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Case Study: Application Of McFarlan’s Strategic Grid On EBAY

Case Study: Application Of McFarlan’s Strategic Grid On EBAY

Case Study: Application Of McFarlan’s Strategic Grid On EBAY


Andrei NECULAU The Royal Institute of Technology, Stockholm Stephanie HABIB

The Royal Institute of Technology, Stockholm

Miganoush Katrin MAGARIAN KENARAKI The Royal Institute of Technology, Stockholm Aron HENRIKSSON

The Royal Institute of Technology, Stockholm

Yuanchang Liu The Royal Institute of Technology, Stockholm Abstract Neculau, Andrei. Habib, Stephanie. Henriksson, Aron. Magarian Kenaraki, Miganoush Katrin. Liu, Yuanchang. 2009. Alignment of Business and IS/IT Strategy at Telenor Sweden. Keywords: strategic alignment, IS/IT strategy, business strategy, organizational strategy, case study, Telenor

1. Introduction

1.1. Background

The increasing employment of information technology to support business operations has been inexorable in the last few decades. The role that IT plays has, however, changed over the years: the initial sole emphasis on efficiency has shifted to strategic value creation (Pearlson & Saunders, 2006). The new role of IT as a strategic asset in providing competitive advantage requires that it be tied to business processes and, crucially, aligned with business strategy (Gray cited by (Rusu, 2009, p. 50). The increasing ubiquity of IT in organizations has led to escalating investments in IT. Effective business- IT alignment has consequently become an even more pertinent issue to business executives, as poorly planned systems may result in customer dissatisfaction, bloated production costs, and unnecessary and costly delays in supporting business needs (Rusu, 2009, p. 39). This may subsequently hamper an organization’s ability to move swiftly as a strategic player in a turbulent environment. Information technology is, however, not only an enabler of effective business strategy execution, but also a driver. It is not uncommon today for a technological innovation to propel an organization to alter its strategy in order to exploit it and so gain a competitive advantage. Regardless of the role that IT plays, it is of great significance that it is aligned with the business goals of the organization. Numerous models have been designed to assist managers in assessing the role of IT and its alignment with business in their organizations; however, as is usually the case, theoretical models do not always mirror the reality of the industry.

1.2. Research Goal

The goal of this paper is to apply the concept of strategic alignment between business and IT, and to some extent organizational design, on Telenor Sverige AB. The project thus focuses on analyzing their business and IT strategies individually, and subsequently assessing the extent to which they are aligned. The case
study aims to reveal means of promoting business-IT alignment by looking at how the process is de facto performed in the industry.

1.3. Research Methodology

Our research is a qualitative one, in the form of a case study. Four theoretical models – the Information Systems Strategy Triangle, Venkatraman’s Strategic Alignment Model, Luftman’s Strategic Alignment Maturity Model, and McFarlan’s Strategic Grid – were employed as the theoretical basis for the case study. The case study is partly based on existing papers, previous case studies and published articles; however, the most significant input came from conducting two interviews at Telenor: one with a key business manager and one with a key IT manager. Their responses form the basis of the assessment of strategic alignment at Telenor Sverige AB. The interviews were semi-structured. Some questions were sent to our interviewees beforehand according to their wishes in order to enable them to form an idea of our expectations and to prepare. For one of the interviews, some quick answers were elicited in advance, prior to the meeting – the reason being the limited time available on the day of the interview. Therefore, that interview was slightly less structured than the other, allowing the interviewee to delve deeper into questions and situations that demanded interactive deliberation.

1.4. Resources

The theory that is presented in this paper is primarily abridged from (Pearlson & Saunders, 2006) and (Luftman, Bullen, Liao, Nash, & Neumann, 2004). This literature constitutes the compulsory reading in the “Strategic Management of IT” course, given at the Royal Institute of Technology (KTH) in the spring of 2009. Our research on the strategies employed by Telenor – both the Telenor Group and Telenor Sverige AB – was pursued through the help of newspaper articles and interviews with Telenor personnel. Additionally, previous papers investigating Telenor’s operations were also consulted. Last but not least, the primary resource in delivering this case study on Telenor is the result of the two interviews that were conducted with Helene Ålander and Jesper Hedblom. Ms. Ålander is Head of Planning and Design of IT Systems, while Mr. Hedblom is Head of Product Management at the Stockholm office of Telenor Sverige AB.

