Book Review: Enterprise
Architecture as Strategy
One of the most difficult
aspects of enterprise architecture is gaining the
support of senior management. Most senior managers
consider that enterprise architecture is the
responsibility of the IT Department. In fact it is they,
themselves, who are the real architects of the
enterprise, while IT has the responsibility to build the
systems required to support the enterprise.
It has been exceedingly
difficult to communicate this message clearly. At last
I've found a book that helps in this task. It is titled:
“Enterprise Architecture as Strategy: Creating a
Foundation for Business Execution”, by Jeanne Ross,
Peter Weill and David Robertson, Harvard Business School
Press, Boston: MA (2006). The authors all work for the
MIT Center for Information Systems Research (CISR) in
Boston in the MIT Sloan School of Management, which
recently published a report on the “Four Stages of
Enterprise Architecture”.
This was discussed in TEN36.
This issue of TEN reviews
the book: it shows how enterprise architecture can be
used to achieve business excellence and profitability
with strategic agility.
“Enterprise Architecture as
Strategy: Creating a Foundation for Business Execution”
The book is modest in size
(207 pages) but is powerful in its message. I will
provide a brief overview:
The authors start by
discussing problems encountered by most organizations,
through business silos and redundant data. In
discussing how to build a foundation for execution, they
present the concept of an operating model, which is the
“necessary level of business process integration and
standardization for delivering goods and services to
customers”. They introduce enterprise architecture
as “the organizing logic of business processes and IT
infrastructure, reflecting the integration and
standardization requirements of the company’s operating
model”. They discuss the IT engagement model, which
is “the system of governance mechanisms that ensure
business and IT projects achieve both local and
company-wide objectives”.
Many case study examples
from real-life organizations are used throughout the
book to illustrate concepts by example. Although they
consistently refer to “companies” in the book, their
message applies also to Government, Defense and
non-profit organizations, with case study examples from
Government also included.
The authors introduce four
types of operating models in a diagram with four
quadrants, with the X-axis ranging from low to high
Business Process Standardization and the Y-axis ranging
from low to high Business Process Integration (see
Figure 1) as follows:
-
Coordination (low
standardization, high integration)
-
Diversification (low standardization, low
integration)
-
Unification (high standardization, high integration)
-
Replication (high standardization, low integration)
Figure 1: Operating Model
Quadrants (Adapted from Figure 2.3 of “Enterprise
Architecture as Strategy”)
They give examples of
companies in the separate operating model quadrants in
Figure 1 and discuss the characteristics of each
quadrant so that you can characterize your own company
and decide its operating model. They discuss that: a
Coordination model provides seamless access to shared
data; a Diversification model provides independence with
shared services; a Unification model uses standardized,
integrated processes; while a Replication model provides
standardized independence. They explain:
“An operating model
represents a general vision of how a company will enable
and execute strategies. Each operating model presents
different opportunities and challenges for growth. For
example, the need to integrate business processes, as in
Coordination and Unification operating models, makes
acquisition more challenging because the new company
must reconcile disparate data definitions. On the other
hand, the process integration of the Coordination and
Unification models facilitates organic growth through
expansion into new markets or extensions of current
product lines.”
The authors discuss how the
operating model becomes the company vision:
“Focusing on the operating
model rather than on individual business strategies
gives the company better guidance for developing IT and
business process capabilities. This stable foundation
enables IT to become a proactive – rather than reactive
– force in identifying future strategic initiatives. In
selecting an operating model, management defines the
role of business process standardization and integration
in the company's daily decisions and tasks.
The operating model concept
requires that management put a stake in the ground and
declare which business processes will distinguish a
company from its competitors. A poor choice of
operating model – one that is not viable in a given
market – will have dire consequences. But not choosing
an operating model is just as risky. Without a clear
operating model, management careens from one market
opportunity to the next, unable to leverage reusable
capabilities. With a declared operating model,
management builds capabilities that can drive profitable
growth.”
The authors present the
concept of enterprise architecture using a one-page core
diagram. They provide examples of this EA diagram for
case study companies in each operating model. Figure 2
shows the Core Enterprise Architecture diagram for Delta
Airlines, which uses a Unification operating model.
Figure 2: Core Enterprise
Architecture Diagram for Delta Airlines (Adapted from
Figure 3.1 of “Enterprise Architecture as Strategy”)
Delta identified four core
processes: customer experience; operational pipeline;
business reflexes; and employee relationship management.
These processes all surround the core diagram in Figure
2. The customer experience identified all of the ways in
which Delta touched customers. The operational pipeline
was concerned with loading, moving, unloading and
maintaining planes. Business reflexes focused on how the
company made money: through scheduling, pricing and
financial processes. Employee relationship management
included processes for scheduling, compensating and
development of Delta’s highly mobile workforce.
Once the Delta management
team had agreed on these core processes, they identified
the data that is critical to process execution: shown
central in the diagram, surrounded by the Delta nervous
system. This shows the various infrastructure devices
and software that access the data for real-time updates
and make it available to customers, employees and the
company’s core processes on a need-to-know basis. The
result is a concise one-page diagram that communicates
the key focus of Delta’s Enterprise Architecture.
Each company will likely
have to develop its own diagram, but if developed well,
this diagram will serve to represent the overall company
enterprise architecture for corporate discussion
purposes. The authors give examples of typical core
enterprise architecture diagrams for each of the four
operating models. They discuss that IT facilitates
senior management discussions, while IT leaders design
the core diagram.
