20120717 baker boundaries for business architecture v3
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The document discusses business architecture and operating models. It defines business architecture as designing the operating model of a business based on strategic business model decisions. An operating model describes how a business operates across domains like customers, capabilities, structure and metrics. The intersection of business model decisions and operating model identifies required changes. A business architect needs skills in facilitation, decomposition, structuring and knowledge of strategies, offerings, organizations and more to design effective operating models.
20120717 baker boundaries for business architecture v3
- 1. Business Architecture - Unbounded July 17, 2012 David Baker Principal, PwC Emerging Technology & Architecture [email protected] +1.512.554.9035 (mobile)
- 2. Architecture is very elusive . . . “What is architecture anyway? Is it the vast collection of the various buildings which have been built to please the varying taste of the various lords of mankind? I think not. “No, I know that architecture is life: or at least it is life itself taking form and therefore, it is the truest record of life as it was lived in the world yesterday, as it is lived today, or ever will be lived. “So architecture I know to be a great spirit. It can never be something which consists of the buildings which have been built by man on earth—mostly now rubbish heaps or soon to be. “Architecture is that great living spirit which, from generation to generation, from age to age, proceeds, persists, creates, according to the nature of man, and his circumstances as they change. That is architecture. - Frank Lloyd Wright, 1937 7/17/2012 PwC 2
- 3. . . . because it is the intangible results of design 7/17/2012 PwC 3
- 4. Therefore, business architects create business designs CORPORATE STRATEGY AMBITION BUSINESS MODEL TARGET OPERATING MODEL CUSTOMER OFFERING BUSINESS CAPABILITIES PROCESS ORGANISATION TECHNOLOGY PEOPLE CAPABILITIES INFORMATION CORPORATE STRUCTURE ENTERPRISE PERFORMANCE MANAGEMENT METRICS 7/17/2012 PwC 4
- 5. A business model is not an operating model A business model describes the decisions made by an enterprise to create and deliver value • Decide where it operates (e.g., which markets, countries, customer segments) • Decide how it competes (e.g., strategies for products and services, pricing strategy) • Decide how it mobilizes the organization (e.g., organization structure). An operating model describes how the organization operates across different domains in order to deliver the business model • How it uses its customer offering, business capabilities and corporate structure to create, deliver and capture value. In a business transformation, the business model is defined before the operating model. The decisions made in the business model drive the design of the target operating model. 7/17/2012 PwC 5
- 6. Here are some sample strategic business model decisions • Moving up or down stream, or significantly shifting the portfolio focus in such manner, to hold the most profitable (Where to Play) Value Chain Role value chain position(s) Participation Market • Entering, exiting, or significantly changing focus on market segments, such as consumer segment, purchase occasion, Targeted Customers, industry/type/size (B2B), geographic market, or retail channel (e.g., e-Commerce) Markets • Entering new markets vs. achieving local leadership/density, Market specialization vs. broad market focus • Shift to higher margin categories, price points • Shift from product focus to services or integrated solution • Financing • Installed base (e.g., Aftermarket, consumables, ancillary) Core Offerings • In/out licensing to optimize offering portfolio • Shift from product category focus to consumer lifestyle focus • Specialty vs. commodity, private label • Blockbuster, product pyramid or profit multiplier models • Increased differentiation via <xyz> • Optimizing the value proposition for target customer via <xyz> • Establishing a guarantee or warranty • Eliminating <xyz> areas of unprofitable differentiation • • Competitive Strategy (How to Win) Value Proposition Over-invest in R&D to develop 1-2 year lead Improve the purchase/ usage experience • Exclusive offerings • Switchboard (matching opportunities and capabilities) • De-facto standard • Encourage trade up through <xyz> • Centralization of pricing, reduced price competition • Penetration pricing • Alignment with cost to serve, menu pricing Pricing Strategy • Yield pricing • Customer value capture (shared risk/reward) • Per use fee, monthly fee • Bundling A with B • Significant change in promotion spend • Changing focus from awareness to preference/conversion