STRATEGIC ALIGNMENT MATURITY SIM FAIRFIELD-WESTCHESTER DR. JERRY LUFTMAN STEVENS INSTITUTE OF TECHNOLOGY [email protected] 2/20/03 AGENDA 1. WHAT IS STRATEGIC ALIGNMENT? 2. WHY IS IT TAKING SO LONG TO ADDRESS? 3. HOW MATURE IS YOUR IT-BUSINESS ALIGNMENT? Which technology issues will be of greatest concern to you and your company in the next year? 168 163 151 126 72 70 61 56 Better links to customers and suppliers Enhancing corporate-wide processes Aligning IT and business goals Lowering costs of technology Increasing user competence Enabling/enhancing e-business and e-commerce Data security / privacy Implementing new technologies (e.g., wireless) * CEO Responses TOP 3 ARE IT BUSINESS ALIGNMENT ISSUES Ref : Conference Board Organization Concerns Rankings Rank Issues 1 Aligning IS and Corporate Goals 2 Connecting to Customers, Suppliers and/or Partners Electronically 3 Using IT for Competitive Breakthroughs 4 Creating an Information Architecture 5 Improving the IS Human Resource 6 Integrating Systems 7 Developing an IS Strategic Plan 7 Implementing Business Reengineering 9 Cross-Functional Information Systems 9 Enabling Change and Nimbleness 11 Capitalizing on Advances in IT 11 Developing a Digital/E – Commerce Strategy 11 Organizing and Utilizing Data 14 Software Development Quality 15 Developing Executive Information Systems 16 Determining the value of IS 16 Restructuring the IS Function 18 Improving the Systems Development Process 18 Cutting IS Costs Ref: Robert Gray, Anil Gulati - Western New England College Top 10 IS Management Priorities, 2002 Key Findings Improve synchronization Average weighted score (10 = max) 1 Strategizing for IS/business linkage Providing leadership and guidance for the board/executive Demonstrating business value of IS Developing leadership and behavioral competencies in the IS senior mgmt. team Reducing total IT costs Strengthening program/project prioritization and management Tightening security and privacy safeguards Developing e-enabling IT architectures Attracting, nurturing and sustaining IS resources Reducing IT complexity Gartner 2 3 4 5 6 7 8 9 10 • During tough times, strategizing and executive leadership are more important than ever, as is eenabling the enterprise Delivering value, cut costs • Now is the time to demonstrate value for IS investments and to focus on better IS management Fix security and business continuity • Privacy and security concerns top the IS management agenda • The scope of security includes business continuity CSC Survey Rankings ’01 ‘00 ‘99 ‘98 ‘97 ‘96 ‘95 ‘94 ‘93 ‘92 ‘91 ‘90 ‘89 Aligning IS and Corporate Goals 2 5 3 1 1 1 1 2 2 1 2 4 2 Connecting to Customers, Suppliers Electronically 6 1 1 4 5 7 7 16 16 20 15 19 NR Organizing & utilizing data 4 5 2 3 2 2 3 3 4 4 5 7 6 Developing an E-Business Strategy 13 4 4 19 NR NR NR NR NR NR NR NR NR Integrating systems 10 7 5 6 6 5 16 8 11 13 9 16 12 Optimizing Enterprise-Wide Systems 1 2 5 NR NR NR NR NR NR NR NR NR NR Instituting cross-functional IS 7 9 7 6 9 3 2 4 4 6 3 3 7 Capitalizing on Advances in IT 14 12 8 5 3 5 15 13 14 19 20 NR 17 Improving the IS Human Resource 20 15 9 2 7 11 5 9 12 5 13 11 8 Educating management on I/T 12 13 9 11 13 13 11 18 18 16 14 2 3 Using IT for Competitive Breakthroughs 16 7 11 10 3 4 13 15 15 14 12 8 1 Creating an Information Architecture 18 16 12 8 8 9 8 5 7 3 8 9 5 Cutting IS Costs 15 14 13 12 12 15 17 12 6 11 11 10 14 Improving the Systems Development Process 11 11 14 13 11 12 10 6 3 9 4 6 13 Updating Obsolete Systems 9 10 15 9 10 8 9 7 8 18 NR 13 NR Changing technology platforms NR 18 16 17 16 14 12 9 10 NR NR NR NR Restructuring the IS Function 19 17 17 13 17 17 NR NR