Information Systems Management

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Information Systems Management

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Achieving IT-Business Strategic Alignment via Enterprise-Wide Implementation of Balanced Scorecards

To cite this Article: , 'Achieving IT-Business Strategic Alignment via Enterprise-Wide Implementation of Balanced Scorecards', Information Systems Management, 24:2, 173 - 184 To link to this article: DOI: 10.1080/10580530701239314 URL: http://dx.doi.org/10.1080/10580530701239314

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Information Systems Management, 24:173–184, 2007 Copyright © Taylor & Francis Group, LLC ISSN: 1058-0530 print/1934-8703 online DOI: 10.1080/10580530701239314

Achieving IT-Business Strategic Alignment via Enterprise-Wide Implementation of Balanced Scorecards C. Derrick Huang and Qing Hu Department of Information Technology & Operations Management, College of Business, Florida Atlantic University, Boca Raton, FL, USA.

Address correspondence to C. Derrick Huang, Department of Information Technology and Operations Management, College of Business, Florida Atlantic University, Boca Raton, FL 33431, USA. E-mail: [email protected]

Abstract IT-business alignment remains one of the top issues of IS managers. This article presents a case study in which four key elements of ITbusiness alignment — integrated planning, effective communication, active relationship management, and institutionalized culture of alignment — were enhanced by the enterprise-wide implementation of an established strategic management tool, the balanced scorecard. Keywords: governance of IS organization, leadership roles, strategic IS planning, IT-business alignment

Information technology (IT) is a critical resource for companies competing in the global economy of the digital era. Depending on the industry, market, and business goals, it can enable or drive a company’s competitive strategy. In addition, IT has become the essential infrastructure of any company, the backbone for corporate information flow and the enabler or driver of business processes. Examples of companies that use IT effectively to increase competitiveness abound (Porter & Millar, 1986; Ross, Beath, & Goodhue, 1996; Werbach, 2005). But for every success story about IT, one can find a counterexample. Despite its critical role, to many companies, IT is still a necessary evil. The technical nature of this resource frequently isolates it from the rest of the business. While consultants and visionaries alike make claims that IT is an indispensable strategic resource, the large investments required for IT projects often raise questions regarding their business justification. Some companies, for instance, poured millions of dollars into enterprise resource planning (ERP) systems, only to find ineffective operations, work disruption, or even lost revenues (Davenport, 1998). The difficulty in managing and getting value out of IT grew so intense that it recently ignited a heated debate on whether “IT matters” to companies anymore (Carr, 2003, 2004; DeJarnett, Lasky, & Traino, 2004). Today, it is widely recognized that whether or not IT works for a company has less to do with the technology itself, and much more with how IT

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Today, it is widely recognized that whether or not IT works for a company has less to do with the technology itself, and much more with how IT is used and managed. is used and managed. The effectiveness of IT goes well beyond software and hardware; even the best technology cannot work efficaciously for a company unless it is put to proper use in the right context at the appropriate time. To make IT deliver business values beyond supporting daily operations, management needs to plan and execute, not from the technology end, but based on the business strategies. The main determinant, therefore, is how well IT is aligned with the business strategy, deemed one of the top issues in the minds of IT executives (Luftman and McLean, 2004; Luftman et al., 2006).

IT-BUSINESS ALIGNMENT Researchers and practitioners have long recognized the importance of IT-business alignment (Chan, Copeland, & Barday, 1997; Croteau & Bergeron, 2001; Henderson & Venkatraman, 1993; Kearns & Lederer, 2000; Sabherwal & Chan, 2001). When alignment exists, IT delivers systems and services that are crucial to the company’s strategies, operations, or user needs. As a result, executives can see the contributions IT makes, and users are more likely to accept and utilize IT resources. And the benefit does not stop there. Making plans based on the business strategy, IT can actually anticipate what the business requires in the future, and lay out a trajectory to meet those upcoming needs. This is especially critical in a growth-oriented environment (Cragg, King, & Hussin, 2002). When a company is feverishly developing a new product, for example, it might not pay enough attention to information systems that could support the marketing and sales phases. As a result, the product launch may be delayed because of the required system development lead time. If IT is well aligned with the business strategy, the Huang and Hu