1.5. Limitations

The primary concession is the result of the limited amount of time that was available for this project. As part of the “Strategic Management of IT” course given by the Royal Institute of Technology (KTH), the authors had a time frame of only five weeks. After building the team, finding a company for the case study, and securing the interviews, there was precious little time left for conducting background research, preparing questions, and – most importantly of all – conducting the analysis. Secondly, the case study is primarily based on the input of two top managers of Telenor Sverige AB. While the knowledge and insight that they kindly shared was undoubtedly valuable, a more comprehensive case study would have necessitated interviews with more employees – and at varying echelons of the organization. That would surely have consolidated, or perhaps even altered, the findings of the research. Having more readily access to project portfolios and financial figures, such as budget distribution, would also have greatly facilitated our research and led to the drawing of more accurate conclusions.

1.6. Target Audience

This paper is primarily targeted towards providing another case study of business-IT alignment, and it is thus beneficial to the research community and the industry alike. Telenor Sverige AB is not only an important player in the Swedish market, but the Telenor Group is also the predominant group in Scandinavia and one of the major telecommunication groups in the world (Telenor Sverige AB, 2009). That makes this case study even more significant as a source of how the process of aligning business and IT is being managed in today’s increasingly information driven world of business. Furthermore, hopefully this paper can, to some extent, prove useful for Telenor Sverige AB as an external assessment of the level of cooperation between business and IS/IT, or better said between product management and the architectural level in this case. Perhaps the evaluation can provide some indications of what needs to be done in order to promote further the never ceasing process of aligning business and IT.

2. Telenor Sverige AB

2.1 Background

Over 150 years of experience in the telecom industry have led Telenor to its position today as the 7th largest mobile operator in the world. Behind its success is a long story of development, innovation, ambition and strategy. Today, Telenor operates in 12 countries across Europe and Asia, with more than 38,800 employees and 164 million subscriptions. The company offers a wide range of services to private customers and businesses alike, such as mobile and fixed line services, broadcasting, satellite communication, Internet and broadband, as well as other telecom-related services (Telenor Group, 2009). A critical milestone in the company’s history occurred in the year 2000 when Telenor became partially privatized and listed in the stock market, after being government owned for more than 100 years. The need for privatization became even more pertinent after the failed merger between Telenor and the Swedish operator Telia in 1999. In fact, at that time, the status of the two companies as government owned strongly participated in the conflicts between the respective management groups, which led to the termination of the merger within only two months of its formation (Schmid & Daniel, 2009). Telenor Sverige AB established itself as a mobile operator in 2005 when it acquired the third largest carrier in Sweden, Vodafone Sverige. Prior to that, Vodafone had in turn acquired the Europolitan operator (Telenor Sverige AB, 2009). Telenor’s acquisition of Vodafone promoted it as a major player and competitor in the Swedish telecom industry. Moreover, having a good financial status, Telenor Sverige AB adopted an extensive acquisition strategy between 2005 and 2007, which was reflected by its purchase of two Internet service providers: GlocalNet and Bredbandsbolaget. In addition to that, the company includes the television distributor Canal Digital. Through its multiple brands and its wide service portfolio, Telenor Sverige AB has reached its position as the 3rd largest mobile operator and the 2nd largest provider of broadband services in Sweden (Telenor Group, 2009). In addition to its acquisition strategy, Telenor Sverige AB has built several alliances that enhanced its status and promoted its development. For example, its agreement with DaimlerChrysler Services Fleetboard consists of equipping a large number of European trucks with SIM cards from Telenor, allowing them to communicate over the mobile network. This has effectively confirmed Telenor’s leadership in the Machine-to-Machine (M2M) business (Telenor Group, 2009). Another measure taken by the company is to contract Ericsson to integrate its IMS-based Business Communication Suite (BCS) in Telenor’s own IMS network, allowing efficient mobile unified communication for business users (Telenor Group, 2009). Furthermore, Telenor Sverige AB has signed a partnership agreement with Finnish telecom company Elisa that involves common development, marketing and support of solutions to large and medium-sized companies in the Nordic market. This agreement entails a common and single contact point for the customers of the two companies, as well as a common business solution in the Nordic region (Telenor Group, 2009).

2.2 Business Strategy

Today, Telenor builds its business strategies around a set of core values, namely simplicity, inspiration, respect and honesty, as well as its vision: “we’re here to help”. However, as the telecom industry becomes more and more competitive, Telenor needs to take into account several challenges when establishing its business strategies, such as maturing markets, financial instability, pricing pressure, and regulatory issues. Besides the external challenges, the company faces internal challenges, mostly correlated with the continuous changes in the corporate structure resulting from mergers, acquisitions, and expansions. In fact, it has been difficult for Telenor to strike the right balance between centralization and decentralization of its management structure due to the interdependencies between its units and the complexity of its business, which also affects its business strategies (Telenor Group, 2009). Telenor has defined a set of objectives and goals that it wants to achieve within the next two years. The fundamental objective is formulated as:

