Strategic Business and IT Alignment

The information technology (IT) age is now pivotal in guiding corporate operations and activities. As more and more companies see the potential for IT to open up new avenues of innovation, IT has become an essential factor in their success. One company that has shown incredible strategic insight and can serve as an inspiration is Air Canada. They have used IT to their advantage, streamlining procedures, reducing costs, and achieving great success. For example, Air Canada increased operational efficiency and made better decisions after implementing a centralized system that allowed data analysis. This real-world application of IT strategic business alignment—aligning IT and business strategies to accomplish organizational goals—shows how important it is for organizations to use IT to achieve their goals. As Turban et al. (2021) further emphasize, an organization’s capacity to attain business-IT alignment significantly impacts its performance and durability. The IT-driven success story of Air Canada serves as an example of this principle in action, drawing attention to the critical role that IT played in the company’s rise to the top and encouraging other businesses to follow suit.

The story of Air Canada exemplifies how information technology can revolutionize an industry, but it must be remembered that this change did not happen by chance. The business saw IT for what it could be: a resource and, subsequently, a creative collaborator whose strategic use could help it accomplish its purpose and mission. Nevertheless, the change took work. Workers at Air Canada were skeptical about the advantages of IT and used to more conventional ways of doing things. Therefore, the company encountered strong opposition from them. A thorough strategy for managing change and an organized approach to communicating with stakeholders was necessary to overcome this resistance. The audience of business strategists and IT experts can relate to this issue because it is similar to the difficulties many firms encounter while introducing new IT systems. Information technology was critical in Air Canada’s ability to innovate, manage operations, and reduce costs (Karimi-Alaghehband & Rivard, 2014). However, the company also faced technical challenges during the implementation, such as system integration issues and data migration complexities. Nevertheless, this change was not just about IT; it was a joint venture between IT and strategic management, and that relationship was what allowed IT to gain a competitive edge. This focus on collaboration, which encourages camaraderie and motivates the audience to join forces on their paths to transformation, brings to light the critical function of IT.

The most motivating part of Air Canada’s story is how IT has been instrumental in driving business transformation, revealing both the necessity for alignment and the potential benefits of doing so. However, it’s important to note that IT strategic alignment has risks and limitations. For instance, the rapid pace of technological advancements can make it challenging for organizations to keep up, and there’s always a risk of investing in the wrong technologies. In their 2007 article, Luftman and Kempaiah state that alignment should center on bringing IT and business in harmony, with IT serving as both a catalyst for and an enabler of business transformation. According to Karimi-Alaghehband and Rivard (2014), it is genuinely admirable that Air Canada is trying to use IT skills to accomplish the organization’s mission. By highlighting enthusiasm and new ideas, Air Canada hopes to cultivate loyalty. Competition is fierce, and the airline sector has many obstacles to expansion and profit. According to Furukawa et al. (2014), companies need to be cautious with their IT investments because of the high level of uncertainty and volatility in today’s business climate.

Adjustments to Air Canada’s Information Technology

The IT landscape of Air Canada has undergone a dramatic shift, altering the alignment of IT services with business activities. Many internal and external changes happened to the organization between 1994 and 2011. Air Canada and IBM’s partnership transitioned from being dependent to being centered around innovation and constant improvement. According to Karimi-Alaghehband and Rivard (2014), IBM took over operations for Air Canada after acquiring their systems and applications, specific equipment, and computer assets. While several suppliers provided IT services, IBM was front and center for all IT-related matters. However, it’s important to note that the success of this partnership was not solely due to IBM’s capabilities but also to Air Canada’s strategic vision and commitment to change. Air Canada prioritized reorganizing its IT department to improve involvement and collaboration across different groups. According to Karimi-Alaghehband and Rivard (2014), ineffective prioritization and coordination resulted from department officials’ failure to communicate with one another. Air Canada has discovered the IT strategy framework that supports its goals and objectives through its commitment to continual development.?

Method of Outsourcing

Air Canada’s utilization of onshore and offshore IT outsourcing tactics made several initiatives and process improvements possible. In 1994, Air Canada began to save money and concentrate on its core business activities by outsourcing its information technology to IBM. According to Karimi-Alaghehband and Rivard (2014), the decision allowed the airline to focus on its core business while cutting costs. A small management team and IT architects maintained the company’s IT standards and regulations. According to Turban et al. (2021), even if a company has all the necessary IT resources, it can still improve its customer focus and profitability by concentrating on what it does best and contracting out IT development to specialist companies. Karimi-Alaghehband and Rivard (2014) state that information technology (IT) is essential to the company’s ability to manage costs, innovate, and run operations. However, it’s crucial to consider the long-term sustainability of these strategies, as the IT landscape is constantly evolving, and what works today may be ineffective in the future.

