Business Architecture Visualising Value Delivery

Summary

This article discusses the concept of Business Architecture, a new and fast-maturing disciple whose purpose is to improve the strategic alignment of IT investment with business drivers.

Two models, the Capability Model, and the Value Stream, are emerging as powerful tools that are essential for building robust strategic views of the business. These architectural views speak to decision-makers in their simplicity, and empower these senior business stakeholders to make objective planning decisions. Success is measured by evaluating outcomes against clear performance objectives, which are agreed before any investment is made in building IT Assets.

Aimed at the practicing business analyst, this article presents the Capability Model and the Value Stream Map in easy-to-understand language, and uses an example of each to further clarify the discussed ideas.

A follow up article will use these two models to understand the competencies identified by the IIBA in a personal context, and then to build value stream models that describe how a Business Analyst delivers value to their customer.

Why Business Architecture?

Enterprise Architecture takes a strategic view the organisation in terms of the business functions being executed to create shareholder value, and the IT capabilities that support those business functions.

Business Architecture applies a set of tools and techniques to create a business-centric view of the enterprise that supports the technical views of the enterprise derived from the Software, Infrastructure and Information Architectures. It is a discipline that is maturing to support the overall strategic understanding of the enterprise.

The practice of Business Architecture brings focus to improving enterprise agility, while at the same time reducing costs. An enterprise can leverage its Business Architecture is to increase market share (in increasingly competitive marketplaces), and to reduce unnecessary waste, especially waste arising from the misalignment of Business and IT.

Reality Check: Achieving these lofty ambitions is a tall order.

To assist the Business Architect achieve these goals two essential business models have emerged whose main purpose is to allow decision-makers to both visualise, and importantly to share, their strategic view, both with each other and also the organisation at large.

Discussions that revolve around a common business model drives out a shared vocabulary. This agreed vocabulary will, in time, address the problem of ambiguity that is so common in organisations. Overall, we can expect that this will lead to objective decision-making that can ultimately guide the enterprise to greater heights.

If the mission statement, vision, and specific business goals chart communicate why the enterprise exists in the first place, then Business Architecture models describe what (“What the Business Does”) and how (“How the Business Does It”) in the context of this strategy.

Business Architecture Defined

To start, let’s understand the definition of Business Architecture.

The OMG’s Business Architecture Special Interest Group[1] uses this definition:

A Blueprint Of The Enterprise That Provides A Common Understanding Of The Organization And Is Used To Align Strategic Objectives And Tactical Demands.

Ralph Whittle and Conrad Myrick, in their paper Enterprise Business Architecture: The Formal Link between Strategy and Results[2], are more specific with their definition:

The [Enterprise Business Architecture] defines the enterprise value streams, their relationships to all external entities and other enterprise value streams, and the events that trigger instantiation. It is a definition of what the enterprise must produce to satisfy its customers, compete in a market, deal with its suppliers, sustain operations and care for its employees. It is composed of architectures, workflows and events.

The remainder of this article discusses capability modelling, which is the enterprise blueprint, and value stream mapping, which describes how the business satisfies customers.

Capabilities

A business capability is an abstraction of a business function that describes what is being done by the business to achieve a specific purpose or outcome.

Conceptually, a capability is a “black box” view of a business function[2], and each capability encapsulates the people, processes and IT platforms that are needed to realise the desired outcome, and accomplish the stated purpose.

By observing the capability as a black box we can evaluate the performance in terms of known inputs and expected outputs, and we can make an assessment of how effective the capability is in terms of its stated purpose.

The description of a business function, or capability, brought into view by examining its externally visible behaviour, is tremendously stable. In contrast, observing how a business function is delivered, seen by taking an internal view of the enterprise reveals the heady pace of change in most businesses today.

The analysis of business function, leading to the identification of capability, must ensure that each identified capability is unique. Discovering similar capabilities is a signal for further investigation. Quite likely, your analysis has uncovered duplication and redundancy.

Leveraging the stability of capabilities, we organise the capabilities our analysis has revealed into a change-resilient model of the enterprise; our enterprise blueprint. When necessary, further analysis to decompose complex capabilities into simpler, smaller, and more purpose-specific capabilities can be performed. Only decompose when necessary, and no sooner.

Using the model we can also investigate how the identified capabilities relate to each other. The connections between capabilities are defined by the relationships that the capabilities have with one and other. Capabilities that are heavily interconnected with other capabilities may prove difficult to change, and the business architect can use this to highlight areas that pose a high risk in the face of change.

The Business Architect uses the capability model as their blueprint for understanding the business-at-rest.

