Chapter 1 - A conceptual framework for IT Management
The core concept of business/IT alignment
Title Slide
• Subject: A conceptual framework for IT management.
• Focus: Business/IT Alignment.
• Model: The Strategic Alignment Model (SAM).
• Context: MSc Business Administration - Management and IT (Course F710327).
• Required Reading:
• Henderson J.C., Venkatraman N. (1999). Strategic alignment: Leveraging information
technology for transforming organizations.
• Matt, C., Hess, T., & Benlian, A. (2015). Digital Transformation Strategies.
• Vial, G. (2019). Understanding digital transformation: a review and a research agenda.
(Findings section only).
Strategic Alignment Model (SAM) - Overview
Concept Definition: The Strategic Alignment Model is a model that highlights strategic choices regarding
the role of IT in organizations. The core question it addresses is: How to align the use of IT with the
business strategy and operations?
Origin: Professors Henderson (Boston University) and Venkatraman (Sloan School of Management of
MIT) developed the Strategic Alignment Model. It clarifies what strategic choices managers have
regarding the alignment of the use of IT (or digital technologies) with business strategy and operations.
The Two Dimensions of the Model:
1. Strategic Fit:
• Definition: The (infra)structure of the organization and its operations (the internal
domain) should fit its strategic positioning (the external domain).
• Context: The issue is whether an organization's internal structure, infrastructure, and
operations are appropriate for realizing the organization's strategy. Conversely, it asks
whether strategies are formulated that can be realized given the existing organizational
structure, infrastructure, and operations.
2. Functional Integration:
• Definition: IT as a source of strategic advantage. It requires internal coherence between
organizational requirements/expectations and the delivered IT capability.
• Context: Simply stated, the supply of information, communication, automation, and
other IT services should match its demand. This must happen both strategically (What is
expected?) and operationally (What is realized?).
1
,The Four Domains of SAM
Visual Description of the Model: The model is displayed as a matrix with four quadrants representing
distinct domains.
• Vertical Axis (Strategic Fit): Separates "External" (Strategy) from "Internal" (Infrastructure).
• Horizontal Axis (Functional Integration): Separates "Business" from "Information Technology".
The Four Quadrants:
1. Business Strategy (External/Business): Includes Business Scope, Distinctive Competencies, and
Business Governance.
2. IT Strategy (External/IT): Includes Technology Scope, Systemic Competencies, and IT
Governance.
3. Organizational Infrastructure and Processes (Internal/Business): Includes Administrative
Infrastructure, Processes, and Skills.
4. IS Infrastructure and Processes (Internal/IT): Includes Architectures, Processes, and Skills.
Key Relationships:
• Strategic Fit: Must happen for both the Business domain
(left side) and the IT domain (right side).
• Functional Integration: Must happen for both the External
domain (top half) and the Internal domain (bottom half).
• Integration: There are "Automation" and "Linkage"
connections crossing the center.
Management Implication: Effective management of IT in/for an
organization requires that strategic choices in all four domains are
balanced.
Strategic Fit in the Business Domain
Concept: Strategic fit in the business domain is generally well understood. It means that strategic
choices regarding external positioning and internal arrangement are consistent; they support each other
and reflect a global strategic vision.
1. External Domain Components:
• Product-market offering: What is sold and to whom.
• Distinctive attributes: Attributes that differentiate the organization from competitors.
• Make-versus-buy decisions: Choices regarding partnerships and alliances.
2. Internal Domain Components:
• Logic of the organizational structure: How the organization is arranged.
• Rationale for the (re)design of critical business processes: Why operations function the way
they do.
• Acquisition and development of human resource skills: Ensuring necessary skills are available to
achieve required organizational competencies.
Example: If a company decides to develop a new product in-house (External decision), it must ensure
the necessary knowledge (Internal decision) is available (e.g., product designers, process engineers),
that a New Product Development (NPD) process is implemented, and that a responsible R&D function
exists within the organization.
2
,Strategic Choices in the IT Domain
1. External Domain of IT (The IT Marketplace):
• Strategic Choices of Positioning:
• IT Scope: The choice of information technologies to support or shape business strategy
initiatives.
• Systemic Competencies: Attributes of IT strategy that contribute to the creation of new
business strategies or better support existing ones. These contribute to competitive
advantage.
• IT Governance: The selection and use of mechanisms for obtaining required IT
competencies.
2. Internal Domain of IT (The IT Organization):
• Strategic Choices of Arrangement:
• IT Architecture: The design of the IT infrastructure. This consists of data architecture,
information systems, and their composing technologies (software applications,
databases, computing devices, network facilities).
• IT Processes: Work processes central to the development, maintenance, operation,
monitoring, and control of IT systems.
• IT Skills: The knowledge and capabilities required to effectively develop, operate, and
manage the IT systems.
Example - Analytical Customer Relationship Management (aCRM)
Scenario: A strategic business initiative involving IT: Using aCRM to increase customer retention.
A. Strategic Choices in the IT Marketplace (External):
• IT Scope: Invest in "Big Data Analytics" to
inform customer retention actions.
• Systemic Competencies: "Accurate
prediction of customer churn" (Goal:
avoiding costs associated with false
positives and false negatives).
• IT Governance: Sponsor a "University
research chair in predictive analytics" to
develop accurate techniques based on
novel data mining algorithms (e.g., deep learning).
B. Strategic Choices in the IT Organization (Internal):
• IT Architecture: Construct a "Big Data platform" (e.g., Apache Hadoop ecosystem) for
storing/processing data and applying analytics.
• IT Processes: Processes for "data loading" and "map and reduce" processes for retrieving
information.
• IT Skills: Hire "data scientists" and aCRM data analysts.
Functional Integration Context: The aCRM strategy to increase customer retention is part of the overall
CRM strategy to increase Customer Lifetime Value (CLV). The prediction of churn must be followed up
operationally (e.g., targeting marketing campaigns toward customers likely to leave who have a high
potential CLV).
3
, Difference between External and Internal Domain
Definitions: External and internal domains refer to where IT decisions primarily create impact.
External Domain:
• Focus: "What IT does for the business."
• Description: How IT supports business strategy and market goals. It is outward-looking—using
technology to strengthen how the firm competes, serves customers, or innovates.
• Example (from previous slide):
• Scope: Big Data Analytics.
• Competency: Accurate prediction of churn.
• Governance: University research.
• Outcome: All of these help the company achieve better customer retention (an external
business outcome).
Internal Domain:
• Focus: "How IT makes it possible."
• Description: How IT supports operations and infrastructure inside the firm. It is inward-looking—
ensuring the technology, people, and processes actually make the strategy work.
• Example (from previous slide):
• Architecture: Hadoop platform.
• Processes: Data loading, map/reduce.
• Skills: Data scientists.
• Outcome: These enable the analytics capabilities promised on the external side.
Alignment: Both must align. The arrow in the middle of the model represents this "Strategic fit."
Dominant Business/IT Strategic Alignment Perspectives
Overview: The SAM describes four different perspectives on how to approach business/IT alignment. All
perspectives require cross-domain relationships (internal/external, business/IT).
The Four Perspectives:
1. Business Strategy as the Driver (2 perspectives):
• Current or new investments in IT support the realization of business strategies.
2. IT Strategy as the Driver (2 perspectives):
• IT is the key factor in formulating new business strategies or (better) executing existing
business strategies.
4
The core concept of business/IT alignment
Title Slide
• Subject: A conceptual framework for IT management.
• Focus: Business/IT Alignment.
• Model: The Strategic Alignment Model (SAM).
• Context: MSc Business Administration - Management and IT (Course F710327).
• Required Reading:
• Henderson J.C., Venkatraman N. (1999). Strategic alignment: Leveraging information
technology for transforming organizations.
• Matt, C., Hess, T., & Benlian, A. (2015). Digital Transformation Strategies.
• Vial, G. (2019). Understanding digital transformation: a review and a research agenda.
(Findings section only).
Strategic Alignment Model (SAM) - Overview
Concept Definition: The Strategic Alignment Model is a model that highlights strategic choices regarding
the role of IT in organizations. The core question it addresses is: How to align the use of IT with the
business strategy and operations?
Origin: Professors Henderson (Boston University) and Venkatraman (Sloan School of Management of
MIT) developed the Strategic Alignment Model. It clarifies what strategic choices managers have
regarding the alignment of the use of IT (or digital technologies) with business strategy and operations.
The Two Dimensions of the Model:
1. Strategic Fit:
• Definition: The (infra)structure of the organization and its operations (the internal
domain) should fit its strategic positioning (the external domain).
• Context: The issue is whether an organization's internal structure, infrastructure, and
operations are appropriate for realizing the organization's strategy. Conversely, it asks
whether strategies are formulated that can be realized given the existing organizational
structure, infrastructure, and operations.
2. Functional Integration:
• Definition: IT as a source of strategic advantage. It requires internal coherence between
organizational requirements/expectations and the delivered IT capability.
• Context: Simply stated, the supply of information, communication, automation, and
other IT services should match its demand. This must happen both strategically (What is
expected?) and operationally (What is realized?).
1
,The Four Domains of SAM
Visual Description of the Model: The model is displayed as a matrix with four quadrants representing
distinct domains.
• Vertical Axis (Strategic Fit): Separates "External" (Strategy) from "Internal" (Infrastructure).
• Horizontal Axis (Functional Integration): Separates "Business" from "Information Technology".
The Four Quadrants:
1. Business Strategy (External/Business): Includes Business Scope, Distinctive Competencies, and
Business Governance.
2. IT Strategy (External/IT): Includes Technology Scope, Systemic Competencies, and IT
Governance.
3. Organizational Infrastructure and Processes (Internal/Business): Includes Administrative
Infrastructure, Processes, and Skills.
