1. STRATEGIC STRATEGIC ALIGNMENT ALIGNMENT MATURITY MATURITY DR. JERRY LUFTMAN STEVENS INSTITUTE OF TECHNOLOGY JLUFTMAN@STEVENS-TECH.EDU 2/20/03 SIM FAIRFIELD-WESTCHESTER

2. 1.WHAT IS STRATEGIC ALIGNMENT? 2. WHY IS IT TAKING SO LONG TO ADDRESS? 3.HOW MATURE IS YOUR IT-BUSINESS ALIGNMENT? AGENDA

3. Which technology issues will be of greatest concern to you and your company in the next year? Ref : Conference Board Better links to customers and suppliers 168 Better links to customers and suppliers Enhancing corporate-wide processes 163 Enhancing corporate-wide processes Aligning IT and business goals 151 Aligning IT and business goals 126 Lowering costs of technology 72 Increasing user competence 70 Enabling/enhancing e-business and e-commerce 61 Data security / privacy 56 Implementing new technologies (e.g., wireless) * CEO Responses TOP 3 ARE IT BUSINESS ALIGNMENT ISSUES

4. Organization Concerns Rankings RankIssues 1 Aligning IS and Corporate Goals 2Connecting to Customers, Suppliers and/or Partners Electronically 3Using IT for Competitive Breakthroughs 4Creating an Information Architecture 5Improving the IS Human Resource 6Integrating Systems 7Developing an IS Strategic Plan 7Implementing Business Reengineering 9Cross-Functional Information Systems 9Enabling Change and Nimbleness 11Capitalizing on Advances in IT 11Developing a Digital/E – Commerce Strategy 11Organizing and Utilizing Data 14Software Development Quality 15Developing Executive Information Systems 16Determining the value of IS 16Restructuring the IS Function 18Improving the Systems Development Process 18Cutting IS Costs Ref: Robert Gray, Anil Gulati - Western New England College

5. Top 10 IS Management Priorities, 2002 Strategizing for IS/business linkage Providing leadership and guidance for the board/executive Demonstrating business value of IS Developing leadership and behavioral competencies in the IS senior mgmt. team Reducing total IT costs Strengthening program/project prioritization and management Tightening security and privacy safeguards Developing e-enabling IT architectures Attracting, nurturing and sustaining IS resources Reducing IT complexity 12345678910 Average weighted score (10 = max) Key Findings Improve synchronization During tough times, strategizing and executive leadership are more important than ever, as is e- enabling the enterprise Delivering value, cut costs Now is the time to demonstrate value for IS investments and to focus on better IS management Fix security and business continuity Privacy and security concerns top the IS management agenda The scope of security includes business continuity Gartner

6. CSC Survey Rankings Top IS/IT Issues’01‘00‘99‘98‘97‘96‘95‘94‘93‘92‘91‘90‘89 Aligning IS and Corporate Goals 2531111221242 Connecting to Customers, Suppliers Electronically 611457716 201519NR Organizing & utilizing data4523223344576 Developing an E-Business Strategy134419NR Integrating systems1075665168111391612 Optimizing Enterprise-Wide Systems125NR Instituting cross-functional IS7976932446337 Capitalizing on Advances in IT141285351513141920NR17 Improving the IS Human Resource2015927115912513118 Educating management on I/T121391113 1118 161423 Using IT for Competitive Breakthroughs 1671110341315 141281 Creating an Information Architecture1816128898573895 Cutting IS Costs15141312 151712611 1014 Improving the Systems Development Process 11 14131112106394613 Updating Obsolete Systems91015910897818NR13NR Changing technology platformsNR181617161412910NR Restructuring the IS Function1917 1317 NR Managing Dispersed ComputingNR2018201516NR Determining IS valueNR19 1619 NR Implementing Business Reengineering (Transformation ’01) 81820131410411211‘89 Protecting and Securing IS2NR Optimizing Org. Effectiveness53NR

7. 7% 20% 28% 27% 18% IT is an equal agenda item in your company’s strategy and planning sessions STRONGLY AGREE STRONGLY DISAGREE DISAGREE AGREE NEUTRAL Ref : CIO and Boston-based consultancy ICEX

8. SOURCE: CUTTER CONSORTIUM, ARLINGTON, MASS. Product strategy E-business strategy Sales/marketing Customer service Competitive position IT’s Role Manufacturing 35% 8% 38% 43% 49% 51% Corporate executives were asked: Which subjects are included in your formal business strategy?

