enterprise architecture as strategy

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Innovation Value Institute – Creating IT Enabled Business Innovation Enterprise Architecture as Strategy Monday, 2 July 2007 Professor Peter Weill Page 1 © 2007 MIT Sloan CISR – Weill Center for Information Systems Research Enterprise Architecture as Strategy: Enterprise Architecture as Strategy: Creating a Foundation for Business Execution Creating a Foundation for Business Execution This research was made possible by the support of CISR sponsors and patrons. The research team included Jeanne Ross, Peter Weill, David Robertson (IMD), George Westerman, Nils Fonstad, Lenny Zeltser, Charles Zedlewski, Niraj Kumar (MIT), and Mingdi Xin (New York University). Professor Peter Weill Director Center for Information Systems Research (CISR) MIT Sloan School of Management Phone: (617) 253-2930, Fax: (617) 253-4424 [email protected] http://mitsloan.mit.edu/cisr/ INNOVATION VALUE INSTITUTE INNOVATION VALUE INSTITUTE Creating IT Enabled Business Innovation, 2 July 2007 Creating IT Enabled Business Innovation, 2 July 2007 CISR CISR’s Mission Mission Founded in 1974; CISR has a strong track record of practice-based research on how firms manage & generate business value from IT Research is disseminated via electronic research briefings, working papers, research workshops & exec. ed. programs including http://mitsloan.mit.edu/cisr/education.php Boston Consulting Group BT Group Diamond Management & Technology Consultants – Gartner CISR Research 20022007 Managing the IT Resource What the CEO wants from IT The Future of the IT Organization IT Governance in Top Performing Firms Enterprise Architecture as Strategy IT Portfolio Investment Benchmarks & Links to Firm Performance Reducing IT-Related Risk IT and Business Strategy Business Models and IT Investment and Capabilities IT-Enabling Business Innovation and Transformation How IT Can Enhance Business Agility Managing Across Boundaries Effective Governance of Outsourcing Building Effective Relationships Between Business & IT Leaders Effective Distributed Collaboration Effective IT Engagement Inside and Outside the Firm Contact Information: 3 Cambridge Center, NE20-336 Cambridge, MA 02142 Ph. 617-253-2348, Fax 617-253-4424 E-mail [email protected]; http://mitsloan.mit.edu/cisr/ CISR gratefully acknowledges the support and contributions of its Research Patrons and Sponsors MIT Sloan Center for Information Systems Research (CISR) – Merrill Lynch & Co., Inc. – MetLife – Mohegan Sun – News Corporation – Nissan North America, Inc. – Nomura Research Institute, Ltd. (Japan) – Northrop Grumman Corp. – PepsiAmericas, Inc. – Pfizer Inc. – PFPC, Inc. – Procter & Gamble Co. – Quest Diagnostics – Raytheon Company – Renault (France) – Standard & Poor’s – State Street Corp. – TD Banknorth – Telenor ASA (Norway) – Time Warner Cable – Trinity Health – TRW Automotive, Inc. – Unibanco S.A. (Brazil) – United Nations – DESA – Walt Disney Company CISR Sponsors – Aetna Inc. – Allstate Insurance Co. – American Express Corp. – AstraZeneca Pharmaceuticals, LP – Banco ABN Amro Real S.A. (Brazil) – Biogen Idec – Campbell Soup Co. – CareFirst BlueCross BlueShield – Care USA – Caterpillar, Inc. – Celanese – Chevron Corp. – Chubb & Son – Commonwealth Bank of Australia – Det Norske Veritas (Norway) – Direct Energy – EFD – EMC Corp. – Family Dollar Stores, Inc. – Guardian Life Insurance Co. of America – Information Services Int’l – ING Groep N.V (Netherlands) – Intel Corporation – International Finance Corp. – Liberty Mutual Group IBM Corporation Microsoft Corporation Tata Consultancy Services—America CISR Research Patrons 6/25/2007 © 2007 MIT Sloan CISR Center for Information Systems Research

