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  • 3-01-05 Aligning Strategies, Processes, and InformationTechnology: A Case Study

    Rainer FeurerKazem Chaharbaghi

    Michael WeberJohn Wargin

    PayoffA business alignment process guides information technology assessment, acquisition, andimplementation. This case study demonstrates how business strategies, teams, operations,processes, and information technologies can be carefully and successfully aligned.

    Problems AddressedProcess innovations and process redesigns frequently must employ technology in order toachieve major improvements in performance. Information technology has become anenabler for newly designed processes by eliminating limitations of time, location, ororganizational structure or by providing a new basis for differentiation. This can only beachieved, however, when processes and information technology are carefully aligned withthe overall organization's objectives and interfunctional teamwork.

    While there is a general consensus among practitioners that business/IT alignment isnecessary, the way to achieve it is often unclear. This is because business strategies areusually defined first and the operations and supporting strategies, including technologies,are then aligned. Such a sequential approach defines strategies, processes, and actions in thelight of the technologies available, as opposed to identifying technologies that drive thecritical success factors.

    A better approach is one in which strategies, processes, technologies, and actions aredefined and aligned concurrently. The aim of this article is to present a business alignmentapproach, one used and developed by Hewlett-Packard Co., for designing andimplementing new business processes that are enabled and supported by new generationsof information systems.

    This approach has been practiced over several years, both internally and externally,generating a portfolio of best practices. The well-defined activities are closely linked and areapplied by multifunctional teams for the purpose of business reengineering as well asredesigning core business processes. The whole approach is complemented by a strongfocus on teamwork, specialized and objective-driven business units, and a commitment toquality and customer satisfaction.

    Framework for Business AlignmentStrategies are only effective when they are translated into actions readily. This implies thatsupporting information technologies need to be highly responsive. Business processes

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  • should be continuously optimized through the application of relevant technologies andcarried out by high-performance teams. Strategies must therefore be:

    Formulated by closely examining the role of technology as an enabling source.

    Translated into actions through highly interactive processes that consider all current andfuture business factors.

    In the past, the design of business processes and information technology applicationswas focused on achieving incremental benefits. Flexibility and ability to react to majorchanges were largely neglected. The business alignment framework in Exhibit 1 links anygiven strategy and its corresponding actions.

    Business Alignment Framework

    Linking Strategy and ActionsStrategies determine the critical success factors that in turn define the necessary

    business processes and their information needs. The availability, cost, and flexibility ofdifferent technologies may limit their selection, therefore business processes must betranslated into feasible application models while information requirements are translatedinto workable data models. In this way, the gap between the ideal and workable solutionscan be minimized, while ensuring a logical linkage between strategy and optimized actions.

    The aim of such a framework is twofold:

    To make process changes without being restricted by or limited to existing technology,applications, and suboptimal data structures.

    To make visible the impact of new technologies on processes, and vice versa.

    The business alignment framework takes into account the necessary process changesresulting from changes in the environment as well as potential advancements intechnology. Because any change in strategy and technology potentially results in a changein the value system, culture, and team structures of the organization, it is vital to includethese additional factors within the overall framework.

    By employing this framework, Hewlett-Packard (HP) has experienced a number ofbenefits, including:

    Optimization of all the business processes with the support of integrated technology, asopposed to the suboptimization of individual processes and organization units with thesupport of fragmented technology.

    Consistent focus on processes that maximize stakeholder values.

    Common understanding of issues and future targets throughout the organization.

    High level of transparency and flexibility to act and react to changes stemming from thecompetitive environment as well as improvements in technology.

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  • High level of commitment from people throughout the organization.

    In this framework, target processes, technologies, and standards drive the selection ofpotential solutions. User participation forms an integral part of the framework and helps toensure fast and effective implementation.

    Implementing the Business Alignment FrameworkThe business alignment framework is implemented by cross-functional teams that includemembers from different organizational and functional units. Team members are given acharter by senior-level management to initiate and implement major changes. To preventtunnel vision, teams are sometimes supported by external consultants and a key role isassigned to management.

    According to the structure of the framework, business processes and informationrequirements are defined in parallel to technology enablers and models, which are thenlinked throughout the alignment process. Objectives and measures are defined andreviewed in the light of the intended overall strategy, which leads to adjustments andrefinements of existing results. The approach used to develop the business alignmentframework includes the following modules:

    Breakthrough objectives and process links.

    Business models.

    Technology enablers and models.

    Solution mapping and selection .

    Functional mapping.

    Breakthrough Objectives and ProcessesThe alignment process commences with the existing business strategy or strategic directionof the organization or organizational unit. Based on a strategy review, potentialbreakthrough objectives are defined. Breakthrough objectives create a distinct competitivedifferentiation in the eyes of the customer when implemented. This can be achievedthrough significant improvements in performance in the area of cost, introduction ordistribution of new products, outsourcing of noncore activities, consolidation scenarios, ormodification of supplier relationships.

    After a comprehensive list of potential breakthrough objectives is defined, the mostcritical (usually two to five) objectives are selected. These objectives form the basis ofcritical success factors , which in this sense are all those factors that have to go right inorder to achieve a breakthrough. In parallel, potential obstacles that prevent the achievementof the breakthroughs are identified. These may fall in different categories includingmanagement practices, technology support, training, and goal conflicts between differentstakeholders.

    Innovative, Core, and Supportive ProcessesThe next step is formulating the key processes that have a major effect on achieving thebreakthrough objectives. These processes basically support the critical success factors.Processes that support several critical success factors are classed as innovative processes.

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  • These usually involve multifunctional activities that directly create stakeholder value. Theybecome the focus of business, process, and information models. Other process categoriesinclude supportive and core processes that, although important, do not result in adifferentiation in the eyes of the stakeholders. This is because these processes usuallycorrelate with only one or two critical success factors. Exhibit 2 shows diagrammaticallythe way in which breakthrough objectives and innovative processes are identified. Exhibit 3demonstrates the classification process used to determine innovative, core, and supportiveprocesses based on their potential impact on cost, quality, speed, and flexibility.

    Breakthrough Objectives, Critical Success Factors, and Key Processes

    Process Classification and Potential Impact

    Process Impact ----------------------Major Processes Process Classification Cost Quality Speed Flexibility-------------------------------------------------------------------------------Manage Productand Parts Info Core x x x

    Control Production Innovative x x x

    Plan and ProcureMaterial Innovative x x x x

    Manage MaterialFlow Core-Innovative x x x

    ManufacturerProducts Core x x x x

    Distribution Core x x x

    Financial Supportive x------------------------------------------------------------------------------

    Business ModelsBusiness models are developed for describing innovative processes and their role withinthe overall organization. HP designs business models