3. Literature Review
In this section, the research project is placed in the context of other relevant work. This
section aims to explore the themes that occur in the literature and determine any gaps in
existing research before identifying a suitable design and data collection method for the
planned study.
3.1. IT and Business Alignment
IT alignment continues to be an important theme in the Information Systems (IS) literature,
in part because it has been shown to have a positive impact on firms’ performance (Gerow,
Grover, Thatcher and Roth, 2014; Coltman et al., 2015; Renaud, Walsh and Kalika, 2016).
These studies are noteworthy as they provide important insights into how improved IT and
business alignment can support further digitalisation in traditional firms.
There are a number of definitions of ‘alignment’ in the literature. Some have focused on
the fit between business and IT strategy. Henderson and Venkatraman (1993) expand on
this definition, highlighting alignment in the context of fit and integration not only between
business and IT strategy, but also between business and IT infrastructure and processes.
The work of Tallon (2008) expands the definition further to include the value of strategy-
resource alignment in addition to business and IT processes. This ‘black box’ relationship
between all components is an important source of a firm’s competitive advantage.
The digital transformation, has encouraged firms to reflect on and develop a ‘digital
strategy’. Unlike the traditional view that considers information systems and business as
two distinct structures, digital strategy recognises the fundamental role that IT plays
throughout the organisation and ensures that IT strategy is integrated with business
strategy (Yeow, Soh and Hansen 2017). The complexity and constantly changing nature of
business and technology suggest that digital strategy is iterative and is influenced by
evolving organisational capabilities (Galliers, 2011).
These theories have nonetheless been received with criticism that question how IT
alignment under these constantly evolving conditions can successfully be achieved. Critics
9
therefore call for a shift of focus to incorporate the process or alignment rather than
focusing on alignment only. In the words of (Yeow, Soh and Hansen, 2017: 2),
“Alignment is not an event nor an end state, but rather a journey of continuous adaptation
and change”. This is supported by the work of Mithas, Tafti and Mitchell (2013) from
whom we learn that in the context of digital strategy constant ‘dynamic synchronisation’ is
needed between business and IT to ensure a competitive advantage. Other relevant work
concludes that strategy is implemented via a series of processes that occur over time.
Earlier research has identified two broad patterns in the way that firms align their business
and IT strategies (Yeow, Soh and Hansen, 2017). In the first, Rondinelli, Rosen and Drori
(2001) refer to a continuous, incremental adjustment of business, IT strategy and resources.
A useful example of this is highlighted in the work of Hirscheim and Sabherwal (2001)
who show that firms may adjust their business strategy, IT roles, sourcing activity and
structure over time. These changes, however, were not necessarily always in the direction
of alignment. More recent work describing this incremental shift has indicated that the
evolving processes are not only due to top-down direction but are also influenced by new
bottom-up processes.
The second pattern highlighted in the literature is referred to as ‘punctuated equilibrium’.
Organisations that exhibit this pattern typically undergo long periods of incremental
adjustment with sudden bouts of extreme change. Similar to the incremental approach,
punctuated equilibrium is not a forward direction of change with an end state in mind
(Sabherwal, Hirschheim and Goles, 2001).
The understanding of how firms should align business and IT has been refined and
improved as the literature has developed. In the early literature, it was acknowledged
simply that business and IT should align. As understanding developed, the focus shifted to
the role of resources in the relationship between business and IT strategy and their effect
on a firm’s competitive advantage. Finally, the emphasis shifted to a continuous, iterative
process of alignment rather than a final end-state. The focus on process has allowed for a
more holistic framework that incorporates incremental and ‘punctuated equilibrium’
patterns of development as well as the understanding that change is not solely at the level
of business and IT strategy, but also at the resource-level.
10
Prior research reminds us that aligning can be a difficult task to fulfil successfully (Benbya
and McKelvey, 2006). The work of Hirscheim and Sabherwal’s (2001) suggests that
organisations are faced with organisational inertia, split responsibilities and an
underestimation of problems in their aligning activity. Further, an organisation’s past
investments in business and IT resources and processes may come to create path
dependency, making it challenging for an organisation to develop new resources and
processes to support the required changes in their strategy (). Other scholars have also
noted that strategic alignment is often confronted by the tension between the formal, top-
down approach that exploits existing resources and plans, and the informal, improvised
approach that takes advantage of emerging opportunities and resources at hand (). Viewed
holistically, there is a paradox of alignment. Paradoxes – elements that seem logical
individually, but inconsistent when juxtaposed – give rise to contradictory demands or
tensions (). Indeed, some firms might resort to resolving this tension by taking an either/or
approach. However, research strongly advocates a both/and approach. This approach
demands acceptance, learning to live with the paradox and appreciating the differences as
an opportunity for creative solutions.
In response to this perspective, the work of Yeow, Soh and Hansen (2017) presents a new
approach, claiming that organisations with dynamic capabilities are more likely to have a
greater acceptance of paradoxical tensions. Their work builds on that of Smith and Lewis,
(2011). This is an important research outcome on IT alignment. In particular because the
dynamic capabilities approach is concerned with strategic change which is also the core
focus of IT alignment research. It helps to provide a toolbox enabling organisations to
change or adjust their resources and strategy in order to adapt to a changing environment.
