Business Architecture

There is a lot of “Architecture” out there in the enterprise world?  It seems that the title ARCHITECT once held a lot of cachet.  You’d find someone titled or a book titled with the term architect in it almost everywhere.  However, during my most recent deep dive into the term applied almost all –IMHO– were not architects but designers and in many cases project managers.  I reached this conclusion based upon the definition I used to define architecture.  That definition has as it foundation the understanding of the components, interactions and uses of such used to create a desired entity.  That entity can be as concrete as a house or as abstract as an enterprise.  Which has led me to an interesting linguistic puzzle:  In many organizations and associations there has been a stated difference between an Enterprise and a Business architect.  Yet isn’t the definition of enterprise a business?  So rightly so shouldn’t an enterprise architect be a business architect?

With that puzzle aside, I again started to ponder my activities around Portfolio Management.  Much of what I’ve seen and experienced in large corporations in regard to Portfolio Management has been around economic prioritization.  That is “We has a fixed budget, how can we spend it all to receive the greatest return on each individual investment?”  This inevitably results in a effort to stack rank projects by simple ROI or in the case of IT projects KLO (keep the lights on).

Most recently I watched several organization build up a portfolios (aka backlogs) of projects to be prioritized and executed.  Many of these projects were classified as either KLO or Innovation projects which were given the highest priorities depending upon who in executive leadership was overseeing.  However, deeper investigation revealed that these where neither, but rather what I would call optimization projects (see portfolio management project portfolios).  While not a bad thing doing such gamesmanship results the enterprise as a whole not achieving the optimum return on investment strategy.  That is to say senior leadership has developed a strategy and middle to lower management, though well meaning, compromises achievement of such through their efforts of local optimization.

The way out of such conundrums is not having senior leadership make every investment decision down to the smallest detail though.  My belief is the best way to ensure investment optimization for the enterprise is to make the business architecture explicit and develop a consistent means to determine alignment, interdependency, and priority of current and future desired states.  Though looking at the existing enterprise’s state as a whole — what needs to say the same, what needs to change and when– an optimum path to an uncertain future can be charted.

The problem with such an approach is that it is often looked upon as complicated, thus is rejected out of had as lately the management trend is make things simple.  Which is rather ironic given we are in an time of multiple priorities and the second generation of the information age.  Such thinking is both comical and disturbing, given that many high tech companies are pushing products for Business Intelligence and Analytics to gain actionable insights yet they are still managing their own investments with nothing more than glorified spreadsheets.  Maybe I should not be so critical of the state of industry, given how long it has taken other engineering and design disciplines to mature into well understood principles to be applied.

In either event I’m now about an eight (real swag) through defining a comprehensive enterprise design methodology and associated curriculum for the book.  In architect-speak, I’ve laid out the rough framework and have started construction/acquisition of components for the methodology.  Two moths in, I may have to push back my anticipated book completion date.  One the positive side my employers will gain the benefit of this research and hopefully be able to apply it to their advantage.

 

Enterprise Portfolio Management -Thoughts and Insights

Woke up early this morning to the buzzing in my head…An idea that Options Theory as currently applied within more sophisticated enterprises for IT Investment was off the mark.  I’d spent the past year going through application of approaches such as Black-Sholes which for external markets tracks well.  However, for IT Investments there is something slightly askew.  That uncomfortable feeling of what and how finally popped in my head this morning.

Several things about the standard approach to Investment Markets Options Theory rely upon market forces to determine value.  However, within the Enterprise Ecosystem value is not measured by standard economics of buyer/seller in the traditional sense.  Arbitrage in the market does not apply in the traditional sense.  The investment is either exercised for its perceived utility or not; typically based and prioritized upon return on investment of the asset (in the broadest sense of the word asset).   In corporations however there are two economic systems at play:

  • External Ecosystem, the one in which the enterprise participates in.  Here the economics that investment professionals typically discuss and where options theory approaches such as Black-Scholes apply.  One can apply hedging as in Black-Scholes to capture the best Risk/Reward.  Within this ecosystem market dynamics have investments flow between investment vehicles based upon perceived future value.  With items other than perishable commodities the perceived value is not always inline with standard accounting practices.  When valuation of corporations occur Intangible assets such as “Customer Good Will” and “Intellectual Property” are used as a filler to account for the difference between residual value of physical assets in general accounting practices  (i.e., cadaver accounting) and investment accounting.
  • Internal Ecosystem, a set of economics that is governed more strongly by general accounting practices; costs and benefits must somehow be in balance.  However, a semi-closed system is assumed within such an economic system.  That assumption is later adjusted each quarter or year by increasing an Intangible Asset valuation on the books.  This ecosystem is driven by several factors: Asset Depreciation and Utility Value of Assets deployed.

