Effective Strategy Execution with Capability-Based Planning, Enterprise Architecture and Portfolio Management

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Effective Strategy Execution with Capability-Based Planning, Enterprise Architecture

and Portfolio Management

Iver Band

The Open Group Conference, Baltimore, July 22, 2015

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INTRODUCTION

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3 3 © 2015 Cambia Health Solutions, Inc.

Iver Band

• Enterprise Architect at Cambia Health Solutions

• Chief architect for external web and mobile presence

• Business architect for Digital Solutions organization

• Vice Chair, Open Group ArchiMate Forum

• Co-Chair and Co-Founder, Oregon Enterprise Architects

• TOGAF and ArchiMate certified, CISSP, Certified Information Professional, AHIP Certified IT Professional

[email protected]

http://www.linkedin.com/in/iverpdx

http://www.cambiahealth.com/

http://www.twitter.com/iverband

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About Cambia

22 companies

and growing

© 2015 Cambia Health Solutions, Inc.

A tax-paying nonprofit

headquartered in

the Pacific Northwest

Nationally recognized:

Top 100 Healthiest

Workplaces

5,300 employees

in 30 states

100 million people

touched nationwide

5 5 © 2015 Cambia Health Solutions, Inc.

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Cambia Health Solutions

© 2015 Cambia Health Solutions, Inc.

Senior

Services

Health

Insurance

Retail

Enablement

Provider

Enablement

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About BiZZdesign

Scientific DNA founded in 2000 as a spin-off from a Dutch research institute known for the ArchiMate standard

Passionate People over 80% with advanced degrees and over 10% with doctorates, sharing knowledge, open innovation

Focused on Solutions leading digital enterprises through business transformation empowerment

Hundreds of Customers on 6 continents across all industries

Global, Fast Growing Company with a direct presence in more than 10 countries

Worldwide Partner Network

leading global consultancies, boutique consultancies and resellers

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BiZZdesign Enterprise Studio

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Summary

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• The difficulty of strategy execution should not be underestimated

• Capability-based planning helps make strategy concrete • Enterprise architecture closes the remainder of this gap,

and ensures alignment and coherence • Enterprise portfolio management allows managing large

enterprise landscapes based on business value • ArchiMate models tie it all together, providing a clear line of

sight from strategy definition to realization • Powerful tool support makes this a strong combination!

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The Challenge

• The Digital Enterprise requires major business change

• Many disciplines are involved in these transformations, but a lack of coherence compromises their success

• The speed of change makes strategy implementation even more difficult

• Few organizations have a systematic and reliable way of translating a business strategy into action

• They invest in many assets and change initiatives, but find it difficult to decide on their value and priority

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TWO BIZZDESIGN CLIENT CASES AS EXAMPLES

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Anonymized Client Cases Used

“ArchiPharma”: • Large international pharmaceutical organization • Geographically dispersed locations • Result of many mergers and take-overs • Want to be world-leading provider of pharmaceuticals “ArchiSuranceBank”: • Medium-sized financial (both banking and insurance) • Also the result of mergers and take-overs • Rationalizing the insurance landscape as precursor to separating

banking and insurance businesses

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Similar Necessity for Change in Both Cases

• External – Large and upcoming competitors – Strict and changing regulations

• Internal – Enormous legacy application landscape – Heterogeneous processes, products, databases, ... – Cost pressure

How to perform a strategic transformation on this scale?

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Transformation Challenges

• Need to – Do strategic planning – Get from planning to execution – Monitor execution – Be able to quickly adapt planning – Keep the IS landscape up and running

during transformation

Requires collaboration between many disciplines And sharing & integrating information to support this

transformation 14

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Connecting Strategy and Execution

ArchiPharma’s starting point: • Business capability map

– Identify key business capabilities based on strategy

– Decompose each key business capability

• Project and program portfolio – Define programs that realize desired capability

increments – Decompose programs into projects

12 key capabilities, 200+ programs & 5000+ projects

Strategic

management

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Project portfolio

management

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Gap Between Strategy and Projects

• Many project deliverables are not aligned with the strategy

• Projects with similar deliverables

• Projects with contradicting deliverables

• Programs with a solution unrelated to the strategy

• Strategy parts not reflected in any program

• Unclear what the effect is of application rationalization

How to manage this large transformation? Project portfolio

management

Strategic

management

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Strategy, Architecture, and Portfolio Management

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Strategy management

Enterprise architecture

Portfolio management

Aim

Analyze & Design Realize Coordinated

approach

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ArchiMate Models to Connect Strategy, Architecture and Portfolio Management

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Strategy management

Enterprise architecture

Portfolio management

Realize

Aim

Analyze & Design

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Relating Strategy & Capabilities to Target Architecture & Change Programs

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Business Goals

Capabilities

Architecture Plateaus

Change Programs

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Bringing Enterprise Architecture to the Next Level

• With a mature enterprise architecture you are ready for the next level: – How do I use my architecture to realize strategy, make investment

decisions, support management decisions, etc.?

