S TRATE G I C ALI G N M E N T

A M O DE L FO R O RG A N I ZATI O N A L
TRA N S F O RM ATI O N V I A
I N F O RM ATI O N TE C HN O LO G #

J o h n Hend ers o n
N Venk at ra ma n
.

N ovemb er 1 990

G I S H WP N o 2 1 7 .

S l oa n W P N o 3 22 3 90
.
-

0 1 990 J C
. . He nd e rs o n , N Venkatrama n
.

C e nt e r for I nfo rmat i o n S ys t e ms Re s ea rc h

S loa n S c h ool of M a na g e me nt
M a s s ac h u s e tts Ins titut e of Te c h nolo g y
 Strategic Al i g m n t A M od l for Organ i zati onal T nsformation
n e e ra

S tr a t e gi c Al i g n m e n t
AM o d e l f or O r g an iz a ti o n a l Tr an s f o r m a t i o n m a I nf o r m a ti o n T e c h n o l o gy

Abs tract

Thi s paper develops a model for research an d practi ce of s trategi c

man agement of information technology The mo d el terme d the Strategic
.
,

Alignment M o d el is d efined in term s of four d omains of s trategi c c h oice : b us iness

,

strate gy; i nforma ti on technolog y strate gy; organiza tion i nfra s tru c tu re an d processes ;
an d i nform ation technolog y inf ras tructure an d p rocesses each with its con s ti tu ent
dimen s ions The mo d el is conceptualiz ed in term s of two fun d am ental
.

characteris tics of strategi c management : strategic fit the interrelationships

between external and internal domains ) and fun ctional integra ti on integration
between b u s iness an d functional domains ) A set of propositions is d eveloped base d
.

on thi s model with implications for research and management practi ce .

A c k n o w l ed g em en t s
The authors would like to acknowledge the contribu tions to
.

this research ma d e by Christine Bullen G ar y Ge ts on Charles Gold Jim Sharpe

, , , ,

Cesar Toscano and other individuals who served on our academic and in d ustry
advisor y panels This research was funded b y the I B M Corporation
.
.

Version prepared for inclusion in Thomas Kochan and M ichael Us eem

( E ditors ) Tr a nsfor mi ng O r gan i za t i ons O xfor d U niversit y P ress ( forthcoming
# #
,
,

O ur than k s to Tom Kochan and M ichael Us eem for their cons tru ctive
comments on our previous drafts .
Strategic Alignm nt A M od l for Organ i z a tional Transformati on
e : e

I n tr o d u c ti o n
As organiz ational trans forma tion emerges as an important theme am ong
m
both man age ent s c holars and pra c titioners it is perhaps a t ruism tha t the ,

organizati ons of the 1 9905 wil l be signif icantl y different from those of the las t few
decades Wh ile several factors have been argu ed to infl uence
. an d propel the
organizati onal trans formation process as the papers in this volume attes t a major , ,

force l ies in the recent developments and capabili ti es offered b y inform ation
technologies ( I / T) namel y computers an d co mmun i ca ti on technologi es This is
, .

mainl y due to the a cceleration of power and capab ilities of these technologi es with
corresponding improvement in cos t performance ra tio in recent years ( Scott -

M orton , O ver the las t few years several different arguments have b een
,

offered to highlight the poten tial of I / T to influence competitive ch aracteristics ( see

for ins tance Keen , , 1 986 ; M c Far l an , 1 984; Parsons , 1 983 ; Porter an d M i l l ar , 1 985;

Roc k ar t and Scott M orton , 1 98 4 ; W iseman , 1 98 5) as well as enab le an d sh ape

business tr ansformations but there is a glaring lack of systema ti c frameworks to
,

conceptualize the logic scope and pa tterns of organizational transforma tion enabled
,

by informa tion tech nolo gy ( I / T) To help address this deficienc y this paper develops
.
,

and presents a conceptual model with a set of propositions and management

implica tions .

O ur paper is bas ed on a pivotal premise namel y: recentl y the , , r ol e of

’
informa tion techn olog y in organizations h as shifted beyond its tr aditional back ,

office support role towards an integral part of the s trategy of organiz a ti ons
,
#
.

Following King Ro c k ar t and Scott M orton ( 1 984 ) and o thers we differenti ate ,

among three major roles for I / T ’

administration '
;
’
operations ; an d competitive
’ '
.
’

The ad mi n i s t r a t i on role signifies the scope of I / T as the automation of accounting

and con trol functions which is reasonably well understood in the traditi onal
,
-

literature on management information systems ( see for ins tance Ein Dor and ,
-
Strategi c A lignment A M od l for Organizational Tran sformati on
: e

Segev , 1 978 ; I ves Hamilton and Davis

, , , I ndeed the im portance of te c hnology
,

for streamli n ing the a cti vi ties of pa yroll accounts payables and accounts receivables
,

is taken as gi ven and is not wor th elaborati ng here S u ffice to state that th is role .

'

requires the deplo ym ent of an efficient I / T platform ( includ i ng hardwar e software ,

and comm u nication s ystem s ) for a d mini s tration and contr ol an d is in d epend ent of
the strate gi c management of the organi z ation The oper at i ons role . is an extension of
the firs t role and is dis tinguished by the creati on and d eplo yment of a technology
platform that creates the capabili ty to automate the enti re set of business processes as
oppose d to onl y the administrative a c tivities T his role requires the deplo yment of .

an I / T infras t ruc t u re that responds to and supports the chosen business strategy

( King 1 978 ; M c Lean and S oden

, ,

Following Grant and King H ax and M a l uf

j an d Hofer and
Schendel strategic management can be viewed in terms of a hierarchy of
three levels of strategies : c or por ate s t ra tegy ( concerned with the portfolio of and
interrelationships among businesses ) , bu s i ness s t rategy ( focu sing on developing a
s trategy that maximizes firm spe c ific compara tive advantages to best compete in the
-

marketplace ) and fu nc t i onal s tr at egy ( refl ecting efficient allocati on of resources

,

allocated to the particular function) Within this hierarchy .

, I /T strateg y is at th e

functional level with a charter of efficientl y allocating its resources to best support
,

the chosen business strategy Th u s within these two roles

.
, , I T strategy refl ects a
functional effi ciency orienta tion ( King
, ,

I n contras t the, mpet i t i ve role represents a sign ificant point of departu r e

co .

