Managing Business Capabilities Within Strategic Enterprise ArchitectureBy Gunnar Eriksen Print
A strategic discussion about where and when technology investments should be made is as much of a business topic as it is a technology one.
Technology executives have increasingly realized the need to interact with business leaders. However, as these discussions tend to focus on various projects, supporting processes and needed IT applications, they usually lead to IT-centric discussions that aren’t aligned well with business strategies and related cohesive actions.
In addition, business strategies, if they exist at all, are often focused on the short term and change frequently on a year-to-year basis. Meanwhile, the technology strategies only tend to catch up.
Well-defined business capabilities can go far in closing the gap between business interests and technology concerns, if they provide the right level of detail and are consistent. Enterprises that have converged business and technology management are no longer in just technology discussions. Instead, they conduct business discussions about where and when technology investments shall be made. Business capabilities that are understood by both groups facilitate these discussions.
Business capabilities document what the enterprise does for a living and focus on the outcomes—not how the processes to accomplish this are performed. They are typically expressed in hierarchies and can be cross-industry and cross-vertical, with reference models from various sources. These capabilities establish a commonly understood business context, which simplifies the discussions between business and technology management.
Organized into hierarchies, the top level defines the major business areas that are segmented into the level where outcomes are clearly defined—all in business language. The capabilities can typically be described in terms of their business names; importance/criticality (undefined, low, medium, high); annual investment spend (ranges of hundreds to millions of dollars typically); cost/impact of regulatory controls, information risk (none, low, medium, high); technology risks (undefined, low, medium, high); status (proposed, approved, denied, etc.); and application landscape by organization (consolidate, decommission, remediate, replace, etc.).
Both the business and management capabilities are part of the enterprise strategy and belong in the strategic enterprise architecture functional area. There are several ways of making this visual for the decision-making process, all depending on the enterprise architecture tools being used. Often, the capability hierarchies at the highest levels are organized into major areas, such as sales and marketing, manufacturing, product, service, etc.
Then, within the manufacturing capability, for instance, it can further be divided into groups of capabilities, such as inventory management, order fulfillment, plant and equipment management and so on. The inventory management capability can further be detailed into specific business capabilities, such as direct material management, finished product management, vendor inventory management, etc.
The capabilities can be visualized as rectangles with different colors indicating ranges of costs, and thickness and colors of the frame lines. Depending on the EA software used and the level of automation in bringing the information about the capabilities to life, this can be quite advanced and extremely helpful.
Once organized and made visually available for management and stakeholders for the decision-making process, analysis can be made to answer questions such as the following:
• Are investments aligned and allocated to the core capabilities? The total investment spend is compared with the importance of each business capability.
• How are we investing in response to regulatory controls? The capabilities affected by regulatory controls are shown with their costs.
• What information risks are in the business? An information risk assessment will provide insights.
• What technology risk does the business have? A capability risk map that breaks down technology risks and status will show the highest risk areas.
• How does technology support the business? An application landscape by capability and organization distribution shows how the technology costs are allocated.
To succeed, it’s important to involve both business and technology leadership, stay focused on the business questions and issues, and make sure that the data underlying the capabilities are current and of the highest quality.
Gunnar Eriksen is practice director at BTM Corporation. BTM innovates new business models and enhances financial performance by converging business and technology with its products and intellectual property.© 2010 BTM Corporation | email@example.com
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