Business Strategy, Structure and IT Alignment

The structure of production during the last decade has been changed radically. The importance of design, flexibility, quality, and dependability increased. The main motive behind that restructuring seems to be the qualitative and quantitative diversification of demand (regulatory, technology, and other issues can be mentioned as well). The diversification of demand forced production to be more flexible in order to accommodate the environment’s variations. Information systems (IS) proved to be a perfect ‘partner’ for the enterprise who wants to move along at this pace: to increase competitive advantage and retain its competitive position in the market. The capabilities of information technology (IT) for increasing competitive advantage forced management to consider IT in the strategic planning process and to consider IT not as a mere tool of bolts and nuts, but as a strategic partner. The key for the successful IT-IS adoption is the strategic IT alignment model. According to this, IT should be aligned with organizations’ structure and employees’ culture in order to avoid resistance and increase core competence at the strategic level. But the strategic options offered by advanced IT investments are not appraised by using the usual hard financial criteria. Instead, Black and Scholes developed a financial formula to valuate derivative financial products and open the road to valuate options offered by real investments. Thus, the application of Black and Scholes’ formula offers an opportunity to valuate financially strategic IT investment. The importance of alignment among IT-business structure and strategy-environment is increased strategically, but the relationship among all those variables is complicated. Generally, in the classical strategy school, strategy is determined by environmental uncertainty. Structure (as well as technology) should follow the needs of strategy, and advanced information technology must be aligned with business strategy and structure. This alignment is a prerequisite for the creation of competitive advantage. Information technology is a key element of structure to bypass environmental uncertainty. In this model, other contingencies like size, age of organization, political forces, regulatory framework, and so forth must be taken into account as the interaction among all those factors forms the alignment model. BACKGROUND