Extending beyond internal effi ciency focus the capability now exis ts for
, ,

organizations to deploy new I T applications that leverage informati on and

technological attributes to obtain differential so ur ces of competiti ve advantages in
the marketplace ( Cash and Kon s yn s k i , 1 985; Copeland and M cK en n ey, 1 98 8 ;

M c F ar l an , 1 984 ; V en k a tr am an and Kambil ,

I ncreased attention is being paid to
Strategic A lignm nt A M odel for Organizational Transformation
e :

the potenti al role of I / T to influence stru c tural chara c teris tics of marke ts
Clemons and Ro w , 1 98 8 ) as we l l as shape the bas is of competi ti on ( see for instance ,

Ro t emb er g and S al o ner , 1 990; M alone Yates an d Benjamin

, , , It is becoming
increasingly clear that a li mite d consideration of th e first t wo roles for I / T in
modern corp oration is sub op timal with potentiall y d ysfun c ti onal consequences
-
.

M ore importantl y the emergence of the competi tive role

, h as significant
implications for organiza tional trans formation T his is . b eca u se the mere
superimposition of powerful I T cap abilities on the exis ting organiz ational s tructure
and processes is unlikely to yield superior competiti ve benefits This is supporte d by .

one of the central messages from the recentl y concluded M I T R esearch P roject,

M ana e
g men t i n the 1 9905 ( Scott M orton , 1 990) that successful organizati ons can be

d istinguished b y their abili ty to leverage I / T capab ilities to trans form their

b u s inesses ( structures processes and roles ) to obtain new and powerful sources of
, ,

compe ti ti ve advantages in the marketp lace .

While we are on the threshold of the competi tive role we al so note that the ,

existing frameworks are limited in terms of their ability to provide fundamental

insigh ts and guidance The adminis trative
. r ol e is supported by fram ework s such as

Cri ti cal S uccess Factors ( Roc k ar t , 1 979; Davis , while the secon d operati onal ,

role is supported by fram eworks like : Business S ystem P lanning ( I BM Corpora tion ,

1 98 1 ) or Value Chain analysis ( P orter and M illar , However ins ights for
,

leveraging the competitive role being sufficientl y diff erent from the other two
, ,

cannot be obtained from the above framewor k s .

Nevertheless several frameworks have been proposed to address the

,

challenge of recognizing the competitive role of I / T These include : P arsons ( 1 983 ) .

’

articulation of d ifferent levels of impact of I / T in the marketplace; M c F ar l an

’
s ( 1 984)

adaptation of P orter s competi tive strategy framework to a context ch aracte rized b y

’

the deploym ent of I / T applications ; Roc k ar t and Scott M orton s ( 1 98 4) adaptati on of

'
Strategic A li gnm n t A M od l for Organizational T nsformation
e : e ra

Leavitt s ( 1 965) organ iz ati on theory model ; as well as other framewor ks roote d in a
’

set of conve n ient dimens ion s Wiseman , 1 98 5; Hammer and M an gu r i an ,

Based on a general assessment of these framework s ( for a systematic approach to

org anizing th ese framewor k s see Earl , , we argu e that they are u seful for
describing and highlighti ng the emerging interconnection betw een I / T capabilities
an d organiz ational a cti ons but th e y fail in their lack of arti c ul ati on of the
,

fundamental logic and rationale for exploiting I / T capabilities as well as the

complexiti es of the organiz ational transformation required to leverage technological
capab i lities . M ore specifically they fail to simultaneously address the bus iness
,

( external ) and organiz ational ( internal ) requirements of transformation enabled and

shaped by new and powerful I / T capab ilities Th is paper aims to address the need . by

offering a model to link organiza tional trans formation and the exploitation of I I T
capabiliti es in its c ompet i t i ve role .

P r o p o s e d S tr a t e gi c Alig n m e n t M o d el
The proposed model is depicted in Figure 1 . It is based on four k ey domains of
strategic choice : b u siness str ategy organiz ational infras tru c ture and processes ; I / T
,

strategy; and I / T infrastructure and processes We briefl y describe each domain and .

subsequentl y articulate the distinctive features of the model .

B us in ess Strate g y
If we view organiza tional transformation from a volunt aristic as opposed to ’ ’

’
a deterministic perspect ive ( As tley and Van de Ven
’
, 1 983 ; M iles and Snow ,

then business strategy is a central concept However the concept of str ategy
.
, is

overarching ( A ndrews , 1 971 ; H ax and M a l u f,

j 1 984 ) and covers a broad terrai n with
multiple meanings definitions and conceptualizations ( V en k atr am an and Grant
, ,

1 986 ; V en k atr am an , 1 98 9b ) . Nevertheless most discussions deal with three central

,

questions : ( a ) bu s i n es s s c ope choices pertaining to product market offerings ( Hofer -

at egi c Al ignment A M odel for Organ iz ati onal Tr ansformation
:
Strategic Al ignm nt A M od l for Organ i zational Transformation
e : e

and Schendel , (b ) d i s t i nc t i ve c ompet en c i e s those attr ibutes of str ategy

pri c ing qualit y valu eadded servi ce superior distribution cha n nels ) that contr ibute
, ,
-
,

to a dis tinctive comparative advantage over other competitors ( P orter

, , 1 98 0; Snow
H r eb i n i ak , and ( c) bu s i ness gover na nc e choices of structural mechanisms
to organize the bus iness operations s trategi c alliances joint ventur es and
, ,

licensing) that recog n iz e the continuum between markets and hi erarchy

( W illiamson 1 985; Jarillo

, ,

O rgan i z a ti o nal Inf rastr uct ur e an d P rocesses

The relevance of including organiza tional infras tru c ture and processes need
not be extensivel y justified in the context of organizational transform ation .

