performance driven architecture v2 august 2010

Booz & Company

This document is confidential and is intended solely for the use and information of the client to whom it is addressed.

Performance-Driven ArchitectureA strategy-led approach to focus and align an organisation’s architecture capabilities to create business value

Canberra, August 2010 Perspective

1Performance Driven Architecture - v2 August 2010.ppt

Overview

Strategy by Design

Booz & Company Approach

Our Experience

Booz & Company 2Performance Driven Architecture - v2 August 2010.ppt

This document outlines a strategy-led approach to focus and align an organisation’s architecture capabilities to create business value

Document Overview

� For years, many companies have experienced a problematic tension between their IT departments and business units - one approach to close the distance is the discipline called ‘architecture’ which can be

described as the logical framework and design that establishes the links between strategy and organisational structures, business processes, information and underlying technologies

Background

Strategy by Design

Our Global Study

Linking Maturity & Value

Performance-driven Architecture

� Whilst organisations have been heavily investing in architecture over several years and many consider it

core to their strategic advantage, senior business & IT executives still question the value it actually delivers.

Many also question the role of an architecture capability within an organisation in terms of its accountability across the enterprise, domain and solution levels

� To this end, Booz & Co. recently completed a global study by surveying executives across a mix of financial

services and government organisations to determine how much value architecture can contribute to the

business and to understand the key challenges and best practices adopted by mature organisations

� The results of the study are revealing - the amount of value realised through architecture was clearly linked

to the organisation’s architecture maturity level, however, many organisations struggle to manage their performance. This was particularly evident in terms of measuring and communicating to the business, the effectiveness of their architecting capabilities and the impact of their design decisions

� To address these challenges, Booz & Co. have developed a comprehensive framework aimed at enabling a

strategy-led approach to focus and align an organisation’s architecture capabilities and demonstrably create business value including revenue generation, customer intimacy, reduced costs, increased agility, reduced risks and lower complexity

Note: These are the highlights of a recent Booz & Company viewpoint, released in June 2009; For more information, see http://www.booz.com/media/file/Enterprise_Architecture.pdf


Overview

Strategy by Design


Our Experience


4

Organisations have been investing in architecture to address keychallenges in the current economic environment

Optimisation of operations & infrastructure

1

Customer intimacy & speed to market

2

Changes to business models

3

Increased focus on risk & compliance

4

Core systems replacement

5

Challenges & Themes (1) Description

� Cost pressures and across-the-board budget cuts forcing organisations to do ‘more-with-less’ including leverage and re-use of existing assets

� Optimisation of operations and infrastructure including standardisation,

consolidation and integrated portfolio planning between business & IT

� Achievement of integrated customer services & products across multiple

delivery channels with a strong focus on meeting customer’s preferences

� Increased agility / speed to market with customer service and new products

� Changes to industry structures and consolidation of market following

mergers and acquisitions

� Evolution and readjustment to develop new business models and

emergence of new value chains

� Increased focus on corporate governance and enterprise risk management

� New regulatory and legislative requirements will increase role of compliance and interactions with key regulatory bodies

� Many organisation’s driving major transformation programs to upgrade or

replace their core business platforms

� New platforms will drive changes in business processes, systems and structures including the broader IT operating model required to support them

(1) Sourced from Senior Business Executives & CIO interviews with over 60 Financial Services & Government organisations in Australia, US, Middle East. UK & GSA


However, architecture remains a fuzzy concept in modern corporate strategic planning - no common industry definition exists

The process of translating business vision and strategy into effective enterprise change by creating, communicating

and improving the key principles and models that describe the enterprise’s future state and enable its evolution

Source: MIT Sloan Information Systems Research Centre, Wikipedia, The Open Group, Gartner, ANSI/IEEE

A complete collection of artifacts to describe the logical organization of business strategies, metrics, business capabilities, business processes, information resources, business systems, and networking infrastructure within the

enterprise.

The structure of a business, or the documents and diagrams that describe that structure; the business methods that seek to understand and document that structure; a business team that uses EA methods to produce architectural

descriptions of the structure of an enterprise

The organising logic for business processes and IT infrastructure reflecting the integration and standardization

requirements of the firm’s operating model

Definitions of Architecture

Architecture is the fundamental organisation of a system embodied in its components, their relationships to each

other and to the environment, and the principles guiding its design and evolution


We see architecture as a key strategy to bridge the business-IT divide and address the key challenges facing organisation’s today

Source: Booz & Company

Results (for business and customer)

Business Vision and Strategies

(*) Note: Example business processes. Not exhaustive.

