Elsevier

Information & Management

Volume 41, Issue 8, November 2004, Pages 1003-1020
Information & Management

Ideal patterns of strategic alignment and business performance

https://doi.org/10.1016/j.im.2003.10.004Get rights and content

Abstract

Strategic alignment or “fit” is a notion that is deemed crucial in understanding how organizations can translate their deployment of information technology (IT) into actual increases in performance. While previous theoretical and methodological works have provided foundations for identifying the dimensions and performance impacts of the strategic alignment between IT, strategy, and structure, few attempts have been made to test the proposed theory empirically and operationalize fit systemically. Based on a gestalt perspective of fit and theory-based ideal coalignment patterns, an operational model of strategic alignment is proposed and empirically validated through a mail survey of 110 small firms. Using cluster analysis, it was found that low-performance firms exhibited a conflictual coalignment pattern of business strategy, business structure, IT strategy, and IT structure that distinguished them from other firms.

Introduction

The trend toward globalization and virtualization of the business environment remains unabated and has spawned profound transformations, both internal and external, as most organizations must re-create their value chain and strive for closer relationships with their customers and business partners. In response to or anticipation of changes in their environment, most organizations are deploying information technology (IT) at an increasing rate. Thus, it has raised a fundamental question underlying these transformations: how can an organization actually translate its IT investments into increased business performance, be it in terms of productivity, increased market share, profitability or other indicators of organizational effectiveness?

Given the complex nature of this question, some researchers surmised that the answer would be predicated upon adopting a contingency theory perspective, whereas IT would influence business performance to the extent that it would be in “alignment” or “fit” with the strategic, structural, and environmental dynamics specific to each organization. Assuming there is no single best way to invest in IT, theoretical IS contingency frameworks have been proposed, purporting to describe and explain the impact of alignment upon performance. At the empirical level, some authors have examined the relationship between strategic and IT management, and between organizational and IT structure. However, studies that have actually operationalized alignment and demonstrated its effect upon organizational performance have been few and far between. Adopting a definition of fit as gestalt, our study examined the impact of the coalignment between business strategy, business structure, IT strategy, and IT structure on business performance in 110 small and medium-sized firms.

Section snippets

Theoretical background

The notion of strategic alignment originates from a body of conceptual and empirical work in the organization literature whose fundamental proposition is that organizational performance is the consequence of fit between two or more factors such as strategy, structure, technology, culture, and environment [13]. The contingency relationship that has received the most attention has been the one between organizational strategy and organizational structure [16]; this has been studied extensively in

Research model

Each prior study focused on a single pair of alignment domains of a single type. That is, studies examined the impact on performance of the fit either between business strategy and IT strategy or between organization structure and IT structure. However, contingency theorists argue that a holistic, rather than a bivariate conceptualization of fit, has greater explanatory power because of its ability to retain the complex and interrelated nature of the relationships between constructs [77].

Sample and data collection

A cross-sectional survey was conducted, with a target population consisting of 1000 small and medium-sized enterprises (SMEs). Half were manufacturing firms listed in Dun and Bradstreet’s Directory [25] and the other half were service firms listed in Scott’s Directory [67]. In order to be selected, a firm had to have between 10 and 300 employees, and annual sales under $ 50 million. So as to obtain a representative sample, firm selection followed a systematic sampling procedure—a firm picked at

Results

Structural equation modeling was used to assess the measurement model, using an EQS technique [6]. The validity of the research constructs was assessed from an estimation and respecification of the measurement model by confirmatory factor analyses [2].

Discussion

The analysis of the results leads us to generally accept the research proposition that conflictual coalignment patterns of business strategy, business structure, IT strategy, and IT structure will exhibit lower levels of business performance. There are, however, particularities that must be discussed. Out of the four groups of organizations (Groups 1–4), three of them (Groups 1, 3, and 4) show non-conflicting patterns, and one group (Group 2) exhibits a conflicting pattern. Following our

Implications

In reconciling our research findings with previous theoretical and empirical work, potential implications can be drawn. Having lent empirical credence to the concept of coalignment and its relationship with performance impact, this study has some implications for researchers. First and foremost, coalignment constitutes a valid theoretical foundation on which to further investigate the fundamental IT problem for organizations, namely how to achieve value from ever-increasing IT investments. On a

Limitations and conclusion

This study has attempted to define the concept of strategic alignment and demonstrate the influence of this complex managerial process on business performance. Given such an endeavor, the research findings have inherent limitations. The most significant resides in the range of constructs developed to represent strategic alignment. When compared with IT strategy and IT structure found in the literature, only some aspects of complexity have been captured here. Other alignment domains not present,

François Bergeron is professor of information technology and electronic commerce at Université Laval, Québec. He holds a PhD from the Anderson School of Management, UCLA, and an MBA and an MSc in economics from Laval. His areas of research are in business and IT strategy, IT management, and electronic commerce. Professor Bergeron is the author of six books and one CD-ROM on IT Management and electronic commerce strategy. This is his fifth publication in information & management. His research

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    François Bergeron is professor of information technology and electronic commerce at Université Laval, Québec. He holds a PhD from the Anderson School of Management, UCLA, and an MBA and an MSc in economics from Laval. His areas of research are in business and IT strategy, IT management, and electronic commerce. Professor Bergeron is the author of six books and one CD-ROM on IT Management and electronic commerce strategy. This is his fifth publication in information & management. His research has been published in several other international journals including the Journal of Strategic Information Systems, Omega, Data Base, MIS Quarterly, Journal of Small Business Management, and, in french, Revue Internationale PME and Revue internationale de Gestion.

    Louis Raymond, PhD, professor of information systems at the Université du Québec à Trois-Rivières, is titular of the Canada Research Chair on Enterprise Performance. He has published in various journals such as the Journal of Management Information Systems, the MIS Quarterly, Entrepreneurship Theory and Practice, Information & Management, and Decisions Support Systems and in international proceedings such as the International Conference on Information Systems. His research interests include the alignment of IT and business performance, particularly in the context of small enterprises and network organizations.

    Suzanne Rivard is professor of information technology and holder of the Chair of Strategic Management of Information Technology at HEC Montréal. She received a PhD from the Ivey School of Business, the University of Western Ontario. Dr Rivard’s research interests are in the areas of outsourcing of information systems services, software project risk management, strategic alignment of information technology, and the adoption of information technology. Her work has been published in journals such as Communications of the ACM, Canadian Journal of Administrative Sciences, Data Base, Information and Management, Journal of Management Information Systems, and MIS Quarterly, and others.

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