Posted by: S R Balasubramanian
business strategy, IT alignment, IT strategy, KPIs, strategy
We often talk of our IT strategy and its alignment with business. We may be right in our intentions but may perhaps have to examine whether we talk of these terms loosely and without fully understanding its import. We, of course, look good saying the right things and striking a good note with our peers, but a close look inwards may reveal our need to understand the subject better.
Let me, therefore, initiate a discussion on corporate strategy―our need to know and understand where the company is headed to―and the alignment of IT with the corporate strategic goals (IT plans that seek to serve the organization’s strategy).
Understanding business strategy
Business strategy is the direction that a company adopts over the long-term, a move which provides advantage to the organisation through its configuration of resources within a challenging environment, to meet the needs of markets and to fulfil stakeholder expectations.
In other words, we have to first enquire, research and understand the company strategy by raising the following questions:
* Where is the business trying to get to in the long term? (The direction).
* Which are the markets / segments that the company is trying to compete in and what kind of activities are involved in such markets? (Markets and scope).
* What are the set of activities that business plans to take up in order to perform better than the competition in those markets? (Competitive advantage).
* What resources (skills, assets, finance, relationships, technical competence, facilities) are required in order to be able to compete? (Strategic resources).
* What external, environmental factors affect the businesses’ ability to compete? (Environment/ changes).
* What are the values and expectations of those who have power in and around the business? (Stakeholders).
Types of business strategies
Strategies exist at several levels in any organisation – ranging from the overall business (or group of businesses) through to individuals working in it.
* Corporate strategy is concerned with the overall purpose and scope of the business to meet stakeholder expectations.
* Business unit strategy is concerned more with how a business competes successfully in a particular market. It concerns strategic decisions about choice of products, meeting needs of customers, gaining advantage over competitors, exploiting or creating new opportunities etc.
* Operational strategy is concerned with how each part of the business is organised to deliver the corporate and business-unit level strategic direction. Operational strategy therefore focuses on issues of resources, processes, people etc.
Once the CIO understands these imperatives, it becomes easy for him to look at IT from the management’s point of view and shape IT offerings in such a way as to help the company win in the markets.
If the IT strategy is to be aligned with business strategy, it will have to reflect steps that help achieve organisations defined priorities and goals. The IT strategy document, many a time, is worked out jointly by CIO and some business heads.
Following are some of the elements of an IT strategy:
(1) Key business imperatives: A report on the main business issues that are sought to be addressed. For example, it could state matters like manufacturing strategy (production planning optimization, material availability, lower manufacturing costs), finance (cost control, lower working capital, budget control etc.), or marketing and sales (order fulfilment, customer complaints re-addressal, marketing and sales analytics, etc).
(2) Priority listing: Some issues may be more critical than others and therefore the ranking of the applications in the order of their importance.
(3) Time frame: Drawing out a broad time frame for their implementation.
(4) Assessment: A scan of the technology environment and a clear technology direction that is most appropriate for the company given the set of business requirements specified.
This may include:
a. The hardware landscape: This may include aspects such as movement towards consolidation of servers and storage, moving towards virtualization, building reliability, etc.
b. Software choices: Of moving in the direction of standard packages, putting in analytics, other specialized packages necessary.
c. Safety and security: Defining requirements and overall policy direction, indicating levels of protection necessary etc.
d. Outsourcing policy: Defining a direction either in the form of strategic outsourcing or selective outsourcing.
e. Taking stock: Resources necessary in the form of funds, people, training etc. for achieving the defined objectives.
(5) A set of deliverables and standards in the form of key performance indicators which would help in drive performance and ensuring that implementation stays on course.
IT strategy is usually drawn out for a period of five years or for a period that the organisation thinks is appropriate.
The IT strategy document, however, is not static and would undergo a change if there is change in organisations strategies and goals or when technology advancements cause a change in the directions we took earlier. This makes IT an integral part of business and can play an important role in making business successful.