Proceedings of the 38th Hawaii International Conference on System Sciences - 2005
Aligning IT with Firm Business Strategies
Using the Balance Scorecard System
Qing Hu
Florida Atlantic University
[email protected]
Abstract
High levels of investment in IT and related
products and services over the last two decades have
produced only mixed results. Research has shown
that one of the most significant determinants of
successful IT investment is the alignment between IT
and the competitive strategies of a firm. Yet, it is
largely unclear to both researchers and practitioners
how to achieve such alignment in a complex business
environment. In this paper, using the IT alignment
model of Reich and Benbasat [27] as the underlying
theory, we present the preliminary findings of a case
study on how one company used a well established
strategic management tool, the Balanced Scorecard,
as the framework for aligning its IT initiatives with
business strategies, that resulted in financial success
for the company.
Key words: IT alignment, IT strategy, Balanced
Scorecard, relationship management, IT management
1. Introduction
Studies have shown that misalignment, or the
lack of alignment, between IT and business strategies
is one of the main reasons why organizations fail to
realize the full potential of their IT investments [5, 6,
11, 22]. On the other hand, organizations that have
accomplished a high degree of alignment are often
associated with better overall business performance
[3, 7, 6, 26, 27]. As a consequence, the strategic
alignment between business and IT has consistently
been one of the top concerns of business executives
and IT managers around the world [3, 22, 27, 31].
Luftman et al. [22] argue that in the increasingly
competitive global markets, business success depends
on the harmony of business strategy, IT strategy,
organizational structure and processes, and IT
infrastructure and processes. It is not sufficient for
firms to work on those areas in isolation, given the
extent to which IT is embedded in business processes,
products and services, and the information
requirement in a fast-changing market condition.
C. Derrick Huang
Florida Atlantic University
[email protected]
Given the importance of aligning IT with
business and the fact that firms struggle to achieve
such an alignment [1, 5, 6, 13], IT researchers and
practitioners alike have made many attempts to
address the issue of how to achieve alignment. From
the strategic alignment model of Henderson and
Venkatraman [11], to the recent alignment model of
Reich and Benbasat [27], a number of frameworks
and methodologies have been developed, some of
which have been adopted in a large number of
organizations [20, 26]. Yet, “alignment is not a state,
but a journey–one that is not always predictable,
rational, or tightly planned” [6, p. 98]. Strategic
alignment requires not only a set of steps and
procedures, but also a continuing process that can
align, monitor, and adjust in order to stay on track
over a long period of time, and one that is capable of
handling contingencies and inevitable changes in
organizations and the marketplace. Most of the
existing alignment frameworks and methodologies
seem inadequate in that aspect.
What is clearly called for, as a logical extension
to the current alignment literature, is the development
of a framework that encompasses major phases of
alignment and from which processes, measures, and
checkpoints can be improvised in the context of a
specific organization. In this paper, we expand the
alignment model of Reich and Benbasat [27] with
two new components, the relationship management
antecedent and the Balanced Scorecard management
tool. We use this model to explain how a
biopharmaceutical company accomplished a high
degree of business-IT alignment and stayed on track
while going through major organizational and market
changes.
2. Research Background
2.1 Alignment between IT and Business
Strategies
Even though the initial concept of strategic
alignment between IT and business can be traced
back to late 1970s [23], it was not until the
introduction of the strategic alignment model by
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Proceedings of the 38th Hawaii International Conference on System Sciences - 2005
Henderson and Venkatraman [11] that managers
began to systematically understand and implement
alignment. In this model, they argued that strategic
alignment between IT and business required four
building blocks (business strategy, IT strategy,
organizational infrastructure and processes, IT
infrastructure and processes) and two fundamental
relationships (strategic fit and functional integration).
Strategic fit recognizes the need for any business or
IT strategy to address both external and internal
domains of a firm, and subsequently guides the
functional integration that concerns more specifically
with how the choices made in the IT domain impact
those made in the business domain and vice versa.
