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Creating a business architecture
Success today is all about focus, discipline and execution. Not only do you have to correctly anticipate market trends and conditions, you also have to focus on specific opportunities, and make hard choices about what not to pursue. Success also requires that you understand the customers in target markets) and how they want to work with suppliers.
But aligning-or realigning-a complex business is no easy task. People and organizations have an incredible capacity for inertia, to keep doing what they've always done, and in the same, familiar ways. Sometimes a charismatic leader arises who can communicate the strategic vision and new competitive imperatives with such force that the organization can align behind them without additional prodding or direction. But such leaders are rare, so most companies require a more structured, methodical process, the core of which is defining a business architecture.
What Is A Business Architecture?
Thinking architecturally means thinking about the building blocks of an organization-how they interact and interface with each other, and how to configure them to achieve superior performance and create value. In this sense, creating a business architecture involves the same kind of thought process (and consensus-building) as a technology architecture, with many of the same issues.
* Governance: Who gets to do/decide what, and how standards and policies are established and enforced.
* Processes: How much variation or standardization is required and how processes are improved and measured.
* Information flows: Policies around information and network security and how to use and integrate information to run the business better.
* Use of outsourcers and service providers: When to use external versus internal resources and who is allowed to engage external providers.
* Partnership participation: When and how to engage in partnerships that complement the strategy and competencies of your business.
A business architecture and a technical architecture can feed each other, as shown in Figure 1. For example, knowing the potential for automation and leveraging integrated information that IT can bring will affect decisions on business architecture. Similarly, many business policy and governance issues affect how technology will be deployed and managed.
Architectures usually are laid out in something like a pyramid, with the most general and universal precepts at the top and specific standards, policies and guidelines at the bottom (Figure 2, p. 23). A business architecture starts with a vision of the future strategic position and the associated competitive imperatives. Next comes an articulation of principles and high-level policy guidelines that can be applied in a wide variety of situations. While a business architecture will have general provisions, it must state clear directions and specific business practices, such as how to handle shared information with external parties, who can engage an outsourcer or what kinds of business models are acceptable.
The third step is to define a structural model of the business-key building blocks and their capabilities, interactions, boundaries and interfaces. The building blocks for each organization will differ; in some, the basic unit is the project team, while in others it may be a product development and marketing group.
Scope and boundary questions (e.g., which units have authority to establish external partnerships and alliances and in what areas, or whether two internal units may compete with each other in the market) also need to be addressed. For example, top management may decide that the company is in the product rather than the professional services business, a decision that has implications for partnering opportunities. If a corporation has multiple lines of business, there will be questions concerning the relationships, if any, among the different lines of business.
You can think of this as "rules of engagement" -how departments, functional units (e.g., HR or manufacturing) or individual lines of business interact and interface with groups both internal and external. Among the key issues are information security and how to share information with business partners, customers and suppliers. More generally, these architectures address the enablers (e.g., standards, changes in process, etc.) required to derive competitive advantage from information.
In the fourth level of the architecture, specific choices are made about the standards, policies and business models the enterprise will adopt, and where each applies within the organization.
Architecture With The Strategy
Don't expect to realign business architecture overnight. I worked with one company for six years, as it evolved from conglomerate with dozens of unrelated businesses to a focused gorilla in high tech. In the process, they shed old practices, like independence of business units and lack of process or information standards, and consolidated from 25 different IT functions to one global infrastructure and four process/application development groups, each focused on one of the major processes that unify the business (supply, demand, new product, management). They are now working to enable a faster transition to e-business.
Another company had evolved a very diversified and highly decentralized architecture with hundreds of product units, and its strategy focused on maximizing time-to-market and innovation. However, today its customers expect an integrated set of electronic interfaces, rather than a jumble of separate links to each product unit; cross-selling has become increasingly critical. So this company is seeking the best of both worlds: It realizes that it needs to change how it operates to capture the value created by new information technologies and standards, but it still wants to put the fewest possible constraints on its product units. Here, what not to standardize has been a key issue.
A Central Focus
Streamlining, standardizing and linking processes end-to-end are challenges that all businesses face as they struggle to improve efficiency and service quality. Every organization thinks that its needs and approaches are unique, but this is not usually true. Common approaches to specific functions or services (e.g., logistics, purchasing, finance, etc.) can lower costs, speed IT system implementation and promote integration of information about business performance, capacity and quality.
For example, exploiting 13213 e-business trends within the enterprise will affect your approach to process definition and improvement. In the B2B world, your people work with partners and service providers to execute key business processes such as logistics, customer service or manufacturing. This means that standardization of processes and data definitions at the industry level will be more important, and there's been good progress via efforts like RosettaNet and the Supply Chain Operations Reference (SCOR) model of the Supply Chain Council, as well as efforts to define standards for process definition like the Business Process Modeling Language (BPML).
Closely related to business process standards and structure are agreements on standards and integration points for data and information. A business architecture usually will define major information flows and measurement/reporting requirements, and discuss how and where the enterprise must better exploit information to improve business performance, meet regulatory requirements or create new assets.
While a business architecture is not a substitute for a true data architecture, it establishes the business context, policies and priorities that enable a data architecture to be effective. Similarly, a business architecture establishes the context, policies and priorities that will allow other technical architectures, such as an application or network architecture, to move ahead.
Use A Participatory Approach
As with technical architectures, a business architecture's acceptance and implementation depend upon people understanding the motivations underlying it, and agreeing with the basic tradeoffs and choices it embodies. This means soliciting input, having dialogue and repeatedly communicating decisions that have been made.
These steps, while time-consuming, are essential for the organization to come to grips with new imperatives and understand what it will take to succeed. Many people will react with fear; they foresee bureaucracy and red tape triumphing over innovation and creativity. In fact, the opposite is true. The best architectures set out simple rules that make clear choices and define the way that each business intends to win. Within these constraints, creativity and energy are focused on the things that matter-better products, services, partnerships, marketing, branding, etc.-rather than on changing basic processes that have little or nothing to do with competing better.
Conclusion
A good architecture creates a flexible, modular set of business capabilities, which can make integrating acquisitions easier and even make divesting go more smoothly. Starting new lines of business also becomes easier with reusable process, data and systems definitions. The result is a more consistent approach to building and managing business capabilities and allocating resources.
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