Professional Documents
Culture Documents
Joint effort between IMD and MIT Interviewed or surveyed over 150 organizations in 7 countries in the US and Europe Quantitative survey of 103 organizations in US and Europe Book published in June 2006
IMD 2007
Outline
What is architecture? Why dont organizations have the right architecture? Why does aligning IT with strategy make things worse? What decisions do organizations have to make? How do you transform your architecture (and legacy systems)?
IMD 2007 3
IMD 2007
Enterprise architecture is the organizing logic for the work processes and IT systems in an organization
IMD 2007
An organizations architecture lets it execute some initiatives well but not others Johnson & Johnson: Over 200 operating units $47B in annual revenues Sales increases and double-digit earnings increases every year for 20 years J&Js Management: Autonomous management of each unit Different systems and processes in each unit Great local flexibility and fast response to changing market needs
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Customer Group 1
IMD 2007
Customer Group 2
Customer Group 3
Customer Group 19
8
Change in Environment
Architectural Entropy
No Plan
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IMD 2007
10
Corporate Data
11
Siloed architectures and a short-term cost focus lead to long-term cost increases
IT Budget
63%
Time
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12
IMD 2007
13
Outline
What is architecture? Why dont organizations have the right architecture? Why does aligning IT with strategy make things worse? What decisions do organizations have to make? How do you transform your architecture (and legacy systems)?
IMD 2007 14
Organization Leadership
Drives direction
Strategic Initiative
Strategic Initiative
Organization Foundation
Core work processes and IT Systems
The resulting ITsupported processes help the organization achieve its strategic objectives
Source: Enterprise Architecture as Strategy: Creating a Foundation for Execution, by J Ross, P Weill and D Robertson, Harvard Business School Press, 2006 IMD 2007
15
ABC Company aims to build and consolidate leadership positions in its chosen markets, forging profitable growth opportunities by coordinating a strategic, synthesized approach to achieve maximum returns for our stakeholders.
16
Organization Leadership
Reduced flexibility Strategic Initiative Provides only vague direction
Strategic Initiative
Organization Foundation
Core Business Processes and IT Systems
Source: Enterprise Architecture as Strategy: Creating a Foundation for Execution, by J Ross, P Weill and D Robertson, Harvard Business School Press, 2006 IMD 2007
17
Outline
What is architecture? Why dont organizations have the right architecture? Why does aligning IT with strategy make things worse? What decisions do organizations have to make? How do you transform your architecture (and legacy systems)?
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Building capabilities
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19
Building capabilities
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10
To achieve greatness requires learning basic skills so well that they become second nature
IMD 2007
21
11
In many organizations managers spend too much time on basic tasks not focusing on higher-value activities
Understanding
constituent needs
Collecting taxes,paying benefits, delivering services
IMD 2007
Getting the architecture right for basic tasks gives you a platform for innovation Developing innovative new services
Understanding
constituent needs
Collecting taxes,paying benefits, delivering services
IMD 2007
12
To support your strategy, define your operating model The operating model is your answer to two questions: 1) What are the core activities in your organization? o What activities do you want to perform repeatably, flawlessly, and efficiently? o What activities did you perform yesterday, and will you perform today and tomorrow? 2) How standardized and integrated do they need to be? The operating model: Focuses on the sacred transactions of the organization the core activities that should be second nature Provides a stable view of the organization Is more useful for guiding IT efforts
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13
How much standardization do you need? (Or: how much standardization can you live with?) Standardization: Simplifies operations, reduces costs, and increases efficiency Allows measurement, comparison, and improvement Can accelerate innovation
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27
