Importance of aligning IT Strategy with Business Strategy
Information Technology & Business are becoming inextricably interwoven. I don’t think anyone can talk meaningfully about one without talking about the other – Bill Gates
Technology & Business are almost inseparable. We cannot even imagine a business without computers, internet & software today. Information Technology plays a very vital role in the efficient functioning of a Business. In this article, we will focus on understanding the importance of aligning IT strategy with business strategy.
What Is Business IT Alignment?
Business strategy is the roadmap to achieve the company’s business objectives. The business strategy consists of defining business goals, planning the course of actions, business processes, and taking decisions to achieve specified business objectives.
IT Strategy or Information technology strategy provides guidelines on how technology should be used to help the business achieve its objectives.
Business–IT alignment is a process where businesses leverage information technology (IT) to achieve strategic business objectives, such as expanding the reach of their products, improving financial performance, or more. E.g. Companies that only sell their products through physical stores, can leverage IT to launch an eCommerce website & carry out online sales to expand their reach and increase market share
Why aligning IT with business strategies is the need of the hour?
“Our future success is directly proportional to our ability to understand, adapt and integrate new technologies into work” – Sukant Ratnakar
The business scenario is changing rapidly. Customers’ expectations have also increased. They want the right quality product, at the right price to be delivered to them right away. Adopting technology is inevitable for improving customer experience & satisfaction.
With advancements such as computing power, internet, mobility, cloud computing, automation tools, application software are now widely available & affordable. Technology is now well within the reach so, companies must leverage IT to meet and overcome current business challenges and stay ahead of the competition.
Why Senior Management/Business Leaders must demand more from Information Technology?
Digitization, Mobile, Internet, have changed the way we connect and communicate. Whether it is our employees, customers, suppliers, partners, or more. As Bill Gates mentions in the book, Business @ the speed of thought, NOW is truly a time to create a digital nervous system for the company. Business leaders must focus on achieving:
1. Complete Business Visibility
Business Leaders or Senior Management should aim for digitization & automation to get complete visibility of their business processes, streamline their processes, and improve employee productivity, efficiency.
2. Real-Time Data
Digitization & Automation enables gathering real-time data across various departments, locations, units of the organization, even from field staff. This provides real-time & complete visibility of all areas of business
3. Single Source of Accurate Data
When companywide data is stored in a central server, the right information is available to the right people, anytime, from anywhere. They can closely monitor & make informed, timely decisions conducive to achieve business objectives.
4. Improves Collaboration & Communication
Instant access to accurate data means better coordination among different teams that improve their efficiency. This will result in the optimum utilization of resources as well as higher productivity, which enable achieving business objectives
5. Improved Customer Service
Greater insights into customer behavior and customer requirements helps companies to serve their customers more effectively, and improve customer satisfaction. Happy customers provide repeat orders as well as references that play a significant role in growing business revenues.
6. Define KPIs & Monitor Progress
With the help of IT & ERP, companies can specify criteria for performance measurement and monitor progress frequently. This will help to identify problem areas quickly & achieve continuous improvement.
Let me share an example of how IT enables making informed decisions towards achieving business objectives:
Suppose, one of the business goals is to Reduce Inventory Costs by XX% or from XXX to XXX
Implementing ERP Software or Material Management Software will contribute towards achieving this goal by:
- Implementing Inventory Management Rules & Disciplines
- Setting up Standard processes, Reports, KPIs, and review system
- Specifying Lead Time for inventory items
- Determining Max Stock levels & Safety Stock levels
- Defining Reorder Point & Reorder Quantity to ensure optimum inventory
- Set up Alerts & Notifications for the effective management of inventory
This will ensure that the company can order just enough quantities, required for the production process, just in time, and it will help reduce procurement cost as well as inventory holding costs.
Advantages of aligning Business & IT
- Transparency and Complete Visibility of Business
- Faster Production by eliminating wastes, delays & bottlenecks
- Assured Product Quality by ensuring Strict Quality Control measures
- Speed in Business achieved by turbocharging existing processes
- Optimum utilization of resources
- Excellent Customer Service
- Improved Profitability
Business Strategy & IT must go hand in hand. When IT is aligned with business strategies, companies can leverage IT effectively to achieve business objectives such as growing market share, increasing productivity, higher profitability, and more.