A Business Model expressed as a Value Chain would show the sequence of high level processes that add to the margin and accumulate cost at each stage of the chain.
Two different Business Models for the same type …
While a Business Model (BM) identifies the way a company (activities, resources, channels, partnerships… as described in the BM canvas) returns value/profit while delivering the product, the Value Chain identifies the company s…
In the 1980s, Michael Porter proposed the Value Chain (VC) concept to illustrate the operation of a company.
A Value Chain is a set of activities that an organization carries out to deliver value to its customers and…
We are proud to announce that SEAS Inc. has published t […]
5 Capability Model Introduction to corporate governance […]
An Enterprise Architecture is an integrated, living and ever evolving business artifact that is both informed and informs other parts of the business. It takes a holistic view of both ‘business’ and ‘IT’ with business being the driver and IT … Continue reading →
This post is the fifth in a series of ten about real life experiences of using business model thinking as a foundation for planning and delivering change. Writing this post I’ve had the help of a true friend and admirable colleague (Eva Kammerfors) whom I’ve shared many of the referred to business model experiences with. […]
This post is the fourth in a series of ten about real life experiences of using business model thinking as a foundation for planning and delivering change. Writing this post I’ve had the help of a true friend and admirable colleague (Eva Kammerfors) whom I’ve shared many of the referred to business model experiences with. […]
This post is the third in a series of ten about real life experiences of using business model thinking as a foundation for planning and delivering change. Writing this post I’ve had the help of a true friend and admirable colleague (Eva Kammerfors) whom I’ve shared many of the referred to business model experiences with. […]
One of my startup heroes Steve Blank wrote in a blog post that “value proposition is the fancy name for your product or service” It is with some trepidation that […]
‘Value-proposition’ is a term much-bandied-about in business-models and the like. Yet what exactly is it? A tweet by Alex Osterwalder pointed me to an article by Steve Blank on ‘How to build a billion-dollar startup‘, which included this brief section on the role of…
Generally speaking, IT departments have all sorts of criteria to justify projects and measure their performance. They use measurements and metrics, KPIs. Going to the solution level, they commonly use indicators such as percentage uptime for systems from the System Management team, error rates for applications from the Development Support team, or number of calls resolved on the first call from the Service Desk, etc. These KPIs usually are defined at an early stage and very often delivered in dashboards from various support applications.
On the other hand it is much more difficult to define and implement quantifiable measure for Enterprise Architecture. Many activities introduced with appropriate governance will enhance the quality of the delivered products and services, but it still will be a challenge to attribute results to the quality of Enterprise Architecture efforts.
This being said, Enterprise Architects should be able to define and justify the benefits of their activities to their stakeholders, and to help executives understand how Enterprise Architecture will contribute to the primary value-adding objectives and processes, before starting the voyage. The more it is described and understood, the more the Enterprise Architecture team will gain support from the management. There are plenty of contributions that Enterprise Architecture brings and they will have to be documented and presented at an early stage.
There won’t be just one single answer to demonstrate the value of an Enterprise Architecture but there seems to be a common pattern when considering feedbacks from various companies I have worked with.
Without Enterprise Architecture you can probably NOT fully achieve:
- IT alignment with the business goals
As an example among others, the problem with most IT plans is that they do not indicate what the business value is, and what strategic or tactical business benefit the organization is planning to achieve. The simple matter is that any IT plan needs also to have a business metric, not only an IT metric of delivery. Another aspect is the ability to create and share a common vision of the future shared by the business and IT communities.
With the rapid pace of change in business environment, the need to transform organizations into agile enterprises that can respond quickly to change has never been greater. Methodologies and computer technologies are needed to enable rapid business and system change. The solution also lies in Enterprise Integration (both business and technology integration).
For business integration we use Enterprise Architecture methodologies and frameworks to integrate functions, processes, data, locations, people, events and business plans throughout an organization. Specifically the unification and integration of business processes and data across the enterprise, and potential linkage with external partners become more and more important.
To also have technology integration, we may use enterprise portals, enterprise application integration (EAI/ESB), Web services, service-oriented architecture (SOA), business process management (BPM) and try to lower the number of interfaces.
- Change management
In recent years the scope of Enterprise Architecture has expanded beyond the IT domain and Enterprise Architects are increasingly taking on broader roles relating to organizational strategy and change management. Frameworks such as TOGAF 9.1 include processes and tools for managing both the business/people and the technology sides of an organization. Enterprise Architecture supports the creation of changes related to the various architectures domains, evaluating the impact on the enterprise, taking into account risk management, the financial aspects ( cost / benefit analysis), and most importantly ensure the alignment with business goals and objectives. Enterprise Architecture value is essentially tied to its ability to help companies to deal with complexity and changes.
