STRATEGIC ALIGNMENT MODELAND

MCFARLAN'S STRATEGIC GRID

-MANISH CHAURASIA(15030141085)

STRATEGIC ALIGNMENT MODEL• It is Framework for aligning IT with business strategy

• It is Framework for directing strategic role/management of IT

• Framework for using IT on a continuous basis to achieve sustainable competitive advantage.

STRATEGIC ALIGNMENT MODELEXTERNAL AND INTERNAL DOMAINS

• Four Domains

• Two internal and two external domains

• External domains also referred to as Strategy Domains (Business Strategy Domain and IT Strategy Domain)

• Internal domains also known as Infrastructure Domains (Business Infrastructure and IT Infrastructure Domains)

FOUR DOMAINS OF STRATEGIC ALIGNMENT MODEL

ScopeCompetenciesGovernance

StructureProcesses

Skills

ScopeCompetenciesGovernance

InfrastructureProcesses

Skills

Strategy(External)

Infrastructure(Internal)

Business Information Technology

Functional Integration

StrategicFit

STRATEGY OR EXTERNAL DOMAIN

• Business• Scope: What business are you in?• Distinctive Competencies: What do you do well to distinguish yourself from your

competitors?• Governance: What external business relationships do you depend on?

• IT• Scope: What information technologies support or create strategic business opportunities?• IT Competencies: What characteristics of IT create business advantage?• IT Governance: What external relationships does IT depend on (outsourcing, vendors,

etc.)

INFRASTRUCTURE OR INTERNAL DOMAIN

• Business• Structure: Organizational structure• Processes: What are key business processes?• Skills: What HR needed to accomplish specific competencies?

• IT• Infrastructure: Hardware, Software, Database, Networks• Processes: Development, Maintenance, Operations• Skills: What skills required to maintain architecture and execute the

processes?

MCFARLAN'S STRATEGIC GRID

MCFARLAN'S STRATEGIC GRID

• The strategic grid model is an IT specific model that can be used to assess the nature of the projects that the IT organization has in its portfolio with the aim of seeing how well that portfolio supports the operational and strategic interests of the firm.

The X-axis:

• The X axis represents impact of the project on IT strategy. One way of expressing what we mean by this is: what options does this project offer the firm by way of affecting one of Porter’s five forces in our favour?

• Does it change the nature of competition in our market.

• Does it enable us to offer completely new products and services, or enable us to substitute one of ours for one of someone else’s in the eyes of their customers?

MCFARLAN'S STRATEGIC GRID

The Y-axis:

• The Y axis represents the impact of the project on IT operations.   One way of expressing this is to say that projects that are high on this axis improve the efficiency or quality of our existing systems and business processes, or lower their costs.

• McFarlan divided the grid into 4 quadrants• Support• Factory• Turnaround• Strategic

MCFARLAN'S STRATEGIC GRID

Support:

• Low operational impact, low strategic impact. This quadrant is about local process improvements for individual users.

Factory:

• High operational impact, low strategic impact. This quadrant is about operational improvements that affect large portions of the firm, and are aimed at improving performance or decreasing cost.

MCFARLAN'S STRATEGIC GRIDTurnaround:

• Low operational impact, high strategic impact. This quadrant is about exploiting new technologies to provide strategic opportunities.

Strategic:

• High operational impact, high strategic impact. IT organizations that have most projects in this quadrant understand that IT can both improve core operations of the firm while simultaneously generating strategic options.