Using the Capability Model

The diagram below presents a generic, level-1 capability model that the Business Architecture Body of Knowledge[4] uses as an example to support its discussion on capabilities. The capabilities have been organised into three categories according to the intent of the capability. These categories are:

  • Strategic or Direction Setting;
  • Core or Customer Facing;
  • Supporting.

By stratifying the capabilities according to their intent we are better able to communicate with our stakeholders. The concepts we wish to convey using the model are simply stated, and require little additional explanation. Meaningful discussions can be initiated quickly.

During our analysis, while we are building the model, we will decompose these level-1 capabilities into their constituent elements. We will only decompose capabilities as necessary, and when necessary. There is a danger of getting bogged down with unnecessary over-analysing.

Figure 1: Example Level-1 Business Capability Model
Figure 1: Example Level-1 Business Capability Model

Once we have built our capability model we can mine it for information using heat mapping, and other techniques. These methods allow us to clearly identify and better prioritise IT initiatives (and will be the subject of a subsequent article). Breaking free of the how-trap[5] takes practitioners beyond mere process improvement and refinement, and the what-centric view encourages decision-makers to focus resources on those areas of their business that create the most value.

For example, analysis can highlight capabilities that hold high-value, but are performing poorly. These underperformers will naturally attract resources and investment over better performing, or less valuable capabilities.

In this way the capability model becomes pivotal to achieving strong alignment between Business and IT.

Value Streams

James Martin[6] defines the value stream as:

A value stream is an end-to-end collection of activities that create a result for a “customer” who may be the ultimate customer or an internal “end user” of the value stream. The value stream has a clear goal: to satisfy (or, better, to delight) the customer.

Where the capability model provides a view of the enterprise at rest, the value stream demonstrates how business capabilities are orchestrated to deliver customer value, and value streams[7] allow you to visualise your business in motion[8].

Customers have three basic requirements: on-time delivery of a product or service at the right price to the expected level of quality. Value streams span the enterprise, and take a cross-functional, birds-eye, process-centric view of how the enterprise acts to deliver on the customer requirement. A value stream can even include external participants such as suppliers and channel partners.

Each value-stream must align with at least one business goal, and its associated business objectives. In this way, the business value of each stream to be objectively assessed and prioritised during planning, and returns on the investment can be measured once the project has delivered an IT asset.

A value stream stage is enabled by a set of capabilities. Each unique capability can be used multiple times when doing value stream mapping, and capabilities are reused across any number of value stream stages and appear on multiple value stream maps.

The value stream therefore acts to tie what an enterprise does to create customer value (and by extension to grow shareholder profits) to how the enterprise actually delivers this value.

The diagram below simplistically describes a hypothetical value stream for processing a permit application.

Figure 2: Example Value Stream
Figure 2: Example Value Stream

Conclusion

Building the business architecture consists of constructing strategic views of both the current and the desired future state across all aspects of the enterprise for the purpose of planning the transition to the desired future state.

Because the architecture models are sufficiently abstract, there is a natural inclination to focus on the ‘big picture’, and discussions do not become mired in tactical details during the planning sessions.

The business architecture underpins a common language for sharing strategy, and communication amongst team members is unambiguous. There is tremendous opportunity to drive this common language down to line managers and team leads to ensure a consistent view of the enterprise at all operational levels.

A transparency will emerge that encourages collaboration and cooperation. The business architecture will highlight duplication and redundancy, brings sharp focus to improvement areas, and informs the tactical decisions necessary to improve co-operation and cohesion across all business units.

Effectively executed, the business architecture will directly lead to enterprise agility and cost reduction.

References

[1] OMG Business Architecture Special Interest Group. http://bawg.omg.org/

[2] Ralph Whittle, Conrad Myrick. 2004. Enterprise Business Architecture: The Formal Link between Strategy and Results.

[3] Ulrich Homann. 2006. A Business-Oriented Foundation for Service Orientation. Microsoft Corporation.

[4] Business Architecture Handbook version 2.0. 2012. Available from the Business Architecture Guild. http://www.businessarchitectureguild.org/About

[5] Ric Merrifield. 2009. Rethink: A Business Manifesto for Cutting Costs and Boosting Innovation.

[6] James Martin. 1995. The Great Transition.

[7] Note: It is important to not confuse Value Streams with Value Chains. Although the terms are often used interchangeably, they actually refer to different concepts.

[8] William Ulrich. 2011. Business Architecture-Why it Matters to Business Executives. Enterprise Architecture Advisory Service. http://www.cutter.com

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