business architecture operating model

Selecting an Enterprise Operating Model Based on the Business Model Design

BY : Sergio Compean

In Part 3 of the Enterprise Architecture for Business Model Innovation Series, an enterprise operating model will be selected based on the business model design described in Part 2, Using Design Thinking to Design Business Models.

Identifying an Operating Model

An operating model is the first layer in the foundation for execution in an enterprise architecture. The operating model is the business process standardization and integration necessary to deliver value to Customer Segments. It is the conceptual component in the organizing logic that defines an enterprise architecture. In this sense, the operating model is the initial manifestation of the business model when it is deployed as it indicates how value is created, delivered and captured by the business units in the enterprise. Research conducted by MIT’s Center for Information Systems Research found that enterprises implementing an operating model reported the following:

17% greater strategic effectiveness,
31% higher operational efficiencies,
33% more customer intimacy,
34% higher product leadership, and
29% greater strategic agility than those companies that did not. 4

Based on survey and case study research at more than 200 companies in the United States and Europe, MIT’s CISR developed a quadrant based on the two dimensions of business process standardization and integration in which high performing enterprises that had implemented an operating model could be classified.

Operating Model Quadrant (Enterprise Architecture as Strategy, Ross et al, 2006)

Coordination Operating Model

The Coordination Operating Model is characterized by shared customer, product or supplier data but operationally unique business units that can impact each other’s transactions. These autonomous business units have a high degree of control over business process design to adapt to its specific operations. Visually a Coordination Operating Model is represented in the following diagram.

Unification Operating Model

The Unification Operating Model is based on a globally integrated set of business processes where customers and suppliers are distributed geographically. Business units have similar operations where process and data are designed centrally so they can be shared. Centralized management of these processes typically leverages a matrix approach to keep track of the business unit composition. Although the business units have distinct operations, high-level business process owners work to standardize business processes across the business units. Essentially, Unification is based on a canonical set of processes and data that can be dynamically configured to execute within each business unit’s operations.

Unification Operating Model

Diversification Operating Model

Diversification is based on the fact that business units have few, if any, shared customers or suppliers. These business units also are operationally unique and have transactions that are independent. There is minimal business process standardization and integration in a Diversification Operating Model. Most IT decisions and business process design are made at each business unit. However, these business units do leverage a common set of shared services that can be integrated into their specific environment.

Replication Operating Model

The Replication Operating Model also has few, if any, shared customers or suppliers. The autonomous business units in a Replication Operating Model leverage a federated approach to business process integration and standardization. Business process design is centrally managed as are IT services. The information architecture is standardized with canonical data definitions but the actual data is locally owned with some aggregation to the enterprise. From an operations perspective, the business units are very similar in execution.

Replication Operating Model

Mapping Business Model to Operating Model

The next step in the process is to identify an operating model that is well-suited for the business model characteristics. The process is defined by evaluating standardization and integration necessary in certain elements in the business model. Elements in the business model that play a significant role in determine the operating model include Customer Segments, Key Activities, Key Resources and Key Partners. The mapping presented here provides insight into the rational for selecting an operating model as well as a structured matrix for organizing the logic in the process.

The mapping activity should be conducted in a session including the intrapreneurs and enterprise architects. The intrapreneurs can provide data and characteristics from the business model to the mapping matrix. Enterprise architects can analyze the business processes, system linkages, and data necessary to support that aspect of the business model to lead to a choice for the operating model. The mapping process and criteria can be adapted to suit the enterprise’s particular business model innovation parameters.

Mapping Matrix

Designing an Ecosystem to Support the Operating Model

In order to begin implementing an enterprise architecture to support a foundation for execution, it is important to consider the composition of the types of architectural practices, standardized technologies, and platforms in the ecosystem. Technology standardization is part of the evolution of the enterprise system landscape toward an optimized, agile ecosystem that provides the responsiveness needed to enable strategic initiatives to be implemented at higher velocities. Identifying the set of services and platform capabilities in a holistic manner allows a systems thinking approach to support design initiatives for the enterprise architecture. The cost benefits are also significant as it gives enterprise architects a roadmap to perform technology and platform evaluations that are compliant with the ecosystem governance model to avoid redundant deployments and wasted resources.

