Translating Business to Enterprise Architecture: Methodology Activity #4

Portfolio Decision Making Methods

The process by which alignment occurs in organizations is never a simple activity.  While it would be great to have a mathematical formula that generates enterprise architecture from business strategy, the fact of the matter is that there is no one right answer that fit for all.  Having business strategy x does not always translate to enterprise architecture y.    

The alignment of Business Strategy and Enterprise Architecture resembles algebra or calculus more than simple addition.  The areas that have yielded promise:  multi-variant analysis, Real Options (a derivative of options theory); Bayesian models, and quality function deployment.  If this appears to be a short course in decision science it is. 

In the 80s Marylyn Parker et al, at the IBM Los Angeles Scientific Center developed a methodology, BEAM, which guided MIS directors on the prioritization of I.T. investments.  If it was created today it would likely be called Balance Scorecard for I.T.  Unfortunately the timing was not right for acceptance of this approach, nor was access to corporate strategy or decision authority granted at the senior MIS levels.  But that doesn’t make it less useful today.  The heart of BEAM is using multiple weighted criteria to establish a prioritized list of I.T. investments in line with Business priorities.

BEAM worked well in determining priorities; however, in today’s economy long horizon projects such as infrastructure decisions create a problem.  Many organizations are unwilling to have projects that have 18 month horizons.  Today the name of the game is short cycle and agile.  This strategy is useful in limited technical risk, but there is a tradeoff it also restricts the potential upside.

What is needed a means to merge the benefits of large projects with the flexibility or short cycle and agile.  This is where options theory shines as a method.   The feature behind Real Options (options theory) is the dividing a project or investment into a sequence of investment decisions that are made after over the course of a project.  These decisions are whether to invest another segment of the total investment.  So at each investment point or option of the project, if partitioned correctly, the decision marker is faced with determining whether the next investment is of value and alignment with current conditions.  The previous point is evaluated as to whether it reached its immediate goal, nothing more.  Likewise the next investment decision or option is only evaluated in context to what it provides.  This decision is made as to whether to invest for what value the option brings or not.  A large project becomes a series of continuation decisions over time rather than the big bang investment approach.

Bayesian decision models allow one to yield a decision based upon decision criteria factors weighted as each has different relative importance in a decision.  Applying this method –similar to BEAM—enables a more effective decision.

Quality Function Deployment aids in defining the features needed to fulfill needs.  This technique can be adapted in the design chain I’ve previously discussed in this blog.         

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Translating Business to Enterprise Architecture: Case Study #1 & 2 establishment

Situation

The past week been engaged in two projects; developing a business plan for a start-up nonprofit and reviewing information technology strategy for a large existing non-profit that is trying to transform themselves.   Both projects have similar attributes and as I survey other organizations, it seems to be a common malady:  misalignment between Business and Information Technology.

In the case of the start-up, it’s more a case of designing the business to enable the technology that provides the service for its clients.  In the case of the existing nonprofit, the I.T. organization has an objective to assist the business in revitalizing itself by making itself more relevant through innovation.  A quick review of the I.T. organization’s strategy and activity indicates a strong misalignment with the current business strategy

Startup

The Startup is composed of a group of technically brilliant people all focused upon their individual technical expertise.  The issue becomes how to integrate the individual work efforts of each, build and enabling infrastructure that would support the nonprofit’s mission.  However, design of organizations are still an evolving multi-disciplinary activity that continues to present challenges as new disciplines need to be integrated into the design.  Followed by the challenge of how-to align technology to support the workflow that the organization believes gives it a competitive advantage yields a wicked problem.

This is yielding a business plan unlike the typical plans most enterprises assemble that cover the financial aspects and minimal organizational structures.  The goal of this business plan is not primarily obtaining finance or defining organizational hierarchy.  Its objective is to define a roadmap for the enterprise’s initial construction, operation and evolution.  As such more attention to system dynamics and relationships are its key features which will yield a series of states that are used for financial projections using options theory concepts to guide its evolution.   Next week the first draft will be distributed to the team for comments.       