To make the strategic alignment model closer to
an operational framework for practitioners,
Henderson and Venkatraman [11] suggested four
alignment perspectives with each focused on one
building block of the alignment model. The strategic
execution perspective reflects the notion that business
strategy should be the driver for both organizational
design and IT infrastructure choices. The technology
potential perspective focuses on developing an IT
strategy in response to a business strategy and
defining the corresponding IT infrastructures and
processes. The competitive potential perspective
focuses on the exploitation of emerging IT
capabilities to impact new products and services,
influence key attributes of strategy, as well as
develop new forms of relationships. The service
level perspective focuses on building a world class IT
service organization.
Luftman [20] extended the strategic alignment
model by classifying the four main components
(business strategy, IT strategy, organizational
infrastructure, and IT infrastructure) into three
(anchor, pivot, and impact) domains. The anchor
domain is the catalyst or the enabler of a particular
perspective; the pivot domain is the area that has
problems or opportunities that are being addressed in
a particular perspective; and the impact domain is the
area that is being affected by the changes to the pivot
domain. Luftman also argued that the application of
the strategic alignment model was more than just
assessing the components of the model, identifying
the initial perspective and planning the approach, and
then applying it. Instead, alignment should be a
continuous process, in which the previously
identified pivot domain becomes the anchor domain
and the previous impact domain becomes the pivot
domain in the next iteration.
The strategic alignment model, even with the
articulated four perspectives, remains a high-level
conceptual map, which by itself does not reflect the
dynamic aspects of achieving strategic alignment
over time [12]. Subsequently, researchers have
continued the pursuit of operationalizing the model in
a variety of ways in different organizational contexts.
Luftman and Brier [23] proposed a six-step approach
to accomplish alignment, created specifically to
target the enablers and inhibitors of the strategic
alignment identified in a survey of the business
executives of large U.S. firms.
In a significant departure from the strategic
alignment model, Prairie [26] presented the IT
strategic alignment benchmarking approach used at
IBM consulting services.
She argued that by
studying the management processes of the firms that
have achieved a high degree of alignment between
business and IT strategies, management could
identify proven processes that they could implement
in their own organizations.
While many researchers have focused on the
mechanics to achieve strategic alignment by
developing
process-oriented
frameworks
or
methodologies that management can adopt, others
have chosen to address the “soft” factors that might
impact the alignment processes with more enduring
effects. After studying the strategic alignment of ten
business units in three organizations, Reich and
Benbasat [27] found that in the short term, shared
domain knowledge between IT and business
executives and successful IT implementations in the
past led to better communication between business
and IT executives. In conjunction with a strong
connection between business and IT planning, this
ultimately led to alignment. In the long run, however,
they found that shared domain knowledge between IT
and business executives was the most important
factor in strategic alignment.
Asking, “Why haven’t we mastered alignment,”
Chan [6] suggested that total IT and business
alignment is complex and difficult to achieve. “In
fact, IT alignment is best described not as a unidimensional phenomenon but as a superset of
multiple, simultaneous component alignments that
bring together an organization’s structure, strategy,
and culture at multiple levels(IT, business unit, and
corporate), with all their inherent demands” (p 99).
She argued that it was the informal structures, such as
the relationship between business and IT executives,
trust, culture, and communications, that were more
important to, and had an enduring effect on,
achieving alignment than commonly recognized
formal structures such as governance, location, and
infrastructure.
In summary, after more than two decades of
academic research and managerial practice, the
significance of alignment between IT and business
strategies has been well recognized and broadly
practiced [20, 26]. Yet, achieving such alignment
remains a challenge at many organizations today [13].
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For academics and IT practitioners, the key question,
how to accomplish strategic alignment between
business and IT in the complex and dynamic
environment of the real world, remains unanswered.
However, in recent years, a strategic management
tool called the Balanced Scorecard has gained
increasing popularity in management literature and
practices. Researchers of strategic alignment have
taken notice of the potential benefits of using the
Balanced Scorecard as a tool or framework for
implementing and sustaining the strategic alignment
between IT and business strategies.
2.2 Balanced Scorecard as a Performance
Measurement Tool
Kaplan and Norton [15] first presented the
concept of a Balanced Scorecard system for
measuring firm performance from a holistic
perspective. They argued that traditional financial
accounting measures, such as returns on investments,
can only give limited or even misleading signals for
competitive business activities, because they are
lagging indicators of business health. Instead, the
Balanced Scorecard outlines both a firm’s current
operating performance and future performance
drivers by tracking and measuring four dimensions of
business: financial, customer, internal processes, and
innovation and learning.
