As far as corporate strategy is concerned in facilitating businesses make important operation decisions, rather than trying to be involved in defining corporate strategy, one should be aware of what it is. In this article, 'An Essential Step for Corporate Strategy', Tim Laseter strongly argues that Michael Porter had failed to recognise the importance of just how much the operations strategy is relied upon and required by the overall strategy (manyworlds.com, 2010). According to Porter the companies unrelenting focus on achieving operational effectiveness motivated by the desire to catch up with their Japanese competitors with lower costs and higher quality has made them lose sight on what strategy really is (Laseter, 2009). Porter disputed that many operations executives, focused entirely on adopting the "best practices" rather than figuring out how to build unique capabilities, which they would have done better if they tried developing their capabilities while keeping in mind their company's desired, differentiated position in the marketplace.
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In his celebrated literature (what is strategy?), Porter separates strategy from operational effectiveness and defines strategy as "the creation of a unique and valuable position, involving a different set of activities" (Porter, 1996). But a closer look would suggest that for an effective overall strategy, and by Porter's definition, it needs an operations strategy as well. Laseter then explains his perspective of what an operations strategy is, namely from works by, Wickham Skinner's manufacturing decision areas (1969); where operations arena are needed to resolve important trade-offs, and Jay Barney's capabilities-based strategy, and gives an explicit definition as: An operations strategy should guide the structural decisions and the evolution of operational capabilities needed to achieve the desired competitive position of the company as a whole (Laseter, 2009).
Laseter defines structural decisions as those that specify the what, when, where, and how of investing in operations bricks and mortar. He includes four interrelated decision areas that should be understood and discussed in relation to the company's competitive positioning: Vertical integration, facility capacity, facility location, and process technology.
As for operations capabilities, Laseter explains that there are six general processes that provide coverage of most operational contexts: Innovation and product development, customer service management, operations planning and control, purchasing and supplier development, quality management, and attraction and development of people. Article closes by telling that an operations strategy includes both decisions related to structural investments and investments in capability building, and that their consistency or fit "determines the company's effectiveness in achieving the desired positioning articulated by the overall corporate strategy" (Laseter, 2009).
Area of focus - aligning business and IT strategies
Companies around the world are in a race with one another and the need for operations to co-align with their corporate strategy is vital to their survival. What Porter saw as there being no need of an operations strategy may not quite apply to the modern day where each day brings about new innovations and technology. Especially with new emergence and areas such as electronic business, globalisation, mass customization, competitive differentiation, quality improvements, process automation and improvement, and CRM; is enough proof for this. Companies need to build on their operations capabilities even more than they needed to 16 years ago when Porter's view was first publicised. At this point, it presents a question of whether the management of technology can be aligned with the overall corporate strategy, to build on the operations capabilities as Laseter describes. Or is an alignment between business and Information Technology (IT) necessary for competitive edge?
Technology development and management
It is no doubt that with the recent trends and factors such as the unstable economic conditions creating a challenging business environment, companies have given attention to technology in order to gain opportunities for competitive advantage. Generally because it allows businesses to lower their costs and day-by-day their abilities to utilize technologies are improving as well. But senior executives are still facing the paradox of harnessing technology to help their businesses. Sure, technology can change the rules of competition overnight just like how FedEx used a new combination of systems and business operations for overnight delivery of small packages (Luftman, 1996). But do they have the capability to deliver lasting value?
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Since many a research has shown positive relationship to the alignment of technology and corporate strategy (Weis & Anderson, 2004), management must recognise its strategic value and exploit it while requiring strong management support, strong leadership, good working relationships, and effective communication to name a few. IT and business personnel at all levels in the organisation should work together to attain successful alignment and strategy implementation. It is interesting, therefore, that there is a tendency within some of the literature (for example Reich and Benbasat, 2000) and amongst others to view communication and collaboration as a result of IT credibility rather than a basis for it (Campbell et al, 2005).
While in another literature, Broadbent (1991) tells us that there are nine features that give a business the information-based competitive edge over others: Strong well-established planning approach which involved staff at all levels, Strategic processes which were well documented, A consensus between senior managers and IT managers, A concern for information content, Alignment of IT with organization infrastructure, Maximum interaction between IT and business managers, IT literate business managers, Business literate IT managers, and Information provided in an effective, efficient, and productive manner when a business looks to IT to deliver (Weiss & Anderson, 2004).
Strategic alignment is a state of harmony in the strategic coordination between business and IT (Lederer and Mendelow, 1989; Woolfe, 1993). We know that aligning business and technology is important. One tool that can be used for strategic alignment is the Strategic Alignment Model (SAM) by Henderson and Venkatraman (Smaczny, 2001).