These two economic systems interact through several interfaces of which not all are visible or easily measurable.  Monetary funds go into the Internal Ecosystem from the External Ecosystem on the assumption that these funds will be used to purchase assets and through utilization of these assets return more or increase in value the enterprise.  This in the external system takes the form of stock price or dividends.   Which in many US based firms now provides a stronger drive to the internal dynamics of a publically held corporation.

However, the value of individual assets inside a corporation is not as simple as those in the external ecosystem.  Inside the corporation assets are combined with a purpose in mind, to create a utility value.  While the individual assets are accounted for in general accounting practices the utility value of a configuration of assets is typically not.

An example; a machine is purchased, a process developed to use it and others to create a product or service, supplies/consumables are also purchased, and people trained to create and sell the product / service.  This creates some value if the product or service is consumed by the external ecosystem in exchange for revenue.   Ten years later the internal assets have been depreciated in value to zero, yet the enterprise is still getting utility value from this configuration of assets.  One year later a competitor’s product / service attracts enough consumers to make the enterprise’s offering unprofitable.  The assets once providing utility value, though zero accounting value through depreciation, are now in negative territory.  Now we’ll complicate things.  One of the assets in the configuration was a computer.  It can be reassigned to do other tasks thus extending its utility value in another configuration.

Thus the value of assets in an internal ecosystem’s portfolio needs to be managed differently.  Those management practices need to more strongly account for internal utility value that it contributes within an hierarchy of abstract portfolios that support an enterprise’s participation in the various value streams in which it is a member.  That insight realized this morning has been what has been driving me to revise the portfolio management practices I had defined for previous employers –though better than none– seem not adequate for the task.   With that insight in mind developing the economic methods –for what I’ve called Level 5 Dynamic Management that are closer aligned to how an enterprise operates internally– appears more attainable and palatable than just inserting a standard Black-Scholes model.

Structure in Threes: Concerning Architecture

There is a broad debate within the various enterprise architecture communities 1) What is Enterprise Architecture 2) What is the value of Enterprise Architecture, and 3) Who is an Enterprise Architect and how does s/he accomplish work.  This text will present my own opinion on this topic, the three questions above, and more.  This is based upon my own experiences practicing this arcane discipline.  I do not propose this is the definitive answer to such questions –but rather an effort to document an ontology of the architectural concerns with methods and tools I’ve collated over the years to manipulate these variables– though a publisher may later add hyperbole in an effort to sell the book.

This work is being design to be used in a digital format as there will be many cross connections to the multidimensional space I believe Enterprise Architecture exists in.  If you are reading this in book form be prepared to flip forward and backward to get the full context of what is being discussed.

Structure in Threes -the Preface

Decided to start a little early actually writing the book.  I know by the start of next year I’ll have restructured the original outline to better address the objectives I have, but I though several chucks of material could be written as these are unlikely to change much in the later editing process or will just move to new locations in the book.

PREFACE

It has been close to thirty years since John Zachman coined the term Enterprise Architecture and introduced business to the Zachman Framework. Over the years the metaphor has been used and abused, technical religions have grown around methodologies and still the term Enterprise Architecture is derisive.

  • Is it an activity that produces a plan for building various systems?
  • Is it the actual plan for an Enterprise?
  • Is it a methodology to produce standard compliant designs?
  • Is it a collection of diagrams that represent different types of information about the information systems used in an enterprise (Zachman Framework)
  • Or maybe a specific set of standard components organized in a specific structured way

When I started the initial concept for this book years ago I had considered creating a text that would provide methods for designing an enterprise; this being the goal of Enterprise Architecture or at least my belief is the goal. However, over the years experience has taught me five things:

  1. Nothing is simple when explaining yourself [Lesson taught by John Zachman]
  2. Words have different meanings depending upon the context and experience of others [Lesson taught by Michael Kutcher, John Sowa, Gil Laware, and Frank Kowalkowski]
  3. The difference between a methodologist and a terrorist is that you can negotiate with the terrorist [Lesson taught by IBM CIM Architecture Department and TC184/SC4 & SC5 working groups]
  4. Thinking in the abstract and in multiple dimensions while technically possible by most, is often avoided in most enterprises in the name of speed and comprehension [Lesson taught by most managers and mid-level executives I’ve had to deal with]
  5. Nothing is foolproof as fools are so dam cleaver and Nature always sides with the hidden flaw [Murphy you were an optimist]

Those insights came to light over the years of associating and working with those I consider giants and mentors in the field. Included in this book are vignettes of how those insights were developed; if for no other reasons than to pay tribute to my mentors and colleagues and to establish part of the context for the content in the book.

