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Strategic alignment: Leveraging information technology for transforming organizations

 Award plaque by J. C. Henderson
and N. Venkatraman

It is clear that even though information technology (I/T) has evolved from its traditional orientation of administrative support toward a more strategic role within an organization, there is still a glaring lack of fundamental frameworks within which to understand the potential of I/T for tomorrow's organizations. In this paper, we develop a model for conceptualizing and directing the emerging area of strategic management of information technology. This model, termed the Strategic Alignment Model, is defined in terms of four fundamental domains of strategic choice: business strategy, information technology strategy, organizational infrastructure and processes, and information technology infrastructure and processes—each with its own underlying dimensions. We illustrate the power of this model in terms of two fundamental characteristics of strategic management: strategic fit (the interrelationships between external and internal components) and functional integration (integration between business and functional domains). More specifically, we derive four perspectives of alignment with specific implications for guiding management practice in this important area.

Originally published:

IBM Systems Journal, Volume 32, Issue 1, pp. 4-16 (1993).

Significance:

In business, the fit between the business strategy with respect to products and services provided to external customers and the internal structure of the enterprise is critical for economic performance and efficiency. This paper presents the notion that information technology strategy should be articulated in terms of the external business strategy (how the firm is positioned in the IT marketplace) in addition to how the infrastructure of the information systems should be managed and configured. Examples are given of how such strategic alignment of business and IT can provide competitive advantage. The strategic alignment model shows the fit between external and internal business and IT strategies. Business strategy can drive IT strategy as well as the organizational and IT infrastructure, but IT strategy can also enable new and enhanced business strategies. Functional integration of business and IT makes IT a source of competitive advantage.

This highly cited paper was the lead paper in the IBM Systems Journal 32, No. 1 (1993), a special issue on business transformation through information technology. Many of the papers in that issue were also highly cited. See, for example, “Transforming the enterprise: The alignment of business and information technology strategies,” by J. N. Luftman, P. R. Lewis, and S. H. Oldach, IBM Systems Journal 32, No. 1, pp. 198-221 (1993). See also “Strategic control in the extended enterprise,” by B. R. Konsynski, IBM Systems Journal 32, No. 1, pp. 111-142 (1993).

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