The Elusive Link Between Technology and Strategy

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Monday, November 16, 2020
Brian Cameron
Associate Dean, Professional Graduate Programs, Smeal College of Business, Pennsylvania State University
Photo by iStock
Business students must understand that technology should support organizational objectives to create value, not merely align with strategy to cut costs.

In their book The Balanced Scorecard, authors David Norton and Robert Kaplan note that 90 percent of organizations fail to execute their strategies successfully. Furthermore, according to analyst Michael Krigsman, approximately 68 percent of IT projects fail to achieve desired business objectives or simply fail outright. In fact, organizations often cite lack of alignment between strategy and IT as a major contributing factor in poor strategy execution.

It seems that true strategic alignment remains the holy grail for business and IT executives. But what if IT and strategy shouldn’t be aligned? Perhaps it makes more sense for organizations to adopt IT strategies that are nimble enough to support good business strategy. Organizations can achieve competitive advantage when IT allows their leaders to quickly and easily tweak their strategies as business conditions evolve.

Our students must understand this nuanced interaction between IT and strategy—that the more they try to make IT align with business strategy, the more technology will distract the organization from its objectives. But the more they use IT to support strategy, the more the holy grail of strategic alignment will be placed within reach of their organizations.

From Alignment to Engagement

In their 2001 book The Strategy-Focused Organization, Kaplan and Norton reported that “a mere 7 percent of employees today fully understand their company’s business strategies and what’s expected of them in order to help achieve company goals.” How, then, should we teach students this aspect of strategy that so few people understand?

First, we must stop using phrases such as “IT alignment with the business” or even “IT and the business” in our courses. Such language implies that IT stands apart from “the business,” rather than being an integral part of it. Moreover, aligning IT with strategy often results in systems that are expensive and hard to change to suit changing business conditions.

Second, we must shift our students’ understanding of strategy from an alignment perspective to an engagement perspective. They must know that all members of the organization must be engaged partners who are creating business value through their teamwork, communications, governance, and use of technology.

Finally, we must adopt new ways of thinking about the link between IT and strategy. Under the old way of thinking, for example, a leader might spend most or all of the IT budget only on sustaining the business. This often leads to the CEO asking, “How are we spending all this money and getting nothing of value?”

Under the new way of thinking, a leader allocates the IT budget across many objectives, including running the business, growing the business, and transforming the business. In this scenario, IT helps organizations to fulfill their strategies by enabling business capabilities, creating revenues, and driving value for the company.

Our Educational Challenge

While most business schools teach strategic development and project management, few explore strategic execution. But if students are to truly understand IT’s role in strategic execution, they must know how all the functions and capabilities of an organization work together. This is largely described by two concepts: enterprise architecture, which refers to the larger business model of the organization, and business architecture, which refers to its technical systems.

Enterprise architecture. This concept has its roots in information technology strategic planning, but it has come to encompass much more than IT. Enterprise architecture is the practice of effectively integrating four foundational areas of the organization—business, data, application, and the technical infrastructure.

"We must stop using language that implies that technology stands apart from "the business," rather than being an integral part of it."

For any business to achieve ongoing strategic alignment, its leaders must know the current state of the organization across all four areas, the desired future state for the organization, and the plan for moving the organization from the first state to the second. Enterprise architecture is the bridge that leaders can use to get the organization from its current state to its desired future state.

Business architecture. Business architecture involves the more traditional aspects of the organization, from the hardware, software, and communication technologies it uses to the data it analyzes to support strategic decisions.

Since 2008, the Pennsylvania State University’s Smeal College of Business has offered an online master’s program in enterprise architecture and business transformation, in collaboration with Penn State’s College of Information Technology. In 2018, we launched a three-course online graduate certificate in business architecture, designed to provide students with a foundation in business architecture concepts, practices, and structures that enable effective strategy execution.

There are two primary audiences for this certificate: a technical modeling-oriented audience and a business strategy-oriented audience. Students can choose one of two options for the third course in the program, depending on their orientation.

The program starts with Strategic Business Architecture, a course that offers a foundation in how business motivations, operations, and analysis frameworks link together within enterprises. Next, students take Emerging Trends, Technology, and Corporate Innovation, which provides a survey of trends and disruptors that are creating new markets and influencing all aspects of the enterprise.

Finally, they may choose to take either Enterprise Modeling, which explores how architectural modeling enables organizational planning and decision making, or Global Strategic Management, which explores how multiple functional business areas integrate to resolve global business problems and improve organizational performance.

These courses are offered as either core courses or electives in the enterprise architecture and business transformation master’s program, as well as elective concentrations in our online MBA program and our new master’s in corporate innovation and entrepreneurship program. In this way, students can use them as springboards into further education.

The second offering of the graduate certificate program concluded in spring 2020 with a cohort of 51 professionals. Students came from industries ranging from government and defense to manufacturing and information technology; most worked at companies with only 30 to 40 employees and believed that a business architecture practice would enable their companies to avoid strategy execution mistakes.

Business Architecture in Action

Projects in these courses often focus on work-related objectives or problems at students’ own organizations. For example, in Strategic Business Architecture, one student worked for a global corporation that was struggling with a plethora of patchwork systems, arcane processes, and cumbersome procedures. These mismatched systems had evolved because many employees in the organization were unclear about its mission and vision.

A student team worked with business architecture professionals within the organization to review strategy documents and discuss the current and desired future states with senior executives—in this case, its leadership wanted to streamline its systems and expand into new markets. The team also developed a business model canvas to understand the context, customers, drivers, and resources inherent to the success of the firm.

"One student remarked that he was surprised 'that more companies don't have a business architecture group.'"

After mapping out the company’s business capabilities and documenting its highest-level value streams (related to factors such as products and suppliers), the team collaborated with the enterprise and IT architects to map the company’s applications, systems, and IT services to its capabilities. Finally, the team developed the most critical deliverable—recommendations for ways the organization could adjust or add to its capabilities to achieve its strategic objectives. As part of this process, they identified where the company might pursue promising new projects, change existing projects, and eliminate projects that were no longer needed.

Stoking Future Success

After completing the certificate, one professional from the aerospace industry told us, “I came out with a holistic view of business architecture and how it ties to the strategy and innovation areas of the business, how it integrates with other areas of the business, and how it bridges that strategy to execution.” Another from the automotive industry remarked that he was surprised “that more companies don’t have a business architecture group.”

Business schools can contribute to the future success of organizations by teaching business leaders the ways that enterprise architecture and business architecture contribute to strategic execution. If professionals continue to lack an understanding of these topics, organizations will continue to wonder why their strategies fail or why their technological investments do not produce the desired results.

Brian Cameron
Associate Dean, Professional Graduate Programs, Smeal College of Business, Pennsylvania State University
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