April 16, 2010

Breaking Down Organizational Bottlenecks

Improving organizational performance is often grounded in identifying bottlenecks (constraints) and fixing them, so that the firm runs better, faster, cheaper than before and at an advantage to it’s competitors.

Enterprise architecture helps us to locate the bottlenecks through an understanding of our business processes, information flows, and systems and then facilitates our reengineering these though business process improvement and the introduction of new technologies.

Harvard Business School (HBS) put out a working paper in February 2010 called “The Strategic Use of Architectural Knowledge by Entrepreneurial firms,” by Carliss Baldwin that describes how “an entrepreneurial firm can use architectural knowledge to unseat a larger incumbent.”

The premise is that knowledge is a firm’s most critical resource, “including knowledge about how to assemble resources to pursue an opportunity.”

We can architecturally disassemble and assemble our resources and processes whereby we—“isolate the bottlenecks” and then “alleviate the bottlenecks.”

This process is grounded in modularity theory, where we use architectural knowledge to modularize (or breakdown) a complex system into its functional components as well as address how these components are related (through their interfaces).

Once we decompose the firms business, data, and systems into its modular components, we can then “remodularize” (or assemble) them into strategically more effective systems for doing business.

Moreover, the paper suggests that the firm “insources bottleneck components and outsources non-bottleneck components,” so as to focus resources (and innovation) on the trouble spots—the areas that are potentially a source of competitive advantage.

Fixing bottlenecks can produce valuable differentiators for a company that we would not want shared with those outside the organization and made available to competitors.

In my opinion, bottleneck functions can also be outsourced, whereby we decide to “let the experts handle it,” when the functions are not strategic in nature. For example, many companies outsource things like payroll and basic call center functions, and it enable the organization to focus its energy and efforts on its core mission.

The notion that enterprise architecture itself is a strategic differentiator for organizations that know how to wield the architecture knowledge is critically important. Through decomposition and assembly of processes and enabling technologies, we can create stronger organizations that not only reduce bottlenecks, but also drive improved decision-making in terms of what to invest in and how to source those investments.

While many organizations treat architecture as a compliance only mechanism and reap little to no benefits from it, those that understand EA’s strategic significance can use the knowledge gained to their organization’s competitive advantage.


No comments: