Case study - Sunlife - https://www.itbusiness.ca/news/sun-life-chooses-aws-as-its-cloud-tech-provider/119336 Use the model of Strategy Co-Evolution to explain why the implementation of the AWS Cloud could be a driver to business strategy change
Transcribed Image Text: A Model of Strategy Co-Evolution
With IT becoming more integral to the development and delivery of business strategy, more attention is being paid to strategy development than in the past. But how exactly does IT impact strategy development?
At the highest level, a strategy is an approach to doing business. Traditionally, a competitive business strategy involves performing different activities from competitors or performing similar activities differently.
Competitive advantage accrues when these activities are difficult or expensive for others to copy. In the pre-digital world, such strategies allowed organizations to charge a premium for their products and services and/or
allowed them to grow their market advantageously. In the digital world, however, the competitive advantage derived from systems and technology is hard to defend and typically shortlived given the ease of duplication
and/or enhancement of IT systems. As a result, sustainable competitive advantage with technology alone is difficult to achieve (Teece et al. 2021).
Furthermore, changing value models and the development of integrated, cross-functional systems and applications have elevated the importance of both an enterprise and a technology strategy that span traditional lines of
business. Many participants remarked that their senior executive teams now finally understand the potential of IT to affect the top line. "IT recently added some new distribution channels, and our business has just
exploded," stated one manager. Others are finding that there is a much greater emphasis on IT's ability to grow revenues, and this is being reflected in how IT budgets are allocated and projects prioritized. "Our executives
have finally recognized that business strategy is not only enabled by IT, but that IT can present new business opportunities as well," said another manager. This is reflected in the changing position of the CIO in many
organizations over the past decade. "Today our CIO sits on the executive team and takes part in all business strategy discussions because IT has credibility," said a group member. "Our executives now want to work closely
with IT to understand the implications of technology decisions," said another. "It's not the same as it was even five years ago." Today CIOs are valued for their insight into business opportunities, their perspective across the
entire organization, and their ability to take the long view.
However, this does not mean that organizations have become good at developing strategy or at effectively integrating business and IT strategies. "There are many inconsistencies and problems with strategy development,"
said a manager. As a result, organizations have to develop new strategy-making capabilities to cope in the future competitive environment. Strategy development, therefore, must become more evolutionary, more interactive
between IT and the business, and better integrated across the organization (Swanton 2021). Within IT, strategy development must become more focused on developing the strategic capabilities that will support a variety of
changing business objectives (Teece et al. 2020). In the future, the group predicted that managers will not align business strategy and IT at particular points in time but will participate in an organic process that will address
the need to continually evolve IT and business plans in concert with each other.
Therefore, the focus of strategy development is shifting from isolated business and IT strategic planning to a much more interactive and holistic process (Cox and Rosenstein 2021). Whereas in the past business strategy
drove IT strategy, today new technologies can also create new strategic possibilities for a business. As Figure 2.1 depicts, there is no directionality within the new model of strategy co-evolution. New behaviors can be
leveraged by new strategies; new technologies can facilitate new structures, which lead to new business strategies; or new behaviors can lead to new business and technology strategies (Felin 2016). For example, one
company is enabling its employees to identify new strategic projects (Felin 2016). Another found that it needed to incorporate employee behavior in its business strategy or its new strategically important technology was
doomed to fail (Smith and Watson, 2019). Each of these "gears" must work together effectively to create new, sustainable organizational capabilities. It is thus the combination of these elements (i.e., strategy, behaviors,
structures, and technology) that together creates the new organizational capabilties that represent true strategic advantage.
Behavior
&
Structure
Strategy
Technology
New
Organizational
Capabilities
Figure 2.1 New Organizational Capabilities Are Driven by the Co-Evolution of Strategy, Technology, and Behavior/Structure
Such co-evolution is often seen when a new technology (e.g., mobility, data analytics) is applied to meet a strategic business need (e.g., improved customer engagement to increase sales). Successful execution of this
strategy (e.g., providing salespeople with mobile access about customers and basic analytic capabilities) will likely lead to its users now seeing potential new applications of technology (e.g., adding external data, acquiring
tablet-based sales presentation apps), which if adopted could give an organization a true competitive advantage (e.g., a skilled, data-driven salesforce with real-time execution).
At the same time, this strategy co-evolution model also applies at the industry level, and business and IT leaders must also pay attention to this dimension as well in their strategy development. For example, the
digitization of content (i.e., new technology) led to online sales of virtual books (i.e., new strategies), resulting in the decreasing relevance of bookstores (i.e., new behaviors) and the need for physical fulfillment (i.e., new
structures). Over time, new industry capabilities have evolved in response to these changes, such as library e-book lending, the development of e-readers, and analytically derived reading suggestions.
In both these cases, technology was the initial driving force but by itself represented only potential; it took a business strategy to articulate a value proposition and new structures and behaviors to execute it, which
together delivered the capabilities that brought something new and valuable into fruition. Thus it is the co-evolution of each of these factors that results in successful strategy that delivers business value.