To Invest or Not to Invest, That is the Question

There are scarce dollars for investment purposes and many competing alternatives to invest in. Therefore, organizations must make wise investment decisions.

Common sense dictates that we invest in those technologies that will bring us the greatest return on investment. However, investing in IT is not only about seeking to maximize profitability or superior mission execution, but also about mitigating risk.

MIT Sloan Management Review, Spring 2009, discusses the need to balance between two types of investment risks.

The first, and obvious one is financial risk—“the failure to achieve satisfactory returns from an investment;” those organizations that load up on too much financial risk, can actually put themselves in danger of not being able to stay financially solvent i.e. too many poor investments and the company can be sunk!

The second risk is competitive risk—“the failure to retain a satisfactory competitive position for lack of investment.” Organizations that are too conservative and don’t invest in the future put themselves at risk of falling behind the competition, and may be even out of the race altogether.

So how do we balance these two risks?

On one hand, we need to make critical new IT investments to stay competitive and become more effective and efficient over time, but on the other hand, we need to manage our money prudently to stay on solid financial footing.

Managing financial risk is a short-term view—similar to looking at the daily stock market prices or quarterly financial returns; if we can’t meet our financial obligations today or tomorrow, game over. While managing competitive risk is a long term perspective on investing—we need to remain agile amidst our marketplace competitors and outmaneuver them over time picking up additional customers and market share and building brand and satisfaction.

In information technology management, we must manage both the short-term financial risk and the long-term competitive risks.

What tools are in the CIO’s arsenal to manage these risks effectively?

Enterprise architecture planning is a strategic function that takes a primarily top-down view and assesses organizational requirements (including competitive needs) and drives IT investments plans to meet those needs. In this way, EA manages competitive risk.

IT governance or capital planning and investment control is a bottom-up view that helps us manage shorter-term financial risks by providing a structure and process for vetting IT investments and prioritizing those. Sound IT governance helps us limit financial risk.

So we attack the risks from both ends—from the top and from the bottom.

While we cannot entirely eliminate the risks of failed IT investments or of missing opportunities to knock the competition off its feet, we can manage these by architecting our enterprise for long-term success and by appropriately scrutinizing the selection, control and evaluation of our investments so that we safeguard our financial resources.

So the CIO can err by going too far in either direction:

So a balance needs to be maintained.

“More specifically, a balance should be maintained between errors of omission and commission.” Fail to invest and modernize the organization’s technology and you commit the error of omission. Invest overly aggressively and you commit the error of commission. “A balance must be struck between the error of pursuing too many unprofitable investment opportunities as opposed to the error of passing up too many potentially profitable ones.”

To Invest or Not to Invest, That is the Question

IT Planning, Governance and The Total CIO

See new article in Architecture and Governance Magazine on: IT Planning, Governance and the CIO: Why a Structured Approach Is Critical to Long-Term Success

(http://www.architectureandgovernance.com/content/it-planning-governance-and-cio-why-structured-approach-critical-long-term-success)

Here's an exrcept:

"IT planning and governance undoubtedly runs counter to the intuitive response—to fight fire with a hose on the spot. Yet dealing with crises as they occur and avoiding larger structures and processes for managing IT issues is ultimately ineffective. The only way to really put out a fire is to find out where the fire is coming from and douse it from there, and further to establish a fire department to rapidly respond to future outbreaks."

IT Planning, Governance and The Total CIO

Brand and The Total CIO

David F. D’Allesandro, the CEO of John Hancock insurance group has a bunch of wonderful books on building brand and career, such as “Brand Warfare”, “Career Warfare” and “Executive Warfare”.

All the books have three things in common. One, they are about the importance of brand. Two, they are about moving ahead in the corporate world. And three, they all end in “warfare.”

Brand is critical for building value. Brand is our reputation. It’s how we are known to others. It’s what people think and say about us. It’s a representation of our values and integrity.

We all know corporate brands such as those from consumer product companies and fashion designers. Those that have a “good” brand, tend to convey a higher status and cost a premium. We trust those brands and many people wear the brand labels as a status symbol.

We all carry a brand. Like a mark of “Grade A” or “Prime Beef” seared on a side of a hide of cattle, a brand is mark of distinction for us.

At work, we are branded as honest or not, fair or not, hard working or not, team players or not and so on and so forth.

As the CIO, it is imperative to have a brand that synthesizes the best of business and technology for the organization.

