Strategic alignment in a digital world: The Copula analogy

Information technology and business strategy as one – so painstakingly obvious yet so elusive for management teams and board members alike. In Greek leadership fora the debate continues on whether systemic banks could accelerate their digital transformation. Domestic aging industry needs to up its tech game. The strategic failures of Praxia Bank, cyber-attacks of the Greek Postal Service company, outages of exchanges and payment systems, and a plethora of other cases across sectors should be thwarted by importing better practices.

How does a company survive evolutionary threats with legacy stuff – people, processes, technology, materials – even if committed to digital transformation? After all the consultant said it is necessary.  Execution eats strategy for breakfast, but how rare is it to find a veteran bionic business technologist scientist financier to do it all?

Do we integrate IT and business decisions sequentially or in parallel? Is this enigma more complex than it sounds?  As I sit in a FTSE 250 bank board room contemplating how we have successfully navigated our corporate strategy alignment, I reflect on the younger smarter version of me enthusiastically using complex techniques to solve real life problems.  Are there similarities to trading exotic derivatives where unrelated quantities had to be concurrently assessed? Back then, advanced models were deployed to value and hedge hybrid securities while also providing vital information to shape the recovery course of action for that ghastly tail event..  Statistics and probability theory helped us design complex methods to simplify delusive problems.

Boards attempt to master business and IT strategy through agile teams, consultants, and best practices. During annual strategy days, one executive team presents after the other while gracefully concealing competitive tensions.  It all so often looks perfectly well thought through – until it’s not!  Experience dictates that performance driven boards desperately need a framework sophisticated enough to jointly optimize long term strategic trajectory and short term tactical recalibration.

Reflecting on the conundrum, business and IT Strategy cannot be viewed as independent, orthogonal dimensions, but as intertwined variables. Each has its own distribution—corporate drives growth, innovation, market entry; IT focuses on infrastructure, data, digital enablement. The integration of the two addresses missed market opportunities, calibrated time to market for new products, adaptivity to industry disruptive forces, operational resilience, growth acceleration to name a few.

But what matters most is how these strategies develop together. To untangle this problem I reflect on the possibility to model them through a multivariate cumulative distribution function also known as Copula.

Let’s tone this down a notch. A copula is a mathematical function that connects two or more marginals to form a joint distribution, capturing how their outcomes are structurally dependent, not just statistically correlated.

In my analogy, corporate and IT strategy are the two marginal distributions.  Copula represents the alignment mechanisms which in practical terms means shared planning cycles, governance structures, tech-enabled business models. Business fundamentals that ensure corporate and IT strategies are not drifting apart, but evolving in sync. You don’t design a customer journey and then call in the tech agile team to automate steps towards digital transformation. Unless you have appetite for digital spaghetti – otherwise inefficient processes. Rather technology is part of the language that articulates the very process, its marketing, new product design, and the customer journey.

This relationship shapes the overall strategic coherence of the enterprise. Misalignment isn’t just inefficiency—it produces conflicting signals, corporate silos, duplicated effort, and brittle operations irrespective of the board beating the digital transformation drums.

Most organized boards have succeeded to place digital transformation high on the agenda, yet often they struggle with the pace of adoption and behavioral change in the depths of their corporation. There are many reasons why internally or externally led initiatives are slower than what the blueprint predicted.  The deliverables often have a narrower scope and of course budgets cannot be met. There exist a plethora of great reasons, legacy systems, simple is better mantras, customer experience rigidity, skill gaps, comfort zones, culture and the list goes on.

In reality, companies often treat business and IT strategies as though they can be optimized independently. Sometimes this approach is somewhat buffered by tech/business/corporate agile teams but the pathogeny is ubiquitous.

Our Copula analogy reveals the inherent flaw of independent optimization. Decisions in one domain reshape the context of the other—business innovation demands technology adaptability; IT choices constrain or unlock inorganic transactions. Effective strategy isn’t about augmenting X and Y separately—it’s about managing their joint behavior.

Lets look at this visually. The target state is to achieve alignment and deep integration of corporate ambition and IT enablement.

This picture depicts a static surface, or in other words a static world. In reality the passage of time and forces of nature mean the surface is constantly shifting.

Therefore the optimal point is something of a unicorn. It manifests as a beacon for the endless directionally essential effort; the investment required to combat disruptive forces, to monetize opportunistic environments and to prove resilient if forced to slide into areas of unwanted tail events.

And what of these black swans? Joint behavior modeling benefits extend beyond the local linear relationship. It becomes vital in tail events that trouble board risk committees; outcomes that can threaten the going concern of any business, where correlations of critical failures rise and vicious cycles reveal their menacing strength.  While day-to-day operations showcase alignment quality, stress events such as cyberattacks, market supply demand shocks, and technology discontinuities expose the depth of this aforementioned interdependence.  In copula terms, tail dependence shows whether both strategies are jointly vulnerable to co-failure—a sign that their integration is either a source of resilience or a point of fragility.

My trusted consiglieri and veteran Information Technologist, Michael Kalkavouras, graciously entertains this mental avalanche of mine. He nimbly navigates the analogy patiently proving through his real life implementations in Greek Telco, Gaming, Industry, Banking sectors how boosting IT maturity reduces business model fragility and increases adaptive capacity to shifting native contexts.  He draws my attention to an often overlooked asymmetrical time dependency between business and IT strategy. The former, he says, has a high response function to external impulses such as tariffs, regulatory changes, market crisis, and supply chain disruptions. Information Technology should be viewed with longer life cycles as major transformations have a time lag and should be designed for a future predicted state rather than patch work to overcome todays obstacles.

The bottom line is that business and IT strategies are not orthogonal planes. They form a complex joint surface, shaped by how they depend on and influence each other.  These surfaces adapt to reality and constantly shift requiring organizations to maintain themselves in an incessant state of strategic alert.   

Our copula analogy reminds us that aspects of strategy are not additive or correlated but relational, structurally dependent and evolutionary. This coexistence  demands careful modeling and study by boards. The purpose is not only to thrive in prevailing market dynamics but also to provide stakeholders with assurance of the Corporation’s resilience during black swan events, where recovery plans unfold their existential importance.

Thymios Kyriakopoulos is a former Goldman Sachs Managing Director who currently serves as a Non Executive Board Director specializing in Strategy, Transformation, Risk Management, Balance Sheet optimization, and Governance matters in developed and emerging markets.