Enterprise Architecture in Strategy Deployment
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An industrial company implemented an enterprise architecture (EA) approach to better support its strategy deployment. The EA bridged the gap between the company's strategy and its implementation by formally describing the operational layer and mapping strategic goals to IT systems. This allowed the company to align its resources and capabilities with its operations strategy and market requirements. The EA identified "hot areas" where business value could be exploited through components like customer management and product delivery.
Enterprise Architecture in Strategy Deployment
- 1. University of Jyväskylä 19.9.2018 Supporting Strategy Deployment with EA Case: An Industrial Company Jouko Poutanen Enterprise Architect, IBM
- 2. Agenda Theory § Perspectives into Strategy § Strategy Tools and EA Practice § Bridging the Gap from Strategy to Implementation § Case: Industrial Firm § Use of Industrial Reference Architectures 2
- 3. Foreword: Sense and Respond... § Rather than follow the make-and-sell strategy of industrial-age giants, today’s successful companies focus on sensing and responding to rapidly changing customer needs and environment. Information technology has driven much of this dramatic shift by vastly reducing the constraints imposed by time and space in acquiring, interpreting, and acting on information. § As CEO Jack Welch has said, GE’s goal is not to become smaller but to “get that small-company soul and small-company speed inside our big- company body.” § In today’s turbulent business environment, strategies have to be implemented in tactical timeframes. In response to this challenge, top-level managers need to view information technology in a new light. Rather than investing in isolated IT systems—such as e-mail, reservation systems, or inventory control systems—a company must invest in the IT capabilities that it will need to manage by wire. § The ideal manage-by-wire implementation uses an enterprise model to represent the operations of an entire business. Based on this model, expert systems, databases, software objects, and other technical components are integrated to do the equivalent of flying by wire. § Many companies have spent decades automating pieces of their businesses, scattering networks and incompatible computer platforms throughout their organizations. But the empowered, decentralized teams of the information economy need a unified view of what’s happening within an organization § Coherent behavior requires more than blockbuster applications and network connections; it must be governed by an enterprise model that codifies the corporation’s intent and “how we do things around here” More important, a coherent model should include “how we change things around here”. § Adding the institutional ability to adapt in a dynamic environment has become a survival imperative for most companies. And this ability will ultimately differentiate a manage-by-wire strategy from the static make-and-sell strategies of the past.
- 4. Firm’s Strategic Options 4 ~ cost, differentiation, focus
- 5. The Big Picture StrategyIndustry key success factors Organisational capabilities Resources Tangible • Financial (cash, securities,..) • Physical (plant, equipment,.. Human - Skills/know-how - Capacity for communication and collaboration - Motivation ‘Individual resources do not confer competitive advantage, they must work together to create organisational capabilities’ Intangible - Technology (patents, copyrights, ..) - Reputation (brands, relationships) - Culture Dynamic capability perspective: ‘the firm’s ability to integrate, build, and reconfigure internal and external competences to address rapidly changing environments’ The resource-based view (RBV) argues that resources that are simultaneously valuable, rare, imperfectly imitable and imperfectly substitutable (VRIN) are a source of competitive advantage Competitive advantage
- 6. Strategy ABC’s… Successful strategy Effective implementation Simple, consistent, long-term goals Profound understanding of the environment Objective appraisal of resources source: Grant (2008) ‘A strategy that is formulated without regard to its implementation is likely to be fatally flawed. At the same time it is through their implementation that strategies adapt and emerge’ ...the determination of the basic long term goals and objectives of an enterprise, and the adoption of courses of action and the allocation of resources necessary for carrying out these goals… Alfred P. Chandler (1962) Strategy and Structure: Chapters in the History of the American Enterprise, Cambridge, Mass: MIT Press, p.13
- 7. Characteristics of Strategic Decisions… § Strategy is about the future § Strategy is about taking risk § Strategic decisions are complex § Strategic decisions take time to bring to fruition and are irreversible § Strategic decisions require the organisation and coordination of large numbers of people within organisations § Strategies have implications for change § Strategic decisions have significant scale and importance ..makes you understand why implementing those are challenging
- 8. Strategy: A Multiple Perspective View source: Cummings et.al. (2007)
- 9. Strategy Tools and EA
- 10. AM Positioned Amongts Other Strategy Tools by Its Characteristics Boundary conditions and strategy tools, techniques and frameworks, JARZABKOWSKI (2006) 2 Speed IT !