On one hand, many view the CIO as the technical leader for the organization; the wang-bang guru that leads the enterprise through the often confusing and fast-changing technology landscape. In this role, the CIO can make or break the future of the organization with wise or poor technical decisions that can put the enterprise on the cutting-edge, build competitive advantage, and increase revenue/profits, market share, and customer satisfaction. Or the CIO can lead the organization down a technical sinkhole with failed IT projects that jeopardize mission, alienate customers, drive out good employees out, and waste millions of dollars.

On the other hand, many like to say that the CIO is not and should not be tech-focused, but should be about the business—understanding the business strategy, operations, and requirements and then driving an IT organization that is responsive to it. Taken to an extreme, the CIO may not be required to have a technology background, an IT degree or even a technical certificate. This person may be from the business side of the house and could almost alien to the CIO organization and therefore, may not easily garner the respect of his more technical people.

The true successful CIO melds business and technology together. Their brand is one where business drives technology and where strategy is paramount, but operations is a given! This CIO is someone who can be relied on to make wise technical decisions today that will enhance the strategic success of the organization tomorrow. The CIO is a leader who manages not only upward, but who reaches across the organization to build partnership and understanding; who inspires, motivates, trains, recognizes, and rewards his people; and who conducts outreach and brings in best practices from beyond the strict organizational boundaries. This CIO is loyal, dedicated, hard-working, smart, and has the trust and confidence to get the job done!

So what with the “warfare” part in the books?

Well, unfortunately not everyone wants us to succeed. So, we must work on our brand to build it and make it shine, but at the same time, there are others inside and outside the organization who for various reasons would like to tarnish our brand: perhaps, they are jealous, competitive, nay-sayers, change resistant, oppositional, confrontational, troubled, or just plain crooked.

What D’Allesandro says is that to be successful, what sets us apart, is our ability to build relationship with others, even when it is challenging.

To be a successful CIO, we need a terrific personal brand, but more than that we need to have courage and conviction to stand by our beliefs and the vision and the ability to articulate it to guide and influence others to advance the organization’s long-term business and technical success.

Brand and The Total CIO

Nimbleness, Ingenuity and The Total CIO

We all know the story of David and Goliath, where little David slays the monstrous adversary from the Philistines, Goliath.

From a religious perspective, of course, David is victorious over this incredible enemy, by the hand of G-d; it is a miracle!

Metaphorically, David slays the Giant with a rock and sling shot overcoming the daunting Goliath and his foreboding weapons (sword, spear, shield, and armor); it is David’s nimbleness and ingenuity that overcome the hulking and conventional giant, Goliath.

You have to love this story.

Good wins over evil. The smaller defeat the larger. The underdog overcomes the “sure thing.”

The modern day, Hollywood version of this is Rocky whose sheer determination and laser focus prevails against superior adversaries. How many times does the smaller Rocky defeat the larger, better trained, more muscular opponents? Remember—Apollo Creed (taller, trimmer, faster), Hulk Hogan (the giant who literally picks Rocky up over his head), Clubber Lang (the awesome Mr. T), Ivan Drago (the steroidal, methodically-trained Soviet), and so on.

David versus Goliath, Rocky versus Ivan Drago…

While these are amazing and inspiring stories of success, these aren’t unique stories or themes in history. Why?

As the old saying goes, “the bigger they are, the harder they fall.” Small, nimble, and innovative can and will overcome large, lumbering giants. This can be in the ring (like Rocky), on the battlefield (like David and Goliath), and in marketplace competition (like challenger brands such as Apple, Google, Honda…).

Recently, the Wall Street Journal has an article entitled “Honda’s Flexible Plants Provide Edge.” (23 September 2008)

“One recent morning, the Hondo Motor Co. plant here churned out 120 Civic compacts. Then the production line came to a halt and workers in white uniforms swept in to install new hand-like parts on the giant gray robots that weld steel into the car’s frames. About five minutes later, the line roared back to life, and the robots began zapping together a longer, taller vehicle, the CR-V cross-over. In the automotive world, this is considered quite a feat.”

Honda’s plants are the most nimble in the industry.

In the first 2/3 of the year, while sales are down 24% at Chrysler, 18% at CM, 15% at Ford, and even 7.8% at Toyota, Honda is up 1.7%!

Like with Honda’s more efficient production process—“to shuffle production among different plants as well as make different models in one plant--flexibility and innovation are the rocks and slingshot of the modern day David. Watch out Goliaths!

The great lesson here for large, successful organizations is that no matter how much bigger and better you are than the competition, you can never rest on your laurels.

