Information & Management 41 (2004) 1003-1020www.elsevier.comllocateklsw
Ideal patterns of strategie alignment and business performance
François Bergerona,*, Louis Raymondb, Suzanne Rivardc"Département des systèmes d'information organisationnels, Faculté des sciences de l'administration,
Université Laval, Québec, Que, Canada, GIK 7P4.
bDépartement des sciences de la gestion, Université du Québec à Trois-Rivières, Trois-Rivières, Que, Canada.
CDépartement des technologies de l'information, HEC-Montréal, Côte Ste-Catherine, Montréal, Que, Canada.
Keywords: Business strategy; Business structure; IT strategy; IT structure; Business performance; Coalignment; Gestalt; Fit
1. Introduction
The trend toward globalization and virtualization ofthe business environment remains unabated and has
spawned profound transformations, both internaI andexternal, as most organizations must re-create theirvalue chain and strive for doser relationships withtheir customers and business partners. ln response toor anticipation of changes in their environment, mostorganizations are deploying information technology(lT) at an increasing rate, Thus, it has raised a fundamental question underlying these transformations:
how can an organization actually translate its ITinvestments into increased business performance, beit in terms of productivity, increased market share,profitability or other indicators of organizationaleffectiveness?
Given the complex nature of this question, sorneresearchers surmised that the answer would be predicated upon adopting a contingency theory perspective,whereas IT wou Id influence business performanceto the extent that it would be in "alignment" or"fit" with the strategie, structural, and environmentaldynamics specifie to each organization. Assumingthere is no single best way to invest in IT, theoreticalIS contingency frameworks have been proposed, purporting to describe and explain the impact of alignment upon performance. At the empiricallevel, sorne
1004 F. Bergeron et al./lnformation & Management 41 (2004) 1003-1020
authors have examined the relationship between strategie and IT management, and between organizationaland IT structure. However, studies that have actuallyoperationalized alignment and demonstrated its effectupon organizational performance have been few andfar between. Adopting a definition of fit as gestalt,our study examined the impact of the coalignmentbetween business strategy, business structure, IT strategy, and IT structure on business performance in 110small and medium-sized firms.
2. Theoretical background
The notion of strategic alignment originates from abody of conceptual and empirical work in the organization literature whose fundamental proposition isthat organizational performance is the consequence offit between two or more factors such as strategy,structure, technology, culture, and environment [13].The contingency relationship that has received themost attention has been the one between organizational strategy and organizational structure [16]; thishas been studied extensively in large and small manufacturing and service firms (e.g. [29,31]).
The fundamental view of fit propounded by strategic management researchers and organization theorists is that it involves a search for aligning theorganization with its environment and arrangingresources to support that alignment [45]. As strategyis the force that mediates between the firm and its
environment, it is, in practieal terms, the basie alignmen~ mechanism, and the organizational structuremust be weIl suited to it if a significant competitiveadvantage is to be created. Firms whose strategy andstructure are aligned should be less vulnerable toexternal change and internaI inefficiencies and shouldthus perform better.
Information processing in the context of organizational decision making and uncertainty was used as aframework for better understanding of the fit betweenstrategy and structure [73]. Strategic change createsthe need for more information and greater informationgathering, interpreting, and synthesis capabilities,which in turn lead to changes in structure [30]. Thisapproach is thus based on the assumption that organizations will be more effective when there is a match
between the information-processing requirements
of their strategy and their information-processingcapacities.
As shown in Table 1, the principal aim of organizational contingency studies was to identify congruentpatterns of strategy and structure, expressed by coupling strategic and structural dimensions such asdiversification and centralization. For instance, it
was found that an increasing level of product diversityleads multinational corporations to choose a productdivision rather than a functional division structure
[33].
Other organization studies have attempted to relatethe information-processing requirements and capacitiesassociated with strategie and structural choices. Forinstance, a worldwide product division structure ismeant to satisfy the greater requirements for productrelated information processing by facilitating information flows between the head office and the subsidiaries
[26]. Conversely, the more extensive information-processing capacity associated with greater structural integration (e.g. through the presence of liaison deviees andprofessional staff) encourages diversification in that itprovides managers with more time and objectivity toperceive business opportunities (e.g. through environmental scanning) [61].
The information-processing requirements of anorganization are translated into an IT strategy.Researchers have conceptualized this notion in variousways. For instance, IT strategy can be seen as a fourdimensional construct, including competencies, roleof IT, systems design and development, and infrastructures [21], whereas the strategic orientation ofISfocuses on the firm's application portfolio as a miITorof its business strategie orientation along dimensionsof aggressiveness, analysis, defensiveness, futurity,proactiveness, risk aversion, and innovativeness [15].
The organization's information-processing capacityis reflected in ils IT structure. This concept has beenconceptualized mostly along three dimensions. Thefirst is the IT organizational architecture dimension,whieh comprises the locus of responsibility of the ITfunction and the degree of decentralization of the ITorganizational structure [11,12]. The second is thetechnologieal architecture dimension, encompassingthe degree of application and data integration, standardization of the technology, and the nature of hardware deployment [27,28,36,42]. The third is theprocess and skills dimension, whieh includes planning
F. Bergeron et al.llnformation & Management 41 (2004) 1003-1020
Table 1
Information processing perspective of strategy-structure coalignment
mechanisms and the standardization of applicationdevelopment and implementation approaches [IJ.