– How do I gain control of the large asset and project landscapes that I need to manage?

– How do I move away from a narrow focus on implementation towards designing and supporting business change?

Make your enterprise architecture actionable Move towards designing the future of your organization

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Enterprise Architecture in Context

Enterprise Architecture

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EA as Knowledge Hub for Coherence

Enterprise Portfolio Management

Strategy

Capability-Based Planning

Process, Rule & Data Management

Governance, Risk & Compliance

Development, Delivery & Improvement

Program & Project Management

Enterprise Architecture

Service Management

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STRATEGY

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Determining Your Business Goals

First you need to know what your goals are:

• Business Strategy: What is the course of your organization?

• Stakeholder and Driver Analysis: Who are involved and what are their needs?

• Business Models: Where to play and how to win?

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Stakeholder and Driver Analysis

• Where do decisions on investments take place? – For example, is there a Program or Portfolio Board consisting of

senior management, or busines line management with their own budget?

• How do interests of stakeholders influence each other? – Can investments be targeted wisely for different interests that

support the same goal?

– How can we prevent wasting funds by investing in conflicting interests?

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Business Strategy

• Align your organization’s investments, operating model, architecture and processes with its strategy!

• Use models for traceability from strategic goals to realization, and vice versa

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Stakeholder and Driver Analysis

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Business Models

• Business Model Canvas gives a useful overview of your strategy

• Good starting point for deciding on investments

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Modeling Strategy in More Detail in ArchiMate

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CAPABILITY-BASED PLANNING

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Business Capabilities

• A business capability is something an enterprise does or can do, given the various resources it possesses – Which capabilities do you need for your strategy, business model

and operating model? – What are the required capability levels? – What are the necessary resources? – How do plan the evolution of your enterprise?

• Input for investment decisions: portfolio management • Helps you plan and manage programs & projects

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Defining Business Capabilities

• They are owned by the business and named and defined in business terms

• They are unique and stable

• They may be composite, consisting of sub-capabilities

• They can be organized in a business capability map

• Their maturity can be assessed cross different dimensions

• This will be supported in the next ArchiMate version

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Business Capability Map

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Capability Assessment in Different Dimensions

Analysis and planning of capabilities using an ArchiMate model and various metrics

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Capability Analyses

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ENTERPRISE PORTFOLIO MANAGEMENT

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Why Portfolio Management?

• Decisions are needed on many different investments – Both in assets such as applications and in changes, such as projects

• A structured overview is needed, grouping these investments in categories known as portfolios, such as – Innovation, New Product Introduction, Going Concern

• Pre-allocating investments to these portfolios based on business value supports a balanced capital allocation – Avoids problems such as as the “innovation squeeze”, an ever-

growing maintenance budget that eats up other investments

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What is Enterprise Portfolio Management (EPM)?

• Enterprise portfolio management manages the entire enterprise landscape (projects, assets, services, capabilities, etc.) in portfolios – Group things of the same type based on some criteria – Manage groups as a whole – Provide enterprise-wide overview – Support analyses and comparisons – Promote consistent and informed decision-making at all

levels

• Manage on business value, not only on costs

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Retirement

Back office

Front office

Critical

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Gartner on IT Portfolio Management

“The challenge is to provide the integration of individual portfolios (projects, assets and IT services) to present a holistic story regarding the true state of the IT portfolio.

Integrating these views enables IT leaders to see the cost, effort, technical complexity, feasibility and interrelated

effects of a proposed IT change or initiative.”*

And there is more than just IT!

40 *Gartner, Magic Quadrant for Integrated IT Portfolio Analysis Applications, 2013

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How Are Asset and Project Portfolios Related?