That being the sand I started building this work upon, I realized I needed to answer several questions first before I introduced my approach to Enterprise Architecture. The book itself is meant to be a practical guide on “practicing” Enterprise Architecture, a theoretical text explaining my perspective on what Architecture or more specifically Enterprise Architecture is, and how these fundamentals are expressed in practice.

 

Portfolio Management Insights: Opportunity Gap

This morning’s R&D had me reviewing some previous work on Expected Commercial Value calculations.  One of the flaws or should I say weaknesses at lower levels of Portfolio Management Maturity is a the assumption that delaying a project only shifts to the right when a project yields value.  This however is most often not the case.  When evaluating each project’s value for a Portfolio one needs to account for both NPV of funds expected, NPV of funds received, AND also a potential reduction is value received as a result of a short recovery period and project lifecycle.

Consider this first scenario: Buying a new automobile.  While the utility may not change on a new vehicle purchased towards the end of the year its market value certainly drops as one gets closer to the next model year.  Another scenario: The utility value is sensitive to when in the lifecycle a initiative is executed (e.g., having a large shipment of ice cream available for summer in New York vs. fall).

As such Enterprises with more mature Portfolio Management capabilities will consider this factor in portfolio decisions.

Opportunity Gap

 

 

Enterprise Portfolio Management insights

This weekend’s brainstorming and reading brought up some interesting insights.  So much so I couldn’t sleep and woke up around 2am with the following visuals in my head.

First of was a refinement? on Govindarajan and Trimble’s concepts about two competing engines within an enterprise in their book Beyond the Idea.  Their proposed model theorizes whay its so hard to get innovations deployed and adopted in existing concerns while startups do not seem to have this internal conflict issue.

Gravity Centers in Enteprise

Second was an idea I’ve been refining over the years; that portfolio selection is not just a single event but a series of filters applied to narrow down the pool to the portfolio member to actively work on.  There are lots of models on sections methods (BCG Matrix) Balanced Scorecard, etc.  What is common to all is a concept of sorting and filtering members into groups, which creates a group of members to actively work on.

 

Portfolio selection is a filtering process

While these are not likely the final visualizations of the presentation I’ve proposed for an internal conference in February.  The metaphors speak clearly to me; I wonder if they do the same to others?

 

Modern Enterprise Portfolio Management

Added “mho” to interesting discussing on the Enterprise Architecture forum this morning.  Below is the base premise I started with for creating a hierarchical portfolio which is acted upon in each enterprise from observation.

IT Asset Class Hierarchy

If, as presuppose IT is part of Enterprise, then asking IT or Enterprise Capability is moot.  If however, once recognizes the context switch we often go through doing these discussing you’re left with the following:

  1. Information Management Capabilities are a Enterprise Capability; Database Management is a unique configuration of multiple assets (people, software, hardware, etc.) that create one instance that capability.  This is where the Enterprise Portfolio Management R&D I’ve been doing is headed.  imho a Capability is defined as the ability to achieve a desired result from an action.  It is not the actual action itself (potential vs kinetic energy).  The exercising the capability often entails employment of a unique configuration of assets (people, process, technology classes).
  2. There can be multiple configurations of assets that create such a capability
  3. Assets can be combined in different capabilities to create different capabilities
  4. Time, Money, and People are dynamic assets ( Time is a self perishable/consumable asset; Money is a mutable asset as well success measure in Western Culture, it is often used as the medium of exchange for other assets; People are assets with unique properties and competencies that can increase or decrease in value based upon the social-economic-technological ecosystem they operate within.
  5. Information, Knowledge, and Wisdom hierarchy of asset value is time/context dependent (e.g., the Knowledge of how to build buggy whips has depreciated over time and current social-economic-technological ecosystem they operate within).
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