How much standardization do you need? (Or: how much standardization can you live with?) Standardization: Simplifies operations, reduces costs, and increases efficiency Allows measurement, comparison, and improvement Can accelerate innovation BUT: Can limit local flexibility May require that local units replace perfectly good systems and processes with new standards May be politically difficult to implement
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14
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Business Unit 2
Customers Customers
Business Unit 3
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15
How much integration do you need? (How much can you live with?) Integration: Links efforts through shared data Provides transparency across the organization, and the seamless flow of information across activities Allows an organization to present a single face to a customer, supplier, or partner
IMD 2007
31
How much integration do you need? (How much can you live with?) Integration: Links efforts through shared data Provides transparency across the organization, and the seamless flow of information across activities Allows an organization to present a single face to a customer, supplier, or partner BUT: Requires common data definitions Can be time-consuming and difficult to implement Unnecessary if units are organized around unique customer groups
IMD 2007
32
16
Business Unit 1
High
Diversification
Business Unit 1
Customer Customer Group A Group A
Replication
Business Unit 1
Customer Customer Group A Group A
Low
Business Unit 2
Customer Customer Group B Group B
Business Unit 2
Customer Customer Group B Group B
Business Unit 3
Customer Customer Group C Group C
Business Unit 3
Customer Customer Group C Group C
Low
Source: Enterprise Architecture as Strategy: Creating a Foundation for Execution, by J Ross, P Weill and D Robertson, Harvard Business School Press, 2006 IMD 2007
High
High
Process 3
Process 14
Low
Process 1 Process 9 Process 15
Low
High
17
ING DIRECT
Business Process Integration
High
Business Unit 1
Customer Customer Group A Group A
Business Unit 2
Low
Business Unit 3
Low
High
ING DIRECT
Simple products, mostly savings and simple loans No current account, no cash, no ATMs No bank branches: internet and call centers only Copy best practices between country business units Shared IT architecture and applications
142 123 96 59 49 44
43
IMD 2007
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18
External Services
Prospect Fulfillment
Reports local/HQ/Tax
Channel Services
IVR/CTI server Imaging server E-mail server Web server Gateway server
Customer-Contact:
Call Center, IVR, E-mail, Direct Mail
Self-Service:
Internet, MinTel, ATM, WAP, (WebTV)
Source: Enterprise Architecture as Strategy: Creating a Foundation for Execution, by J Ross, P Weill and D Robertson, Harvard Business School Press, 2006 IMD 2007
37
High
Customers Customers
Low
Low
High
19
Gate Readers
Hand Helds
Electronic Events
Location Flight Schedule Maint.
Business Reflexes
Cell Phones Desktops
Equip.
Employee
Aircraft
Customer
Ticket
Laptops
Scanners
Reservation Systems
Skylinks
Travel Agent
Ticket Counter
Crown Room
Boarding
Inflight
Baggage
Customer Experience
Digital Relationships
Loyalty Programs
IMD 2007
Source: Adapted from Delta Air Lines documents used with permission
39
Business Unit 2
High
Business Unit 3
Customers Customers
Low
Low
High
20
Customer
Screen Entry & Validation Marketing Illustrations Order Entry Underwriting Billing/Payment
ACORD XML ACORD JLife
Business Rules
Integration Hub
Party Management
Underwriter
Call Center
Claims
Product Admin Service Provider Partner Portals Events Service Workflow Recording
41
IMD 2007
Organization Leadership
Provides only vague direction
Strategic statements are often promises (get closer to our customers) or operational directives (enter Chinese market) Strategy provides little information on long-term direction of organization By the time IT finishes its work, the strategy has changed The resulting IT legacy makes the organization less flexible in the future
Strategic Initiative
Strategic Initiative
Organization Foundation
Core Business Processes and IT Systems
Source: Enterprise Architecture as Strategy: Creating a Foundation for Execution, by J Ross, P Weill and D Robertson, Harvard Business School Press, 2006 IMD 2007
42
21
Organization Leadership
Innovation (Happy Surprises) Strategic Initiative Strategic Initiative Drives direction
Operating Model
Process integration & standardization requirements
Strategic Initiative
Enterprise Architecture
Builds foundation
Organization Foundation
Core Business Processes and IT Systems
IMD 2007 43
Outline
What is architecture? Why dont organizations have the right architecture? Why does aligning IT with strategy make things worse? What decisions do organizations have to make? How do you transform your architecture (and legacy systems)?
