Business Architecture

Business Architecture:Linking Business, Data,and Technology

by Ken Orr, Fellow, Cutter Business Technology Council

Business architecture is now on the front burner in many

organizations. And it is the link between business and technology

— current and future, especially future. This Executive Report

offers the latest thinking about the structure, methods, and

modeling approaches involved in business architecture. The

report discusses the major phases of business architecture:

strategic intention discovery; business context modeling; business

value chain modeling; business value stream modeling; and

business process modeling.

Enterprise Architecture

Vol. 10, No. 2

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Cutter Business Technology Council

Access to the

Experts

Tom DeMarco Christine Davis Lynne Ellyn Jim Highsmith Tim Lister Ken Orr Lou Mazzucchelli Ed YourdonRob Austin


mailto:[email protected]

Business architecture is a key link,perhaps the key link, between theenterprise and technology. Thislink has been presumed to workfrom “the business” down to “thetechnology” (aligning the technol-ogy to the business’ problems),but the argument is equally validthat the business is also constantlypushed by technology to leveragenew business opportunities (align-ing the business with the techno-logical opportunities). The tempoof this business-technology dancehas been increasing for as long asanyone can remember and showsno signs of slowing down.

Business architecture seeks to pro-vide both structure and flexibility(agility) for our businesses. It pro-vides a link to business strategyand the other major architectures:data (information), application,technology, and security. Business

architecture works in multipletime dimensions: short-range, tomeet today’s business demands,medium-range, to push plannedproducts into the marketplace,and long-range, to build a flexibleorganization to adapt to unantici-pated demands on the horizon.

Business architects are translators;they translate technology for thebusinesspeople and business forthe technology folks. The natureof the job requires people whounderstand (and are interested in)both business and technologydevelopments and trends.

The Business EnterpriseArchitecture Modeling (BEAM)1

framework, which I developed,provides a way to separate thebusiness architectural issues fromthe rest of the enterprise so thatthe focus is on business value

and business process. BEAMinvolves five major phases: strate-gic intentions; business architec-ture; data/information/contentarchitecture; application architec-ture; and technology architecture.This Executive Report discussesthe major subcomponents of thebusiness architecture phase.

The underpinning of the BEAMapproach is based on an urbanplanning model, which has morein common with a “living systems”approach to business architecturethan it does with building architec-ture (the source of the ZachmanFramework2), for unlike buildings,urban areas are constantly evolv-ing and changing: new areas aredeveloped, old areas decay, andareas are torn down and rebuilt.(See sidebar “Purpose of aBusiness Architecture.”) Thisarchitecture model, unlike the

Business Architecture:Linking Business, Data, and Technology

ENTERPRISE ARCHITECTUREADVISORY SERVICEExecutive Report, Vol. 10, No. 2

by Ken Orr, Fellow, Cutter Business Technology Council


VOL. 10, NO. 2 www.cutter.com

22 ENTERPRISE ARCHITECTURE ADVISORY SERVICE

more traditional, static way oflooking at enterprise architecture(EA), provides a useful mecha-nism for considering the value,cost, and impact that business andtechnology have on each other.

In recent years, various leading-edge companies like Walt Disney

and Microsoft have adoptedurban planning models as thebasic model for EA because theybetter represent the emerging,dynamic aspect of enterprisearchitecture. Walt Disney talksabout the dual role of the enter-prise architect: master plannerand building inspector. The

former concentrates on the bigpicture, and the latter concen-trates on ensuring that the archi-tectural standards are followed.

Business architects must be ableto look into the future and toreview the past at the same time.Because of the considerable time

The Enterprise Architecture Advisory Service Executive Report is published by Cutter Consortium, 37 Broadway, Suite 1, Arlington, MA02474-5552, USA. Tel: +1 781 641 9876 or, within North America, +1 800 492 1650; Fax: +1 781 648 1950 or, within North America, +1 800 888 1816; E-mail: [email protected]; Web site: www.cutter.com. Group Publisher: Kara Letourneau, E-mail: [email protected]. Managing Editor:Cindy Swain, E-mail: [email protected]. ISSN: 1530-3462. ©2007 by Cutter Consortium. All rights reserved. Unauthorized reproduction in any form, including photocopying, faxing, image scanning, and downloading electronic copies, is against the law. For information about reprints and/or back issues of Cutter Consortium publications, call +1 781 648 8700 or e-mail [email protected].

PURPOSE OF A BUSINESS ARCHITECTURE

The following is an excerpt from D.W. McDavid’s “A Standard for Business Architecture Description” (IBM Systems Journal,Vol. 38, No. 1, 1999):

A valid question may be raised as to why we should be concerned with an architecture of business concepts, in the context ofbuilding software systems. After all, IT architects do not create businesses; they create technology-based information systems.However, the systems that they create do have a fundamental impact on businesses. In addition to purely technical issues, infor-mation systems architects need to be concerned with the content and usage of the systems that are built.

An analogy is often drawn between the architecture of buildings and the architecture of software systems.1 One lesson from thatanalogy is that architects of buildings start with a fundamental understanding of the purposes to be served by those buildings.Architects of suburban homes need to understand something about the behavior patterns of young, growing families. Architectsof manufacturing plants need to understand patterns of configurable assembly lines. Architects of high-rise office towers andarchitects of mini-malls need to understand patterns of business behavior in core business districts and outlying areas, respec-tively. In a similar fashion, architects of enterprise systems need to understand patterns of business behavior and patterns oftechnology and how they work together to enable businesses to achieve their strategic and tactical goals.

The building analogy only goes so far in understanding business and its IT support. Another perspective on business enterprises is tothink of them as living systems, undergoing an ongoing process of evolution. This analogy helps us to understand the relationshipbetween businesses and information systems technology. Evolution is the result of two basic conditions. One is a source of novelty,2

and the other is an opportunity to expand into unoccupied environments.3 Today the use of information technology is creating boththe necessary source of novelty and the expansive environment that is driving the rapid evolution of business.

1A reference to Christopher Alexander in this regard may be found in P.T.L. Lloyd and G.M. Galambos, “Technical Reference Architectures,”IBM Systems Journal 38, No. 1, 51-75 (1999, this issue).

2Biological evolution is driven by changes in DNA produced by mutation, bacterial recombination, and symbiogenesis. Symbiogenesis is theprocess whereby, long ago, bacteria formed such inextricable associations with each other that they created whole new life forms. Everycell in every plant and every animal on earth contains myriad independently reproducing mitochondria, each with its own DNA and RNA,that are the living descendants of these symbiotic relationships. Lynn Margulis refers to our cells as “cellular corporations.” See L. Margulisand D. Sagan, Microcosmos, University of California Press, Berkeley, CA (1997).

3Species tend to emerge to fill empty eco-niches. Generally this follows catastrophic events, such as asteroid collisions or the oxygen crisis.Occasionally, it is the result of new environments being created. An example of noncatastrophic opportunism is the existence of some 170species of fish of the same genus found only in Lake Victoria in East Africa. They evolved from a river-dwelling ancestor when earth move-ment suddenly created one of the largest bodies of fresh water on the planet. See M. Rothschild, Bionomics: Economy as Ecosystem, HenryHolt & Co., New York (1990).


©2007 CUTTER CONSORTIUM VOL. 10, NO. 2

EXECUTIVE REPORT 33

it takes to plan, acquire, andinstall new technologies andnew systems, they must lookat the major competitive forces/technologies at work and howthese forces/technologies mayaffect their organization’s strate-gies, markets, and products wellinto the future. At the same time,they must be able to look at theircurrent architecture and legacyenvironments to ensure that newinitiatives cause a minimum ofdisruption.

A recent article in the Wall StreetJournal3 discussed how CIO jobsare changing focus with more andmore attention being paid to strat-egy and transformation. Whilethey are still charged with drivingout costs wherever possible, theirbigger task is to provide the “busi-ness architecture” between busi-ness strategy and the systemsand infrastructure that allows theorganization to turn on a dime.

This Executive Report offersthe latest thinking about thestructure, methods, and modelingapproaches involved in businessarchitecture. The report discussesthe following five major phasesof business architecture (seeFigure 1):

1. Strategic intention discovery

2. Business context modeling

3. Business value chain modeling

4. Business value streammodeling

5. Business process modeling

The report also examines the roleof business architecture in the real-time enterprise, business architec-ture modeling and tools, andbusiness architecture governance.