IS researchers have looked essentially at two typesof bivariate fit relationships, one being between business and IT strategy, the other being between businessand IT structure. ln this body of work, sorne researchers have been primarily interested in determiningwhether such relationships exist [4,41,64,70J, whereasothers see fit as a goal to reach, and focus on findinghow to define the IT strategy or design the IT structurein order to align them with the business strategy orbusiness structure [43,53,59,65,71,72J. Finally, others
Table 2
Contingency studies of the performance impacts of fit
see fit as emerging through joint and mutual adjustments between business strategy or structure, and ITstrategy or structure [19,44,49J.
While several authors have adopted a contingencyperspective to describe and study the relationshipbetween organizational and IT strategy and structure,only a small number have empirically examined theimpact of the fit between these alignment domainsand organizational performance. Table 2 summarizesthe studies, including the form of fit conceptualizedin each.
Authors Alignment domains
Business
BusinessIT strategyIT
strategy
structure structure
Bergeron and
XX
Raymond, 1995
Teo and King, 1996
XX
Chan et al., 1997
XX
Palmer and
XX
Markus, 2000 Sabherwal and
XX
Chan, 200 1
Croteau et al., 200 1
XX
" Univariate measure.
Form of fit
Mediation
moderation
Mediation"
Matchingmoderation
Matching
Profile
deviation
Covariation
Results
Fit between strategic orientation of IT
management and business strategy has a
positive impact on performance
Fit has a significant positive relationshipon organizational performance
IS strategic alignment as a predictor ofbusiness performance
No relationship was found between
alignment and business performance
Business and IS strategies' alignment
affects performance for prospectors andanalyzers
The coalignment of org. and ITinfrastructures has a positive effect on
performance
1006 F. Bergeron et al.llriformation & Management 41 (2004) 1003-/020
3. Research mode}
Each prior study focused on a single pair of alignment domains of a single type. That is, studies examined the impact on performance of the fit eitherbetween business strategy and IT strategy or betweenorganization structure and IT structure. However,contingency theorists argue that a holistie, rather thana bivariate conceptualization of fit, has greater explanatory power because of its ability to retain the complex and interrelated nature of the relationshipsbetween constructs [77]. Applied to the present context, adopting a holistie approach would mean that theimpact of the fit between aIl four alignment domainson firm performance must be examined.
Such holistic conceptualizations of fit are found inthe IS literature. For instance, the importance ofaligning external and internaI business domains (business strategy and organizational infrastructure andprocesses) with external and internaI IT domains(IT strategy and IT infrastructure and processes) hasbeen stressed [35]. More recently, a framework withinwhieh the four alignment domains are taken intoaccount has been suggested [63]. As shown inTable 3, this framework defines six alignment types,each corresponding to a bivariate fit; that is, one of thesix possible arrangements of two alignment domainsamong the four. For each alignment type, theoretiealpatterns of alignment are derived from the literatureand depend on the constructs used to assess eachalignment domain. The six alignment types constitutethe company's strategie IT management profile.
Borrowing from research on fit and misfit withmultiple contingencies [32], this framework positsthat a given strategic IT management profile couldbe in conflict, not in confliet, or neutral. A confliet
situation is one where misalignment dominates; that
Table 3
Strategic IT management profile-alignment types
is, where the number of poorly aligned alignmenttypes is greater. A non-conflict situation would bethe opposite, while a neutral situation wou Id be onewhere the number of appropriately aligned and poorlyaligned types is the same. Based on this framework,the following general proposition can be tested:
Conflicting coalignment patterns of business strategy, business structure, IT strategy, and IT structurewill exhibit lower levels of business performance.
Central to this proposition is the notion of coalign-ment, which is based on the premise that we ought toaddress, simultaneously, the many contingencies inthe research model. This approach is preferred tobivariate perspectives of fit, which, by examininghow pairs of context and design factors interact toexplain performance, are said to be reductionist anddysfunctional [24]. Another assumption of coalignment is equifinality, whieh recognizes that numerousequally effective alternatives may exist [74]. As shownin Fig. 1, the research model adopts a perspective of fitas gestalt, looking "simultaneously at a large numberof variables that collectively define a meaningful andcoherent slice of organizational reality" [46].
Theoretieal patterns of alignment depend on theconstructs used to assess each alignment domain, andthere exist as many potential alignment patterns ascombinations of values for each alignment domain.Assuming that each of the model's four alignmentconstructs can take three values-high, moderate, orlow level-there would be a total of 81 (34) potentialalignment patterns. Given the nature of the constructsselected for this study, and as suggested by the literature and summarized in Table 4, a high degree ofalignment for each of the six alignment types would becharacterized by similar values for both elements ofthe alignment type component. Consequently, overall
Alignment type
Business alignment
Strategic alignment
Structural aIignment
IT aIignment
Cross-dimensional aIignment 1
Cross-dimensional alignment 2
Alignment domain 1
Business strategy
Business strategyBusiness structure
IT strategyBusiness structure
Business strategy
AIignment domain 2
Business structure
IT strategyIT structure
IT structure
IT strategyIT structure
F. Bergeron et al.llnformation & Management 41 (2004) 1003-1020 1007
Fig. 1. Gestalt model of strategic alignment.
alignment wou Id be considered non-conflictual if thenumber of "high" alignment types was larger than thenumber of "low" ones. If the number of "low"
alignments was larger than the number of "high"ones, overall alignment would be considered as inconflict. FinaIly, if the number of "high" and "low"alignments were the same, overall alignment would beneutral. As shown in Table 4, there would be three
"ideal" patterns, that is, ones where aIl four alignmentconstructs take the same value. AIso, the "worst"
patterns in terms of conflict are those where only thetwo cross-dimensional alignments are "high".
