I am meeting a CIO of a big company this week. The company is making major acquisitions globally. Their goal is to leave each business operating independently with local autonomy to make decisions for growth. Initial information I received is that the CIO will leave the current IT systems alone leaving some room for future functional consolidation – HR, Procurement, Finance/Operations.

Which Operating model is this company going to adopt?

My research and analysis tells me that this company is going to pick “Coordination” Operating model. The product that the company produces is perishable that a common man in the world consumes. They have shared customers – but the packaging and distribution of the product may wary depending on the national factors – culture, currency etc.

Per Enterprise Architecture as a Strategy, the authors Jeanne Ross, Peter Weill, David Robertson –

“Coordination calls for high levels of integration but little standardization of processes. Business units in a Coordination company share one or more of the following: customers, products, suppliers, and partners. The benefits of integration can include integrated customer service, cross-selling, and transparency across supply chain processes. But while key business processes are integrated, business units have unique operations, often demanding unique capabilities. For companies with a Coordination model, low cost is usually not the primary driver in company-wide decisions. Autonomous business heads execute their processes in the most efficient manner possible, but corporate directives and negotiations focus on providing the best service to the customer. Strong central management defines the need for cooperation. Successful companies rely on incentive systems and management training to encourage company-wide thinking at the business unit level.”

IVI has launched the IT Capability Maturity Framework (IT-CMF). The IT-CMF provides a concise management roadmap to optimize business value derived from IT investments. The IT-CMF consists of a five-stage maturity model which is used to organize and structure a framework for mapping IT improvement efforts. The holistic approach of the IT-CMF is shown through four macro process for each of the five maturity stages. These consist of Managing the IT Budget, Managing the IT Capability, Managing IT for Business Value, and Managing IT like a Business. Altogether, 36 individual processes are managed by the framework.

• ITIL is a set of techniques and concepts for helping manage IT infrastructure, development and operations.
• COBIT (ISACA, 2007) is another framework which has attracted significant adoption and has its roots in the information security and auditing domain.
• An extension of COBIT called VALIT (ISACA, 2008) extends the risk management and security focus into the domain of value management.
• CMMI (SEI, 2003) is used often for software development and project management practices in IT organizations.
• The IT Service CMM (Niessink, 2005) applies a CMM approach to the IT service Management aspect of IT and has gained some traction in the Netherlands and surrounding countries.

If you are already applying one or more of other frameworks listed above, how will you use integrate IT-CMF?

1. Awareness that Mental models influence Architecture – The person in charge of the architecture will bring his patterns into play.

• Green is in big play now. IT Data Center Consolidation, virtualization, Cloud Computing, SOA. Operating Models and Organizations structures have evolved over the last two decades.
• You cannot come up with anything original unless you are willing to make mistakes.

2. Invest in Perpetual learning – Architectural History should be big on every practitioners list. The big example that I have constantly used is the building of Aswan Dam in Egypt.

• Keeping the historic context in mind – do you know what influenced the current architecture? Do you know the impact of change to upstream and downstream outcomes
• Seeing what this is next – is very hard for the Enterprise Architect practitioner.

3. Awareness that consequences of your architecture will be unknown in long term

• Price of responsibility is loneliness – Testing an idea before completely implementing it, and having enough data to make factual decisions in most cases is possible. However, when you are innovating sometimes you have to take risks. Enterprise Architect should be willing to make a decision based on instinct, and price of responsibility (success or failure) is loneliness.
• Dependence on quality of data – Generations of Analysts, Data “People”, and Decision Makers have grown up with the principle of GIGO – Garbage in, garbage out. It made a lot of sense for a very long time. The web unfortunately threw a big spanner into the works because now we have too much data. It seems absolutely dumb to argue that while the quality of data used to make decisions is important, it is actually not that important to have the highest data quality.
• Consequences of Architecture – The evolution of the architecture will depend on how the solution will be adopted by the organization. The importance factor is not just the scalability of the solution but the impact of this solution overall running of the business. The solution becomes mission critical if the solution is revenue generating. The government regulations, taxation policies on the top line revenue, the capabilities of the organization, evolution of the workforce again will drive the architecture into unknown areas not factored into the mental models of the Architect practitioner. The solutions built in each of the eras – Mainframe Era, PC Era, Client Server Era, and Web Era have continued to exist in one form or the other. The complete Rip & Replace is non-existent.

The big example that I have constantly used is the building of Aswan Dam in Egypt. I understand that this is a highly intensive capital infrastructure project and may be unrelated to IT Enterprise Architecture projects. But the lesson learnt that applies to Enterprise IT Architectures as well is that the consequences of the decisions made are never immediate. While the solution is always intended to solve the Problem Defined within the organizations constraints known at that time, the full positive and negative impacts is not known until later because of natural time lag. The decisions have to be made by leaders with the best data available and gut check.

Problem Definition for building of Aswan Dam – Without impoundment, the River Nile would flood each year during summer, as waters from East Africa flowed down the river as they did in ancient times. As the population along the river grew, there came a need to control the flood waters to protect and support farmland and cotton fields. In a high-water year, the whole crop might be entirely wiped out, while in a low-water year there was widespread drought and famine.

Negative Consequences – Environmental and cultural.