STRATEGIC INTENTIONS:COMPETING IN THE 21ST CENTURY

If business architecture is to assistbusiness and technology managersin considering their major options,it has to have a serious interfacewith the enterprise’s strategic, tac-tical, and operational planningprocesses. This component ofbusiness architecture is called“strategic intentions.”4 Strategicintentions are a way of looking atthe enterprise’s future as well asthe past. The past must be under-stood in terms of providing theexisting platform on which the cur-rent business operates; the futuremust be anticipated if the organiza-tion is to prosper and survive.

In one respect, strategic inten-tions are what we can see of the

enterprise’s strategic vision fromwhat appears above the organi-zational waterline. Most businessarchitects are not privy to allthe strategic thinking behindthe enterprise’s strategic vision.Oftentimes, an enterprise’smedium-term strategies (forexample, mergers, partnerships,and divestitures) cannot beshared with the organization’smiddle managers and businessarchitects for legal and regulatoryreasons. As a result, businessarchitects have to find ways toelicit the strategic intentions of theorganization from other sources,including their own researchand thinking on the enterprise, itsproducts, and its markets. The pri-mary sources involve studying anumber of key issues including:

Competitive advantage

Market positioning

Technology roadmapping

Let’s review each area.

BusinessProcesses

StrategicIntentions

BusinessContext

BusinessValue Chain

BusinessValue Streams

Figure 1 — Business architecture phases.

Competitive Advantage

Being “all things to all peo-ple”is a recipe for strategicmediocrity and below-average performance,because it often means thata firm has no competitiveadvantage at all.

— Michael Porter,Competitive Strategy5

Just last week (February20th 2007) a Wall StreetJournal article suggestedthat the remit of CIOs hadchanged. CEOs now wantCIOs to focus on IT for strate-gic competitive advantage,rather than managing ITtechnical support.

— Gerry Brown, IT director6

In the 1980s, Michael Porter wrotetwo books: Competitive Strategyand Competitive Advantage.7 Theideas in these two books, whichhave become classics, provide a

framework for the discussion ofstrategic intentions. In CompetitiveAdvantage, Porter defines compet-itive advantage as anything thatallows an organization to domi-nate an industry or market seg-ment for a long period of time.The billionaire investor WarrenBuffet says what he is lookingfor in all of his investments is a“durable competitive advantage.”Since all companies are interestedin competitive advantage but onlya few manage to achieve it, busi-ness architecture needs to focuson how systems and technologycan help the organization con-stantly strive for this advantage.

In Competitive Strategy, Porteridentifies five major competitiveforces at work in the marketplace:(1) rivalry among existing firms;(2) bargaining power of buyers;(3) bargaining power of suppliers;

(4) threat of new entrants; and (5)threat of substitute products orservices (see Figure 2). Thesecompetitive forces create adynamic environment in whichorganizations must constantlyrespond.

Overall, Porter considers twomajor strategies for achievingcompetitive advantage: opera-tional effectiveness and strategicpositioning. Operational effective-ness involves performing specificprocesses better than competitors,while strategic positioning involvesdoing the same processes differ-ently or combining processes dif-ferently. For Porter, competitiveadvantages boils down to strategicdecisions with respect to cost,differentiation, and focus (moreon this later).

Today, there is a great deal of talkabout business processes, individ-ual activities, benchmarking, andbest practices, but Porter cautionsthat in the long run, “few compa-nies have competed successfullyon the basis of operational effec-tiveness over an extended period,and staying ahead of rivals getsharder every day.” One of thereasons that operational effective-ness is so hard to leverage is thateveryone else is working fromthe same playbook. You loweryour costs, they lower theirs; yourespond a little faster, they getfaster as well. In the end, every-body gets cheaper and faster,everybody has less profit, andthe market positions are aboutthe same.



Barriers to Entry

Determinants of

Supplier Power

Determinants of

Substitution Power

Determinants of

Buyer Power

Rivalry Determinants

PotentialEntrants

Threat ofnew entrants

Suppliers

Bargainingpower

of suppliers

Bargainingpower

of buyers

Threat of substituteproducts or services

Substitutes

Buyers

Rivalry amongexisting firms

IndustryCompetitors

Figure 2 — Michael Porter’s five competitive forces.


Porter believes, as do most stu-dents of strategic planning, thatstrategic positioning provides amore difficult but more secureapproach to gaining competitiveadvantage. Having a different busi-ness model, especially a businessmodel where all (or most) of thekey business processes are inte-grated under a unified businessmodel, makes it difficult for othersto respond. Dell is an interestingrecent example of this notion.

Dell is (or until recently was) theposter child for the make-to-orderbusiness process model. Like a lotof business process innovations,Dell didn’t get into the make-to-order business on purpose; it justdidn’t have the money to follow amake-to-inventory model. In itsearly days, Dell had to wait untilits customers sent in their checksbefore it could buy the parts itneeded to make its products. AsDell got bigger, even as its com-petitors were using more tradi-tional models, it stuck with itslow-cost, make-to-orderprocesses.

As it turned out, the model didwonders for Dell’s strategic posi-tioning. Building to order on amassive scale meant Dell had toautomate its assembly line andfine-tune its vendor (supply chain)relationships. As a result, Dell wasable to save money on inventoryand at the same time have the lat-est components in its computers.Because it didn’t have big invest-ments in inventory, when Intel(or AMD) came out with a new,

cheaper, more powerful chip,Dell could respond before itscompetitors. Dell became thebenchmark for a great manyindustry practices.

But despite all of the analysisabout industry best practice, itturned out that other PC manu-facturers who came from tradi-tional make-to-inventory materialrequirements planning (MRP)–style manufacturing never seemedto be able to emulate Dell’s inte-grated business processes. Dell’sdurable competitive advantagewas its entire business process,not just a set of independent activ-ities. This happens over and overagain: overall business processes(value streams) are hard to emu-late or change.

Another way Porter suggestsorganizations look at competitiveadvantage is to think in terms ofcompetitive advantage versuscompetitive scope (see Figure 3).Here, Porter lays out four basiccompetitive strategies. If you have

a “broad target” and “lower cost”strategy, for example, then yourstrategy is “cost leadership,”whereas if you have a “broad tar-get” and “differentiation,” thenyour strategy is “differentiation.”

If, on the other hand, you have anarrow target and your competi-tive advantage is “lower cost,”then your strategy is “cost focus.”If you have a narrow target andyour competitive advantage is“differentiation,” then your advan-tage is “differentiation focus.”Cost and differentiation in Porter’sworld are the two royal roads tocompetitive advantage.

From a business architecturestandpoint, coming up with theenterprise’s strategic intentionsinvolves keeping a close eye onmanagement’s competitive strat-egy. The good news is that suchstrategies don’t change all thatoften. The bad news is that thecompetitive pressures are con-stantly increasing. These pres-sures, often associated with


EXECUTIVE REPORT 55

Competitive Advantage

Lower Cost Differentiation

Broad

Target

Narrow

Target

Co

mp

eti

tiv

e S

co

pe

Cost leadership

Cost focus

Differentiation

Differentiation focus

Figure 3 — Competitive advantage vs. competitive scope.(Source: Michael Porter’s Competitive Strategy.)

technology change, technologyobsolescence, and technologyopportunities, frequently occurwith new entrants and substitutes,as discussed below with regard todisruptive technologies and thelong tail phenomenon.

Disruptive Technologies

About a decade after Porterpublished his major works,another professor at Harvard,Clayton Christensen, coauthoredan extremely interesting paperwith Joseph Bower, under theprovocative title “DisruptiveTechnologies: Catching theWave,”8 stemming fromChristensen’s doctoral thesis.The question that Christensen setout to address in his thesis was:Why did the dominant manufac-turers of 5¼-inch disk drives notbecome the dominant players inthe 3½-inch market?