4. Methodology
4.1. Sample and data collection
A cross-section al survey was conducted, with a targetpopulation consisting of 1000 small and medium-sizedenterprises (SMEs). Half were manufacturing firms
Table 4
Characterization of coalignment patterns by type of alignment
listed in Dun and Bradstreet's Directory [25] andthe other half were service firms listed in Scott's
Directory [67]. ln order to be selected, a firm had tohave between 10 and 300 employees, and annual salesunder $ 50 million. So as to obtain a representativesample, firm selection followed a systematic samplingprocedure-a firm picked at random from the first k
units and every kth unit thereafter [18,40]. The questionnaire was pre-tested during interviews with fivesmall business CEOs. The pre-test led to minor modifications only.
The questionnaire was faxed to the CEO (or arepresentative manager) of each selected firm.Respondents were asked to fill out the questionnaireand to send it back, preferably by fax, to a toll-free1-800 number. One week later, a reminder was faxed
to aIl selected firms. Two weeks after the first faxing,foIlow-up phone calls were made to a sample of 293CEOs who had not yet returned their questionnaire.The main reasons invoked for not participating were:an internaI policy not to participate in surveys, timeconstraints, too many solicitations to answer surveys,and privacy concerns. Given the length of the questionnaire, the dislike of owner-managers for anythingthat smacks of bureaucracy or red tape is here a moreplausible cause for non-response than the characteristics of the sample or the nature of the question understudy [3].
One hundred and fifty-one questionnaires werereturned, for a gross response rate of 15%. Out ofthese, a total of 41 questionnaires were eliminated forvarious reasons: they were incomplete, or they werereceived from organizations that did not have a computer system, had less than 10 employees, or hadrevenues above $ 50 million. The final response ratewas Il %; this was to be expected as response rates inthe 10-15% range are typical in small business survey
Alignment type Ideal patternIdeal patternIdeal patternWorst patternWorst pattern
Business alignment (strategy-structure)
H (H-H)H (M-M)H (L-L)L (L-H)L (H-L)Strategic alignment (strategy-IT strategy)
H (H-H)H(M-M)H (L-L)L (L-H)L (H-L)Structural alignment (structure-IT structure)
H (H-H)H(M-M)H (L-L)L (H-L)L (L-H)IT alignment (IT strategy-IT structure)
H (H-H)H (M-M)H (L-L)L (H-L)L (L-H)Cross-dimensional alignment 1 (structure-IT strategy)
H (H-H)H (M-M)H (L-L)H (H-H)H (L-L)Cross-dimensional alignment 2 (strategy-IT structure)
H (H-H)H (M-M)H (L-L)H (L-L)H (H-H)Characterization of overall alignment
6H no conf/ict6H no conf/ict6H no conf/ict4L 2H conf/ict 4L 2H conflict
1008 F. Bergeron et al.llnformation & Management 41 (2004) 1003-1020
research [39]. The participating firms operate in avariety of sectors including manufacturing (49.1 %),wholesale/distribution (24.4%), services (11.4%), andothers (15.1 %). The average firm in the sample has 54employees, and an average IS budget of $ 84 000. Therespondents were: CEOs (63.9%), vice-presidents(7.1%), directors of finance (15.0%), other managers(13.3%). The sample is fairly representative ofCanadian SMEs in terms of size and sector.
4.2. Measurement
The measures of business strategy, business structure, and business performance were taken from thestrategie management, organization theory, and smallbusiness management literature. The measures of ITstrategy and IT structure were developed for thepurposes of this study.
4.2.1. Business strategy
For the purposes of the study, the construct ofstrategie orientation of business enterprises wasadopted to assess business strategy. This constructrefers to realized as opposed to intended strategy,focuses on the "resource deployment patterns" thatfirms adopt to reach their desired goals, is defined atthe level of the business unit, and adopts a holisticrather than a functional perspective. Strategic orientation comprises six underlying dimensions: aggressiveness, analysis, defensiveness, futurity, proactiveness,and riskiness. It was measured using the STROBEinstrument [75]. Twenty-nine items rate the firm'sstrategies on 7-point scales, tracing its course of actionin terms of the six dimensions. This instrument was
previously used and parti Y validated in two studies ofstrategie alignment [8].
4.2.2. Business structure
The structural dimensions most commonly found inorganization theory and IS studies include specialization, vertical differentiation, professionalization,formalization, and centralization [20]. Specialization(or horizontal differentiation) was measured by thenumber of distinct job titles in the organization chart[54]. The number of levels in the firm's hierarchybelow the chief executive level assessed vertical dif
ferentiation (the Aston studies [56]). The percentageof p~ofessional staff members in the firm indicated
professionalization [48] whereas formalization wasmeasured by the extent to which rules, procedures,and activities are written. Centralization is indicated
by the ratio of managers to total employees, commonly referred to as the firm's administrative intensityor managerial hierarchy [9].
4.2.3. IT strategy and IT structureThe firm's IT strategy includes: the type and range
of its systems and capabilities, the systemic competencies that play a role in the creation of new businessstrategies or better support existing ones, and the ITgovernance mechanisms selected to provide therequired capabilities. The components of the firm'sIT structure are management processes and skiIls; Le.the managerial activities and competencies that areaimed at effectively and efficiently building an ITarchitecture and deploying IT resources in the organization [69]. The constructs of IT strategy and ITstructure were measured with an instrument developedand validated as the first step of this study.