9. 102030405060 Profit Center Responsible primarily for technology maintenance Core part of decision-making team that sets overall strategy Instrument for cutting costs within the company Resource for creating new business processes Ref: Optimize Research What is the role of IT at your company ? % of respondents Cost Center and drain on corporate resources 70 Tool for improving business- process efficiency Vital utility, like electricity Manager of key data, communications, hardware, and software Note: Multiple responses allowed

10. WHAT IS STRATEGIC ALIGNMENT??? WHAT IS STRATEGIC ALIGNMENT???

11. Where is the Value From IT Investments? IT Investments Strategic Benefits Business Transformation External Internal Every business is an information business. Information is the glue that holds value chains & organizations together.

12. A New Perspective Investments in Business Change!!! IT Investments

13. Business Outcome: Business Process: IT Enabler: Value Management Framework Portfolio Management Options IT-Business Process

14. Functional Integration Business Scope Distinctive competencie s Business Governance Administrativ e Structure ProcessesSkills Technolog y Scope Systemic competencie s IT Governance IT Architecture ProcessesSkills BUSINESS Business Strategy IT IT Strategy IT Infrastructure Strategic Fit Organizational Infrastructure The Strategic Alignment Model

15. Symptoms of Strategic Alignment Problems LONG LIST ABOUT SYMPTOMS OF ALIGNMENT PROBLEMS

16. WHY IS IT TAKING SO LONG TO ADDRESS??? WHY IS IT TAKING SO LONG TO ADDRESS???

17. There is no “silver bullet”… It takes a combination of “things” to make it a success!!!

18. New Org. Structures, X-engineering, Business Partnership Mgt New Org. Structures, X-engineering, Business Partnership Mgt Wireless PDAs via Semantic Web Wireless PDAs via Semantic Web Customercentric, IT enabled/driven differentiation Customercentric, IT enabled/driven differentiation Value Demonstration Value Demonstration Leverage Core CSFs Enterprise Application Integration: CRM, SCM, & K Enterprise Application Integration: CRM, SCM, & K Disintermediation, Reintermediation, Hypermediation, Infomediation, Aggregation Disintermediation, Reintermediation, Hypermediation, Infomediation, Aggregation Incremental vs Radical Innovation Incremental vs Radical Innovation Revenue vs Earnings Growth Revenue vs Earnings Growth Multiple careers. Rightsizing, Skills Shortage Multiple careers. Rightsizing, Skills Shortage Leadership Skills: Agility, Experimentation & Learning Hierarchy of Imagination Leadership Skills: Agility, Experimentation & Learning Hierarchy of Imagination Secure, Integrated Infrastructure Secure, Integrated Infrastructure E-NOUGH Knowledge Economy internal/external Knowledge Economy internal/external BUSINESS BUSINESSTRANSFORMATION IT can: IT can: - Enable - Enable - Drive - Drive - Inhibit - Inhibit BUSINESS BUSINESSTRANSFORMATION IT can: IT can: - Enable - Enable - Drive - Drive - Inhibit - Inhibit Global Community & Economy; Enronitis Global Community & Economy; Enronitis

19. HOW MATURE IS YOUR HOW MATURE IS YOUR IT-BUSINESS ALIGNMENT???

20. Climbing the Strategic Alignment Maturity Model Business Strategy IT Strategy LEVEL 1 Initial Process LEVEL 2 Committed Process LEVEL 3 Established process LEVEL 4 Improved Process LEVEL 5 Optimized Process Alignment Gap