However given the challenge to speci fy a parsimonious set of dimensions we

, ,

consider the following : ( a ) ad mi n i s t r a t i ve i nfras t r u c t u r e including organizational

structure roles and reporting relationships ( G albraith
, , ( b ) proc esses the
ar t iculation of workflows and the associated information flows for carry ing out the
k ey acti viti es ( Thompson , 1 967; Zu b o ff, and ( c) ski l l s the capabilities of the
individuals and the organizati on to execute the key tas ks that support a business
s tra tegy ( Fo m b ru n Tichy , , D evan n a, 1 985; Scott M orton ,

I nformation T echn olog y Strategy

The concept of I / T s trategy is relatively new and hence open to differing
definitions and assumptions . Analogo us to b us iness strategy we conceptualize I / T
,

strategy in terms of three dimensions : ( a ) i nfor ma t i on t ec h n ol ogy s c ope refers to

the types and range of I T systems and capabilities electronic imaging systems ,

local and wide area networks expert s ystems roboti cs etc ) potentially available to
, , ,
.

the organization ; ( b ) sys temi c c ompet enc i e s focusing on those distinctive

attributes of I T competencies higher system reliabilit y interconne c tivi ty , ,

flexibility) that contribute positively to the creation of new bus iness strategies or
better support exis ting business strategy; and ( c) I /T gover nanc e choices of
Strategic A li gnment A M od l for Org anizational T nsformation
: e ra

structural m ech anisms joint ventu res long term contracts equi ty
,
-
,

partnerships joint , R8: D , etc ) to obtain the requi red I / T capabilities involving
.
,

issues such as t h e deplo yment of proprietary vers u s com mon networ k s ( Barret t 8:

K on s yns k i , 1 982 ; Ro t emb er g 8: S al on er , 1 990; V en k atr am an , 1 990) as well as

strate gic ch oices pertaining to development of partn ershi ps to exploit I / T capabilities

and serv ices ( Henderson , 1 990; Johnston 8: La wr ence , 1 98 8 ; Johnston 8: Vital e , 1 988;

Koh 8: V en k at r am an ,

I n format i on T echn ology I nfr astruc tu r e an d Process es

Analogous to organization infrastructu re and process es this , d omain i s

defined in terms of three dimensions : ( a ) ar c h i tec t u r e choices pertaining to

applications data and technology configurations ( see for instance
, , , Z achman , 1 986 ;

P arker , Bens on 8: T rainor ( b ) pr oc ess es concerne d with the work processes

central to the operations of the I T infrastructure including processes for s ystems
,

development maintenance as well as monitoring and control s ystems ( B os to m and

, ,

Heines , 1 97 7; Henderson , Roc k ar t , and S i fo n i s , 1 98 7; Janson and S mith , 1 98 5; M ar cus

and Robe y, 1 978 ; M artin , 1 98 2 a, b; Ragh u n at h a n and King , 1 988 ; R o ck ar t and Short ,

and ( c) s ki l l s choices pertaining to the k nowle d ge and capa b ilities required

to effectivel y manage the I / T infrastruc t u re within the organization ( M artin , 1 982 ;

M umford , 1 98 1 ; Strassman ,

D i s t i n c t iv e F ea t u r e s of th e M o d el
Before proceeding further it is useful to enumerate the distinctive features of
,

the proposed strategic alignment model Specificall y we highlight two features : ( i ) .

,

distinguishing I / T s trategy from I T infrastr ucture and processes ; and ( ii )

differentiating the concept of str ategic ali gnment from b ivar iate fit ( re l ationships
involving an y two domains discussed earlier ) and cross domain alignment -

( relationships involving three domains ) Subsequentl y we conclude with a .

,
Strategic Alignm nt A M od l for Organizational Trans f ormation
e : e

discussion on s trategic alignment as a cen t ral element of organizational

transformati on .

D i st i n gu i sh i ng I /T S trategy From IIT I n f rastr uctu r e an d P r o c es s e s

The first feature relates to th e d istinction between I / T strategy and I / T
infras tructu re and processes which is criti c al gi ven the general lack of consensus on
,

what cons ti tu tes I / T s trategy So we b ui l d from .

, a
th e l i ter tu re on b u s i n ess s tra tegy ,

wh ere there is a clear d istinction between ex ter nal al i g nmen t : posi tioning th e
business in the extern al product market space and -
i n ter nal ar r ange ment: d esign of

organizational structure processes and systems ( see for ins tance Snow and
, , M iles ,

Within the I / T arena given the historical predispositi on to view it as a

,

functional strategy such a distinction h as neither been made nor considered

,

necessary However as we consider the potential that exists to leverage emergi ng

.
,

I / T capabilities to redefine market structure characteris ti cs as well as reorient th e

attributes of competiti ve success the limitation of a functional view is rea d il y

,

apparent .

I ndeed the hierarchical view of the interrelationship between business and

,

functional strategies is increasingl y being questioned given the prevalent feeling

that the subordina tion of functional strategies to business s trateg y m ay be too
restric tive to exploit potential sources of competiti ve advantage that lie at the
functional level . A ccordingly, functions are being considered as sources of
competitive firm specific advantage Key emerging themes include : strategic
,
-
.
’

marketing managemen t ’
recogn izing the exploitation of sources of marketing
advantages a t the business strategy level Win d 8: Robertson ,
’
strategic
human resource management ’
highlighting the explicit consideration of human
resource profiles and capabilities in the formulation an d implementation of
s tr ategies Fo mb r u n , Tich y 8 D ev an n a, notions of manufacturing as a
’
:

competitive weapon ’
illus trating the potential sources of advantages that lie
Strategic Al i gnment A M od l for Organizational T ansformation
: e r

within th e production and manufa c turing fun c tion Wh eel r i gh t , as well

as explori ng the linkage between finance an d corporate strate gy ( M y ers , A

common the me is the recognition of an extern al marke t place : where these function
specific advantages coul d be leveraged ; and an internal organi z ati onal function
where the function activities should
-
be manage d efficientl y .

