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August 13, 2005

Business-IT Alignment: Three Levels of Change

It's most commonly said that the alignment of IT and Business focuses on the way that IT "delivers business value". Because of the pace and intensity of change within and around the business, the alignment effort emphasizes the need to define and protect both the deliverables and the integrity of the delivery path.

Said more carefully, IT delivers support of the value-capture modes of the business. This clarification points out that business value is not just "created at the IT point" and then run through a gauntlet of business issues on a delivery path.

But even that should be put more precisely. Instead, interlinked value-creating modes in a "value chain" are managed by the business, and IT is managed distinctively at each link, thus affecting the way that business value is ultimately realized.

Viewing that value chain as a hierarchy of dependencies lets us associate certain changes with different depths or levels of intervention, while still seeing that changes can simultaneously and independently occur on all levels. The challenge of alignment is to identify and coordinate these changes.

From the business point of view, change in the business affects the integrity and performance (i.e. success) of that "value chain" on three general levels.

One change level involves the definition of the basic components that are used to construct the business's production tools and procedures. Change alters the quality of the components.

Another and higher level involves the arrangement of the components into the various forms of facilities, resources and locations that the business uses in daily execution. Change alters these forms.

The highest level involves the agreements and expectations by which the business executes its activity towards goals, opportunity, and stakeholders. Change redirects activity and the demands it makes on underlying levels.

The following tabular diagram illustrates the active business elements in the management of the value chain versus change.
- A software application is taken as an example of IT being managed for alignment.
- As shown by the far left column and the center arrow, management expectations drive and constrain the cultivation of value at each link or level.
- These business expectations bear particular ways that IT functionality is developed into business resources.
- In turn, the effectiveness of those approaches is leveraged through operational management that works to confirm and conform the IT utilization to the business expectations.

Alignment must be seen as a business success factor if change across these levels is going to be strategic instead of merely opportunistic. Because the different levels and types of change are each independently sensitive to the strengths, weaknesses, opportunities and threats of the organization, management must continually view and assess the benefits and risks that various changes present to the value chain -- specifically, lowering the risk of driving benefits to the business bottom line.

Posted by Malcolm Ryder at August 13, 2005 8:20 AM

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