Aligning Business and IT Strategies in Multi-business Organizations

Abstract

The alignment of business and information technology (IT) strategies is an important and enduring theoretical challenge for the information systems discipline, remaining a top issue in practice over the past 20 years. Multi-business organizations (MBOs) present a particular alignment challenge because business strategies are developed at the corporate level, within individual strategic business units and across the corporate investment cycle. In contrast, the extant literature implicitly assumes that IT strategy is aligned with a single business strategy at a single point in time. This paper draws on resource-based theory and path dependence to model functional, structural, and temporal IT strategic alignment in MBOs. Drawing on Makadok's theory of profit, we show how each form of alignment creates value through the three strategic drivers of competence, governance, and flexibility, respectively. We illustrate the model with examples from a case study on the Commonwealth Bank of Australia. We also explore the model's implications for existing IT alignment models, providing alternative theoretical explanations for how IT alignment creates value.