Business architecture is an emerging area of expertise that is critical for a successful digital transformation. As companies move from product-centric strategies to new ways of working that are primarily focused on the needs of customers, we’re seeing businesses take the capabilities they have and realign them for faster reaction times.
PM-Partners recently held a Transformation Forum round table event, where senior executives from several prominent organisations discussed the challenges and opportunities ahead of them. That discussion touched on a number of critical areas, from the impact of the recent Royal Commission into the financial services industry through to managing the changing needs of what some call an increasingly “fickle” customer base.
What is business architecture?
The first challenge faced by the group was deciding what business architecture really means. Ultimately, it was agreed that there is a connection between business capabilities that tell you what your organisation does (the value chain) and business architecture is what links these together. One of the representatives at the table from a large financial services firm discussed the challenge of having a siloed organisation. While a customer might use and receive services from several parts of the company, internally each business unit operates independently. By assessing this data and where it comes from across the various divisions and silos, it is possible to shift to a business architecture that is customer (rather than product) focused. It might be challenging to deliver politically, as vested interests seek to maintain the status quo – it is what they are comfortable with. But by having support for a capability model focused on delivering what customers want at the board level, it’s possible to move CXOs along the path to a capability-based business architecture.
The obstacles of traditional organisational structures
Traditional organisational structures tend to segregate functions with different streams of line management, typically siloed by specific activities or expertise. As a result, people started to superimpose an organisational structure on different business capabilities, ignoring the reality that delivering a business outcome or meeting a customer need requires multiple capabilities. That resulted in a business architecture founded on delivery rather than capability. However, there is a risk that needs to be addressed. It’s possible that by moving to an entirely customer-centric model that the business can become distorted with all operations funneling into a single part of the business, such as that operated by the Chief Customer Officer.
While there are many business capabilities that can interact with the customer, it was noted during the discussion that only a subset actually deliver benefits to customers and shareholders. While not everyone in that origination was happy with what the analysis showed, they understood the importance of the analysis and what it revealed about the business. Having a business architecture that is linked to the strategic intent of the business is critical. For example, one party noted that they had a team of 140 business analysts working on different projects. Unless they understand the strategic intent of their piece of the enterprise’s puzzle, how can they make any decisions on the design? Without an architecture and framework that links one to the other, you may end up with 140 people floundering.
Data is power
Through the discussion, there was a consistent theme that was revisited several times. Data is extremely important as it can help cut through misconceptions and gut feel in decision making. Having real time information assists with making decisions quickly and corrections along the way. Having data allows actions to be tied back to strategic objectives so that strengths and weaknesses can be identified and acted upon. It also fosters greater accountability.
It was noted how having real-time data of customer behaviour in a highly dynamic environment allowed them predict customer behaviour so they could pre-emptively offer the customer a different service before they moved to a different product. This would not have been possible without data and the supporting analysts to assist with decision making.
Technology assists business capability
Underpinning this architecture are a range of technologies. In order to use data to support the company’s strategic objectives, data from different sources including social media, alongside corporate systems, must be accounted for. Artificial intelligence and machine learning can analysis that data faster than any human and deliver insights that can be acted on – often automatically.
C-level commitment drives success
For this approach to succeed, there must be complete commitment from the board and senior management.
A financial services company represented at the roundtable said there was some resistance to the use of data to determine where the company was deriving the most value, and how well activities were aligned with strategic objectives. However, a new CEO is now asking different questions that forces old assumptions to be revisited. By engaging (non-combatively) with individuals who have been accustomed to working a certain way for a long time, the company has moved along the road of defining a business architecture that focuses on delivering value to customers. This is underpinned by the right technology to deliver meaningful information when it is available and needed.
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