IT department may actually anticipate the need for such a system and mobilize development resources that parallel the product development efforts to synchronize with the required launch timeframe. Thus, alignment is more than passively matching operations of IT with business activities. It involves active design, management, and execution of the IT functions in accordance with the company’s goals and strategies. Alignment is not just a process, but a mindset of how IT can work for, and with, business all the time — in other words, a basic principle of interaction between IT and business. In so doing, alignment can maximize the potential return on IT investment. However, experience in IT management over the last three decades shows that alignment is easier said than done. IT is a highly technical field; people who traditionally excel in IT are more technically capable than business savvy. In contrast to the traditional corporate vocabularies of finance, marketing, and sales, IT technical jargon and lingo do not resonate with the syntax and lexicon of the boardroom, and this culture gap between IT and business has been shown to be an impediment to aligning the IT function with the rest of the business (Pepper & Ward, 1999; Ward & Pepper, 1996). Conversely, taking the extra time to understand the importance of technology in business is difficult for many non-technical managers who lack a general understanding of IT and focus sharply on the bottom line. Feeling remote and perhaps indifferent, business executives often ignore IT or, at most, set some high-level performance target for it (Lohmeyer, Pogreb, & Robinson, 2002). CIOs and IT managers, without a clear vision of business directions, often run IT organizations on technical merits and budgetary constraints. As a consequence, alignment remains one of the top issues in IT management (Luftman et al., 2006).

HOW TO ACHIEVE SUSTAINED ALIGNMENT Given the importance, as well as the difficulty of achieving IT-business alignment, there have been many proposed methodologies to achieve it (Luftman & Brier, 1999; Luftman, 2003; Madapusi & D’Souza, 2005; Prahalad & Krishnan, 2002; Sauer & Willcocks, 2002). The focus has been, understandably, on 174


e ffective alignment processes — helping companies build a process that, when followed, can match the technical nature of IT with the commercial nature of the business. Experience has shown that integrating IT and business in a specially designed process may be sufficient in the short term. But, without an overall commitment and culture to rid it of gaps and silos, and a mechanism to deal with the inevitable shift in business and market conditions, the IT alignment process would likely be unsustainable in the long run (Leganza, 2003; Moody, 2003). This “soft” side of alignment, indeed, has been recognized as an important but difficult-to-achieve factor (Chan, 2002; Reich & Benbasat, 2000). Therefore, to achieve sustainable alignment between IT and business, a holistic approach — one that combines and balances the appropriate processes as well as cultural components — is necessary (Hu & Huang, 2006). Based on the review of previous research results and discussions with company executives on their practices, we find that such an approach entails the execution of four key elements: The first and fundamental step to alignment is the reflection of business objectives and strategies in the IT planning and operations. The presence of an actual IT plan and its integration with overall business planning have been the focus of many of the proposed frameworks for alignment to date (Kearns & Lederer, 2003; Reich & Benbasat, 1996). But perhaps even more important is the actual planning process to reconcile the operation coordination, expected deliverables, and resource management (Luftman & Brier, 1999). Without being operationalized in the planning process, alignment will remain more theoretical than practical. ⦁ Maintaining effective communication channels. Open and effective exchanges and interactions help IT and business understand each other’s needs and work together well (Brown & Ross, 1996). However, this crucial communication component is often entrusted, by default, to a few individuals in the IT department who interface regularly with other business functions. To ensure alignment at the operational level, management must create and maintain a system of effective communication channels between IT managers and business ⦁ Integrating IT planning with business planning.