What Christensen discovered wasconfusing to business manage-ment gurus. It was not that the5¼-inch manufacturers wereunaware of the 3½-inch technol-ogy; indeed, their research labshad invented the new form factor.What Christensen found was thatthe new form factor didn’t makesense in these manufacturers’business models. When the newdisks came out, the 5¼-inch diskmanufacturers were building 100megabyte disks, and their cus-tomers (the manufacturers ofdesktop computers) wanted 200megabyte disks (sound familiar?).The existing customer base wasn’t

all that interested in these newsmaller disks. Moreover, thesenew disks didn’t represent a bigenough avenue for growth for 5¼-inch builders. The biggest ofthese companies were alreadyUS $1 billion firms that needed togrow at 20% to be attractive totheir investors. Finally, from afinancial standpoint, the 3½-inchdisks didn’t provide a goodenough margin.

It wasn’t that the 5¼-inch diskmanufacturers were not well-runbusinesses; in fact, they were verywell run. But their business modeldidn’t see the new form factor asan opportunity. What happenedthen was that a number of engi-neers and others saw an oppor-tunity with these new, smaller,lighter disks and started new busi-nesses that specialized in theseform factor disks. To be success-ful, they had to be able to operateon smaller margins and smallerinitial growth, and, perhaps mostimportantly, they had to find anew set of clients. They foundthat new set of clients among thenewly emerging laptop manufac-turers. Over time, these new kidson the block caught up with theirbigger brothers and passed themin terms of both growth andmegabytes. By that time, however,the old order couldn’t adapt to thenew business model.

In the last decade, Christensenhas shown similar patterns inother businesses such as dis-count department stores andsteel minimills. What he and his

collaborators have shown is thatthere is a pattern in “overserved”markets where new entrants (orsubstitute products) appear andthe market leaders cede to thelow end of their market and keepgetting pushed further and furtherout on the sustaining technologycurve. Often when this happens,the existing dominant player firstmoves up the cost curve towardhigher-priced, higher-technologyproducts with higher margins.This happened in computers and,over the last three decades, inautomobiles.

But newer, lower-cost productscome along, providing lower-costoptions that then slowly move upthe cost curve. PCs first pushedout minicomputers and thenmainframes. Auto companies letthe low-end sedans go and movedup to minivans, SUVs, and reallybig trucks. Japanese carmakersgot their foot in the door of theNorth American auto market dur-ing the 1970 oil crisis, and thenthe Big Three automakers movedto high-priced, high-consumptionSUVs and trucks with highermargins. As long as the NorthAmerican market embraced thesenew macho products, everythingwas OK, but when the next oilcrisis hit, the foreign car manu-facturers’ small and midsizedsedans and minivans began toquickly edge out domestic ver-sions. Not only that, but duringthis same period, Japaneseautomakers also pioneered high-mileage hybrid cars and broughtout increasingly attractive SUVs




and really big trucks as well.Figure 4 shows how firms lever-aging disruptive strategies tendto change existing markets.

In the 1970s and 1980s, the semi-conductor manufacturers learnedto deal with disruptive technolo-gies by “eating their own young”(that is, by constantly bringing outnew products that ate away atthe market, price, and marginsof their own existing products).Moore’s Law provided a templatebased on the idea that every 18months the price of chips wouldbe cut in half while their powerwould double. In a market wherethe underlying product develop-ment cycle is fundamentally dis-ruptive, organizations have todevelop management and infra-structure environments that canattack their most profitable prod-ucts. The nature of rapid changeforces the competitors in the mar-ketplace to adapt and actuallywork down the chain to makesure they can sell enough to jus-tify the volumes that keep themcompetitive. For your own orga-nization, you should consider thefollowing question: How do dis-ruptive technologies affect the ITbusiness architecture planning?

The Long Tail

Another technology-enabled com-petitive strategy that runs againsttraditional management doctrineis called the long tail. For a verylong time, Pareto’s principle hasbeen one of the things that every-one in the business world canagree on: 20% of the products

provide 80% of the sales; 20% ofour customers provide 80% of ourprofit; and so on. However, withthe Internet and the Web and theincreasing substitution of bits foratoms, organizations in a numberof different fields have begun tochallenge this truism. Web-basedcompanies like Amazon, Netflix,Rhapsody, and eBay have discov-ered that electronic (digital) oper-ations make it possible to makemoney even in the face of Pareto’sprinciple. The theory of the longtail, popularized by Wired editorin chief Chris Anderson, is that“our culture and economy isincreasingly shifting away from afocus on a relatively small numberof ‘hits’ (mainstream productsand markets) at the head of thedemand curve and toward a hugenumber of niches in the tail.”9

Historically, finished goodsinventory costs (and distributioncosts) determined just how much

inventory an enterprise couldafford, and that, coupled withPareto’s principle, severely limitedthe number of products organi-zations could profitably affordto keep in stock at any one time.This meant that certain prod-ucts with reasonable but smalldemand could not be profitablystocked.

But the Internet has made it pos-sible to aggregate demand, notjust over millions of customersbut over hundreds of millions (orbillions) of customers. Now evena small demand for a very rareproduct is enough to turn a profit.Through Internet marketing andadvanced Web-based systems,organizations can make moneyon even rare items.

Take the following example:A couple of months ago, I wasworking with a colleague toredevelop a technology that we


EXECUTIVE REPORT 77

Hig

h M

argi

n,

Low V

olum

e

Low Margin,

High Volume

Perf

orm

an

ce

Time

Dis

ruptiv

e te

chnolo

gy

Most demanding

High-quality use

Medium-quality use

Low-quality use

High margin,

low volume

Low margin,

high volume

Figure 4 — How disruptive technologies gain market share from the bottom.(Source: Modified from Wikipedia entry on disruptive technologies

[http://en.wikipedia.org/wiki/Disruptive_technology].)

had both worked on in the 1980s.The only book ever written on thesubject was long out of print,and neither of us could find ourcopies. Finally, I gave up, loggedonto Amazon, and found fourused copies of the book. I orderedthree copies by express mail andhad them in two days. In thiscase, Amazon didn’t even havethose four copies in its inventory.It simply acted as middleman byinterfacing me with a used book-store and taking care of theelectronic logistics and billing.Amazon didn’t even have to storea single copy of the book in itsinventory. eBay has taken thisprocess even further, acting sim-ply as the world’s largest flea mar-ket. By doing so, it has createdthousands of new Internet busi-nesses for markets too small to beattractive in the past.

A bricks-and-mortar book andmusic retailer like Barnes & Nobleonly carries about 130,000 booksand CDs in its entire inventory for

all its stores, and it makes most ofits revenue from just a small per-centage of those items. Amazon,on the other hand, carries nearly20 times as many items andmakes most of its revenue fromthe long tail (see Figure 5). Thelong tail phenomenon is nowbeing used to do product planningin media areas such as broadbanddistribution, multimedia contentdevices, digital photos, and con-tent management on the Web.

In a sense, disruptive technologiesand the long tail are both opera-tional effectiveness strategies.They simply allow organizationsto utilize new technological inno-vations to turn the tables on thebig entrenched market leadersand provide things that the bigguys can’t offer or a substituteproduct at less cost. Unfortunately,HP eventually catches up withDell; Blockbuster sees Netflix andadopts a hybrid, mail-based DVDstrategy where it can leverage itsexisting stores as well as the mail.

For your own organization, youshould consider the followingquestions: Are there disruptivetechnologies that are likely toaffect your organization’s competi-tive position? Could your organiza-tion utilize long tail thinking in itsmainline business? What kinds ofchanges to your IT systems wouldbe involved? How fast can your ITorganization respond to disruptivechange?

Differentiation

If sustainable competitive advan-tage through organizational effec-tiveness is difficult to achieve andmaintain, then what about differ-entiation? How is it that organiza-tions differentiate their productsor offerings to the point that peo-ple will pay a premium to possess,let’s say, a Bang & Olufsen prod-uct? This section addresses theidea of differentiation.

Extreme Differentiation

Probably no one in the world,certainly no one in the consumertechnology world, is as influentialor recognized as Apple CEO SteveJobs. Microsoft’s Bill Gates andinvestor Warren Buffet are richer,but Steve Jobs is known for inno-vation. Over a period of threedecades now, Jobs has beenable to come up with unique tech-nology mashups that change theentire technology landscape. Hedid it for the personal computer(the Apple II); he did it for userinterfaces (the Mac); he did itfor personal music devices (theiPod); and now he is attempting



Figure 5 — The long tail. (Source: IDFuel.)


to do the same for the smart cellu-lar phone (the iPhone).