(Enterprise) Business Processes *

� Strategy planning� Sales and marketing

� Customer services

� Product processing� Account management

� Payment processing

� Financial management� Portfolio management

� Regulatory reporting

� Structure� Roles and responsibilities

� Skills / competencies� Performance management

Organisation Information Technology

� Data architecture and management

� Business information� Customer data

� Application services� Product platforms

� Integration layers� Infrastructure

Extended Enterprise

� Associations � Third party service providers � External systems

Alignment

Standards

Integration

Key Components of Architecture

Services

Requirements

Our Architecture Definition

� Provides an end-to-end holistic view of the capabilities within an organisation at the enterprise, domain and solution levels and supports the decision-making process needed to continuously improve and transform the business

� Serves as a guiding reference and a communication bridge connecting business operations with IT

� The blueprint and the road map for the development and management of two views: the existing enterprise, and the enterprise of the future as it is envisioned to achieve its business goals


Organisations typically focus their architecture efforts across 3 distinct levels: Enterprise, Domain and Solution

Source: Booz & Company IC

� Architecture operates across breadth of

organisation (i.e. multiple lines of business)

and is aligned to the corporate strategy and

outcomes

Capability Scope Description

� Architecture relevant to specific business

unit(s) or operating models within an

organisation

� Also referred to as segment architecture and

is aligned to business strategy & outcomes

� Architecture supports detailed design and

technology implementation relevant to support

specific projects or capability outcomes

Enterprise

Domain

Solution

Continuum Level

Architecture Capability Continuum

Low

High

Level of Detail


Our recent global study re-enforces the benefits of architecture through the compelling link of architecture maturity and value

Architecture Maturity & Value

� Over 60% surveyed mature organisation’s realise all 4 sources of value through architecture

� Organisations that report little or no value through their architecture capabilities are all within the ‘Emerging’ maturity level

� Agility is the most challenging source of value through architecture and is ultimately the product of realised reduced complexity & innovation to enhance the speed to market for new products & services

Link between Architecture Maturity & ValueResults of Booz & Company Global Study


The drive business value, organisations should focus on three key value drivers across both architecting and architecture disciplines

To drive business value, organisations should focus on maturing three key value drivers1: 1). Strategic Alignment, 2). Competency &

3). Performance

Value Drivers

Architecture

�Architecture refers to the actual products, artifacts & decisions created by the architecting capability within the organisation

Architecting

�Architecting refers to the effectiveness and role of the architecture function within an organisation operating at the enterprise, domain and solution levels

Maturity Elements

Strategic Alignment

Process

Competency

Performance

Organisation


Our research highlights many organisations face challenges in maximising the performance of their architecture capabilities

Operationalised architecture

function

Organisation’s have significant

investment in architecture (people,

process and tools) but outputs are

often limited to the definition of

theoretical end states and are

contained within an “Ivory Tower”

Fully operationalise the architecture

function by maintaining role in

strategic planning whilst also informing

day-to-day operations and technology

investment decisions within the

business and projects

Measured outcomes

Emphasis on the architecture function

being a necessary evil and input to

either co-design, governance and/or

compliance processes

Formalise accountability through the

definition of metrics and targets.

Measure value attributed through

architecture and communicate the

realisation of the target state over time

Integrationacross domains

Conflicting strategies and tension

between the enterprise and business

driven “solutions”. Architectural

integrity often loses and increased

complexity is the outcome

Integrate function across domains -

enterprise, domain and solution

architecture functions integrated at a

design, governance and

organisational level. Architecture

function taking the lead in pragramatic

trade-offs between specific business

demands and enterprise alignment

Challenge Optimal End State


Overview

Strategy by Design


Our Experience


To address these challenges, the Booz & Co. Performance Driven Architecture Framework can be used to manage performance…

Business Value

Booz & Company Performance Driven Architecture Framework

… and developing integrated core capabilities

spanning people, process, governance & technologyUnlock and deliver

business value…

… by applying an

operational lifecycle …

Discipline

Capability

Continuum Level

LifecycleBusiness Value


… by providing the capabilities necessary to align architectural efforts within an organisation and unlock business value

