Investigating Strategic IT-Business Alignment: A Case Based View of Challenges, Outcome and Consequences

Chapter 1. INTRODUCTION

TODAY, information technology (IT) is a critical organizational resource that must support a firm’s competitive strategy. The alignment of IT management strategies with a firm’s competitive strategy has been cited as a critical management issue for both information systems (IS) executives and general managers. In spite of this, the extent to which IT management strategies are aligned with a firm’s business strategies varies widely among firms. This is often due to the lack of a clear plan.

IT Strategic Alignment is the implementation of information technology (IT) in the integration and development of business strategies and corporate goals. Aligning IT and business strategy is the most fundamental factor that must be addressed in order to secure high levels of return on IT investments.

Strategic alignment enables corporations to realize greater IT payoffs.

The cost and time required to create a new product or service are so large that lack of a perfectly aligned and executed innovation strategy can be extremely wasteful. You can pursue any opportunity you want, but you cannot afford to pursue every opportunity you want. Strategic alignment in IT "creates a directional beacon that defines which domains to explore and which ones to avoid."

Strategic IT alignment has been shown to be a key predictor of IT investment profitability particularly for today's information-intense firms. Alignment processes that promote knowledge sharing are essential in determining IT profitability. Indeed, identifying and cultivating these processes can improve profitability and result in a competitive organizational asset. To achieve success, firms have "had to realign not merely their IT strategy but also their business strategy and to maintain close alignment between the two"
Previous research has suggested that there are significant variations among firms in the degree to which IT has been aligned with their business strategies. These differences are reflected in three evolutionary roles that IT plays in firms: Please cite the reference

1) Traditional role, i.e., IT supports operations but is not strategy related,
2) Evolving role, i.e., IT supports strategy, and
3) Integrated role, i.e., IT is integral to strategy.

The firms’ competitive strategies are also linked to this evolution. The evolutionary role of IT and the extent to which IT management strategy can be pursued depends greatly on a firm’s IT management sophistication. Higher levels of IT management sophistication or IT maturity represent the evolution of a firm’s IS function from the traditional role of supporting data-processing operations to that of being strategic to the firm.

The literature suggests that firms cannot be competitive if their business and information technology strategies are not aligned. Yet achieving strategic alignment continues to be a major concern for business executives.

Although executives continue to voice concern for payoffs from investment in information technology (IT), strategic alignment or the alignment of information systems with business strategy, has emerged as one of the most important issues facing executives in India. Although IT business value and strategic alignment are often treated separately, researchers argue that a firms inability to realize sufficient value from IT is due in part to an absence of strategic alignment. If, as these researchers suggest, IT payoffs are indeed a function of strategic alignment, then an absence or deficiency in payoffs from IT may point to a misalignment between the business and IT strategies.

Many small and medium enterprises (SMEs) try to adopt IT to support their business. Due to their limited resources, SMEs IT adoption is different from larger business (Fink; Thong; Welsh & White). An incorrect IT investment decision can have devastating effect for SMEs. Therefore, SMEs need to be very careful in their IT investment decision-making.

So far, the existing literature seems to have concentrated more on drivers and barriers of IT adoption. There is lack of strategy to guide SMEs in IT adoption process.

It is well known that survival of SMEs is very crucial for Indian economy. Any adverse impact on the growth of firms will have serious implications on the employment and foreign trade.

Small and medium-sized enterprises (SMEs) are the life-blood of the Indian economy. They are the main source of revenue and play a key role in enabling India to compete in world markets. Information and communication technologies (ICTs), and particularly B2B portals, offer many opportunities for SMEs and local and regional networks of SMEs and technology transfer centres to grow and prosper.

In India, small and medium industries play a vital role in the growth of the economy. Small industries have a 40% share in industrial output, producing over 8000 value-added products. They contribute nearly 35% in direct export and 45% in the overall export from the country. They are one of the biggest employment-providing sectors after agriculture, providing employment to 28.28 million people.

Against the backdrop of Information Technology pervading all facets of life, higher educational institutions are the right forum to familiarize Enterprise Resource Planning (ERP) and e-governance systems with millions of Small and Medium Enterprises (SMEs) in the country.

The government needs to provide basic and technological infrastructure to SMEs without which firms cannot use IT effectively. And without adoption of appropriate IT firms may not remain competitive in the era of liberalisation and globalisation. A large number of garment manufacturing firms reported that they had to have their own alternative arrangement for regulated and sufficient electricity which ultimately results is higher cost of production. Many firms were surviving in export markets due to MFA quota and not because of lower cost of production. In view of the fact that MFA provisions are no more available to garments sector firms since January 1, 2005, export-oriented firms need to be cost effective. Hence there is a necessity to embark on providing technological, physical, and communication infrastructure at a globally competitive rate so that SMEs can withstand onslaught posed by large firms and MNCs.

Equally, if a corporation tries to reposition or change its strategic alignment, consideration may need to be given to any subsequent shift in the value the corporation realizes from IT investment, with downstream implications for firm performance. This question. Long debated by both academics and IT practitioners. Leads to the first and most important question in this paper, namely: what is the nature of the relationship between strategic alignment and IT payoffs and, in particular, does strategic alignment have a positive impact on IT business value?

For IT to play a major role in realizing firm performance, known as its business value, strategic alignment or alignment of information systems (IT) strategy with business strategy should be achieved. This paper addresses the issue of strategic alignment from several perspectives and states the preconditions necessary to realize it. The study introduces also a number of alignment frameworks and models proposed by researchers in order to help firms determine their alignment level. Finally, the paper presents a case study of an Indian manufacturing firm SME in kitchen design, discusses its strategic alignment situation and recommends ways of evaluating and improving it.





















1.1 SUMMARY OF ABSTRACT

As an introduction, this study explains strategic alignment and its value to organizations, and outlines the critical success factors for a successful IT-business alignment.

The Paper then focuses on a case study about the use of IT solutions in SME in India, GODREJ INTERIO since inception and throughout its maturity stages. It overviews the dramatic change that the organization business strategy has undergone, and how IT helped in meeting several challenges that transpired accordingly.

A description of the status of current information systems is presented. The efficiency of such systems and the level of their exploitation are investigated. The study reveals also the organization’s future directions towards expanding IT utilization to realize more benefits and successes. Finally the study discusses the degree of alignment in GODREJ INTERIO and proposes suggestions for further improvements.