“By 2011, we aim to be one of the fastest growing mobile operators in the world, with a strong broadband position in all markets, successfully developing new services and adopting new and responsible business models.” (Telenor Group, 2009)

As for its goals, Telenor aims first to increase its profits mostly from existing businesses and by expanding to new markets, as well as by focusing on emerging fields such as M2M communication. Another measure that will be taken to increase profit is to adopt benchmarking and best practice sharing within the company, which would help reduce costs and improve cash flow operations. The company also seeks to strengthen the performance culture within the group by promoting decentralized management, combined with a common and shared governance model, which takes advantage of both local approach and global expertise. Furthermore, Telenor has been an active force in fighting climate change as it considers environmental awareness to be a responsibility, but also beneficial to the company in terms of energy saving and limitation of risks. Another key goal for the company is to offer outstanding and unique customer experience by prioritizing the customers’ needs and being able to satisfy them. In addition to customer satisfaction, Telenor aims to achieve a competitive advantage by focusing on innovation and promoting change and renewal; in fact, the company is currently targeting five main areas of innovation: broadband outside the Nordic region, M2M communication, financial services, partner- driven innovation, and solutions for the climate change (Telenor Group, 2009).

2.3 IS/IT Strategy

As previously mentioned, Telenor has undergone several drastic changes in its organization and business strategies after its privatization in 2000. These changes were accompanied by specific IT strategies that were implemented to assist and support the company’s metamorphosis. In fact, during 2001 Telenor realized that it needs to establish a collaborating and innovative workspace as new markets were entered, new services were provided, and clearly new ways of doing business were adopted. Among the measures taken were the implementation and adoption of an e-learning platform that consisted of twelve modules covering different topics such as “ICT solutions” and “new ways of working”. The learning program was mandatory and identical for all employees. The motive behind the e-learning system was to gain competitive advantage by acquiring new skills and knowledge in a faster and more efficient way than its competitors. In addition, the e-learning project was intended to contribute to the transformation of the company from a hierarchical organization to a more decentralized organization (Netteland, Wasson, & Mørch, 2007). Furthermore, Telenor realized the importance of adopting information sharing to support its expansion strategy. In fact, information sharing helped realize several business goals such as the rapid development of new opportunities, the expansion to new markets, and the consolidation of internal and external value networks. Several tools have been adopted over the years to facilitate information sharing, such as

Microsoft SharePoint, Live Meeting, and Confluence. This has induced a stronger synergy among the group, considerable cost reductions, and an opportunity for more innovation (Allee & Taug, 2006). Another important issue that Telenor faced throughout its expansion strategy was the lack of automation in its business processes, such as ordering and billing. The problem became evident when the company decided to work with many sub-contractors, as a result of increased competition on cost reduction. With multiple sub-contractors to work with, Telenor could not any longer afford to do the transactions manually, and turned to the business process management solution, TIBCO, to automate the process of case-specific distribution of orders to the most appropriate subcontractor (TIBCO Software, 2007). The benefits of this strategy were demonstrated by a 47% ROI over one year and savings of 7.59 million USD.

3. Application of Information Systems Strategy Triangle on Telenor As was mentioned before, Telenor adopted a wide expansion strategy between 2005 and 2007, which resulted in the acquisition of four different companies. This business strategy drove changes in the organizational strategy of Telenor as it has undergone several reorganizations. According to Hedblom (Interview on the Business-IT Alignment at Telenor Sverige AB, 2009), in the fall of 2008 the company also merged the business and customer sides, which resulted in even more changes in the organization of the company. On the other hand, the mergers also had a significant impact on IT, as the newly reorganized organizational structure necessitated unified and shared IT tools. For example, Telenor needed to have one point of contact with its customers in terms of billing and support, which would represent the various brands of the company. According to Hedblom (Interview on the Business-IT Alignment at Telenor Sverige AB, 2009), initially there were three different billing setups, of which two covered the fixed services provided by Bredbandsbolaget and GlocalNet, and one covered the mobile side. After the merger, a large-scale billing migration project was needed and thus promptly implemented by the IT department. Furthermore, since the mergers, the company has been facing the problem of having its computers connected to three different LANs. As Hedblom (Interview on the Business-IT Alignment at Telenor Sverige AB, 2009) explains, the employees are not able to connect to their desktops from remote locations within the company since the computers are configured to one of Bredbandsbolaget, GlocalNet or Telenor, with varying access to resources. Another problem is that the e-mail servers are still separated among the three companies, which means that the employees can only share Outlook calendars with people on the same LAN. To tackle to those issues, the IT department is implementing several projects to unify the company’s infrastructure. The above examples provide demonstrations of instances where Telenor has been successful in harmonizing its various strategies. The mergers were the result of a business opportunity that was exploited according to the dictates of the company’s business strategy. The merging of companies necessitated restructuring of the organizational design – an issue of organizational strategy. To facilitate these organizational changes, changes to the IT strategy, and subsequently to the IT infrastructure, were needed. The IT department has thus, in turn, decided to launch several projects to unify the merged organizations’ infrastructures. Such initiatives clearly promote the alignment between business and IT strategies. Having presented some cases where the ISS triangle has been balanced, we now turn to examining a reverse situation. One of the business strategies that Telenor employs to subdue competition is speed. In fact, as Hedblom (Interview on the Business-IT Alignment at Telenor Sverige AB, 2009) presents it, the time to market of a product or service needs to adhere to the assigned deadline for the project in order for the company to retain its competitive advantage and satisfy its customers. However, Hedblom sees a problem with Telenor’s mobile services, as the IT department is unable to handle all projects adequately and needs to rely on consultants at some stage. As a result, a certain project’s delay becomes unacceptable, and the company cannot market the product or service as fast as it would like to, which effectively hampers its ability to achieve a competitive advantage. Thus, in this particular case there is an

