A Business Strategy Definition
Back in 1962, Alfred Chandler, who was then Professor of Business History at Harvard, defined business strategy as “The determination of the long-term goals and objectives of an enterprise, and the adoption of courses of action and the allocation of resources necessary for carrying out those goals”. (Not a bad definition, in our view.) Chandler also argued that structure follows strategy: meaning that the organisational structure of a business should be designed to achieve its strategy. To be precise, organisational structure in this sense encompasses business functions, teams, business processes, IT applications and their supporting technologies.
How Enterprise Architecture relates to Business Strategy
Given that ‘enterprise architecture’ literally means the structure of a business organisation, it is therefore clear that the work of an enterprise architect should be linked to and driven by an organisation’s business strategy, as shown in the diagram below:
Are most Enterprise Architects too IT focused?
The problem for many organisations is that their enterprise architects are overly focused on IT-related clean-up operations: tidying up data definitions, simplifying the IT applications portfolio, rationalising the technology estate, avoiding overlaps and conflicts between projects, and so forth. All worthy aspirations that can make life easier both for the IT function and for the business as a whole, but this lower-level focus fails to address the big opportunities or to head off potential disasters.
All too often the IT function is blindsided by an announcement out of the blue by the executive board of some significant event, such as a major business acquisition or a decision to outsource a critical business function. Such events can have a huge and costly impact on the existing business processes and IT estate with often limited time and resources to make the necessary adjustments. How then can enterprise architects engage with the people responsible for crafting and driving such changes in business strategy in ways that support, rather than hinder, their implementation?
How can EAs become more Strategic?
The first challenge is one of education: ensuring that the business strategists appreciate the constraints and the opportunities associated with the existing business operating model. In our consulting work we came across a manufacturing company that had merged with a similar firm in another country. The business case assumed that materials and components could be easily moved between any of the factories regardless of geography for further processing, but the systems changes needed to handle cross-border traffic with the necessary additional controls and reporting had not been factored in. Although the CIO had not been consulted when the business case was developed, the IT function was then unfairly blamed not only for the late implementation but also for the merger’s failure to achieve the promised synergies in that area. War stories like this one are a good way to educate the decision makers of the dangers of making naïve assumptions about the capabilities or the flexibility of the current operating model.
In a previous blog we discussed the problems posed by the understandable need for secrecy in respect of mergers, acquisitions and outsourcing deals. We argued that as custodians of an organisation’s business operating model, the CIO and the Chief Enterprise Architect (CEA) should be consulted as early as possible in such cases, so that the impacts and options can be properly assessed and costed. Including these individuals in the decision-making process should be as natural as involving the Chief Financial Officer. Sadly, this is all too often not the case. Even when the promoters and designers of the major business change have some awareness of the impacts on the business operating model, the CIO and the CEA may simply not be trusted with sensitive information relating to the change.
How to Address a Lack of Trust
This lack of trust is basically a question of political credibility. In our experience a good way to start to build credibility is to engage with the business strategy. The aim here is to be able to have adult conversations with the movers and shakers in the business. There are two valuable sources of information from which the CIO and the CEA can often draw inspiration. One source is the annual business report (supplemented by quarterly reports if necessary). The other is the most recent report on business progress and projections to the financial analysts. Many senior business executives don’t bother to read these reports, so for example, when someone asks why you believe that your firm is planning to pursue an acquisition strategy, you can confidently say that this is what the Chairman has been telling the markets. That kind of intervention should get you noticed, but to earn your rightful place with the decision makers you will need to gain their respect. And this will require political skills of a kind that do not always come naturally to people with an IT background.
So, if the CIO and CEA were to ask the decision makers for a well-defined timetable of acquisitions of specific companies over a two-year period, they would be likely to get short shrift. The smarter way is to probe with hypothetical questions and follow up with points that are potentially crucial to ensure the success of the business change. For example, if the company intends to make a major acquisition sometime within the next six months, would the acquired company continue to operate as an arms-length business or would its operations need to be integrated with those of our company. And if the latter is the case, over what time period would this be expected to happen. Having early answers to questions such as these would be extremely helpful for both resource planning and risk mitigation purposes.
Useful Links:
Do Enterprise Architects need to engage with Corporate Politics?
Why Enterprise Architects need to get to grips with Business Strategy