A Strategic Framework for IT-Business Alignment in Small and Medium Enterprises Undergoing Rapid Digital Transformation

Abstract

Digital transformation (DT) is no longer a choice of competitive edge, but an existential must for Small and Medium Enterprises (SMEs). SMEs, despite significant investment in digital assets, are suffering disproportionately high rates of transformation failure (estimated to lie between 70% and 87.5%) mainly due to mismatching of information technology (IT) capabilities with core business objectives, both in terms of strategic intent and structural and cultural alignment. Classical models of IT business alignment (like Henderson and Venkatraman's Strategic Alignment Model (SAM)) are designed for the stable and legacy business environment, and lack any of the resource scarcity, structural agility, or high velocity in which most modern SME digital ecosystems operate. This paper aims to fill this gap by introducing the SME Digital Alignment Framework (SDAF), an integrated three-layered governance model.This paper aims to close this gap by proposing a three-layered integrated governance model, the SME Digital Alignment Framework (SDAF). The framework is based on a critical realism perspective and developed using the arguments of dynamic capabilities theory, which serve as three falsifiable propositions: tactical execution as a mediator and shared domain knowledge as a moderator. The paper ends with pragmatic managerial pathways and an empirical framework for testing the proposed framework in the context of industrial and digital-native small and medium sized enterprises (SMEs).

Key words : IT-Business Alignment, Digital Transformation, Small and Medium Enterprises (SMEs), Strategic Alignment Model (SAM), Governance, Agile Infrastructure.