Since its inception, Balanced Scorecard has been
widely adopted by firms and has claimed an
important role as a performance management tool for
business [17, 19, 32]. In addition to applying the
Balanced Scorecard to an organization as a whole,
attempts have also been made to apply the Balanced
Scorecard to performance measurement in more
narrowly defined corporate functions such as an IT
department [24], project management [8], and
electronic commerce [10].
2.3 Balanced Scorecard as a Strategic
Management Tool
In order to implement Balanced Scorecard, a
firm needs to identify factors in the four perspectives
based on its vision and strategy [15, 25]:
• Knowledge, skills, and systems needed to
improve the business continually (innovation and
learning perspective),
• Necessary factors to build strategic capabilities
and efficiencies (internal process perspective),
• Values that customers seek (customer
perspective), and
• Financial performance to maximize the
shareholder value (financial perspective).
The four perspectives are interdependent, and the
relationship among them is termed “the Balanced
Scorecard theory of business” [16]: firms that
continuously improve their capabilities for learning
and innovation achieve better performance in their
internal business processes which, in turn, leads to
more effective execution of their customer value
propositions and eventually results in sustained
competitive advantage and improved financial
performance. With all the components identified
based on the vision and strategy and the
interdependent relationship leading to the strategy
execution evidenced by financial performance, a plan
for implementing the corporate strategy emerges [18].
2.4 Balanced Scorecard as an IT-Business
Alignment Tool
The Balanced Scorecard has only recently been
adopted as a theoretical model for MIS research.
Initially, the focus was on building an “IT Balanced
Scorecard,” using the four perspectives of the
Balanced Scorecard for a holistic approach to
managing IT projects or IT departments [10, 24, 30].
Martinson et al. [24], for example, outlined a
methodology for constructing a Balanced Scorecard
for strategic IT management.
While the proposed “IT Balanced Scorecard”
approach produces a seemingly appropriate tool for
managing IT, it also tends to isolate the IT functions
from the corporate strategy. An independent IT
Balanced Scorecard, however well constructed, may
not reflect the business strategies of a firm, resulting
in misalignment of IT and business strategies. To
take advantage of the real strength of the Balanced
Scorecard—integrating and managing business
functions based on corporate strategy—a recent
research stream has focused on using the Balanced
Scorecard to align IT and business. Van Der Zee and
De Jong [33], for instance, explored the ways of
integrating business and IT management by
examining two cases of building a corporate
Balanced Scorecard. They argued that the Balanced
Scorecard offers two unique benefits to the alignment
process in contrast to traditional methods. First,
business and IT management can use the same
“performance measurement” language, enabling
discussions on what IT can do to support business
performance. Second, IT can be managed using an
integrated planning and evaluation cycle as other
business processes.
Applying the fundamental
principles of strategic alignment to the management
of emerging technologies, Huang and Hu [14]
demonstrated how Balanced Scorecard could be used
to guide the integration of Web services technology
with a firm’s competitive strategies in order to
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Proceedings of the 38th Hawaii International Conference on System Sciences - 2005
maximize the benefits of this new technology. They
proposed a framework that matches the potential
technical benefits of Web services with the chosen
business strategies in terms of their contributions to
the four perspectives of the Balanced Scorecard.
3. Research Model
In this study, we explore the theory and practice
of IT-business alignment with a case study of how
one biopharmaceutical company extensively and
successfully adopted Balanced Scorecard as its
strategic management tool, as well as a framework
for aligning its corporate functions (IT included) with
business strategies. To guide our exploratory case
study, we anchored our initial research questions on
the alignment model developed by Reich and
Benbasat [27]: the alignment is achieved through two
mechanisms—communication between IT and
business managers and connections between IT and
business planning processes—with two antecedents,
the shared domain knowledge among IT and business
managers and successful IT history. This model is
largely consistent with the alignment literature with
more emphasis on the informal structure and less
focus on the processes of alignment as the strategic
alignment model requires. We argue that in order to
provide a strategic alignment framework that can be
used by practitioners as a roadmap and an action plan,
both the processes and the information structures of
alignment are necessary. From this perspective, we
expanded the Reich and Benbasat [27] model with
two new components: the relationship management
as an antecedent of alignment as suggested by Chan
[6], and the Balanced Scorecard as the mechanism of
alignment. This integrated alignment model is
presented in Figure 1.
