by Dennis Stevens
Ric Merrifield is the head of Business Architecture for Microsoft. To view another interview with Ric check out http://channel9.msdn.com/ShowPost.aspx?PostID=179160#179160.
1. What is Business Architecture and how does it relate to Strategic Alignment?
Business architecture is not so different from the architecture of a building in that it is an abstract representation of “what” something is, down to a very low level of detail. Then “how” that architecture is implemented, in the case of the house is the color of paint you use, and the quality of the materials you use, and places where you decide to emphasize quality, and where you decide to be more frugal. So the “how” describes the implementation of the architecture, and those implementations will change over time, as you replace your roof and do a remodel and so on and so forth, and as you do those changes, you will often go back to the architecture to inform some of those changes.
Similarly, the business architecture is a depiction of “what” makes up a business, and in this case we refer to the parts that make up the architecture the “business capabilities” and the detailed ones might be “Pay Employees” (which is a part of the “Human Resources” capability) or “Ship Product” (which is part of the “Fulfill Orders” capability). As with the house, “how” those capabilities are implemented in the form of who does the work, and what specific process steps are used, and what technology supports it, those are the implementation of the capabilities, and any or all of those implementations can change over time, but like the house architecture, the business capabilities remain comparatively stable and static.
For example in the “Pay Employees” example, things about that capability that are common are who in the organization owns that capability, the performance metrics are fairly universal, and the relationship of the performance of the capability to its parent, Human Resources, is well known and understood. So what you end up with in business architecture is a highly stable, measurable, and transparent view of a business. And then if you see that business as a complete business and not just “the four walls of the company” in which case something like Pay Employees may be outsourced to another company, but the capability is still part of your business, you have an end-to-end transparent view of the business, that is clear and understandable to business people and IT people, and this opens up a whole new dialogue about where change is needed, and who should do the work, and how it should be prioritized and so on and so forth.
With that, you are able to create a very bottoms up view of the business, or even just a part of the business, and link that to organizational strategy in a way that informs strategic direction, but also allows the strategy owners to get very specific about the impacts of their recommendations in terms of impact and benefit. Further, once you achieve this linkage, because of the richness and objectivity of the metrics you get from business architecture, you can achieve real time, or at least real enough time reporting of progress against strategy, which is a very big step forward for a lot of organizations.
2. What is the cost to organizations from the lack of strategic alignment?
Organizations that lack strategic alignment are going to see cost in three specific areas:
a) Risk. If you do not have an explicit link between strategy and the details of the business operations, things will happen at the operational level, and the strategy owners won’t be able to see it either reactively or proactively, and even when they are made aware of an issue, they still may not have clarity with respect to the strategic impact and that can create great risk to a company if they do not respond properly to strategic shifts. Similarly, not having that linkage makes it harder to get predictability in outcomes and performance, and for most organizations, high variably in outcome can be very expensive.
b) Waste. Absent an explicit link, the people in the tactical roles may invest in projects, people, and technologies that are not aligned with strategy, and while not every decision has to be aligned with strategy, if there is a link, people can at least ask the question. If people are investing in the “wrong” things and there are no checks and balances, those investments are at best a waste of money, and at worse are actually counter to organizational strategy.
c) Wrong spending. Different from simple waste, organizations are often faced with decisions about project selection and prioritization. If the strategy and operations are not linked, there is a chance that projects that are aligned with strategy will not get funded, either because of politics or some other reason, and that can also be very expensive in terms of recovery and simply ending up with an organization that is different from what the strategy calls for.
3. How is Business Architecture different than Process Mapping or BPM?
It is very easy to get caught up in a “label” disagreement, but there are some very specific differences that we have found most people are comfortable with:
1) What/How. The business capabilities that make up a business architecture describe “what” the work is and process usually describes “how” it is done. At the higher level functions, the labels can be very similar, but as you get more detailed into something like “Send Fax to Agent”, that describes how they are performing a capability which is “communicate status to agent” where the fax is an implementation decision.
2) Schematized. Capabilities have a schema associated with them (with attributes such as who owns it, who is the customer of it, what are its performance measures, are there compliance needs, etc.), whereas process has not historically had that. So what often happens with process is if you ask five people to describe a given process, you can get five different depictions, whereas with the capability, because its attributes cause it to have more objectivity and more specificity in terms of where it starts and where it stops, the capability definition tends to be more objective and stable.
3) Stability. You can change the process without changing the capability, but you can’t change the capability without changing the process. In the example of “Pay Employees”, whether it is five process steps, or ten, or whether it’s automated or manual or even outsourced, all of those things can change, and it’s still “Pay Employees” with the same performance measures and inputs and outputs.
4) Not just the company. People typically stop process mapping at the four walls of the company and capability mapping encourages people to view the entire business with all partners, customers, suppliers, regulatory bodies, and so forth.
5) Process is unique to a company, and business architectures tend to be highly common within an industry, and in some cases even across industry. “What” a company in an industry does is usually very similar. It is “how” they do the work that makes them unique, that defines their brand and identity. This allows organizations to look within and even outside of their industry to make decisions about what to outsource and what to focus on from a strategy perspective as some industries get more and more competitive. Focusing on that small percentage of the business that truly drives performance, and brand, and identity, in this day and age is a big advantage.
4. Does a balanced scorecard serve the same purpose?
Absent a schematized view of a department, or a division, or even the entire business, you cannot “stitch” together all of the scorecards in the same way that allows end-to-end organizational transparency. Scorecards, by their nature, measure the results of activities. They don’t give you insight into what to change to get different results. Also, in many implementations, scorecards cascade through the organizational hierarchy. So the conflicts inherent in that structure are reflected in the scorecards. In business architecture, the business model comes first, and the organizational hierarchy second. What is powerful is if you combine scorecards with business architecture in a meaningful way. So, scorecards are necessary but not sufficient.
5. How does Business Architecture help with Organizational Alignment?
Because of the transparency provided by business architecture, different parts of the business that do similar things, or even the same thing, with different people, or process, or IT allows the organization to ask the questions about whether they should be different people, processes and IT. It allows businesses to highlight areas of best practices, it highlights opportunities for consolidation (there’s a good reason HR is a central function in many organizations), risk reduction (doing contract management five different ways can be a risk if it doesn’t need to be different), even outsourcing if it makes sense for the business.
# # #
Ric Merrifield is the head of business architecture at Microsoft. You can contact Ric at
Dennis Stevens leads Synaptus, a consulting firm that helps executives improve business performance by connecting strategy to execution. For more information, please visit www.synaptus.com.