In each of these cases, Jobs hasfocused on packaging existingtechnologies with slick design andeven slicker user interfaces. Jobshas stressed that everything thatApple makes must fit with every-thing else that Apple makes seam-lessly, and because of the focuson integration, other organizationshave to adhere to Apple standardsrather than industry ones. Jobsis also not interested in playing“follow the leader.” Apple strivesto be the leader in the markets itplays in — even if the market issmall. Indeed, Apple strives to bean industry innovator. In recentyears, with the introduction of theiPod and iTunes, Apple has onceagain focused on new productsthat integrate with other Appleproducts and that create newmarkets. Today, Apple dominatesthe personal music player fieldand has roughly 80% of the legalmusic download market.10

Not everybody can be a SteveJobs, but, increasingly, organiza-tions are getting into the inno-vation business. In a world ofglobalization, low cost is an issueof survival but not competitiveadvantage. Differentiation allowsorganizations to charge moreand control the marketing agenda.At the January 2007 InternationalConsumer Electronics Show in LasVegas, thousands of vendors andthousands of products were dis-played, but the buzz was all aboutthe iPhone and Apple.

Firms like Mercedes-Benz andBang & Olufsen have been leadersin the development and deliveryof innovative, highly differentiatedproducts for a very long time — avery tough job. Questions to askyourself include: What kinds ofsystems do innovative firms useto support extreme differentiationstrategies? What kinds of businessprocesses will bring advancedproducts to the market faster thanyour competitors?

Delayed Differentiation

In the early part of the 20th cen-tury, Henry Ford used scientificmanagement, the assembly line,and vertical integration to revolu-tionize the manufacturing of auto-mobiles. His theory, which madehim the world’s first billionaire,was that the way to drive costdown was to build a massive pro-duction facility making one prod-uct at very high speed. To Ford,variety was the enemy. Whetherhe actually uttered the phrase isunclear, but still the “Any cus-tomer can have a car painted anycolor that he wants so long as it isblack” quote captured Ford’s atti-tude. But Ford’s failure to recog-nize the importance of varietyallowed other manufacturerslike General Motors to ultimatelyassume leadership in the auto-mobile industry.

By the end of the 20th century,variety went from being some-thing to be avoided to being anessential strategy. Product intro-ductions soared, while productcycles became shorter and

shorter. Department store andgrocery store shelves exploded.Manufacturers learned to buildplants that could turn out a varietyof new and existing productsbased on demand. As a result,the concept of “delayed differenti-ation” has become more andmore important.

Delayed differentiation is prettymuch what it sounds like. Delayeddifferentiation involves “architect-ing products” so that decisionsabout the exact configuration ofthe product can be postponeduntil the last minute. An exam-ple of this is United Colors ofBenetton. Benetton, being in theclothing business, discoveredmany years ago that the key tosales was not so much style asit was color. Determining styleproved easier than choosing the“in” color of the season.

As a result, Benetton developed adelayed differentiation strategy bymaking many of its products inwhat is referred to in the apparelindustry as “grey goods.” Greygoods are sweaters, skirts, pants,and so on made of a noncolored(light grey) material. These prod-ucts are then stockpiled at manu-facturing sites. As feedback aboutthe season’s hot colors comes infrom stores and market intelli-gence, Benetton then dyes andships the up-to-date products tocatch the current wave.

Another approach to delayed dif-ferentiation is through productarchitecture. Businesses like Black& Decker, which makes a large


EXECUTIVE REPORT 99

variety of electric hand tools,invest heavily in modular productarchitecture, where a number ofdifferent products in a given prod-uct family (for example, drills)share common components.Process engineers then work toset up a flexible assembly linewhere different products can beassembled depending upon theactual product forecasts.

As discussed earlier, Dell hasmade delayed differentiation itscore business strategy. Driven bythe make-to-order (“pull”) busi-ness model, Dell also puts signifi-cant effort in a modular productarchitecture and a flexible assem-bly line. Questions to ask yourselfinclude: What is your organiza-tion’s differentiation strategy?What kind of systems changeswould be required to supportdelayed differentiation?

Market Positioning

It doesn’t matter what busi-ness you think you’re in,what matters is what busi-ness your customers thinkyou’re in.

— Paraphrased from Al Riesand Jack Trout, Positioning:

The Battle for Your Mind11

1. Stand for somethingdifferent; 2. Make your pitchsimple so people can under-stand it; 3. Deliver on whatyou promise.

— Allen Adamson,BrandSimple12

A second major element ofstrategic intentions is an idea

from marketing — positioning.Differentiation is not just a productstrategy; it is also a marketingstrategy. From a marketing per-spective, positioning is about howa company is seen by the market-place. Ries and Trout, like Porter,discuss durable competitiveadvantage but as a matter of“mind share.” The steel that goesinto a Volkswagen and a Porschecosts about the same, but theprice that people are willing topay for the two brands is vastlydifferent. As with Apple, peoplepay for something intangible —for image.

Those organizations that are mar-ket leaders, Ries and Trout main-tain, are generally those that getto the market first and acquire adistinct position in the customer’smind. These organizations maynot be the ones that inventedthe principal product, but theyare often in the group of earlyentrants. During the early days inan industry, there is often a periodwhen market share is determined.When this happens, the winneroften dominates the market fordecades. But once an organizationhas positioned itself in the market,it must be very careful not todestroy that marketing position inan attempt to expand. Ries andTrout argue that “brand extension”tends to destroy the mind shareof the original product. Marketingpositioning is a deep, semioticversion of the “elevator speech”that every novice entrepreneur iscoached to develop.

Technology Roadmapping

One of the most difficult parts ofbusiness-IT management is tryingto deal with the constant changein both the business and tech-nology domains, what RichardD’Aveni calls “hypercompeti-tion.”13 In the world of hyper-competition, “there” doesn’t exist.Globalization, optimization, out-sourcing, insourcing, businessprocess renovation, and so on, arecreating a world with less and lessstability and more and more risk.Like the deer in the proverbialheadlights, top managers in mod-ern businesses are often petrifiedby their options.

Technology roadmapping is aplanning technique developed toaddress just the kind of environ-ment in which business-IT plan-ners find themselves. Initiallyconceived at Motorola in the1970s, technology roadmappinghas spread to a great many high-tech manufacturers andindustries. I first learned aboutroadmapping from Cutter FellowRobert Phaal of the University ofCambridge (UK). Phaal directs aprogram that sets up technologyroadmapping activities. In this job,Phaal has developed technologyroadmaps for more than 80 differ-ent organizations.

Technology roadmapping worksin a backward fashion by havingyou look out some number ofyears (in the case of Figure 6,four) and ask, based on competi-tive factors, what markets doesthe business want to be in? This





EXECUTIVE REPORT 1111

could be based on, for example,how fast the market is growing,strategic alignment, technologiesin the pipeline, and so on. Basedon the markets, the planningprocess works backward to definewhat products the business wantsto have in place in year three inorder to begin to compete in yearfour. Based on that, what systemsneed to be in place in year twoto make it possible to support theproduct and marketing plans?Finally, in year one, what kind ofresearch or technology needs tobe installed to make it possible tobuild the systems, manufacturethe products, and support themarketing plans?

Roadmapping defines theapproach as being driven by “marketing pull” and “technologypush.” Using this approach, orga-nizations all over the world havedone their outyear planning. Oneof the great advantages of thisapproach is that the business andtechnology managers make allthe critical decisions, and by thetime they are done, everyoneinvolved in the process knowswhy the plan contains all theelements that it does.

BUSINESS CONTEXT

Every enterprise has a context.There is an external contextand an internal one. The externalcontext describes those externalentities (actors) with which theenterprise deals (communicates).The internal context describeshow the communication takes

place between internal entities(actors again) and external enti-ties. There are two aspects ofbusiness context modeling: (1)modeling the business context asit is now, and (2) modeling thebusiness context as it will be atsome future time.

From the vantage point of busi-ness architecture, it is importantto understand the business con-text in terms of the major mes-sages (or things) that move aboutthe organization — and not nec-essarily all of the detailed ones.What the business architect is try-ing to understand is the generalinformation context within theenterprise in order to be able to:

Define the business semantics

Map the business value chainand value streams

Identify the major data(information) categoriesand relationships

This section discusses thebusiness context diagram andbusiness semantics.