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IT-business alignment is not a static state. executives (Brown, 1999; Reich & Benbasat, 2000; Ward & Pepper, 1996). ⦁ Developing strong relationships between IT and busi-

ness. Relationship is the key soft factor, or infor-

mal structure, that fosters and rejuvenates the state of alignment (Chan, 2002). Previous studies show that close working relationships between IT and business managers are a critical success factor for IT (Feeny, Edwards, & Simpson, 1992; Jones, Taylor, & Spencer, 1995). The CIOs’ interactions with other top management, for instance, can positively influence the assimilation of IT in an organization (Armstrong & Sambamurthy, 1999). Further, the lack of a close relationship was ranked as a top alignment inhibitor (Luftman & Brier, 1999). Therefore, actively managing the relationships between the CIO and top management, as well as between IT and business managers, can lead to a better alignment between IT and business. ⦁ Institutionalizing the culture of alignment. IT-business alignment is not a static state; it’s a continuous maturing process over the long run (Luftman, 2000, 2003). Despite the best efforts, temporary misalignment would inevitably occur as a company moves through different product and market life cycles. A successful alignment system must possess and demonstrate the flexibility to adapt and rejuvenate in an environment of change, such that the management can foster a culture of alignment by institutionalizing the elements of alignment into organizational routines (Chan, 2002; Moody, 2003). To substantiate our arguments for achieving sustainable IT-business alignment, we use a case study of BIOCO (a pseudonym). As part of its strategic business transformation, BIOCO adopted a popular management tool, the balanced scorecard, which identifies and measures the indicators of a firm’s current operations and the drivers for future performance from four perspectives of the business: financial, customer, internal process, and innovation and learning (Kaplan & Norton, 1992). Implementing the balanced scorecard, which requires a firm to Achieving IT-Business Strategic Alignment


identify appropriate measures and indicators in each of the four perspectives to support its corporate strategy, gives rise to a strategy map of how the firm can apply its tangible and intangible assets to gain competitive advantage and sustain superior financial performance (Kaplan & Norton, 1996, 2000a). In the remainder of the article, we illustrate how BIOCO accomplishes all four elements of IT-business alignment by way of its enterprise-wide implementation of the balanced scorecard.

BUSINESS TRANSFORMATION AT BIOCO Our case company, BIOCO, is a medium-sized biopharmaceutical company located in the southeastern United States, employing over 700 people with revenues close to $180 million in 2004. It develops, produces, and markets biopharmaceutical products that prevent and treat infectious, autoimmune, and addictive diseases. Faced with declining sales of its then-core products in the late 1990s, BIOCO underwent an extensive restructuring to refocus its business. For this strategic transformation to take hold, the traditionally department-focused organization gave way to a new corporate culture, where multiple business functions, including IT, were brought in line with the new strategies. To communicate the new vision to the company and ensure the execution of the new strategy by all business groups with different vested interests, the CEO adopted a series of change management programs, the centerpiece of which was the balanced scorecard management system. The CEO secured commitments from the top management team and designated the CIO as the champion for the implementation of the balanced scorecard. Key personnel were sent to training seminars to learn and master the essence of the balanced scorecard theory and techniques. Strategy maps — visual representation of how strategies can be successfully executed — were drawn based on the new visions and strategies of the company, and the corporate-level balanced scorecard was created and populated with relevant measures in the four perspectives in one year’s time. This clear blueprint enabled the company to see how its new strategies could be carried out, and how progress would be measured along the way (Kaplan & Norton, 2000a). Huang and Hu

