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Selecting an Enterprise Operating Model Based on the Business Model Design

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.

~ Written By Sergio Compean

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.

Coordination Operating Model

image-1Operating Model Quadrant (Enterprise Architecture as Strategy, Ross et al, 2006)

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

image-2

 

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.

Diversification Operating Model

image-3

 

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

image-4

 

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.

Architecture Principle Objectives
Responsive Mobile First Design

Responsive Mobile First Design is the principle to design interfaces as if they were targeting a mobile audience that may be using various types of devices such as smart phones or tablets.  The objectives of this principle are: 

·        Personalized content, capabilities, context delivery

·        Enhanced customer relationships

·        Support for ambient awareness

·        Optimized omni-channel distribution for demand generation or service delivery

OODA Loop5

The Observe-Orient-Decide-Act Loop principle is a paradigm that informs designing analytical and event-processing capabilities into the operating core as well as new ventures.  The OODA Loop includes components for decision modeling.  Some of the objectives driving this architectural principle include: 

·        Open world decision support for consumers

·        Real-time data insights

·        Complex event processing

·        Distributed enterprise collaboration and decision support

Cloud First Design

Cloud First Design is the principle to design all services with business modularity and cloud computing capability to maximize utility of network effects.  The principle helps to achieve these objectives: 

·        Global class integration

·        Partner and supplier plug-n-play

·        Supply chain agility

·        On-demand scale and elasticity

 

Ecosystem Architecture Principles

image-5

 

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.

Technology/Platform Objectives/Candidates
Mobile

Mobile platforms produce responsive interfaces for consumers using smart phones or tablets.  Platforms should facilitate deploying context-aware, personalized content and capabilities in the various relationships, channels, and revenue streams the consumer is engaged. 

Candidate platforms include:

·        Apple iOS, Google Android

·        Xamarin, Apache Cordova, Appcelerator

·        Bootstrap, Skeleton

Ubiquitous Computing

Ubiquitous computing is driven by need to capture more open world contextual data via sensors to develop enhanced situational awareness to empower the decision modeling in the enterprise. 

Candidate platforms include:

·        Arduino, Rasberry Pi, Intel Edison, Intel IoT Gateway

·        RFID, Energy sensors, Manufacturing sensors, Agriculture sensors, Retail beacons

·        Smart products, smart vehicles, smart buildings

·        Ayla Networks, ThingWorx, Amazon IoT, Microsot Azure IoT Suite, IBM Watson IoT

Big Data and Machine Learning

Big Data is the collection of large volumes of data from diverse sources at high velocities.  Big Data can enable business context insights to move with high velocities across business units and/or partners in the operating models as well serve as the source for shared data. 

Candidate platforms include:

·        Microsoft Azure HDInsight, Azure Machine Learning

·        IBM Watson

·        Apache Hadoop, Apache Spark

To unlock value from vast amounts of data over large numbers of dimensions, machine learning platforms can provide the numerical analysis to develop insights based on classification, regression, and predictive analytics.  As such, these platforms can also drive personalization for products and services and facilitate open world decision modeling in the consumer customer segments.

 

 

 

Technology/Platform Objectives/Candidates
Cloud Computing

Cloud computing provides elastic computing resources for scalability and also relay mechanisms for enabling linkages between business units and enterprises.  This platform capability is especially valuable for business model innovation since these services can be used in an on-demand basis and can be disconnected if the new business model does not perform well.  These connections can be made as part of a new venture or in response to market feedback or competition. 

Candidate platforms include:

·        Microsoft Azure Cloud Services

·        Amazon EC2

·        IBM Bluemix

·        OpenStack

Complex Event Processing

Complex event processing is necessary to capture rich context information in real-time.  Events occurring in the consumer’s open world or in the collaborative distributed enterprise contains contextual data that should be incorporated into decision modeling for determining how to respond. 

Candidate technologies include:

·        Microsoft Azure Streaming Analytics

·        Amazon Kinesis

·        TIBCO BusinessEvents & Streambase

Enterprise Service Bus

In modern enterprise architectures that have successfully evolved to support composite services and applications, an enterprise service bus is often a key enabler for reaching the data velocities required for business agility.  An enterprise service bus provides key capabilities to support high data velocity at the operating core such as message routing, service brokering, mediation, and message processing including transformation and enrichment, operations management, as well as quality of service. 

Candidate platforms include:

·        Windows Azure Service Bus

·        Mulesoft Anypoint

·        Neudesic ESB

·        Microsoft BizTalk Server

Enterprise Collaboration Portals

Enterprise collaboration portals are the interface for group collaboration within and across business units in the enterprise.  These platforms include social network and virtual teaming capabilities to support standardized business processes and accessing shared data. 

Candidate platforms include:

·        Slack

·        Microsoft SharePoint

 

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?”

To read the original blog please visit: http://labs.sogeti.com/selecting-an-enterprise-operating-model-based-on-the-business-model-design/

Sergio Compean
Sergio Compean
Manager at Sogeti USA
+1 937-291-8100
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