Information technology (IT) plays a major role in today’s companies. Although, in most firms IT does not generate the core customer value itself, it rather supports creating additional customer value or enables cost efficiency of business processes. This is why IT departments are viewed in most cases as service centres of companies, providing a defined set of services for as low costs as possible. But, service centres should still strive to provide only these services which are necessary for supporting the company’s strategy. In the beginning of information technology, IT departments defined the quality and quantity of services provided for the firm. Also, innovations concerning IT, evolved mostly within the IT department. This was because only IT-staff has known the range of possibilities IT was able to offer. A major problem of the IT department defining the quality of service was that many improvements have been made for the sake of IT only and have not been aligned to the strategy of the company. Therefore, many resources of a company have been wasted in IT departments. However, for today’s businesses it is essential that IT enables only corporate strategies in order to remain effective.
Caused by the current financial crisis, uncertain times for businesses are expected. This makes strategy alignment and execution of IT departments even more significant in order to stay efficient and effective. But, a recent survey carried out by McKinsey & Company shows that there are still enormous potentials for improving the performance of IT departments. For example the survey shows that the basic services are met quite well by many IT departments, but the big challenges for supporting the business, still remain. Also, 67% of all respondents of the survey (chief information officers and senior executives) think that the business and IT strategy are not tightly integrated in their company. (cf. McKinsey 2008)
Consequently, strategy alignment of business and IT as well as strategy execution are not simple tasks. Processes which are supporting the strategy effectively have to be defined and controlled constantly. Controlling tangible assets, which affect the strategy, might turn out to be fairly complex, controlling intangible assets is even more difficult. [...]
Table of Contents
1 Introduction
2 Problem definition
2.1 Introduction to IT organisations
2.1.1 Structure of the examined IT department
2.1.2 Processes of the IT department
2.2 Existing management ratios
2.3 Goal of the thesis
3 The Balanced Scorecard (BSC)
3.1 BSC Fundamentals
3.1.1 Financial Perspective
3.1.2 Customer Perspective
3.1.3 Internal Perspective
3.1.4 Learning and Innovation Perspective
3.2 The BSC as Strategic Management System
3.2.1 Translating the Vision
3.2.2 Communicating and Linking
3.2.3 Business Planning
3.2.4 Feedback and Learning
3.3 Strategy Maps
3.4 Implementation of a BSC
3.5 Summary of BSC advantages
3.6 BSC criticism
4 Alternatives to the BSC
4.1 Gälweiler’s Strategic Navigation System
4.1.1 Comparison to the BSC
4.2 Stakeholder Scorecard
4.2.1 Architecture
4.2.2 Criticism
5 The IT BSC
5.1 Model of Kütz
5.1.1 Perspectives
5.2 Model of Schmid-Kleemann
5.2.1 Perspectives
5.2.2 Strategy Map
5.3 Symons’s IT Strategy Maps
5.3.1 Perspectives
5.3.2 Strategy Map
5.4 Conclusion on IT-BSC models
5.5 Alignment to corporate BSC
5.5.1 Definition of the IT strategy
5.5.2 IT functions within the corporate BSC
6 Implementation of the IT BSC for the IT department examined
6.1 Decision
6.2 Implementation
6.2.1 Mission statement
6.2.2 Vision statement
6.2.3 IT Strategy
6.2.4 Strategy Map
6.2.5 The IT BSC
6.2.6 Finishing the Implementation
7 Conclusions
7.1 Results
7.2 Further Improvements
8 References
Appendix A – The IT Strategy Map
Objective and Research Focus
The primary objective of this thesis is to provide a comprehensive overview of the latest developments regarding the Balanced Scorecard (BSC) framework and to demonstrate how it can be specifically tailored for use within an IT department. The central research question addresses how IT performance and strategy execution can be improved by aligning IT objectives with the broader corporate strategy through a systematic Balanced Scorecard implementation.
- Theoretical analysis of the Balanced Scorecard and its evolution into a strategic management system.
- Evaluation of existing IT-BSC models, including approaches by Kütz, Schmid-Kleemann, and Symons.
- Comprehensive SWOT analysis of an IT department within a major Austrian retailer.
- Development of a strategy map and specific performance measures for the IT department.
- Alignment of IT processes and infrastructure with corporate business objectives.
