Relationship between Business Strategy and IT Strategy
Relationship between Business Strategy and IT Strategy
The relationship between a business and its IT resources extends far beyond the use of IT as a mere tool in proper execution of business operations. Instead, both are linked deeply. The relationship starts with the alignment of Corporate Strategic Planning (CSP) with Information Systems Planning (ISP). Determining an entity’s mission and goals and developing competitive strategies to meet those goals is CSP. This is an iterative procedure. ISP is a systematic way of establishing the information needs of an organization.
ISP also includes developing systems, technologies and databases once these needs are known. ISP is successful only when it is done keeping in mind the mission, goals and competitive strategy determined through CSP (Hoffer, George, and Valacich, 1994). The processes of CSP and ISP run parallel and involve three steps. First, current organizational position is described along with the current IS processes, data, human resource and technological inventory. Secondly, the desired future state of organization is determined. This simultaneously yields required future IS situation.
Third step is to develop a strategic plan to achieve the envisioned future state. ISP plays a crucial role by identifying the schedule of projects to undertake to bring IS situation in line with corporate position (Hoffer, George, and Valacich, 1994). With this framework laid out, we will answer the questions about Lowry’s dream of collaborative computing and the concept of B2B exchange. Were there problems with strategy formulation? In case of collaborative computing, the strategy was seriously flawed due to these reasons.
Jack Lowry was so enthusiastic in pursuit of dream that he failed to properly determine whether the people outside Goldman were ready for such an ambitious project yet. He dedicated two years and millions of dollars in laying the ground without finding a partner willing to make a commitment (Worthen, 2001) because his judgment of importance of the project for Goldman and its partners was erroneous. Collaborative computing was undoubtedly an idea worth materializing. However, it was ahead of its time.
A company in a different position may have had much better results since Goldman resided much lower in supply chain and did not possess the leverage to bring about an industry wide change. It required a deep overhaul of entire industry including supply chain, manufacturers and customers. Therefore, the strategy had serious problems in timing, position and power to implement. Same is true for the case of B2B trading exchanges. The concept of bringing together suppliers and customers in a marketplace is undoubtedly very useful but the strategy used for the purpose was not formulated properly.
It failed to identify the real problem: lack of software and services to make those exchanges useful (Sawhney, 2002) and focused on creating exchanges. The correct approach would have been to provide software and services to facilitate collaboration between all stakeholders and the exchanges could come automatically as a logical consequence. Were there problems with strategy implementation? Lowry used Goldman as a laboratory to work on his collaborative computing dream and used millions of dollars in the process.
Since Goldman did not hold the position in the industry to effect the change envisioned by Lowry, the implementation of his strategy had this basic problem. For automotive industry, companies such as GM or Ford from USA or Toyota from Japan were in much better position to implement Lowry’s dream because of their dominance in the industry and the dependence of entire industry on these giants. They also had advantage of being on top of the chain since they were the penultimate buyers of the industry and had direct contact with consumers, the ultimate buyers of finished products.
The case for B2B exchanges also had flawed execution of the idea since they set out to solve a problem that did not even exist. They had to re position themselves and change strategies to start getting positive results. They changed their focus from creating a trade exchange which was not needed to solving individual business problems via IT solutions. This gave them a customer portfolio which could later be geared towards the goal of creating a trade exchange. Were there problems with the strategic process?
In case of collaborative computing, the process was flawed since Lowry did not put significant time and energy in determining whether any supporters of his concept exist outside Goldman, will he find partners ready to invest into his proposed system. He assumed that he will find partners readily based only on cursory investigation before dedicating significant resources to the project. The correct process would have been to prepare partners before a hefty investment into the project to avoid failing to find any partner after two years.
In case of B2B exchanges, the process had the problem that the steps were reversed. The experts wanted to have an entire industry on board to create the exchange. The first correct step, as they later realized, was to solve the problems of individual customers that may later yield a portfolio to be used to create an exchange. The scenario leads to the conclusion that in both cases, the concepts and ideas were wonderful but strategies were grossly inappropriate. The cases reinforce the importance of the relationship between CSP and ISP at every level.
University/College: University of California
Type of paper: Thesis/Dissertation Chapter
Date: 16 October 2016
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