Marketing Strategy • Targeted marketing • Capturing deep customer insights on an ongoing basis • Creation of a loyalty program • Significantly improved POS presentation / merchandising • Elimination of channel loading, significant • How channels are coordinated (e.g., incentives) changes to trade promotion • Significant re-allocation of resources to accounts/customer • Cross-selling segments/geographies or hunting/farming Sales Strategy • Optimizing sales force size or structure • What sort of results sales incentives are focused upon (e.g., volume • Long-term contracting vs. profit), how strong sales incentives are • Alternative retail formats • New customer acquisition vs. retention focus • Joint planning with customers • Product life cycle time profit (e.g., maximizing launches) • Increase speed to market, service levels • Focus on a few R&D projects to double down • Optimize capacity • Eliminate waste (Lean/TPS) or eliminate variation (Six Sigma) • Close high cost facilities • Contract manufacturing, outsourcing, offshoring, shared services Operations Strategy • Achieve overall scale, transaction scale • Digitization, automation • Build to order • Minimize fixed costs to maximize industry cycle profit • Source strategically 7/17/2012 PwC 6
- 7. An operating model is described using diagrams Operating Level of Phase Audience* Diagrams* model Detail Strategy Executive High-level Conceptual Conceptual diagrams reflect the usage characteristics of Leaders as Operating the TOM – what the owners are going to do with it. In other Owners Model words, conceptual diagrams should not have any internal components. By way of example, in civil architecture, the first blueprints show the outside of the building, and some simple layout of the entrances, rooms, and major features, but not the placement of electrical wires, pipes, or duct work. Design Architects as Detailed Logical Logical diagrams reflect the internal components and their Designers Operating connections. In this manner they are an intermediary Model between what is desirable (the "conceptual") and what is physically and technically possible (the "physical"). For example, in civil architecture, the second set of blueprints shows the location of electrical outlets, wiring diagrams, location of HVAC equipment, ducts, trusses, and beams, but does not identify specific products or techniques for construction or installation. Construct Engineers as Built Physical Physical diagrams document the construction techniques Builders Operating and connections while reflecting the physical constraints Model and limitations. For example, in civil architecture, the Components engineering diagrams specify specific makes and models of equipment, their dimensions as well as how and where they get connected. * Either from or adapted from the Zachman Framework 7/17/2012 PwC 7
- 8. The intersection of the business model and operating model identifies the changes Business Model Decision 1 Decision 2 Decision 3 … Decision n Customer Offerings Impact Impact Impact … Impact Organization Impact Impact Impact … Impact Business Capabilities People Impact Impact Impact … Impact Operating Model Process Impact Impact Impact … Impact Note: This analysis is an excellent Technology Impact opportunity Impact your company’s Impact to use … Impact business capability map to focus on Information Impact Impact specific areas … Impact Impact Corporate Structure Impact Impact Impact … Impact EPM Metrics Impact Impact Impact … Impact 7/18/2011 PwC 8
- 9. A business capability map (current and future) is a critical input for doing impact analysis Strategy & Vision Product & Service Marketing & Operations Service Design Selling & Support • Develop Strategy & • Analyze Products & • Advertize Products • Plan & Distribute Schedule Vision Service Marketing & Services • Optimize Aircraft Routes • Plan & Schedule Crew • Decide & Manage • Design Product & • Offer Products & • Plan & Schedule Station / Ground Initiatives Service Offerings Services Facilities / Resources • Plan & Schedule Maintenance • Conduct Market • Fare Product & • Make Reservations Equipment & Resources Research Service Offerings • Book / Issue • Checkin • Segment Target • Design Brands Tickets • Perform Gate & Boarding Services Markets • Plan Flight & Dispatch • Conduct Product & • Collect Payments • Track Flight & Aircraft • Define Product & Services Tests • Perform Inflight Services Brand Strategy • Manage Revenue • Perform On-ground Operations • Perform Maintenance • Manage Partners • Service Customer Requests • Manage Customer Relations Corporate Functions Manage Manage Operate Contracts & Operate Ensure Manage Improve Deliver Operate HR Finance Supply Legal Comms Compliance IT Processes Training Facilities Chain 7/18/2011 Example derived from an airline company PwC 9
