Strategic Alignment
(Venkatraman)

Aligning business and information strategy. Explanation of Strategic Alignment of Venkatraman, Henderson and Oldach. ('93)



  

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What is Strategic Alignment? Description

The Strategic Alignment model of Venkatraman, Henderson and Oldach helps to create alignment between the Business and IT Strategy of a company.

 

Venkatraman and his colleagues argue in 1993 that the difficulty to realize value from IT investments is firstly caused by the lack of alignment between the business strategy and the IT strategy of the organizations that are making investments. Secondly it is caused by the lack of a dynamic administrative process to ensure continuous alignment between the business and IT domains.

 

They describe four dominant alignment perspectives regarding the analytic alignment of Business and IT.

 

 

Strategic Alignment Aligning Business IT

Four Alignment Perspectives

  1. Strategy Execution. This perspective views the business strategy as the driver of both organization design choices and the logic of the IT infrastructure (the classic, hierarchical view of strategic management). Top Management formulate the strategy; IT Management is only strategy implementer. [Arrow 1]

  2. Technology Potential. This perspective also views the business strategy as the driver. However it involves the formulation of an IT strategy to support the chosen business strategy and the corresponding specification of the required IT infrastructure and processes. The top management should provide the technology vision to articulate the logic and choices pertaining to IT strategy that would best support the chosen business strategy. The role of the IT manager should be that of the technology architect. He designs and implements efficiently and effectively the required IT infrastructure that is consistent with the external component of IT strategy (scope, competences and governance). [Arrow 2]

  3. Competitive Potential. This alignment perspective is concerned with the exploitation of emerging IT capabilities to:

    • impact new products and services (i.e. the business scope),
    • influence the key attributes of strategy (i.e. distinctive competences), as well as
    • develop new forms of relationships (i.e. business governance).

    Unlike the two previous perspectives, which considered business strategy as given (or as a constraint for organizational transformation), this perspective allows the modification of business strategy via emerging IT capabilities. The specific role of the top management to help this perspective succeed is that of the business visionary, who articulates how the emerging IT competences and functionality as well as changing governance patterns in the IT marketplace would impact the business strategy. The role of the IT manager is to act as a catalyst. He identifies and interprets the trends in the IT environment. In doing so he assists the business managers to understand the potential opportunities and threats from an IT perspective. [Arrow 3]

  4. Service Level. This alignment perspective focuses on how to build world class IT organization within an organization. In this perspective, the role of business strategy is indirect. This perspective is often viewed as being necessary, but not being sufficient, to ensure the effective use of IT resources and to be responsive to the growing and fast-changing demands of the end-user population. The specific role of the top management to make this perspective succeed is that of the prioritizer. They decide how the scarce resources should be allocated, both within the organization as well as in the IT marketplace (in terms of joint ventures, licensing, minority equity investments, etc.). The role of the IT manager is one of business leadership, with the specific tasks of ensuring that the internal business succeed within the operating guidelines from the top management. [Arrow 4]

 

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Recent User Comments
 - UK Challenges to establish Strategic Alignment "In my view the major challenges to the establishment of Strategic Alignment are reflected in the term. The strategic perspective is long term. Business strategy is dynamic and tactical modifications must be made dependent on market reactions, the framework references then of strategic planning sets a general direction and allows operational decision making within a unifying context.
IT capability is also a dynamic concept. The emergence of new technological platforms, tools and therefore capabilities is myriad, but decisions must be taken in the light of the current and near future view of these capabilities and their potential to support the business strategy's unfolding reality.
This then is the challenge. To take two dynamic concepts of extreme complexity and incrementally build a flexible IT infrastructure that can support the current and future requirements of the business without the requirement for any step change in implementation."		    2
 - India Strategic Alignment is Important "The strategic alignment concept basically throws light on how IT can be helpful for business strategy. Business is totally backed up by the latest information and technology. Strong IT embedded organisations are making their names in the world."    1
 - UK Practical Implementation of IT Strategy "The Venkatraman model for strategic alignment offers a framework for understanding the organizational drivers for technological development and alignment. These drivers will change over time and alter the loci of the decisions that will affect the technological strategy.
However, strategy should not change over the short term. How then does the organization resolve conflicts in the direction of organizational drivers of technology strategy? I would propose that the perspectives offered in Venkatramans framework should be viewed as being inclusive in the development of IT strategy and that the resolution of conflicts will be dependent on the technological maturity of the organisation. I.e. sunk costs will have the major influence."		    5
Zibuyile - South Africa How is Strategic Ailignment Managed? "How should Strategic Ailignment be managed within an organization?"    0
Zibuyile - South Africa Challenges to establish Strategic Alignment? "What are the main challenges of achieving strategic alignment in an organisation?"    0
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Compare with Strategic Alignment: Strategic Thrusts  |  Twelve Principles of the Network Economy  |  7-S framework  |  Organizational Configurations  |  Impact/Value framework  |  Ashridge Mission Model

 

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Copyright 2009 12manage - The Executive Fast Track. V10.4 - Last updated: 11/21/2009. All names tm by their owners.


  ● Maria Ford MBA (USA) Strategic Alignment and In-House Talent "As reflected in the Venkatraman framework diagram, the IT and business domains are reliant on each other. While I agree with Mr. Gordon that sunk costs are one of the most important considerations for organizational technology strategy, the other equally important consideration is in-house talent. Certifications are today's standard, but lack of know-how and experience are detrimental to any organization and cannot be planned for. They are usually realized after hiring and numerous costly errors. Yet, we continue to hire certified inexperienced talent. There has to be a happy medium established so that sunk costs are not involved with poor talent."
  ● Sunil Attarde (India) Business & IT Strategy "Good Article/post - Summarizes in nut-shell How IT & Business strategies impact each other and can be effiectively used to compliment each other."
  ●  (UK) Strategic Alignment and In-House Talent. "The technological platform of an organisation must necessarily be considered as the primary driver of the requirements for technical skills. Legacy technical skills are equally difficult to resource as state of the art technical skills, although for different reasons. In order to improve the level of technological maturity decisions must be made regarding the mix of old and new technologies and how these are to be integrated. A transformational road map must be developed to take the organisation from the old to the new world. The organisational skills base required for this journey is a key consideration which must be planned effectively. However, I would consider the development of an In-House IT Capability only as strategic where these are deployed to maintain mission critical applications. Use of third party resources is many times to be preferred as the requirement to maintain the skills base is significantly reduced."
  ● usman (Pakistan) IT & Business Strategy "Good overview of the effect of IT on Business Strategy. But it has given so much importance on IT. It seems to be an alternative of humane beings. Which is not true in any case. However it is good to explain the effect of IT on BS."
  ● Mark Tocco (USA) Alignment as Process "The Venkatraman Framework is useful for establishing possible perspectives. Alignment achievement must be a process in my opinion to be successful. As a process it should have a starting point which I would submit should be enterprise strategy and organization (assuming an existing situation).
My assumption here is that an organization will have a strategy and structure that must be considered. A useful way of evaluating this determinant is the Value Discipline Approach (M. Treacy and F. Wiersema). Companies usually succeed at delivering a particular type of business value such as operational excellence, customer intimacy or product (or service) leadership. Once identified this overarching strategic concern will allow the optimized usage of one of the perspectives defined by Venkatraman to better assess and adopt key alignment criteria like business processes, organization and skills, management systems and technology platforms and applications."