Business Context Diagram

The business context diagramis the most valuable tool that abusiness architect has at his orher disposal. It allows the busi-ness architect to communicatewith others both inside and out-side the organization, to learnabout parts of the business thatthe architect doesn’t understandor are new, and to get managersand subject matter experts to rec-ognize just how complicated thecurrent business environmentreally is.

$ $ $ $

$$ $$ $$ $$

Market/Outcomes

Products/Services

Systems

Research

Resources

Technology p

ush

Mark

et pull

Design

Execution

Y1 Y2 Y3 Y4

Figure 6 — Technology roadmap.

Context diagrams define the“actors” and “messages” that areactive within the specific context.These diagrams have a numberof significant advantages:

1. They are easy to use.

2. They identify the major actors.

3. They identify the major mes-sages (communications) thatgo from one actor to another.

4. They set the stage for theother phases of business archi-tecture that follow (businesssemantics, value chain, valuestreams, business process, dataarchitecture).

These diagrams can be developedfrom a standing start, and busi-ness managers and subject matterexperts can grasp them veryquickly.14

Because of their simplicity, con-text diagrams scale. One of thereasons for this is that contextdiagrams are additive: if you taketwo diagrams done separatelywith careful definition of theactors and messages involved,you can add those diagramstogether to create even larger,more expansive diagrams.Because of their structure, youcan also hide (and show) detailsby combining any number ofactors within higher-level actors.It is possible, for example, to cre-ate individual context diagramsbased on interviews with multipleindividuals (or groups) and thenadd those individual context dia-grams together to create a master

(enterprise) diagram. Context dia-grams can be arbitrarily large, andthere are automated tools for spe-cific forms of context diagramsthat allow the rapid manipulationof very large diagrams.

Figure 7 is a context diagram ofAcme Printing Co. The diagram isthe earliest example of a businesscontext diagram in my files. Infact, this diagram was developedin the 1970s when I was a consul-tant in Chicago. The diagrammingtechnique itself goes back to atleast the 1930s and 1940s.

What we now call business con-text diagrams have many othernames: entity diagrams (pre-ERD),actor-message diagrams, opera-tional node connectivity diagrams(DoDAF), and value networks.15

I am sure that there are dozens,perhaps hundreds of others.

In BEAM, context diagrams pro-vide a communication vehiclefor talking about the explicitcommunication that exists (oris planned). It also is the spring-board for business semantics,discussed in the next section.

Business Semantics

The importance of business con-text modeling is that it providesclues to developing a businesssemantic model that defines themajor categories of data that formthe framework for our data archi-tecture as well as providing basicinformation for developing thebusiness value chain and valuestreams/high-level business

processes. This is described atlength in my earlier Cutter reporton business semantics.16

Business semantics identifiesthe following major categoriesof data/information:

Actors

Messages

Objects

Events

Locations

Roles

Relationships

Business exchanges

Business relationships

While business context diagramsonly explicitly describe actors andmessages, all of the other cate-gories are implied in some way.

The importance of businesssemantics in developing a solidbusiness architecture cannot beoveremphasized. In recent years,terms like “semantics,” “ontology,”and “taxonomy” have begun topop up increasingly in systemsliterature. Indeed, the SemanticWeb and Web 2.0 are built onthese concepts. But semantics(the study of meaning), ontology(the study of the real world), andthe companion term “epistemol-ogy” (the study of how we learn)are as old as philosophy itself. Thegreat leap that the Greeks made inlearning stemmed in no small partfrom their understanding of thesekey concepts. Business semantics




brings these concepts to bear onthe problem of improving ourunderstanding of our enterprisesand their relationships at a muchhigher level. The better we under-stand the real world that our busi-nesses operate in, the better wewill be able to build systemsand databases that allow us toachieve/sustain competitiveadvantage for our enterprises.

BUSINESS VALUE CHAINS AND VALUE STREAMS

This section discusses the thirdand fourth phases of the businessarchitecture: value chains andvalue streams.

Business Value Chains

One of the major goals of enter-prise architecture is to help bothbusiness and technology man-agers and professionals to think“broader and longer.” To do that,we need tools (diagrams, pic-tures, tables, and so on) that allowus to develop better high-levelvisualizations of the enterprise asa whole. This is a major challengesince many of our traditional toolswere developed for low-level pro-gram and systems design andcoming up with the appropriatehigh-level diagrams is particularlyimportant.

Porter’s Value Chain

In addition to his analysis ofcompetitive advantage, MichaelPorter’s idea of the business valuechain is also important for busi-ness architecture. In his initialwork, Porter proposed the valuechain diagram (see Figure 8).It is hard to overestimate theimportance of the value chain inbusiness and systems thinking.Business process expert PaulHarmon, for example, suggeststhat Porter’s value chain markedthe beginning of the businessprocess era.



Figure 7 — Enterprise context diagram of Acme Printing Co.

The basic idea behind Porter’svalue chain is that there are twobasic forms of activity:

1. Primary activities — themeans by which the enterpriseadds value and createsproducts/services to themarketplace

2. Supporting activities — themeans of providing resourcesand management control

Now at one level, there is nothingnew in dividing activities intomajor classes. In classic organiza-tional theory, for example, thereis the distinction between “line”(primary operations) and “staff”(supporting operations). Thisdistinction is embedded in man-agement accounting as well (forexample, “direct costs” and “over-head costs”). What Porter did wasto provide an elegantly simple pic-ture that highlighted the sequenceof primary activities in a form thatcould be used to describe theenterprise as a high-level business

process (note that I added thearrow in Figure 8). While Porterinitially used these diagrams todescribe manufacturing firms,they have been used in all mannerof other organizations, both publicand private.

These value chain diagrams wereadapted in the 1980s and 1990s toapply to enterprise architecture. Inthe process, we developed a tem-plate that allowed us to support amore elaborate systems feedbackmodel of an enterprise, such asthe one in Figure 9).17

This model provides a contextfor the value chain (whichreplaces Porter’s activities withthe enterprise box). It too showsresources (inputs) and products/services (outputs), but it alsoshows product usage (outcomes)by the market/customer. Thismodel allows us to address prod-uct quality and customer qualityexplicitly in business architecture.Combining the information from

these two forms of enterprise dia-grams has allowed us to createa template for developing valuechains and integrating them with abalanced scorecard and manage-ment strategies (see Figure 10).18

One of the great advantages ofthis extended form of the valuechain is that it allows organiza-tions to integrate their highest-level business processes withtheir highest-level managementfeedback and control mecha-nisms (for example, the balancedscorecards and managementstrategy reporting). What we havefound in using business valuechains is that good value chainsusually track the life history ofeither the product/service or thecustomer.

Business Value Streams

A value stream is an end-to-end set of activities whichcollectively create value fora customer.

— James Martin, The Great Transition19

Having introduced the conceptof business context and businessvalue chains, the next majorcomponent (phase) of businessarchitecture is value streams.While the sequence of primary(value-adding) activities in thevalue chain is useful in describingthe enterprise at the highest level,it is too high to represent themajor (core) business processes;however, value streams identifyclearly those core processes.



Firm Infrastructure

HR Management

R&D

Procurement

SupportingActivities

Inb

ou

nd

Lo

gis

tics

Op

era

tio

ns

Ou

tbo

un

dL

og

istics

Ma

rke

tin

g a

nd

Sa

les

Se

rvic

e

Primary Activities

Products/

Services

Resources

Figure 8 — Porter’s value chain (with resource → product/services arrow added by the author).


Value Streams á la James Martin

One of the major problems withbusiness process managementhas always been the level of the

process being considered. Whenmany people refer to businessprocesses, it is often unclearwhether they are referring to a“lowercase” business process

(bp) or an “uppercase” businessprocess (BP). Lowercase bpinvolves small but significantbusiness processes (for example,“travel advance,” “travel expense



Sources

(Business Partners)

EnterpriseMarket

(Customers)

resources(inputs)

products/services(outputs)

productusage

(outcomes)

product feedback

customer feedback

Figure 9 — An extended systems feedback model.