The IT strategy construct included two dimensions.The first, IT environment scanning [38,51,55], represents to what extent the firm has the capability ofdetecting and reacting to technological changes relativeto its competitors. The second, strategie use of IT[10, Il],represents to what extent it uses IT to increasesits quality, competitiveness, and performance. The ITstructure construct is also bidimensional. It has one
dimension relating to IT planning and control [7,14],namely how weIl the firm manages its IT function,resources, and infrastructure relative to its competitors.Another dimension, IT acquisition and implementation[57,60], relates to how weIl the firm manages theselection and introduction of new IT applications.
A list of 66 items related to the preceding fourdimensions was developed from a review of theliterature. Following a Delphi-based procedure [52],the list was submitted to 26 small firm CEOs (halfmanufacturing, half services), asking them to indicatewhich were most cri tical to their firm. A finallist was
obtained by retaining the 29 issues mentioned by morethan one respondent, as presented in Appendix A. Theconstructs of IT strategy and IT structure were measured by having the respondents indicate the extent towhich an item constituted a strength or a weakness fortheir firm, relative to their competition. Note that thisapproach lessens bias on the respondents' part in that
F. Bergeron et al.llnformation & Management 41 (2004) 1003-/020 1009
they are not asked to rate the firm in absolute termsagainst an ideal, but rather to compare it with others;this is easier to do from both a cognitive and affectivestandpoint.
4.2.4. Business performanceManagement research has defined performance
from a variety of perspectives [78]. The businessperformance perspective was selected here. It includesindicators such as retum on sales, retum on capital,and profit per share, as weIl as non-financial indicatorssuch as market share or new product development. lnorder to remain consistent with our definition of
business strategy, wherein business performance isseen as "the long-term well-being and strength ofthe enterprise relative to its competitors", businessperformance is defined along two dimensions: growthand profitability relative to the competition [79]. The
Table 5
Descriptive statistics of the reseatch variables (n = 110)
growth dimension takes into account the notion of"long-term weIl being" while the profitability dimension embeds the notion of strength.
Strategie management researchers have proposed asubjective approach to measure business performance[22,47]. Such an approach is most appropriate in asmall business context where financial data is often
unavailable or unreliable [66]. The business performance instrument was previously validated in a smallbusiness context and deemed appropriate for the present study [58]. The CEO was asked to indicate on a 7point Likert scales how his or her firm performedrelative to the competition during the last 5 years ontwo dimensions (growth and profitability), in terms ofsales growth rate, market share gains, net profit, ROI,retum on sales, and financialliquidity. The descriptivestatistics of the research variables are presented inTable 5.
Business strategy (strategic orientation)'Aggressiveness
4.084.251.181.256.25
Analysis
5.685.830.901.677.00
Defensiveness5.525.751.072.007.00
Futurity
5.145.301.151.007.00Proactiveness
4.754.800.992.206.80
Business structure (formaI complexity)Formalizationb
4.004.001.751.006.00
Administrative intensityC
0.110.090.070.010.47Professionalizationd
0.090.030.140.000.71
Specializatione
3.093.001.831.009.00Vertical differentiationf
2.963.000.851.005.00
IT strategy'IT environment scanning
5.385.330.953.007.00
Strategic use of IT
5.886.000.942.697.00
IT structure' IT planning and control
5.355.440.932.007.00
IT acquisition and implementation
5.425.440.943.JI7.00
Performance' measures Growth
4.714.831.311.337.00
Profitability
4.644.601.211.607.00
, 7-point scales.b Extent to which rules, procedures, and activities are wriuen.CNumber of managers/number of employees.d Number of professionalslnumber of employees.e Number of distinct job titles in the organization chart.f Number of organizational levels below the chief executive.
1010 F. Bergeron et al./lnformation & Management 41 (2004) 1003-1020
5. ResuUs
Structural equation modeling was used to assess themeasurement model, using an EQS technique [6]. Thevalidity of the research constructs was assessed froman estimation and respecification of the measurementmodel by confirmatory factor analyses [2].
5.1. Assessment of construct va/idity
Using the data from the 110 small firms sampled,maximum likelihood (ML) estimates of the measurement model's parameters (standardized factor loadings,correlations, error variances, and the t goodness-of-fitstatistie) were obtained from the EQS program [5].
riskiness
(0.= .40)
The primary question here was to determine the unidimensionality of the constructs, so that they could thenbe related within the coalignment model.
As shown in Figs. 2-6, the constructs were shown tobe reliable and valid overall. For the business strategyconstruct, namely strategie orientation, the riskinessdimension was found to be unreliable, however, asindieated by Cronbach's CI. coefficient, thus it had to beremoved for the EQS program to obtain convergence.The weak loading also indicated that aggressivenesswould not be a constitutive element of strategieorientation as initially posited. Again, this is in linewith an earlier finding that both aggressiveness andriskiness did not correlate significantly with any ofthe other four dimensions, but only with each other.
x2 = 367.6 (df= 243, P < 0.001)X2/df= 1.5comparative fit index (CFI) = 0.87
': p<.05 ''', p<.OOI
Fig. 2. Confirmatory factor analysis of the business strategy (strategie orientation) measure.
X2= 0.7 (df= l, P = 0.397)X2/df= 0.7comparative fit index (CFI) = 1.00
Fig. 3. Confirmatory analysis of the business structure (formaI complexity) measure.
F. Bergeron et al.llnformation & Management 41 (2004) 1003-1020 1011
"': p<.OOI
IT Strategy(p = .71)
X2=69.3 (df=40,p=0.OO3)X2/df= 1.7comparative fit index (CFI) = 0.96
Fig. 4. Confirma tory factor analysis of the IT strategy measure.