Following this tradition we dis tingu ish in the str ategic al ignm ent model
, , I /T

str ategy from I / T infrastructure and processes Fo u r different b u s i ness examples are
.

invok ed to ill u strate the d istincti on . O ne the deci sion

, b y Amer i can Ex pr ess to
commit a high level of resources to its electronic imaging technolog y platform as a
k ey capabilit y to provide value added services ( via providing copies of receipts with
-

the monthl y statements ) as a means of differenti ating its travel related services -
is

related to its 1 / T scope as well as s ystemic capabiliti es which are con ceptuall y
different from i ts internal management of its data centers or its global
telecommunica tions network Both are necessar y for efficient leveragi ng of I / T
.

capabilities but one falls within the purview of external domai n whi le the other is
, ,

Eas tma n Kod ak

'
concerned with internal operations Second .
, s decision to outsource
its data center operations to I BM is related to cri ti cal make versus
’
- -
bu y
’
choices ( I / T
governance ) in the I / T marketplace and is logically distinguishe d from i ts deci sion
of centralizing and decentralizing s ystems development activiti es across its different
business units .

w Hi ll s custom publishing s trateg y

'
The thir d example is provided by M c G ra

in its textbook b u siness . It has recently developed a strategy of offering custom

textbooks as an al ternative to standard textbooks via its sophisti cated electronic
imaging technology infrastructure in a three way joint venture with -
E as t man

Kodak and RR D onnell ey 9 S ons

< . T his I / T b ased b usiness capa b ilit y which re flects ,

i ts I T strategy that shapes and supports its business strategy is to be conceptu all y
dis tinguished from its internal I / T infras tructure and operational s ystems Finall y .
,
Strategic Alignmen t A M od l for Organizational Trans f ormation
e

B ax ter H eal th c ar e known for its A nalyti cal Systems A utomated P urchasing

( A S AP ) recentl y anno u nced the formation of a joint ven t ure with I BM for
providing software hardware , , an d information based services to the hospitals thus ,

refle cting its I / T governance pos t ure of collaboration whi ch is to , be disti ngu ished
from its internal management of the informati on systems function Colle c tivel y .
,

these four business examples illus trate the importan ce of the three d imensions of
I / T strategy delineated in Figu re 1 as well as argu e for the separation of I / T s trategy
from internal man agement of the IS function .

D i fferent i a ti n g Strateg i c A l i gn men t From B i variate Fi t and Cross doma i n

-

A l i gnme n t

The propose d strategi c alignment model is more than the articul ation of the
underl ying axes the four domains and their constituent dimensions
, . It derives its
value from the different types of relationships among the four domai ns .

Spe cifically three dominant types of relati onships can be delineated in the mo d el
,

depicted in Figure 1 . T hese are termed as : bivariate fit; cross domain alignment; and -

strategic align ment .

B i va r i a te Fi t . The simplest type of rela tionship is a bi var i a te one linking

two domains either horizontally or verti call y The bivariate relationship between
, .

bus iness strategy and organization infr as tructu re and processes is the cl assic s trate gy
s tructure fit that has been a dominant theme in organizati onal strateg y research

( Chandler 1 962 ; Ru m el t 1 974 ; for an overview see V en k atr am an and Camillus

, , , ,

Correspondingly we specify a bivariate relationship be tween

, I T Strategy and
I / T infras tructure and processes in this model highlighting the need to interconnect ,

an organization s external positioning in the I / T marketplace with its approach to

’

managing the 15 function in its organizational context These two relationships .

represent the classic strategy formulation implementati on perspectives for the two-

strategies considered here : business strategy and I T s trategy .

St ategic A li gnme t A M odel for Org nizational T ansformation
r n : a r

In con t ras t the other two bivariate relationshi ps lin k the

, d omains

horizontall y The li nk s between b u s iness s trategy and I / T s trategy

. ar t ic u lation
of the required I / T scope developmen t of s ystemic competencies , as well as I /T

governance mechanisms ) re flects the capability to leverage I / T strategy to both shape

and sup p ort business s trategy This is parti cu larl y relevant for the competiti ve role
.

of the I / T fun c tion disc u ssed earlier Correspondingl y the link between .
,

organizational infras tr u cture and processes an d I / T i nfras tru ctu re and processes

reflects the nee d to ensure internal coherence b e tween the organ iz a ti onal
requiremen ts and expectations on the one hand and the , d elivery capabilit y within
the IS function on the other hand
, which is cons istent with the notion of viewing

IS as a ’
bu siness within a b u s iness ( Cas h ’
, M c F ar l an , an d M c K enn ey,

B en efi t s a nd Li mi t a t i o n s f B i v a ri a t e F i t
o . A major benefit of the bivariate fit
perspective lies in its simplification of the relevant domain invo k ing , c et er i s

par i bu s conditions . If for ins tance the organizational and

, IS infrastr uctu res can be
reconfigured easily then a bivariate interconnection be tween b u s iness and
, I T
strategies could suffice H owever most instances of organizati onal transformation
.
,

require adaptation across a complex set of multiple d omains , th u s limiting the

value of bivariate perspectives . An obvious approach lies in the consideration of
multiple bivariate relationships which could lead to an error of logical typ ing or ,
’ ’

reductionism ( Bateson iller and M i n tz b er g , 1 98 3 ; V en k at r am a n , 1 98 9a)

’
1 979; M
’
.
,

I ndee d a m ajor area of controversy in the literature on organizations relates

,

to the distinction between bivariate relati onships among a narrow set of variables
an d multivariate holistic relationships among a set of of variables representing an
,

organiza ti onal system ( M iller and Friesen , 1 98 2 ; M c K el v ey , 1 975; see also A lexander ,

The main controvers y is tha t if one were to d ecompose the s ys tem into a set of
bivariate relationships there exists a serious possibilit y of internal logical
,

inconsistencies ( or mutuall y conflicting directions ) among mul ti ple p airwi se

,
Strategic Al ignment A M odel for Organizati onal Transformation
:

contingencies . As Child remarked : What happens when a conf iguration of

#

different con t ingen c ies are found each having dis tinctive implications for
,

organiz ational design ##

( 1 975; p l 75) Ex tending this to the present context of
. .

strategic I / T management the lim i tati on lies in consi d era ti ons of exte rnal
,

perspectives onl y ( via bus iness and IT strategies without an y regar d for the intern al
considerations ) or intern al perspectives onl y ( via integrati ng the IS functions and
activities within the overall organi zational infras truct u re) . A lternativel y, the
bivariate fit coul d involve considerations of b u s iness and IT perspe c tives separately ,

which have been argued to be d ysfunctional (see for instan ce , K in g, 1 978 ; P yburn ,

1 983 ; M c L ean and Soden , This calls for the recogniti on of mutivariate
relations hips or more precisely cross domain relations hips discus sed below
, ,
-
.

C r os s d o m a i n
-
al i gn m en t . The first type of muti domain relationship -

involves three domains linked sequentially This can be conceptualiz ed as a

, .

triangle overlaid on the mo d el sho wn in Figure 1 . Although eight com b inations of

cross domain alignments are possible we argue that four are particul arl y important
-
,

and manageriall y relevant for our discussion here Th ese are summari z e d in Table . 1

and are labeled as : s trategy implementation technology exploitation technology , ,

leverage and technolog y implementation

, .