Luftman used and then modified this model into 12 components (4 main components: Business strategy, Organisation infrastructure and processes, IT strategy, and IT infrastructure and processes) of alignment (see Appendix 1). This, together with the "Enablers and Inhibitors of Strategic Alignment" (Luftman et al, 1999) assesses the alignment of business and IT (Luftman, 2003) (see Appendix 2). His indication is that the strategic alignment maturity model/assessment can help the organisation to see where they are, where they need to go, and what actions they need to take to drive the business strategy and to attain or sustain this alignment with technology.
In order for this alignment to work out, certain criteria's should be focused on: communications, competency/value measurements, governance, partnership, scope and architecture, and skills (Luftman, 2003). Appendix 3 shows a detailed summary of how these criteria's are focused on each level of the strategic alignment model. There are many opportunities that can be looked upon here. One interesting concept is economies of scope which is said to be achieved in a strategic alliance/partnership; one of the many criteria's in aligning IT with strategy. Economies of scope exists when two or more businesses gain lower operations cost and reap rewards when they centralise their management rather than when functioning alone.
Companies create alliances to gain benefits such as to: obtain new capabilities, obtain access to specific markets, and reduce financial and political risks like General Motors and Chrysler's alliance of 2004 helped them to develop new fuel-saving hybrid engines for their automobiles. Value-chain partnerships such as that of P&G working with Mr Coffee, Krups, and Hamilton Beach used technology licenced from Black & Decker to market a pressurised, single-serving coffee-making system called Home Café (Wheelan & Hunger, 2010). It helped them to gain common advantages with common key suppliers. Working together to share technology helps these businesses to come out with products quicker as well.
Steps for Strategy Alignment
To make a strategic alignment to work, there are six procedure steps that a business can look upon (Luftman, 2003). They would need to:
Set the goals and establish a team. The team should contain business sponsors, champions (like in the six sigma model), both business and IT executives, and people from the major business functional organisations (SBU's),
Understand the business-IT linkage and evaluate each of the six criteria of the strategy alignment maturity model,
Analyse and prioritize the gaps. The purpose of this step is to understand the activities necessary to improve the business-IT linkage,
Specify the actions to be taken to each of the gaps. These could include the deliverables, timeframe, resources needed and risks,
Choose and evaluate the success criteria. This step sees whether the goals have been met. The review of the measurements should serve as a learning vehicle to understand how and why the objectives are or are not being met, and
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Sustain this alignment. Obtaining IT-business alignment is a difficult task. To sustain the benefit from IT, "alignment behaviour" must be developed and cultivated. The criteria described to assess alignment maturity provides characteristics of organizations that link IT and business strategies. Adopting these behaviours can increase companies' potential for a more mature alignment assessment and improve their ability to gain business value from investments in IT.
Implications of Strategy Alignment
IT used to be considered as a cost rather than what business value it could bring. But companies need to be current and up-to-date of future potentials and key developments to take advantage of the market. Managing IT successfully and incorporating it into corporate strategy requires managers to know how new technologies can be integrated into the business as well as their strengths and weaknesses and its corporate-wide effects.
Factors affecting the alignment include the level of communication between business and IT executives. Management would need the whole organisation to work well together in order to achieve the alignment. There can therefore be resistance to some changes (especially when new technology comes into the picture) which should be dealt with measures such as having a good leader managing the alignment, empowerment, participation and good communications with all the employees as well as having a good reward system and training the employees on using the new technologies. It all can be summed up with what Weiss & Anderson (2004) suggested, i.e. for a successful alignment, what the business needs are the 4 C's: Clear Direction, Commitment, Communication, and Cross-functional integration.
There have been many criticising the model by saying that the implicit dominance of a structured strategy process is questionable in today's time where uncertainty and flexibility predominate and the articulation of the strategic intent is difficult (Ciborra, 1997). Strategic alignment also presumes that management has full control and that information infrastructure can be aligned with emerging management insights (Maes, 1999; Ciborra, 1997). Hence some argue that strategic alignment is illusory (Maes, 1999).
Most alignment models are founded on studies to large businesses and it was not until recently that alignment paradigms have focused their attention to small and medium enterprises (Gutierrez, Orozco, and Serrano, 2009). For example, Chan et al. (2006) observed that organisational size affects alignment. He explained that SME's tend to be structured around functions and use centralised structures to coordinate subunits. This limits the need for other explicit mechanisms to promote functional alignment and consequently the organisation lacks alignment.