Supporting (Financial, HR, IT, …) Assets

Safety

Program / Project/ Contract Management

ansportation

Planning

Pre-

ConstructionConstruction Maintenance

Real-time

Operations

Research and Laboratory

Transportation Infrastructure Assets

Local Support (Public Transit, Aviation, other)

HR Management

Financial Management

IT Management

Administration Management

HR Management


IT Management


Management Strategies

Transportation Value Chain


IT Management

HR Management


Supporting (Financial, HR, IT, etc. ) Assets

Program/Project/Contract Management

TransportationPlanning

Pre-Construction

Construction MaintenanceReal-TimeOperations

Local Support (Public Transit, Aviation, Other)

Research and Laboratory

Safety

Transportation Infrastructure Assets

SupportingActivities

PrimaryActivities

SupportingProcesses

Support AssetInfo

ProcessManagement

CoreBusinessProcess

QualityManagement

ProductInformation

Feedback Information

Balanced Scorecard

highways

public transit,aviation, etc.

Figure 10 — Integrated business value chain model.

routing”), whereas uppercase BPdeals with larger end-to-endprocesses (for instance, “conceptthrough project initiation,” “mar-ket to collection”). Now, thanks toJames Martin and to Ralph Whittleand Conrad B. Myrick,20 we havea term for talking about thoseuppercase business processes —the value stream.

Value streams represent the veryhigh-level business processes(BPs), and they provide a frame-work (mental model) for continu-ous business process reinvention,renovation, and renewal.21 I firstencountered value streams as aconcept when I was working as aconsultant for Xerox in the mid-1990s. At that time, Xerox was inthe process of implementing itsXerox 2000 initiative using aframework called the XeroxBusiness Architecture (XBA).22

Within this umbrella, Xerox had

defined four primary activities inits value chain:

1. Inventing

2. Developing

3. Acquiring and delivering

4. Marketing, selling, and servicing

It also defined four value streams:

1. Time to market

2. Integrated supply chain

3. Market to collection

4. Customer services

Today, organizations everywhereare becoming more and moreengaged in integrating andimproving their business proc-esses as a way of achieving com-petitive advantage. But this is atall order. Most organizations haveliterally thousands of businessprocesses that have evolved overdecades. One of the problems

organizations have is integratingthese business processes toeliminate redundancy, waste, andtime. Often the result is subopti-mization — individual processesare streamlined but they don’tplay well with each other.

Business architecture uses valuestreams (uppercase businessprocesses) as a way to provide anoverall framework for the detail,lowercase business processes.Perhaps the most important partthat value streams play in busi-ness architecture is to providegoals, a focus, and names forthe set of high-level businessprocesses that are most criticalto the enterprise. In the case ofXerox, for example, it allowedthe company to not only lay outits overall value chain, but alsoto show on that value chain themost important processes, thoseprocesses that it most wantedto control and improve (seeFigure 11).

For quite some time, my col-leagues and I have been usingbusiness exchanges/major busi-ness processes as a way to helpdefine uppercase businessprocesses. The idea of businessexchange harkens back to theearliest form of commerce —the barter. In a barter transaction,two parties (actors) exchangesomething of value: for example,you give me a chicken, I giveyou some salt. Over time, directbarter arrangements were medi-ated through the introduction ofmoney (I get the chicken, you get



Inventing Developing Acquiring

and

Delivering

Marketing,

Selling,

and Servicing

Time to Market

Integrated Supply Chain

Market to Collection

Customer Services

Figure 11 — Xerox 2000 value chain and value streams.


money), but the basic concept isthe same. This exchange mayinvolve multiple business mes-sages (transactions).

In a normal business exchange likemarket to collection (or order tocollection), there are four businessmessages (transactions): order

(“contract”); shipment (“customershipment”); bill (“invoice”); andpayment (“customer payment”) —see Figure 12. These four wouldmake up the external businesstransactions in a modern market-to-collection business value stream/business exchange. (Note: there

may be hundreds of internalbusiness transactions to actuallyaccomplish what seems from theoutside to be a straightforwardexchange. At the time I was work-ing with Xerox, the Xerox market-to-collection value stream involvedmore than 1,500 applications.)



Figure 12 — A market-to-collection value stream context.

In other value streams — forexample, “time to market,” whichinvolves bringing a new product tomarket and begins at the point anew product concept is availableand continues to the point that theproduct is ready for production —the business exchange or valuestream is somewhat harder todefine since the “customers” inthis case are internal; however,the same idea holds. Martin talksabout “value stream reinvention”:

Value-stream invention asksseveral basic questions:

What are the valuestreams of the enterprise?

Who are the customersof each value stream?

What are the customers’needs and desires?What would delightthe customer?

How can the value streambe reinvented to meetcustomer desires assimply and directly aspossible, using the mostappropriate technologyand information systems,and minimizing the costsof doing so?23

With the right tools, context dia-grams can be used to provide acontext for creating value streambusiness processes.

The most evident thing about avalue stream like market to collec-tion is that it covers a large portionof the context “map” of the infor-mation flow within and without.One advantage of this value

stream is that the ultimatecustomer is clear.

Value Stream Mapping á la Ohno and Shingo

The basis of the ToyotaProduction System is theabsolute elimination of waste.

— Taiichi Ohno, Toyota Production System24

As appealing as James Martin’sidea of value streams is, it is notthe only game in town. Indeed, ifyou look up “value stream” on theInternet, you are much more likelyto find references to “value streammapping” and to the names Ohnoand Shigeo Shingo (the same fel-lows famous for being the leadersin implementing just-in-time [JIT]lean manufacturing at Toyotastarting in the 1950s).

Value stream mapping was devel-oped not just to model businessprocesses but to model all formsof resource usage and especiallyto track waste. Often overlooked,the emphasis on the eliminationof all forms of waste has been amajor part of the lean manufactur-ing movement and the Toyota pro-duction system since its inception.Value stream maps were designedto track key resources (time,material, water, manpower, andso on) in a single consistentframework (see Figure 13).25

Value Streams, Business Processes,and Assembly Lines

In a factory for a complexproduct, rather than one

assembly line, there maybe many auxiliary assemblylines feeding sub-assemblies(i.e. car engines or seats) toa backbone “main” assemblyline. A diagram of a typicalmass-production factorylooks more like the skeletonof a fish than a single line.

— Wikipedia26

The assembly line is a conceptthat has driven manufacturing forthe last century. As a result, it isa concept that has played a bigpart in a great many enterprises.Assembly lines are everywhere,driving productivity in everyform of product business.Unfortunately, assembly linethinking has not worked itsway yet into much of mainstreambusiness process thinking.

There are two major strategies indeveloping business processes: a“push” strategy and a “pull” strat-egy. In large part, this is becausemost business process thinkinguses push strategies that start atthe beginning (the inputs) andwork forward, rather than a pullstrategy that starts at the end (finalresult) and works backward. Theresult of this is that organizations,especially manufacturing orga-nizations, that embark on simul-taneous “business processrenovation” and “Lean Six Sigma”projects often find themselveshaving difficulty communicating.

The “lean” in the lean manufac-turing context is largely synony-mous with “just in time,” and JITreverses the way that traditional




assembly lines, especially theinventories associated withassembly lines, actually work.Mass production factories weredesigned so that the “machine”never stopped. Each workstationhad to have enough inventory sothat the line never slowed down.The advantage was that parts andproducts could be built at a maxi-mum rate, which meant that prod-ucts could be built at a rate thatwould justify the huge invention intooling and operation. To balanceout the inventory so that it wasnot excessive, push systemsdeveloped a strategy called mater-ial requirements planning (knownas MRP).

Lean manufacturing uses anassembly line model, but turns iton its head. Rather than maximiz-ing production, lean manufactur-ing seeks to minimize waste.Instead of enough inventory nomatter what, lean manufacturingis based on the idea of a JITinventory system that would pro-vide just the inventory that wasneeded just the instant before itwas needed. The initial modelfor this was the so-called Kanbancard system, whereby as productsor parts are produced, a cardrequesting replacement is createdand sent back up the assemblyline to trigger the next part. Thisis the essence of a pull system.

Today, pull systems are largelybased on sophisticated computersystems that implement a Kanbanstrategy.

Because of the long history ofassembly lines and the increasingfocus on JIT, manufacturing sys-tems are finely tuned. Through theuse of value stream mapping suchsystems are also sparing in theiruse of resources and the produc-tion of wastes. Business processesin other organizational areas arenot so advanced, but the attemptto apply lean thinking to nonman-ufacturing business areas is likelyto be the next major breakthrougharea in business process thinking.