Architecture Principles

Enterprise architecture principles that inform program portfolios related to the core operating model and new ventures can serve as valuable guides to building out the ecosystem in a cohesive, consistent manner. These principles also facilitate increasing organization capability to design, develop, test, and deploy solutions with higher quality and high velocities. Establishing a set of architectural principles for enterprise architecture development underscores the important consideration that process is just as important as technology for creating world class solutions. Besides agility, economies of scale and scope can be achieved by leveraging or extending existing architectural components and subsystems to deliver new solutions required to support a new venture. These architectural principles specifically help address the challenges needed to succeed in the global connected economy.

Ecosystem Architecture Principles

Ecosystem Architecture

Technology and Platform Capabilities

In addition to standardizing the process for designing the ecosystem, the technology infrastructure and platform capabilities also need to be classified to facilitate deployment decisions. These categories are essentially the toolbox for the enterprise architect to use to create solutions to power new ventures launched from business model innovation initiatives. The categories have been defined as they help address specific aspects of the types of capabilities needed to succeed in the global connected economy. It should be noted, however, that the ontology presented in the table below is not exhaustive. Enterprise architects should develop a more comprehensive catalog of the technology and platform capabilities needed to support the operating model and any extensions for new ventures.

Ecosystem Technology and Platforms

With the operating model identified, Part 4 will introduce a design language via the Core Diagram. A Core Diagram is a visual representation of the organizing logic for the digital ecosystem that enables the enterprise architecture. Part 4 will present a design process of the Core Diagrams for each class of Operating Model. The Core Diagram answers the question, “What does the enterprise architecture look like?”

About Sergio Compean

Sergio Compean comes to Sogeti USA with extensive technology consulting and leadership experience in the areas of distributed systems software engineering and enterprise solutions. He has been successful in building culture of innovation and entrepreneurship to develop high performing teams that deliver significant value to clients across market segments and project portfolios. Sergio has a consistent track record for delivering high-touch client services with deep insights to realize positive outcomes from business strategy and technology vision.

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Gartner Glossary

Operating model.

An operating model is the blueprint for how value will be created and delivered to target customers. An operating model brings the business model to life; it executes the business model. An information and technology (I&T) operating model represents how an organization orchestrates its I&T capabilities to achieve its strategic objectives. An enterprise operating model describes how the enterprise configures its capabilities to execute its actions to deliver business outcomes as defined in the business model.

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IMAGES

IAG Multi-Dimensional Enterprise Business Architecture Framework. www.iag.biz
Business Architecture Driven IT Operating Model for the digital age
Operating Model Design
The Power Of Operating Models
How you design a value-oriented digital operating model that maximises business value
architect: Business Architecture Operating Model

VIDEO

unit 3 1 PRODUCT ARCHITECTURE INTRODUCTION
Model based Software Architecture Part-1
High level system architecture in system design-Behavioral modelling
MODEL BASED SOFTWARE ARCHITECTURES
The Open Business Architecture Standard -The Open Group Austin Event, July 2016
The Introduction

COMMENTS

Architecting an Operating Model
Architecting an Operating Model - Deloitte US
4Types of Operating Models-Choosing the Right Business Model
An operating model is the first layer in the foundation for execution in an enterprise architecture. The operating model is the business process standardization and integration necessary to deliver value to Customer Segments. It is the conceptual component in the organizing logic that defines an enterprise architecture.
Operating Model
An operating model is the blueprint for how value will be created and delivered to target customers. An operating model brings the business model to life; it executes the business model. An information and technology (I&T) operating model represents how an organization orchestrates its I&T capabilities to achieve its strategic objectives.
Using Business Architecture to Realize your Operating Model
e.g., Core Diagram, Operating Model, Business Model Canvas. Summary Views. Detail Architecture. Blueprints * *Source: Business Architecture Guild, “A Guide to the Business Architecture Body of Knowledge (BIZBOK™).” Summary views provide context and guidance for detail architecture. Derived from . Strategyzer.com Boeing, EO&T IT EA | 9
Enterprise Architecture for Operating Model
Operating model is the blueprint of business organization representing “how” it operates. It is a holistic representation describing how the organization creates and delivers value to its...