Excerpt from the Book
6.2.3.1 Internal success factors
The success factors for examining the strengths and weaknesses of the IT department are defined with the use of Schmid-Kleemann’s BSC perspectives. This is because these perspectives are defined specifically for IT departments and provide a helpful set of department internal strategic considerations. Hence following success factors were determined: costs, customer orientation, reliability of IT systems, IT architecture, IT infrastructure, IT processes and employees.
The costs spent by an IT department is definitely the most important key success factor, because IT is in most cases not the business itself and rather a means of carrying out the business. Thus, a simple economic equation could be used: when having a defined set of IT services, the lower the costs, the better the profit margin of the company. In order to improve the cost structure, costs have to be transparent. This means, that in an ideal case, for each service and for each part of each service the exact costs should be known. Since many services performed in an IT department, are carried out with projects, this is a very difficult goal to achieve. The difficulty exists, because employees have to record their working time exactly corresponding to each project. Thus, the level of cost accuracy must be defined in order that employees stay efficient and do not have to much administrative work.
The internal customer orientation is the second most important success factor for an IT department. For the IT department internal customers are mainly IT users and IT project sponsors. The reason for the importance of customer orientation is that each of the other success factors finally influences customer orientation, directly or indirectly. Also, a good customer relationship is the basis for a long-term success of an IT department, because only a satisfied customer will again order services from the IT department at the long term. Unsatisfied customers on contrary will try to change to another supplier of services or they will simply escalate problems to the next higher authority within a company.
Summary of Chapters
1 Introduction: Provides an overview of the importance of IT in modern business and the necessity for aligning IT strategy with corporate goals.
2 Problem definition: Analyzes the specific organizational structure and current performance measurement limitations within the examined IT department.
3 The Balanced Scorecard (BSC): Discusses the fundamental principles of the BSC and its application as a strategic management tool.
4 Alternatives to the BSC: Evaluates alternative management models like Gälweiler’s Strategic Navigation System and the Stakeholder Scorecard.
5 The IT BSC: Explores and compares specific IT-related Balanced Scorecard models developed by Kütz, Schmid-Kleemann, and Symons.
6 Implementation of the IT BSC for the IT department examined: Details the practical step-by-step implementation, including SWOT analysis, strategy formulation, and development of a custom strategy map.
7 Conclusions: Summarizes findings and suggests potential future improvements for the IT-BSC framework.
Keywords
Balanced Scorecard, IT-BSC, Strategic Management, IT Strategy, Strategy Map, Performance Measurement, IT Governance, SWOT Analysis, IT Infrastructure, Cost Management, Process Optimization, Customer Satisfaction, Organizational Alignment, Key Performance Indicators, Innovation Management.
Frequently Asked Questions
What is the core focus of this thesis?
This work focuses on the implementation of a Balanced Scorecard (BSC) within an IT department to improve strategic alignment and performance measurement.
What are the primary thematic areas covered?
The thesis covers IT organizational structures, existing management ratios, BSC theory, alternatives to the BSC, IT-specific BSC models, and the practical application of these concepts.
What is the main goal of this research?
The goals are to provide a thorough overview of current BSC findings for IT and to develop a tailored Balanced Scorecard for the specific IT department of an Austrian retailer.
Which methodologies are employed in the study?
The research uses theoretical literature analysis of management frameworks and a practical SWOT analysis to derive strategic approaches for the IT department.
What topics are discussed in the main part?
The main part examines BSC fundamentals, strategy maps, comparisons of existing IT-BSC models, and the detailed implementation steps including mission and vision formulation.
Which keywords best describe this work?
Key terms include Balanced Scorecard, IT strategy, strategic management, performance measurement, and SWOT analysis.
How is the IT department structured in the case study?
The IT department consists of three primary subdivisions: Operations and Service Management, Technology Management, and Application Management.
Why was the Balanced Scorecard chosen over other models?
The BSC was chosen because it is a broadly recognized and approved tool that facilitates better strategy communication and alignment, even if it requires careful implementation.
What is the significance of the strategy map for the IT department?
The strategy map visualizes cause-and-effect relationships between strategic objectives, helping to align internal IT processes with the goal of cost leadership and business expansion.
What role do external factors play in the IT strategy?
External factors such as the current financial crisis, technological advancements, and the European expansion are critical drivers that the IT department must address to remain effective and efficient.
- Citar trabajo
- DI, MBA Peter Hirschbichler (Autor), 2009, Implementation of an IT Balanced Scorecard, Múnich, GRIN Verlag, https://www.grin.com/document/165294