- Reduced time to market and increased IT responsiveness
Enterprise Architecture should reduce systems development, applications generation and modernization timeframes for legacy systems. It should also decrease resource requirements. All of this can be accomplished by re-using standards, or existing components such as the architecture and solution building blocks in TOGAF 9.1. Delivery time and design/development costs can also be decreased by the reuse of reference models. All that information should be managed in an Enterprise Architecture Repository.
- Better access to information across applications and improved interoperability
Data and information architectures manage the organization assets of information, optimally and efficiently. This supports the quality, accuracy and timely availability of data for executive and strategic business decision-making, across applications.
- Readily available descriptive representations and documentation of the enterprise
Architecture is also a set of descriptive representations (i.e. “models”) that are relevant for describing an Enterprise such that it can be produced to management’s requirements and maintained over the period of its useful life. Using an Architecture Repository, developing a variety of artefacts and modelling some of the key elements of the enterprise; will contribute to build this documentation.
- Reduce IT costs by consolidating, standardizing, rationalizing and integrating corporate information systems
Cost avoidance can be achieved by identifying overlapping functional scope of two or more proposed projects in an organization, or the potential cost savings of IT support by standardizing on one solution.
Consolidation can happen at various levels for the architectures: for shared enterprise services, applications and information, for technologies and even data centers.
This could involve consolidating the number of database servers, application or web servers and storage devices, consolidating redundant security platforms, or adopting virtualization, grid computing and related consolidation initiatives. Consolidation may be a by-product of another technology transformation, or it may be the driver of these transformations.
Whatever motivates the change, the key is to be in alignment, once again, with the overall business strategy. Enterprise architects understand where the business is going, so they can pick the appropriate consolidation strategy. Rationalization, standardization, and consolidation process helps organizations understand their current Enterprise Maturity level and move forward on the appropriate roadmap.
- More spending on Innovation
Enterprise Architecture should serve as a driver of innovation. Innovation is highly important when developing a target Enterprise Architecture, and realizing the organization’s strategic goals and objectives. For example, it may help to connect the dots between business requirements and the new approaches SOA and cloud services can deliver.
- Enabling strategic business goals via better operational excellence
Building Enterprise Architecture defines the structure and operation of an organization. The intent of enterprise architecture is to determine how an organization can most effectively achieve its current and future objectives. It must be designed to support an organization’s specific business strategies.
Jeanne W. Ross, Peter Weill, David C. Robertson in “Enterprise Architecture as Strategy: Creating a Foundation for Business” wrote “Companies with more-mature architectures reported greater success in achieving strategic goals” (p. 89). This included better operational excellence, more customer intimacy, and greater product leadership (p. 100).
- Customer intimacy
Enterprises which are customer focused and aim to provide solutions for their customers should design its business model, IT systems and operational activities to support this strategy at the process level. This involves the selection of one or few high-value customer niches, followed by an obsessive effort at getting to know these customers in detail.
- Greater product leadership
This approach enabled by Enterprise Architecture is dedicated to providing the best possible products from the perspective of the features and benefits offered to the customer. It is the basic philosophy about products that push performance boundaries. Products or services delivered by the business will be refined by leveraging IT to do the end customer’s job better. This will be accomplished by the delivery of new business capabilities (e.g. on-line websites, BI, etc.).
- Comply with regulatory requirements
Enterprise Architecture helps companies to know and represent their processes and systems and how they correlate; fundamental for risk management and managing the regulation requirements, such as those derived from Sarbanes-Oxley, COSO, HIPAA, etc.
This list could be continued as there are many other reasons why Enterprise Architecture brings benefits to organizations. Once your benefits have been documented you could also consider some value management techniques. TOGAF 9.1 refers in the Architecture Vision phase to a target value proposition for a specific project. Here we would apply the value proposition concept to the Enterprise Architecture initiative as a whole.
Value Management uses a combination of concepts and methods to create sustainable value for both organizations and their stakeholders. Some tools and techniques are specific to Value Management and others are generic tools that many organizations and individuals use. There exist many Value Management techniques such as Cost-benefits Analysis, SWOT Analysis, Value Analysis, Pareto Analysis, Objectives Hierarchy, Function Analysis System Technique (FAST), and more…
The one I suggest to illustrate is close to the Objectives Hierarchy technique, which is a diagrammatic process for identifying objectives in a hierarchical manner and often used in conjunction with business functions. Close, because I will use a combination of the TOGAF 9.1 metamodel with the ArchiMate 2.0 Business Layer, Application Layer and Motivation Extensions Metamodels, consider core entities such as value, business goals, objectives, business processes and functions, business and application services, application functions and components. This approach being inspired by the presentation by Michael van den Dungen and Arjan Visser at the Open Group Conference in Amsterdam 2010 and I’m here adding some Archimate 2.0 concepts.
Firstly the entities from the TOGAF 9.1 metamodel: