Architecting Value

Clarifying the Business Architect’s Role in Business Strategic Planning

It occurs to me that as I describe elements of a good strategy that some readers may be tempted into thinking that I am prescribing a method for developing strategies. To be clear, I am not. Strategy development is an essential task for the business to accomplish. A robust and rigorous business strategy will include internal and external analysis. Some of these insights – particularly external analysis – are likely to be beyond the capabilities of the business architect, even if they are positioned in the business organization instead of IT.

There are may be some individuals whose titles are business architects but positions require them to develop business strategies for their organization. In those cases, I would suggest that they are playing a different role – the role of business strategist. The role of the business architect is to translate the strategy into plans for execution.

The key activity for the business architect with regards to strategy, irrespective of how and whom develops it, is to ensure that it is clearly articulated and comprehensible to the business’s key stakeholders. It may seem illogical that a business strategy is developed that isn’t comprehensible or clearly articulated but this often does occur because the strategies are often initially developed for a very limited audience. They are entrenched in contextual understandings that may be obvious to those working within the organization but completely alien for those on the outside.

I find that to be the case with my sales organizations. From my limited experience, it seems that sales organizations have a common way that their strategy is communicated internally that I have difficulty interpreting. There are a number of deliverable formats that can be used but the end goal should be to clearly communicate the future state vision, the key priorities and actions that get there, and the outcomes that enable measurement of success.

Elements of Strategy

I begin planning with a basic assumption that it is impossible to do everything – there simply isn’t enough money, resources, or time to fulfill everything that is needed or desired. In the face of these constraints, we have to determine what it is that we should focus on. That’s  where I turn to strategy.

My former boss and mentor at Merck, Bev Rosella, developed this graphic with clients to help them understand the core components of a strategy. (Bev is now a private consultant – I highly recommend her if you need assistance with articulating your strategy).

A strategy consists of some basic elements:

Vision describes where we want to be in the future. This can be either long-term aspirational vision or a description of the short-term ideal future state, i.e. your three-year vision.

Mission describes the organization – what is the organization, what is its purpose, a high level description of how the organization creates business value.

Business outcomes describe the tangible and measurable results that the organization is driving to achieve its vision over time. This is the tangible description of the business value that is being sought.

Strategic Priorities/Actions are the key initiatives over time that describe how the outcomes are achieved in order to realize the vision.

To me, a strategy is very much like planning a trip. The vision is your final destination, the mission is your mode of travel (i.e. car, foot, a plane, etc.), the outcomes are the results you want from your trip (i.e. I want to arrive in 4 hours or I want to see these monuments on my journey), and the priorities and actions are the route that you take to get there.

A Framework for Planning

My team is somewhat unique within Microsoft IT in that we are a fairly senior team whose work spans all of the lines of business we support. We are accountable for helping our organization navigate the investment planning process and actively manage the IT portfolio. To this task, we bring a diverse range of expertise including Six Sigma, business architecture, portfolio management, and project management, among others.

We’ve developed a planning framework that we use to understand how business value is defined and how we subsequently realize it. This framework allows us to thread our planning expertise together in an end-to-end view and provide a vehicle for educating our clients about planning.

 

Business Value Definition
The first phases of planning are used to define what provides business value. These activities are represented in the semi-circle on the right starting with Strategy Development, Architecture Planning, and Demand Management.

Strategy Development is the activity of defining where the business would like to be in a 3-5 year time frame, what are the key outcomes that it is trying to achieve in that timeframe, the major change initiatives that will get them there, and the relative priority of those initiatives.

Architecture Planning is an activity of translating the strategy into business capabilities that will enable the strategy. These capabilities then must be understood in terms of their future state and compared to their current state implementation. The deltas between the current and future state and the prioritization of capabilities form the foundation of a strategic roadmap for realizing the strategy.

Demand Management is the activity of receiving and managing demand for an investment portfolio. This demand will constitute both strategic demand coming from the architecture planning work as well as tactical demands that serve near-term business interests. Managing this demands also involves performing some level of triage so as to focus only on those items that have some realistic expectation of delivering business value and normalizing the demands so that they can be easily compared. This is likely the activity in which business cases are created with ROI and other types of investment calculations to assist with portfolio optimization.

Business Value Realization
The last phases of planning are used to help realize the business value that has been defined and are represented by the activities that appear in the semi-circle on the left.

Portfolio Optimization is the activity of applying constraints – minimally funding but also other defined investment criteria – in order to determine the best portfolio of investments.

Portfolio Management is the activity of actively managing the portfolio to ensure that investment programs are on track to deliver the value that has been committed. Changes in priorities, funding, program delivery schedules , and other factors can disrupt the investment plan and may necessitate making changes to the investment plan.

The existing portfolio and its execution against business value, in turn, inform strategy development in a continuous cycle. I should note, however, that strategy is also informed by demand and other factors so the representation in the framework is a simplified understanding of planning and not meant to represent a linear process.