Figure 3 shows the Core EA
diagram for ING Direct as an example of a Replication
operating model. ING offers simple banking products to
13 million customers in Europe, North America and
Australia and replicates its processes and systems to
its banks in these countries.
Figure 3: Core Enterprise
Architecture Diagram for ING Direct (Adapted from Figure
3.7 of “Enterprise Architecture as Strategy”)
The core diagram in Figure 3
shows no data because the nine country-based banks do
not share data (each bank serves its own customers
regardless of where they are located when they seek
banking services). Instead the core diagram highlights
the key processes of ING Direct, which management refers
to as “services”.
In discussing the benefits
of enterprise architecture the authors highlight:
-
Reduced IT costs
-
Increased IT responsiveness
-
Improved risk management
-
Increased management satisfaction
-
Enhanced strategic business outcomes
They emphasize that the
CIO is the key driver of enterprise architecture
benefits and show how the CIO role evolves with
increasing architecture maturity.
The book covers the topic of
enterprise architecture for management at a very broad
level. It references Steven Spewak’s 1993 book and John
Zachman’s 1987 IBM Systems Reference Journal paper but
provides no additional detail. If a reader wants a
concise explanation of enterprise architecture that goes
beyond the core EA diagrams in Figure 2 or Figure 3,
this book lets the reader down somewhat. This would be a
problem if it was the only book on enterprise
architecture.
I reviewed another book in
TEN20 that is excellent here in its explanation of
EA. This covers enterprise architecture using examples
from the perspective of history, to illustrate that EA
is a way of thinking about the complexity of an
enterprise. This book is titled: “Enterprise
Architecture using the Zachman Framework”, by Carol
O’Rourke, Neal Fishman and Warren Selkow, Course
Technology, a division of Thomson Learning, Inc. Boston,
MA (2003).
For IT readers who want to
understand enterprise architecture fully, I recommend
you also read the above book, then my 2006 book:
“Enterprise Architecture for Integration: Rapid Delivery
Methods and Technologies”, by Clive Finkelstein, Artech
House, Norwood MA (March 2006), which was reviewed in
TEN34. This book describes methods to identify
reusable processes as standardized processes, so that
enterprise architecture systems can be delivered
rapidly.
The authors introduce the
Four Stages of Enterprise Architecture Maturity.
discussed in TEN36, based on the article of the same
title in CIO Magazine in Feb 2007. The stages addressed
in the book are:
-
Stage 1: Business Silos
-
Stage 2: Standardized Technology
-
Stage 3: Optimized Core
-
Stage 4: Business Modularity
The authors were directly
involved in the research carried out from 1995 – 2006 of
456 companies in North America and Europe by the MIT
Sloan Center for Information Systems Research (CISR).
Since the Feb article, the authors have renamed Stage 3.
It was previously called “Standardized Processes”. It is
now called “Optimized Core” to refer to both
standardized processes and shared data.
They use the example of
Toyota Motor Marketing Europe to illustrate Toyota’s
approach to continuous architecture improvement,
discussing: architecture principles; project
methodology; incentives; funding; enforcement authority;
and initial appraisal.
Chapter 7 highlights the
important role that enterprise architecture takes in
managing outsourcing relationships. The authors discuss
three types of outsourcing relationships: 1) strategic
partnerships; 2) co-sourcing alliances; and 3)
transaction relationships. Case study examples are drawn
for each of these outsourcing relationships from
Campbell Soup Co (1), the City of Liverpool, UK (2), and
Dow Chemical (3). They discuss aligning outsourcing
relationships with the architecture stages and
outsourcing for architecture maturity.
They cover management
practices for realizing value from architecture maturity
and show how these management practices evolve for each
architecture stage. They discuss the lessons from top
performers:
-
Greater senior
management involvement.
-
Architecture built into project methodology.
-
Greater architecture maturity
The authors discuss
profitable growth for each operating model using the
example of 7-Eleven Japan, which creates more value each
year from their enterprise architecture and Replication
model. They cover profitable growth in a Coordination
model and a Diversification model and discuss managing
the architecture through Mergers and Acquisitions,
drawing on case study examples of acquisitions by UPS
and CEMEX, a Mexican cement manufacturer, and also
7-Eleven Japan.
At this point, the authors
introduce the emergence of a fifth stage of enterprise
architecture maturity, which they call: “Dynamic
Venturing” and discuss how it applies to Dow Chemical.
They consider how a Stage 4 company evolves beyond
business modularity and prepares for Stage 5, noting
that no company has yet made this transition.
In the final chapter, the
authors ask – “would you like your business to have:
-
Higher profitability?
-
Faster time-to-market?
-
More value from your IT
investments?
-
25% lower IT costs?
-
Better access to shared
customer data?
-
Low risk of
mission-critical systems failures?
-
80% higher senior
management satisfaction with technology?”
They provide key steps in
rethinking the foundation for execution, relating each
step back to the relevant chapters. They summarize six
important steps for success with enterprise
architecture, and then conclude the book with 10 top
leadership principles.
The book provides a valuable
bridge for senior management and IT, using enterprise
architecture. It fills what has previously been a
yawning gap of understanding. I highly recommend it to
you.
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