S t rat egy i mpl emen ta t i on as depicted in T able

, 1, is a c ross domain perspe ctive
-

that involves the assessment of the implications of implementing the chosen

business strateg y via appropriate organizational infrastruc t ure and management
processes as well as the design and development of the required internal I / T
infras truc t u re and processes This is perhaps the most common
.
, , an d widel y
understood cross domain perspective as it corres p onds to the classic hierarchical
-
,

view of strategic management ( see for ins tance the three level hierarch y in -
H ex and
M a l u f,
j Given its widespread acceptance it is not surprising that several ,

different analyti cal methodologies are available to operationalize this perspecti ve ,

Strategic Al i gnment A M odel for Organizational T ansformation
: r

where the more popular approaches include : critical success factors ( Roc k ar t ,

business s ystems planni ng ( I B M Corpora tion , 1 98 1 ) and ente r prise mod eling

( M artin ,

Tec h nol ogy e x pl oi ta t i on,as shown in Table 1 , reflects the potential of I / T

str ategy to influence k ey dimensions of bus iness str ategy Within the competiti ve #
.

role for I / T thi s perspe ctive is concerned wi th

’
, th e exploitati on of emergi ng I / T
capabilities to impact new products an d servi ces b usiness scope ) i nfluence the
,

k ey a ttrib utes of s trategy ( dist i nctive competenci es ) as well as d evelo p new form s of
relationshi ps b usiness governance ) . U nl i k e the previo u s pers pective that
considers business s trategy as given ( or a constraint for organiza tional ,

transform ation ) this perspective allows the modification of b u s iness s tr ategy via
,

emerging I / T capabilities Beginning with the three dimensions of

. I T s trateg y thi s
,

perspective see k s to identify the best set of strategi c options for bu s iness strategy and
the corresponding set of decisions pertaining to organiz ational infrastru cture and
processes .

Key examples of the t ec h n ol ogy e xpl oi ta t i on perspecti ve include : the

exploi tation by B ax ter Heal th car e ( previously A merican , Hospital Suppl y
Corporation) via its proprietar y A S AP electronic order entr y s ystem to deliver
-

superior value added service to its hospital customers and the cons equent
,
-

implications for redesigning the internal organizational processes ( see for ins tance ,

V en k a t r am an and Short , the attempt by F ed er a l Expr ess to create a new

standard for overnight delivery though i ts C O S M O S / P UL S A R system and the
corresponding implications for redesigning its internal processes ; and the ability of
American Express , I DS division to leverage its I / T infras tructure to develop
capabilities for elec tronically filing income tax returns as well as leveraging the
information for tailoring its financial products to the individual needs
( V en k at r a m an and Kambil ,
Strategic A lignm nt A M odel for Organizational Transformation
e :

Th u s while much of the current excitement abo ut

, I / T in i ts competi tive role

lies in the techn olog y exploitation perspecti ve the discussion has been a t the level ,

of the bivaria te fit between I / T strategy and business strategy ( see for ins tance ,

M c F ar l an , 1 98 4; W i s eman , W e argue that an y considerati on of the

attractiveness of the emerging I / T capabilities without correspon d ing attenti on to
the re d esign of i nternal operations is serio u s l y limite d with negati v e cons equence s
for organiz ational transform ati on This is b eca us e p erformance . is cl earl y a fu ncti on
of both formula tion and implementation of strategi es and m yo p ic att e ntion to , an y

one at the ex p ens e of the other coul d obs cure the b est possible mod e for
organiza tional transformation .

Tech nol ogy l everage as shown in Table

, 1 , is a cross domai n p erspective that
-

involves the as sessment of the implications of implementing the chosen b u siness

strategy through appropriate I / T strategy and the arti culation of the required IS

functional infrastru cture an d s ys temic processes The un d erl ying ra ti onale is that
.

business strateg y is best executed by leveragi ng the emerging technologi cal

capabilities rather than through the d esign of an effi c ient internal organization For .

example : US AA a leading , US insurance compan y decided that the best strate gic
,

option involved the development of a superior d ocument hand ling s ystem bas ed
on s tate -
o f- the art electronic imaging technolog y This was accomplished through a
-
.

joint d evelopment venture wi th a key vendor involving fundamental changes to ,

the internal I T infras tructure : data applications and confi gu rations

, ,
.

A noth er example is A mer i c a n Expr ess Tr avel Rel a ted S er vi ces whose
,

b u siness strategy anchored on two technology based competenci es : quick approval of -

purchases and p roviding copies of receipts to the cardholders . Approval proce ss on a

charge car d without an y p re set spen di ng limit) typ icall y has a longer
-
lea d -
time
than a corresponding transaction involving their competitors cre d it card ( with a ’

pre set spending limit )

-
. It was imperati ve that American Express at leas t match the
Strategic A lig ment A M od l for Organizational Transformation
n : e

response time of its leading compe t itors failin g which the cardholder may switch to
,

an alternative faster tr ans acting car d This business strategy required a s ystemic
,
-
.

'
competence i nvolving expert s y stem s ( Au th or i z er s As s i s ta n t) as well as
corresponding changes in t h einternal I S organ ization for developing maintaining ,

an d controlling the systems The second component te r med as

.
, E C C B ( Enhanced

Cou ntr y Club Bill i ng) refers to their b u s i ness competence of providing copies of all
charge sli p s with the monthl y statement While cardholders expresse d s atisfacti on
.

with this s ervice the cost of maintaining

, an d d istri b uti ng the slips was becoming
p rohibitive in the traditi onal mode However an optical scanning storage and
.
, , ,

las er printing s ystem allowed the

-
d elivery of the same level of s ervice more
efficientl y .

I n terms of the proposed strategic alignment model these exam ples highlight ,

the i mpac t of business s trategy ( distinctive competence ) on I / T strategy ( I / T

governance and s y stemic competencies respectively) and the corresponding
implications for I / T i n frastructure and processes IS architectures ) . Again , the
limitations of a bivar iate fit perspective are apparent Either a formula tion view .

the impact of business scope on I / T scope or s ystemic competen ci es ) or an

implementation view the implications of s ystemic competencies or new I / T
governance for internal IS operations ) is limited in terms of its coverage Some .

emerging anal y ti cal perspectives are beginning to reflect t ec h n ol ogy l ever age As . an
example Gartner s G / C UE ( Gartner Group 1 98 9) examines an organization s
’ ’
, ,

business s trategy and develops implications for I / T s trategy with respect to k ey

trends in the I / T markets v i a technology scanning scenarios as well as identify the ,

implications for migr ating from the current I / T infrastructure to the desired state .

Tec h nol ogy i mpl emen tat i on , as depicted in Figure 1 , is concerned with the
s trategic fit between the external articulation of I / T strategy and the intern al
implementation of the I T infrastructure and processes with corresponding impact
Strategic Alignm nt A M od l for Organ i zati n l Transformati on
e : e o a

on the overall organizational infras tru ctu re and processes . In this per sp ec t i v e
/ th e

role of business strategy is minimal and indirect and is best viewed as provi d ing the
necessar y ad minis trative support for the internal organization This perspective is .

often viewed as a necessary (b u t not suffi c i ent) to ensure the effective use of I / T
resources and be respons ive to the growing and fast chan ging dem ands of the end -

user po p ulati on . A nal ytical methodologi es even p ar tiall y reflect i ng this perspecti ve
requires a s ystemati c anal ysis of the I T mar k ets as well as possib le ser vi ce
contracting approaches Ex amples of anal y tical metho d s i ncl ude : end user need
.
-

surve ying ( Allowa y and Q u i l l ar d , service level contracting ( Leitheiser and

-

W e t h er b e , 1 986 ) and architec t u ral planning ( Z achman ,

By way of summarizing the dis c ussion on four cross domai n perspectives we -

,

develop the following propositions :

PI : The effectiveness of s trategic I T management will be signi ficantl y greater

for an y cross d omain perspective than an y bivariate fit relations hips
-
.

P2 : On average the four cross domain perspectives for s trategi c I / T

,
-

management will be equally effective .

The rationale for the first propositi on is derived from the preceding
discussion on the limita tions of bivariate relati ons hips in a complex organizational
s ystem and the need to integrate across external and intern al domains as well as
across business and technology domains T he rationale for the second proposition is
.

based on the principle of eq u i fi n a l i t y i . e .

, multiple equally effecti ve approaches to
exploiting technology for organizational transformation where the un iversal ,

superiorit y of one approach over another cannot be a pr i or i argue d .

Further from Figure

, 1 and T able 1 , it is clear that the four four perspe c tives
discussed above reflect a top down orientation -
where either business strategy or
I / T strateg y direct the subsequent internal ( organizational ) cons iderati ons As .

recognized earlier it is entirel y conceivable to consider corresponding b ottom

,
-
u
p
St ategi c Al i gnm nt A M odel for Organizati onal Transformation
r e :

orientations For example the orga n ization infrastructure could serve as a domain
.
,

anchor for a process that considers the impact of organizational capabilities on

business strategy and the subsequent implicati ons for I / T s trate gy Such perspectives .

'

woul d s ign al the recognition of the current organizational i n fras tructure or I / T

infrastr u ctu re as the relevant s tarting points for d eriving i mplicati ons for the
extern al strategic choices Thu s while the top down or i entati ons reflect the
,
.
,
-

preference of strategic managers as well as the rational anal ytic approach as adopted ,

here it is important to recognize that the proposed strategi c align ment model does
,

accommodate the possible existence of internally cons istent bottom -

,
-
u
p anal ysis of
cross domain relationships
-
. I n the interest of space and given the relativel y limited
prior attenti on to these perspectives these are not discussed here , .

S t r a t egi c A l i gn m en t . The final type of rela tionship in the proposed model is

strategic alignment . It involves s i mu l ta neou s or c onc u r r en t a tt en t i on to al l fou r
d omai ns and can be conceptualized in its weak and s trong fo r ms . I n i ts weak form it ,

can be concep tuali zed in terms of a s i ngl e l oop -

t r a nsfor ma t i on pr oc e ss across the
four domains while in its strong form it should be viewed as a
, , d ou bl e -
l oop
f
t r a ns or ma t i on process The noti on of a loop requires the specification of a star ting
.

point as well as a parti cular direction of transformation and hence the disti nction ,

between a single loop and a double loop process ( see

- -
Ar gyr i s 1 977;, The former
accommodates only one single direction of transformation while the la tter ,

recognizes the cen trality of both possible directi ons The logic underlying s trategic .

alignment is elaborated below by invoking two theoretical concepts : completeness

and validity .

C ompl et eness is a central concept of strategic alignment because it is clear that

lack of considerations of an y one of the four domains will leave unrecognized one
domain and the consequent relationships . As disc u ssed above ea c h of the four
dominant cross domain perspectives does not recognize
-
takes as given and
St ategic Alignment A M odel for O
r : r g an i z a b on a l
’

Transformati on

fixed ) one of the four domains For ins tan ce .

, tech n ol ogy ex p l oi tat i on ( T able 1) does
not recognize cri tical issues pertaining to I / T infras tructure and is therefore , ,

incomplete G iven the critical interp la y among the four domai ns we argue for the
.
,

importance of completeness or more formall y s i ng l e l oop , ,

-
f
t r an s or mat i on a l
pr oc ess .

V al i d i t y refers to th e d egree of attention to explicitl y overcome the possibilit y

of b i as via unrecogniz ed or hi d d en frames of reference . A major concern r aised by

Churchman M as o n an d M i tr off ( 1 98 1 ) an d W eick ( 1 979) withi n the context of

a d ecision making process relates to the potential threat to validity of decisions

-
,

introduced by the existence of a domain anchor or a fixed reference frame that

remains un c h al lenged ( for a discussion within the IS context see H en d erson , an d

S i fo n i s ,
Following M ason and M i t r off ( 1 98 1 ) an d A r gyr i s ( 1 977 ; we cal l
for an anal y tical method that explicitl y challenges the assumption of a given
domain anchor . M ore formall y the anal y tical method shoul d incorporate a
, d ou bl e

l oop f
t r a n s or ma t i ona l pr oc ess .

Figu re 2 schemati call y represents the different t ypes of relation s hips discussed
above excluding bivariate fit
, which was argued to be m yopic and d ysfunctional .