4. IS Infrastructure and Processes (Internal/IT): Includes Architectures, Processes, and Skills.
Key Relationships:
• Strategic Fit: Must happen for both the Business domain
(left side) and the IT domain (right side).
• Functional Integration: Must happen for both the External
domain (top half) and the Internal domain (bottom half).
• Integration: There are "Automation" and "Linkage"
connections crossing the center.
Management Implication: Effective management of IT in/for an
organization requires that strategic choices in all four domains are
balanced.
Strategic Fit in the Business Domain
Concept: Strategic fit in the business domain is generally well understood. It means that strategic
choices regarding external positioning and internal arrangement are consistent; they support each other
and reflect a global strategic vision.
1. External Domain Components:
• Product-market offering: What is sold and to whom.
• Distinctive attributes: Attributes that differentiate the organization from competitors.
• Make-versus-buy decisions: Choices regarding partnerships and alliances.
2. Internal Domain Components:
• Logic of the organizational structure: How the organization is arranged.
• Rationale for the (re)design of critical business processes: Why operations function the way
they do.
• Acquisition and development of human resource skills: Ensuring necessary skills are available to
achieve required organizational competencies.
Example: If a company decides to develop a new product in-house (External decision), it must ensure
the necessary knowledge (Internal decision) is available (e.g., product designers, process engineers),
that a New Product Development (NPD) process is implemented, and that a responsible R&D function
exists within the organization.
2
,Strategic Choices in the IT Domain
1. External Domain of IT (The IT Marketplace):
• Strategic Choices of Positioning:
• IT Scope: The choice of information technologies to support or shape business strategy
initiatives.
• Systemic Competencies: Attributes of IT strategy that contribute to the creation of new
business strategies or better support existing ones. These contribute to competitive
advantage.
• IT Governance: The selection and use of mechanisms for obtaining required IT
competencies.
2. Internal Domain of IT (The IT Organization):
• Strategic Choices of Arrangement:
• IT Architecture: The design of the IT infrastructure. This consists of data architecture,
information systems, and their composing technologies (software applications,
databases, computing devices, network facilities).
• IT Processes: Work processes central to the development, maintenance, operation,
monitoring, and control of IT systems.
• IT Skills: The knowledge and capabilities required to effectively develop, operate, and
manage the IT systems.
Example - Analytical Customer Relationship Management (aCRM)
Scenario: A strategic business initiative involving IT: Using aCRM to increase customer retention.
A. Strategic Choices in the IT Marketplace (External):
• IT Scope: Invest in "Big Data Analytics" to
inform customer retention actions.
• Systemic Competencies: "Accurate
prediction of customer churn" (Goal:
avoiding costs associated with false
positives and false negatives).
• IT Governance: Sponsor a "University
research chair in predictive analytics" to
develop accurate techniques based on
novel data mining algorithms (e.g., deep learning).
B. Strategic Choices in the IT Organization (Internal):
• IT Architecture: Construct a "Big Data platform" (e.g., Apache Hadoop ecosystem) for
storing/processing data and applying analytics.
• IT Processes: Processes for "data loading" and "map and reduce" processes for retrieving
information.
• IT Skills: Hire "data scientists" and aCRM data analysts.
Functional Integration Context: The aCRM strategy to increase customer retention is part of the overall
CRM strategy to increase Customer Lifetime Value (CLV). The prediction of churn must be followed up
operationally (e.g., targeting marketing campaigns toward customers likely to leave who have a high
potential CLV).
3
, Difference between External and Internal Domain
Definitions: External and internal domains refer to where IT decisions primarily create impact.
External Domain:
• Focus: "What IT does for the business."
• Description: How IT supports business strategy and market goals. It is outward-looking—using
technology to strengthen how the firm competes, serves customers, or innovates.
• Example (from previous slide):
• Scope: Big Data Analytics.
• Competency: Accurate prediction of churn.
• Governance: University research.
• Outcome: All of these help the company achieve better customer retention (an external
business outcome).
Internal Domain:
• Focus: "How IT makes it possible."
• Description: How IT supports operations and infrastructure inside the firm. It is inward-looking—
ensuring the technology, people, and processes actually make the strategy work.
• Example (from previous slide):
• Architecture: Hadoop platform.
• Processes: Data loading, map/reduce.
• Skills: Data scientists.
• Outcome: These enable the analytics capabilities promised on the external side.
Alignment: Both must align. The arrow in the middle of the model represents this "Strategic fit."
Dominant Business/IT Strategic Alignment Perspectives
Overview: The SAM describes four different perspectives on how to approach business/IT alignment. All
perspectives require cross-domain relationships (internal/external, business/IT).
The Four Perspectives:
1. Business Strategy as the Driver (2 perspectives):
• Current or new investments in IT support the realization of business strategies.
2. IT Strategy as the Driver (2 perspectives):
• IT is the key factor in formulating new business strategies or (better) executing existing
business strategies.
4
