The alignment of business and IT strategy in multi-business organisations

Abstract

The alignment of business and information technology (IT) strategy is an important and enduring theoretical challenge for the information systems discipline and has remained a top issue in practice for the past twenty years. The extant literature makes two implicit assumptions. One is that IT strategy is aligned with a single business strategy, either at the corporate level or within a single strategic business unit (SBU). The other is that strategies are developed at a single point in time. Therefore, multi-business organisations present a particular alignment challenge, because business strategies are developed at both the corporate level and SBU levels, and these strategies are developed over time.

This dissertation contributes a dynamic, capabilities-based theory of business and IT strategy alignment. Rather than extending existing models, this study draws on theory from the resource-based view of the firm and path dependence to address business and IT alignment within and between corporate and SBU levels across the strategy cycle. A new dynamic alignment model conceptualises IT alignment as the fit between business and IT strategies within the corporate and SBU levels and the coherence between these two levels. Value is created by complementary relationships among business and IT capabilities. IT alignment (or misalignment) is embedded over the strategy cycle, with the degrees of freedom declining quickly over time.

The new model is validated using pattern matching with a single critical case of strategy development in a multi-business organisation across a complete strategy cycle. The strong match between the empirically observed and theoretically predicted patterns, and the complex nature of these patterns, provides strong support for the model.

The model reconceptualises the way IT alignment drives organisational performance and how IT alignment changes over time. This has implications for existing IT alignment models, providing alternative theoretical explanations of how IT alignment creates value and how IT alignment changes over time. The new model also has implications for practice across the IT investment value chain and its governance.