The purpose of this research is to investigate whether the alignment of IT with the strategy of an SME could have a decisive influence on its performance.



1.2 OBJECTIVE AND SCOPE

ü Strategic alignment will be modeled as an interaction or product term involving multiple process-level measures of business and IT strategy and how it helps to increase the organizational effectiveness.

ü Analysis will be done to confirm that strategic alignment is related to payoffs from IT at the process-level.

ü Analysis of the fact: Is Strategic alignment leading to greater payoffs from IT or this relationship is only valid up to a certain critical level of strategic alignment.

ü Will investigate the relationship between strategic alignment and organizational flexibility and to identify if IT can help reduce any of the negative consequences of strategic alignment.

ü Will study this concept with reference to Small and Medium enterprises India.

ü The objectives of this study are to address the issue of measuring IT management sophistication and to examine whether certain IT management strategies are more important for certain competitive strategies than for others.




1.3 METHODOLOGY

ü Primary and Secondary sources of data like surveys, interviews, case studies, research papers, business journals.

ü Will study with reference to Small and Medium enterprises in India and try to interact with them in person.

ü Regular discussions with the corporate and faculties.

ü Will be doing the analysis and research part with the help of a Case study by visiting Godrej Interio in Mumbai and try to formulate a thesis on the basis of the strategic alignment concepts.

ü In this paper, I will explore both of these questions in the context of a process oriented model of IT business value and strategic alignment. Both variables are examined at the process-level and at the firm level.

ü Will do a review of recent literature on strategic alignment and IT payoffs will study the Strategic Alignment Model in SME’s i.e. Godrej Interio.

ü After this, I will try to present a theoretical model and hypotheses to more fully investigate the relationship between strategic alignment and IT business value.

ü I will then describe how the model was tested using data from survey in Godrej Interio (SME). This is followed by a review of my results and a discussion of findings uncovered by my analysis.


















Chapter 2. REVIEW OF LITERATURE

The field of business policy, from which strategy research has emerged, has its origins in the concept of matching or aligning organizational resources with environmental threats and opportunities. Accordingly, a business strategy reflects decisions that align corporate resources and capabilities with environmental threats and opportunities. This interpretation has implications for how we define and interpret strategic alignment. For example, by viewing strategic alignment as a snapshot of the link between business and IS strategies, we can focus on the content of strategic alignment, or specifically what aspects of IT are aligned with what aspects of the business strategy.

Previous research on strategic alignment has often applied this approach. For example, Reich and Benbasat apply the term linkage to the degree to which the IT mission, objectives, and plans support and are supported by the business mission, objectives and plans. Similarly, Broadbent and Weill define strategic alignment as .the extent to which business strategies were enabled, supported, and stimulated by information strategies.

One way to identify the content of strategic alignment is to identify if the business plan links or refers to the IT plan, and vice versa. However, in reviewing whether strategic alignment has been achieved, we accept that cross-referencing between the written IT and business plans (which would illustrate the content of strategic alignment) is at best a surrogate or proxy for .true alignment since planned-strategy can be different from realized-strategy (Mintzberg). This would imply that efforts to relate strategic alignment to IT payoffs should extend beyond an examination of the content of written plans to include measures of actual or realized IS and business strategy and from this, to compute an actual measure of realized strategic alignment to compare against a measure of realized IT business value.

Although low levels of strategic alignment may undermine payoffs from IT, some researchers sound a word of caution for corporations who try to improve IT payoffs through strategic alignment. For example, Jarvenpaa and Ives argue that for corporations competing on a global scale, tight fit between the IS and business strategy might reduce strategic flexibility and force a firm down a path from which it cannot escape.1 If this argument is valid, then there is a point beyond which increased alignment may weaken a corporation’s ability to respond to environmental threats and opportunities, with the possibility that a reduction in flexibility may also erode IT payoffs. This would then imply that beyond a hypothetical inflection point, greater strategic alignment could, paradoxically, lead to lower IT payoffs

Several definitions for IT alignment have been proposed by researchers; according to Henderson & Venkatraman, IT alignment is the internal fit and functional integration between business strategy and IT strategy and how this integration is important to gain a competitive advantage. Luftman, Reich & Benbasat and Tallon & Kraemer define alignment as the extent to which the IT mission, objectives, and plans support and are supported by business mission, objectives, and plans.
Chan, Huff, et al. see strategic alignment as the degree to which the resources being directed to each of the seven dimensions of IS strategy are consistent with the strength of the organization’s emphasis on each of the corresponding seven dimension of business strategy (aggressiveness; analysis; defensiveness; futurity; innovativeness; proactiveness, and riskiness). Luftman and McKeen & Smith approach business-IT alignment as applying information technology in an appropriate and timely way and in a harmony with business strategies, goals and needs.

Maes sees alignment as a concept aiming at the exploitation of IT in an organization, at the effective enabling (and not disabling) of the organization by IT. Reich and Benbasat defined two types of strategic alignment: short term where business and IT executive understand and are committed to each other’s short-term (one to two year) plans and objectives; and long term where business and IT executives share a common vision of the ways in which IT will contribute to the success of the business unit.

A number of researchers highlighted the value of strategic alignment; it is considered as an important concern to the practitioner community that management has been grappling with since the mid-1980s. Brancheau found out that alignment was a perennial top ten IT management issue in a series of surveys. One of the top two concerns of business and IT executives in the 1990s is the need to improve alignment between the organization’s business plan and its deployment of IT. A recent survey of over 300 CIO’s and CEO’s revealed that IT-business alignment is currently their number one priority. As organizations evolve, and engender new forms of IT-enabled competitiveness, strategic alignment is likely to assume greater degree of importance.

Researchers noted that strategic alignment is linked to IT business value; they argued that organizations’ inability to realize sufficient value from IT investments is due in part to an absence of strategic alignment. Alignment between business and IT strategies has been found to positively influence the effectiveness of company information systems. Alignments has been found not only to be a significant and positive predictor of the potential capabilities of an organization’s IT infrastructure, but also to be an organization-wide issue that directly impacts overall performance, and in perceiving higher payoffs from IT. Also alignment of organizational and technological infrastructures has been found to enhance business performance.

Where studies of strategic alignment exclude measures of firm performance, there is often an implicit assumption that greater levels of strategy alignment are preferable to lower levels of strategic alignment. Among those studies that have considered the performance impacts of strategic alignment, there is often a wide variation in the type of performance metrics used.