To find a provider that might help them achieve their strategic goals and stimulate innovation, Air Canada requested proposals. The goal of the collaboration between IBM and Air Canada was to establish a system for overseeing and encouraging innovation, according to studies done by Karimi-Alaghehband and Rivard (2014). In 2000, Air Canada shifted its focus from seeing information technology as a liability to a resource that might help the company grow and prosper. The selection process involved thoroughly evaluating potential providers’ capabilities, including their technical expertise, financial stability, and track record. To offer a cutting-edge network solution that could be seamlessly integrated into the IT strategy, the company relied on Telecom’s knowledge and experience. Collaborating with Telecom, a vendor focuTelecom network services, waTelecomsince a solid IT function requires a reliable network to run smoothly.

It was around 2003 that Air Canada realized it needed to revamp its system and applicant acquisition procedure. Karimi-Alaghehband & Rivard (2014) state that to gain access to the market’s specialized, high-quality aviation products in an efficient and cost-effectively, the company implemented a multiple-vendor strategy. Air Canada’s decision to rely on industry experts bolstered the objective of working with vendors familiar with the airline industry’s ins and outs and the company’s inventive requirements. Operation SYS, the selected provider, established Air Canada’s confidence in providing sufficient industry-specific support. After realizing the burden of managing various vendors due to their continuing vendor acquisition, Air Canada sought IBM to handle all vendor application integrations. Karimi-Alaghehband and Rivard (2014) state that for IBM to integrate any new applications, regardless of age, from any vendor, the apps must be compatible with Air Canada’s preexisting information technology regulations and standards.

Organizational Shifts in the IT Sector

Air Canada found ways to reorganize the IT department for long-term organizational success and impact while working on the strategic IT vision. Cronholm and Salomonson (2014) state that, in response to rising costs, IT companies have begun to use frameworks and measurements to track, evaluate, and reorganize their operations. At Air Canada, a single point of contact in the IT department was responsible for delivering services to several business units. Karimi-Alaghehband and Rivard (2014) state that IT was seen as a stumbling block because of how slowly it responded to actual business demands. Despite Air Canada’s hopes, the centralized model failed to deliver the desired organizational benefits. The outcome was a reorganization at Air Canada that brought the IT and business divisions closer.

Decentralizing the IT department was part of the new plan to bring IT reps closer to the business and help them understand how each unit used IT. The main goal was to simplify operations inside business units and offer tailored solutions by utilizing IT expertise. To achieve this goal, the IT business representatives and vendors could coordinate their efforts on the unit-specific problems. The corporate IT department was responsible for the infrastructure, the reservation system, and any other systems that stretched across the branches since these were fundamental components that affected the company’s locations (Karimet-Alaghehband & Rivard, 2014). Problems with the new structure made it difficult for IT business representatives to communicate effectively with their counterparts in other departments. For example, according to Karimi-Alaghehband and Rivard (2014), every department needed to be more busy making apps to think about how their work would help or affect other units.

By 2010, Air Canada had adopted a new approach to turn the IT department into an esteemed collaborator where both parties could reap the benefits and share in the burdens. In this reorganized system, there was a designated representative from each department, including Customer Service, Commercials, and Operations. The responsibility of understanding the business’s needs and requirements, translating them into IT solutions that could benefit the company, meet corporate IT standards, and potentially save costs was with the directors, according to Karimi-Alaghehband and Rivard (2014). The solutions were then passed on to the vendors for implementation. Maximizing visibility into operational activities and cooperation for effective communication throughout execution were crucial goals of the strategy, which standardized enterprise IT with the branches. As part of the strategy, top executives voiced their desire to see the company’s many divisions work together more closely on IT governance.

According to Turel and Bart (2014), good governance may ensure managers put stakeholder interests first, uncover funding sources for IT projects, and make management look into neglected IT issues. Closer to home, according to Karimi-Alaghehband and Rivard (2014), Air Canada’s IT department was comprised of seven functional units. A senior director who directly reported to the Chief Information Officer (CIO) was in charge of the project management office (PMO). IT Sourcing, Transformation IT, Customer Solutions and Innovations, and Marketing and Customer Experience were all on the same floor at the corporate headquarters. The IT Customer Service, IT Commercials, and IT Operations departments were all in their organizational branches, but they worked together and coordinated their efforts.

Difficulties Faced by the Organization in 2011

Despite the numerous advantages of the new structure, the plan helped pinpoint problems that may be solved in 2011. Improving the firm’s productivity, customer relations, and innovation were among the difficulties that needed to be addressed. To overcome the challenges that come with working with numerous vendors, Air Canada implemented a multiple-vendor procurement approach (Karimeti-Alaghehband & Rivard, 2014). IT Sourcing and Transformation IT made a resolution to this problem possible. The team (Transformation IT) collaborated with IT Sourcing to develop and execute appropriate SLAs for each vendor, continuously assessed and enhanced the performance of the three most essential vendors and others as required, established and communicated corporate IT policies and standards to IBM and the business branches, and so on, all to guarantee uninterrupted service (Karimet et al., 2014).

