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Lund, May 2017

The Existence of Digital Strategies and Strategic Alignment

SOFIA KARLSSON & FRANS WÅHLIN

Industrial Engineering and Management, Faculty of Engineering, Lund University

We are currently in the midst of the development from an industrial society to a digital society. With the increased digitalization, the need of developing digital strategies becomes vital for companies to be able to keep up with the competition in today’s digital economy. The literature is not only talking about the need of having a digital strategy, but the importance of integrating or merging the digital strategy with the overall business strategy (Bharadwaj et al. 2013).

Introduction

Digitalization and digital technologies are changing companies’ ways of doing business, and Sweden has during the last

few decades been through a technological

revolution. Keeping up with this rapid

technological change is especially

challenging for small companies and the

manufacturing industry

(Näringsdepartementet 2015). Since the

literature is talking about the importance of

having a digital strategy and aligning it

with the overall business strategy, but little is written about how companies actually are

working with digital strategies in practice,

there was a need of investigating this

matter further. Thus, it became the focus of

the project ‘Digital Strategies and Strategic Alignment: The Existence of Digital Strategies and Their Alignment with

Business Strategies for Small and

Medium-sized Swedish Manufacturing

Firms’. Since SMEs in Sweden lag behind

in their digital maturity but are vital for the economy, and since it is the small companies, and especially within the manufacturing industry, that faces great

challenges in the technological

development, those companies were

investigated in the study.

Purpose

The purpose of the project was to describe

and analyze the existence of digital strategies and their alignment with the overall business strategies for Swedish SMEs in the manufacturing industry. Methodology

To fulfill and answer the purpose, a

multiple case study was performed by

having qualitative interviews with

executives at manufacturing SMEs. Apart

from this, a literature review was

performed to provide relevant theories and

frameworks to be used in the analysis of the

study.

The criteria that needed to be satisfied to

qualify as a case company in this study

were set to be companies within the manufacturing industry, with under 250 employees, under 50 million euro in turnover and located within the Skåne region. To reach potential case companies, a list of potential companies was first created and relevant companies were contacted by email and phone. Interviews with six of these companies were held

between mid-March and the beginning of

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Lund, May 2017

Theory

Basic theoretical concepts about strategy,

digital strategy and organizational

structures were presented and the

frameworks the Strategic Alignment Model by Henderson and Venkatraman (1993) and

the Strategic Alignment Maturity Model by

Luftman (2000) were described and used in

the analysis to assess the case companies’

strategic alignment maturity.

The Strategic Alignment Model is based on

the four dimensions of (1) Business strategy, (2) IT strategy, (3) Business infrastructure and processes and (4) IT infrastructure and processes, and the integration and alignment between the four. The developed model, The Strategic Alignment Maturity Model, by Luftman (2000) is further subdivided into six criteria; (1) communications maturity, (2) competency/value measurement maturity, (3) governance maturity, (4) partnership

maturity, (5) scope & architecture maturity

and (6) skills maturity. When the model is

utilized, the six criteria are assessed

individually and given a score between 1

and 5. The total Strategic Alignment

Maturity level for a company is given by

the average score from the six criteria. Conclusions

The study showed that the investigated companies are not discussing digitalization

to a large extent internally and are not

explicitly working with digital strategies,

with the exception of a digital marketing

strategy at one of the firms. Instead of

having digital strategies separated from the

overall business strategies, the case

companies generally see investments and

decisions regarding digital technologies as

part of their overall business strategies and

as support in achieving their overall strategic goals.

When analyzing why the companies

generally had a low focus on digitalization

and did not work with explicit digital strategies, multiple factors and drivers were

identified as potential reasons; the size of

the company, the complexity of the product

and production process, the composition of

the value chain, the type of product and

sales process and the use of the term digitalization. Further, the result of the strategic alignment assessment showed that the investigated companies generally have

a low level of strategic alignment, slightly

above level 2 (on a scale from 1 to 5)

according to the theoretical model, which

corresponds well with theory.

If companies are not using the term digitalization internally, and do not have formulated digital strategies, as was the

case in the study, it is easy to say that they

are not digitalized and thus also have a low

level of strategic alignment. However, the

case companies uses digital technologies to

varying degrees in their respective

organizations, and are making decisions

when investing in them in line with their

overall business strategies, implying a

certain integration or alignment between digitally related decisions and overall

business strategy. So, if companies are

using currently sufficient digital

technologies for their respective

organizations and invest in them in accordance with their overall business

strategies, do they have a high level of

strategic alignment and are digitalized? According to the framework used, the

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Lund, May 2017

answer is no, but in practice, the answer

might be yes.

The project also showed that the theoretical

models were difficult to apply in practice.

They were considered inflexible and

theoretical and not well suited to use when

assessing small companies. Also, they were not originally intended to measure the

alignment between a digital strategy and

the business strategy, but an IT strategy and

the business strategy. Thus, besides the above presented results, the insights from

the study can be used in order to better

adopt the models for analyzing companies

similar to the case companies in the study,

as well as for assessing strategic alignment

for digital strategies rather than IT strategies.

References

Bharadwaj, A., El Sawy, O. A., Pavlou, P.

A., & Venkatraman, N. (2013). Digital

Business Strategy: Toward A Next

Generation Of Insights. ​MIS Quarterly,

37(2), pp. 471-482.

Henderson, J. C., & Venkatraman, N. (1993). Strategic alignment: Leveraging information technology for transforming

organizations. ​IBM Systems Journal, 32(1),

pp. 472-484.

Luftman, J. (2000). Assessing business-IT

alignment maturity. ​Communications of the

Association for Information Systems, 4(14).

Näringsdepartementet. (2015). ​Smart

industri – en nyindustrialiseringsstrategi för Sverige. (Article N2015.38). Stockholm: Näringsdepartementet.

References

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