IT planning & control
(a = .91. P ~ .92)
IT Structure
(p = .90)
***: p<.OOI
Fig. 5. Confirmatory factor analysis of the IT structure measure.
x2 = 224.4 (df= 127, P < 0.001)X2/df = 1.8comparative fit index (CFI) = 0.93
Given this last result, it was decided to delete both
riskiness and aggressiveness from the measurementmodel in order to insure the unidimensionality of thestrategie orientation construct.
For the business structure construct, both centrali
zation and professionalization initially loaded belowthe 0.5 level. The problem here was the heterogeneityof a sample composed in equal parts of small manufacturing and service firms, as relationships involving centralization and professionalization differedbetween these two sectors of activity. As a result,the measurement model was respecified by deleting
the two indieators that did not work out as planned,thus restricting the assessment of the firm's businessstructure to its formaI complexity.
5.2. Test of the research proposition
As it is the most appropriate way to examine it froma gestalt perspective, cluster analysis was used to testthe research proposition of the study [76]. Thisapproach groups organizations so that their membership is homogeneous with respect to certain characteristics. Here, the characteristies (or clustering
le = 86.1 (df= 19, P < 0.001)X2/df= 4.5comparative fit index (CFI) = 0.91
Fig. 6. Confirmatory factor analysis of the performance measure.
1012 F. Bergeron et al.llnformation & Management 41 (2004) 1003-1020
variables) are the four components of coalignment:business strategy, business structure, IT strategy, andIT structure. A second aim is that each group differsfrom others with respect to the same characteristics.Given this study's focus on multivariate coalignment,Ward's hierarchical clustering method was used, as itforms groups by maximizing within-group homogeneity (i.e. within-cluster sum of squares), thus producing groups that are compact [68].
A four-cluster solution was found to be most parsimonious in identifying groups of firms that could beclearly distinguished from one another, based on ameaningful pattern of relationships among the fourclustering variables [34]. Three and five-cluster solutions were also discarded on the basis of clusteringstatistics that evaluate the consequences of forming anew cluster at any given step, such as the root-meansquare standard deviation (RMSSTD) that measuresthe homogeneity of the cluster formed.
Table 6 presents the means and standard deviationsof the clustering variables for each of the four clusters.
Table 6
Results of analyzing fit as gestalt
One-way analysis of variance (ANOVA) was used toevaluate the equality of variable means across theclusters and thus assess the distinctiveness of each
derived cluster. The F-tests presented on the bottomline confirm that these means differ significantlyacross the four groups for aIl four clustering variables.Added tests of significance of pairwise contrasts(Duncan's multiple range test) indicate certain similarities however. Clusters 1 (n = 31) and 4 (n = 26)did not differ with regards to business strategy, ITstrategy, and IT structure, but did differ significantly inbusiness structure. Also, clusters 2 (n = 34) and 3(n = 19) are not distinguishable in terms ofIT strategy.
To present these results in summary form, the groupmean of each clustering variable was categorized as"high" (H), "moderate" (M), and "low" (L). Thus,clusters 3 and 4 appear to be the most internallycongruent while the other two are less so. Firms ingroup 4 are characterized by a business strategy with astrong strategie orientation, a complex structure, a
Four groups of firms obtained from hierarchical c1uster analysis1 (n = 31) 5.6 a M 0.5 2.8 c M 0.7
2 (n = 34) 5.1 b M 0.5 3.8 b H 0.8
3 (n = 19) 4.3 c L 1.1 2.0 d L 004
4 (n=26) 5.9a H 0.6 4.4 a H 0.7
al! (n = 110) 5.3 0.8 3.4 1.1
F (ANOYA) 24.4" 26.1"
Clustering variable
Cluster
Business strategy
(strategie orientation)
Mean S.D.
Business structure
(formai complexity)
Mean S.D.
IT strategy IT structure
Mean
aS.D.MeanaS.D.
6.2 a
H0.46.0 aH0.4
5.1 b
L0.54.8 bL0.34.9 b
L0.74.5 cL0.8
6.3 a
H0.46.0 aH0.5
5.6
0.85.4 0.8
52.8"60.7"
Clustering variable Growth Profitability
Cluster
Mean(")S.D.Mean(")S.D.
Breakdown of growth and profitability by c1uster1 (n=31)
5.2 aH1.34.9 aM1.1
2 (n = 34)
4.3 bM1.34.2 bM1.1
3 (n = 19)
4.1 bM0.94.2 bM1.0
4 (n = 26)
5.1 aH1.35.2 aH1.3
Al! (n = 110)
4.71.34.6 1.2
F (ANOYA)
5.0' 5.5'
Within columns, different letters indicate significant (at P < 0.05) pairwise differences on Duncan's multiple range test.
a Mean in upper (high)/middle (moderate)/lower (low) third percentile (33%) of the total sample.* P < 0.01.
•• P < 0.001.
F. Bergeron et al.llnformation & Management 41 (2004) 1003-1020
Table 7
Characterization of the c1usters by type of alignment
a "Non-strategic" IT has "Iow" alignment with any level of strategic orientation.
b "Non-strategic" IT has "Iow" a1ignment with any level of formaI complexity.
strong IT strategy, and a sophisticated IT structure; Le.an "H-H-H-H" pattern. The opposite is true ofGroup 3 whose members are not strategieally oriented,have a simple structure, a weak IT strategy, and a basieIT structure; i.e. an "L-L-L-L" pattern. Group 1firms differ from those in Group 4 in that theirstructure was of moderate complexity, and their strategic orientation was of moderate to high strength; Le.an "M-M-H-H" pattern. Group 2 firms differed fromthose in Group 3 in that their strategie orientation wasmoderate and their structure complex; Le. an "M-HL-L" pattern that is the least congruent of the four.