Time can change everything.

The smaller, seemingly disadvantaged enterprise is eyeing those in the #1 spot and taking it as their personal challenge to unseat them. They are clawing their way up and will use their smaller size to outmaneuver, and their ability to innovate to leap ahead of the competition.

The Total CIO (like King David and Rocky) find a strategic advantage to enable them to overcome stronger and/or larger competitors. The Total CIO leverages technology/business process improvement as tools of innovation to change the game completely.

Nimbleness, Ingenuity and The Total CIO

Toyota and Enterprise Architecture

MSNBC on 24 April 2007 reported: “through a shrewd combination of investing in environment-friendly vehicles, offering sharp new models and wooing drivers with brand power, Toyota has toppled GM from the top global sales spot for the first time ever.”

Harvard Business Review, June 2008, reports on “Contradictions that Drive Toyota’s Success.” (by Hirotaka Tekeuchi, Emi Osono, and Norihiko Shimizu) “Toyota Motor Corporation has become one of the world’s greatest companies because of Toyota Production System (TPS)…enables the Japanese giant to make the planet’s best automobiles at the lowest cost and to develop new products quickly.”

What is Toyota’s secret?

Reaching for the stars—Toyota sets “near-unattainable goals.” For example, “consider the company’s strategy: Meet every customer need and provide a full line in every market.” This runs counter to Michael Porter’s strategy of “choosing what not to do.” Additionally, Toyota’s goals are “purposely vague” to force exploration, innovation, and collaboration to meet them.

Consider the goals stated by Toyota’s president, Katsuaki Watanabe:

“Build a car that makes the air clean [not just less dirty], prevents accidents [not just reduces accident’s], makes people healthier and happier when they drive it [not just a car that gets you from place to place], and gets you from coast to coast on one task of gas [not just incrementally improving gas mileage].”

Have you ever seen anything like these goals in your organization’s strategic plans?

I highly doubt it. But imagine how your enterprise would change culturally and competitively overnight if you did!

Of course, Toyota’s strategy of Kaizen—continuous improvement—is part of their unending desire to succeed and not be satisfied. They view improvement as not something you achieve, but as something you continuously strive for.

We can apply Toyota’s reach goals and Kaizen philosophy to making enterprise architecture planning more effective too. We need to stop conveniently “planning” on things we are working on now or for which we have a head-up that are just around the corner. Sure it’s easy to plan with 20-20 hindsight and it helps us to achieve our unit and individual performance plans and gets inappropriately recognized and rewarded, but this is really a short term outlook and not one that will drive organizational success. Instead, like Toyota, we need to set goals that are stretch goals for the organization, and which make us go beyond our comfort zones, so that we can truly work to break out of the box and differentiate ourselves and our organization from the status quo and the limits of our imagination. Setting the bar truly high and then not settling for anything less than continual improvement is a long term strategy for success and one that needs to be genuinely encouraged and rewarded.

Here’s another important aspect of Toyota’s success:

Employees are highly valued— “Toyota views employees not just as pairs of hands, but as knowledge workers.” Ideas are welcome from everyone up and down the organization. “Employees have to operate in a culture where they constantly grapple with challenges and problems and must come up with fresh ideas…when people grapple with opposing insights, they understand and come up with effective solutions.” In fact, at Toyota, “employees feel safe, even empowered to voice contrary opinions and contradict superiors.” There is a culture of open communications, and a tremendous value is placed on personal relationships and networking. Additionally, value is placed not on results, but for “how much trust and respect the manager has earned from others,” and “refusing to listen to others is a serious offense.”

This concept of valuing employees and listening to them can shed light on how we need to develop effective enterprise architecture and sound governance; whereby, we provide all major stakeholders a voice at the table--to participate in and influence planning, decision making, and innovation. This is the way to achieve higher returns and lower risks. We need to stop planning and making decisions on the whims of the few or based on gut, intuition, and politics. We must cultivate information sharing, collaboration, and elevate people as the quintessential element of our enterprise’s success.

“Toyota’s culture…places humans, not machines, at the center of the company. As such, the company will be imperfect, and there will always be room for improvement.”

People are flawed, but our endeavors make us great!

Toyota and Enterprise Architecture

The Three I’s and Enterprise Architecture

One question that is frequently asked in enterprise architecture is whether new technologies should be adopted early (more cutting edge) or later (more as quick followers). Of course, the third course of action is to close ones eyes or resist change and simply “stay the course.”