NR NR NR NR NR Managing Dispersed Computing NR 20 18 20 15 16 NR NR NR NR NR NR NR Determining IS value NR 19 19 16 19 19 NR NR NR NR NR NR NR Implementing Business Reengineering (Transformation ’01) 8 18 20 13 14 10 4 1 1 2 1 1 ‘89 Protecting and Securing IS 2 NR NR NR NR NR NR NR NR NR NR NR NR Optimizing Org. Effectiveness 5 3 NR NR NR NR NR NR NR NR NR NR NR Top IS/IT Issues IT is an equal agenda item in your company’s strategy and planning sessions STRONGLY AGREE AGREE 7% STRONGLY DISAGREE 18% 20% NEUTRAL 27% 28% DISAGREE Ref : CIO and Boston-based consultancy ICEX Corporate executives were asked: Which subjects are included in your formal business strategy? Product strategy 51% E-business strategy 49% Sales/marketing 43% Customer service 43% Competitive position 38% IT’s Role Manufacturing 35% 8% SOURCE: CUTTER CONSORTIUM, ARLINGTON, MASS. What is the Manager of key data, communications, hardware, and software role of IT at your Vital utility, like electricity company ? Tool for improving businessprocess efficiency Resource for creating new business processes Instrument for cutting costs within the company Core part of decision-making team that sets overall strategy Responsible primarily for technology maintenance Cost Center and drain on corporate resources Note: Multiple responses allowed Profit Center 10 20 30 40 % of respondents Ref: Optimize Research 50 60 70 WHAT IS STRATEGIC ALIGNMENT??? Where is the Value From IT Investments? External IT Investments Business Transformation Strategic Benefits Internal Every business is an information business. Information is the glue that holds value chains & organizations together. A New Perspective IT Investments Investments in Business Change!!! Value Management Framework IT Enabler: Business Process: Portfolio Management Options IT-Business Process Business Outcome: The Strategic Alignment Model BUSINESS IT Business Strategy IT Strategy Technolog y Scope Business Scope Distinctive competencie s Business Governance Systemic competencie s IT Governance Strategic Fit Administrativ e Structure Processes IT Architecture Skills Organizational Infrastructure Processes Skills IT Infrastructure Functional Integration Symptoms of Strategic Alignment Problems WHY IS IT TAKING SO LONG TO ADDRESS??? There is no “silver bullet”… It takes a combination of “things” to make it a success!!! Incremental vs Radical Innovation Knowledge Economy internal/external Customercentric, IT enabled/driven differentiation Value Demonstration E-NOUGH Secure, Integrated Infrastructure Leadership Skills: Agility, Experimentation & Learning Hierarchy of Imagination BUSINESS TRANSFORMATION IT can: - Enable - Drive - Inhibit Multiple careers. Rightsizing, Skills Shortage Revenue vs Earnings Growth Global Community & Economy; Enronitis New Org. Structures, X-engineering, Business Partnership Mgt Leverage Core CSFs Enterprise Application Integration: CRM, SCM, & K Disintermediation, Reintermediation, Hypermediation, Infomediation, Aggregation Wireless PDAs via Semantic Web HOW MATURE IS YOUR IT-BUSINESS ALIGNMENT??? Climbing the Strategic Alignment Maturity Model LEVEL 5 Optimized Process LEVEL 4 Improved Process Business Strategy LEVEL 3 Established process LEVEL 2 Committed Process LEVEL 1 Initial Process Alignment Gap IT Strategy COMPETENCY/VALUE MEASUREMENTS COMMUNICATIONS •Understanding of Business by IT •Understanding of IT by Business •Inter/Intra - organizational Learning/Education •Protocol Rigidity •Knowledge Sharing •Liaison(s) effectiveness · •IT Metrics •Business Metrics •Balanced Metrics •Service Level Agreements •Benchmarking •Formal Assessments/Reviews •Continuous Improvement