The central proposition of this study was thatcertain alignments or patterns of strategy, structure,IT strategy, and IT structure would outperform othersin terms of business growth and profitability. Thus,one-way ANOVAs were used to test for performancedifferences across the four clusters. An F-test indi
cated that group means significantly differed acrossgroups for both performance measures. Added tests ofsignificance of pairwise contrasts (Duncan's test)indicated that Groups 1 and 4 were similar in achieving high-performance, with the former showing highlevels of growth and profitability and the latter beingalso composed of high-growth firms with a moderateto high level of profitability, whereas both Groups 2and 3 were composed of firms whose growth and profitperformance was only moderate.
Each of the four clusters was then characterized
following the alignment framework shown in Table 3.This characterization was synthesized in Table 7. First,the level of alignment was assessed for each of the sixalignment types. Second, when the number of "high"(H) alignments was larger than the number of "Iow"(L) alignments, overall alignment was considered to
be high and characterized as a "no conflict" alignment. When the number of "Iow" alignments waslarger than the number of "high" alignments, overallalignment was considered to be low and was labeled"conflict" .
6. Discussion
The analysis of the results leads us to generallyaccept the research proposition that conflictual coalignment patterns of business strategy, business structure, IT strategy, and IT structure will exhibit lowerlevels of business performance. There are, however,particularities that must be discussed. Out of the fourgroups of organizations (Groups 1-4), three of them(Groups 1, 3, and 4) show non-conflicting patterns,and one group (Group 2) exhibits a conflicting pattern.Following our proposition, Groups l, 3 and 4 shouldail be associated with firms exhibiting higher performance in terms of growth and profitability. This is truefor Groups 1, and 4, but not for Group 3 which has anon-conflicting alignment associated with lower performance. Group 2, showing a conflictual pattern,conforms to the research proposition by being associated with lower performance.
6.1. Strong peiformers
Group 4 is the one that shows the greatest coalignment among the four clustering variables since eachvariable is rated as high (H). ln Group 4, ail variableswere highly related and aligned. These organizationsdisplayed important characteristics. First, they actedstrategically in spending time and money to analyze
1014 F. Bergeron et al.llnformLltion & Management 41 (2004) 1003-1020
large amounts of data on their past and present performance, trying to identify tendencies and predict thefuture, and being proactive relative to new markets andnew products or services. Second, they adopted acomplex organization structure where tasks werehighly formalized, specialized, and vertically differentiated. Third, their IT strategy put much emphasison environment scanning and on the strategic use of ITso that their portfolio of IT applications was full yjustified in terms of profitability, cost-effectiveness,and organizational priorities. Finally, associated withhigh levels of growth and profitability in Group 4 wasan IT function structured such that IT personnelfollowed systematic and comprehensive developmentmethods for the implementation and management ofIT, completing "by the book" each of the steps ofplanning, acquisition or development, implementation, and control.
Another group that showed a non-conflictual pattern of coalignment was Group 1, a group that performed as weIl as Group 4, even though its level ofcongruence between the four alignment domains wasnot as high. Group 1 showed a high level of businessalignment although the organizations in this groupdisplayed on average only a moderate level of strategic orientation matching a moderate level of structural complexity. ln comparison to Group 4, theyspent less time analyzing their business data, searching for explanations for variations in growth andprofitability, developing scenarios of the future, orsearching for the "killer" product or service. Accordingly, their structure was only moderately formalized,with only a liule specialization and sorne verticaldifferentiation. IT alignment was strong in Group 1,with high nominallevels of IT strategy and IT structure. These organizations were very similar to Group4 in their way of scanning their environment, emphasizing the strategic use of IT and adopting a highlystructured process in managing IT.
Group 1 showed only moderate levels of congruence in terms of the four other types of alignments,these being strategic alignment, structural alignment,and the two cross-dimensional alignments. The moderate strategic alignment results formed a mismatchbetween the business strategy, which was at a moderate level, and the IT strategy, which had a high level.At first glance, this situation could seem somewhatcounter-intuitive, since one might think that the IT
strategy should support the business strategy, and notthe other way around. However, this was previouslyobserved in a study, where business strategy andstrategic IT management showed mutually moderating effect in relation to performance [8]. ln this casewe had a group of organizations where the IT personnel was eager to find and implement profitable ITapplications for the business, whereas this was only amoderate concern for the organization as a whole.Structural alignment was also at a moderate level inGroup 1 where the IT function was well structured, asreflected in the managers' use of comprehensive project management methods whereas the business structure was only of moderate complexity. Given theseresults, the two cross-dimensional alignments werealso at a moderate level. Hence, alignment domainswere not perfectly coaligned; still, there were not somisaligned as to inhibit business growth and profitability. Given Group l 's overall characterization asbeing non-conflicting, added credence was thus givento the validity of the research proposition.
6.2. Moderate and weak performers
While Groups 1 and 4 were both strong performers,Groups 2 and 3 were not. Group 2 presented a conflictual coalignment situation, given that of six possible alignments, one was high (IT alignment), twowere moderate (business alignment and the strategyIT structure cross-alignment), and three others werelow. The low nominallevels of IT strategy and structure played a major role. Their moderate to low levelsof congruence with business strategy and structuredomains characterized coalignment as being con flictuaI overall. As firms in Group 2 were not strongperformers on average, this again provided empiricalsupport for the research proposition.
The last group, Group 3, was a most interesting one,since it seemed to contradict the research proposition.yet it was composed of firms that were not strongperformers. Indeed, with low nominal levels for allfour alignment domains, four types of alignments endup as high and two as low. On the one hand, it was asurprise to find so many firms (nearly 30% of thesample) showing minimallevels of strategic orientation, structural complexity, IT strategy, and IT structure. Their status as small and medium-sized
enterprises (SMEs) might be the reason why this
F. Bergeron et al.llrifonnation & Management 41 (2004) 1003-1020 1015
was so. On the other hand, the other 70% were also
SMEs. Thus, one had to wonder why the former didnot perform as weil as the latter in terms of growth andprofitability since they did display a non-conflictingcoalignment pattern. A similar result was reported andanalyzed in a prior study, indicating that the "lowlow" coalignment pattern of strategie orientation andstrategie lT management was less plausible a prioriand less effective empirically in explaining performance than the "high-high" pattern, contradicting thebivariate "matching" alignment perspective. Morerecently, using a bivariate "profile deviation" alignment perspective, no significant relationship wasfound between coalignment and performance for organizations whose strategie activities were minimal interms of aggressiveness, proactiveness, and analysis[62]. It was concluded that "the importance of aligning lS strategy and business strategy may not be asuniversal as previously believed". Using a multivariate gestalt approach, the results of the present studyleads one to conclude that using the fit betweenbusiness dimensions and lT dimensions to explainperformance is valid only if organizations haveattained minimum thresholds on ail four alignmentdomains; Le. are not systematieally at the low end ofthe spectrum.
7. Implications
ln reconciling our research findings with previoustheoretical and empirical work, potential implicationscan be drawn. Having lent empirieal credence to theconcept of coalignment and its relationship with performance impact, this study has sorne implications forresearchers. First and foremost, coalignment constitutes a valid theoretieal foundation on whieh to further
investigate the fundamental IT problem for organizations, namely how to achieve value from ever-increasing lT investments. On a methodologieal basis, thegestalt perspective seems effective in its capacity todescribe, prediet, and explain the performance of IT.
This research also has prescriptive implications formanagers and lS practitioners. When shifts in thebusiness environment, both external and internaI,
require strategie choiees or provide. strategic opportunities, resulting changes must be inter-linked andassessed continually across ail four of these domains
in a systemic manner if the firm wants better performance. The coalignment approach thus transcendsboth strategie integration (bivariate fit between business strategy and lT strategy) and operational integration (bivariate fit between business structure andIT structure) to achieve "systems" integration andincrease performance.
When strategic orientation is the driving force,management must see to it that its formulation of anew or enhanced business strategy is simultaneouslyimplemented in two forms, one being the formulationof an appropriate lT strategy (how IT can be used tosupport strategie objectives and satisfy informationneeds), the other being the design of an organizationalstructure with the appropriate levels of formalizationand differentiation. The newly designed lT strategyand structural configuration in turn require an appropriate lT infrastructure in the form of enhanced ITplanning, acquisition, implementation, and controlprocesses.
For instance, a small textile manufacturing firmwhose business strategy is formulated in terms oflowering production costs and increasing productivityexecutes this strategy through an integrative lT strategy based on ERP software [23]. If this firm is toachieve performance gains, implementing such anapplication would entail conforming to the software'sunderlying business model (e.g. R/3 in the case ofSAP), usually requiring added formalization of theorganizational structure, if not added horizontal andvertieal differentiation. And the successful planningand execution of such an inherently complex projectwould obviously require more in terms of the smallfirm's IT management competencies.
Alternatively, when lT strategy is the enablingforce, management seeks to determine how emerginglT capabilities can be used to enhance the firm'sstrategic orientation. With information obtained fromscanning the IT environment, management shouldenvision the potential competitive uses of lT to adaptthe firm's business strategy, with new or expandedstrategie thrusts in the form of product/serviee differentiation and innovation, and new or expanded strategie targets in the form of growth and strategiealliances. Such changes also require a correspondingadaptation of lT structure to analyze and meet theincreasing needs of both internaI and external lScustomers. The newly emerging business strategy
1016 F. Bergeron et al.llnjormation & Management 41 (2004) 1003-J020
and increased serviee level required of the IS management function may, in turn, require that the firm'sstructure be improved by creating support units andnew staff positions.
For instance, a small maker of interactive industrial
kiosks, operating in "make-to-order" productionmode, sees an opportunity in being the first in itsindustry to develop a commercial web site [17]. Totranslate this choice into higher performance levels,the firm's business strategy would have to be adaptedfor the resulting sales growth. AIso, IT managementwould now have to plan, implement, and evaluateinter-organizational IS to pro vide pre- and post-salesserviee to on-line customers (customer-relationshipmanagement), and to strengthen links with businesspartners (supply-chain management). This in turnwould imply creating a better adapted structure toenable the small firm to respond to changes in itsenvironment.
8. Limitations and conclusion
This study has attempted to define the concept ofstrategie alignment and demonstrate the influence ofthis complex managerial process on business performance. Given such an endeavor, the research findingshave inherent limitations. The most significant residesin the range of constructs developed to representstrategic alignment. When compared with IT strategyand IT structure found in the literature, only sorneaspects of complexity have been captured here. Otheralignment domains not present, such as environmentaluncertainty, must later be included. AIso, given thatcoalignment is an emergent process that continues tochange after it has been achieved, a longitudinal ratherthan cross-sectional investigation wou Id have provided deeper knowledge and truer confirmation ofcausal relationships.
Another limitation pertains to a possible responsebias associated with survey research, particularly theuse of a single organizational informant. Multipleinformants and triangulation of collected data ideallyprovide more accurate measures of organizationalproperties. However, given that the sampled organizations are small businesses [37,50], entrepreneurs orowner-managers "embody" their organization and arethus the best-placed, if not the only individuals, to
provide valid and accurate data on their businessstrategy, IT strategy, and business performance.
Finally, while most empirical studies on strategie ISand alignment have been conducted in latfe, technologieally sophisticated organizations, such as Fortune1000 manufacturing or service firms, this survey wastargeted at small manufacturing and serviee firms. Assuch, no claim for external validity and generalizationof the results beyond the sampling frame can be made.Small businesses constitute an investigation terrainthat is initially more amenable and comprehensive,making it more feasible for researchers to take asystems approach in developing and testing a validoperational model of strategic alignment.
ln an economie context that has become fundamen
tally globalized and virtualized, business enterprisesmust leverage IT in order to transform themselves into"intelligent" and "agile" organizations, continuouslyadapting and changing in a process of strategie alignment or fit. Of increasing importance is research thatprovides more rigorous measurement, more accuratedescription, and better explanation of this process andits impact on organizational effectiveness. While previous theoretieal and methodologieal works have provided a solid foundation for identifying thedimensions and performance impacts of strategiealignment, and for conceptualizing fit, few attemptshave been made to empirically test proposed theoryand operationalize fit systemically. As a further step,this study has framed IT strategy and IT structurewithin the larger framework of organizational strategyand structure to provide a richer view of strategiealignment and how it contributes to business performance.
Appendix A. Items measuring IT strategy andIT structure dimensions
A. J. IT environment scanning
1. Using an external information network to identifyyour requirements in information technology.
2. Knowing the information technology used by yourcompetition.
3. Instituting a technology watch in order tochange rapidly your information technology whennecessary.
F. Bergeron et al.llnformation & Management 41 (2004) 1003-1020 1017
4. Ensuring that your choice of information technology follows the evolution of your environment.
5. Using the information technologies that willpermit a rapid reaction to environmental pressure.
A.2. Strategie use of IT
1. Use of IT to reduce your production costs.2. Use of IT to make substantial savings.3. Use of IT to improve your firm's productivity.4. Use of IT to increase your firm's profitability.5. Use of IT to improve the quality of products or
services.
6. Use of IT to respect the deadlines requested byyour customers.
A.3. IT planning and control
1. Mastering current information technology products.
2. Maintaining control over projects involved withthe acquisition of new technology.
3. Being considered as a leader in informationtechnology usage.
4. Development of a technological culture in yourfirm.
5. Having the required human and organizationalresources to manage the information systems.
6. Having the ability to effectively identify and fillyour needs in information technology.
7. Strategie planning of information systems inrelation to the organization's business objectives.
8. Mastering the technology presently in use in yourorganization.
9. Using a distributed system to share informationwithin the firm.
A. 4. IT acquisition and implementation
1. Structured approach to acquire the needed information systems.
2. Use of specifie selection criteria for the acquisitionof new information systems.
3. Using financial tools in planning the acquisition ofnew information systems.
4. Choosing information technology related to thestrategie orientation of your firm.
5. Knowing the impact that IT will have on thedifferent functions of your firm.
6. Evaluating potential problems related to thestrategie orientation of your firm.
7. Knowing the resuIts of a financial feasibility studybefore the acquisition of IT.
8. Identification of possible sources of resistance tochange before implementation.
9. Evaluating the employee's aptitude to use thechosen IT.
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François Bergeron is professor of in
formation technology and electronic com
merce at Université Laval, Québec. Heholds a PhD from the Anderson School of
Management, UCLA, and an MBA and anMSc in economics from Laval. His areas
of research are in business and IT
strategy, IT management, and electronic
commerce. Professor Bergeron is theauthor of six books and one CD-ROM
on IT Management and electronic com
merce strategy. This is his fifth publication in information &management. His research has been published in several other
international journals inc1uding the Journal of Strategie Informa
tion Systems, Omega, Data Base, MIS Quarterly, Journal of Small
Business Management, and, in french, Revue Internationale PMEand Revue internationale de Gestion.
Louis Raymond, PhD, professor of
information systems at the Université duQuébec à Trois-Rivières, is titular of the
Canada Research Chair on Enterprise
Performance. He has published in various
journals such as the Journal of Manage
ment Information Systems, the MIS Quar
terly, Entrepreneurship Theory and
Practice, Information & Management,
and Decisions Support Systems and in
international proceedings such as the
International Conference on Information Systems. His research
interests inc1ude the alignment of IT and business performance,
particularly in the context of small enterprises and network
organizations.
1020 F. Bergeron et al./lnformation & Management 41 (2004) 1003-1020
Suzanne Rivard is professor of information teehnology and holder of the Chair ofStrategie Management of InformationTeehnology at HEC Montréal. She reeeived a PhD from the Ivey Sehool ofBusiness, the University of WesternOntario. Dr Rivard's researeh interests
are in the areas of outsoureing of infor-
mation systems services, software projeet risk management,strategie alignment of information teehnology, and the adoptionof information teehnology. Her work has been published in journalssueh as Communications of the ACM, Canatlian Journal of
Administrative Sciences, Data Base, Information and Management,
Journal of Management Information Systems, and MIS Quarterly,and others.