The advantages to bleeding edge technology adoption is having the early advantage over competitors in the marketplace (this head start provides the ability to incorporate innovation into products early and capture a hefty market share and quite possibly dominance), while the advantage to quick followers being learning from mistakes of others, building from their initial investments and a more mature technology base (for example, with software, one where the bugs have been worked out) thereby potentially enabling a leapfrog effect over competitors. The advantage to staying the course is organizational stability in the face of market turmoil; however, this is usually short lived, as change overwhelms those resistant, as the flood waters overflow a levee.

The Wall Street Journal 5-6 July 2008 has an interview with Theodore J. Frostmann, a billionaire private-equity businessman, who tells of Warren Buffet’s “rule of the three ‘I’s,” which is applicable to the question of timing on technology adoption.

“Buffet once told me there are three ‘I’s in every cycle. The ‘innovator,’ that's the first ‘I’. After the innovator comes the ‘imitator.’ And after the imitator in the cycle comes the idiot. So when…we’re at the end of an era it’s another way of saying…that the idiots have made their entrance.”

I relate the innovator and the early adopter in their quest for performance improvement and their sharing the early competitive advantage of innovation.

Similarly, I associate the imitator with the quick followers in their desire to learn from others and benefits from their investments. They recognize the need to compete in the marketplace with scarce economic resources and adapt mindfully to changes.

Finally, I relate the idiots that Warren Buffet refers to with those that ignore or resist change. Often these organizations mistake their early market success for dominance and in their arrogance, refuse to cede to the need to adjust to changing circumstance. Alternatively, these enterprises are truly ignorant of the requisite to adapt, grow, mature, and transform over time, and they mistakenly believe that simply sitting behind the cash register and waiting for customers is the way to run a business (versus a Costco whose warehouse, wholesale model has turned the nature of the business on its head).

In architecting the enterprise, innovation and imitation, while not without cost and risk, will generally speaking be highly rewarded by superior products and services, greater market share and more loyal customers, and a culture of success in the face of constant change. You don't need to look far for examples: Apple, 3M, P&G, Intel, Toyota, Amazon, and more.

The Three I’s and Enterprise Architecture

Bill Gates and Enterprise Architecture

On July 1, Bill Gates is stepping down from his day-to-day duties at Microsoft, but will continue to serve as Chairman. Bill Gates grew Microsoft into the worldwide software development leader with revenue of $51 billion for fiscal year ending June 2007 and 78,000 employees in 105 countries and regions.

As the prior CEO and chief software (and technical) architect it is definitely worthwhile to look at the legacy that Bill is leaving behind at Microsoft.

Fortune Magazine, 7 July 2008, provides four lasting imprints that Bill Gates is leaving on Microsoft and here are my thoughts on these as relates to enterprise architecture:

1. Software can do anything—Gates has a “utopian view of software. He believes it can do anything.” Like Bill Gates, we need to believe in the mission of our organization. Such belief is critical in inspiring passion for and dedication to what we do. However, blind belief that any one thing can do anything is folly. For example, software without hardware is a no-go as is hardware without software. Both are non-starters without the people to innovatively apply them to our greatest challenges.
2. Engineers rule—“Microsoft employees about 30,000 programmers among its 90,000 employees. In operating groups, engineers are involved in every major decision…Microsoft $8 billion computer science R&D lab is the world’s largest” Engineers are critical to solving our challenges, but you should not ignore marketing and sales either. Marketing and sales reach out and touch the people. You cannot ignore the human aspect to solving problems. Maybe it partially Microsoft’s obsessive engineering approach that has left it vulnerable on the people side, for example: “Apple’s biting ad campaign has successful painted Windows as uncool.”
3. “Institutionalize paranoia”—“’It’s very Microsoft to prepare for the worst,’ says Gates…Bill and Steve (Ballmer) created what I guess I’d characterize as a culture of crisis,’ says chief software architect, Ray Ozzie. There’s always someone who’s going to take the company down.” Paranoia is a disorder, but fighting for competitive advantage is reality. Your competitors are not laying down to die; they are fighting for their professional lives, and you need to meet the challenge every day if you want to be the best out there.
4. “Invest for the long term”—“Whatever the cycle is, we will keep investing through the cycle, because we know on the other side of whatever cycle happens, there is opportunity,” says entertainment division president Robbie Bach. The approach for long term planning is very enterprise architecture focused. However, the architecture planning without the good governance to administer structured, consistent, collaborative decision making is not very workable. Planning without effective decision making and enforcement falls short on the execution side. Again, perhaps here too, Microsoft could benefit from a less top heavy culture and a more open decision process, where all project and product stakeholders have a serious voice at the table. Then turning over the reins from Bill will not be as traumatic requiring approximately four years of preparation and turnover.