• Program and project portfolio management – Manage and monitor project portfolios

– Manage asset change through roadmaps

• Asset portfolio management – Manage and monitor asset portfolios

modeled in architecture

– Basis for defining change projects

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Project portfolio

Asset portfolio

Projects Roadmaps

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Common Use Cases for EPM

• Application portfolio management

• Long-range capability planning

• Benefits optimization

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Enterprise Architecture & Portfolio Management

• Enterprise architecture: – Modeling as-is and to-be situations – Analysing gaps, giving direction and defining roadmaps for coherent

change

• Enterprise portfolio management – Quantitative analysis of as-is and to-be situations

• Defining metrics on costs, risks, benefits,..

– Prioritization based on business criteria

These models and analyses allow coherent, informed decision-

making, prioritization, and planning

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Questions to the Audience

• How do your enterprise architecture and portfolio management functions cooperate?

• What are the challenges you encounter?

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Integrated Portfolio Management Process

• Design phase: – Investigate goals and stakeholders, related to business strategy

– Define suitable portfolios

– Choose valuation criteria

• Execution phase: – Collect and score assets

or change initiatives

– Analyze portfolios

– Decide as input to the realization

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Strategy Portfolios Valuation

Design

Collection Analysis Decision

Execution

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PORTFOLIOS

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Portfolio Grouping Criteria

• Strategic objective • Such as supply chain optimization, outsourcing, increasing market share, cost

reduction.

• Supported business capabilities • Allocating investments to strategically important capabilities is a good way to

implement your business strategy

• Product life cycle stage • Such as the ‘cash cows’, ‘dogs’, ‘stars’, and ‘question marks’ of the growth-

share matrix • Follow best practices such as

• Do not put all your money in your cash cows • Do not over-invest in question marks

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Portfolio Grouping Criteria (cont.)

• Customer/market segment • Such as based on competitive position or predicted growth in these

markets

• Architectural dependencies • Such as applications that use shared data or support the same

channels

• or business processes that are part of the same value chain

• Technology life cycle stage • Experimental, innovative, mature, and legacy technology

• Pace layering (Gartner)

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Portfolio Landscape View

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VALUATION

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Valuation Criteria

• Cost is often the least complicated to calculate – Elaborate cost models are used by many financial departments

to ensure all costs are accounted for

– However, estimation of technical projects is often challenging as well, although these challenges can be addressed by a set of best practives

• Benefits can be more difficult to determine: assessing future benefits has to deal with a lot of uncertainty – In public sector organizations, societal benefits may be more

important than financial revenues

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Valuation Criteria Continued

• Architectural fit – Does the asset or project fit within the envisaged architecture?

• Development risk – The risk that a project fails to deliver part or all of its value

• Strategic importance – For example, replacing a monolithic legacy system with a new,

flexible business process management suite may enable various valuable future options, such as being first to market with new products or outsourcing business processes

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Asset Metrics

Two common metrics to assess the importance and quality of applications are: • Business value: the extent to which an application supports

the business capabilities • Technical value: the technical quality of the application,

including its adaptability to changing circumstances These might also partly be derived from the relationships in your architecture, such as those with • Business processes, capabilities and strategy • Technical infrastructure

54 http://www.aslbislfoundation.org/nl/asl/best-practices/cat_view/5-asl-best-

practices-nl/8-application-cycle-management

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Metrics in ArchiMate

• A Metric is a specialization of the Driver concept in ArchiMate: a driver that can be measured

• The definition of a metric includes information on how the represented property is measured, such as: – the unit of measurement (type of measurement result) – the way of measurement, e.g., manual or automated

• Metrics are associated with architecture elements – To measure, for example, the business value of an application – The result of a measurement

can be modeled using an Assessment in ArchiMate

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Aggregated Metric Definition

• The score of an aggregated metric is determined by its components. For example – The score for the metric “performance” is determined by the

“number of incidents”, “user experience” and “SLA compliance”.

• Only the lowest-level components are scored; the rest is calculated

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Adding Metrics to Portfolios

• Relevant metrics are added to portfolios

• Objects in the portfolios are scored against these metrics

• Dashboards are used to display metric scores

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PORTFOLIO DATA COLLECTION

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Data Collection Questions

• Where to get the data that is needed as input for the valuation? Inside, or outside the organization? From people, or systems?

• What is the quality of the available data (accuracy, timeliness, etc.)? And what is the quality that is needed?

• Which disciplines in the organization need to be involved? What’s in it for them?

