IT Planning: Business Strategy & Enterprise Architecture

• This lecture is about addressing practical problems in IT planning using a business strategy as the foundation for an Enterprise Architecture (EA) practice.
• It also includes establishing a productive dialogue between business and IT representatives.

The Position of an EA Practice

• An EA practice serves as a mediator between strategic management and projects management.
• This role enables effective coordination of plans and activities among all relevant actors involved in strategic decision-making and implementation of IT systems.
• The ultimate goal is improved business and IT alignment, ensuring that IT initiatives support business objectives.

Problems with the Business Strategy

• A business strategy defines the overall long-term direction for the whole organization.
• A comprehensive business strategy plan typically includes elements like a core mission statement, organizational vision and values, competitive and business analysis (SWOT, PEST, Five Forces), strategic goals and objectives, and quantitative key performance indicators (KPIs).
• Business strategy rarely provides an adequate basis or requirements for IT planning in a narrow sense because it is often unclear or abstract.

The Role of Business Strategy for an EA Practice

• A business strategy rarely provides a very useful input for an EA practice in a narrow sense.
• The strategy doesnt specify what IT should do, either now or in the next 3 to 5 years.
• Business strategy sets a "soft" context for an EA practice but lacks "hard" data.

Strategy Is Often Vague or Merely Absent

• The guidance provided by the business strategy may be too vague, unclear, or abstract for practical IT planning.
• Many strategies proclaim largely meaningless generic motherhood statements that dont translate into actionable IT guidance.
• The business strategy may be miscommunicated, misunderstood, interpreted differently, or unknown, leading to misalignment between business goals and IT efforts.
• In some cases, a formal and documented business strategy is simply missing altogether, leaving IT planners without a clear direction.
• The absence of a clearly defined, mutually agreed, and widely understood business strategy undermines the strategy-based IT planning efforts.

Strategy Rarely Provides a Direction for IT

• A business strategy often does not offer any clear suggestions for IT, making it difficult to translate business goals into IT actions.
• Mission statements, market-share goals, and financial performance indicators are not a solid foundation for IT planners.
• Without adequate guidance, IT planners must make planning decisions based on their own guesswork, increasing the risk of misalignment and inefficiency.
• Inconsistencies between business planning and IT planning minimize the value of the business strategy as an input for EA practice.

Strategy Is Unstable and Often Changes

• In many organizations, the business strategy changes too often to provide a stable foundation for IT planning
• Constantly changing business objectives quickly make any strategy-based plans for IT outdated and irrelevant.
• In extreme cases, IT strategy-based plans become obsolete before they are completed, rendering them useless.
• The unpredictable, volatile, and unstable nature of the business strategy makes strategy-based IT planning almost impossible, requiring more agile and adaptive approaches.

Strategy Requires Non-Reusable Systems

• The business strategy requires highly specific IT systems essential for the current strategy but useless in the long-term future.
• Business strategies may be active for 3-5 years, but the IT systems implemented to support these strategies “live” for 10-15 years or even longer.
• IT systems that are considered as an asset for the current strategy but will become a liability for the next strategies.
• Chasing latest business strategies leads to proliferation of legacy IT systems, which create significant problems in the long run.

Discussion Points for Business and IT


• Other aspects and elements should be discussed for developing optimal IT-related planning decisions.
• These discussion points should provide a middle ground relevant to both business and IT.
• The middle ground for business and IT alignment should be meaningful and come from the business and IT viewpoints.
• This middle ground should provide certain discussion points across the entire time spectrum.

Five Key Discussion Points


• Operating model – global process standardization and data sharing requirements from an organization-wide perspective.
• Business capabilities – specific capabilities of an organization that need improvement.
• Specific business needs – specific needs of an organization that need addressing.
• Business processes – high-level process change requirements to specific IT solutions.
• Business requirements – detailed business requirements to specific IT systems.

Operating Model

• An operating model is the desired level of organization-wide process standardization and data integration.
• It defines which business processes are standardized and which business data is shared across major business units, like lines of business, business functions, or regional offices.
• It determines global standardization and integration requirements for the key business-enabling EA domains, including business, applications, and data.

Process Standardization

• The required level of process standardization indicates the degree to which business units should perform business processes in the same way.
• Standardization has both advantages and disadvantages for organizations, influencing brand recognition, global efficiency and predictability, and local opportunities.
• Standardization facilitates brand recognition, global efficiency, and predictability, creating consistency across the organization.
• It limits local opportunities for customization and innovation, potentially reducing responsiveness to local market needs.