In the end, Microsoft is truly terrific company and Bill Gates is leaving a company that is nothing short of spectacular. Of course, even the best can get better with continuous learning and innovation and that is the next chapter for Microsoft in the world of the likes of Google and Apple.

Bill Gates and Enterprise Architecture

Personalization and Enterprise Architecture

Everyone likes to have things personalized for them. Personalization appeals to our desire to be unique and distinct—special in our own ways.

Online, we have the ability to personalize our portals, like Yahoo, so that we get the information (content) that we are interested in and the look and feel for the layout (format) and navigation that we are comfortable with.

We also like to get personalized recommendations (advice and offers) for things we might be interested in, assuming that the suggestions are pretty darn solid and hit the mark.

MIT Technology Review, May/June 2008, reports that “people do buy more when you help them find what they need”

Generally, while advertising often gets bothersome and we tune it out, people do like “that internet companies have dedicated such ingenuity, memory, and processing power to offering me good suggestions.”

Hence, the ever growing amount of:

• “Customers who bought this item also bought…” (Amazon)
• “Just for you” (Apple iTunes)
• Pop-ups
• Context-sensitive advertisements

On Amazon, for example, “reviews, recommendations, and rankings become an essential part of browsing and shopping.”

And the larger the number of users that the recommendation engines can infer from (the “network effect”), the better the personalized suggestions become.

Where’s all this personalization going?

“Perhaps Google’s Gmail will tell you—to whom you should forward that urgent email to, or remind you to keep in touch with a friend you’ve inadvertently ignored…[or] imagine Facebook suggesting what information should be shared with whom—or who should be sharing more with you.”

Those companies and organizations that can architect personalization and recommendations right for their consumers and end users stand to profit hugely. For example, “Netflix is offering a million dollars to anyone who can improve the efficacy of its (exceptionally successful) recommendation engine. That’s a small price to pay for a company who future depends on its ability to compete with Blockbuster and the digital video companies of the future.”

Time is money, and both are scarce and valuable. Enterprises that are able to develop personalized recommendations that speed up the shopping experience and help us get better value for our dollars—and at the same time aren’t “in your face” and annoying--will have an architecture that will pay off in terms of strategic competitive advantage.

The target enterprise architecture here is increased sales and profitability (performance); focused sales and marketing (business); greater personalization and useful recommendations (information); systems processing automated suggestion algorithms (services and technology), all done securely and with privacy assured (security).

Personalization and Enterprise Architecture

Strategy and Enterprise Architecture

Enterprise architecture develops the organization’s IT strategic plan and influences its business strategic plan. In order to do this, EA itself must have a strategic roadmap.

Harvard Business Review, April 2008, states that “companies that don’t have a simple and clear statement of strategy are likely to fall into the sorry category of those that have failed to execute their strategy or, worse, those that never had one. In an astonishing number of organizations, executives, frontline employees, and all those in between are frustrated because no clear strategy exists for the company or its lines of business.”

Elements of a strategic plan

What are the elements of a strategic plan?

1. Mission— “why we exist;” this is the purpose of the organization
2. Values—“what we believe in and how we will behave”
3. Vision—“what we want to be
4. Strategy—“What pour competitive game plan will be; this includes the following: A) Objectives—what we want to achieve: goals and objectives B) Scope—“the domain of the business; the part of the landscape in which the firm will operate.” C) Advantage—the means or initiatives that define how you will achieve your objectives; “what your firm will do differently or better than others,” defines your competitive advantage.
5. Balanced scorecard—“how we will monitor and implement that plan” A strategic plan for EA
   According to the American Management Association, the mission statement defines what the ultimate purpose of the organization is. It tells who you are, what you are, what you do, who do you serve, and why do you exist.
   The mission statement takes the form of: The [blank] is a [blank] that [produces blank] for [blank] to [help blank].
   For example, the mission statement for enterprise architecture:
   The [enterprise architecture program] is an [office of the CIO] that [develops information products and governance services] for [the employees of ABC organization] to [improve decision-making].
   The values of EA are: driving measurable results, aligning technology with the business, information-sharing and accessibility, service interoperability and component reuse, technology standardization and simplification, and information security.
   The vision of EA is to make information transparent to enable better decision-making.
   The strategy provides the conceptual way you will pursue your mission and vision.
   “Defining the objective, scope, and advantage requires trade-offs, which Porter identified as fundamental to strategy.” For example, a growth or market size strategy may obviate profitability, or a lower price strategy may hinder fashion and fit. The point is that an organization cannot be everything to everybody! Something has got to give.
   So for example, in EA, we must trade off the desire to be and do all, with the reality that we must focus on entire enterprise. Therefore, we distinguish ourselves from segment architecture and solutions architecture. In EA, we focus on strategic outcomes and delegate line of business architectures and systems architectures to the lines of business and solution developers.
   Finally, EA implements a balanced scorecard by instituting mechanisms for monitoring and implementing its plans. These include performance metrics for both information products and governance services.
   In sum, to get a meaningful EA plan in place, we have to answer these fundamental elements of strategy for the EA program itself.