- 10. What should architects know and do? An architect should be ingenious, and apt in the acquisition of knowledge. Deficient in either of these qualities, he cannot be a perfect master. He should be a good writer, a skilful draftsman, versed in geometry and optics, expert at figures, acquainted with history, informed on the principles of natural and moral philosophy, somewhat of a musician, not ignorant of the sciences both of law and physic, nor of the motions, laws, and relations to each other, of the heavenly bodies. -Marcus Vitruvius Pollio de Architectura, ~15BC 7/17/2012 PwC 10
- 11. What are the fundamental architect skills? Source: “What is Design Thinking” http://emergentbydesign.com/2010/01/14/what-is-design-thinking-really/ 7/17/2012 PwC 11
- 12. What does a business architect need to do and know? • Skills • Facilitate discussions with senior executives to define the supporting operating model • Decompose a business into core capabilities • Identify the entities that interact with those capabilities, and the interactions between them • Decompose a business into meaningful structural units including roles and responsibilities • Decompose a business into meaningful process areas and the flows amongst them • Identify business information needs • Work with technical architects to identify the logical technology components enabling the operating model • Structure corporate financial, legal, and tax entities and their governance • Knowledge • Corporate strategy including a business unit’s desired end state business model • Product and service offerings structures • Organization structure and people capability trends • Business processes management • Business information, analytics and semantics • Corporate structure options 7/17/2012 PwC 12
- 13. You can start your business architecture efforts in several different directions Strategy Driven Issue Driven • Understand ambition • Identify change drivers (efficiency? effectiveness?) • Understand business model • Align with ambition and business • Identify impacts on current operating model model • Identify impacts on current operating model Target Operating Model 7/17/2012 PwC 13
- 14. Thank You ©2012 PwC. All rights reserved. "PricewaterhouseCoopers" refers to PricewaterhouseCoopers LLP, a Delaware limited liability partnership, or, as the context requires, the PricewaterhouseCoopers global network or other member firms of the network, each of which is a separate legal entity. This proposal is protected under the copyright laws of the United States and other countries. This proposal contains information that is proprietary and confidential to PricewaterhouseCoopers LLP, and shall not be disclosed outside the recipient's company or duplicated, used or disclosed, in whole or in part, by the recipient for any purpose other than to evaluate this proposal. Any other use or disclosure, in whole or in part, of this information without the express written permission of PricewaterhouseCoopers LLP is prohibited. 7/17/2012 PwC 14
Editor's Notes
- #3: 1. Clarity: Company strategies range from either high-level visionary statements and targets with no detail, to detailed ‘wish list’ of functionalities required with no over-arching objective or strategy 2. Identifying: Company strategies are expressed in terms of growth and profitability targets and are not often grounded in what the ‘customers’ want or what is feasible from a market perspective. 3. Translating: Business and IT within an organization do not have a ‘common language’ to specify, understand and modify the business drivers into operational implications and from operational implications to technology requirements. Mismatched business and IT expectations4. Quantifying: Organizations often do not follow through on the rigor of quantifying, assigning responsibility, and measuring business benefits and costs. Even if costs of a program are measured, benefits are rarely quantified5. Complexity: ‘Changing the wings while flying’ or incorporating new initiatives with complex operational and technology changes within ongoing operational and development pressures . . . challenges even the most capable organizations. Competing objectives for resource capacity
- #4: Sources: “Does Design Defy Thinking? Give it a Try…” http://glimmersite.com/2009/08/16/contribute-to-the-design-is-definitions/design-is/“What is Design” http://www.mshanks.com/2010/01/11/what-is-design-thinking/“What is Design”, Tiffant Chu, http://ytiffanie.wordpress.com/danish-design/what-is-design/Schools of design Rational modelAction centric model (e.g. agile)design thinkingPeople of designbernieroth
- #12: “What is Design Thinking” http://emergentbydesign.com/2010/01/14/what-is-design-thinking-really/