Strategic Alignment & Business Models

6 Nov

In this weeks post I am going to explore how the business model is an essential base for achieving successful business-IS alignment in firms.

A business model can be defined as: A construct that mediates the value creation process. The business model provides a coherent framework that takes technological characteristics and potentials as inputs, and converts them through customers and markets into economic outputs i.e. creating economic value. (Chesbrough & Rosenbloom, 2002)

“The business model concept improves the alignment of strategy, business organization and technology.” (Osterwalder, 2004)

Aligning the IS organization with that of the enterprise ranks highly in key issues in information systems management. The effectiveness with which IS can support the enterprise’s information needs is dependent on its position within the enterprise. Information systems departments reporting within a traditional functional area, such as finance, often find that they overemphasize financial systems development at the expense of other opportunities within the enterprise. On the other hand, reporting in a 100% staff role may isolate IS from the mainstream of the enterprise. Establishing appropriate reporting relationships is a difficult managerial and political problem. It has become more troublesome as organizations decentralise. (Brancheau & Wetherbe, 1987)

In order to guarantee a smooth implementation of business visions and alignment between the different groups, firms require a very clear communication of concepts and understandings between the implicated parties. This is where conceptually defined business models come into play. By using an ontological approach to business modeling, one can create a shared and common understanding of what a company does to earn money and facilitate communication between people and heterogeneous and widely spread application systems. (Fensel 2001)

The triangle and the business model are subject to continuous external forces. Among others these forces include competition, legal, social or technological change and changes in customer demand. It is the manager’s role to design or adapt a company’s business model by responding to these external forces.

 

The above image shows a mutually beneficial relationship between ICT and the business model of a firm, which enables strategic alignment within the departments of a company.

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3 Responses to “Strategic Alignment & Business Models”

  1. cob12 November 6, 2012 at 9:40 pm #

    That was an interesting post, cdat2. You mentioned above the importance of communication between the various parties involved in the alignment of IS, which is something I wrote about myself in my previous two posts. You made a great argument about the use of business models in ensuring effective communication between people, and more specifically information systems. Obviously this is imperative in allowing, as you said the “smooth implementation of business visions and alignment between the different groups”. Perhaps my recent two posts on the topic may be of interest to you as well, as I discuss some similar points. I look forward to hearing from you.

  2. thestrategicblogger November 27, 2012 at 5:30 pm #

    Just a quick question you mentioned at the start of your post how models offer firms a base “for achieving successful business-IS alignment”. However you mention how the business model can fight external forces (unrelated to alignment). You also finish by showing how ICT and models are a beneficial relationship but how does this achieve strategic alignment which you claim it does.

Trackbacks/Pingbacks

  1. Strategic Alignment: A Summary « So Opinionated … - November 30, 2012

    […] Week 3: This blog explored how the presence of a flawless business model paved the way for successful strategic alignment.  Osterwalder points out that “The business model concept improves the alignment of strategy, business organization and technology”. […]

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