Strategy and Enterprise Architecture

Creating Competitive Advantage and Enterprise Architecture

Planning endeavors, such as enterprise architecture, typically help drive competitive advantage for the organization.

In the book, Making Change Happen, by Matejka and Murphy, the authors summarize Porter’s model for competitive advantage, developed at Harvard University.

To achieve competitive advantage, an organization typically follows one of five strategies based on differentiation or scale:

1. Differentiate based on superior customer service—“provide such excellent customer service that it results in strong customer loyalty. These satisfied customers not only provide repeat business, but also enthusiastically refer your business to others.” The overall strategy is encapsulated by the slogan, “the customer is always right.” User-centric EA is an excellent enabler for customer service orientation, since the architecture captures lots of information on internal and external factors, analyzes, catalogues, and serves up this information to end-users to enhance decision-making and thereby provide superior customer service. For example, the EA can identify performance metrics such as customer satisfaction, quality, timeliness, and so on and apply business, information, and technology resources to achieve superior customer service.
2. Differentiation based on superior products—“build a better mousetrap…make products and services that are clearly better than your competitors from a feature and function perspective.” The goal is to command a price premium through innovation, superior product and service design. EA supports the development of superior products through the use of emerging or specialized technologies that can give the enterprise’s products an edge in their design and development. The EA identifies that baseline and target architectures and transition plan, and can use these to direct innovation and superior product development.
3. Differentiation based on niche market space—“identify and focus on smaller market segments and produce products and services that appeal to those unique markets…the goal to provide a more informed, personal touch that make customers feel special, because they identify with the image associated with the product or service.” The customers in essence feel special and become members of an affinity group. User-centric EA provides for strong requirements management capability, whereby the requirements of niche customers can be identified and business and technical solutions can be deployed to satisfy their unique needs.
   
4. Scale based on cost orientation—“become the low cost producer!” Common strategies to achieve low cost include: “achieving economies of scale (volume production); installing efficient (and volume discounted) supply chain management; continually improving production processes (including lean production techniques that eliminate waste); and outsourcing non-core competencies.” Here, the strategy is to “pursue continuous improvement and new technology.” EA can facilitate the investment in new technologies or more efficient technologies that reduce cost or make possible mass production and the attainment of economies of scale.
   
5. Scale based on market dominance—“be the 800-pound gorilla.” Strategies here include: “acquisitions, joint ventures, exclusive supplier relationships, new product development, new market entries, warranties or guarantees, integrated sales and IT structures.” The strategy here is to “keep growing market share.” EA is vital in identifying gaps that can be filled through strategic M&A, and in integrating disparate enterprises, consolidating redundant IT systems, developing interoperability between merging or partner organizations, and providing standards and governance for these large scale enterprises.

User-centric enterprise architecture is critical to achieving Porter’s vision of competitive advantage, driving organizational change, and achieving a winning business strategy.

Creating Competitive Advantage and Enterprise Architecture

Change Management and Enterprise Architecture

“Change denotes the transition that occurs between one state to another…[There are two primary] “cultural attitudes towards change [either]:

• Change is random, lacking determinism or teleology, [or]


• Change is cyclical, and one expects circumstances to recur. This concept, often seen as related to Eastern world views such as Hinduism or Buddhism, nevertheless had great popularity in Europe in the Middle ages, and often appears in depictions of The Wheel of Fortune.