The dynamic capabilities approach has emerged from the Resource Based View of the firm
and is largely concerned with the processes on which firms rely to change. This includes
not only their resources, but also their products and services. The dynamic capabilities
approach was first introduced by Teece, Pisano and Shuen (1997: 516). Together they
defined dynamic capabilities as “[a] firm’s ability to integrate, build, and reconfigure
internal and external competencies to address rapidly changing environments”. In this way,
the dynamic capabilities approach is linked to the organisation’s capacity to effectively
11
sense, seize and transform. More recently, leading scholars of the dynamic capabilities
approach have defined dynamic capabilities in more general terms such as “the capacity of
an organisation to purposefully create, extend, and modify its resource base” (Helfat et al.,
2007: 4).
The research presented here has produced well-understood IT-Business alignment concepts
that help us to comprehend the process of aligning functional IT with business strategy,
both on the intellectual as well as the social level (Henderson and Venkatraman, 1993;
Reich and Benbasat, 2000). Yet, alignment between the split of CDO role is less
understood.
3.2. The Chief Digital Officer
The literature references the roles of CDO, CIO and CTO, but the specificities of the roles
continue to be poorly defined. Further, in practice firms seldomly have even one of these
roles in place. For the purpose of this study, these terms are therefore collectively referred
to as CDO.
Through its evolution, the role of CDO has been associated with significant pressure,
reflecting the constantly changing role expectations, the advent of new technologies, and
other significant changes in the business environment (Haffke, Kalgovas and Benlian,
2016). There are many sources of uncertainty for CDOs, for example, poorly performing or
risky projects, outsourcing challenges and, more recently, information security
(Kappelman, McKeeman and Zhang, 2006). While charged by other top management team
members with pursuing strategic objectives, the CDO often reports to the Chief Financial
Officer (CFO) and has a focus on containing costs. This limitation can create significant
barriers for CDOs attempting to fulfil strategic expectations (Muse 2016). Simultaneously,
CDOs often compete with other company officers for the funding needed to complete their
projects. However, in many firms a history of failed IT-related projects results in little
commitment from the board to fund IT projects (Enns et al. 2011). Moreover, CDOs often
do not understand the IT function and its importance to business strategy and are thus
unsuccessful in formulating value-adding strategies.
12
In light of the pressure to achieve both effective supply-side leadership and demand-side
leadership, recent research predicts a bifurcation of the CDO role. This categorisation is
based on the notion that IT can change business both internally and externally, leading to
both operational efficiency and business innovation. Demand-side leadership therefore
explores IT-enabled innovations and strategic opportunities for the company in light of the
constantly changing environment. They focus on responding faster to changing business
needs by helping businesses to innovate through its use of technology. Supply-side
practitioner tasks, on the other hand, tend to be internally focused on managing the IT
function and delivering cost-efficient support. In practice then, one role of the CDO would
encompass the traditional focus of an ‘IT Manager’ and the other role would look to enable
strategy, process and information innovations specifically. Along these same lines,
Peppard et al. (2011) envision the CDO position reverting back to the original technical
view of the role, while other business executives assume ownership of overseeing the use
of IT for innovation and strategic differentiation.
The theory of CDO ambidexterity, on the other hand, suggests that CDOs can master both
supply-side and demand-side leadership effectively (Gibson and Birkinshaw 2004).
Ambidexterity is conceptualised as the ability to balance competing objectives, typically
exploration and exploitation. In this context, exploration is associated with search,
variation, risk taking, experimentation, play, flexibility, discovery and innovation while
exploitation is associated with refinement, choice, and production.
Although the position of the CDO has received significant attention from practitioners,
academic research in this field nevertheless remains limited. There is still confusion about
what the CDO is expected to achieve, what their responsibilities are and how they can
collaborate with other members of the organisation. Yet, it remains of great interest for
firms to understand how they can deploy the role of the CDO to embrace the opportunities
presented by digital technologies (Haffke, Kalgovas and Benlian, 2016). In their research,
Horlacher and Hess (2016) address this issue by providing first insights into the role and
managerial tasks of the CDO across different industries. Overall, their findings present that
CDOs serve as catalysts for change in the companies that they work for. The work of
Fritzgerald et al., ( :2) confirms this, commenting that a large number of executives and
13
managers find that “the pace of [technological] change in their organisation is […] slow”
and that cross-department authority for digital initiatives is a means by which companies
can easily overcome this issue effectively. This authority includes:
(1) taking on the strategic aspects of the digital transformation, devising and
implementing digital strategies as entrepreneurs and;
(2) the communicational aspects, countering cultural resistance in their companies
as spokespersons and leaders.
In this view, the strategic and communicational aspects of the transformation process fall
solely within the remit of the CDO, the CDO is not responsible for the technical aspects of
the digital transformation. This is most likely due to the fact that CDOs can often easily
collaborate with other IT professionals, either internally or externally, who are able to take
on the technical aspects. This may even be assumed by the CTO or CIO, if these roles
exist. This bifurcation of tasks highlights that the areas of responsibilities arising through
the digital transformation seem to have reached a level of complexity that makes it difficult
for one person to assume alone. Accordingly, Horlacher and Hess (2016) comment that
CDOs and their respective peers should clearly distinguish between their roles
responsibilities. This is important in ensuring that a clear trace of ownership exists and the
CDO and their peers can be held accountable for tasks.
CDO leadership is based on collaboration and openness. It starts with recognizing that a
CDO cannot digitise their company on their own. Chief Digital Officers have to
understand that they are part of an ecosystem – including both internal and external
resources. The digital transformation requires CDOs to give up control and design for
velocity and scale that can be readily implemented across the workforce and new work
structures that have come to exist alongside the digital transformation.