For example, Venkatraman (1989) and Chan, Huff, Barclay and Copeland (1997) use metrics such as net margin, market share, revenue growth, return on investment, cash flow and profitability. Yet, with the exception of Chan et al. (1997), the empirical literature has remained silent on the degree to which strategic alignment has impacted IT
business value (where IT business value mediates the link between strategic alignment and firm performance).


Figure 1. Strategic Alignment Model

This figure shows that, if a firm wants to generate best performance levels, it should align its IT strategy with its strategy and its organizational structure. In others words, firms can achieve best performance levels by aligning IT strategy with corporate strategy and structure.
The literature suggests that firms cannot be competitive or successful if their business and information technology (IT)/information systems (IS) strategies are not aligned.

Strategic alignment positively influences IT effectiveness, leading to greater business profitability. Conversely, it is argued that failure to leverage IT may seriously hamper a firm’s performance and viability.

Strategic alignment’s importance is well known. Papp indicates that the importance of this concept has been documented since the late 1980s and continuous to be ranked one of the most important issues faced by business executives. Most of these investigations examine the impact of firm performance, given the firm’s current alignment perspective.
Organizations embraced IT due to its effect in improving their internal operations, thereby reducing internal costs and developing products more quickly. IT also supports sales and marketing processes in many ways. It provides salespeople with better information about prospective customers and helped them identify and demonstrate the right product choices. Using IT, companies can set better marketing strategies based on accurate and timely information. In summary, IT can support a company throughout all its value chain: product design, procurement, manufacturing, sales and marketing, delivery, customer service, and finance.

But for IT to play a major role in realizing firm performance, known as its business value, strategic alignment or alignment of information systems (IT) strategy with business strategy should be achieved. This paper addresses the issue of strategic alignment from several perspectives and states the preconditions necessary to realize it. The study introduces also a number of alignment frameworks and models proposed by researchers in order to help firms determine their alignment level. Finally, the paper presents a case study of an India manufacturing firm Godrej Interio in kitchen design, discusses its strategic alignment situation and recommends ways of evaluating and improving it.

Existing tools for performance analysis and instructions for their implementation have been primarily developed for large firms. Compared with large enterprises, small and medium-sized enterprises (SMEs) have fewer financial resources, less technical expertise and poorer management skills (Blili & Raymond) and have only started to use IT relatively recently.
The present research focuses particularly on SMEs and seeks to test if this type of enterprise could achieve best performance levels by aligning strategy, structure and IT.




























Chapter 3. Analysis of Work Done
3.1 Analysis of the Problem under research

Ø Misalignment in organizations (SME) results in a redundancy and inefficiency in IT functions and in an increase in costs and delays. It can even be one of the critical reasons behind the failure of IT to improve organizational performance.

Ø Strategic alignment is not only critical to organizational effectiveness and efficient resource utilization, but alignment must be present before IT can be chosen and diffused to achieve maximum IT effectiveness.

Ø Need to confirm that strategic alignment is related to payoffs from IT at the process-level?

Ø However SMEs in India, which constitute more than 80% of total number of industrial enterprises and form the backbone of industrial development, suffer from the problems of sub-optimal scale of operation and alignment of business strategy with IT.

Ø Indian SMEs are facing a tough competition from their global counterparts due to liberalization, change in manufacturing strategies and turbulent and uncertain market scenario.

Ø Analysis of the fact: Is Strategic alignment leading to greater payoffs from IT or this relationship is only valid up to a certain critical level of strategic alignment?

Ø Although there may be some consensus on the changing role of I/T within organizations, managers are still confronted with basic questions such as:
ü What are the implications of I/T in my business operations? Today? In the future?
ü What are the alternative perspectives for leveraging information technology capabilities for business operations?
ü Is the locus of I/T competence "inside" or "outside" the operation?
ü What is the executive role of senior management for leveraging I/T capabilities?
ü How should the I/T function be organized, and what is the role of I/T outsourcing?
ü What are the appropriate criteria for assessing I/T-based benefits?
Ø Investigation of the relationship between strategic alignment and organizational flexibility?
Ø Identify if IT can help reduce any of the negative consequences of strategic alignment?

Ø In this paper, I will explore both of these questions in the context of a process oriented model of IT business value and strategic alignment. Both variables are examined at the process-level and at the firm level.

Ø To solve the problem of measuring Information Technology (IT) productivity, different perspectives must be found to evaluate IT-based systems implementation. The process and goal of achieving competitive advantage through developing and sustaining a symbiotic relationship between business and IT.
Ø Inappropriate alignment can cause problems not only with the development and integration of business and information technology strategies, but actually prevent technology from being leveraged to its maximum potential in the firm. Since information technology plays an increasingly vital role in corporate decision-making, its correct application will facilitate both a more competitive and profitable organization.
TOP FIVE ENABLERS
ü Understanding the business environment
ü Close partnership between IT and business
ü Support for IT
ü Linked IT & Business plans
ü Strong IT leadership
Figure 2. IT-Strategy Framework

TOP FIVE INHIBITORS
ü Lack of support for IT
ü Lack of influence from leaders
ü Lack of business communication with IT
ü Lack of business commitment of budgets for IT investments
ü Lack of clarity and predictability of corporate goals/directions

REASONS FOR FAILURE
ü Too internally focused
ü Ignore processes that identify the purpose and type of alignment required
ü Not being able to measure resulting internal efficiency and external market engagement
ü Individuals and teams planning/performing on an ad-hoc basis
ü Lack of leadership and processes to define & implement political/technical & business requirements

3.2 PROPOSED SOLUTIONS (STUDY OF STRATEGIC ALIGNMENT CONCEPTS)

Strategic Alignment Models and Frameworks (Proposed Solutions)
Researchers have proposed several frameworks of strategic alignment. Some of them will be presented with a special focus on Henderson & Venkatraman, Van Der Zee & Berend De Jong, and Mike Eom & Surinder Kahai frameworks.
Strategic Alignment Model of Henderson & Venkatraman (1990)

The strategic model of Henderson & Venkatraman (1990) is widely used by many researchers and organizations to assess the level of alignment in a firm. The model consists of four parts (see Figure 1). Each part contains three components which, when analyzed together, can be used to operationally define each part. These twelve components (see Table 1) are used to determine the extent and type of alignment within a corporation (Henderson & Venkatraman, 1990; Papp, 1995).


