Architect's Corner!

Mapping financial perspective to the Zachman framework cells


Translating the “strategies� to “operation� – bridging the gap

This is very critical. Very often, strategy models and the operational instances of the enterprise and enterprise models are completely out of sync. It is an ongoing effort to ensure their exist alignment between the various models at the strategy level with respect to the various models at the operational level. Some of the quick measurements can help you to arrive at the gaps. How about the three operational items:

1. operational information sets,
2. service descriptions vs. service instantiations,
3. operational business goal & the prevailing business rules

Operational instance of an enterprise consist of operational data, services, operational organization, people, operational rules, and the locations where businesses are being operated etc. Can we use the performance indicators of balance score card to measure the operational instances? Can we use them for alignment?

It's important to know and remember that these measurements are not point in time, but these are measured on ongoing basis. These values evolve with time.

Mapping financial perspective to the Zachman framework cells:


Today's CFO & CEOs faces a dynamic and demanding conditions. Globalization, merger and acquisition activity, cost constraint, emerging competition, etc. just a few of the business trends the organization must be prepared to address. Effective implementation & utilization of enterprise architecture models provide extensive strategic insight to the enterprise. You will agree this insight is critical to governance, compliance and controls.

Let's focus on the two important perspective that is financial and customer. In the part IV I will talk about the customer perspective. Today, I will discuss about how we map the performance indicators related to financial perspective to the row 1 and row 6 cells of the Zachman framework.

As you will see in the diagram below, I have reorganized the “motivation� column and have it as the first column instead of “data� column. Please note that this has been done for your convenience and easy understanding. On the closer look, you will find that financial, performance indicators could be mapped to cell titled “list of business goals�[cell 1] and titled “enterprise success� [cell 31]

As you will find, the cell 1 will have the financial information [descriptive list], while the cell 31 will have the operational values for financial performance. The cell 31, will also have the financial performance indicator values about how it is evolving with time.

I will try to illustrate this mapping with the help of performance indicators and balance score for "Just in time" manufacturing.



Step 1: define list of financial indicators for "Just-in-time" manufacturing.

In our discussion, we will use five financial indicators as listed in the image below. The key indicators include increasing revenue, cost savings, material cost reduction, decreasing the scrap and rework cost, saving in inventory carrying costs.

Step 2: define measurements for the financial indicators for "Just-in-time" manufacturing.

For each of the above indicators, we will define the current value, target value, minimum value, maximum value, weightage, optimization direction, unit of measurement, timeline etc. I will discuss about these in detail in the part IV.

Step 3: review and auditing of the indicators on a regular basis
As you see in the image below, nearly 80% is the total cost savings. The major cost reduction is around 44%, saving in inventory carrying cost is around 50% and decrease in the scrap and rework cost is nearly 50%. These indicators are not point in time, but are based it on a regular basis.



We can map these indicators to the operational "strategy" model that is measure effectiveness of the strategy.


Step 4 -- mapping financial performance indicators from just-in-time manufacturing
We can map financial indicator definitions to the cell one in the Zachman framework as described in the picture below. While, the measurable value of the performance indicators are mapped to the row 6, cell 31, as described in the image below.

Step 5 -- creating the financial performance dashboard for just-in-time manufacturing
This dashboard is combines financial data visualization and it could be easily mapped to how the values evolve with time line.

You will agree that a Financial Dashboard is the best way for C-level executives, business supervisors and knowledge workers to process the enormous supplies of financial data. Knowing the current and future financial status of your enterprise is an essential part of conscientious management. In the part IV, we will discuss about how we have translated the objectives on our strategy map into a set of key business processes. This will help in determining and delivery of differentiation services that provide extra value to customers which will support the lasting growth of an enterprise.
In the dashboard image below, we have picked up three key indicators for the dashboard:

• Total cost savings, and it’s target value in 2011 [ 2010 to 2011]

• Savings in inventory carrying costs in 2011 [ 2010 to 2011]

• Overall performance indicators in 2011 [ 2010 to 2011]

As the business environment changes, strategies can comprise innumerable tactics, with lots of folk involved in attempting to reach an comprehensive goal. In our discussion, we have used financial indicators as a key indicator of effective business practice. In the coming days, I will discuss about how strategies are mapped to business processes and service instantiation. So, do visit again soon.