This model reflects the following thesis: we
accept all of the propositions in the Reich and
Benbasat [27] model and, further, posit that the
addition of relationship management and Balanced
Scorecard not only strengthens the theoretical
soundness of the model but also enhances its
applicability in practice. Well-managed relationships
between business and IT managers has long been
identified as one of the key antecedents or enablers
for achieving strategic alignment. Chan [6], for
example, found that business executives repeatedly
downplayed the value of formal organizational
structure, but frequently emphasized the critical role
of relationships in achieving strategic alignment. A
longitudinal study by Luftman and Brier [23] was
perhaps more revealing about the role of relationships
in achieving alignment. They found that while
having a close relationship between IT and non-IT
functions was the fourth among the fifteen identified
alignment enablers, the lack of a close relationship
ranked top of the fourteen alignment inhibitors. We
therefore derive this proposition:
Proposition
1:
Active
relationship
management by IT managers will positively
influence the communication between
business and IT mangers and the connection
between business and IT planning.
As a strategic management tool, Balanced
Scorecard has been shown to be robust and adaptive
to many different management scenarios, including
use as a strategic management tool to help
organizations articulate and execute their strategies
and refocus them on their core competences [4, 18].
Recently, researchers have called for Balanced
Scorecard as a strategic alignment tool (e.g., [14],
[33]). The true strength of Balanced Scorecard lies in
its focus on strategy and its emphasis on identifying
initiatives that execute the strategy at all vital areas
and all levels of an organization. Integrated with the
management philosophy of alignment and favorable
informal structures, Balanced Scorecard could be
used to help managers achieve high levels of
alignment. For this reason, we propose:
Proposition 2: Implementation of Balanced
Scorecard as a strategic management tool
will positively influence the communication
between business and IT managers and the
connection between business and IT
planning.
4. Research Methodology
4.1 Methodology
We have chosen case study as our research
methodology. The case study method is most
appropriate when “a ‘how’ or ‘why’ question is being
asked about a contemporary set of events, over which
the investigator has little or no control” [34, p. 9].
Further, case study is regarded a viable IS research
strategy when studying state-of-the-art IS questions
in a natural setting, and when investigating an area
where little or no previous research has been
performed [2]. More specifically, we have engaged
in a single-case, embedded design [34].
To
investigate how Balanced Scorecard can be used to
align a firm’s IT and business strategies, a revelatory
case was carefully identified where the system was
recently implemented with strong management
sponsorship and involvement. When conducting the
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Proceedings of the 38th Hawaii International Conference on System Sciences - 2005
Relationship
Management
Communications
between IT and
Business
Balanced
Scorecard
Shared
Domain
Knowledge
Successful IT
History
IT and
Business
Alignment
Connections
between IT and
Business Planning
Figure 1. The Research Model
research, we focused on the whole organization at the
case level, while giving attention to the IS department
as the embedded unit of analysis.
The research is structured into three phases:
1)identification and formulation, 2)data collection
and analysis, and 3) theory building and validation.
The identification and formulation phase started with
a literature review of the main research areas and the
construction of an initial research framework. This
framework guided the early design of the research as
well as site selection. To refine the initial research
framework, we pre-tested it with our key informant—
the CIO of BIOCO—and added to and clarified its
constructs.
We then designed the interview
instrument for the second phase.
Phase two was data collection and analysis. Data
collection included a variety of techniques, such as
semi-structured interviews, company documents,
archival records, public and published information,
and follow-up email and telephone discussions.
Ongoing field notes were kept to record the progress
of data collection. We also employed the “unique
team role” technique suggested by Eisenhardt [9] in
interviews, where one researcher handles the
questioning and recording, while the other makes
side comments and observations.
