Strategic Alignment for the Little Guy
Strategic alignment — when IT goals are in lockstep with business goals — is a guiding principle for large organizations. Overlooked, however, is that strategic alignment is equally important for smaller businesses and entrepreneurial firms. Brent Gallupe, professor at Queen’s School of Business, working with Chris Street (University of Regina) and Jeff Baker (American University of Sharjah), studied what strategic alignment looks like in smaller firms. In this conversation with QSB Insight, Gallupe explains why the standard models of alignment overlook important dynamics that drive entrepreneurial enterprises.
Why Strategic Alignment is More Relevant Than Ever
The idea of strategic alignment has been one of the top two or three issues worldwide for CIOs. It’s really the alignment of business strategy, goals, and tactics with IT strategy, goals, and tactics. When business strategy is aligned with IT strategy, research shows that firms perform better. Strategic alignment also helps to identify how new IT capabilities can open up strategic opportunities for an organization. The skill a firm displays in building compatible business and IT strategies is a potential source of competitive advantage.
Larger firms have planning horizons, they have strategic planning groups, they own resources to move towards alignment. Very little research has been done in small and medium-sized enterprises (SMEs) about alignment. Our thinking as researchers was that this could be really important for small business because any little issue could blow things out of the water.
It’s also true that advances in IT are pushing technology further and further into SME processes and operations. Current IT now enables — and in many cases even forces — SMEs to compete worldwide with organizations of all sizes. With competitors and suppliers increasingly using IT in their operations, managers of SMEs need to have a better understanding of how the alignment of their business and IT strategies impacts their firms.
How it Plays Out in Small Businesses
What we know about strategic alignment generally is that it can be affected by three types of factors relating to size, to planning techniques and time horizons, or to culture and leadership. These can be very different in small businesses as opposed to large businesses.
Small and medium-sized enterprises, for example, have fewer employees. That actually makes it easier for small businesses; they have fewer people to deal with, they have more close ties and are able to quickly adapt and align. It’s a simpler matter for IT and non-IT business leaders to communicate their strategic objectives to one another, and they have relatively less work to do to “sell” the strategic plan to employees. We’ve done a couple of in-depth case studies, one in high-tech films and another in home health care, and that’s pretty much what we found. The smaller ones seem to be more agile: this is the way we’re going to move this month. . . Boom! Done. Larger businesses are like oil tankers; turning a tanker is much more complex than turning a small yacht.
In terms of the cultural and the leadership aspects, it’s clear that the more owners know about the capabilities of IT, the much greater chance they have of aligning IT with the business. If this is true for large organizations, it’s equally important, if not more so, for SMEs where one key individual may make major strategic decisions and be a catalyst for strategic alignment.
What that means for the small business person is that you cannot ignore the notion of aligning your IT with your business. If you ignore it, you can suffer the consequences. You have to take a look at your size, your planning horizons. You have to take a look at yourself as a business owner in terms of what you need.
My experience, both as an entrepreneur and as someone who works with small companies, is that things happen at a pace that is much quicker. If your technology can’t adapt to that pace, you’re going to be at a disadvantage.
Why entrepreneurial firms may look out of alignment when they really are aligned
Existing measures of alignment were developed for larger organizations. A more refined view of alignment is needed for entrepreneurial organizations because of their opportunity-seeking characteristics.
Entrepreneurial organizations that experiment with new ideas, that co-evolve with emerging industries, or that follow experiential strategies are not bound as much by organizational inertia. They have fewer expectations about what “proper business” should look like and are more likely to follow an improvisational approach to strategic alignment.
When we looked at small enterprises, we found that the goals of the business and the goals of IT were a little out of alignment. But when we looked more closely, IT was behind because they simply hadn’t caught up. The next month, though, they were. Is that bad alignment or is that sort of alignment that is necessary in order for things to progress in a smaller firm?
Alignment looks messy in an entrepreneurial firm. But when you look at what happens over time, it actually follows a pattern of being slightly out of alignment, in alignment, slightly out of alignment, in alignment as the company moves forward and quickly with what they’re doing. It’s because of very short planning horizons.
Take the case of the small high-tech film company out of Winnipeg that we studied. Initially they were doing some commercials but then they got overtures from Hollywood. And they said, Oh, we don’t have the resources, how do we bill these people, how do we establish contacts? We need this, this and this by that time. Okay, here’s what we’re going to do. So if you’re looking at them today, it might appear they’re out of alignment, but if you look at them tomorrow, everything’s working.
— Interview by Alan Morantz
When choosing between options, do you rely on cool analysis or lively intuition? Both have their place, yet both have shortcomings. Here’s a framework that helps you make smart decisions with rigour