GOVERNANCE •Business Strategic Planning •IT Strategic Planning •Organization Structure •Budgetary Control •IT Investment Management •Steering Committee(s) •Prioritization Process IT BUSINESS ALIGNMENT MATURITY CRITERIA PARTNERSHIP · · · · · · •Business Perception of IT Value •Role of IT in Strategic c Business Planning •Shared Goals, Risk, Rewards/Penalties •IT Program Management •Relationship/Trust Style •Business Sponsor/Champion SCOPE & ARCHITECTURE •Traditional, Enabler/Driver, External •Standards Articulation •Architectural Integration: - - Functional Organization -Enterprise -Inter - Inter - enterprise •Architectural Transparency, Agility, Flexibility •Manage Emerging Tech. SKILLS •Innovation, Entrepreneurship •Cultural Locus of Power •Management Style •Change Readiness •Career crossover; training/education •Social, Political, Trusting Interpersonal Environment •Hiring and retaining Level 5 Strategic Alignment Maturity Summary •Optimized process •COMMUNICATIONS: Informal, pervasive •COMPETENCY/VALUE: Extended to external partners •GOVERNANCE: Integrated across the org & partners •PARTNERSHIP: IT-business co-adaptive/improvisational •SCOPE & ARCHITECTURE: Evolve with partners •SKILLS: Education/careers/rewards across the organization Level 4 •Improved/ managed process •COMMUNICATIONS: Bonding, unified •COMPETENCY/VALUE: Cost effective;Some partner value;Dashboard managed •GOVERNANCE: Managed across the organization •PARTNERSHIP: IT enables/drives business strategy •SCOPE & ARCHITECTURE: Integrated with partners •SKILLS: Shared risk & rewards Level 3 •Established focused process Level 2 Level 1 •COMMUNICATIONS: Good understanding; Emerging relaxed •COMPETENCY/VALUE: Some cost effectiveness; Dashboard established •GOVERNANCE: Relevant process across the organization •PARTNERSHIP: IT seen as an asset; Process driver;Conflict seen as creative •SCOPE & ARCHITECTURE: Integrated across the organization •SKILLS: Emerging value service provider;Balanced tech & business hiring •Committed process •COMMUNICATIONS: Limited business/IT understanding •COMPETENCY/VALUE: Functional cost efficiency •GOVERNANCE: Tactical at Functional level,occasional responsive •PARTNERSHIP: IT emerging as an asset; Process enabler •SCOPE & ARCHITECTURE: Transaction (e.g., ESS, DSS) •SKILLS: Differs across functional organizations •Initial/Ad-Hoc process •COMMUNICATIONS: Business/IT lack understanding •COMPETENCY/VALUE: Some technical measurements •GOVERNANCE: No formal process,cost center, reactive priorities •PARTNERSHIP: Conflict; IT a cost of doing business •SCOPE & ARCHITECTURE: Traditional (e.g., acctng, email) •SKILLS: IT takes risk, little reward; Technical training Strategic Level 5 •Optimized process Alignment •COMMUNICATIONS: Informal, pervasive •COMPETENCY/VALUE: Extended to external partners Maturity •GOVERNANCE: Integrated across the org & partners Summary •PARTNERSHIP: IT-business co-adaptive/improvisational •SCOPE & ARCHITECTURE: Evolve with partners •SKILLS: Education/careers/rewards across the organization Level 1 •Initial/Ad-Hoc process •COMMUNICATIONS: Business/IT lack understanding •COMPETENCY/VALUE: Some technical measurements •GOVERNANCE: No formal process,cost center, reactive priorities •PARTNERSHIP: Conflict; IT a cost of doing business •SCOPE & ARCHITECTURE: Traditional (e.g., acctng, email) •SKILLS: IT takes risk, little reward; Technical training IT IS NOT JUST THE LEVEL OF MATURITY WHERE IS THE ORGANIZATION STRONG/WEAK? WHERE IS THERE DISAGREEMENT? WHAT ARE THE IMPLICATIONS? WHAT CAN BE DONE TO IMPROVE THE MATURITY LEVEL? IT OPENS THE DOOR TO DISCUSSING ALIGNMENT
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