If enterprise models are OUT OF ORDER and so is your business, need fix? - part I

This is a serious problem and most of the management folks are struggling to keep pace with the ongoing changes. One of the potential ways of solving this could be by combining Balance Scorecard with Enterprise Architecture initiatives.

It's been quite some time when the idea stuck. Thanks to the current engagements, I should board flight at least 6-8 times in a month. Of course, you need to ignore the last 60 days, I have boarded flights over 25 times ;-)...U guessed it right, am writing this piece while waiting at Sydney airport, terminal 1.

Any ways, it is heartening to know that Enterprise Architecture (EA) is gaining encouragement, and slowly moving from the innovator to early adopter phase. Interestingly, some of the members of the management team continue to ignore it ( even though they are the ones who should have most visibility to EA activities). Very often, the people who engage architecture consultants end up suggesting that these ideas needed to be told to the CEO & BoD. It's the matter of few interactions, which soon make them realize the intensity & dimensions of impact that needs to be escalated to the top. Personally, I find it interesting as 50% of the architecture initiatives are driven by not just the CEOs (but also the business owners) themselves.

As you will know Balance Scorecard ( BSC) is a framework ( tool / concept whatever term you use) , which has been used by business for performance management and strategic planning. It essentially consists of a set of Key Performance Indicators (KPIs). These KPIs are categorized under four categories i.e. 1. Financial Perspective, 2. Customer Perspective, 3. Internal Business Processes & 4. Learning and Innovation Perspective.

Around the globe, enterprise management team has been using Balance Scorecard for quite some ( formally or informally) to ensure they could measure the results regularly. Of course, when you extend a department centric BSC with 16-19 indicators, it's easy to manage. The complexity increase multiple folds as you extend the performance scorecard across 8-10 departments each having 16-20 indicators. Let's say if you are managing KPIs for Just In Time - Manufacturing, which has around 16 indicators. Can you ignore the influence of indicators related to departments like Inventory Management, Capacity management, Global Logistics, Manufacturing? Now, we are talking about 120 to 160 performance indicators with 5-6 major categories. I know you must have thought have 50-60 indicators while I am talking about 120 ;-). No issues, we need to simplify it any ways. BTW, have you imagined the cascading impact?

There are several "technical" challenges as you initiate your journey with scorecard ( I am keeping "non-technical" challenges for a later date) :
1. How do we extend the department focused performance indicators to ENTERPRISE focused performance indicators?
2. How to we analyze the cascading impact if there is a change in the performance indicator "category" or indicator "value"and its impact across the indicators across departments and groups.
3. “How “ to achieve the said "performance indicators" and what're the structural base or models ( and their relationships) to achieve the performance.
4. How do we extend the classic BSC focus ( which is primarily focused on process changes to solve the problem) without much importance to systems, applications, network models, information models, etc....?
5. Can we extend the conventional BSC to support federated enterprise architecture? So that we could use it for effective measurements and governance for an operational ENTERPRISE (departments, etc.).

In the other hand, Enterprise Architecture is emerging discipline about how to architect an enterprise, manage implementation & operation of enterprise and also provide a reference base for making changes in the future. A good enterprise architecture implementation would consist of several enterprise models such as strategy, finance, processes, systems, applications, information, network, data, people, etc. as well as there inter-relationships. It's important to note here that for an enterprise to be optimized, each of the models have to be optimized.

These descriptive models are very helpful in creating instance of the operational enterprise.
There are several challenges as we start with some of the EA activities:
1. How do you translate strategy definitions to service descriptions?
2. Identify and define business process model departments wise, enterprise wide and map them to service descriptions.
3. Identifying applications, which can automate above business processes and, which processes to be left to be done manually.
4. Selection of technology which can support the implementation and operation,
5. Information model required to support & operate such initiatives,
6. Organization structure, which is needed to support above.
7. Measurement of each of the activities in a timely manner wrt meaningful performance indicators

Of course, don't forget the issues of timeliness and associated cost at each of the above steps. You will agree that these tasks (above) are very critical for the success.

It's not difficult to know why hardly 10% of the strategies ever get translated into effective operation. Most of the above issues have been at the core of several enterprises being sub-optimized. You won't be surprised if you found that these are reasons why ENTERPRISES are finding it difficult to change and expand as the customer needs are changing with time. As most of the enterprise models are "out of sync" or is it fair to say they are "out of order".

It's the matter of time, when Enterprise Architecture will eventually start to appear common sense the way "gravity" does today. I will use Zachman framework, which is a de facto standard for Enterprise Architecture. The framework defines a set of 36 primitive enterprise elements, which are the basis for defining and implementing enterprises. I will use these elements as a base for extending and mapping the balanced scorecard with enterprise architecture initiatives. To start with, I can extend my BSC, which could look like this (image below) ;-)

As you would have realized your typical balanced scorecard will mainly consist of the performance indicators without any guidance for how you're going to achieve them. That's where the enterprise architecture framework could be very helpful.

I am planning to complete this in a 5 part series. Don't forget to visit again later to see how we can extend the process performance indicators to three categories i.e. 1. Innovation process 2. Manufacturing processes 3. Post sales process. Can we map these categories to different cells in Zachman Framework? How do we translate business performance indicators to system performance indicators? and more...