- 11. Strategy tool usage, combined results of research source: Poutanen (2008)
- 12. Enterprise Strategy Fire and hope! Enterprise Architecture Business Operating Environment and IT Infrastructure Transition Planning Architecture Governance Bus Arch’ture IT Architecture AEI Corporate Yankee Group Saturn Group Yarn Division Knits Division Seneca Plant Raleigh Plant Cash Management Shipping Accounting Component Design Yarn Buying Order Entry Component Scheduling Yarn Dyeing Inventory Assortment Planning Component Knitting Tagging & Packing Business Structure Business Locations EA as the “planning” function between strategy formulation and delivery ProgramfocusEnterprisewidefocus Strategy Planning Design and Delivery Change Programs Soln Outline Macro Design Micro Design Devt, etc. Program Architecture Soln Outline Macro Design Micro Design Devt, etc. Program Architecture Enterprise Architecture = “the city plan” System Design = “the buildings” Strategy = “the city’s purpose & goals”Technology Availability Business Opportunity Bus Strategy IT Strategy
- 13. EA’s Supporting Role in Strategic Management source: Simon et.al. (2014)
- 14. Enterprise Architecture ABC’s… e.g. DATA ENTERPRISE ARCHITECTURE - A FRAMEWORK Builder SCOPE (CONTEXTUAL) MODEL (CONCEPTUAL) ENTERPRISE Designer SYSTEM MODEL (LOGICAL) TECHNOLOGY MODEL (PHYSICAL) DETAILED REPRESEN- TATIONS (OUT-OF- CONTEXT) Sub- Contractor FUNCTIONING ENTERPRISE DATA FUNCTION NETWORK e.g. Data Definition Ent = Field Reln = Address e.g. Physical Data Model Ent = Segment/Table/etc. Reln = Pointer/Key/etc. e.g. Logical Data Model Ent = Data Entity Reln = Data Relationship e.g. Semantic Model Ent = Business Entity Reln = Business Relationship List of Things Important to the Business ENTITY = Class of Business Thing List of Processes the Business Performs Function = Class of Business Process e.g. Application Architecture I/O = User Views Proc .= Application Function e.g. System Design I/O = Data Elements/Sets Proc.= Computer Function e.g. Program I/O = Control Block Proc.= Language Stmt e.g. FUNCTION e.g. Business Process Model Proc. = Business Process I/O = Business Resources List of Locations in which the Business Operates Node = Major Business Location e.g. Business Logistics System Node = Business Location Link = Business Linkage e.g. Distributed System Node = I/S Function (Processor, Storage, etc) Link = Line Characteristics e.g. Technology Architecture Node = Hardware/System Software Link = Line Specifications e.g. Network Architecture Node = Addresses Link = Protocols e.g. NETWORK Architecture Planner Owner Builder ENTERPRISE MODEL (CONCEPTUAL) Designer SYSTEM MODEL (LOGICAL) TECHNOLOGY MODEL (PHYSICAL) DETAILED REPRESEN- TATIONS (OUT-OF CONTEXT) Sub- Contractor FUNCTIONING MOTIVATIONTIMEPEOPLE e.g. Rule Specification End = Sub-condition Means = Step e.g. Rule Design End = Condition Means = Action e.g., Business Rule Model End = Structural Assertion Means =Action Assertion End = Business Objective Means = Business Strategy List of Business Goals/Strat Ends/Means=Major Bus. Goal/ Critical Success Factor List of Events Significant Time = Major Business Event e.g. Processing Structure Cycle = Processing Cycle Time = System Event e.g. Control Structure Cycle = Component Cycle Time = Execute e.g. Timing Definition Cycle = Machine Cycle Time = Interrupt e.g. SCHEDULE e.g. Master Schedule Time = Business Event Cycle = Business Cycle List of Organizations People = Major Organizations e.g. Work Flow Model People = Organization Unit Work = Work Product e.g. Human Interface People = Role Work = Deliverable e.g. Presentation Architecture People = User Work = Screen Format e.g. Security Architecture People = Identity Work = Job e.g. ORGANIZATION Planner Owner to the BusinessImportant to the Business What How Where Who When Why SCOPE (CONTEXTUAL) Architecture e.g. STRATEGY ENTERPRISE e.g. Business Plan TM Zachman EA Framework
- 15. Bridging the Gap from Strategy to Implementation 15
- 16. Operations resources Capacity Supply networks Process technology Development and organisation Market requirements Quality Speed Dependability Flexibility Cost Top - down Corporate strategy Business strategy Functional strategy Bottom - up Emergent sense of what the strategy should be Operational experience Operations Strategy Operations strategy must reflect four perspectives – top-down, bottom-up, market requirements, and operations resources. Operations Strategy EA contributes to the alignment of organisation’s resources source: Slack & Lewis (2008)