As of the writing of this paper, we interviewed
five key personnel at BIOCO: the CIO, three
corporate vice presidents (I, II, and III), and an IT
manager. While the data collection is ongoing, this
limited interview data, along with other company
documents, allowed us to report preliminary findings
of the case study. After all the data have been
collected, we will enter the final phase of theory
building and validation.
4.2 The Case Company
The case company, BIOCO, is a medium-sized
bio-pharmaceutical company located in the southeast
United States. The company develops, produces, and
markets
vaccines
and
antibody-based
biopharmaceutical products that prevent and treat
infectious, autoimmune and addictive diseases. In
the year leading to the case study, BIOCO has several
revenue-generating products and multiple clinical
trial programs aimed at bringing products in the
pipeline to market within a few years. The healthy
and growing state of the company was acknowledged
by the investment community, as indicated by its
stock price, reaching an all time high in early 2004.
To get to where it is today, BIOCO had gone
through a major transition started in early 2000 Prior
to 2000, BIOCO relied on a business model that was
in decline due to a number of factors, and the
company’s financials suffered as a result. The thenChief Operating Office (who had since been
promoted to CEO and President) initiated a series of
strategic restructuring and reorganization efforts to
transform the company into a new biopharmaceutical
business. As part of this transformation, he and the
CIO championed the adoption of the Balanced
Scorecard in 2000 as a strategic management tool.
At the time when the case study was being conducted,
BIOCO successfully implemented
Balanced
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Proceedings of the 38th Hawaii International Conference on System Sciences - 2005
Scorecards at both the corporate and the department
levels. They had started working on developing
Balanced Scorecards for teams and individual
employees.
5. Findings and Discussions
5.1 Evidence of Alignment
Direct measurement of the level of strategic
alignment achieved and maintained in an
organization is undoubtedly difficult. However,
indications of strategic alignment can be observed
and measured, as suggested by Reich and Benbasat
[27] and implied in our research model. We adopted
the measures of “connections between business and
IT planning” and “communication between business
and IT mangers” as indicators of alignment level in
our focal company. As shown in Table 1, the
evidence strongly supports management claims and
our assumptions that BIOCO has achieved a high
level of alignment between business and IT.
The corporate strategy document clearly lays out
the objectives of the IT department for the current
year, and both the CIO and the senior manager of IT
reiterate those objectives for their department in the
interviews. The CIO, in particular, maintains that the
role of IT to the overall success of the company
should be “the enabler so the business can execute its
business strategy,” and he meets with IT managers on
an annual basis to ensure that his department
understands and practices those corporate business
strategies and IT objectives.
Table 1. Evidence of Business-IT Alignment
Connections between Business and IT Planning
"The Information Technology strategy concentrates
on enabling the enterprise with the necessary
business information supported on a cost-effective
technical infrastructure. Among the most significant
elements of this strategy are achieving operational
excellence through discovering opportunities to
perform business processes more efficiently and
supporting the business growth associated with our
initiatives to bring high value products to market."
(BIOCO’s Long-term Strategic Business Plan)
"The [BIOCO] business plan involves several
transformational events with significant implications to
the role of Information Technology. These events are
numerous and involve the globalization of existing
products […] and the launch of [BIOCO product].
This will require enabling technologies to succeed,
some of which exist today requiring upgrades and
some of which do not currently exist requiring
investments of time and capital."
(BIOCO’s IT
Strategic Plan)
“There is an annual strategic planning process, and
out of that comes the business plan approved by the
board of directors, and out of that come the corporate
objectives, and out of that come the departmental
scorecards.” (VP III)
Communication between Business and IT
Managers
“E-mail, voice mail, formal meetings, walking over to
his office, him walking over to my office. I don’t know
what else is there to do with that, but we use them
all.” (VP III)
“We communicate pretty frequently, especially with
our new liaison program because it forces us … to
make sure we meet [the business managers].” (IT
Manager)
“[W]e have a very close relationship and have
identified key people within my group and key people
within IT who have … every-other-week or monthly
meetings on [our IT system].” (VP I)
Connections between IT and business planning
processes are strong at BIOCO. There exists a
formal, annual process for business planning, where
the company examines the current business drivers
and develops the corporate strategic plan (a ten-year
plan).
