CIS - McFarlan's Strategic Grid

1. McFarlan's Strategic Grid

To develop an appropriate IT management strategy for our organization, we must first look at two critical dimensions. The first is the strategic impact of the firm’s IT initiatives on its operations (vertical axis). The second is the strategic impact of IT initiatives (horizontal axis) that will influence future sustainable business advantage for the firm. Let's discuss these two variables in greater detail.

A. Impact of IT Initiatives on Core Operations (Vertical Axis)

For some organizations, the second by second, utterly reliable, precision execution of IT operations is crucial to an organization's survival. Even the smallest interruption in service or in the quality of service could have a profound impact.  In such cases, the impact of IT on core operations is very high. Examples include NASA, Dept of Defense, AOL, eBay, etc.

In other organizations, the impact of IT on core operations may be low. In other words, it would take a significant disturbance in IT operations over an extended period of time (hours to days) to have a major impact on an organization's ability to function. Extreme examples include a beauty shop or a small local gift shop. 

B. Impact of IT Initiatives on Core Strategy (Horizontal Axis)

For some businesses, IT-enabled business initiatives are critical to the company's present and/or future strategic positioning.  In such cases, the impact of IT on core strategy is very high. Examples of these firms could include Wal-Mart, FedEx, Verizon, Apple, Microsoft, etc.

For other organizations, new IT applications or initiatives provide local improvements or aid in operations but do not affect business strategy. For these organizations, the impact of IT on core strategy is very low.  

C. Where does an organization/firm fall on the Strategic Grid?

We should ask ourselves two questions when analyzing where our organization/firm sits on the Strategic Grid.

1. How important is IT’s impact on our core operations (Vertical Axis)?
Is our organization so heavily dependent on the utterly reliable execution of IT operations where even the smallest interruptions in services would have a profound impact? Yes or No?

2. How important is IT’s impact on our core strategy (Horizontal Axis)?
How important is IT in sustaining business advantage for our organization? Are new IT-enabled initiatives critical to our organization’s future strategic positioning and success? Yes or No?

Using the answers to these 2 questions, we can now plot where our organization/firm sits on the Strategic Grid.

II. Henderson and Venkatraman's Strategic Alignment Model 

Research shows that cyclists expend significantly less energy when properly positioned to draft off one another. Similarly, geese can travel 70% farther when aligned in a “V” formation. Businesses, can achieve similar benefits when they are well aligned. However, increasingly, businesses are suffering from a lack of alignment. 

Henderson and Venkatraman developed the Strategic Alignment Model to assess business and IT alignment across all components of the business model.
1. Strategy Domain - assesses alignment in terms of context, purpose, positioning, project, and goals.
2. Capabilities Domain - assesses alignment in terms of leadership, people/partners, processes, organization, and infrastructure.

The model specifies the need for two types of alignment. These are:

1. Alignment between corresponding IT and business domains (dotted line-figure below)
2. Alignment between IT and business strategy and the firm's capabilities (solid line)

Value is created through alignment across all four (4) domains.