1. Flooded much of lower Nubia and over 60,000 people were displaced.

2. Lake Nasser flooded valuable archaeological sites. Abu Simbel is an archaeological site comprising two massive rock temples in southern Egypt on the western bank of Lake Nasser about 290 km southwest of Aswan. The twin temples were originally carved out of the mountainside during in the 13th century BC. However, the complex was relocated in its entirety in the 1960s, on an artificial hill made from a domed structure, high above the Aswan High Dam reservoir. The relocation of the temples was necessary to avoid their being submerged during the creation of Lake Nasser, the massive artificial water reservoir formed after the building of the Aswan High Dam on the Nile River.

3. The valuable silt which the Nile deposited ashore in the yearly floods and made the Nile floodplain fertile is now held behind the dam. Silt deposited in the reservoir is lowering the water storage capacity of Lake Nasser.

4. Poor irrigation practices are water logging soils and bringing salt to the surface.

5. Mediterranean fishing declined after the dam was finished because nutrients that used to flow down the Nile to the Mediterranean were trapped behind the dam.

6. Erosion of farmland down-river as the river replenishes its sediment load. Erosion of coastline barriers due to lack of new sediments from floods will eventually cause loss of the brackish water lake fishery that is currently the largest source of fish for Egypt, and the subsidence of the Nile Delta will lead to inundation of the northern portion of the delta with seawater, in areas which are now used for rice crops.

7. The delta itself, no longer renewed by Nile silt, has lost much of its fertility.

8. Red-brick construction industry, which used delta mud, is also severely affected.

9. Significant erosion of coastlines due to lack of sand, which was once brought by the Nile all along the eastern Mediterranean.

10. As salt water stagnates and evaporates it leaves behind salt crystals on the soil causing salination and decreased yield.

11. Standing water is a breeding ground for snails carrying the parasite bilharzias, the second most socio-economic negative parasite, second only to malaria.

12. Increased use of artificial fertilizers in farmland below the dam has caused chemical pollution which the traditional river silt did not.

13. Increase the salinity of the Mediterranean Sea affects the Mediterranean’s outflow current into the Atlantic Ocean. This current can be traced thousands of kilometers into the Atlantic.

14. Due to the Aswan Dam inhibiting the natural fluctuations in water height, i.e. floods, the bilharzias disease has flourished causing great expense to the Egyptian economy and people.

According to Forrester, Capability Map is a model of the firm associating the business capabilities, processes, and functions required for business success with the IT resource that enables them.

A business is characterized by the capabilities required for that business to accomplish its objectives. Each capability is itself a collection of actions the business takes — like responding to a customer’s service request or defining sourcing strategies for new products.

In a business capability map, each business capability is associated with -

1. Business goals. The importance of a capability is characterized by expected outcomes resulting from the capability, expressed as strategies, objectives, and metrics. These work best when business management defines specific results for each capability — like reducing cost per package-mile for a shipping capability. But outcomes will inevitably cross multiple capabilities — like the goal of speeding idea-to-product time, which spans market research, product development, and manufacturing capabilities.
2. Processes and functions — and the information they work on. Business capabilities comprise business processes and functions that flow within and across them — like the process order-to-ship, which spans capabilities like sales, order taking, inventory management, and shipping. And the business processes and functions have information they work with — like order-to-ship process and associated applications, which manage a list of goods requested by a customer against finished-goods inventory or manufacturing capacity.
3. The “bill of IT.” A business capability map employs a “bill of IT” — the collection of the hardware, software, and IT services required to enable a specific business capability. The bill of IT is simple when there are dedicated systems but becomes complicated when a single system supports multiple capabilities — as in a virtualized data center.
4. Future-state capabilities. Capability maps can be the basis for comparing the “as is” and a “to be” state, yielding a picture of capability, process, and bill of IT gaps between these two states. And because the model maps capabilities to business goals, organizations, processes, and information, the future-state capabilities can form the basis for both IT and business planning.

Enterprise Architecture as Strategy recommends that to execute Business Strategies, it is essential to first build the Foundation for Execution. And to develop the foundation for execution, it is very important to understand the current Operating Model of the company.  

What is an Operating Model?

An Operating Model is the necessary level of business process integration and standardization for delivering goods and services to customers. An Operating Model describes how a company wants to thrive and grow. By providing a more stable and actionable view of the company than strategy, the operating model drives the design of the foundation for execution.

1.       Operating Model is recommended to support a company’s strategy. Foundation for Execution is the IT infrastructure and the digitized processes automating a company’s core capabilities.

2.       Choice of an operating model is a critical decision for a company. It’s the first step in building a foundation for execution. An operating model enables rapid implementation of a range of strategic initiatives.

3.       Operating model is a choice about what strategies are going to be supported.

Market Strategy Viability

Hugh Courtney’s interview in the McKinsey Quarterly clearly articulates the need to rethink the Strategic planning processes. In the months to come, decisions will have to be made quickly on fundamental opportunities that may drive company’s earnings for the next decade or more. These decisions will have to be made in real time. That requires a continuous focus on market and competitive intelligence and far more frequent conversations among the top team about the current situation. Senior executives may not have the raw material and the structure to work through strategic decisions systematically. The daily leadership conversations have to move beyond getting through that day’s crisis to more fundamental strategic issues as well, because the decisions made today may open up or close off opportunities for months and years to come.

Also, corporations spend about $100 billion a year on management consulting and training, most of it aimed at creating strategy. Studies have found that less than 10 percent of effectively formulated strategies carry though to successful implementation. So something like 90 percent of companies consistently fail to execute strategies effectively.

The current financial woes of the companies are a sobering reminder that a Foundation for Execution cannot sustain a company if its market strategy is not viable.

Trying to understand….

When the range of strategic outcomes in uncertain environments is limitless, can the same operating model support initiatives with changing assumptions?