Riding on the success of the corporate-level balanced scorecard, all departments developed their own scorecards. Riding on the success of the corporate-level balanced scorecard, all departments developed their own scorecards. As in the corporate-level exercise, a departmental scorecard is based on goals and strategies — here, the department’s operating objectives developed in the annual planning process. This chain of derivation — from corporate strategies to department’s objectives to department’s operations — guarantees that the department’s scorecard reflects the way that the department operations contribute to the execution of the corporate strategies (cf. Kaplan & Norton, 2000b). In retrospect, what started as a strategic management system became BIOCO’s change agent. Along the way, the balanced scorecard brought many benefits to BIOCO. It not only successfully communicated the company’s goals and strategies, and how they could be executed, down to the frontlines, but also became the main platform for integrating various business functions, IT included, around the core vision and strategies of the company. The balanced scorecard had become so successful that in 2004, BIOCO began to implement the scorecard for individual employees as guidelines for their work. The employee scorecard was developed based on the departmental scorecard, which in turn was based on the corporate scorecard, formally linking each employee’s actions to the corporate strategy. Executives at BIOCO believe that such individual scorecards not only have the potential to be used as a basis for an employee incentive system but also enable everyone to see his or her specific contribution to the company’s goals and take pride in such achievements.

BALANCED SCORECARD AND IT-BUSINESS ALIGNMENT In our research, the level of alignment at BIOCO was assessed using the “current practices indicators” — connections between business and IT planning 176


and communication between business and IT executives — proposed by Reich and Benbasat (2000) and adopted as part of Luftman’s alignment maturity assessment model (Luftman, 2003). At BIOCO, IT is part of a formal, annual process for business planning. The corporate strategy document clearly states the objectives of the IT department for the current year, while the IT department strategic plan cites the corporate business plan as its foundation. The CIO and other senior managers of IT reiterated those corporate objectives for their department during the interviews, and the IT department scorecard, which governs the prioritization of its initiatives and projects, is developed based on the corporate scorecard. This results in a high degree of connections between IT and business planning (Hu & Huang, 2006). We also identified well established and frequently utilized communication channels between IT and business executives. A liaison program, similar to the “account manager” role in other organizations (Brown, 1999), puts IT and business managers in touch on a regular monthly or weekly basis. Temporary teams consisting of IT professionals and users are created when necessary. And a permanent IT steering committee (called IT Investment Review Committee at BIOCO), composed of senior executives of the company, is responsible for prioritizing IT projects and investments across all business areas. In addition to those formal channels, IT personnel keep business managers aware of IT issues related to their functions informally on a continuing basis. The CIO communicates with other executives through formal executive-level meetings and strategic planning sessions and interacts frequently with business managers in informal settings. One business executive commented, for instance, that he talks to the CIO “multiple times a week,” and an operations vice president asserted that she had been on several “cross-continental teams that worked on issues with [the CIO] and his folks…” Beyond the current practices indicators, our interviews with the managers of BIOCO, from CEO to divisional VPs and managers, also revealed a culture of IT-business alignment (Hu & Huang, 2006). The CEO and other business executives spoke of the CIO and his IT department with a high degree of respect for their capability and confidence in their working relationships. The CIO, in turn, talked about the 177

business strategies and long-term vision of the company like a business executive. In the following sections, we show how the implementation of the balanced scorecard has been used as the platform for an alignment process and the embodiment of the alignment culture at BIOCO to accomplish the four elements of alignment laid out earlier in this article.

Platform for IT-Business Planning Integration Using the balanced scorecard as a platform for integrating planning across the company, BIOCO constructed scorecards from the top — corporate goals and strategies — to the bottom — execution of projects and initiatives by individual departments to support the corporate strategies. BIOCO has stuck to this planning philosophy and practices it religiously. Its formal planning hierarchy is closely matched with the balanced scorecard implementation (Figure 1). During annual strategic planning sessions, executives meet to determine the company’s goals and strategies for the coming year and beyond. The resulting strategy gives birth to short-term business goals and tactics, and all departments develop their operationsal plans for the year accordingly. It is important to compare BIOCO’s approach with commonly cited methodologies for developing a departmental scorecard. When creating a balanced scorecard for the IT organization, for example, the popular emphasis has been on a bottom-up approach, starting from IT’s organizational objectives (Gold, 2002), operations requirements (Martinsons, Davison, & Tse, 1999), service provider role (Kaplan & Norton, 2000b), or governance issues (van Grembergen & Saull, 2001). BIOCO, however, developed IT’s strategy map and the ensuing scorecard solely from its corporate level strategy and scorecard. Based on the needs of the company, the IT function not only plays the traditional service provider role, but also serves as a key resource to enable business processes. This top-down process ensures the integration of IT planning with the company’s business planning. This integrated planning process is not static, and the balanced scorecard has proved to be capable Achieving IT-Business Strategic Alignment