21. · · · · · · - · - - - Inter- - IT BUSINESS ALIGNMENT MATURITY CRITERIA PARTNERSHIP Business Perception of IT Value Role of IT in Strategicc Business Planning Shared Goals, Risk, Rewards/Penalties IT Program Management Relationship/Trust Style Business Sponsor/Champion SCOPE & ARCHITECTURE Traditional, Enabler/Driver, External Standards Articulation Architectural Integration: - Functional Organization -Enterprise -Inter enterprise Architectural Transparency, Agility, Flexibility Manage Emerging Tech. SKILLS by Business Liaison( COMMUNICATIONS Understanding of Business by IT Understanding of IT Inter/Intraorganizational Learning/Education Protocol Rigidity Knowledge Sharing s) effectiveness COMPETENCY/VALUE MEASUREMENTS IT Metrics Business Metrics Balanced Metrics Service Level Agreements Benchmarking Formal Assessments/Reviews Continuous Improvement GOVERNANCE Organization Structure IT Investment Management Prioritization Process Business Strategic Planning IT Strategic Planning Budgetary Control Steering Committee(s) Cultural Locus of Power Change Readiness Innovation, Entrepreneurship Management Style Career crossover; training/education Hiring and retaining Interpersonal Environment Social, Political, Trusting

22. Improved/ managed process COMMUNICATIONS: Bonding, unified COMPETENCY/VALUE: Cost effective;Some partner value;Dashboard managed GOVERNANCE: Managed across the organization PARTNERSHIP: IT enables/drives business strategy SCOPE & ARCHITECTURE: Integrated with partners SKILLS: Shared risk & rewards Established focused process Strategic Alignment Maturity Summary Initial/Ad-Hoc process Committed process Optimized process Level 2 Level 1 Level 3 Level 4 Level 5 COMMUNICATIONS: Good understanding; Emerging relaxed COMPETENCY/VALUE: Some cost effectiveness; Dashboard established GOVERNANCE: Relevant process across the organization PARTNERSHIP: IT seen as an asset; Process driver;Conflict seen as creative SCOPE & ARCHITECTURE: Integrated across the organization SKILLS: Emerging value service provider;Balanced tech & business hiring COMMUNICATIONS: Business/IT lack understanding COMPETENCY/VALUE: Some technical measurements GOVERNANCE: No formal process,cost center, reactive priorities PARTNERSHIP: Conflict; IT a cost of doing business SCOPE & ARCHITECTURE: Traditional (e.g., acctng, email) SKILLS: IT takes risk, little reward; Technical training COMMUNICATIONS: Limited business/IT understanding COMPETENCY/VALUE: Functional cost efficiency GOVERNANCE: Tactical at Functional level,occasional responsive PARTNERSHIP: IT emerging as an asset; Process enabler SCOPE & ARCHITECTURE: Transaction (e.g., ESS, DSS) SKILLS: Differs across functional organizations COMMUNICATIONS: Informal, pervasive COMPETENCY/VALUE: Extended to external partners GOVERNANCE: Integrated across the org & partners PARTNERSHIP: IT-business co-adaptive/improvisational SCOPE & ARCHITECTURE: Evolve with partners SKILLS: Education/careers/rewards across the organization

23. Strategic Alignment Maturity Summary Initial/Ad-Hoc process Level 1 COMMUNICATIONSCOMMUNICATIONS: Business/IT lack understanding COMPETENCY/VALUECOMPETENCY/VALUE: Some technical measurements GOVERNANCEGOVERNANCE: No formal process,cost center, reactive priorities PARTNERSHIPPARTNERSHIP: Conflict; IT a cost of doing business SCOPE & ARCHITECTURESCOPE & ARCHITECTURE: Traditional (e.g., acctng, email) SKILLSSKILLS: IT takes risk, little reward; Technical training Optimized process Level 5 COMMUNICATIONSCOMMUNICATIONS: Informal, pervasive COMPETENCY/VALUECOMPETENCY/VALUE: Extended to external partners GOVERNANCEGOVERNANCE: Integrated across the org & partners PARTNERSHIPPARTNERSHIP: IT-business co-adaptive/improvisational SCOPE & ARCHITECTURESCOPE & ARCHITECTURE: Evolve with partners SKILLSSKILLS: Education/careers/rewards across the organization

24.  WHERE IS THE ORGANIZATION STRONG/WEAK?  WHERE IS THERE DISAGREEMENT?  WHAT ARE THE IMPLICATIONS?  WHAT CAN BE DONE TO IMPROVE THE MATURITY LEVEL?  IT OPENS THE DOOR TO DISCUSSING ALIGNMENT IT IS NOT JUST THE LEVEL OF MATURITY