The strategic plan sets the company’s
milestones for the next year. Based on the strategic
plan and the milestones, all functional areas submit
their own operating plans to form the company’s
tactical plan for the coming year. IT is part of the
process—like all other departments and divisions. Its
operating plan is developed, based on the business
objectives and ratified by the senior executives.
Communication between business and IT
executives also appears to be strong. There are
several formal communication channels. A liaison
program puts IT and business managers in touch on a
monthly, if not weekly, basis. Temporary teams are
created functionally with IT and users when
necessary, and a permanent “IT Investment Review
Committee,” composed of senior executives of the
company, is responsible for prioritizing IT projects
and investments across all business areas. In addition
to the formal channels, IT personnel keep business
managers aware of IT issues related to their functions
informally or on a project-by-project basis. The CIO,
in particular, communicates with other executives
through formal executive-level staff meetings and
strategic planning sessions as well as frequent
informal personal interactions with business
managers.
5.2 Antecedents of Strategic Alignment
5.2.1. Relationship Management Active relationship
management by IT managers seems to be part of the
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core culture of the IT division at BIOCO. The CIO
thinks that relationship management is one of the
most important jobs of IT management, and this
thinking is reflected in his IT department. The IT
Manager stated that it is very important to invest time
and effort in managing relationships with other
departments. Although relationship management
may be a soft, “intangible” factor, the CIO seems to
have established some systematic ways to manage it.
One means of building relationships is to understand,
on an ongoing basis, how to work with the rest of the
company. For that, IT has installed liaisons with
each of the business areas to encourage regular
communication.
Another way to enhance
relationships is to foster the perception that IT is part
of the mainstream business, not just a technology
group. All three vice presidents cited the fact that the
CIO led the corporate implementation of the
Balanced Scorecard project as an example that IT had
stepped outside of the traditional technology
boundary. Other departments, as a result, felt
comfortable to talk to IT and the CIO whenever there
was an IT concern, or when they just sought general
advice from IT to enhance their own work. As Table
2 shows, this relationship management effort by the
IT managers has paid off. We repeatedly heard
remarks that expressed respect for, and trust of, the
CIO and his IT department.
5.2.2. Shared Domain Knowledge
Reich and
Benbasat [27] argued that the level of shared domain
knowledge has a positive influence on both the
communication between business and IT managers
and the connections between business and IT
planning, two indicators of strategic alignment.
Luftman and Brier [23] showed that “IT understands
business” and “IT does not understand business” are
among the top four in a list of 25 strategic alignment
enablers and inhibitors, respectively. Conversely,
“understanding IT by business” and “knowledge
sharing” are among the attributes of the
communications criterion of strategic alignment
maturity [21]. Both business and IT managers in our
case company seem to be well aware of the
significance of understanding each other’s domain
and have strived to enhance their knowledge of other
parts of the business through various means. Both
the CIO and the senior manager of IT have been in
the biopharmaceutical industry for many years, so
they know the business well. The CIO is very much
into the management issues and reads extensively in
the area of strategic management literature. As a
result, he and another corporate VP are considered
the Balanced Scorecard “gurus” in the company and
spearheaded its implementation and on-going
refinement. Furthermore, we found that business
executives extend their knowledge about IT in two
ways. They read stories about IT applications in their
own functional areas and they have led or
participated in IT projects for their departments.
Some quotes from the interviews that support this
finding are shown in Table 2.
5.2.3. Successful IT History A successful IT track
record tends to improve its relationships with
business at all levels [29], and it is argued that the
degree of IT implementation success can enhance the
communication between business and IT executives
and the connections between business and IT
planning processes [27]. In our case company, we
found that business executives in general had a high
level of confidence in their IT division to do the right
thing. Business executives expressed satisfaction
with some of the major IT projects, such as the ERP
implementation they had been involved with. In
cases where issues and problems inevitably
developed, these business executives showed a high
degree of understanding, as VP II puts it: “We strive
for excellence; there are always hiccups along the
way because of the nature of us. But I’m very
satisfied with what our IT group has been able to
accomplish with the resources that they’ve had to
work with over the past several years.”
An interesting finding is that the “successful IT
history” and the “relationship management” seem
interrelated, rather than independent antecedents as
the research model suggests. At BIOCO, strong
relationship seems to enhance the perception and
influence of success and mitigate those of failure.
Conversely, one may argue that weak relationship
exacerbates failure and discount success. However,
further study is needed to understand the dynamics
between these two constructs, especially since weak
relationship is not observed in our case. Some quotes
from the interviews that support this finding are
shown in Table 2.
Table 2. Antecedents of Strategic Alignment
Relationship Management
“So now all of us managers within IT have liaisons
within the business community.
Several times
throughout the year we make sure that we stay in
touch with [other departments]; and at the budget
time, we have meetings that are more informal to
review their requirements… [I]f we don’t have a good
partnership with them, then we’ll fail. So it’s really
extremely critical. Until you learn that, your IT is not
successful.” (IT Manager)
“On an informal basis, I guess I make it a point to get
down to the IT area … multiple times a week,
because I always have needs, in particular, relative to
the website, or I’ll get help on jazzing up a
presentation or something like that. So on ad-hoc
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basis, it’s probably several times a week.” (VP II)
Shared Domain Knowledge
“I’ve known [IT managers] forever, and we’ve got
[name omitted] there that’s been with the company for
a long time… So that structure and the senior
management within IT [are] very much experienced at
[BIOCO]. They’ve grown up with us.” (VP I)
“…I was part of a design-and-development team for
that particular system. I was involved in the design
and development of a previous system that we had
many, many years ago that involved our laboratory
testing as well. I was very much part of the SAP
adoption.” (VP I)
“I read CIO magazine and the Harvard Business
Review monthly. I also research the web on topic of
interest on a weekly basis using the magazine
websites from CIO Insight, InformationWeek, etc.”
(CIO)
Successful IT History
“I think my answer to [the question that if IT has a
good track record in implementing projects and
initiatives] is ‘Yes’... [O]verall, I think whenever we
have any changes, it’s planned well ahead in IT…”
(VP I)
“I think they’re successful…I know we’re all human
and we all make mistakes. We strive for excellence;
there are always hiccups along the way because of
the nature of us. But I’m very satisfied with what our
IT group has been able to accomplish with the
resources that they’ve had to work with over the past
several years.” (VP II)
5.3 The Role of Balanced Scorecard
The implementation of Balanced Scorecard
seems to have a great impact on the company in
many aspects. The CIO feels that the Balanced
Scorecard helps the departments look beyond their
own operations, and VP II thinks that it helps
communicate the company’s goals and strategies,
thus mobilizing everyone in the company. In
addition, all informants believe that the use of
Balanced Scorecard contributed significantly to the
overall success of the company through clarifying
strategies, prioritizing competing projects, and setting
up tangible goals for every department and employee
that are clearly linked to the overall goals of the
company. “You know that if you have to help [my
division] do something in order to meet the Balanced
Scorecard goals, and then that Balanced Scorecard
goes to [my division] and leads into the Balanced
Scorecard goals for the corporate” (VP I).
Our data also supported the proposed role of
Balanced Scorecard in helping BIOCO achieve
business and IT alignment. For the connections
between IT and business planning processes, the CIO
described a typical planning session where the
corporate Balanced Scorecard set up the basic
corporate planning framework and then every
business division plan, including the IT plan, fits into
the big puzzle. In such a planning session, exchanges
such as “Okay, IT, I need you to give me a […]
project” (CIO) unequivocally demonstrated the
connection between IT and business planning
processes under the Balanced Scorecard mechanism.
When IT develops its own scorecard, the measures
have to be based on the corporate scorecard, which,
in turn, reflects the corporate vision and strategies.
And by linking back to the corporate strategies, IT
can align its cost structure, service levels, and capital
investments according to what is paramount to the
business at a particular time. This process provides a
formal mechanism to align IT and business strategies
at BIOCO. More evidence is presented in Table 3.