Figure 1

Long-term Corporate Strategic Plan

Corporate Strategy Map

Short-term Corporate Execution plan

Corporate Scorecard

Division/Department Execution Plan

Div./Dept. Scorecard

IT Department Execution Plan

IT Department Scorecard

The planning hierarchy at BIOCO (adapted from Hu & Huang, 2006).

of continuous renewal of IT-business alignment at BIOCO. The measures in its IT scorecard often require soliciting comments and reactions from the users and other departments. Then, every year, the balanced scorecards at all levels are reviewed and reexamined based on the current year’s strategic and tactical plans at the corporate level. When the annual review time comes, all these comments and reactions can be incorporated to fine-tune the IT scorecard for the coming year, and the alignment between IT and business at all levels can be maintained. As a result, old, outdated items are removed or updated, and new items are added and prioritized. Interestingly, as caretaker of the balanced scorecard system at BIOCO, the CIO is designated the point person to oversee this annual ritual, ensuring the continuous integration of the planning process. It is important to note that the continouous renewal and revival do not mean constant changes to the scorecards. Despite necessary updates due to changes in industry, market, or company conditions, the continuity of alignment needs to be preserved. People are proud of their accomplishments; when the measures of their performance get discarded and replaced every year, it may convey the message that their accomplishments of previous years are not viewed as important. So while updates to, Huang and Hu

and fine tuning of, IT scorecard measures are necessary to keep the alignment, wholesale changes can be counterproductive.

Channel for Effective Communications Communications between business and IT executives are deemed critical at BIOCO, and several formal communication channels have emerged. In addition to those programs, the balanced scorecard has, intentionally and indirectly, become an effective communication channel between IT and business at BIOCO. The IT scorecard is published throughout the company. Although the scorecard is derived from the corporate scorecard, users of IT services often voice different opinions regarding the appropriateness of the incorporated measures as well as the targets. For example, business users voiced their concerns to the IT department when the company started to expand into international markets in 2004, while the IT scorecard only reflected the performance measures of domestic operations based on the beginning-of-the-year corporate objectives. IT managers, registering users’ concerns, can therefore adjust their operations during the year and amend 178


the measures and targets on the IT scorecard during the annual update period. In this way, the balanced scorecard does not just align IT and the business at the strategic planning level, but also at the day-today operational level. The implementation process of the balanced scorecard affords an effective opportunity for the executives to communicate openly on the state of their business. They gather annually to develop the proper measures and targets in the corporate scorecard in a room with walls full of blank posters, each of which represents a department or a division. After the corporate balanced scorecard is determined, all department heads move to develop their own objectives and initiatives to support the measures in the corporate scorecard, and how they are to achieve them. Then they write down all the “prerequisites” for achieving those departmental objectives on sticky notes, go around the room, and put the notes under the departments from which the support is to come. For example, the R&D division might have “hiring 10 new analytic chemists,” “regulatory-compliant Laboratory Information Management System online by June,” and “clear patent for formulation W” as the requirements for its current-year objective of “completion of drug X formulation.” The notes for those three requirements would go under HR, IT, and legal departments, respectively. After all the notes are up, each department head will take them down, tally them up, and list them against his or her own business objectives and budgets. The requests are expected to be incorporated into the department’s scorecard, because other departments depend on them to accomplish their goals. If there is any conflict, particularly with respect to budget and resource allocations, negotiation between the requesting and requested departments begins, and the CEO and CFO may step in to moderate the negotiation if necessary. At the end of the meeting, all departments, including IT, emerge with a set of business objectives and tactics that are congruent with corporate strategy, supported by other departments, and supportive of others’ activities, as the basis for constructing their departmental scorecards. This way, the balanced scorecard not only achieves top-down communications for the IT-business alignment, but enhances horizontal communications for department-level alignment as well. 179

The balanced scorecard not only achieves top-down communications for the IT-business alignment, but enhances horizontal communications for departmentlevel alignment as well. Tool for Relationship Management Because of the “language” barrier, cultural differences, and stereotypical perceptions associated with “techies,” informal structures — relationships, trust, and culture — can have a more enduring effect on how IT and business work together than formal organizational structures and governance. It is, therefore, important for the IT department to maintain good relationships with the business units (Ross et al., 1996). To some, a good working relationship can mean effective communications. It may also mean partnership or alliance among different divisions. To others, relationship can mean mutual trust and understanding. In the context of IT-business alignment, relationship encompasses all of the above. IT and business have to communicate well formally and informally, keeping each other aware of the present situation as well as potential issues. IT and business should work as partners to tackle common business problems with shared knowledge and common beliefs. The business side must understand, respect, and trust IT, and such trust and understanding can be established through both intangibles such as friendship and dedication, or more tangible assets such as a successful history of IT. Studies have shown that such “shared knowledge” between IT and business executives is an important precursor to alignment (Reich & Benbasat, 2000). At BIOCO, the CIO and IT managers actively manage relationships with other business functions in several ways. To break down the cultural wall between a technical division like IT and the rest of the business, the CIO strives to maintain a perception that IT is part of the business mainstream by Achieving IT-Business Strategic Alignment


The IT department updates its balanced scorecard and publishes the performance results every quarter. articipating and leading business projects in BIOCO. p He reports directly to the CEO and sits in the senior executive meetings, participating and contributing to the company’s strategic management. He has been actively involved in the core value initiative, the balanced scorecard project, and the strategy development process, all of which are important elements to the company’s strategic transformation. As such, other executives are comfortable in discussing technology and business issues with him. At the lower level, IT has installed liaisons within each of the business areas, who are required to hold regular meetings with their business counterparts to strengthen the interaction between IT and business users. Beyond the liaison program, all IT managers are encouraged to stay in touch with other departments to find out current operational needs. “Customer” measures are built into the IT department’s and employees’ scorecards, motivating them to actively manage the satisfaction of users. As a result, other divisions feel at ease seeking out IT for advice whenever there are technology problems or concerns for their own work. Also at BIOCO, the balanced scorecard is used effectively as a relationship management tool. The IT department updates its balanced scorecard and publishes the performance results every quarter. This way, users of IT can clearly see what IT has accomplished. Perhaps more important, it sets the users’ expectation for IT, because they now understand IT issues through the scorecard. A case in point — during the company’s transformation, funds were redirected to research and development, and IT suffered significant budget cuts. By way of the published balanced scorecard, which carefully reflected the service levels based on the reduced resources, the IT department was able to inform users what could be afforded to them with the limited budget. Instead of condemning the service erosion, the general sentiment in the company was that IT had done a “masterful” job in maintaining a Huang and Hu

satisfactory service level with severe resource constraints. This perception of a successful IT operation goes a long way in maintaining a good working relationship between IT and business. As one of the vice presidents put it: “We strive for excellence; there are always hiccups along the way because of the nature of us. But I’m very satisfied with what our IT group has been able to accomplish with the resources that they’ve had to work with over the past several years.”