Change [does]...require organisms and organizations to adapt. Changes in society have been observed through slow, gradual modifications in mindsets and beliefs as well as through dramatic action (see revolutions). History is one of the tools used to document change.” (Wikipedia)

In the book, Making Change Happen, by Matejka and Murphy, the authors show how the United States is well suited to handle change, but also why we must be vigilant not to let our prosperity lead us into a lull.
“Since its birth as a nation, the United States has consistently been on the cutting edge of change. Why? Immigration, invention, and the belief in a better tomorrow…[we] have created the most diverse nation on the face of planet Earth…immigration has led to the invention. Each group brings different values, cultures, ideas, and prospectuses and is motivated to achieve the American dream. [Finally,] our belief in possibilities—a better tomorrow—has further stimulated change. This belief in what could be is an optimistic, creative approach to life itself.”
Ultimately, in our diversity lies our strength!
So what’s the issue?

“Evan a country such as the United States, generally more comfortable with change than other nations, has occasionally seen its collective organizations caught off-guard, dwelling in the past, asleep at the switch!”
Here’s one telling example:

“…a former member of the board of directors of Motorola (the leader in the cell phone industry at the time). At one board meeting, a board member walked in holding a small cell phone and exclaimed, ‘who the heck is No-ki-a and where are they? Sounds Japanese!’ When told that Nokia was a new competitor, located in Finland, the board member remarked, ‘Finland? How can that be? There’s nothing in Finland but ice and snow!’”
This is the new marketplace, “where firms you never heard of, from places you aren’t familiar with, can suddenly appear on your radar screens one day and steal your competitive advantage the next.”
So from a User-centric enterprise architecture perspective, there are two major imperatives here:

• Information is key to survival—“The way to stay afloat now is to go into a ‘heads up, sensing, searching, sorting anticipating, adjusting, survival mode.’ Pay attention! Scan the environment. Gather information quickly and process it even faster. Your life depends on it. As external changes accelerate and competitive advantages shift, leading change becomes an organizational imperative.”
• There must be an imperative to change—“The true paradox of ‘success and change.’…We must learn to change when we are performing successfully. But success makes us cocky and content. Change is the antithesis of the much-loved maxim ‘if it ain’t broke, don’t fix it!’ First organizations must be willing to change. But willingness depends on the belief that a change is necessary and that the proposal is the right change.” What makes change even more difficult is that strategic change is the enemy of short term efficiency (and profits).

In enterprise architecture, the architects are the change agents and the architecture is the roadmap for strategic change. The EA provides the information for the organization on internal and external factors that enable it to understand the nature, intensity, and impact of the oncoming change, and to take action to adapt, transform, survive, and even thrive. Further, EA is often maligned for shaking things up and there is often significant resistance to EA and change efforts; however, EA is doing exactly what it is supposed to be doing, which is helping the organization change strategically, even when things are going well, and where operational efficiency may possibly ‘suffer’ somewhat. Strategic change is for the long term survival of the organization and this needs ongoing care and feeding to be successful, and not just an adrenaline shot when the heart of the organization is already in cardiac arrest.

Change Management and Enterprise Architecture

Porter's Five Forces Model and Enterprise Architecture

“Porter's 5 forces analysis is a framework for industry analysis and business strategy development developed by Michael E. Porter in 1979 of Harvard Business School….It uses…5 forces to determine the competitive intensity and therefore attractiveness of a market…They consist of those forces close to a company that affect its ability to serve its customers and make a profit. A change in any of the forces normally requires a company to re-assess the marketplace…Strategy consultants use Porter's five forces framework when making a qualitative evaluation of a firm's strategic position..”

Porter's Five Forces include the following:

Three forces from 'horizontal' competition -

1. threat of substitute products
2. the threat of established rivals
3. the threat of new entrants

and two forces from 'vertical' competition -

1. the bargaining power of suppliers
2. bargaining power of customers

(Adapted from Wikipedia)

“The definition of your industry and competition is not a ‘mechanical task’, but requires objectivity and imagination. Strategic planning is not only about today’s customer needs and today’s competitors, but also about future needs and future competitors.”

Porter’s Five Forces Model helps identify industry forces and market attractiveness. Combining the Five Forces (“microenvironmental factors”) with other factors like technological change, growth and volatility of the market, and government and regulatory intervention (“macroenvironmental factors”) is a powerful tool for market analysis and strategy development.

(Adapted from American Management Association)

The Five Forces Model is a terrific tool to understand your industry and decide whether you have a competitive advantage (cost, technological…) that will enable you to serve your customers and do it profitably.Analyzing the Five Forces helps EA practitioners to understand their organization’s competition—and decide whether the enterprise can deliver their value proposition more effectively than their competitors and successfully defend against them. EA is not only about technology differentiation, but also about general planning and governing for the organization's success and longevity.