Figure 3. Strategic Alignment Model

The IT Alignment model, is a good framework for comparing, analyzing the IT department goals, objectives and activities to the goals, objectives and activities of the firm. Features of the model highlighted by the authors are: (1) IT strategy as distinct from IT infrastructure and processes; and (2) the concept of strategic alignment as distinct from bivariate fit (relationships involving two domains) and cross-domain alignment as a central element of organisational transformation.

The proposed strategic alignment model is more than the articulation of the underlying axes, the four domains, and their constituent dimensions. It derives its value from the different types of relationships among the four domains; bivariate fit, cross-domain alignment, and strategic alignment. The bivariate fit is the simplest relationship linking two domains either horizontally or vertically.


Table 1. Components of Strategic Alignment Model

Two types of links exist in the model, the vertical one representing the strategic fit or the use of strategy to determine infrastructure. The second link is the horizontal one that is referred as functional integration stating that IT strategies must change as business strategies change and correspondingly, business or IT infrastructures must keep pace as either business or IT undergoes change.

Focusing on three of the four parts of the model at a given time permits both strategic fit and functional integration to be addressed simultaneously (Papp, 1995; Luftman, Papp & Brier, 1999).

Thus, eight perspectives result in all combination of each three parts. In each perspective, there exist three components: the anchor, pivot, and impacted domains.

The anchor domain is the strongest one driving the changes to be applied to the pivot domain. The pivot domain, or weak domain is the area to be changed by the anchor domain. The impacted domain is directly affected by changes to the pivot domain.


Table 2. Strategic Alignment Perspectives

These eight perspectives can be used to assess the level and type of strategic alignment within an organization.

Once the company’s alignment perspective is identified, the next step is to recognize possible future iterations (to be in the same direction as the present alignment cycle) to facilitate long-term planning and strategy formulation. Strategic alignment is achieved by continuous reassessment and adjustments with respect to the perspectives (Papp, 2001; Henderson & Venkatraman, 1990).












Strategic Alignment Model of Van Der Zee & Berend De Jong (1999)

The model proposes the need to integrate business and IT planning using the balanced business scorecard framework. This framework was developed by a research group initiated by Nolan Norton Institute in 1991 to be used in business planning and in measuring business performance (see Figure 3).

The balanced scorecard framework measures a firm’s business performance from four perspectives: financial, customer, internal processes, and organizational learning. A simplified example of a scorecard is shown in Table 3.

Figure 4. The Balance Scorecard



Table 3. Typical Example of Balance Scorecard

When integrating both business and technology using the balanced scorecard, two major problems will be solved: the lack of a common language between business and IT management, and the time lag between business and IT planning processes.

Strategic Alignment Model of Mike Eom & Surinder Kahai (2004)

The model suggests that for alignment to be reached, a degree of agreement and compatibility should be realized between business and IT strategies. The model presents four categories of IS strategy based on Miles and Snow (1978), and Sabherwal & Chan (2001). These categories are:

ü IS for Efficiency that is concerned with internal and inter-organizational efficiencies and long-term decisions
ü IS for Flexibility, which focuses on market flexibility and quick strategic decisions.
ü The third category is IS for Comprehensiveness, considered as a combination of both previous strategies, and the fourth is
ü No IS Strategy when IS reacts to internal and external changes in an ad-hoc manner.

Eom & Kahai (2004) argued that alignment should be achieved between correspondent types of business and IT strategies. For example, Defender organizations need IT systems to mainly support existing organizational structure and processes, thus, IS for Efficiency could be the best IT strategy in this case. The same concept could be applied with the other strategies’ categories.
Other Strategic Alignment Frameworks

Another framework integrating business and IT strategy is the four levels of integration model proposed by Teo & King (1997). The first stage is the administrative integration in which there is a weak relationship between business and IT planning. The second level is the sequential integration where a sequential relationship exists between business and IT planning, the latter primarily focusing on providing support for business plans. The third level is the reciprocal integration, in which a reciprocal and interdependent relationship between business and IT planning, so that the latter plays a role both in supporting and in influencing business plans. Finally, the fourth level referred to as full integration where there is little distinction between the business and IT planning processes, both occurring concurrently in an integrated process.

Synnott (1987) proposed another model for planning; it encompasses five types: No Planning, where no formal planning exist either for business or IT, Stand-alone Planning, where either business or IT plan exists but not both, Reactive Planning at which a business plan is prepared and an IT plan reacts to it having a passive role. The fourth planning type is the Linked Planning interfacing business an IT plan and system resources are matched with business needs. The last type is the Integrated Planning making business and IT planning occurs simultaneously and interactively without distinction between them.

Reich & Benbasat (1996) suggested two dimensions in linking business and IT strategies: an Intellectual dimension related to IT validity and business objectives; and a social dimension regarding mutual understanding and commitment between business and IS executives in an organization. Other researchers have further ideas based on the original model (Papp, 1995; Chan et al., 1997; Kearns & Lederer, 2000).

Another contribution of this research is my definition of, and related approach to measuring, strategic alignment. While strategic alignment is typically defined as a measure of the extent to which IT supports the business strategy, this paper employs a two-dimensional definition based on the notion of IT shortfall (IT fails to support the business strategy) and IT under-utilization (business strategy fails to utilize existing IT resources to the fullest extent possible). In Figure 4, we see a graphical representation of these dimensions of IT shortfall and under-utilization by depicting the bi-directional relationship between the business and IT strategy. The interaction between both strategies will feature prominently in measuring strategic alignment.

Figure 5. Dimensions of Strategic Alignment

For example, perfect strategic alignment will exist when the IT strategy fully supports the business strategy and when the business strategy, in turn, has fully capitalized on the capabilities offered by the IT resources. This suggests that misalignment can occur through a lack of IT support for the business strategy (possibly caused by a lack of IT spending) or, alternatively, by failure to capitalize on IT resources (possibly caused by excessive spending on IT or by failure on the part of executives to understand the business opportunities presented by IT).
Correspondingly, Miles and Snow (1978) proposed four categories of business strategy: Defender strategy values stability, internal efficiency and control to produce products for steady customers. Prospector strategy welcomes innovation, risks, new opportunities, and growth. Analyzer strategy is a mixture of defender and prospector strategies. Reactor strategy refers to responding to environmental threats without a special plan.