Technology will continue to evolve faster than any organisation. Strategic alignment can help firms achieve synergy and facilitate the development of business plans, and also increase profitability and efficiency. These tangible benefits would allow management to focus on the application of IT as a means to leverage their core competencies, skills and technology scope, resulting in improved efficiency (Luftman et al., 1996).
List of References
Books and Journals
Luftman, J.N. (2003), Competing in the Information Age: Align in the Sand, 2nd Edition, New York, Oxford University Press Inc., pp18-23
Avison, D. et al (2004), Using and validating the strategic alignment model, Journal of Strategic Information Systems, Volume 13 (n/a), pp223-246
Campbell, B., Kay, R., Avison, D. (2005), Strategic alignment: a practitioner's perspective, Journal of Enterprise Information Management, Volume 18 (6), pp653-664
Chan, Y., Sabherwal, R. and Thatcher, J.B. (2006), Antecedents and outcomes of strategic IS alignment: an empirical investigation, IEEE Transactions on Engineering Management, Vol. 53 No. 1, pp27-47
Gutierrez, A. Orozco, J. and Serrano, A (2009), Factors affecting IT and business alignment: a comparative study in SMEs and large organisations, Journal of Enterprise Information Management, Volume 22 (1/2), pp197-211
Smaczny, T. (2001), Is an alignment between business and information technology the appropriate paradigm to manage IT in today's organisations?, Management Decision, Volume 39 (10), pp797-802
Ciborra, C. (1997), De Profundis? Deconstructing the concept of strategic alignment [online], Available at: http://docs.google.com/viewer?a=v&q=cache:xfvbw9hO0QUJ:220.127.116.11/gru/kurssidor/2006/ht/infa32/info/ume/DeProfundis.pdf+Deconstructing+the+concept+of+strategic+alignment+Ciborra&hl=en&gl=my&pid=bl&srcid=ADGEESgnGo4Y1LD2nCfGwCjU81IUUCkjUpDJ5Gttb_M2t7uG8umU3TTvquUfzh2G8TG4FLWV17ZZ6DNYZVgAJ2P3U2S4GISpk3G6tV0BwatOuKj8uI7yVacpV2FmEhfHjrcRWLxoa7qD&sig=AHIEtbQqjHmuOW5SCnUgkX7T3WYnDCCu1w (Accessed on 6th November 2010)
Luftman, J.N. (1996), Competing in the Information Age: Strategic Alignment in Practice [online], Available at: http://site.ebrary.com/lib/staffordshire/docDetail.action?docID= 10142364&p00=alignment+of+corporate+strategy+to+the+management+of+technology (Accessed on 2nd November 2010)
Maes, R. (1999), A Generic Framework for Information Management, Prime Vera Working Paper, Universiteit Van Amsterdam [online], Available at: http://primavera.fee.uva.nl/html/working_papers.cfm (Accessed on 8th November 2010)
ManyWorlds.com (2010), An Essential Step for Corporate Strategy [Online], Available at: http://www.manyworlds.com/exploreco.aspx?coid=CO12910024482 (Accessed on 2nd November 2010)
Porter, M.E. (1996), What is Strategy? [Online], Available at: http://www.ipocongress.ru/download/guide/article/what_is_strategy.pdf (Accessed on 4th November 2010)
Weiss, J.W and Anderson, D. (2004), Aligning Technology and Business Strategy: Issues & Frameworks, a Field Study of 15 Companies [online], Proceedings of the 37th Hawaii International Conference on System Sciences, Available at: http://docs.google.com/viewer?a=v&q=cache:ggmyrgvaT3gJ:citeseerx.ist.psu.edu/viewdoc/download%3Fdoi%3D10.1.1.109.3359%26rep%3Drep1%26type%3Dpdf+Aligning+Technology+and+Business+Strategy:+Issues+%26+Frameworks,+a+Field+Study+of+15+Companies&hl=en&gl=my&pid=bl&srcid=ADGEESgsC7fhTji5wJzFrqWwJuvKKzI-vEmMTGjgdi418p41ZwDK66DPaVWuW9lbRCvYUDpl1YvShEllGD6cKPY1A5oLxBSK7n28p_qhyiTfKmqI6-Mi0yeEAzI_f0X6gvsjSRPM1kLK&sig=AHIEtbTMnr79Vbm6FLBNVHdfJlI9xs3Tkg (Accessed on 1st November 2010)
The twelve components of alignment | Luftman, J.N (2003)
Enablers and Inhibitors of Strategic Alignment | Luftman, J.N, et al (1999)