Embodiment and Institutionalization of the Alignment Culture Perhaps the most important, albeit subtle, role of the balanced scorecard at BIOCO is not its utility as a management tool, but its embodiment of the alignment culture. In our study, we found that the implementation of the balanced scorecard can successfully carry the corporate goals and strategies throughout the company, and the processes and mechanisms of alignment can become routinized and institutionalized. We were struck, for example, by the consistency, from the CEO to middle mangers, in their statements about the vision and the strategy, as well as the processes and their own responsibilities in overseeing the execution of the strategies. The department and the personal scorecards of the IT staff embody the alignment of the IT function with business operations. IT staff understands the visibility of those scorecards in the company and are quick to refer to the measures in the scorecards as a way to explain how they add value to the business. Such thorough implementation and acceptance of the balanced scorecard at the department and individual levels has implicitly fostered a culture of alignment, where everyone, from the members of the top management team to the frontline employees, routinely takes into consideration aligning his/her work with corporate strategies. And this culture is, arguably, the most important element that can sustain the ITbusiness alignment over the long run after the initial success. In this sense, the balanced scorecard is no longer a performance measurement or strategic management system; it becomes the carrier of the company’s value and the alignment culture. 180


DISCUSSION AND LESSONS LEARNED BIOCO has practiced the four key elements of alignment with the help of the implementation of the balanced scorecard in their pursuit for excellence in business performance. Can other companies replicate this experience and expect similar outcomes? We believe the answer is a resounding “Yes,” with two qualifications. The answer is yes, because most, if not all, of the critical success factors — CEO championship, top management support, thorough training and communications, and integration with department and personnel evaluation — are by no means unique to BIOCO. However, any company that wishes to replicate this success must also recognize two conditions. First, IT cannot be singled out for alignment. Rather, IT-business alignment is part of the whole company’s strategic program, for which the implementation of the balanced scorecard is an appropriate tool. Second, alignment is a gradual and continuous process, not one that happens overnight. Even with the best intention, planning, and execution, alignment can hit snags — organizational, cultural, or political — along the way. In addition, since implementation of the balanced scorecard requires extensive training and learning, true acceptance can be slow in coming. But with persistence and a clear path to success (and benefits to employees), the balanced scorecard and the resulting alignment can be implemented successfully, as the BIOCO case has shown. In addition to the implementation of the balanced scorecard, the BIOCO experience also shows the importance of key cultural and organizational factors to achieving alignment. First, alignment is a two-way street: IT needs to be business savvy, and business has to become technology aware. Although the responsibility of informing and discovering innovative use of IT to enhance business rests squarely on the CIO’s shoulders, other executives need to routinely take IT into consideration when formulating and executing business strategies. IT is a critical resource; there is no reason or excuse for business managers not to benefit from its applications simply because it’s technical. It might take some adjustments with regard to self-education and reorientation, but the rewards to the company could be significant and far reaching. 181

The BIOCO experience also shows the importance of key cultural and organizational factors to achieving alignment. An IT-business alignment initiative may appear a rationalization exercise by IT if the business side is not actively participating. To avoid such an image, alignment has to be a top-down initiative, driven by the CEO, not the CIO (Earl & Feeny, 2000). One may argue that it is unrealistic to expect the CEO to actually direct the alignment activities, but the CEO’s leadership in making this happen can reinforce the value of IT and encourage, if not force, the rest of the top management team to adopt IT in their strategic decisions (Feld & Stoddard, 2004; Ross & Weill, 2002). Recognizing the value of IT as the key provider of actionable information and enabler of business processes, the CEO of BIOCO designated the CIO to be the champion of the implementation of the balanced scorecard. In so doing, the CEO legitimizes the role of the CIO as not just a technologist, but also a business leader and strategist (Boochever, Park, & Weinberg, 2002). Such recognition has had a significant impact on the IT-business alignment at BIOCO. It is interesting to note the role that was played by the CIO and his IT department in the implementation and management of the balanced scorecard for the entire company. The CIO not only contributed IT resources to support the balanced scorecard program — the IT department implemented and maintained an automated data collection and reporting system for the balanced scorecards at various levels of the company, accessible in real time by managers using secure web browsers anywhere there is an Internet connection — but also championed the implementation process. Working with the CIO closely on this project, other senior executives came to realize the business value that the CIO and his IT department could bring beyond the day-to-day operations. In turn, the CIO gained considerable insights into other departments’ operations and their information needs, and could therefore direct the IT resources accordingly. Such partnership afforded by the implementation of the balanced scorecard Achieving IT-Business Strategic Alignment


