The Background Of A Researchers Problem Commerce Essay

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For almost three decades practitioners, academics, consultants, and research organizations have identified "attaining alignment between IT and business" as a pervasive problem, Luftman and Kempaiah (2007). Gutierrez, Nawazish, Orozco, Serrano, and Yazdouni (2007) add that despite the wide acceptance of strategic alignment (the strategic use of Information Technology), there is no consensus on how to achieve alignment and with few references that detail the process, there is no common agreement on the term alignment. Terminology such as linkage Henderson and Venkatraman (1993) harmony, integrated, linked, and synchronocity Luftman and Kempaiah (2007) have been suggested and used.

Steiner (1979) points out that there is very little agreement as to the meaning of strategy in the business world. Some of the definitions which he uses include the following:

1. Strategy is that which top management does that is of great importance to the organization.

2. Strategy refers to basic directional decisions, that is, to purposes and missions.

3. Strategy consists of the important actions necessary to realize these directions.

4. Strategy answers the question: What should the organization be doing?

5. Strategy answers the question: What are the ends we seek and how should we achieve them?

Mintzberg (1994), says that people use "strategy" in several different ways, the most common being:

Strategy is a plan, a "how," a means of getting from here to there.

Strategy is a pattern in actions over time; for example, a company that regularly markets very expensive products is using a "high end" strategy.

Strategy is perspective, that is, vision and direction.

Strategy is position; that is, it reflects decisions to offer particular products or services in particular markets.

Porter (1998) states that strategy positioning attempts to achieve sustainable competitive advantage by preserving what is distinctive about a company and that strategy, is the creation of a unique and valuable position, involving a different set of activities, requires that trade-offs be made in competing, to chose what not to do and involves creating "fit" among a company's activities. Fit has to do with the ways a company's activities interact and reinforce one another.

To improve the strategic management of information technology, Henderson and Venkatraman (1993), developed a framework which they called the Strategic Alignment Model (SAM). This model was defined in terms of four fundamental domains of strategic choice namely business strategy, information technology strategy, organizational infrastructure and processes and information technology infrastructure and processes. The model is defined in terms of two fundamental characteristics of strategic management namely the strategic fit (the interrelationship between external and internal components) and functional integration (integration between business and functional domains).

Luftman (2001) improved on the Henderson and Venkatraman (1993) SAM model by developing the Strategic Alignment Maturity Model (SAMM). The model measures IT-business alignment maturity. Six interrelated components for assessing alignment maturity are identified. These are communications, value, governance, partnership, scope and architecture and skills. The scores an organization achieves for these six components of maturity are then compared to a five-level maturity model to denote the organization IT-business alignment maturity Luftman (2001).The levels range from level one to level five where level five is the highest level of maturity. A higher alignment maturity correlates with higher firm performance measures Luftman (2001).

Tying performance measures to strategic goals is a critical step Fonvielle and Carr (2001). A tool to measure performance and to align strategic goals within organisations is the Balanced Scorecard (BSC). The BSC was developed by Kaplan and Norton (1992) to overcome the business's reliance on financial measures. They contend that reliance on only financial measures does not give a complete overview of the organisations measures. The BSC provided a framework to look at strategy, used for value creation from four different perspectives these being financial, customer, internal business process and innovation and learning Kaplan and Norton (1992).One of the principles recommended by the authors, is that for an organization to be focused on strategy, there needs to be alignment among departments to the strategy of the organisation. The alignment sequence recommended by Kaplan and Norton (2006) starts when the corporate headquarters articulates enterprise value proposition that will create synergies among operating units, support units and external partners. This sequence includes aligning IT strategy with the business strategy.

Table 1 show a comparison of alignment problems identified by the three models described above.

Table 1 Problems with alignment in the various alignment models

Model

Alignment Problems

SAM

Inability to realize value from IT investments is, in part due to the lack of alignment between business and IT strategies

SAMM

Alignment is frequently focused only on how IT is aligned with the business and not vice versa, the organisation only sought one method to improve alignment and that there is no effective tool to gauge maturity of IT-business alignment

Balanced Scorecard

Surveys reveals that the greatest gap occurs in organisation alignment when compared to other strategic management problems

STATEMENT OF RESEARCH PROBLEM

Business and IT strategies at PRASA need to be better aligned.

RESEARCH AIM, QUESTION, SUB-QUESTIONS AND OBJECTIVES

Research Aim

The aim of this research is to understand to what extent alignment between Business and IT strategies exists, at the Passenger Rail Agency of South Africa (PRASA).

Research Questions

The research question derived from the problem statement is

What can PRASA do to improve business and IT strategies, alignment?

The sub questions to answer the main question are:

1. What are business and IT strategies?

2. What is alignment between business and IT strategies?

3. What factors contribute to an alignment gap between business and IT strategies?

4. What factors contributes to an improved alignment between business and IT strategies?

Objectives of the research

Based on the sub questions the objectives of the research are to

1. Analyse the Business's and IT strategy

2. Carry out a literature review on the alignment between Business and IT strategies.

3. Analyse the factors that contribute towards Alignment Gap

4. a. Establish strategic alignment best practice.

b. Formulate a methodology for aligning Business and IT strategies.

c. Propose recommendations to improve PRASA's Business and IT strategies alignment.

CURRENT STATUS OF THE RESEARCH AREA

The literature review will be based on the research into alignment of business and IT strategies. There is a plethora of research available on the alignment of business and IT strategies. Chan and Reich (2007) have carried out comprehensive research on this topic.

Business and IT strategies

Business Strategies

Croteau and Bergeron (2001) define business strategy as "the outcomes of decisions made to guide an organisation with respect to the environment, structure and processes that influence it's organisational performance". Hambrick (1980) states that business strategies may be textual, multivariate or typological.

Henderson and Venkatraman (1993) architects of the SAM model, view strategy as involving both strategy formulation (decisions pertaining to competitive, product market choices) and strategy implementation (choices that pertain to the structure and capabilities of the firm to execute it's product market choices).The SAM model presents two business strategy perspectives where business strategy is the driver namely strategic execution, and technology transformation. Table 3 presents the key attributes of these perspectives.

Table 2 Attributes of Business Strategy perspectives (Henderson & Venkatraman 1993)

Perspective

Driver

Role of top management

Role of IS management

Performance criteria

Strategy execution

Business Strategy

Strategy Formulator

Strategic Implementer

Cost/Service centre

Technology transformation

Business Strategy

Technology visionary

Technology Architect

Technology leadership

One of the six components of the SAMM Luftman and Kempaiah (2007), is partnership which includes IT's role in defining the business's strategies. Both of these models (SAM and SAMM) are about aligning business and IT strategies and can be criticised because it does not define what business strategy is.

Kay (1996) says that there is much debate on the substance but that most commentators agree that business strategy is concerned with the match between a companies internal capabilities and its external environment. According to Kaplan and Norton (2001a) strategy implies the movement of an organisation from it's present position to a desirable but uncertain future position. Because the organisation has never been to this future position its intended pathway involves a series of linked hypotheses. It enables the strategic hypotheses to be described as a set of cause and effect relationships that are explicit and testable Kaplan and Norton (2006) The effectiveness of the approach is derived from its ability to clearly describe strategy (using Strategy Maps) and the ability to link strategy to the management system using the BSC.

For the purpose of this research business strategy will be described in terms of corporate strategy meaning it will be concerned with the overall purpose and scope of the organization Johnson and Scholes). A definition of corporate strategy presented by Andrews (1980) is : "Corporate strategy is the pattern of decisions in a company that determines and reveals its objectives, purposes, or goals, produces the principal policies and plans for achieving those goals, and defines the range of business the company is to pursue, the kind of economic and human organization it is or intends to be, and the nature of the economic and non-economic contribution it intends to make to its shareholders, employees, customers, and communities. Strategic management which is similar to corporate strategy is defined as the set of decisions and actions that result in the formulation and implementation of plans designed to achieve a company's objectives Pearce and Robinson (1988).

