Information technology has become an indispensable component of today’s organization. Through the conceptualization and implementation of a variety of IT projects, corporations are able to leverage the power of transaction processing and analytical systems, manage their increasingly complex operations, and process large amounts of sales orders.
When we consider the different business units that exist in a global corporation, we begin to appreciate the potential for conflict in terms of deciding which IT projects to fund, reject, or postpone. It is clearly obvious that the manufacturing and marketing departments will have radically different ideas regarding which IT projects are ‘important’. Also, the poor coordination of IT projects, originating from different business units, could result in redundant, or worse, contradictory projects. Neither outcome contributes to increasing productivity or reducing costs, and will ultimately negatively impact organizational performance.
How then can a business objectively and effectively prioritize its IT projects? My Business-IT alignment model provides a useful starting point:
Below is a brief description of the components of this model:
Corporate Strategy: This is the highest level of strategy formulation in any organization. Key issues that are addressed at this level include the product/service to be provided, and the markets to be operated in. Also, the nature of the relationships between the different products and services need to be defined at the corporate level. Benefits and consequences are associated with tightly coupled, loose and non-existent relationships. IT’s function at the corporate level is to provided strategic information which could be used to facilitate decision making. IT also has to provide counsel on feasible implementation timelines for new business initiatives, since it all has to be enabled by technology.
Technology Strategy: Unlike the name suggests, the goal of the technology strategy is not the optimization of IT within the corporation. Rather, it is the optimization of the business using technology. Therefore, the driving force of the technology strategy in a corporation is the corporate strategy. It directs the enterprise architecture, which refers to a rigorous description of the technology landscape – including platforms, standards, and the relationships between them – and how this is supposed to evolve over time. IT initiatives that originate from the technology strategy are typically enterprise-wide in nature, and top-priority since they benefit the entire organization. A typical example of this would be the implementation of an enterprise resource planning (ERP) system to integrate operations across the entire corporation.
Business Level Strategy: Business level strategies relate to the actions taken by specific business units within a larger corporation to differentiate their products and gain competitive advantage in their respective marketplace. These strategies are enabled by technology, and usually lead to the generation of a significant number of IT project proposals. These proposals are defended by project champions: senior executives within the business units with the political clout to provide project visibility and encourage adoption. The advocacy of project champions for a wide, and diverse, range of projects usually leads to the project prioritization conflict being experienced by most global corporations. An effective approach to tackling this challenge involves identifying:
- which projects have the greatest alignment with the corporate strategy.
- which projects have the greatest potential to increase corporate performance by increasing revenues or decreasing costs.
- which projects can be grouped together to create a single, enterprise-wide initiative whose benefits is greater than the sum of its parts.
IT Initiatives: these are strategic IT efforts that are executed within a corporation. They are usually large in cost and scope, and need to be broken down into smaller, more manageable projects. However, some initiatives are made up of a single project, as is shown in the model above.
Is this model a top-down or bottom-up approach? It depends. Project proposals can originate from anywhere in the organization. However, the key criteria with which all proposals must be assessed is their alignment with the corporate strategy, and potential to improve corporate performance.
A Project Management Office (PMO) has a critical role to play in implementing this model. This office should be set up as part of the technology strategy of the corporation, and its responsibilities would be twofold:
- Analyzing, and ranking projects in accordance with already defined criteria.
- Managing the implementation of approved projects to ensure they are delivered on time and within budget.