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Adding Data to the Architecture

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Architecture Repository

Asset inventories

Contract information

Project plans

Presentations

Evaluations

Architectures Cost & revenue data

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ANALYSIS

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Analysis

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• Analyses combine metrics in an appropriate visualization – E.g. a bubble chart showing the total cost,

benefit, and risk of projects

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Dashboards

• With appropriate tooling, each portfolio view can be summarized on a dashboard as a collection of charts

• Tools should allow automatic chart population from portfolio analyses

• Select the charts to address stakeholder concerns and learning styles

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Application Lifecycle Analysis

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Application Landscape with Life Cycle Advice

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Tracking and Archiving

• An important aspect is the ability to track the development of these portfolios over time, in terms of their scores against metrics

• Appropriate tooling can make snapshots of the current state of a portfolio, including scores and dashboard, and place these on timelines

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DECISION

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Supporting Decision-Making and Planning

• Prioritizing and Planning Projects: How do you select and order different change initiatives?

• Roadmapping: How can you use ArchiMate models to define roadmaps and plateaus?

• Resource Planning: How can you use ArchiMate models to describe the resources necessary to carry out projects and programs?

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Gap Analysis: from Baseline to Target

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Programs and Projects

• Programs contain projects, including their relations

• Per project, cost, value, risk and status (approved, in progress, etc.) are important

• Aggregate program-level metrics can be calculated

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Roadmapping

• The ArchiMate Implementation & Migration extension is useful for defining plateaus of your architecture

• Don’t plan detailed plateaus too far into the future, especially in complicated or complex situations

• Use intermediate plateaus with temporary measures to evaluate alternative transition scenarios with respect to benefits, cost, and risk

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Roadmapping

• You can model roadmaps of programs and projects, showing dependencies between projects and putting them on a timeline

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Conversion Roadmap of ArchiSuranceBank

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Application Landscape Evolution

Cost reduction

2012 2014 2016

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PUTTING IT ALL TOGETHER

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Strategy on a Page

Vision

Become the leading provider of pharmaceutical products in the world

Capability heat map

Business Outcomes

• Improved customer experience when

administering their insurance

• Reduced operational costs from product

maintenance

• Improved way of billing customers

• Increased business agility and

adaptability to new regulations

• Improved administration of customer

information

Strategy

2010 – 2020: Product leadership

2015 – 2020: Operational excellence

Objectives to address assessment

• Improve product offering

• Minimize operational costs

• Eliminate local variance

• Facilitate resource sharing

• Improve information sharing

Initiatives to realise objectives

• Professionalize sales and marketing process

• Professionalise product and asset portfolio management

• Consolidate applications • Harmonize processes • Centralise information

Assessment of current situation

• Heterogeneous and complex product

offerings

• Lack of insight and anticipation on new

regulations

• Product maintenance is expensive

• Non-uniform way of billing customers

• Difficult to comply in time with new

regulations due to complex landscape

• Multiple and inconsistent CRM databases

Mission

We offer the most innovative pharmaceutical products with a quick and reliable solution

Red – needs big improvement; Yellow - needs medium improvement; Green – at desired level

Legend

Application rationalization

Harmonize billing process Homogenize info & data Improve global accessibility Instalment of APM process Product rationalization Professionalize marketing Revision of PPM process

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Caveat: Organizational Resistance

• Knowledge = power: Control of this information gives people influence or power in the organization

• Transparency = threat: You may uncover inefficiencies, overspending, quality issues and other problems, and people may fear to be blamed for those

• Money = power: Budget allocation is often based on e.g. business units or departments. This is often not the best way to distribute investments, but changing this may create resistance among stakeholders, because they lose control

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Summary

• The difficulty of strategy execution should not be underestimated

• Capability-based planning helps make strategy concrete • Enterprise architecture closes the remainder of this gap,

and ensures alignment and coherence • Enterprise portfolio management allows managing large

enterprise landscapes based on business value • ArchiMate models tie it all together, providing a clear line of

sight from strategy definition to realization • Powerful tool support makes this a strong combination!

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Questions?

Iver Band Enterprise Architect Cambia Health Solutions [email protected] Marc M. Lankhorst BiZZdesign Enterprise Architecture Service Line Manager [email protected] Webinars, blogs, e-books, customer stories, training portfolio, software and more on www.bizzdesign.com Whitepaper From Strategy to Successful Implementation with Enterprise Portfolio Management: http://bit.ly/1E1itkC ArchiMate industry usage poll: http://bit.ly/1P9Os63

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