These tie in with the strategy view of the SAM and Balanced scorecard which both discuss strategy in terms of formulation and execution. Kaplan and Norton (2006) state that the IT strategy gets aligned to business strategy through a portfolio of strategic IT services, which is derived from the business strategy and negotiated with the business units and is measured by the value adding contribution of IT. This is done by providing access to timely and accurate information, creating and supporting business unit partnerships and strategic support to the business for competitive advantage.

IT Strategic Management

Gartner (2007), define IT strategy "as a discipline that defines the business value the IT organization will deliver to the enterprise, and the direction it will take to deliver." To do this they recommend that IT build a complete, business-success-focused IT strategy consisting of demand, control and supply. Well-crafted IT strategies demonstrate how IT will contribute to the success of the enterprise relative to its key business goals. The strategies also link major business missions and goals to IT initiatives.

The SAM Henderson and Venkatraman (1993) model presents two I/T Strategy perspectives where I/T strategy is the driver namely competitive potential and service level. Table 4 presents the key attributes of these perspectives

Table 3 Attributes of IT Strategy perspectives (Henderson & Venkatraman 1993)

Perspective

Driver

Role of top management

Role of IS management

Performance criteria

Competitive potential

I/T Strategy

Business visionary

Catalyst

Business leadership

Service level

I/T Strategy

Prioritizer

Executive leadership

Customer Satisfaction

The latter two models will be used to better understand the alignment between Business and IT at PRASA.

What is an alignment gap?

Business and IT strategies may from time be out of synchronisation or may be misaligned. This misalignment is referred to as an alignment gap. No clear accepted definition of an alignment gap between Business and IT strategy is found in the literature. Luftman and Brier (1999) mention inhibitors which hinder alignment. These inhibitors include: IT/ business lack close relationships, IT does not prioritize well, IT fails to meet its commitments, IT does not understand business, senior executives do not support IT, and IT management lacks leadership. They also talk of companies striving to link business and technology and what the impact of misalignment might be if there is no harmony between business and IT. Reich and Benbasat (1996b) define linkage as "the degree to which the IT mission, objectives, and plans support and are supported by the business mission, objectives, and plans."

According to Norton (2002) the reasons why a business strategy and IT strategy gap exist are poor strategy development, management, communication, lack of strategic focus within organizations, and no strategic management process. Rathnam,Johnsen and Wen (2004), used a case study to research why alignment gaps exist, the reasons for alignment gap and the strategy for minimizing the alignment gaps between business and IT. Although the authors talk extensively of alignment gaps in their research, they do not define the term. Their results suggest that improving business strategy vision and communication has the greatest potential for aligning business and IT strategies.

Beer and Eisenstat (2000) state that companies have long known that, to be competitive they must develop a good strategy and then appropriately realign structure, systems, leadership behaviour, human resources policies, culture values and management processes. They have identified what they call the "the silent killers of strategy implementation and learning". Some of them are, a top down but laissez-faire senior management style, an unclear strategy and conflicting priorities, an ineffective senior management team, also and importantly a poor vertical communication channel, poor coordination across functions and businesses and inadequate down-the-line leadership.

Further factors contributing towards the misalignment can take several forms according to Fonvielle and Carr (2001). This can be where individuals believe its members are aligned but in fact, the individuals have different sets of goals or could have the same goals but unstated disagreements on how the goals should be reached. It may also well be that warring camps exist within the organization, ensuring that overall commitment to any chosen strategy is weak. A more relevant case is where an active opposition does not exist, but many group members are unconvinced of the need for, or the likely efficacy of, the proposed action. In other situations and cases people don't know what the goals of the organization are.

Gartner (2008), state that aligning IT with the business is often one of the more frustrating and time-consuming experiences. Alignment is often seen as the business and IT operating in parallel worlds, maintaining a common direction, but separated by distance.

What factors contributes to an improved alignment between business and IT strategies?