Overview

� Delivers a robust and transparent framework to effectively manage the performance of architecture at all levels: Enterprise, Domain and Solution

� Aligns to the typical operational lifecycle of capability development within an organisation and provides an integrated view of core capabilities required to manage performance spanning people, process, governance & technology

� Formalises the accountability of the architecture capability and provides the basis reduce risk and increase business value associated with architectural decisions and strategy

Booz & Co. Performance Driven Architecture Framework

Business Value


The framework outlines a capability toolkit and sample outputs to assist architecture practitioners across the performance lifecycle

Performance Driven Architecture Capability Toolkit

Ob

jecti

ves

Ou

r A

pp

roach

Exam

ple

O

utp

uts

Ben

efi

ts D

elivere

d

� Post project reviews � Annual architecture

maturity assessment � Scenario-based reviews

and before-and-after

impact assessments of key design decisions

� Monthly or Quarterly Architecture Heartbeat Report (underpinned by a balanced scorecard performance

management framework)

� Data collection processes & tools

� Proxy data based on industry-specific benchmarks and best

practices

� Balanced Scorecard Framework

� Business Benefits Realisation Plan

� Architecture

Performance & Value Metrics / KPIs

� Corporate & Business Strategy

� Value Chain� Strategy Map

� Implement a capability that will drive continuous improvement of architecture by providing

the mechanisms to manage change and track the results delivered

� Implement a performance management framework that provides clear visibility & transparency of

the performance / value delivered through architecture

� Ensure mechanisms are used to capture / collect metric data in an effective efficient manner providing

the information necessary to facilitate performance management

� Determine how the realisation of business objectives and value within the organisation

will be measured in both qualitative and quantitative terms

� Identify strategic business objectives across the organisation including those within individual

business units

� Embed the concept of continuous improvement across the architecture

continuum by develop revised measures and stretch targets each year

� Establish a governance model to communicate performance across the

continuum using agreed communication methods tailored to stakeholders needs

� Develop a data collection approach within projects, operations & forums to

measure performance across the lifecycle and architecture continuum

� Highlight data quality &

availability constraints

� Define and align measures across the enterprise, domain and

solution levels� Utilise lead and lag

measures that address architecting and

architecture disciplines

� Map alignment between the business units and the corporate strategy

� Identify key value drivers� Highlight any trade-offs

and prioritise business objectives

� Enables remedial actions and key decisions to be taken on a timely basis

� Measures value delivered from changes made

� Enables understanding of architecture impact on business outcomes

� Fosters accountability and senior leadership to achieve outcomes

� Reinforces cultural changes required to manage / improve performance across the architecture function

� Measures effectiveness of decisions made

� Enables early identification of root causes and potential flow-

on effects which may impact performance and objectives

� Highlights constraints and availability of data to

manage performance

� Alignment across architecture levels linked to business objectives

� Accountability and transparency of performance - agnostic of organisation structures and business

unit constructs

� Ensures a “top-down” and enterprise approach to performance

� Fosters alignment across the C-suite on the priorities of the business as opposed to managing performance within

individual business units or functional silos

1. Align Business Objectives

3. Capture Data2. Define Measures

4. Communication & Reporting

5. Continuous Improvement

Business Value


Our approach draws on insight and expertise from other industries that specialise in non-IT architecture and design disciplines

Cross-industry Best Practices in Architecture & Design Performance Management

� Lend Lease has developed a performance reporting framework to communicate its

performance to shareholders and internal stakeholders. Leading construction firms also

follow a industry-defined ‘Construction Design and Productivity Framework’ which

outlines performance targets and benchmarks for architecture and design including re-

work %, energy efficiency ratings, quality and safety

Construction

� GE implemented a centralised ‘digital cockpit’ to feed its balanced scorecard to enable

the aggregation and capture of performance data. This approach includes the

digitisation of performance data from projects, operational and decision-support

repositories to capture business value (i.e. NPV, savings, operational efficiencies)

Manufacturing

� As part of its product leadership strategy, Intel defines specific design and innovation

performance measures including product development time: from idea to market. These

are cascaded through a balanced scorecard across the business with a core focus on

information capital (design and manufacturing), internal processes and financials

Semiconductors

� Lockheed Martin aligns its 10 functional business units to the corporate strategy through

a Strategy Map and EIS. This approach ensures that business objectives are commonly

understood and aligned horizontally (across similar design capabilities) and vertically

across the organisation’s functions to ensure that ‘strategy is everyone’s business’