Existing Nonprofit

Recently the I.T. organization had engaged a management consulting firm to assist.  The result of several weeks of engagement was a recommendation to rationalize the application portfolio.  While this will make the I.T. organization more cost effective, it does not necessarily support the business objective.  It brings to mind the old air travel joke:  “Pilot gets on the P.A. to tell the passengers good news and bad news.  The bad news; we’re lost, the good news we’re making excellent time”.  This I.T. organization, like so many others has focused on the technology acquisition and deployment to the exclusion of other objectives.  The rational was that they were creating capabilities for the business.   Unfortunately the business often is unable to exploit these capabilities because they require business people to be technologists or technologists to be business people –a rare skill and behavior mix in most corporations.

During my initial discussions with the I.T. group representatives, the sense that the rationalization strategy while providing local success for the group would not yield organizational success was confirmed.  This left them with a choice; focus on their own success or raise the issue and investigate on how to realign to help the business be successful or merge both objectives.  The problem with the latter two alternatives is that most I.T. organizations have never developed the competency to do such effectively.   With tightening budgets and new technologies, it’s usually all an I.T. organization can do to develop minimal competence in deployment and operation of technology, so developing a practice for alignment with business gets short attention if any.  This was all our hour discussion could achieve; however, it’s not the end of the activity we’ve schedule another meeting this coming week to discuss using the alignment methods I’ve been developing. 

Strategy Alignment and I.T.

Been away from my blog the past few days as I’m heads down packing to leave my corporate apartment for new digs.   I had time then to mull over some ideas regarding Business and I.T. strategic alignment.  These circled back to ideas I had in the 80s regarding Computer Integrated Manufacturing (CIM) and a quote from a friend “Technology makes a good servant but a poor master”.    Most of the strategies, and I’ve seen a lot these days.  Everyone has an I.T. strategy and so called architecture –I’ll get on my soapbox about architecture another time—which is positioned as the silver bullet for what ails a corporation.  The problem I see with these is there is no linkage between Business and I.T. Strategies and Architectures.   

I spent most of yesterday in discussion with one of the people I’m mentoring about such.  She’s starting a new position as a Sr. Architect and was trying to figure out her first steps.   I suggested getting to know the organization and its business model first.  We spent time discussion Michael Porter, Adrian Slywotzky approaches and how to analyze the business.  In a short time we had decomposed her new employer’s business model and the competitive threats on the horizon.    She was amazed at how easy yet difficult this was to do.  The “wow” was in her voice.  I replied this was the easy part.  The tough part is determining what to do and aligning the critical stakeholders to do it. 

I had previously worked an engagement years ago, with IBM, in which we used a business strategic analysis method; Strategic Capabilities Network (SCN).  At that time it was just a IBM Research paper.  A subordinate and I built a quick tool to support the method out of MS Access for a strategy engagement we were doing.   We collected the data, analyzed it which helped us develop and eCommerce strategy for the client.  I took a quick mental note that this could be eventually used as the bridge between business and I.T. strategy.  

Fast forward to today, I still see gaps between business and I.T. that Evel Knievel would have second thoughts about jumping.  However, as I started pondering this issue It came to me the reason why was it still was a translation issue.  Business and Technology don’t talk the same language which has brought me back to my SCN application a few other tools and methods I’ve used in the past and how to integrate them into a more cohesive methodology than TOGAF or many of the other technology driven architecture approaches.   This is not a slight against TOGAF, etc. but rather a thought how to bridge Business Strategy and I.T. Architecture into a symbiotic relationship.

In the new role I’m looking at fulfilling I can see this greatly helping my peers be more successful; faster and with greater results that delight clients.        

Strategic Alignment: Getting your people going in the same direction

One of the hardest roles anyone has in a corporation today is that of leadership.  Like Peter Drucker and Henry Mintzberg, I separate leadership from management.  Leadership suggests strategy and change, while management focuses on operational excellence –doing what others are doing , may be a little better—think best practices.  What brought upon these insights and surfaced another method I use in my enterprise architect’s tool box, is last night’s read; Deep Dive by Richard Horwath.  His book highlighted the previous differentiation between strategic thinking (leadership) and strategic planning (operational excellence).