I will spend most of my time on this blog addressing the first two activities, partially because they represent my primary function at Microsoft, but also because I think this is the area that is most immature from a discipline perspective and less well-understood. There are other sources that are better informed than me on the downstream activities of demand management, portfolio optimization, and portfolio management so I will likely only address them in terms of their integration with strategy development and architecture planning.

Rethinking Business Value

In my first post, I asked the question – “what constitutes business value?” I argued that it’s not simply delivering what the client asks because sometimes the client doesn’t have the right perspective. Most of my clients begin their conversation with me by talking about their IT problems. These conversations are typically characterized by the focus on IT systems and the immediacy of the need - they need better functionality from their CRM solution to remove some manual step or they need a specific report. In an order-taking IT organization, we might promptly write down the requirement and try to figure out when we will slot it into a release calendar. The customer’s requirement is heard, understood, and a plan is presented for meeting the requirement. This provides the customer with the value they’re looking for, right?

What’s missing from this conversation, in my mind, is context. Why do they need this particular report or functionality? What is the business goal that they are ultimately driving towards? If we have a good relationship with our clients, we may already know the answer to this question. There are others, though, that we need to have good answers for such as what are the other goals that the business is driving? Over what time horizon? How does this goal or requirement stack up against the others?

Absent a strong understanding of the business goals, strategies, and priorities, information technology organizations risk limiting the value they bring to their business clients.  Deloitte’s Center for the Edge recently published results from their “Shift Index” which found that while labor productivity has more than doubled in the past forty years, return-on-assets have declined by 75%. The researchers point out that much of the capital investment made by companies in the past forty years has been in information technology leading them to the conclusion that IT has failed to deliver significant value. Deloitte hypothesizes that "technology investment... has been overly focused on an industrial-era model. 'It’s been all about standardization and automation of business processes... Until and unless companies learn how to harness knowledge flows, the impact of the technology will mainly be continuing competitive pressure.”

Anecdotally, I have found this to be true. Many IT planning meetings with business clients amount to identifying manual processes and targeting them for automation, irrespective of the value that such automation might bring. The key success measure for one of Microsoft IT’s major strategic programs is being measured in labor productivity. While this isn’t inherently wrong, the question remains, can IT deliver greater value to its customers?

Most non-IT senior executives believe so. A McKinsey & Company survey (registration required) found that while most were satisfied with the ability of their IT divisions to provide basic IT services such as email, workstations, office productivity software, etc., what they found lacking was IT’s ability to provide transformative new business capabilities and innovation. These executives believed that IT was overly focused on creating greater efficiency – a view echoed by many IT executives who were also surveyed by McKinsey.

I am suggesting that IT leaders set a high bar for delivering business value – not just incremental improvements in productivity, cost reduction, and efficiency but significant, transformative changes that leverage the full potential of IT as an engine of the business to achieve its goals and objectives. IT organizations that can accomplish this are ones that have strong understanding of how the business functions and visibility into their clients’ strategy and goals.

This is no short-term journey for most IT organizations. This can involve a major paradigm shift in how we think about the relationship between IT and our business clients; it means changing how we think about the process by which we engage the business in strategic and investment planning; it involves skill sets that are not traditionally found in IT organizations.  In my next post, I will describe a planning framework that can be used to translate business strategies into investment plans.

First, Some Context

Before digging in, I think it’s important to set context. I am a business architect for Microsoft’s internal IT organization, also known as MSIT. MSIT is made up of three key organizations- the solution delivery group, the engineering group, and a services/operations group.

I work in the solution delivery organization, whose function is to provide account management between the business and IT, to facilitate and drive the planning of the IT investment portfolio, to gather business requirements and deliver them to our engineering group, and to otherwise ensure successful delivery of IT to our clients. The engineering organization, which is made up of both business aligned and non-business aligned teams, is responsible for the system development and enhancement while the services/operations group is responsible for running the infrastructure, handling service requests. The shorthand understanding of the difference between groups is Plan, Deliver, Operate.

The solution delivery groups are aligned to particular businesses or business areas; my solution delivery organization supports five sales and marketing lines of business. As with most large, global businesses, their business maturity and the relationship our IT group has with them is varied. While most of our group is focused on account management and business analysis functions, I work on a team whose responsibility is to develop strategic and investment plans for all of our business clients.

How Microsoft funds IT has a significant impact on my role and the dynamics of the business-IT relationship.  IT’s budget is set at the corporate level and doled out across several funding governance bodies. The governance bodies are made up of senior leaders from business and IT organizations. These committees are chaired by the solution delivery leader – my general manager. Although all of our business clients are represented on the governance committee, not all of them have a seat at the table when decisions are made about how funds get allocated. As you might imagine, this can cause some friction in an environment where IT budgets are static or shrinking and there is more demand than investment dollars for supply.

My organization and the governance body that we facilitate operate from the premise that there is enough similarity in IT needs of our clients that we can create systems that are shared by two or more businesses. My team is focused on answering the question – how can we drive the most value from our IT portfolio? Where should we build for economies of scale versus creating capabilities that are specific to the needs of a particular client?  How do we decide which investments will deliver the best results? Hopefully these are questions that resonate with you – how we tackle this question is the subject of this blog.