Figure 13 — Value stream map.

BUSINESS PROCESSES

One man draws out the wire,another straights it, a thirdcuts it, a fourth points it, afifth grinds it at the top forreceiving the head; to makethe head requires two orthree distinct operations; toput it on is a particular busi-ness, to whiten the pins isanother ... and the importantbusiness of making a pinis, in this manner, dividedinto about eighteen distinctoperations, which, in somemanufactories, are all per-formed by distinct hands,though in others the sameman will sometimes performtwo or three of them.

— Adam Smith,The Wealth of Nations27

A business process is aseries of steps designed toproduce a product or ser-vice. Most processes ... arecross-functional, spanningthe “white space” betweenthe boxes on the organiza-tion chart. Some processesresult in a product or servicethat is received by an organi-zation’s external customer.We call these primary

processes. Other processesproduce products that areinvisible to the external cus-tomer but essential to theeffective management ofthe business. We call thesesupport processes.

— Geary Rummler and Alan Brache,

Improving Performance28

The idea of a business process isobviously not new. Adam Smithwrote that one of the reasons forthe success of the new wealth in18th-century England was largelythe result of dividing work intosmall, repeatable activities (divi-sion of labor). And 100-plus yearslater, management scientists likeFrederick Taylor and FrankGilbreth saw the importanceof business process at the detaillevel. By the 1980s, Porterwas able to envision businessprocesses in an entirely new way.

A business process describes thesequence of activities by whichwork gets done and the decisionsthat are made in determining thesequence. Activities can be a list

of individual actions or a “sub-process” (which is yet anotherbusiness process description).

Business processes are the keylink between business and strat-egy. Organizations today are con-stantly working to improve theirbusiness processes. Businessprocess can be implementedmanually or in an automated fash-ion. Figure 14 is what is called a“swim lane diagram” in generalparlance or an “activity diagram”in UML. These diagrams providethe information to run automatedworkflow systems.

Base-level activities — that is,those activities that either dosomething manually or interfacewith some computerized interface(screen, voice recognition, and soforth) — provide a key interfaceto data and application architec-tures. If you know what dataand data structure each activityrequires, then you have much ofthe information to help you designthe enterprise data (database)architecture. If you know what



G/L System

A/R & Sales Accounting

Billing

Production

Production Scheduling

Estim ating

Sales

Customer

job spec

estim ate

Proposal

contract

contract

production

schedule

customer

shipm ent

customer shipment

production

report

job receipt

invoice

customer

paym ent

forecast

entered order Review Job

Estimate Job

PrepareProposal

Submit Order

Submit Orderand Forecast

PrepareSchedule

Run Job

Receive Job

PrepareProduction

Report

Bill Customer

ProcessCustomerPayment

Pay BillEnter Order

Figure 14 — Market-to-collection business process.




data and data structure eachactivity requires and you know thedata (database) architecture, thenyou know how to build the “dataadapter” services that provide thelayer between the business layerand the application layer. If youknow the swim lanes for a set ofbusiness processes, then you havethe workflow implementation.As I said at the beginning of thisreport, the business architectureis the key link between the busi-ness and the data/application/technology.

THE ROLE OF BUSINESS ARCHITECTURE IN THE REAL-TIME ENTERPRISE

The XBA model defines whatwe do. It identifies the coreprocesses we want to man-age and establishes bound-aries for the company. It’sthe context by which Xeroxworks together to collabo-rate and works indepen-dently in harmony: thedesign and the intent. It’sdesigned to be customer-driven and cross-functionalvalue-based, from outsidein. It’s documented, andit’s managed on a cross-functional basis by a processowner. The architectureforms the basis for under-standing the whole, man-agement for a systematicbreakthrough and improve-ment effort. It forms thecontext for empowerment.

— Bill Kane, XBA manager29

Technology, especially software,computers, and communications,is having an ever-increasingimpact on organizations every-where. Technology has facilitated

(enabled) any number of new(or radically improved) businessmodels. Those new businessmodels have enabled whole newmarketplaces to emerge whileundermining others. Digital pho-tography, which had been pre-dicted for two decades, emergedin the mid-1990s and within lessthan a decade had swept theunderpinnings from the filmcamera business. Cellular phoneshave done the same thing, under-cutting the landline businessdramatically.

Business architects must also bepoliticians, for their job demandsthat they work with top businessmanagement and top technologymanagement. Their job is tounderstand and predict the busi-ness and technological future interms that both the business man-agers and the technology man-agers can understand and accept,without getting run over or iso-lated from the mainstream. By itsvery nature, this work is, to saythe least, challenging, and it iscompounded by all the contraryviews that top business and tech-nology management constantlyreceive from vendors and themedia. Business architects mustbe able to counsel managementon the importance of long-rangeplanning and flexibility and short-term adaptability.

The real-time enterprise is alreadyhere. All big organizations todayare already “technology-enabled.”None of them could compete with-out computers, high-speed com-munications, and sophisticated

systems that offload more andmore of the routine tasks and,increasingly, more of the heavy lift-ing as well. The problem is that asour core systems get bigger andmore complex, they also becomemore difficult to modify. As thingsprogress, more and more time andthe majority of our budgets go intosimply keeping these core systemsrunning. Like an ancient automo-bile that is paid for but so old thatreplacement parts and experi-enced mechanics who know howto fix it are hard to come by, manyof our legacy systems don’t drivethe enterprise forward — they actas ever-larger anchors!

Business architecture is involvedin studying the core business, thecore value chain, the core valuestreams, and the core businessprocesses. Through studying theenterprise’s strategic intentionsand competitive strategies, busi-ness architecture counsels thebusiness and technology man-agers and planners about the keydecisions that need to be madeand how they affect the entireenterprise, not just the pieces.

BUSINESS ARCHITECTUREMODELING AND TOOLS

In doing business architecture, it isvery important to remember thatit is mostly about communicatingwith nontechnical (that is, non-programming) people. For thisreason, it is critical to use the sim-plest communication tools anddiagrams possible, meaning mod-eling forms (diagrams) that derivefrom business process analysis

(context diagrams, value chaindiagrams, and swim lane dia-grams) rather than ones devel-oped primarily for programmers(use case diagrams,30 sequencediagrams, and object-class dia-grams). While UML diagrams havethe advantage of being based oninternational standards, my experi-ence is that they don’t communi-cate as well with businesspeople.

On the matter of automated busi-ness architecture tools, my pref-erence leans toward tools thatcome out of the business processmodeling world. Finally, becausebusiness architecture is still in arelatively early stage of develop-ment, my preference is towardtools that can be easily custom-ized to define custom diagramsand custom processes for doingbusiness architecture.

BUSINESS ARCHITECTUREGOVERNANCE: THE SEARCHFOR THE “EAST POLE”

Put a good performer in abad system (the HumanPerformance System), and thesystem will win every time.

— Geary Rummler, SeriousPerformance Consulting31

The interesting point inDr. Deming’s teaching isthat since defects are systeminduced, it can be correctedby making improvements inthe system.… This meansthat by having a proper sys-tem in place and by trainingthose who manage or super-vise, it is possible to solve 85percent of the problems.

— Dr. M.V. John32

The most significant problem inestablishing a strong businessarchitecture is governance. Formore than two decades, organi-zations all over the world havecome to understand how differ-ent managing major businessprocesses (value streams) is frommanaging traditional organiza-tions. Traditionally, organizationshave been organized around theprinciple of “divide and conquer”(for example, hierarchies basedon functional organizations), butthinking about business processesand lean manufacturing has madeorganizations work increasingly tothink about how you organize andabout organizing horizontallyinstead of vertically.

When we first take a job in alarge organization, we are taughtto “look up the organizationchart.” I call this the North-South(vertical) orientation. I report tomy manager, and my managerreports to a division manager, andthe division manager reports to avice president, and so forth. Eachperson does the job assignedwithout looking either to the leftor to the right. Information flowsdown the hierarchy, and somesmall amount flows up. This isthe way it has always been.

But business processes don’t runNorth and South, they run Westto East. They face the customer,not the CEO. Their job is to pro-vide value for the customer byproducing/providing the verybest product or service possible.Classical vertical management is

based on functional specialization.But in product businesses, qualityis managed horizontally along thebusiness process.