The Balanced Scorecard’s impact on the
communication dimension of alignment is more
intangible, but still strong. It plays a dual role in
enhancing communication: providing a platform, or
common language, for communication, and
promoting the understanding of the business by the
IT department. “It provides a focal point and
common language around the key value drivers of the
organization” (CIO). In addition, the Balanced
Scorecard helps IT understands other business
areas—thus serving the internal customers—better.
The IT manager stated that “[w]hat [the Balanced
Scorecard] allows is for us to easily acknowledge the
business objectives [of other division]...”; and “I
think they understand more [of the business
objectives and strategies] because of the Balanced
Scorecard” (VP I). Further evidence can be found in
Table 3.
Table 3. The Role of Balanced Scorecard
Communicate corporate vision and strategy and
enhances accountability
“I think it has been paramount and critical to …
mobilize our company and get us moving. …
[E]verybody is moving in more or less the right
direction, and that’s why we’ve seen some of the
success that we’ve seen in our company, particularly
in the past year. It doesn’t happen on day one, okay.
It takes about a year or so to start. [...] We’re into our
second ... year, and maybe it’s even our third year,
and we’re really starting to see it having an effect
now. A very clear roadmap.” (VP II)
Enable IT department to look beyond their own
operation
“Each functional area can become somewhat
narrowly focused on their own business results. The
[Balanced Scorecard] helps to highlight the key
business priorities, many of which measure success
across functional areas. When a problem emerges
in a key area, the entire management team is
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Proceedings of the 38th Hawaii International Conference on System Sciences - 2005
alerted during the monthly business review. Action
plans are discussed and accountability is shared the
following month if the results have not been
corrected.” (CIO)
Strengthen connections between IT and
business planning
“[T]he corporate scorecard … drives where we as a
company are trying to go. All of the functional area
scorecards are supposed to play into the corporate
scorecard to support that corporate scorecard so
that everybody is hopefully moving in the right
direction. I can’t comment on the specifics of the IT
scorecard, but just knowing how we run the
business, I am confident that their scorecard will be
lining up with the corporate scorecard.” (VP II)
Enhance the communication between business
and IT management
“I think they understand more [of the business
objectives and strategies] because of the Balanced
Scorecard. Not understand more what they have to
do, but more understand how they prioritize. I
believe it has to be across the board.” (VP I)
6. Conclusions
In this study, we showed how a mid-sized
biopharmaceutical
company
used
Balanced
Scorecard as a mechanism, coupled with informal
organizational structures such as strong relationships
between business and IT managers, to achieve a high
degree of strategic alignment between business and
IT. In so doing, this study contributes to the theory
and practice of strategic alignment in at least two
ways. First, this research is one of the few, if any,
case studies that show how strategic alignment via
Balanced Scorecard mechanism is actually being
implemented in practice. Second, we augmented the
Reich and Benbasat [27] alignment model with an
important
theoretical
construct,
relationship
management, and a practical tool, the Balanced
Scorecard. We found that the relationship between
IT and other business departments as an important
antecedent to the two dimensions of alignment was
well supported by data from the case study. And we
found that the Balanced Scorecard contributed to the
alignment of IT and business strategies by acting as a
platform for the communication between IT and
business managers, as well as by strengthening the
connections between IT and business planning
processes.
This study has important implications for both
research and practice. For academic research, several
major research questions remain to be studied in the
future. One is the role of CIO in the alignment
process. In our case company, the CIO spearheaded
the implementation of the Balanced Scorecard in the
organization and served as the care-take of this
management system and its continued refinement.
The unanswered question was, how and how much
has this unique role of CIO influenced the alignment?
Another was the connection between the
“relationship management” construct and the
“successful IT history” construct. As we have
already pointed out in Section 5, multiple case sites
would be needed to have a better understanding of
this issue. For IT managers, this study illustrates a
practical approach toward achieving a high degree of
strategic alignment and the informal structures that
are necessary for successful implementation of this
approach.
Acknowledgement
The authors would like to thank Jim Wilder, the
CIO of BIOCO, for his invaluable contribution to this
research project and the manuscript. His insights on
IT management strategies and innovative work on
using Balanced Scorecard inspired this case study.
We are also grateful to the managers of BIOCO for
their cooperation and contributions.
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