Aerospace

� Toyota follows 14 foundational management principles which underpin its “Lean

Production”. A key principle for its design function includes ‘becoming a learning

organisation through relentless reflection (Hansei) and continuous improvement

(Kaizen)’. This includes identifying root causes in design systems and processes,

scenario-based solution development, before-and-after comparisons of designs and the

development of stretch improvement metrics to continually improve performance

Automotive

Performance Capability DescriptionIndustryExamples

Align Business Objectives

Align Business Objectives

Define MeasuresDefine Measures

Capture DataCapture Data

Communication & Reporting

Communication & Reporting

Continuous Improvement

Continuous Improvement


We recommend a multi-phased approach to drive a typical ‘Performance-driven’ Architecture Project for an organisation

Performance Driven Architecture Into Action: A Typical Project Approach

� Led by core team

� Embed changes as

part of ongoing

architecture

operating model

� Led by core team

and executed by

sub-teams -

leveraging tools

and processes

� Led by senior

architecture

management team

� Led by senior

architecture

management with

input from CIO /

CTO

� Led by senior

architecture

management with

input from sub-

teams

� Led by CIO / CTOProcess

� Identify capability

improvement

opportunities

� Manage capabilities

improvement by

defining changes

required to execute

improvement

recommendations

� Capture the

benefits of changes

made

� Understand current

key alignment

issues and define

business objectives

� Understand and

define key drivers

of architecture

value across the

continuum

� Define core team to

manage / execute

Performance Driven

Architecture

process

� Implement

communication &

reporting

capabilities to

communicate

performance of

architecture

� Establish

governance model

to communicate

performance of the

architecture

function

� Note key

constraints

� Define agreed and

understood metrics

for measuring

architecture

performance with

key stakeholders

� Develop the

mechanisms to

efficiently and

accurately capture /

collect data

� Establish sub

teams to assist with

performance

management

� Establish

appropriate change

management

capability that will

manage execution

of the identified

improvements

across the

architecture

continuum

� Capture baseline

data from defined

data sources

� Assess baseline

results to identify

key problem areas

� Extrapolating

insights for each of

the levels of

architecture

capability

� Assess overall

architecture

function maturity

and drivers of value

Outcomes

Executive Teams

Architecture Teams

Together

Rapid Capability Design and Setup: 4-6 weeks(Strategy Development)

Baseline Data Gathering & Results Assessment

Define Continuous Improvement Tools & Processes

Define Communication & Reporting Framework

Define Measures & Data Collection Approach

Business Strategy Alignment

Ongoing Capabilities Development

Continuous Improvement: Ongoing(Strategy Execution)

A B C D


Overview

Strategy by Design


Our Experience


North America– Atlanta

– Chicago

– Cleveland – Dallas

– Detroit – Florham Park

– Houston – Los Angeles

– McLean

– Mexico City – New York City

– Parsippany – San Francisco

Booz & Company is a leading global management consulting firm, helping the world's top businesses and other institutions

– Moscow

– Munich – Oslo

– Paris – Rome

– Stockholm – Stuttgart

– Vienna

– Warsaw – Zurich

South America– Buenos Aires – Rio de Janeiro

– Santiago

– São Paulo

Australia, New Zealand, and Southeast Asia– Adelaide

– Auckland

– Bangkok – Brisbane

– Canberra – Jakarta

– Kuala Lumpur

– Melbourne – Sydney

Asia– Beijing

– Hong Kong

– Seoul – Shanghai

– Taipei– Tokyo

Europe– Amsterdam

– Berlin – Copenhagen

– Dublin – Düsseldorf

– Frankfurt – Helsinki

– London

– Madrid – Milan

Middle East– Abu Dhabi

– Beirut – Cairo

– Dubai

– Riyadh

� 90 years of consulting experience (founded 1914)

� Solely owned by its 200 officers

� 3,300 firmwide staff

� US$ 1.3 billion annual sales

� 57 offices around the world

� 15 offices in growth region Asia Pacific, 4 in China

� Over 10,000 clients in 75 countries - 400 of the Fortune 500 companies

� Success based on client results - 85% of our assignments come from existing clients

performance driven architecture v2 august 2010

Education

value architecture

architecture capability

business processes

business units

business value canberra

new business models

design booz company

mature organisations