Architecting Value

Where to Get Capability Frameworks

I originally meant to follow up my last post on the use of capabilities with an example of what a capability framework would look like. One of the challenges is that I don't have a ready source for enterprise-scale frameworks.

Microsoft Services has a strategic offering in which our consultants will leverage a number of generic industry models that we've developed over the past 10 years or so. I've developed a number from studying marketing material and white papers from technology consulting firms.

One excellent starting point is APQC. APQC is an organization that specializes in benchmarking studies and research. To facilitate industry and cross-industry comparisons, APQC leverages a process taxonomy developed by IBM. In addition to a generic process framework, there are also a dozen or so industry-specific frameworks, that are detailed down to a L3 or L4 level. Even if your industry isn't covered by one of the models, there's enough material for you to get started with so that you're not re-inventing too much. It's definitely an accelerator to your capability model development.

 

Beware of Watermelons

Microsoft is a company that heavily leverages scorecards for managing performance. Our CIO's scorecard has nearly 100 separate metrics that are used to evaluate his performance - indicated by green, yellow, or red.  Recently, he cautioned us about scorecard "watermelons," that is, items that appear green on the scorecard but are actually significantly underperforming and should be red. This happens when the scorecard fails to capture the right measure.

 

I recently had a "watermelon" experience that should be a standard risk to look out for on business architecture engagements, especially if you suspect that the organization is not strategically mature. I had an executive sponsor insist that we conduct an engagement for his organization as they were undergoing a major strategic shift. He made available some of his managers who committed nearly 20% of their time to helping us create the strategy deliverables.

 

This engagement appeared green on our scorecard since we had executive sponsorship, commitment from the client, and were making progress on the deliverables. The only problem was that the people we were working with didn't really know what the strategy was. The executives had kept the strategy close to the vest and the managers we were working with were taking their best guess.

 

This internal disconnect with the client wasn't discovered until the end of the engagement when the SOAP was presented for validation. The executives were expecting something that articulated their transformational strategy and instead something that showed incremental improvements. We were green when it came to the engagement but bright red when it came to the actual content .

 

It was a terrific lesson - I had allowed the fact that I had engagement from the client obscure the fact that I didn't have the right level of engagement. In retrospect, I should have structured more frequent and earlier reviews with the sponsor to ensure that we were going in the right direction. The deliverables that I'm prescribing are primarily listening devices - they should be used often to validate whether you are on the right track to avoid watermelons.

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.

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.