Data Integration

• The required level of data integration indicates the degree to which business units should share business data between each other.
• Data integration has both advantages and disadvantages for organizations, impacting customer experience, coordination, and data governance
• Data integration presents a "single face” to customers, enables end-to-end transaction processing, and increases transparency, coordination, and agility.
• It increases coupling between business units and requires achieving a common understanding of shared data entities and developing their standard, commonly agreed definitions and formats.

Four Operating Models

• Decisions regarding standardization and integration have far-reaching implications for the whole organization from both the business and IT perspectives.
• There are four possible groups of operating models.
• Diversification
• Coordination
• Replication
• Unification
• Each group of operating model implies different structures of the business, requires a different structure of the IT landscape and supports different types of business strategies.

Unification (Description)

• The unification model is an operating model with high process standardization and high data integration.
• Unification is appropriate for centralized organizations consisting of similar and interdependent business units, like interrelated regional or market segment divisions.
• Business units managed centrally, run standardized processes, and have integrated transactions, shared customers, products, and suppliers.
• IT landscapes consist of global applications, databases, IT services, and infrastructure shared by all business units.

Unification (Capabilities)

• IT landscape core elements are globally accessible systems, which enable core business processes in all business units.
• IT landscape key capability is providing standard IT systems with global data access, reinforcing standardized business processes
• The unification model relies on maximizing efficiency and reducing variability of business processes, integrating data, and minimizing costs.
• The unification model may be unsuitable for competing based on highly innovative offerings that require flexibility and customization.

Diversification (Description)

• The diversification operating model has low process standardization and data integration as a core part of the IT landscape.
• Diversification suits highly decentralized organizations with diverse and independent business units, such as lines of business that operate independently.
• Business units are managed autonomously, design their processes, have independent transactions, and share little to no common customers or suppliers.
• IT landscapes feature global IT services and infrastructure alongside localized applications and databases owned by specific business units.

Diversification (Capabilities)

• The lean layers of shared infrastructure and technology services supporting all business units are core elements of IT landscapes
• IT landscape provides economies of scale through sharing IT services and infrastructure without limiting local independence.
• The IT landscape facilitates independence, flexibility, and local autonomy for business units to serve customers and generate profits.
• It may be unsuitable for centrally orchestrated business innovations since the units operate independently without shared business processes.

Coordination (Description)

• The coordination model is an operating model with low process standardization and high data integration.
• Coordination suits decentralized companies with diverse but interdependent business units, like business functions or product divisions that need to coordinate to deliver value.
• Business units often operate autonomously but may depend on transactions and have shared customers, products, suppliers, or partners.
• IT landscapes feature global databases, IT services, and infrastructure shared across the company with local applications owned by business units.

Coordination (Capabilities)

• Core elements of IT landscapes are central data hubs storing common information accessible to all local applications in business units.
• This creates easy, secured global access to shared data through standard technology interfaces.
• The intent is for higher customer service, local innovation, cross-selling and upselling opportunities, transparency across key transactions, and supply chain and supply chain processes.
• This is unsuitable for competing based on lower costs.

Replication (Description)

• The replication model is an operating model with high process standardization and low data integration.
• Replication suits decentralized organizations of similar but independent business units such as regional offices selling the same product.
• Business units are managed autonomously but follow centrally defined business processes, have independent transactions, manage their customers locally and share little to no common customers.
• IT landscapes consist of globally standardized applications and local databases owned by specific business units and global IT services and infrastructure

Replication (Capabilities)

• Core elements of IT landscapes are replicated IT systems that support business processes and are deployed in all business units.
• The IT landscape provides standard sets of information systems for standardized business processes optimized for global efficiency.
• The replication model drives predictability and repeatable business processes, leading to consistent customer experience and capacity for process innovation.
• The replication model may be unsuitable for building complex customer relationships that require more tailored processes.

Operating Models as Discussion Points

• Since an operating model has profound consequences for both business and IT, it provides a convenient discussion point.
• Each operating model implies a specific way of doing business and determines what an organization can do.
• Each operating model facilitates the execution of some business strategies and inhibits the execution of others.
• Each operating model requires a specific structure of the IT landscape and demands certain IT capabilities.
• An operating model provides suggestions regarding what IT landscapes should do well and should not do well

Time Horizon of Operating Models

• The operating model is the most abstract of all common discussion points between business and IT stakeholders.
• The choice of an operating model is a more fundamental decision than the choice of a business strategy since it shapes the way an organization operates.
• The notion of operating model is appropriate for long-term planning with a horizon of longer than 3-5 years.
• Desired operating module decisions help document long-term goals of organizational architecture principles and data sharing requirements.

Business Capabilities

• A business capability is a general ability or capacity of an organization to perform a specific business activity.
• The full set of all organizational business capabilities represents everything that an organization can do or needs to do to run its business.
• Business capabilities are multifaceted notions encompassing all underlying business processes, people, knowledge an other resources including information systems, required to fulfill these capabilities.
• Business capabilities of an organization offer a stable view to its business and change pretty rarely, only in case of significant business transformations.

