 2008

  8. Three Modes of Alignment: Convergence • Business strategy is shaped through digitized products, services, processes, and relationships • IT strategy is embedded in the business strategy • Processes are created through digital solutions (e.g., online auctions, keyword search) • A single leadership team operates across business and IT • Appropriate for media, banking, financial services, and entertainment industries Business Strategy IT Strategy © Vallabh Sambamurthy, 2008

  9. The Three Modes of Alignment © Vallabh Sambamurthy, 2008

  10. Facilitating Alignment through IT Portfolios Adapted from Weill and Aral, 2006

  11. Implications for Practice • Choose the appropriate mode of alignment for your firm • What view do the senior business executives have about the mode of alignment? • Is there consensus about the alignment mode? • Examine the portfolio of IT applications and investments • Does it reflect the alignment priorities? • What will be the alignment mode in the future? • How is the business likely to change? • How is the industry likely to change? • What will be the likely business strategy? © Vallabh Sambamurthy, 2008

  12. The Differentiating Role of IT Governance • Allocation of decision rights • Good governance enhances the leverage of IT value • Poor governance dissipates organizational resources and energy © Vallabh Sambamurthy, 2008

  13. What are the critical governance decisions? • Demand side • Supply side • How are the • decisions made? • Unilaterally • Shared • Who makes the decisions? • Senior management • Business management • IT management • External partners Designing IT Governance

  14. Building the Right Governance Model Innovation leadership Operational Excellence Customer Intimacy Source: Gartner, 2006 © Vallabh Sambamurthy, 2008

  15. Emerging IS Roles • Infrastructure architect • Vendor relationship manager • Portfolio manager • Innovation catalyst Innovation leadership Operational Excellence • Technology advisor • Project lead Customer Intimacy • Services liaison Source: Gartner, 2006 © Vallabh Sambamurthy, 2008

  16. Changing Face of the IS Organization 1 IT leadership Architecture development Business enhancement Technology enhancement Vendor management 2 Increasingly driven by IT savvy Business leaders Enabled by Business savvy IS leaders 3 1 4 Driving innovation 5 2 3 Delivering change 4 Supporting infrastructure 5 Business aligned Outsourced to external services providers Source: Broadbent and Kitzis, 2005 © Vallabh Sambamurthy, 2008

  17. An Emerging Organizational Model for IT Governance IT Investment Board Business TechnologyCouncil Divisional Project Approval Committee Corporate Project Approval Committee • Head of IT Finance(e.g. CFO of IT) • CIO • CFO • Selected Business SVPs • Head of IT Strategy • CIO • Selected Business SVPs • Head of IT Applications • Functional Area Leads • Client Relationship Managers • Divisional Functional Heads • Divisional CFO • Divisional PMO and Finance rep. • Divisional CIO, Divisional CTO • Enterprise Functional Leads • IT Directors • Head of Portfolio &Program Mgt. • Head of EnterpriseArchitecture • Head of IT Strategy • Business Strategy Analyst • Finance Representative Office of Architecture& Standards Office of the CIO • Head of Enterprise Architecture • Business Architects • Technical Architects • CIO • CTO • Chief Information Officer (CIO) • Chief Technology Officer (CTO) • Head of IT Security • Head of IT Risk • Head of IT Finance • Head of IT Strategy • Head of IT HR • Head of Vendor Management • Head of IT Application Areas • Head of Portfolio & Program Mgt. • Head of Enterprise Architecture • Head of IT Communications Functional Groups Project Teams • Project Managers • Business Analysts • Technical Analysts • Developers • Trainers • IT Director • IT Strategists • Business Analysts © Vallabh Sambamurthy, 2008

  18. Implications for Practice • Organizational governance is less likely to be centralized or decentralized • Hybrid, federal, or dispersed allocation of decision rights • Focus on demand side and supply side governance • Management of risk, finance, and outsourcing will become significant • Emerging models for governance • Emergence/proliferation of new organizational roles • CIOs will have to balance their roles between • Managing the “IT business of the business” • Seeding, stimulating, influencing, and driving IT-enabled business innovation © Vallabh Sambamurthy, 2008

  19. Building Enterprise-wide IT Savviness • Digitizing internal and external communication • Extensive internet use • Digitized routine transactions • Enterprise-wide IT skills • Senior management commitment to IT Investment and use • Enable IT Potential & Options • Relationship Building • Change mindsets • Human Assets • Senior Management Leadership Source, Weill and Aral, 2006 © Vallabh Sambamurthy, 2008

  20. Savviness in Business Executives • T-shaped business managers • Grounded in processes • Thinking of services • Conceptualizing as systems thinkers • Driven by metrics and analytics • Fearless about change • Quest for globalization • Diligent about governance • Savvy about the role and value of information technologies © Vallabh Sambamurthy, 2008

  21. Savviness in IS Executives • IS managers • Technically knowledgeable • Business savvy (process, strategy) • Articulate, persuasive, influence builders • Innovation catalysts • Change agents • Relationship managers (business partners, external vendors) • Financially astute • Diligent about governance © Vallabh Sambamurthy, 2008

  22. Conclusion • Consistent success in leveraging IT value is achievable! • Requires attention to effective approaches to IT management • Alignment • Governance • Building of enterprise-wide savviness • IT management practice is in a state of transformation • Building applications to managing services delivery • Buying technologies to multi-capability integration • One-off outsourcing to multivendor strategic partnerships • Cost-benefit justification to astute financial and risk management • IS research and educational programs have an important role to play in assisting this transformation © Vallabh Sambamurthy, 2008

  23. Further Interest? www.btminstitute.org © Vallabh Sambamurthy, 2006

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