Specificall y two t ypes of cross domain perspecti ves exist : uni dire ct ional or focu sed
,
- -
.

The distinction is that the la t ter recogniz es the potential sources of invalidity ( or
biases ) an d provides a correction mechanism in the pairing of the cross domai n -

perspectives Extending be yond cross domain p erspe ctives t wo forms of s trategic

.
-
,

alignment can be specified the weak form represente d as single loop and the
- -

s trong form specified in terms of the double loop process Th us we develop the
- -
.
,

following proposition :

P 3 : The effectiveness of s trategic I / T management is significantl y greater for a

complete process than for any t ype of cross domain align ments under -
,

c et er i s par i bu s cond i tions .

 Str tegi c Al ignm nt A M od l for Organ i zati on l Trans f ormation
a e : e a

Fi g u re 2
S trategi c l /T M an agement Effectiven es s

Complete

COM PLE TE NE S S

Parti al

I nvali d

VALI DIT#
Strategi c A lignme t A M odel for Organizational Transformation
n :

P 5: On average single loop

,
-
complete but invalid ) and focused
( incomplete but valid ) processes will be equally effective and superior to
unidire c tional process for str ate gic I / T management .

O ur rati onale for the above propositi on rests on the importan ce of

completeness and validity in addressing s tr ategi c I / T issues . A lth ough b oth forms of
strategic I T processes are cu rrently us ed ( Roc k ar t , 1 979; Boyn ton and Zm u d,

there is a lac k of prior theory on the relati ve importance of completeness vers u s

validity Th us while we argue that the single loop and focu sed processes are
.
,
-

superior than a uni directi onal process we refrain from

-
, an y further delineation of
the relative effectiveness of these two approaches .

P 6: O n average double loop

,
-
complete but invalid ) and focused
( incomplete but valid ) processes wi ll be equall y effective and superior to
unidirectional process for str ategic I / T management .

Essenti ally this proposition argues that a complete and valid process will be
,

the mos t effecti ve approach to s trategic I / T management Su c h an a p proach not onl y

.

addresses all the four relevant domains but also see k s to challenge the assumptions
inherent in the domain anchors However it has a major limitation in terms of
.
,

high levels of resources both time and costs which need to be recognized and
,

managed depending on the specific contingen c ies faced by the organization .

S t r a t e gi c Alig n m e n t A s an Elem en t of O r g a n iz a t i o n a l T r a n s f o r m a t i o n

This paper developed a model of organizational transformation that

specificall y addressed the requirements of leveraging the emerging
developments in information technologies T his model is based on the need
.

to achieve alignment across internal and external domains as well as

functional integration across business and I / T areas The value of the model .

is argued with propositi ons for research and practice While this paper has .

provided some support for the conceptual validit y of the model the ,
 Strategic Alignment A M od l for Organizational Transformation
: e

empirical validi t y leading to the confi rmation or falsification of the

propositions require s ystema tic field research We are in the mids t of .

'

O perationaliz i ng the k ey cons tructs and collecting multi period data to test the -

p ropos iti ons offe re d here .

O ver t wo decades ago Thompson ( 1 967;

, 1 4 7) note d , Survival rests on the co

ali gnment of technolo gy and task environment with a viable domain and of ,

an d
#
organizational design structure appropriate to that domain . These
observations are equally vali d toda y and appl y well to the presen t context of
exploiting I / T capabilities for organiz ation design O ur positi on is that str ategic .

alignment espe c ially between business and I / T s trategies across external and
internal d omains is an important element of the larger orga n izati onal
transformation process Specificall y we dis c u ss the usefu l ness of the mo d el along
.
,

three lines : ( a ) d es criptive model; (b ) prescriptive mo d el ; an d ( c ) d ynamic model .

S t r a t eg i c A l i g nmen t as a D es c r i p t i v e M o d el . At a first level , th e propose d

s trategic alignment model can be viewed as a des c riptive model of organiza tional
transformation Specifically it can be us ed to identify the key factors to be considered
.
,

the four domains and the tw elve constitu ent dime n sions shown in Figure 1 ) as
well as alternate directionality of transformation the different cross domain -

perspectives shown in T able T he power of the model lies in ( a ) the parsimonious

delineation of the d i m en s i o n s an d ( b ) the conceptual separa tion of I / T strateg y from
'

the internal , I /T infrastructure and processes From a research point of view t h is

.
,

model can be used to describe and categoriz e the emerging examples of exploiting
I / T as a lever for business transformation From a man agement decision making
.
-

point of view this model serves the purpose of identifying the different alternatives
,

to leverage I T for bus iness transforma tions We are aware of several organizations
.

adopting this as the central model in their s trategic management process where I / T ,

plays a critical role in business transformation .

Strategic Alignm nt A M odel for Organizational Transformation
e :

S tr a t egi c A l i gn men t as a P r es c r i p t i v e M o d el . At a se cond level the proposed

,

model can be viewed as prescribing certain alte r nati ves and approaches . P rescriptive

framewor ks derive their logi c and rati onale from underl y ing theoreti cal argu ments
and / or empirical results Wh i le there are preliminary theore t ical support for some
.

of the cross domain perspe ctives we do not

-
, yet see it as a prescriptive model until
we have tested these propositions with empirical data Thi s is beca u se we are in .

agreement with M i n tz b er g ( 1 977) who noted There has been a tendency to

#
,

prescrib e p rematurel y in management p olic y to tell how it sho u ld be done

without s tu d y ing how it is done and wh y Prescr ip tions become useful only when
it is grounde d in sophisticated des cription .
( pp 91 We believe that the topic of
s trategic man agement of I / T is in a similar position with excessive prescription
based on isolated cases which is counterproductive for both theory and practi ce We
, .

are now in the midst of accumulating a set of empirical observati ons using this
conceptual model to understand the patterns of realiz ing value from I / T
investments with the ultimate aim of developing this into a prescriptive model .

