Strategic IT Alignment May Be Harmful

 
 
By Paul Tallon  |  Posted 2003-11-11 Email Print this article Print
 
 
 
 
 
 
 

It's not always the case that better IT alignment leads to business gains and may actually be a detriment to your ulitmate goals. Learn how to avoid creating information backbones that are too inflexible to embrace marketplace change with this analysis. <

With all thats been written about the benefits of strategic alignment, its hard to believe IT alignment can sometimes fail to produce a business payoff. Yet in a recent study of 238 midsize companies I participated in, jointly conducted by Boston Colleges Carroll School of Management and the Center for Research on IT and Organizations at the University of California at Irvine, we not only found that this alignment paradox is possible, but sometimes strategic alignment might actually harm a company. Our study found that while 70 percent of companies reduce costs or improve sales and customer service after increasing strategic alignment, 30 percent see no improvement or even a decline.

Whats behind this "alignment paradox?" Think rigidity. When companies create an inflexible IT backbone as they align their systems to strategy, they risk locking themselves into a particular way of doing business. Indeed, our research team consistently found that this loss of flexibility was a key reason why the 30 percent group saw no real benefit from their alignment efforts.

A closer look at the data reveals some other insights. Companies that suffered from this alignment paradox did so either because they installed incompatible systems, or they failed to establish a common IT architecture. They were therefore unable to realign their systems and share information as needed when their own strategies or outside business conditions changed.

Diminished flexibility may not pose a major problem for some firms, chiefly those in more stable industries such as chemicals and construction. In these industries, the cost of achieving flexibility may not be worth the business gain. Our study found the highest correlation between IT value and alignment in stable industries such as these.

But inflexibility can be particularly troubling for companies facing increased competition, changing consumer tastes, price wars, shrinking product life cycles or new government regulations. Given these challenges, speed and the ability to adapt to change are essential. If increased strategic alignment restricts IT infrastructure flexibility, alignment could simply strangle the company in a killers embrace.

In fact, the companies we found facing an alignment paradox tended to be in fast-paced industries such as electronics, pharmaceuticals and financial services, where IT flexibility and the ability to turn on a dime are a matter of survival. For example, Dell Inc. has stared the paradox in the face, but managed to avoid it. Executives at Dell had considered deploying SAP software to help solve an immediate need: to integrate its systems around the globe so managers could view production data from Dells plants worldwide. They decided, however, that in the long run standardizing global applications would prevent regional managers in Asia, Europe and Japan from being responsive to their local markets, because they would no longer be able to control their own applications. This was a clear conflict with Dells overriding need for a flexible business model. The company ultimately decided not to deploy SAP.

Next Page: Flexibility takes vigilance and smart management.


 
 
 
 
 
 
 
 
 
 
 

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