The concept of Agility in it Governance and its Impact on Firm Performance

Abstract

With significant advancements in digital technologies, firms find themselves competing in an increasingly dynamic business environment. Therefore, the logic of business decisions is based on the agility to respond to emerging trends in a proactive way. By contrast, traditional IT governance (ITG) frameworks rely on hierarchy and standardized mechanisms to ensure better business/IT alignment. This conflict leads to a call for an ambidextrous governance, in which firms alternate between stability and agility in their ITG mechanisms. Accordingly, this research aims to explore how agility might be integrated in ITG. A quantitative research strategy is implemented to explore the impact of agility on the causal relationship among ITG, business/IT alignment, and firm performance. The results show that the integration of agile ITG mechanisms contributes significantly to the explanation of business/IT alignment. As such, firms need to develop a dual governance model powered by traditional and agile ITG mechanisms.

 

Scales

HOC: Agile ITG mechanisms
LOC Item Acronym Item Key words from literature
Agile
structures
ITG_AS1 In digitization projects, our teams are interdisciplinary. Interdisciplinary teams
ITG_AS2 For digitization projects, our teams organize themselves largely independently. Self-organized project teams
ITG_AS3 The responsibility for the development of innovations is bundled in a concentrated unit (e.g., Innovation Lab). Innovation labs
ITG_AS4 Our firm has a digital transformation steering committee to prioritize innovation initiatives. Transformation/innovation committee
ITG_AS5 Our firm has a multidisciplinary steering committee consisting of representatives of all management levels. Multidisciplinary transformation/ innovation committee
Agile
processes
ITG_AP1 In our firm, agile project and innovation methods (e.g., Scrum, DevOps) are in widespread use. Using agile practices/agile project management
ITG_AP2 Employees are encouraged to take reasonable risks (e.g., trying innovative ideas, trial, and error). Trial-and-error processes
ITG_AP3 Our firm uses change management processes to constantly optimize overall governance. Change management processes
ITG_AP4 For the development of products and features, we regularly use the principle of prototyping. Prototyping
ITG_AP5 In our firm, we conduct co-creation workshops with customers as an innovation measure. Co-creation workshops with clients
Agile
relational mechanisms
ITG_AM1 Executives in our firm treat others as individuals rather than just as a member of a group Transformational leadership
ITG_AM2 Our firm attaches great importance to continuous training of employees in the area of digital transformation to promote skills for agility. Continuous employee training/cross-functional trainings
ITG_AM3 Our communication structures are organized flat. Lean communication structures
ITG_AM4 In the digital transformation, our firm attaches great importance to the empowerment and participation of its employees. Empowerment of employees
ITG_AM5 In the digital transformation, our firm attaches importance to cooperation with start-ups to promote agility. Cooperation with start-ups

 

HOC: Traditional ITG mechanisms
LOC Item Acronym Item Key words from literature
Traditional
structures
ITG_TS1 Our company has a steering committee at the executive level responsible for determining IT development prioritization. IT steering committee
ITG_TS2 Our company has a steering committee comprised of business and IT people. IT project steering committee
ITG_TS3 CIO has a direct reporting line to the CEO and/or COO. CIO has a direct reporting line to the CEO and/or COO
ITG_TS4 CIO is a full member of the executive committee. CIO on executive committee
ITG_TS5 IT is a regular agenda item and reporting issue for the board of directors. IT strategy committee at level of board of directors
Traditional
processes
ITG_TP1 Our firm has established a formal prioritization process for IT investments in which business and IT is involved. Portfolio management
ITG_TP2 Our firm has established formal processes to control for and report upon budgets of IT. IT budget control and reporting
ITG_TP3 In our companies, we use various key performance indicators (KPIs) to measure IT performance. IT performance measurement
ITG_TP4 Our firm has established formal processes to define and update IT strategies. Strategic information systems planning
ITG_TP5 Our firm has established formal processes to govern and manage IT and digitalization projects. Project governance/management methodologies
Traditional
relational mechanisms
ITG_TM1 In our company, business and IT managers/executives have informal meetings on a regular basis. Informal meetings between business and IT executives
ITG_TM2 Internal corporate communication regularly addresses IT issues. Internal communication addressing IT on a regular basis
ITG_TM3 The CIO or similar role in our company is able to clearly articulate a vision for IT’s role in the company. IT leadership
ITG_TM4 Our executives/senior management give good examples of acting as “partners.” Executive/senior management giving the good example
ITG_TM5 In our company, specific communication mechanisms are used to improve communication between business units. Business/IT account management; Knowledge management

 

HOC: Business/IT alignment
LOC Item Acronym Item Key words from literature
Product strategic alignment ALIN_P1 Our corporation attempts to be ahead of its competitors in introducing new products. IT strategies supporting new products
ALIN_P2 Our corporation’s current systems enable it to introduce new products earlier than its competitors.
ALIN_P3 Our corporation attempts to be ahead of its competitors in offering a wide range of products. Products diversification strategies
ALIN_P4 Our corporation’s current systems enable it to diversify its products.
ALIN_P5 Our corporation attempts to be ahead of its competitors in ensuring that its products are distinctively different from those of its competitors. Differentiation strategies
Quality strategic
alignment
ALIN_P6 Our corporation’s current systems help it distinguish its products from those of its competitors.
ALIN_Q1 Our corporation attempts to be ahead of its competitors in quality of products rather than price. IT strategies supporting product quality
ALIN_Q2 Our corporation’s current systems allow the corporation to improve the quality of its products.
ALIN_Q3 Our corporation constantly improves the efficiency of its production processes. Production efficiency strategies
ALIN_Q4 Our corporation’s current systems help improve the efficiency of its production processes.
ALIN_Q5 Our corporation attempts to be ahead of its competitors in providing high-quality service to its customers. Service quality strategies
ALIN_Q6 Our corporation’s current systems enable the corporation to provide high-quality customer service.
Market strategic alignment ALIN_M1 Our corporation attempts to be ahead of its competitors in intensive marketing of its products. IT strategies supporting marketing strategies
ALIN_M2 Our corporation’s current systems enable it to intensively market its products.
ALIN_M3 Our corporation attempts to achieve growth by expanding into new markets. New market strategies
ALIN_M4 Our corporation’s current systems assist it in identifying new markets.

 

HOC: Firm performance
LOC Item Acronym Item Key words from literature
Financial
results
PERF_F1 Our corporation’s return on investment (ROI) is better than the average in the same industry. Return on investment (ROI)
PERF_F2 Our corporation’s return on equity (ROE) is better than the average in the same industry. Return on equity (ROE)
PERF_F3 Our corporation’s return on assets (ROA) is better than the average in the same industry. Return on assets (ROA)
Operational excellence PERF_O1 Our corporation has better productivity improvements than other corporations in the same industry. Productivity improvements
PERF_O2 Our corporation has a better timeline of customer service than other corporations in the same industry Timeline of customer service
PERF_O3 Our corporation has a better production cycle time than other corporations in the same industry. Production cycle time
Customer perspective PERF_C1 Customers perceive our corporation’s quality of products and services as better than that of other corporations in the same industry Quality
PERF_C2 Our corporation has higher customer satisfaction than other corporations in the same industry. Customer Satisfaction
PERF_C3 Our corporation has a better corporate image than other corporations in the same industry. Brand/Image