S t r a t egi c A l i gn m en t as a D y n a mi c M o d el . I mplicit in the discussions

throughout is that strategic alignment is a dynamic concept that is bes t viewed as ,

’
shooting at a moving target O ne of the managers interviewed in conne ction with
’
.

the research project noted that this model is best viewed as a journe y and not as an ’

event This is analogous to

.
’
M iles and Snow ( 1 978) argument that the organizational
adaptive cycle which provides a means of conceptualizing the major elements of
adaptation and of visualizing the relationships among them is a cen tral concept of
strategic management ( p2 7) . It is also consistent with Thompson ( 1 96 7) who noted
that alignment is
not a simple combination of static components Ea c h of the
#
.

elements involved in the [ c o #alignment h as its own dynamics-

[ and #behaves at its own rate governed b y the forces extern al to the
,

organization .
Strategic Alignment A M od l for Organizational T nsformati on
: e ra

if
the elements necessary to the c o alignment are in p art -

i nfl uence d by powerful forces in the organization s enviro n ment ’

,

then organiz ati on survival requires adapt i ve as well as d i r ec t i ve

acti on in those are as where the organi z a ti on maintains dis c retion .

A s environments change the a d mi nis tr ative process mus t deal not

,

j us t with which domain but how an d how fas t to change the design
, ,

structure or tech nology of the orga n ization ( empha s is in original ;

, .

1 96 7; pp 1 4 7

A ccordingl y , we view the strategic alignment mo d el as a d y nam ic

model of strategic I / T management requiring the organizati on to delineate
the areas where it should maintain discretion ( invol ving both the business
and I / T domai ns ) as well as identify the approaches to tr ansform the internal
organiz ation s truc tures and p rocesses However we recognize that a d yn am ic
.
,

perspe c tive does not impl y the need to manipulate an d a d apt all dimens ions
at all ti mes nor is predi ctable in terms of specific trigger points ( Thompson
, ,

1 96 7; Child , 1 972 ; M iles and Snow , I ndeed the , k ey strategi c I / T

management challenge lies in the identifi cation of those strategic d imensi ons
that require modification under differen t contingencies for enhancing
organizational performance . It is our hope tha t our de tailed research project
will offer some no r mative guidelines for recognizing and responding to
criti cal contingencies .

T hus in closing : our view of business tr ansformation expli ci tl y

,

recogniz es the organization at the x s of

ne u k ey streams of actions involving a
complex set of variables where the streams are d y namic in scope moving ,

in different directions and pace W e believe that the challenge of

.

organizational transformation is bes t conceptualized as a dynamic s trategic

alignment process with particu lar considerations to those s trategi c
components that matter at that point in time and our argument has been ,

that I / T occupies tha t role at present and in the foreseeable futu re Hopefull y .
,
Str tegic A lignm nt A M od l for Organizational Transformation
a e : e

this paper h as provided a parsimonious model to conceptualize and manage

one area of complexity inherent in managing toda y s organiza tions
’
.
Strategi c Alignment A M od l for Org anizational Transformation : e

R e f erences

Allowa y Robert M and Judith A Q u i l l ar d User M anagers S ystems Needs '

M #S
#
. .
, , , ,

Q u ar ter ly 7 , , No 2 . 27 4 1 -
.

A ndrews Kenneth R Th e Conc ept of Cor por ate S t rategy

,
.
, , R evised E di tion , R D
. .

Irwin Homewood I L 1 980 , , , .

Ar gy r i s , Double Loop Learning in O rganization s

Chr is ,
#

, Har var d B u s i ness

Rev i ew 55 No 5 1 1 5 1 25 , , .
-
.

Ar gy r i s , Chr i s O rganizational Learning an d ,

#
M anagement I n form ati on S ys tems ,

Data B ase 1 3 No 2 3 ( W inter Spring , , .

, ,
-
3 11
-
.

As tle y, W illiam G , an d A ndrew Van d e Ven

. Central Pers p ecti ves ,
#
in O rganization
T heor y Ad mi n i s t r a t i ve S c i en c e Q u ar ter l y 1 983 , 2 8 , 24 5 2 73
#
-
.
, ,

Barrett Stephanie and Benn K on s yn s k i I nter O rganiza tion I nformati on Sharing

, , ,
#
-

S ystems M I S Q u ar ter ly Special I ssue December 1 982 93 1 05

, , , ,
-
.

Bateson , G .
, M i nd and N at u r e, E P . . Dutton New York , , 1 979 .

Benjamin Robert I John F R o c k ar t M ichael S Scott M orton and John Wym an

, .
, .
, .
,

I nformation T echnolog y : A S trategi c O pportu ni t y

#
S l oa n M anagemen t ,

Revi ew 2 5 No 3 3 10 , , .
-
.

Bost a m , Robert P
and J Stephen Heinen .
, .
, M I S P roblems and Fail u res : A Socio
Technical P erspecti ve P arts 1 and I I , , MIS Q u ar t er ly 1 No 3 , , 1 7 32 ; .
-

and 1 No 4 1 1 28 ,
.
-
.

Cash J# and B K o n s yn s k i I S Redraws Compe titive Boundar ies Ha r var d

#
. .
, , ,

B u s i ness Revi ew 63 No 2 1 34 1 42 , , .
-
.

Child J M anagerial and O rganiz ati on Factors Associate d with Compan y

, .
,

P erformance P art I I A Contingenc y A nal ysis Jou r na l of M anagement -

, ,

S t u d i es 1 2 1 2 27 ,
-

Churchman C W est , .
, Th e D es i gn of I nqu i r i ng S ys tems : B as i c C on cepts of Sys tems
a nd O rgan i zat i on , Basic Books I n c New York 1 97 1 , .
, , .

Copeland Duncan G and James L M c K en n ey A irline Reservations S ystems

#
.
, .
,

Lessons from Histor y M I S Q uar ter ly 1 2 , , 3 53 3 70 -

.

Daft , RL . . and KE . . Weick T oward a ,

#
M odel O rganizations as I nterpretive S ystems ,

Ac ad emy o f M ana e
g men t Revi ew 9 , 2 84 295
-
.
Strategic Ali gnment A M od l for Org anizational T nsfo mation
: e ra r

Davis Gordon B Comments on the Cri tical Success Factors M ethod for Obtaining
, .
,

M an agement I nformation Requirements in A rticle by John F Roc k ar t MI S .

,

Q u ar ter ly 3 N O 3 57 58 , , .
-
.

Davis G ordon B Strategi es for I nformation

,
.
,
#
Requirements Determination , I BM
S ys tems J ou r nal 21 4 30 ,
-
.

Dic k son Gary W Robert L Leitheiser James C W eth er be an d

, .
, .
, .
, M al N i ec hi s , Key
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