W4 - Strategic Alliance Model

Subject:
In Lect 4 - Which alignment strategy in SAM model is the best? and why?
======================================================================
Response:

First, I should briefly define what is SAM. Strategic Alignment Model (SAM) is a framework which is used for aligning IT with business strategy, conceptualizing and directing strategic role or management of IT, leveraging IT on a continuous basis to achieve sustainable competitive advantage. It is widely used as the base of Business and IT alignment theories. This model brings out a key message that the company should ensure the IT strategy is fully aligned with business strategy in order to become a successful company.

There are four dominant alignment perspectives of SAM which are Strategy execution, Technology transformation, Competitive potential and Service level.

To comment on which is the best SAM model, I personally support the argument that there is no best alignment strategy and it depends on different industries and companies. As mentioned by J C Henderson and N Venkartraman, as researchers and observers of strategic management phenomena, we do not believe that there is one universally superior mode to formulate and implement strategy. If there were, it would not be strategic because all firms would adopt it. They basically support the argument. If there were a best model, all firms would make use of it and the model would no longer strategic.

I will now further describe the four dominant alignment perspectives and show their own advantages and successful examples to show all of the four perspectives are good when they are applied to the appropriate nature.

1.      Strategy execution

Business strategy is the driver of both organizational design choices and the design of IT infrastructure. Identifying the specific role of management is the key point to make this succeed. In this perspective, the role of top management is strategy formulator and should articulate the logic and choices pertaining to business strategy while the role of IT manager is strategy implementer and should designs and implements the infrastructure and processes which support the strategy. One more thing is that performance of the IT function is assessed by the financial parameters.

Since strategy execution is the most common and widely understood perspective as it corresponds to the classic, hierarchical view of strategic management, many companies succeed with applying this model.

2.      Technology transformation

Business strategy is the driver of IT strategy and IT infrastructure. This model use appropriate IT strategy to implement the business strategy. The role of top management is technology visionary that best support the business strategy and the role of IT manager is technology architect that designs and implements the IS infrastructure that is consistent with IT vision. This alignment perspective is not constrained by the current organization design. It uses to identify the best possible IT competencies. The other thing is that performance in term of IT market position is assessed by a benchmarking approach.

A successful example is American Express Travel Related Services Co., Inc. It has two technology-based competencies which are providing quick approval of purchases made by charge card and providing copies of receipts to the cardholders. By this, American Express can catch the response time of the leading competitors so as to avoid the cardholders switching to the alternative with faster transacting card.

3.      Competitive potential

IT strategy is the driver of business strategy and organizational infrastructure. This model is to allow adaptation of business strategy via emerging IT capabilities. It seeks to identify the best set of strategic options for business strategy. The role of top management is business visionary that estimates how IT competencies affect the business strategy while the role of IT manager is catalyst that identifies the IT environment so as to assist the business managers to know more about the opportunities and threats of emerging IT. In this perspective, business performance is assessed by business/product leadership including market share, growth and new product introduction.

A successful example of competitive potential is Baxter Healthcare. It enhances Technology scope, greater systemic competencies and governance with IBM through the Spectrum joint venture that will provide software service to the health care marketplace.

4.      Service level

IT strategy is the driver of IT infrastructure and organizational infrastructure. Applying this model is to ensure the effective use of IT. It focus on how to build a world-class IT service organization. The role of top management is prioritizer that allocate the resources within the organization and IT marketplace while the role of IT managers is executive leadership that ensure the internal service business succeed. The performance is assessed by the level of customer satisfaction.

A successful example of service level is PARKnSHOP. It makes use of the RFID technology to make the customers more convenient and have better buying experience. It supports using Octopus card to pay which fasten the billing procedure and it uses MoneyBack card which allow customers to save the cash dollar. By this, PARKnSHOP can maximize the customers’ satisfaction.

To conclude, all of the four SAM models have their own advantages and they can lead the companies to success if the models are adopted in the right nature and well used. There is no best model and it depends on different industries and companies.

Source / Reference:
1)  "Strategic Alignment: Leverage Information Technology for transforming organization" by J C Henderson and N Venkartraman 1993

http://search.proquest.com/docview/26252741/134A6C8B53F19A4F606/1?accountid=16210

2) “Using and validating the strategic alignment model” by David Avison, Jill Jones, Philip Powell, David Wilson 2004

http://www.sciencedirect.com/science/article/pii/S0963868704000356

3) “The Strategic Alignment Model of Henderson and Venkatraman”

http://businessitalignment.wordpress.com/2010/12/17/the-strategic-alignment-model-of-henderson-and-venkatraman/

4) “Strategic Alignment: Analysis of Perspectives” by Coleman, Preston and Papp, Raymond 2006