Because business architecturefocuses on the horizontal dimen-sion of the enterprise (businessvalue chain, value streams, andbusiness processes), to succeed,it must help the organization findbetter and better ways to managehorizontally. In lean manufactur-ing, it involves control flowingright to left (East to West) whileproduct flows in an assembly linetree left to right (West to East). Atsome level, all business process–oriented management is about thesearch for the East Pole.

One of the best models for busi-ness architecture governanceagain comes from the approachthat Xerox used on its Xerox 2000project (see Figure 15).33 Here,Xerox had a business processboard of top executives and“process champions” to whomthe value stream teams reported.Something similar to thisapproach has to be in place ifmajor changes are going todeliver a “durable competitiveadvantage.”

CONCLUSION

Business architecture is anextremely important activity. It ismost important to those organiza-tions whose business models arein the most flux; with the adventof globalization and technologicaland business change, organiza-tions fitting the “in the most flux”




description include an ever-largerpercentage of enterprises. Theresulting business landscape,which business architecture mapsout, is always the result of insight,hard work, and some degree ofluck. Being the first to hit upon anew technology, market, or trendoften bestows good fortune andmarket dominance. However,even the best-managed compa-nies encounter rough times.

Computers and communicationshave made it possible for organi-zations to become more agile,

but systems that were new andinnovative on mainframes orminicomputers 15 or 20 years agohave trouble competing with theInternet-based, wireless systemsof today. In the same way thatorganizations are learning to buildadaptable, agile factories that canquickly change the mix, or eventhe type, of product that they pro-duce, state-of-the-art businessarchitecture allows organizationsto build adaptable, agile systemsthat can quickly change the mixand type of the organization’sbusiness mission.

At a Cutter Summit conferencea couple of years ago, I encoun-tered a director of product devel-opment whose software companyhad developed a new and excitingproduct in record time, only tofind its release of that product tothe marketplace put on holdbecause the corporate billingsystem was so inflexible that thecompany could not bill for thisnew kind of software system thatrequired a new kind of billingalgorithm.



Figure 15 — Xerox 2000’s governance structure.

Like an old elephant that has bredfor strength and stamina, many ofthe current enterprise businessarchitectures are suffering fromhardening of the arteries. Systemsand databases built on mass pro-duction paradigms have troublebecoming lean and agile. Dis-ruptive technologies are becomingdisruptive in an increasingly fasterway. In six or seven years, Googlehas gone from being an interestingtool to becoming a threat to moreand more information deliveryorganizations, and a (former)computer company (Apple) hasan 80% share of the music down-load business.

Unfortunately, though many busi-ness and technology managershave become obsessed with ITcosts, the problems that they faceare deeper and more significant.Costs are a trailing indicator in thiscase. Core systems are decadesold and becoming ever harder tomaintain. As the aging workforcein many regions of the worldbegins to leave the corporatestage, the basic systems and corebusiness systems infrastructuresthat companies have depended onfor decades are increasingly at risk.

Business architects will be inincreasing demand, I believe, asorganizations wake up to the factthat not only is IT not a commod-ity (á la Nicholas Carr), it is, infact, the central nervous system ofthe dispersed real-time enterprise.

ENDNOTES

1Orr, Ken et al. “Business EnterpriseArchitecture Modeling.” CutterConsortium Enterprise ArchitectureExecutive Report, Vol. 8, No. 3,March 2005.

2Orr, Ken. “Extending Zachman:Enterprise Architecture andStrategic IT Planning.” CutterConsortium Business-IT StrategiesExecutive Report, Vol. 7, No. 4,April 2004.

3Tam, Pui-Wing. “CIO Jobs Morphfrom Tech Support into Strategy.”Wall Street Journal, 20 February2007.

4This term is borrowed from RobertJ. Benson, Thomas L. Bugnitz,and William B. Walton’s FromBusiness Strategy to IT Action:Right Decisions for a Better BottomLine (Wiley, 2004). However, it isdifferent in a number of aspects.

5Porter, Michael E. CompetitiveStrategy. Free Press, 1980.

6Brown, Gerry. “How CIOs CanWin Back the Hearts and Minds ofUsers.” Bloor Research, 2 March2007 (www.it-analysis.com/business/content.php?cid=9304).

7See endnote 5; and Porter, MichaelE. Competitive Advantage: Creatingand Sustaining Superior Perform-ance. Free Press, 1985.

8Christensen, Clayton M., andJoseph L. Bower. “DisruptiveTechnologies: Catching theWave.” Harvard Business Review,1 January 1995.

9See www.longtail.com/about.html.

10See http://en.wikipedia.org/wiki/ITunes_Store.

11Ries, Al, and Jack Trout.Positioning: The Battle for YourMind. McGraw-Hill, 2000.

12Adamson, Allen P. BrandSimple:How the Best Brands Keep ItSimple and Succeed. PalgraveMacmillan, 2006.

13D’Aveni, Richard A. Hyper-Competition: Managingthe Dynamics of StrategicManeuvering. Free Press, 2006.

14My experience has been that theonly time individuals have troubleunderstanding context diagramsis when they have been taughtother, more complicated forms ofdiagramming and they read moreinto the diagram than is intended.

15Value network is the name thatCutter Senior Consultant VernaAllee has given to her version ofthe context diagram. The majoraddition that Verna has made isthat of “intangible messages,”which she shows as dottedarrows.

16Orr, Ken. “Business Semantics.”Cutter Consortium BusinessIntelligence Executive Report,Vol. 5, No. 7, 2005.

17Modified from Rummler, Geary A.,and Alan P. Brache. ImprovingPerformance: How to Manage theWhite Space in the OrganizationChart. Jossey-Bass, 1995.




18This model is based on work withtransportation (highway) depart-ments over the last decade.

19Martin, James. The GreatTransition. American Manage-ment Association, 1995.

20Whittle, Ralph, and Conrad B.Myrick. Enterprise BusinessArchitecture, CRC, 2004. Whittleand Myrick’s book brings Martin’sideas of value streams into abusiness architecture context.

21Martin uses the term “reinvention.”

22In William R. Boulton, MichaelL. Gibson, and James Cross Jr.’s“Xerox 2000: Leadership throughQuality.” Sponsored by theThomas Walter Center forTechnology Management, 1996 (www.duc.auburn.edu/~boultwr/xerox200.pdf).

23See endnote 19.

24Ohno, Taiichi. Toyota ProductionSystem: Beyond Large-ScaleProduction. Productivity Press,1988.

25Source: US EnvironmentalProtection Agency (www.epa.gov/lean/toolkit/ch3.htm).

26See http://en.wikipedia.org/wiki/Mass_production.

27Smith, Adam. The Wealth ofNations. Modern Library, 1994.First published in 1776.

28See endnote 17.

29See endnote 22.

30Use case diagrams are a specialcase here. Use case diagrams andsupporting documentation arecurrently the all-purpose require-ments tool by OO developers, andthey are easy to understand. Theproblem from a business architec-ture standpoint is that they tend tobe isolated. My observation is thatif one is not careful, you end upwith hundreds of pictures of theindividual leaves (activities) withinthe enterprise and no picture ofthe trees, much less the forest(the enterprise).

31Rummler, Geary. SeriousPerformance Consulting.International Society forPerformance Improvement, 2004.

32John, Dr. M.V. “Total QualityManagement: Is SurvivalCompulsory?” Quality LearningSystems (www.qlsonline.com/page7.htm).

33Source: See endnote 22.

ABOUT THE AUTHOR

Ken Orr is a Fellow of the CutterBusiness Technology Counciland a Senior Consultant withCutter Consortium’s AgileProject Management, BusinessIntelligence, Business-ITStrategies, and EnterpriseArchitecture practices. He isalso a regular speaker at CutterSummits and symposia. Mr. Orris a Principal Researcher withthe Ken Orr Institute, a businesstechnology research organiza-tion. Previously, he was anAffiliate Professor and Directorof the Center for the InnovativeApplication of Technology withthe School of Technology andInformation Management atWashington University. He is aninternationally recognized experton technology transfer, softwareengineering, information architec-ture, and data warehousing.Mr. Orr has more than 30 years’experience in analysis, design,project management, technologyplanning, and managementconsulting. He is the author ofStructured Systems Development,Structured RequirementsDefinition, and The One MinuteMethodology. He can be reachedat [email protected].



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