obvious misalignment between business and IT strategies. This misalignment is currently of priority zero for Telenor (Hedblom, Interview on the Business-IT Alignment at Telenor Sverige AB, 2009).

4. Application of Venkatraman’s Strategic Alignment Model on Telenor

4.1 Strategic Fit In terms of business scope, Telenor Sverige AB offers a wide portfolio of services that are adapted for its corporate and private customers in Sweden. These services have mostly started out in smaller companies that were later acquired by Telenor. As a result, the company itself has a different market positioning for each type of service. According to Hedblom, Telenor is “struggling to find its unique position in the marketplace” (Hedblom, Interview on the Business-IT Alignment at Telenor Sverige AB, 2009), in contrast to its main competitors – Telia, Tele2 and 3 – that already have clearly defined positions. However, each of Telenor’s subsidiaries has a more clearly defined market position in relation to its competitors. For example, Bredbandsbolaget had attained product leadership by establishing itself as the highest broadband speed provider. Today, speed is no longer exclusive for Bredbandsbolaget, as competitors have imitated this strategy and are able to provide the similar speeds to their customers. Therefore, Bredbandsbolaget is now defending its position in the market by offering new ways and new functionalities for broadband that the customers can have (Hedblom, Interview on the Business-IT Alignment at Telenor Sverige AB, 2009). Another important thing to mention is that Telenor has for some time been focusing on M2M services, and has managed to achieve a strong position in that domain. M2M and telematics are a major part of the company’s processes, and have empowered the governance of Telenor through alliances with other big companies. For example, the company has established an agreement with DaimlerChrysler, which consists of implementing an M2M network between European trucks through SIM cards provided by Telenor (Telenor Group, 2009). As for the strategic fit between Telenor’s business strategy and its organizational strategy, the actual structure of the company must be observed. In fact, Telenor Sweden belongs to the Telenor Group, but – as other subsidiaries – the company has its own management group that can be closely associated with a geographic organization. Moreover, Telenor Sweden has acquired and encompasses several subsidiaries, which initially had their own organizational structures that were rather decentralized. However, as the company is fighting to achieve a strong position in the market, it needed to reduce its costs and to provide a unified point of contact with its customers. As a consequence, Telenor has undergone several reorganizations, with the biggest occurring in the fall of 2008 (Hedblom, Interview on the Business-IT Alignment at Telenor Sverige AB, 2009). This change in organizational design was mainly motivated by the need to align the business with the organizational and administrative structures, and thus achieve a strategic fit that would help the company gain competitive advantage. Innovative and business-aligned IT strategies will create competitive advantages for the organization. Implementing fast and timely strategic fit between IT strategy and IT infrastructure is a challenge for most of companies, including Telenor. In implementing its e-learning system, for instance, one of Telenor’s main challenges resulted from slow changes to the needed infrastructure in order for employees to be able to start working on the system (Netteland, Wasson, & Mørch, 2007).

4.2 Functional Integration At Telenor, in terms of functional integration, IT is primarily seen as an enabler, and to some extent a driver, of business processes and strategy execution (Ålander, 2009). In the following section, the functional integration between IT and business, both in the external domain – i.e. the alignment between business strategy and IT strategy – and the internal domain – the support provided by the IT infrastructure to the organizational structure – is described along with its implications. As IT is primarily employed as an enabler, IT will be used as the starting point to see how it supports the analogous components on the business side.

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