In most organizations IT expenditure is considered as one of the larger if not the largest contributor to capital investment and expenditure. Technology has a significant effect on the business landscape of most organizations and the market place they operate in. The goal of IT as such should be directed toward the alignment of IT strategy with an organization’s overall business strategy (Mulcay, 2001). It is argued though that the inability to successfully derive value from IT investment is, for the most part due to a lack of alignment between IT and business strategies.
Johnson and Scholes cited by Riley (2012) define strategy as follows “Strategy is the direction and scope of an organization over the long-term: which achieves advantage for the organization through its configuration of resources within a challenging environment, to meet the needs of markets and to fulfill stakeholder expectations”. In unpacking the definition, simply the business strategy that the business has decided to follow needs accurate configuration of resource – human resource, technology resource, financial resource etc., so as to gain competitive advantage, meet objectives and stakeholder expectation.
Henderson & Venkatraman (1999) argue that there is no IT application or system, regardless of how cutting edge or sophisticated it maybe, that will build and sustain a competitive advantage for an organization for a sustained period of time. Organizations, in order to sustain competitive advantage should continuously endeavor to exploit it’s IT functionality and resource to maintain an advantage. In my opinion this is achieved by out of the box, evolutionary thinking by both business and IT leaders. Furthermore, both business and IT leaders need to understand fully the role that IT can support and re-shape business strategy decisions and improve IT effectiveness and ultimately improve business performance.
SHOULD A COMPANY’S IT STRATEGY FOLLOW ITS BUSINESS STRATEGY OR SHOULD IT LEAD ITS BUSINESS STRATEGY? WHY
In my opinion IT is vary rarely the core business unless of course we mention Microsoft or Google and the like where technology is the primary focus area but it must noted that the actual business process for each is different and intellectual property is what is regarded most valuable. Hence, I agree with (Abate 2009, Henderson & Venkatraman 1999, Skriletz 2013) and many other researchers and commentators, that IT’s role should be regarded as the enabler or driver of the business strategy. IT’s strategy, investment; architecture even projects all need be dictated by overall business strategy, but should be part of process that helps the formation of the overall strategy.
IT leaders need to possess the knowledge of new enabling technologies and how these technologies can be integrated into the business. Very often the business strategy is formed and developed in isolation and IT is seen as a support function only, rather than as function that can contribute to forming the strategy itself. IT leaders need to be part of the process that delivers the direction the business chooses to follow. Luftman & Brier (1999) echo this sentiment in that just as HR and marketing are important parts of strategy so to should IT. Venkatraman and Henderson (2000) assert that business strategists cannot be seen to take the leading role whilst the IT strategist is seen as a support role. It is imperative both take the lead in designing the business platform. “Business and IT strategists working together to shape new business; IT is not subordinate to business strategy but an extricate part of it”.
FACTORS TO CONSIDER
Technology is seen as one of key elements that drive change and transformation. Intelligent use of technology can deliver a competitive advantage, streamline processes create cost efficiencies and optimization for most organizations and as organizations strive for these competitive advantages and efficiencies it would really not be prudent to exclude the technology people from the process of strategy development as those organizations that do include them, will certainly claim the competitive edge and advantage.
“Regardless of what industry you’re in, it’s hard to think about a business that couldn’t exploit IT for competitive advantage if they chose to,” says Barbara Gomolski, an analyst at Gartner cited in an article by Moore (2011). The industries that have seen growth by aligning IT and business strategy and have used it as a driver and an enabler include the airline industry that has leveraged IT and now allows customers to book directly with carriers rather than involving third party agents. The banking industry has really embraced technology with the likes of online banking and transactions, which show true alignment and involvement of IT in business strategy and goal setting. Technology drives their growth.
The sentiment shared and one that I agree with is that by including IT in the formulation of business strategy will certainly assist the organization in achieving its goals. The exploitation of technology as a means is key and if you don’t necessarily feel that, then I guarantee IT is treated as being outside of the core business strategy and as a result the organization is not deriving value from one of it’s most if not the most valuable resources.
Venkatraman N & Henderson JC. 2000: Business platforms for the 21st Century, in Mastering Information Management, edited by DA Marchand, TH Davenport & T Dickson. Great Britain: Prentice Hall: 283-289
Mulcay K. 2001: The IT Dilemma. World Trade, 14(4): 48-48.
Henderson JC & Venkatraman N. 1999: Strategic Alignment: Leveraging information technology for transforming organisations. IBM Systems Journal, 38(2&3): 472-484.
Luftman J & Brier T. 1999: Achieving and Sustaining Business-IT alignment. California Management Review, 42(1): 109-122.
Abate R, (2008) IT should be an enabler to business [Available online at] http://www.information-managem e nt.com/blogs/IT_business-10015571-1.html (Accessed 18 June 2014)
Skriletz R (2013) How to make IT a business enabler [Available online at] http://www.b-eye-network.com/view/16788 (Accessed 18 June 2014)
Moore J (2011) Make It part of your Business Strategy [Available online at ] http://www.cnbc.com/id/44818677 (Accessed 18 June 2014)
Riley J, (2012) What is strategy [Available online at] http://tutor2u.net/business/strategy/what_is_strategy.htm (Accessed 18 June 2014)