Capabilities as Discussion Points

• Business capabilities represent both the abilities of business and IT assets and provide convenient discussion points for IT and business leaders.
• Business leaders understand the relationship between their business strategy and capabilities.
• Business executives can specify which business capabilities should be improved to execute the strategy.
• Understanding comes from the architects between business capabilities and underlying information systems.
• Architects can determine what new IT systems are necessary to uplift requested business capabilities.

Time Horizon of Business Capabilities

• Business capabilities are more detailed than an operating model.
• They suggest exactly where business and IT improvements are required according to the current business strategy.
• Business capabilities may be very useful for coarse-grained conceptual planning, typically with a long term horizon of 1-3 years ahead.
• Discussions of business capabilities are often supported by capability maps helping decide which capabilities should be uplifted.

Specific Business Needs

• A specific business need represents a general idea to address a particular business problem using IT, like accelerating the mortgage lending process.
• Specific needs can be considered as proposed business initiatives or projects with necessary IT components to address the identified opportunity.
• Each business need implies solving some business problem and changing the organizational IT landscape.

Business Needs as Discussion Points

• Business needs represent both business improvement opportunities and related IT changes, for IT and business.
• Executives understand the relative importance of specific business needs for their business.
• Business leaders can assess the value anticipated from addressing those needs.
• Architects understand what changes in the IT landscape are required to implement specific business needs.
• Architects offer a number of possible technical options or solution for addressing requested business needs with IT.

Time Horizon of Specific Business Needs

• Specific business needs are more detailed than business capabilities, providing a more granular level of focus.
• They suggest what approximately should be done to address a particular business problem.
• Specific business needs are often used for planning the mid-term future for up to 1-2 years ahead.
• Discussions of specific business needs are facilitated by IT investment roadmaps or other similar EA artifacts.

Business Processes

• A business process is a sequence of specific activities carried out by particular actors intended to produce some valuable business outcomes.
• Business processes are characterized by certain inputs and outputs, material or immaterial.
• They define the steps and tasks accomplished by the employees as well as the roles of relevant IT systems in enabling said tasks.

Business Processes as Discussion Points

• Since business processes represent both specific business activities and functionality of IT systems, they lead to convenient discussion points for IT and business.
• Business leaders understand the role of separate business processes for their business
• Business sponsors can evaluate the business benefits of specific changes in established business processes.
• Architects understand the role of information systems in supporting specific processes.
• Architects can articulate what the IT department should deliver to enable the desired changes in processes.

Time Horizon of Business Processes

• Business processes are more detailed than specific business needs.
• They suggest how approximately IT solutions should work and how exactly specific organizational processes should be changed.
• Business processes can be used for relatively short-term planning from now up to 1-2 years ahead.
• Discussions are often based on solution overviews or other similar Outlines helping decide exactly how current processes should be modified by new IT solutions.

Business Requirements

• Business requirements are detailed functional and non-functional specifications for concrete IT systems.
• It describes the expected IT behavior of a particular system from the business perspective.
• It should specify how an IT solution should work and imply system components implementing these requirements with hardware and software.

Business Requirements as Discussion Points

• Since business requirements reflect the IT behavior from both business and IT stakeholders.
• Business stakeholders understand the role of specific business requirements to IT systems.
• Business sponsors can formulate and prioritize business requirements for the IT.
• Architects also understand the role of specific business requirements to IT systems.
• Architects propose and describe detailed structure of new IT requirements that meet the requirements

Time Horizon of Business Requirements

• They are the most detailed of all common discussion points between business and IT stakeholders.
• These provide very specific descriptions of desired IT systems. These are also suitable for short-term IT planning covering the immediately actionable perspective up to 6-12 months ahead.
• Discussions often revolve around solution designs or other similar Designs helping agreeing on new IT specs.

The Role of the Key Discussion Points

• An operating model, business capabilities, business needs, business processes and business requirements are the most common of possible discussion points.
• The five key discussion points are significantly different in their abstraction levels, appropriate organizational scopes and planning horizons.

Granularity, Scopes and Horizons

• Abstraction levels of discussion points negatively correlate to their planning scopes and horizons.
• Discussion points and respective planning decisions appropriate for the widest scopes and longest time horizons are the most abstract ones, and vice versa.
• The same also goes for EA artifacts.
• The EA Uncertainty Principle states that organizations can be either planned for wider scopes and longer horizons in less detail, or planned for narrower scopes and shorter horizons in more detail, but they cannot be planned for wide scopes and long horizons in great detail.