- 17. Tangible and intangible resources Operations capabilities Operations processes Operations strategy decision areas Operations strategy is the strategic reconciliation of market requirements with operations resources Customer needs Market positioning Competitors’ Actions Performance objectives Understand your resources and processes Strategic decisions Capacity Supply networks Process technology Development and organization Required performance Quality Speed Dependability Flexibility Cost Understand your markets source: Slack & Lewis (2008)
- 18. Transformation Needs to Link Business to IT 18 Classic Transformation Semi-formal strategy description Stated in business terms Unstructured links to operations Informal models – at best IT implementation needs formality Stated in IT terms Model-Driven Transformation Formally describe operation layer Identify strategic goals Stated in business terms Map-able to IT Strategy Models Manage Customers Strategy Tactics Execution Merchandising Store/Channel Operations Supply Chain & Distribution Finance Administration Business Administration Business Perf. Mgmt. External Market Assessment Legal and Regulatory Indirect Procurement Real Estate, Facilities and Equipment HR Administration Corporate Finance and Controls Customer Insights Vendor and Product Performance Execution and Management Distribution Center Transportatio n Resources Product Directory Accounting and GL Outbou nd Logisti cs Store/Off-site Services Execution Inventory Planning Channel, Category Strategy and Planning Assortment and Space Planning Management and Execution Supply Chain Strategy and Planning Financial Management and Planning Organization and Process Design Corp. Planning Alliance Management Line of Business Planning Develop and Operate IT Systems Distribution Oversight Market Risk Management Customer Relationship Planning and Strategies Product Planning, Development & Pricing Strategies Customer Insights Vendor Relationship Strategies Assessing Customer Satisfaction Matching Supply and Demand Order Management Customer Account Servicing Item Management Treasury Store Operations Management Transportation Resources Event, Promotion Strategy and Planning Customer Directory Inventory, Product Tracking and Tracing Operations Back Office Financial Outbound Logistics Store/Channel Design and Layout Store/Channel Labor Strategy Store/Channel Objectives & Strategy Planning Manage Customers Strategy Tactics Execution Merchandising Store/Channel Operations Supply Chain & Distribution Finance Administration Business Administration Business Perf. Mgmt. External Market Assessment Legal and Regulatory Indirect Procurement Real Estate, Facilities and Equipment HR Administration Corporate Finance and Controls Customer Insights Vendor and Product Performance Execution and Management Distribution Center Transportatio n Resources Product Directory Accounting and GL Outbou nd Logisti cs Store/Off-site Services Execution Inventory Planning Channel, Category Strategy and Planning Assortment and Space Planning Management and Execution Supply Chain Strategy and Planning Financial Management and Planning Organization and Process Design Corp. Planning Alliance Management Line of Business Planning Develop and Operate IT Systems Distribution Oversight Market Risk Management Customer Relationship Planning and Strategies Product Planning, Development & Pricing Strategies Customer Insights Vendor Relationship Strategies Assessing Customer Satisfaction Matching Supply and Demand Order Management Customer Account Servicing Item Management Treasury Store Operations Management Transportation Resources Event, Promotion Strategy and Planning Customer Directory Inventory, Product Tracking and Tracing Operations Back Office Financial Outbound Logistics Store/Channel Design and Layout Store/Channel Labor Strategy Store/Channel Objectives & Strategy Planning Meetings, Presentations Documents, Discussions Informal Operational Models Autonomic management of infrastructure Orchestrated business process mgmt with sense & respond capabilities Open, standards based integration Autonomic management of infrastructure Orchestrated business process mgmt with sense & respond capabilities Open, standards based integration Key is an operation model w/ enough structure to connect the pieces Very Structured IT Models
- 19. 19 What is a Business Component ?