Table 4. Miles and Snow Comparative study of Business Strategy and IT Alignment (Source: IBM Journal 1991, Miles and Snow)

Figure 6. A generic framework of information management (Maes, 1999) (Source: CIO magazine Unified Framework Model)

The unified framework is a generic framework for investigating and interrelating the different components of information management, and deals with the interrelationships of
business, information, communication and technology at the strategic, structural and operations levels. This framework is the first real attempt to refine SAM to reflect the fact
that IT and business strategies are moving closer together as technology evolves and becomes more integrated.

The initial framework adds a third vertical and horizontal domain to the SAM to reflect the separation of information/communication from technology, stressing the growing importance of information and information delivery. Their main premise is that the use and sharing of information, and not the provision of information, are the real source of competitive advantage. Information sharing acts as a buffer between business and technology, making the benefits of information more apparent to the business.

The horizontal dimension splits the internal domain into structural and operational levels. The new middle row represents the more long-term architectural components, competencies and infrastructures of the organization, combining all functional areas.

The vertical dimension represents the internal and external information/communication aspects, the interpreting processes of information and communication and knowledge sharing. The vertical column is the translator, the finder of a common language between technology and business. At its core, where (infra) structure meets information/communication, the authors introduce information resource management, and the benefits of a learning enterprise through knowledge sharing. Information sharing and communication are anchors for all other boxes within the model.

3.4 JUSTIFICATION OF SOULUTION: How to Realize Strategic Alignment?

Alignment is not an easy task; it requires large and continuing efforts from the part of business and IT executives. Many researchers proposed several success factors to establish IT-business alignment in organizations. The most important factor to be considered is the existence of a mutual understanding and a shared vision among business and IT executives, and to incorporate their understanding into consistent, integrated business and IT missions, priorities, strategies, and processes. All researches recommend a variety of cross-communication and collaboration between business and IT managers to achieve this understanding.

One of the main enablers of strategic alignment is the necessity of support for IT from the part of senior executives. Business managers should also be competent in IT to be able to exploit IT investments effectively in the organization, and become knowledgeable about the current state of IT practice in order to understand IT-enabled business opportunities.

Alignment requires also IT executives to be involved in strategy development, and demonstrate IT leadership.

A vital factor in ensuring continuous alignment is to consider it as a dynamic and continuous administrative process that does not necessarily follow a rigid plan. Undergoing plans’ adjustments should be performed to cope with internal and external changes occurring in the organization.

Another important issue to be considered is the effect on implementation success on alignment. Many researchers highlighted the importance of implementation as its success engenders trust and cooperation between businesses and IT executives. Failure in IT implementation leaves firms dissatisfied with and reluctant to continue their strategic IT planning and creates problems establishing and maintaining priorities in future strategic IT planning.



3.5 CASE STUDY (SME)

The case study presented is based on several interviews performed with the the plant manager, the IS executive, and the IT consultant (LGF) of GODREJ INTERIO (SME).

Note: Proposed Solution, Technical Justification of the Solution, Technical Environment & Technical Details and Possible Applications in the Industry is covered with the help of this Case Study

3.5.1 Company’s Profile
The "Godrej Interio" name & logo is shared by group of family owned companies involved & furniture, construction & related trades. A fourth generation company was founded with a view to continue & enhance the Godrej Company tradition.
A new era in interior solutions beckons. And who better than Godrej to script new beginnings!!
Years of understanding consumer needs, through R&D and matchless expertise means their products –home furniture, office furniture and special project furniture –are world-class and evolving with time. This phenomenal drive to think new is ably backed by exclusive showrooms and dealer outlets across India.
The changing customer, competitive environment and respect for big brands calls for a younger &modern face of Godrej. A perfect amalgamation of time tested values and contemporary outlook. It reflects the Godrej philosophy of breathing life into monotony. It’s vibrant stylish and comfortable. Godrej Interio recognizes the needs of modern lifestyle and stands dedicated to meet these with ease and aplomb.

GODREJ INTERIO is a company specialized in designing and manufacturing kitchens tailored to the need of each individual customer.. Since then, it went through a tremendous progress and success. At present, it’s considered amongst the most successful and professional kitchen design companies in India.
(http://www.godrej.com/GodrejNew/GodrejHome/OurCompanies/GNB/ConsumerProducts/Furniture)

What distinguishes GODREJ INTERIO from other players in the same business is its philosophy in designing DNA kitchens; i.e. kitchens based on civilizations from several regions in the world: Asian, African, Middle Eastern kitchens, etc.. Driven by such concept GODREJ INTERIO products are well perceived among consumers and are typically associated with high expectations.

GODREJ INTERIO is considered a medium sized enterprise with a workforce of 180 employees, of which 120 in manufacturing and the rest occupying executive and administrative jobs. The organization has a large showroom consisting of three floors, and two factories in Mumbai. The first factory (factory 1) is located around 2 km. from the showroom and is dedicated for manufacturing. Final assembly takes place in the second factory (factory 2), which is located around 25 km. from the showroom. The organization has recently established an overseas branch in Dubai (opened Sep. 2006), and is about to open new markets in Qatar and Saudi Arabia, and at a later step in Canada.

3.5.2 First Attempts in Using Information Technology

Since 1983, the organization has been using computer aided design systems (CADs), which are considered a major tool for this kind of business. Designers started by using a 2-dimensional drawing application, and then switched to a 3-dimensional one on Apple Macintosh environment.

In 1992, management decided to change all computers in the organization to IBM compatibles to cut software and hardware costs. At that time compatibles prices witnessed encouraging price reductions that was hardly met by Apple. The same applied for application software.

From 1992 to 1996, the organization faced many IT problems. First, the computers used have been always encountering hardware problems. This resulted in a delay in business flow. Moreover, Logic Consulting Firm (LGF), Godrej Interio’s independent marketing consulting firm, requested accurate information regarding customers, suppliers, sales, etc, so that they can propose marketing strategies based on a right information foundation.

GODREJ INTERIO had several struggles with more than one small software house to develop an information system that could provide the organization with the information required by LGF. Unfortunately, these early initiatives did not succeed due to many reasons such as failure to develop the system as desired, delays in delivering some modules, or possible business discontinuity of these software houses (very thin on the ground and based on 2 or 3 individuals in most cases)

3.5.3 Towards the Right Direction

To overcome hardware deficiencies in compatible machines, the management switched all computers to IBM originals in 1997.

