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IW 500

September 14, 1998


Enablers & Inhibitors

Despite working on different levels, IT and business executives must communicate better in order for companies to experience the benefits of technology

By Jerry Luftman

Businesses in the United States have invested billions of dollars in IT over the years, but even for many of the most innovative corporate users, bringing technology into harmony with overall business needs and strategy remains an elusive goal. To their frustration, companies have found it difficult to harness the true value of IT for long-term benefit, even though there is evidence technology can transform whole industries and markets.

What factors promote and discourage the alignment of IT and business? An extensive five-year study involving IT and business managers provides some insight. Executives from more than 800 U.S. companies representing 15 industries took part in the study at IBM's Advanced Business Institute to assess IT and business alignment. Analysis of the data collected identifies the six most important factors in alignment: senior executive support for IT, IT management's involvement in strategy development, IT's understanding of the business, the existence of a partnership between business and IT leaders, the level of prioritization of IT projects, and IT management's leadership abilities.

At the outset of the study, executives were asked to rate the perceived strength of alignment within their companies. Forty-two percent said their business and IT strategies were not properly aligned, and 8% were unsure or had no opinion. This means only half of the managers believed their companies had a synergistic, cooperative business-IT relationship.

This perceived lack of alignment lead to the next part of the study: identifying factors that aid or hinder alignment. In a five-year period that ended in 1997, IT and business line executives were asked to identify and rank in importance both enablers and inhibitors to alignment. Not only were the responses from IT and business executives similar, but the overall rankings of enabling and inhibiting factors remained consistent over the years.

Support from senior, non-IT executives regularly ranked as the top enabler to business-IT alignment. This is a key finding because it highlights the need for business leaders to be cognizant and supportive of technology innovations. Top business executives need to recognize the value of IT, define and communicate a "vision" of corporate success that includes IT in a major role, and provide leadership and funding for IT projects.

Insurance company and InformationWeek 500 member Cigna Corp. provides an example of how senior management's embrace of a technology initiative can have a huge impact on financial results. The company has launched infrastructure changes, including standardizing on an advanced desktop platform throughout the organization. Cigna management's financial support and recognition of the strategic value of such moves has resulted, at least in the short term, in increased efficiency and productivity of end users, faster development of in-house applications, and increased understanding between business and IT leadership.

Another highly ranked enabler is IT management's participation in the creation of business strategies, and development of its own strategies for success. Both IT and non-IT executives recognize that it's easier to achieve alignment when cross-functional teams, including IT representatives, create enterprise strategies. To this end, companies should establish a binding IT-business partnership that involves mutual trust. At the same time, companies need to have in place an effective IT governance process, which determines who is responsible for funding, overseeing, and measuring the payback of particular technology-based projects.

At pharmaceutical company Bristol-Myers Squibb Co., an IT review board comprising IT and non-IT executives leads the strategy and planning processes, identifies opportunities, and defines priorities for IT. It also tracks projects and uses the concept of an IT-business liaison to maintain and ensure service in the field for its customers.

IT management's understanding of the business environment is another key to successful alignment. Both IT and business managers say the ability to understand the company's customers and competitors is an important enabler. IT executives also need to communicate in business terms rather than technology terms. Conversely, business line managers need to have an understanding of IT and what it means to their business.

One example of how IT managements' understanding of the business climate is crucial comes from the trucking industry. Beginning in the 1980s, the Motor Carrier Actchanged the face of competition by allowing new entrants into the market. To respond, IT leaders at C.R. England & Sons Trucking Co. in Salt Lake City placed a greater emphasis on developing systems and applications that would provide better customer service than its emerging competitors. One such application, Quick Trace Program, allows customers to dial directly into England's system to review the status and location of any delivery.

Another example of a company that has used IT to improve customer service in a dynamic environment is discount brokerage firm and InformationWeek 500 member Charles Schwab Corp. Schwab relies on innovative uses of IT to offer new types of investment programs to its clients and provide better service at lower prices than competitors. Major IT initiatives-such as Telebroker, a fully automated telephone system for real-time stock quotes and order placement, and StreetSmart, software that lets clients trade through Schwab via a PC-have been aimed at improving customer service. In 1996, Schwab began to let customers trade mutual funds on its Web site, becoming the first major brokerage firm to offer the service.

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