The insight I came up with was one of, here’s another business buzzword coming, strategic execution.  Over the past two decades I watched lots of interesting strategies emerge from the likes of IBM, Samsung, Microsoft, etc.  Some had promise, some thankfully died of neglect.  When On-Demand came about, I thought it was a great idea, still think so.  However, execution of that idea was years away.  Not because of technology immaturity, but because of a lack thinking on how to deploy the strategy and the competitive responses it was likely to provoke.   

After a strategy review meeting I sat down with the teams to discuss how to analyze competitive response and what they needed to do to get the strategy operationalized or in management consulting-speak strategic execution.

Competitive Analysis is too broad a topic for this post, so I’ll pass on any further discussion here.  Executing the strategy or any strategy for that matter is a cross between Strategic Thinking and Strategic Planning.  Strategic Planning typically has evoked a set of activities that forecasts based on past performance. (i.e., let’s do what we did last year only better, but we don’t really know how).  So the “how” of achieving those insights seems to get lost in the exercise of metric and resource allocation.

The technique I’ve used is a refinement of concepts that Deming taught Japanese Industry; Hoshin Planning or Strategic Policy Deployment.  The technique is fairly simple to understand, difficult to master but worth the effort.  If you ever wonder why Sony or Honda can get an entire corporation to turn on a dime strategically, this is it. 

Hoshin Planning is simply a set of cascading matrices that interlock objectives with strategies to achieve.  Each subordinate matrix uses the strategies from above as objectives to be achieved.  The owner of the subordinate matrix then determines strategies that will achieve those objectives and determines the strength those strategies have in achieving each.  This provides the alignment.  Next in creating this strategy execution system is defining the goals and measures for both Strategies and Objectives.  Then the matrix structure is almost complete.  Lastly is assignment of resources accountable for each strategy and monitoring progress.

This series of matrices enables someone to see where subordinate activities contribute or conflict with overall corporate strategies.  When I’ve used this technique I’ve had great success in deploying strategy and changes throughout the organization.

Small successes don’t always translate into big wins

Had a discussion this morning with one of my peers; she asked a rather interesting question: “can an organization be successful focusing on lot of small product deliveries? “   The answer like most questions these days is “it depends”. 

Over the course of the past three decades I’ve watched various business and development models come and go.   What I’ve observed from a systems perspective is that you cannot grow a business by savings.  Viscerally this sounds wrong, however, to grow a business takes investment.  No investment no growth. 

Observing nature you find the same phenomena.  All systems that grow take additional resources to grow.  Without allocating resources to growth it remains locked in a near status quo state.  I say near because typically without enough resources to repair and renew components the system will decompose also.  However, that assumes that the system is isolated in a stable environment; a huge and dangerous assumption.  When was the last time you experience any environment being stable.  Certainly today’s economy looks anything but stable.  A series of systems dynamics and little decisions has placed the world economy into a Mobius Loop pitching it back and forth between chaos and stagnation.

With that context in mind, I see too many organizations and managers using the small wins strategy towards business success.  Typically this approach is used to limit losses by timid management, using the excuse of building momentum.  The problem becomes that the next step has not been defined.  There is no there, there in the mind of these managers. 

The strategy is for them not to screw up enough to get fired.  If the project fails, well it was a small lost.  If the project succeeds, it gives the backer rights to try building something else.  The only problem is that the something else then becomes another unsure step because you were not invested enough in the first project.  Thus the next project is often driven by social pressures off from its original trajectory. 

Eventually you have hundreds of small unrelated small wins that in many cases are out of alignment.  Think of a group a small kids, all running after the ball, playing some older kids that have learned how to play as a team.  Sure the older ones have more physical abilities, but, it’s the alignment and coordination that wins the day.    

Many people decry strategies, vision and architecture these days.  However, I contend why this is so is that many strategies, visions and architectures are not or if they are they’re poorly conceived.  Recent books and research on the market are indicating that most management is not up to the task of strategy or architecture.  Small wonder, the jobs they performed and were rewarded for were on operational excellence not strategy and vision.  Maybe that’s why other corporations and nations are winning markets away and not in a temporary manner.        

If you focus on best practices which improve operation effectiveness, you’ll eventually compete on a price level as others will be doing the same.  There is only a limited competitive advantage in best practices as others eventually adopt the same. Strategy and architecture seeks to do things better and different than the crowd.   This small wins without a long term strategy result in either chaos or mediocrity.  .