Within the IT management community, “alignment” has been a hot topic for some time. If, as some suggest, the insurance industry is on the edge of some fundamental, possibly existential challenges, the question might be, “align with what?”
What is ‘Alignment’, Anyway?
A frequently cited review of literature by Chan and Reich, IT Alignment: What Have We Learned, notes that there have been three major themes developed in studies on IT/Business alignment:
- linking the business plan and the IT plan,
- ensuring congruence between the business strategy and the IT strategy, and
- examining the fit between business needs and information system priorities
The authors note that case studies have found that alignment produces results: “the findings support the hypothesis that those organizations that successfully align their business strategy with their IT strategy will outperform those that do not. Alignment leads to more focused and strategic use of IT which, in turn, leads to increased performance.”
So, alignment is a desired state, right? Perhaps, or it might be more situational.
Can You Align with Turbulent?
According to the Chan and Reich, “Tightly coupled arrangements can have negative outcomes especially in turbulent times. That is, if the business environment suddenly changes and alignment is too tight, businesses may have difficulty adjusting to their new environments.”
If you find yourself saying, “That sounds like the insurance industry these days,” you are agreeing with several leading insurance-technology thinkers. At the Analysts Panel during the recent ACORDLOMA Forum, Kimberly Harris-Ferrante, VP and Distinguished Analyst at Gartner said that CIOs are becoming keenly aware of all the pressures in the industry, and are seeing the need to adapt. Insurance Networking News quoted Harris-Ferrante saying that Insurance technology leaders “are becoming very keenly aligned with the need to change.”
Matt Josefowicz, Managing Partner at Novarica noted that there were evolutionary and revolutionary changes facing the industry now. The evolutionary involve changes to process, product, data, and core systems. The revolutionary changes involve structural changes facing the industry.
As an example of the latter, Josefowicz cited the ability of capital markets to access risk (cat bonds would be an example). This challenges the current configuration of insurance companies, including information systems, which were set up to manage information. According to Josefowicz, the structure, including regulatory oversight,”was developed to meet an absolute necessity, and the absolute necessity that it was developed to meet is no longer there.”
If not Alignment, Then What?
Citing work by Henderson and Venkatraman, Chan and Reich write: “The business environment is constantly changing, and thus there may be no such thing as a ‘state’ of alignment. Strategic choices made by one organization frequently result in imitation by other organizations. Thus, strategic alignment is a process of change over time and continuous adaptation.”
The authors conclude that time lag is a fundamental problem with alignment theory: “given that the business environment and technology change so quickly, once an IT plan is enacted, there is a high probability that the plan and the technology are already obsolete.”
Perhaps the state of play today is such that alignment by itself is less important than facilitating communication and ensuring a robust, flexible environment which supports change. At the Analysts Panel, Chuck Johnston from Celent used the example of the introduction of Obamacare in the US which created massive change and disruption for providers of voluntary health coverage. He noted the reaction from the insurers: “people are shrugging their shoulders and saying disruption is happening, now it’s something to manage.”
What Do You Think?
We’re interested in your thoughts about alignment. Has this been a part of your strategy? Is so, how does it work for you, especially in turbulent times? If not, what do you use to link IT and business strategies?