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Technology investments need to fit the organisation’s business model

Technology fit with business model

The right technology ‘fit’ with a business model provides the best return on financial and time investment.

Ultimately, a business’s model and its technology need to work together and support each other.

How does a business model generate value?

Briefly, a business model can be considered the logic of the firm. It describes how it operates, how it creates revenues and, ultimately, value for its stakeholders.

Business models are evolving. This change can occur incrementally (through gradual improvements) or radically (by launching a new product or through technological innovation). A good business model will grow your organisation as quickly as a bad one will destroy it.

Business models operate through the strategies the organisation puts in place and the resources and capabilities it develops. Strategies need to be assessed for their effectiveness and adapted to ensure the organisation remains competitive over time. Each existing strategy feeds the development of the next strategy: like an athlete continually improving their personal best.

How does technology support a business model?

Technology investments need to fit the organisation’s business model, and support its ongoing evolution to remain competitive. For example if an organisation’s business model depends on being highly efficient, then technology that helps automate its key processes would typically represent a good ‘fit’.

Unless technology investments fit and augment the business model and its ongoing evolution towards competitiveness, the technological decisions could end up becoming liabilities rather than assets in the business. Further when locked into an alignment plan (via investing in various technologies), unless it is flexible it can hinder their ability to react to change.

How do you achieve IT and Business alignment (‘fit’)?

IT should be managed in a way that mirrors management of the business. The mission, objectives, and plans contained in the business strategy (i.e. business model) must be supported/complemented by IT investments.

Business and IT thus work together to reach a common goal – ‘everyone rowing in the same direction’. Alignment is also contingent upon the social and cultural aspects of an organisation (Chan and Reich 2007).

For example, communication barriers (eg lack of a common language) between IT and business team can lead to misalignment. History of IT/business relationships, invisibility of IT staff, attitudes towards IT, and top management support (i.e. strong CIO-CEO relationship) all contribute to the degree IT and Business alignment may be achieved. Lastly, alignment should be present at all levels the organisation (organisaitonal, system, project, individual).

Your task

Think about a business model for an organisation you are familiar with. Have the technology investment decisions been aligned with the business model. Do you think the technology investment represents a good fit with the business model?

Reference

Chan, Y.E. & Reich, B. H. (2007). “IT alignment: what have we learned?” Journal of Information Technology, 22, 297-315

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This article is from the free online course:

Competitive Advantage: Using Information to Build Business Success

Deakin University

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