offers a valuable lesson for other companies looking to achieve strategic alignment between IT and business. It is important to clarify the expectations for the CIO in the scheme of alignment. As the title describes, a CIO is an information officer, not a technology officer, although often the CIO and his/her IT department are looked at as a technology, not information, provider. This distinction is a crucial one. Technology comes and goes, and can be obtained and managed in various ways, as the recent trend in outsourcing indicates. A “CTO of information technology and systems,” then, is subject to a company’s current mode of operations and sourcing model of IT. A true CIO, however, is indispensable, because he or she plays a central strategic role in a company’s business; no matter how information technologies are being acquired, operated, or outmoded, a company’s need for information, and the competitive advantage resulting from the effective and innovative way of using information, can only grow stronger over time (Earl & Feeny, 1994). Beyond day-to-day IT operations, a CIO can make the greatest contributions by aligning IT with the business, and positioning the IT department as the provider of actionable information and enabler of key business processes (Feeny & Willcocks, 1998). In this way, IT not only matters, but can also truly enable and drive business strategies. Lastly, some limitations of this study must be noted. BIOCO is a medium-sized high-tech manufacturing firm, whose role of IT is to enable, rather than drive, business strategies. As a result, the hierarchical approach, in which IT is located at the bottom of the strategic planning process (Figure 1), may not be suitable for organizations where IT leads the development of business strategies. Another limitation is our lack of quantitative evidence for IT-business alignment at BIOCO. This is partly due to the fact that BIOCO did not adopt any metrics, nor did they attempt to measure alignment. We assessed the level of alignment at BIOCO qualitatively, based on the four key elements of alignment, and concluded that a strong alignment between IT and business was achieved. However, the issue of alignment metrics remains a limitation of this study and may be addressed in future studies.

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Acknowledgment The authors would like to thank the CIO of BIOCO for his invaluable contribution to this research project and the manuscript. We are also grateful to the managers at BIOCO for their cooperation and assistance in this research. This research is partially supported by the funding from the InternetCoast Institute Scott Adams Professorship at the College of Business in Florida Atlantic University.

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Biography C. Derrick Huang is Assistant Professor in Information Technology at Florida Atlantic University. Prior to his current position, he was marketing and strategic planning executive at a number of high-tech companies. Dr. Huang’s research interest lies in the business value and strategic impact of IT on organizations. Qing Hu is Professor of Information Systems in the Department of Information Technology & Operations Management, College of Business, Florida Atlantic University. His research interests include the economics of information technology (IT) and IT management strategies, especially in the areas of the impact of IT on organizational structure, strategy, and performance.

APPENDIX RESEARCH METHODOLOGY Our research started after observing many companies struggling with IT alignment issues. We selected BIOCO as our case study firm because of our knowledge of its strategic transformation, enterprise-wide implementation of balanced scorecards, and CIO activism. It was used as a revelatory case in a single-case study format to explore state-of-the-art IT management questions in a natural setting, where little or no previous research had been undertaken (Yin, 2003).

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For the case study, we employed a variety of techniques for data collection: interviews, company documentations, archival records, public information, follow-up e-mails, and telephone discussions. We had multiple interviews with key personnel at BIOCO, including members of the senior management team, operating unit heads, and IT managers. BIOCO’s CIO helped the research team uncover key processes to assess and identify key executives to interview. The interviews were done on a semi-structured format, where open-ended questions were asked to solicit

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further comments. We also collected company documents and archived materials, including the longterm strategic plans, short-term operating plans, and corporate and IT balanced scorecards. We compared the interview transcripts with the actual company documents and public records, and drew a picture of how BIOCO performed and handled the alignment issue in the last few years. The data collection and analysis phase took place between late 2003 and early 2004. More detailed case data are reported in Hu & Huang (2006).

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