- 20. 20 Example CBM Map from Retail Sector
- 21. 21 Heat Maps Identify “Hot” Areas to Exploit Business Value
- 22. External and Internal Contexts of Services 22 Direct Execute Control Financial Management Business & Resource Admin Business Portfolio Management Customer Sales & Servicing New Business Development Product Delivery Customer Management Product Services Account Services Treasury Accounting General Ledger Financials Consolidation Facilities Operation & Maintenance Systems Development & Operations Production Assurance (Help Desk) Fixed Asset Register Business Unit Administration Human Resource Management Consolidated Book/Position Maintenance Securitization/ Syndication Inter-bank Account Management Smart Routing Sales Transaction Capture Services Dialogue Handler Transaction Consolidation Authorizations Product Development & Deployment Market Research Campaign Execution Product Directory Marketing Merchant Operations Card Financial Capture DDA/Check- Specific Processing Card-specific Processing Retail Lending Contact/ Event History Collateral Handling Customer Profile Relationship Management Credit Administration Rewards Administration Inventory Management Cash Inventory Market Information Correspondence Document Management & Archive Billing & Payments Customer Accounting Collections & Recovery Finance Policies Business and Resource Planning Business Policies & Procedures External Relations Asset & Liability Policy & Planning Customer Sales & Servicing Planning Segment Analysis & Planning Acquisition Planning Product Operations Planning Customer Portfolio & Analysis Credit Policy & Planning Product Services Planning Account Services Planning Reconciliations Financial Control Business Architecture Business Unit Tracking Audit/Assur- ance/Legal/ Compliance Risk/Portfolio Management Case & Exception Handling Sales/ Service Administration Campaign Management Product Oversight Product Operations Oversight Customer Behavior & Models Application Processing Relationship Oversight Product Services Oversight Fraud/AML Detection Account Services Oversight Each CBM component is responsible for business activities and processes Business processes and activities are automated by business services These are supported by collaborating fine grained services and object interactions
- 23. Case: An Industrial Firm 23
- 24. © 2017 IBM Corporation24 Embracing digital transformation with the use of agile technologies and cognitive solutions will be key to the future of mining US Coal Production IDC FutureScape: Worldwide Mining 2017 Top 10 Predictions Note: The size of the bubble indicates complexity/cost to address. § By 2017, 20% of miners will achieve operational excellence through manufacturization of mining — implementing lean approaches and standardizing ERP and operational software integration. § By 2020, 100% of leading mining companies will have implemented an integrated digital core across the enterprise and operations. § Robotic and cognitive investments will enable autonomous mining, and the first purely autonomous mining operation will go live in 2020. § In 2017, investments in mobile connectivity, security, and cloud by 70% of mining companies will lay the foundation for the digital mine. Source: IDC: “IDC FutureScape: Worldwide Mining 2017 Predictions”, November 2016
- 25. © 2017 IBM Corporation25 Digital Reinvention has created a new agenda – driven by Line of Business The New Agenda § Industry 4.0 / Digital Factories § Further integrate IT/OT / migrate to cloud § Engage / empower employees § Product innovation § Higher margin / connected products § Develop new materials & applications § Reinventing end customer experience – B2B2C § Create new sources of revenue Traditional Agenda § Cost reduction & improving customer service § Improve efficiency § Production optimization § Supply chain § Logistics § Streamline IT § ERP implementation § Focus on core business § Outsourcing non-core activities
- 26. Sources: Acatech: Recommendations for implementing the strategic initiative Industrie 4.0, April 2013;Gartner: Industrie 4.0- The Ten Things the CIO Needs to Know; Deutsche Bank Research: “Upgrading of Germany’s industrial capabilities on the horizon “, April 2014 Autonomous Systems Internet of Services Analytics & Cognitive Flexible Mfg Internet of Things + Internet of People Industry 4.0 § Ability to connect and manage devices § Near real-time data collection § Insights of what is happening § New business models § Flexible machines § 3D printing § Machine to machine § New standards and protocols § The API economy § Vertical / horizontal integration across value chains § New delivery channels and business models § Embedded in equipment, products and services § Predict what may happen § Prescribe actions for best outcomes § Self learning § Communicate in natural language § Smart and networked products § Ability to communicate thru the Internet § Self diagnose / self awareness Capabilities required to enable the 4th Industrial Revolution Reference Semantic Information Model
- 27. • The embedded manufacturing systems are vertically networked with business processes within factories and enterprises • And horizontally connected to disperse value networks that can be managed in real time – from the moment an order is placed right through to outbound logistics. Horizontal integration through value networks Final report of the Industrie 4.0 working group Vertical integration within factories & enterprises Vertical & Horizontal Integration Source: ISA 95 27
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- 32. IBM’s Industrie 4.0 Reference Architecture Balancing load with lifecycle capabilities at Edge, Plant and Enterprise
- 33. Business drivers Requirements Functional requirements Non-functional requirements 01 02 03 Productivity gains: higher throughput and efficiency, eliminating non- value-adding activities Failure prevention: highest OEE, avoiding re-work, scrap, outages, bad product quality Flexibility: hiding complexity, low (re-) configuration effort, plug&produce, avoiding technology gaps • Vertical & horizontal integration • Lifecycle integration, digital twin • Universal connectivity between processes, systems, machines and people • Intelligent worker assistance • Historical data collection and (predictive) analytics • Flexible, business-oriented configuration at all levels – shopfloor, integration and edge Function offload to the Edge • Decisions, analytics, streaming, aggregation Autonomous factory operation • All directly related production system locally Security • At all levels Modular design • Microservices, service orientation + Innovation matters!
