Avoiding Alignment Trap
EXECUTIVE SUMMARY
This case analysis discusses the findings in the article ‘Avoiding the Alignment Trap’, where even though most companies are aware that IT must be aligned with business strategy in terms of aligning IT expenses with revenue growth, over 11% of companies that align IT with business strategy spend more than 13% on average on IT expenses with a resulting of less than 14% average in revenue growth. The objective of this case analysis is to recommend a governance arrangement that will lead most companies that are currently have less effective IT alignment with business alignment to IT-enabled growth where the cost of IT more than compensates with the revenue growth of the company. The recommendation is to adopt a Duopoly governance arrangement where both the CEO and CIO make decisions, form a committee to oversee IT decisions and business strategy decisions made by these leaders, and ensure adequate decision making and monitoring of performance based on IT and business-related decisions. The ISO 38500 can be used as a framework to monitor these decisions and evaluate IT decisions based on their effectiveness, alignment with overall strategy and the value they bring to the organization.
CURRENT SITUATION
According to the article, almost every company is aware that IT and business strategies must be aligned in order to gain competitive advantage in their industry. This means their IT spending must be matched with their growth strategies. To test this notion, the authors of this article surveyed 452 companies and received 504 responses. The survey determined the companies IT spending and 3-year sales compounding to determine annual growth rate. In their survey, they have found the following:
1. 74% of these companies do not align IT to their business strategies. Companies allocate enough funds to their IT necessary to keep the systems running. It is not meant to add value to the business. As a result, their growth rate is 2% below on average
This case analysis discusses the findings in the article ‘Avoiding the Alignment Trap’, where even though most companies are aware that IT must be aligned with business strategy in terms of aligning IT expenses with revenue growth, over 11% of companies that align IT with business strategy spend more than 13% on average on IT expenses with a resulting of less than 14% average in revenue growth. The objective of this case analysis is to recommend a governance arrangement that will lead most companies that are currently have less effective IT alignment with business alignment to IT-enabled growth where the cost of IT more than compensates with the revenue growth of the company. The recommendation is to adopt a Duopoly governance arrangement where both the CEO and CIO make decisions, form a committee to oversee IT decisions and business strategy decisions made by these leaders, and ensure adequate decision making and monitoring of performance based on IT and business-related decisions. The ISO 38500 can be used as a framework to monitor these decisions and evaluate IT decisions based on their effectiveness, alignment with overall strategy and the value they bring to the organization.
CURRENT SITUATION
According to the article, almost every company is aware that IT and business strategies must be aligned in order to gain competitive advantage in their industry. This means their IT spending must be matched with their growth strategies. To test this notion, the authors of this article surveyed 452 companies and received 504 responses. The survey determined the companies IT spending and 3-year sales compounding to determine annual growth rate. In their survey, they have found the following:
1. 74% of these companies do not align IT to their business strategies. Companies allocate enough funds to their IT necessary to keep the systems running. It is not meant to add value to the business. As a result, their growth rate is 2% below on average