Air Canada relied on its IT capabilities to resolve customer relations and experience challenges. Airline competitors are constantly innovating new products, and the customer Solutions and Innovations unit is at the forefront of this effort. According to Karimi-Alaghehband and Rivard (2014), the Commercials division compared Air Canada’s website to competitors to come up with revenue-generating website concepts, while the Marketing and Customer Experience unit focused on customer experience and sales since customers shopped and booked elsewhere. According to Karimi-Alaghehband and Rivard (2014), the IT operations unit transformed the operational systems to be more cost-effective. This, in turn, assisted the bidding processes that pilots and attendants use to choose their flights, which led to a considerable reduction in operating costs. According to Karimi-Alaghehband and Rivard (2014), the IT Commercials unit judged its performance by looking at how happy its commercial branch clients were with the services, systems, and solutions they had received. The IT Customer Service section contributed to Air Canada’s overall cost savings program by offering solutions derived from business analysis. Karimi-Alaghehband and Rivard (2014) reported that IT Customer Service redirected its efforts to projects with the potential to create larger-scale cost savings after implementing the Cost Transformation Program.

Air Canada IT Progression

Air Canada has developed an efficient and effective information technology (IT) infrastructure, procedures, and systems compared to its competitors. Very few companies reach Air Canada’s exceptional level of maturity, which is 5. Organizations at Level 5 have attained optimal strategic IT-business alignment, according to Luftman and Kempaiah (2007). This is done by implementing rigorous governance procedures that effortlessly integrate IT planning with strategic business planning while retaining informal linkages between the business and IT. The firm has evolved the business process through tight cooperation between business processes and IT activities. The IT department and its units demonstrated nimble and dynamic features, including adaptability, survival, and flexibility, as Karimi-Alaghehband and Rivard (2014) reported. Air Canada encountered numerous obstacles before reaching this early stage of business-IT alignment. The main problem, according to Karimi-Alaghehband and Rivard (2014), was getting the business departments to work together since they were used to working independently.

By entrusting IBM with the integrator role, Air Canada was able to take advantage of cooperation with an industry leader to develop solutions that could innovate the company while establishing good corporate governance. Karimi-Alaghehband and Rivard (2014) found that if an IBM business unit were thinking about doing something that might not align with the rules and regulations, Transformation IT would become involved. With the new structure, there was a solid foundation for business and IT alignment, even though communication was casual and IT investments were involved in the budget process to ensure correct alignment. Implementing the department’s new structure made the process simpler and improved the integration of IT with business, according to Karimi-Alaghehband and Rivard (2014). The company emphasized professional advancement opportunities across departments and enhanced employees’ educational backgrounds to achieve its goals of teamwork, mutual understanding, and productive communication. The main focus of Air Canada’s issues now is innovation and adjusting to changes in the industry.

In summary

Transformative gains have resulted from the business alignment, and Air Canada’s cooperation with IT is second to none. The strategic plan of business-IT alignment has dramatically accelerated the company’s innovation and process improvement. The goal is to motivate the academic researchers who will listen to this presentation by highlighting the strategic importance of IT to Air Canada’s performance. Karimi-Alaghehband and Rivard (2014) look at many lessons on how IT functions can help the company. Air Canada’s continuous use of new IT was the main reason that set it apart from its competitors, according to Karimi-Alaghehband and Rivard (2014). A company can gain a competitive edge by differentiating its products, services, and methods of accomplishing its objectives. According to Luse and Mennecke (2014), a company can acquire a competitive edge by developing new processes, procedures, and skills and then modifying the pace of internal operations to match or exceed the rates of change demonstrated by rivals in the same industry. Air Canada can now fly, battle, and win in any airspace because of the strategic alignment of IT with the mission and vision of the company.???

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References

Furukawa, M., Hirobayashi, S., & Misawa, T. (2014). A Study on the “Flexibility” of Information Systems (Part 3): MIS Flexibility Planning Scheme for IT/Business Strategy Alignment. International Journal of Business and Management, 9(6), Article 6. https://doi.org/10.5539/ijbm.v9n6p88

Karimi-Alaghehband, F., & Rivard, S. (2014). Air Canada: Flying High with Information Technology. Harvard Business Publishing, 12(2), 20.

Luftman, J., & Kempaiah, R. (2007). An Update on Business-It Alignment: “A Line” Has Been Drawn. MIS Quarterly Executive, 6(3), 165–177.

Luse, A., & Mennecke, B. (2014). IT can matter: Co-evolution fostering IT competitive advantage. Management Research Review: MRN, 37(6), 574–588. https://doi.org/10.1108/MRR-02-2013-0028

Theodore, J. (2014). The Importance Of Imbedding The Concept Of Continuous Development In The Formulation Of Global Strategies. International Journal of Management & Information Systems (Online), 18(2), 109.

Turban, E., Pollard, C., Wood, G.? (2021). Information Technology for Management: on-demand strategies for performance, growth, and sustainability (12th ed.). John Wiley & Sons, Inc.

Turel, O., & Bart, C. (2014). Board-level IT governance and organizational performance. European Journal of Information Systems, 23(2), 223–239. https://doi.org/10.1057/ejis.2012.61