Luftman (1999) and (Rathman et al., 2004) suggest the following to improve alignment between Business and IT strategies . This is shown in table

Table 4 Business and IT strategies are improved by alignment between the two

Luftman

Rathman et al

• Senior executive support for IT

• IT involved in strategy development

• IT understands the business

• Business partnership

• Well-prioritized IT projects

• IT demonstrates leadership

Improve business strategy development process

More collaborative strategy development between IT and Business departments

Define when and how new technology is introduced into strategy development discussions

Restructure the organization to ensure focus on enterprise needs (e.g. structure the organization around business processes)

Build a business architecture

Use a centralized IT organization

Include a CIO at the executive council level

The Balanced Scorecard will be used to measure the performance of the organisation to ensure alignment between Business and IT strategies

Users of the Balanced Scorecard started using the scorecard as a management system, used to manage strategy, Kaplan and Norton (1996a). From this they introduced five principles of Strategy-Focused Organisations to assist with aligning and focusing resources on strategy, namely

1. Translate the strategy to Operational Terms

2. Align the organisation to the Strategy

3. Make Strategy everyone's everyday Job

4. Make Strategy a Continual process

5. Mobilise Change through Executive leadership

This conceptual model will be used to better understand the alignment of Business and IT strategy at PRASA and is depicted in Figure 1.

Business Strategy

1. What are business and IT strategies?

2. What is an alignment gap between business and IT strategies?

3. What factors contribute to alignment gap between business and IT strategies?

4. What factors contributes to an improved alignment between business and IT strategies?

IT Strategy

Action PRASA takes to improve organisational capability

Figure 1 Achieving alignment between Business and IT strategy at PRASA

RESEARCH DESIGN

The research design will use the interpretive case study approach. The interpretive approach involves the researcher adopting an empirical approaches which focus on human interpretations and meanings Walsham (1995). Interpretive research involves non or anti positivism in which facts and values are intertwined and hard to disentangle, and both are involved in scientific knowledge and nomatism which takes the view that scientific knowledge is ideological and inevitably conducive to particular sets of social ends. Either of the latter two positions is open for the interpretive researcher to adopt

A case study which is defined by Robson (2002) as "a strategy for doing research which involves an empirical investigation of a particular contemporary phenomenon within real life context using multiple sources of evidence." Case Study is also known as a triangulated research strategy (Tellis, 1997).The need for triangulation arises from the ethical need to confirm the validity of the processes. In case studies, this could be done by using multiple sources of data (Yin, 2003). The rationale for using multiple sources of data is the triangulation of evidence. Triangulation increases the reliability of the data and the process of gathering it. In the context of data collection, triangulation serves to corroborate the data gathered from other sources. Yin (2003) identified six primary sources of evidence for case study research. These are documentation, archival records, interviews, direct observation, participant observation and physical artefacts. The research will use the following sources of data: documentation, archival records and results of survey questions

DELINEATION OF THE RESEARCH

The study will explore to what extent (if any) an alignment gap between Business and IT strategies exists, at PRASA. The population would include IT managers and business managers from other departments within the PRASA group.

CONTRIBUTION OF THE RESEARCH

Alignment between Business and IT strategies has been problematic (Luftman, 2007). This study will provide a better understanding of the alignment issue in order to do further research into possible frameworks. Studies have shown that better performance can be attained if organisations are tightly aligned. The research will start with identifying the strategic choice of the organisation, based on the work of (Henderson & Venkatraman, 1993). This will be followed by a strategic alignment maturity assessment developed by Luftman (2001). Finally performance measures described by the BSC will be used to monitor progress in aligning Business and IT strategies. The contribution of this research would be to better understand the alignment between Business and IT at PRASA.

Structure of the research

Chapter one is an introduction to the research.

Chapter two is an in depth literature research on the subject.

Chapter three provides comprehensive background on the three theoretical models used, SAM,SAMM and BSC.

Chapter four introduces the research design and research methodology followed.

Chapter provides the results of the unstructured interviews and

Chapter six is the conclusion and recommendations the organisation could use

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