IMD 2007 44
22
Source: Enterprise Architecture as Strategy: Creating a Foundation for Execution, by J Ross, P Weill and D Robertson, Harvard Business School Press, 2006 IMD 2007
45
46
23
Centralized Collection of standardization of separate departments/units technology platforms with rather than exception integrated management enterprise Separate choices Business process and IT application made for each product, function, decisions made locally and segment Investments based on project ROI Investments based on cost reduction
Source: Enterprise Architecture as Strategy: Creating a Foundation for Execution, by J Ross, P Weill and D Robertson, Harvard Business School Press, 2006 IMD 2007
47
Centralized Collection of standardization of separate departments/units technology platforms with rather than exception integrated management enterprise Separate choices Business process and IT application made for each product, function, decisions made locally and segment Investments based on project ROI Investments based on cost reduction
Source: Enterprise Architecture as Strategy: Creating a Foundation for Execution, by J Ross, P Weill and D Robertson, Harvard Business School Press, 2006 IMD 2007
48
24
Business Modularity
Information and process interface standards defined Business process ownership defined Business case made on time to market, flexibility
Centralized Collection of standardization of separate departments/units technology platforms with rather than exception integrated management enterprise Separate choices Business process and IT application made for each product, function, decisions made locally and segment Investments based on project ROI Investments based on cost reduction
Source: Enterprise Architecture as Strategy: Creating a Foundation for Execution, by J Ross, P Weill and D Robertson, Harvard Business School Press, 2006 IMD 2007
49
Business Silos
Standardized Technology
Optimized Core
Standardization/ integration of processes and data Separation of decisions about processes, applications, data, and infrastructure Business case made on performance (34)
Business Modularity
Information and process interface standards defined Business process ownership defined Business case made on time to market, flexibility
Centralized Collection of standardization of separate departments/units technology platforms with rather than exception integrated management enterprise Separate choices Business process and IT application made for each product, function, decisions made locally and segment Investments based on project ROI (12) Investments based on cost reduction (48)
(6)
50
Source: Enterprise Architecture as Strategy: Creating a Foundation for Execution, by J Ross, P Weill and D Robertson, Harvard Business School Press, 2006 IMD 2007
25
Key Findings The transition from one stage to the next is difficult and time consuming. Moving from one stage to the next requires a business transformation as well as a technical one Companies that try to skip a stage are usually unsuccessful Each stage involves a very different view of the value of IT and the role of IT in the organization The leadership challenges are very different for each transition
IMD 2007
51
The role of the CIO changes as organizations move through the stages
Stage Key Skills of the CIO: Business Silos Standardized Technology Optimized Core/ Business Modularity
Technical knowledge to help with standards decisions Ability to implement standard project methodology and oversight Ability to work with top management team to establish basic governance Ability to make business case for standardization
Detailed knowledge of how the organization functions Ability to manage large organizational change efforts Credibility with business unit or functional heads Ability to manage large central budget Understanding of architecture as a business enabler
Ability to facilitate innovation off new platform Detailed knowledge of core business - could potentially run a business unit if necessary Ability to delegate ownership of key process and data modules, while still ensuring adherence to standards Understanding of strategic benefits of architecture
CEO
CEO or CFO
CEO
0%
26%
50%
* Percent of CIOs having second VP title, from sample of 26 CIOs in US and Europe Source: Enterprise Architecture as Strategy: Creating a Foundation for Execution, by J Ross, P Weill and D Robertson, Harvard Business School Press, 2006 IMD 2007
52
26
Standardized Technology
Architects on project teams IT steering committee Architecture exception process Centralized funding of enterprise applications Centralized standards team
Optimized Core
Business Modularity
Process owners Enterprise architecture guiding principles Business leadership of project teams Senior executive oversight
Enterprise arch. core diagram Post-impln assessment Full-time enterpr architecture team
Source: Enterprise Architecture as Strategy: Creating a Foundation for Execution, by J Ross, P Weill and D Robertson, Harvard Business School Press, 2006 IMD 2007
53
Customer Group 1
Customer Group 2
Customer Group 3
Customer Group 19
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27
Customer Group 1
Customer Group 2
Customer Group 3
Customer Group 19
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Global Agility
Local Agility
Source: Enterprise Architecture as Strategy: Creating a Foundation for Execution, by J Ross, P Weill and D Robertson, Harvard Business School Press, 2006 IMD 2007
56
28
CIO Rating
IT Responsiveness (1)
Architecture Stage
Source: Enterprise Architecture as Strategy: Creating a Foundation for Execution, by J Ross, P Weill and D Robertson, Harvard Business School Press, 2006 IMD 2007 57
CIO Rating
time. excellence, customer intimacy, product leadership and strategic agility. (3) Senior management and business unit management satisfaction.
Architecture Stage
Source: Enterprise Architecture as Strategy: Creating a Foundation for Execution, by J Ross, P Weill and D Robertson, Harvard Business School Press, 2006 IMD 2007 58
29
Enterprise Systems
32% 17%
21% 14%
35%
40%
35%
IT Budget:
100%
85%
75%
IT budgets are corrected for industry differences. Application silo budget is the baseline. Budgets for other stages are represented as a percentage of the baseline budget. Only five firms in stage four reported their IT budgets so data is not reliable. Source: Enterprise Architecture as Strategy: Creating a Foundation for Execution, by IMD 2007 Weill and D Robertson, Harvard Business School Press, 2006 J Ross, P 59
Summary Enterprise architecture is the organizing logic for the foundation of your organization: your work processes and IT systems In most organizations, architecture is hindering execution and preventing innovation Defining your operating model is the first step in choosing the right architecture for your organization Transforming architecture is a difficult, timeconsuming process, but the benefits begin immediately
IMD 2007 60
30