Furthermore, the competitive environment is constantly changing. So the enterprise can never feel “fat and happy” and ignore micro- and macroeconomic factors. The successful strategy in today’s marketplace may be a failing strategy in tomorrow’s. Therefore, EA must constantly monitor the environment and adapt its strategy accordingly.

Porter's Five Forces Model and Enterprise Architecture

Business Intelligence from Enterprise Architecture

There is an interesting article by Bill Cason in Architecture and Governance Magazine, Volume 3, Issue 1 that emphasizes the importance of business intelligence to not only “the business,” but also to the IT of the organization.

What is business intelligence?

“Business intelligence (BI) is a business management term that dates to 1958. It refers to applications and technologies that are used to gather, provide access to, and analyze data and information about company operations. Business intelligence systems can help companies have a more comprehensive knowledge of the factors affecting their business, such as metrics on sales, production, and internal operations, and they can help companies to make better business decisions.” (Wikipedia)

“The ability to learn faster than your competitors may be the only sustainable competitive advantage.” (Arie de Geus)

“The renowned Dutch business strategist got it right…repeatable success depends largely on the ability to adjust course quicker than your competition can adjust theirs. A prerequisite to that course correction is, of course, an understanding of exactly which adjustments need to be made. In the business world, the means to that end is ‘business intelligence’ or ‘BI’ for short.” (Architecture and Governance Magazine)

BI provides an organization not only access to pertinent data, but also analytics that transforms the data into actionable information.

User-centric EA is the foundation for capturing data for developing business intelligence for IT. EA captures massive amounts of data scattered in silos across the organization. The data is unified in the EA—brought together from dispersed geographies, numerous systems (manual and automated), previously stored in varied formats, and managed by disparate individuals. EA harmonizes the data, analyzes and categorizes it, and serves up the information to end user. EA provides business intelligence—EA information can be harvested by BI software to provide valuable analytics; EA synthesizes business and IT information to support decision-making.

Business intelligence from EA is used for “cost optimization, asset maximization, lifecycle management, service delivery, impact analysis, gap analysis, as-is/to-be transformations, etc.” EA enables the CIO to lead by example when it comes to developing and using business intelligence, optimizing the management of IT in support of mission execution.

EA brings information to the table for enhancing decision-making. As W. Edwards Deming said, “In G-d we trust, all others bring data.”

Business Intelligence from Enterprise Architecture

Competitive Advantage and Enterprise Architecture

Competitive Advantage—“When a firm sustains profits that exceed the average for its industry, the firm is said to posses a competitive advantage over its rivals. The goal of much of business strategy is to achieve a sustainable competitive advantage.”

“Michael Porter identified two basic types of competitive advantage:

• Cost advantage
• Differentiation advantage”

“A competitive advantage exists when the firm is able to deliver the same benefits as competitors but at a lower cost (cost advantage), or deliver benefits that exceed those of competing products (differentiating advantage). Thus, a competitive advantage enables the firm to create superior value for its customers and superior profits for itself.”

Cost and differentiation advantages are known as positional advantages since they describe the firm’s position in the industry as a leader in either cost or differentiation.” (quickmba.com)

In User-centric EA, the target state and transition plan in a for-profit, private sector company should be one that develops competitive advantage for the organization and thereby superior profitability. This is done either through business process reengineering/improvement or through technological differentiation. In technological differentiation, information technology solutions are adopted that align to business needs and help it to create either cost or differentiation advantage. IT is used to create cost efficiencies through automation or to developing differentiation advantage through the development of products that are more technologically advanced than its competitors. In essence, the organization employs cutting-edge technology to leap over its competitors in terms of cost or product.

In not-for-profit organizations or government, EA target state and transition plan does not set the stage for competitive advantage in terms of delivering superior profits, but rather in terms of delivering superior value to its stakeholders. Again, either business process or technology enhancements can help the enterprise develop the superior value. Additionally, there is not the same notion (if any) of competition (i.e. so ‘competitive advantage’ should really be more just ‘advantage’—to the enterprise and stakeholders—without the ‘competitive’ in it).

In any case, competitive advantage in terms of continuous improvement vis-a-vis efficiency and effectiveness of mission execution, and performing better, faster, and cheaper on behalf of stakeholders is the end game.

Competitive Advantage and Enterprise Architecture