Regarding the information system required, GODREJ INTERIO decided to develop an in-house system designed by the plant manager using Microsoft Access Database. The system, implemented in 1999, consisted of several separate applications: stocks, suppliers, customers, payroll, planning and quality. At that time, all GODREJ INTERIO departments including manufacturing were hosted in one building only: the showroom. A Local Area Network (LAN) was installed to connect all computers in the showroom (30 computers over 3 floors). Access files were shared between users as well as other individual Excel or Word files designed by employees in sales or accounting departments.

Concerning the design application, Carat was chosen due to its efficiency and ability to create and edit very accurate and sophisticated designs. Unfortunately, using Carat created a major problem: there was a security policy set by Carat making it inaccessible if its date is updated. Due to the lack of control in the organization’s network, users sometimes updated Carat’s date accidentally which resulted in a denial of access to the program. In order to log into Carat again, GODREJ INTERIO had to contact the dealer in Germany to obtain a new entry password.

3.5.4 A Major Shift in Business Strategy

Since it started business, GODREJ INTERIO targeted a niche at the top end of the market (high net worth individuals, etc.), focusing on product exclusiveness and differentiation. In 2000, the management decided to manufacture products that cater for upper middle class who are also looking for exclusiveness but at a lower budget. As a result of this new strategy, customers’ orders increased tremendously, which made the company expand and build 2 factories replacing the original one that occupied part of the showroom building.

In 2005, the organization found itself growing exponentially and had no alternative but to revolutionize how the information flow is managed. Many challenges were faced: the lack of information integration between departments created a communication problem that affected accuracy and promptness. There was a certain degree on uncertainty in the manual accounting outputs (financial statements, cost sheets and periodical reporting, etc). There were problems in managing cash flow, in making analysis and taking decisions based on the information available, and in warehouse management. Most of all, there were no security measures or adequate control on the network, which resulted in unauthorized accesses and virus penetration. Some of the computers in the showroom were connected to the Internet, allowing exchange of files through email sites (hotmail, yahoo, etc).

The absence of a mail server in the organization gave a rise to another security problem with regard to the files to be transferred and the limitation on their sizes especially in case of large design files characterized by graphics. Employees were only able to communicate through telephone lines or physically within the showroom and with the two factories due to the lack of a permanent electronic connection. . There was one server on which all Access, Word and Excel files were stored without protection. Another challenge the management faced was the difficulty in enforcing policies and procedures which became essential in view of the organization expansion, so that business processes would be well structured and not depending on individual management approaches.

3.5.5 A New IT Strategy

Faced by all these challenges, GODREJ INTERIO and its IT consultant (a newly established unit in LGF) cooperated to find the right solution. LGF started first by reviewing the company’s vision, mission, goals and objectives. It then studied the old IT situation very well to identify areas for improvements.

Two major decisions were concluded: to replace the whole network infrastructure and to implement an ERP system to integrate information in different business areas.

Concerning the operating system, LGF set a comparison between Linux and Microsoft Windows. Windows was then chosen because management believes it is better to deal with a well-established body such as Microsoft, possessing a vast experience in research & development, and in meeting users needs. Microsoft India in particular has been expanding its activities by participating in several IT projects with public and private sectors in India. . Based on the above, GODREJ INTERIO selected a Microsoft environment for their IT solution. There was a reluctance to use Linux given its slow development in India, and lack of professionals’ and dealers’ support.

Regarding the ERP system to be selected, GODREJ INTERIO and LGF prepared a market study on available systems. Mr.Vikas Vora, PLANT MANAGER of GODREJ INTERIO stated that the decision approach was based on setting the right balance and synergy between three magic words: “faster better & cheaper”.

When trying to analyze these three words, faster means the fastest implementation cycle possible. When investigating other ERP projects that were implemented in several Indian enterprises, the market study revealed that it took these enterprises 2 or 3 years for partial implementation, and sometimes they failed. This is attributed in part to the complexity of these systems compared to actual business requirements.

“Better” means the better solution applicable to the organization’s business. In most cases, organizations seek latest technologies and highest complexities without checking their compliance with their requirements. GODREJ INTERIO and LGF were aware of this fact, and focused their choice on the most suitable system to GODREJ INTERIO business.

Finally, the last word “cheaper” means the least expensive solution compared to other systems without giving up quality and performance. Microsoft Great Plains was chosen since it met all above requirements.

A feasibility study was performed to estimate the cost of the new solution. The study considered not only the costs of the software, hardware and consultancy fees, but it encompassed also the cost of hiring new staff for data entry, and the indirect costs resulting from the time to be spent in training the staff during the implementation period.

Upon identifying the costs, and the hardware and software to be used, GODREJ INTERIO and LGF made contacts with various IBM (for hardware) and Microsoft (for software) dealers and compared several offers until they negotiated and agreed on the most suitable ones.

An implementation team was formed consisting of GODREJ INTERIO’s, the plant manager, the cost manager, the IT executive, and the consultants from LGF. The pre implementation phase included many activities taking place in parallel, such as setting the new network infrastructure, installing the servers’ software, installing Great Plains and deciding which modules to start with, providing the necessary training for all the employees involved, deciding on the data to be transferred from the previous Access system, and putting a unified recoding system to be followed for each module. This phase lasted about 3 months from 10/2005 to 12/2005. General training sessions were provided for all employees involved in the new system. The implementation team attended all sessions to acquire the full picture. They believed that each employee attending all sessions would be mainly interested on the part related to his scope of work

3.5.6 The Implementation Phase

On 1-1-2006, the implementation of the IT strategy commenced by entering data on Great Plains by a team hired especially for this task, and working in parallel with the old manual team. The plan was to operate online after three months. The implementation team provided support to employees by explaining the benefits to be obtained from the new solution. There was a special focus on assuring old employees that the new system will not replace them: on the contrary, it will facilitate their work, and provide them with timely and accurate information.

During this phase, individual trainings were given to each operator from the software dealer staff. Many problems aroused, like, for example, the inability of some employees to understand the system, especially, that all menus are in English, which constitutes a language barrier for some of them used to work in Hindi. To overcome this problem, more training was provided along with a translation of some of the English expressions to facilitate using the system.

