How 1 Drawing and 2 Questions Can Deliver (Yet) More Value from I.T.

Just one diagram and just two questions will help companies deliver even more value from their IT investments.

It sounds simple but, of course, it isn’t. The work involved in putting getting an Enterprise Architecture (EA) on that piece of paper for execs can be challenging and time consuming.

But as Prof. Joe Peppard told the Irish Computer Society (ICS @IrishCompSoc), if Fortune 100 companies such as Delta Airlines (revenues of $31.8 billion) and MetLife ($52.7 billion) can map their EA, smaller firms should also be up to the challenge.

Peppard, Director of the Cranfield University’s School of Management’s IT Leadership Programme, was speaking at this spring’s CIO Masterclass Series at the ICS in Dublin.

Research shows that once executives understand the core diagram, “they can deliver more value from their IT investment than those who don’t,” Peppard said.

EAs are needed because often a business strategy is too high level. More granularity is needed and that is done by getting a sense of a business’ Operational Model, Peppard said. The EA reflects that model. By bringing clarity to executive team, it also helps inform their decisions on the company’s strategic direction, he said.

Two Questions to Define the Operational Model

  1. How much standardization is needed?
  2. How much integration is needed?

Standardization has its advantages, Peppard said. It can simplify operations, reduce costs and increase efficiency. On the other hand, it can limit flexibility, make local units replace perfectly good systems or processes, and be politically difficult to implement, he said.

standardization_vs_integration_grid

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Integration can link activities through a seamless flow of information, let a company present a single face to the customer, and provide transparency across the firm, Peppard said.

On the down side, it requires common data definitions, can be time consuming and difficult to implement, and may even be unnecessary if units are built around different customer groups, he said.

By mapping integration vs standardization (see grid to left), companies can determine how much of either is right for them.

Coordination: Examples in the top-left, coordination grid are banks that have different service offerings but want to present a common view to the customer. Merrill Lynch is one such company.

Diversification: Down one block in the bottom left are companies with autonomous units that have no need to share data. Typically these would be diversified companies such as GE or DCC.

Replication: Over in the bottom right, are companies with few shared customers that have operationally similar business units. They have highly standardized processes and centrally mandated IT. McDonalds is one such company.

Unification: In the top right are companies with globally integrated business processes, centralized operations and unified decision making. These companies include the likes of Apple and British Airways.

Where the firm falls in the grid is important, and can be a constraint if badly done, Peppard said. “The choices made can limit what you do in the future.” These are business decisions that will have a direct bearing on how companies position for growth either organically or through acquisition, he said.

Putting EA in One Diagram

The Enterprise Architecture diagram should include:

  • Core business processes
  • Shared data driving the processes
  • Key linking and automation technologies eg ERP, CRM, etc.
  • Key customers or channels or segments

The grid the firm is in will determine its starting point when staff build up the EA diagram, Peppard said. Another of his slides is reproduced below to show the path that should be taken.

start point to build EA

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The process will be iterative, Peppard said. Work will continue on the diagram until executives agree on the vision of how the firm will operate, he said.

The drawing will be used to bridge discussions between IT and business managers about IT’s role in the company.

And it can be used “to secure a commitment to exploring the impact of all ITrelated
projects on the enterprise architecture,” Peppard said.

Diagrams in the text are property of Cranfield University School of Management.

Main image courtesy Greblhad on Flickr.