- 34. Architectural Principles q Scalable component architecture that can be applied to specific plant sizes q Vendor and device independent based on open standards for interfaces and protocols aligned with XXX requirements q Open information model as common base for non-intrusive integration q Delegated Configuration concept leveraging rule- and template based configuration to reduce complexity for business users q Authenticated access and encrypted communication (e.g. TLS) between all components q Consistent Plant/Enterprise topology utilizing (proposed) dedicated model for data security, scalability and maintainability. q Controlled release process with three-stage deployment model: development, integration, production q Resilience concepts leveraging load balancing and clustering q Choice between local (low latency, privacy) and cloud (scale, advanced capabilities) q Expandability through component architecture and open interfaces q Event/analyze/action model supported with combination of data collection, analytics and services based actions.
- 35. IBM’s three-layered Industrie 4.0 Reference Architecture balancing load with lifecycle capabilities at Edge, Plant and Enterprise *Refer to Industrie 4.0 Implementation at: https://www.ibm.com/cloud/garage/content/architecture/iotArchitecture/industrie_40 EDGE PLANT ENTERPRISE EDGE DEVICES ENTRY POINT: Cyber-Physical Systems ENTRY POINT: ENTRY POINT: Cross-plant Insights / Analytics New models, speed, functions, channel Watson IoT Platform & IBM Cloud Cognitive Services Edge functionality: ¨ Device/SCADA Integration ¨ Rules ¨ Store ¨ Analytics scoring ¨ Filtering/Transf ormation In-plant or remote functionality: ¨ Connectivity ¨ Data collection ¨ Conditional Monitoring ¨ Predictive analytics ¨ Workflow Cognitive IoT functionality: ¨ Innovation ¨ Disruption ¨ Scalability ¨ Advice/Guidance Edge - Level Plant - Level ENTRY POINT: Plant Service Bus Shopfloor Analytics & Workflow In-plant functionality: ¨ Integration/Con nectivity ¨ Rules ¨ Message Hub Enterprise - Level collect control analyse improve
- 36. Industrie 4.0 IT Architecture Edge Platform (Hybrid Cloud) Enterprise This three-layered distributed architecture takes into account the requirements for autonomy and self-sufficiency of each productive site and balances workload between Edge, Plant and Enterprise. Security DEVOPSRules, Config Mgt & Composition Shopfloor Workflow PRODUCTION MACHINES Transformation & Connectivity Plant Service Bus Plant Data Store Shop Floor Analytics Rule Based Analytics Enterprise Analytics Analytics Based Insights & Actions Smart Devices & Tools Cognitive Services Enterprise IT Composite Applications User Directory Enterprise Data Store Visualization Equipment/Device Layer Enterprise IIoT Hub Data Integration Enterprise Workflow DeviceMgt Enterprise Systems of Record (E.G. ERP, EAM, CRM, PLM) Partner Systems OT/IT Gateway Transformation & Connectivity Mgt Transformation & Connectivity Plant Plant IT Plant Systems of Record (e.g. MES, Line Scheduler) Edge Data StoreLEGEND Application Infrastructure Management Data Store DevOps Security Analytics Capabilities Edge-Plant– Enterprise Flow (Edge-Plant-Enterprise Flow) 1 72 3 7 4 5 6 -Enterprise 1 5 3 2 4 Edge Information Model Plant Information Model Enterprise Information Model 3 3 4 5 6 7 4 5 Composite Applications Supply Chain Integration & Provenance *Refer to Industrie 4.0 Implementation at: https://www.ibm.com/cloud/garage/content/architecture/iotArchitecture/industrie_40 Rule Based Analytics Rule Based Analytics Partner IT