During the whole process, the implementation team was evaluating the situation on daily basis, while getting feedback from the employees using the system, and acting seriously upon their comments. The most important thing was to make the employees feel that they’re part of the organization, and that they can participate in taking decisions, “build a company of citizens not employees”, as Mr. Vikas Vora declared.

In order to endorse the use of Great Plains, management decided that by April 2006, only electronic documents from Great Plains modules would be approved, which means that the manual system in these areas would not be accredited.

3.5.7 Present Situation

Since April 2007, the organization started working online within most departments. The modules implemented are: customers, suppliers, stocks, fixed assets, receivables, bank reconciliation, general ledger, and purchased order enhancements. The license for Great Plains was extended to cover 16 users working simultaneously instead of 8.

Communication between employees in all departments is facilitated through emails, reducing the needs to use phone lines or face-to-face meetings as before.
The new network connects all computers in the showroom departments internally (with 1 GB transfer rate), and with factory 1 through a Virtual Private Network (VPN). The number of computers in the showroom and factory 1 reached 75 computers. There are10 servers installed in the showroom: a file server, where all Carat and other data files are stored, 2 servers for Great Plains, an Internet Security and Acceleration server (ISA), a mail exchange server, a Norton server, a domain controller server, a life communication server that provides instant messaging service, and 2 backup servers.

3.5.8 Benefits Acquired

The benefits obtained from this new IT strategy were more than management expected. Most importantly are the accuracy and the better control on accounting transactions and reporting documents avoiding human calculation errors, the ability to keep a close watch on the company’s inventory to check the movement of raw materials and final products, The remarkable time saving and punctuality throughout the whole business cycle as well as the cycle compliance proved to be an invaluable plus, since business processes are well organized, and holds and posting procedures are performed in an automatic yet a faster way. In addition, the new strategy paves the way to the direction of a paperless organization.

Connecting factory 1 to the showroom enabled the manufacturing department to see all Carat files instead of getting paper copies of all designs from designers, and provided access to Great Plains as well.

There are also intangible gains of great value like enabling the employees to obtain the information they require in an easy and convenient way and empowering them with more knowledge and control, which fosters their loyalty to the company. Employees are motivated to increase their collaboration and to share information since management encouraged communication between all departments. The new strategy offered the opportunity for ambitious employees to be upgraded by providing them with the necessary information required for more focused analysis that could lead to a better work performance.

The system had also an effect on enhancing customer support by providing the sales and support staff with the current status of each customer and with a complete tracking of all
his transactions and history with the company. This enables the staff to serve customers better and faster.

3.5.9 Return on Investment

From a return on investment perspective considerable savings were made on many fronts, and meaningful additional profits were realized. To start at the beginning of the activity cycle, the accuracy in quantity determination and a better grip over prices resulted together in reducing the material cost and saving about 10% on purchase orders.

Then, at the manufacturing stage, early order planning and schedule optimization allowed a decrease in production cost in the range of 2%. The feedback from the system enabled management to monitor job costs closely hence enhancing budget control and squeeze variances. Sales revenues benefited from the instantaneous access to current and updated bills of material and currency exchange rates. The documentation of change orders requested by customers availed a further 1% cost saving.

Finally, to wrap up the activity cycle, the aging receivables alerts prompted better collection contributing to the overall savings by another 1%. From the marketing perspective the company was able to continuously carry out cost-profit-volume analysis by adjusting prices in order to achieve its goals. This caused a significant leap in profitability by about 10%.

3.5.10 Future IT Projects

As for IT future prospects, GODREJ INTERIO is planning to extend the network to cover the computers in factory 2 as well, to increase the bandwidth of the connection between the organization branches in Dubai and India and connect the showroom in Dubai with Great Plains, and to start working with Microsoft Instant Messaging Service (IMS). This application will allow life communication between computers in the showroom, the factories, and the organization branch in Dubai. The manufacturing module in Great Plains will be also installed hoping that integrating it with the other modules could automate most of the production cycle.

The Human Resources module will be used after making several changes related to the payroll system in India. The standard HR module produced by Microsoft does not match some aspects of the Indian employment regulations.

A business portal (Intranet) will be implemented. This portal will have a great effect on achieving more transparency in the organization since it will contain information of interest to the employees such as performance, appraisal and attendance reports. It will also contain the policies and procedures and will enable more communication and collaboration between the employees by establishing discussion boards, publishing events, memos, meetings, etc. Employees will be able to access Great Plains through the portal remotely from any place to get real-time information about products, customers, inventories, etc.

A company’s Web site has just been launched. The management plans to use the site to explore new business opportunities such as, for example, selling kitchen designs globally, and providing tips and information related to the company’s fields of expertise.

GODREJ INTERIO also hopes to connect Carat application to Great Plains. This can be achieved by making changes on Carat so that it accepts coding of designed units. Once accomplished, kitchens pricing could then be calculated automatically and presented on Great Plains once a design is made.
CHAPTER 4. DISCUSSION (Findings and Recommendations)

4.1 FINDINGS

When investigating alignment in GODREJ INTERIO based on the literature review and the case study presented above, I have focused on two main questions (Depending upon the data collected): what is the type and degree of alignment in the company? And do the pre-conditions or enablers for alignment exists, and if they do, to which extent?

Regarding the type of alignment in the company, when applying the strategic alignment model of Henderson & Venkatraman (1990) to the case in hand, I conclude that GODREJ INTERIO is following a Strategy Execution perspective. In this perspective, business strategy is the anchor domain meaning that the company has a strong strategy driving changes on the business infrastructure, which in its turn has a major effect on the IT infrastructure. In this case, IT’s role is mainly reactive or responsive whose main purpose is to meet the demands of the business strategy. IT goals focus on reducing delays and errors, enhancing quality of services, and on saving business cycle time.

A comparison between business and IT strategy types as mentioned by Miles & Snow (1978) reveals an incompatibility between the two strategies’ categories. Business strategy in GODREJ INTERIO can be categorized under Analyzer type - where management maintains stable business while adopting creative initiatives at the same time - and transferring to a prospector one focusing mainly on innovations, risks, new opportunities and growth. This business strategy is totally different from the IT strategy adopted by the organization, since the IS strategy can be considered as IT for Efficiency concerned with internal and inter-organizational efficiencies and long-term decision-making. In order to be aligned with GODREJ INTERIO business strategy, more efforts should be exerted to change the IT strategy to IS for Flexibility characterized by its dynamic nature, or at least to IS for Comprehensiveness which is a mixture of both prior IT strategies.

Another area of improvement could be to fully integrate business and IT planning and processes using the balanced business scorecard to measure business performance in an organization as suggested by Van Der Zee & Berend De Jong. As the model noted, by following this approach, two major problems in IT management can be solved:
ü The absence of a common performance measurement language between business and IT executives, and
ü The time lag between business and IT strategies.

In the case of GODREJ INTERIO, the first problem does not exist since IT management is strongly involved in business, and business executives are extremely competent in IT, which makes both parties use a unified language when communicating with business executives.

Following this framework will mainly help in solving the second problem; as we notice from the case study IT strategies are set and implemented to face challenges resulting from applying business strategies. Integrating both planning processes will allow IT decisions to be taken in parallel with business ones which constitutes a proactive approach instead of initiating IT solutions in response to problems resulting from business changes. Applying the business scorecard framework could also help GODREJ INTERIO in measuring IT payoffs in more fields not considered by the organization like customer and organization learning perspectives.

Concerning the Preconditions for alignment, the study shows that most alignment enablers presented in the literature exist in GODREJ INTERIO. There is a strong relationship between business and IT executives, exchange of ideas occurs frequently and takes place in both formal and informal structures. The Plant Head and the Plant manager have a strong IT knowledge and are always aware of IT state and progress in the organization. IT executives are also involved in the business since the IT consultant is aware of the organization’s objectives and strategy, and the IT executive in GODREJ INTERIO was first working in the HR department, and then moved between several departments in the head office and both factories to be well acquainted of all business aspects in GODREJ INTERIO. The implementation phase passed smoothly as support and involvement were provided by the top management during the whole implementation period.

The direct link between an I/T strategy and organizational infrastructure has no straight-forward logic. One cannot and should not simply seek to identify and adopt the best available technology to restructure the organization or streamline the business processes without due consideration to the two alignment perspectives that have I/T strategy as the driver: competitive potential and service level. The former identifies the potential impact of I/T strategy on business strategy with consequent implications for the organizational infrastructure. The latter seeks to provide the best possible service to the internal client by developing the appropriate basis for the redesign of the I/T infrastructure. We would expect that in the absence of such understanding, there would be a significant probability of failure for investments made to transfer business processes, because of an inability to provide the information necessary to execute the processes

IT can take a more strategic role in GODREJ INTERIO in the future, as the environment in the organization is inductive to this direction. Past successful implementation and the long-term and dynamic vision of the management are the building blocks in such approach.




4.2 RECOMMENDATION: "Which alignment perspective is the best?"
As researcher and observer of these phenomena, I do not believe that there is one universally superior mode to formulate and implement strategy. If there were, it would not be strategic because all firms would adopt it. The four dominant alignment perspectives that use the two strategies as the driver are equally useful and powerful in thinking about the role of I/T in organizational transformation (SAM).
Indeed, I would urge managers not to consider I/T as a panacea and consequently focus only on those two perspectives with I/T strategy as the starting point (namely, competitive potential and service level). Nor do I want to argue that business strategy should always be the starting point and adopt only the other two perspectives on strategic alignment. The potential for I/T impact is so varied and complex that the executive must consider these perspectives as alternative conceptual lenses and be prepared to continuously make adaptations.
Other papers deal with a set of themes that complement the strategic alignment concept. Specifically, the paper by Luftman, Lewis, and Oldach, Miles and Snow explores in more pragmatic detail how to translate the Strategic Alignment Model into management frameworks and action plans for the transformation of the enterprise. Keen develops a companion concept of a fusion map to link information technology to business operations; Boynton, Victor, Van Der Zee & Berend De Jong and Pine examine some of the structural transformations in the market and explore the potential role of information technology capabilities; Davidson provides a complementary perspective by looking at the role of organizational competencies enhanced through information technology; Konsynski considers in some detail the possibility of redefining firm boundaries through information technologies and the required management strategies to compete in the changing marketplace; and Broadbent and Weill discuss valuable lessons from cases in the Australian banking industry on this topic.
My hope is that the conceptual model of strategic alignment and the companion papers will go a long way toward providing a set of ideas, tools, and illustrations to leverage the emerging capabilities of I/T for transforming organizations and markets.









4.3 CONCLUSION

The study highlights many aspects related to IT-business alignment revealing its importance in realizing business value for organizations, and presenting ways to achieve it.

My research indicates that IT accelerates firm growth because it enables firms to scale -- an ability to manage increases in the complexity of their business processes, organization and business model. Firms with business process scalability find it easier to overcome obstacles to growth, differentiate themselves from competitors, and quickly capitalize on opportunities. IT does matter. It is an essential ingredient in long-term business success and not merely a commodity that adds little to the firm’s ability to thrive. IT drives growth.

On managerial field, this research contributes to encourage managers of SMEs to more considerate, when adopting a new technology, the importance of the alignment to generate a better organizational performance. Implementation of the model to determine which perspective a company is following yields important insights with which they can maximize their information technology investment and develop their business and technology strategies. The results of this analysis confirm that strategic alignment is related to payoffs from IT at the process-level. From this, I can conclude that firms that use IT to provide greater support for the business strategy will realize greater payoffs from IT. Despite this, my findings also point to the existence of an apparent alignment dilemma: strategic alignment may lead to greater payoffs from IT, but this relationship is only valid up to a certain critical level of strategic alignment. Beyond this point, further strategic alignment in fact leads to a decline in IT payoffs.
Aligning IT with the business requires you to learn about the business, validating the specific needs and challenges you are identifying, proposing technology initiatives that will help the business, and gaining full approval and commitment of the operational managers of the company in funding and implementing these initiatives.
The results of the research indicate that aligning IT strategy in SME's generates best performance levels. To put it another way, the results suggest that there is a direct positive link between strategic alignment and organizational performance.
A case study about an Indian company specialized in kitchen design (GODREJ INTERIO) is then presented to show IT impact on improving the company’s business. The research reveals that IT strategy has a supportive role in realizing the organization’s business strategy in GODREJ INTERIO, and suggested guidelines to enhance strategic alignment. The study discusses also the preconditions of alignment in GODREJ INTERIO and finds that most of them are already available. This means that GODREJ INTERIO has a promising future in realizing more IT-business alignment.




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