The pitfalls of ‘business-IT alignment’

Over the last decade, technology’s role in an organization has changed significantly from being a support function to a strategic enabler driving business growth and differentiation. In the case of digital-born companies, their business model is anchored on new technologies which enable them to be more agile and responsive to customer needs.
Indeed, technology has become intrinsic to how businesses operate and is crucial for an organization to stay competitive, or at times, even to survive, in today’s extremely challenging business environment.
However, while everyone may agree on its significance, many companies still have differing views on the role of technology in their business. This is evident in how they conduct technology strategy discussions which are primarily focused on rationalization of IT spending, optimization of IT resources, and alignment of IT priorities to corporate strategy. While these conversations are important, technology leaders need to be engaged by the business earlier. In most cases, however, technology strategy is only developed after strategic planning, as an afterthought rather than an integral part of corporate strategy formulation. This approach limits the organization from realizing its full potential by failing to challenge and influence the corporate strategy through innovative use of technology.
There are basically two persuasive realities behind the need to change the approach to technology strategy. First, “pervasive connectivity” due to the proliferation of social media has placed immense pressure on companies to deliver consistently positive customer experiences across various channels. According to the 2018 Global Digital Report by a social media organization, more than 67 million Filipinos spent almost four hours daily on social media in a study conducted from 2017 to 2018. For enterprises, this means that a single piece of negative feedback online has a higher chance of affecting the reputation of a company (potentially resulting in more extreme consequences) as compared to a multitude of paper-based feedback forms of the past.
This “pervasive connectivity” has compelled organizations to confront a second reality, which is: in order for them to survive, companies need to transform into a “digital enterprise,” which customers view not as a product or service provider but as an experience provider. This means that customer experience involves not only meeting the specific customer’s need, but equally important, delivering a personalized interaction through understanding his or her attitude, behavior, and preferences. Thus, the digital enterprise requires organizations to leverage technology effectively across various business capabilities ranging from marketing to customer social interaction, to ecommerce-enabled sales and technology-enabled products.
Despite the necessity, most organizations still tend to not involve technology leaders during strategic planning for the following reasons:

• There is a lack of a holistic view of technology capabilities within the organization since the focus is generally on technology within the scope of the IT department. Furthermore, other technology considerations beyond IT are often overlooked, such as in the case of Internet of Things (IoT) devices and technology used in R&D and manufacturing.

• Technology leaders have a tendency to lean towards technical discussions which may not somehow align well with the management science of strategic planning.

• Technology leaders often focus on keeping the lights on; thus, lagging behind the ambitions of the management for the future.

• Too much emphasis is placed on the issues and challenges of the current state IT operating model which can constrain strategic thinking.

In order to address these challenges, an organization may find it useful to adopt the following changes in the way they formulate technology strategy:

• Engage the C-suite executives early enough in the technology strategy formulation. In this age, technology strategy can no longer be developed by IT management in isolation. The mind-set is that a good technology strategy should essentially enable and influence the formulation of a strong business strategy.

• Consider a broader spectrum of technology capabilities beyond the back-office IT such as Internet of Things (IoT), automation, and SMAC (social, mobile, analytics, and cloud), which can potentially transform how business needs and technology enablement are approached. Indeed, relevant strategic gains may be realized in unexpected areas.

• Formulate a Technology Strategy with a future target state in mind. Too much focus on addressing the challenges of the current state will limit one’s ability to see the full picture. A future target state may be determined by long-term business drivers as well as the competitive forces at play. However, this shouldn’t diminish the need to have a good understanding of the current state in order to build an effective yet practical transition plan.

• Develop the overall business case to justify and articulate the benefits and costs of the Technology Strategy. Unlike before where the Technology strategy tends to be passively aligned to the business strategy, the approach must use a more balanced portfolio management approach to optimize risks and returns.

• Create a road map by setting interim targets which further break down the Technology Strategy into realistic and actionable items and have a proper mechanism in place to track and measure success including benefit realization.

Indeed, in this era when innovation is the name of the game, the line between business and technology strategy has become blurrier than ever. While almost everyone is on digital transformation, what sets a successful organization apart is its ability to integrate and use technology effectively to drive and deliver the ambitions of the company to the next level.
The views or opinions expressed in this article are solely those of the author and do not necessarily represent those of PricewaterhouseCoopers Consulting Services Philippines Co. Ltd. The content is for general information purposes only, and should not be used as a substitute for specific advice.
 
Larianne Kristine B. Cruz is a senior manager with the Technology Consulting practice of PricewaterhouseCoopers Consulting Services Philippines Co. Ltd., a Philippine member firm of the PwC network.
+63 (2) 845-2728 ext. 3234
larianne.kristine.cruz@ph.pwc.com