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  • 1. Innovation Value Institute Creating IT Enabled Business InnovationMonday, Enterprise Architecture as Strategy2 July 2007INNOVATION VALUE INSTITUTE Creating IT Enabled Business Innovation, 2 July 2007Enterprise Architecture as Strategy:Creating a Foundation for Business ExecutionProfessor Peter Weill Director Center for Information Systems Research (CISR) MIT Sloan School of ManagementPhone: (617) 253-2930, Fax: (617) [email protected] http://mitsloan.mit.edu/cisr/ This research was made possible by the support of CISR sponsors and patrons. The research teamincluded Jeanne Ross, Peter Weill, David Robertson (IMD), George Westerman, Nils Fonstad, LennyZeltser, Charles Zedlewski, Niraj Kumar (MIT), and Mingdi Xin (New York University). Center for Information Systems Research 2007 MIT Sloan CISR WeillMIT Sloan Center for Information Systems Research (CISR)CISR gratefully acknowledges the support and contributions of its Research Patrons and SponsorsCISR Research Patrons Boston Consulting Group IBM Corporation CISRs Mission CISR BT Group Microsoft Corporation Founded in 1974; CISR has a strong track record of Diamond Management & Tata Consultancypractice-based research on how firms manage &Technology Consultants generate business value from IT ServicesAmerica Gartner Research is disseminated via electronic research briefings, working papers, research workshops & exec. CISR Sponsors ed. programs including http://mitsloan.mit.edu/cisr/education.php Aetna Inc. Merrill Lynch & Co., Inc. Allstate Insurance Co. MetLifeCISR Research 20022007 American Express Corp. Mohegan Sun Managing the IT Resource AstraZeneca Pharmaceuticals, LP News Corporation What the CEO wants from IT Banco ABN Amro Real S.A. (Brazil) Nissan North America, Inc. The Future of the IT Organization Biogen Idec Nomura Research Institute, Ltd. IT Governance in Top Performing Firms Campbell Soup Co.(Japan) Enterprise Architecture as Strategy CareFirst BlueCross BlueShield Northrop Grumman Corp. IT Portfolio Investment Benchmarks & Links to Firm Performance Care USA PepsiAmericas, Inc. Reducing IT-Related Risk Caterpillar, Inc. Pfizer Inc. IT and Business Strategy Celanese PFPC, Inc. Business Models and IT Investment and Capabilities Chevron Corp. Procter & Gamble Co. IT-Enabling Business Innovation and Transformation Chubb & Son Quest Diagnostics How IT Can Enhance Business Agility Commonwealth Bank of Australia Raytheon Company Managing Across Boundaries Det Norske Veritas (Norway) Renault (France) Effective Governance of Outsourcing Direct Energy Standard & Poors Building Effective Relationships Between Business & IT Leaders EFD State Street Corp. Effective Distributed Collaboration EMC Corp. TD Banknorth Effective IT Engagement Inside and Outside the Firm Family Dollar Stores, Inc. Telenor ASA (Norway)Contact Information: Guardian Life Insurance Co. Time Warner Cable 3 Cambridge Center, NE20-336 of America Trinity HealthCambridge, MA 02142 6/25/2007 Information Services Intl TRW Automotive, Inc. Ph. 617-253-2348, Fax 617-253-4424 ING Groep N.V (Netherlands) Unibanco S.A. (Brazil) E-mail [email protected]; Intel Corporation United Nations DESAhttp://mitsloan.mit.edu/cisr/ International Finance Corp.Systems Walt Disney Company Center for Information Research Liberty Mutual GroupCenter for Information Systems Research 2007 MIT Sloan CISR Weill 2007 MIT Sloan CISR Professor Peter WeillPage 1

2. Innovation Value Institute Creating IT Enabled Business Innovation Monday, Enterprise Architecture as Strategy 2 July 2007 The Business-IT Alignment Problem Data Business SolutionLagLagApplicationsStrategy DesignInfrastructure New idea Center for Information Systems Research 2007 MIT Sloan CISR Weill The Result ..Corporate Data DataApplications TechnologyPlatformsCorporate Networks &Infrastructure Services Source: Enterprise Architecture as Strategy: Creating a Foundation for Business Execution, Center for Information Systems ResearchJ. Ross, P. Weill, and D. Robertson, Harvard Business School Press, 2006. 2007 MIT Sloan CISR Weill Professor Peter WeillPage 2 3. Innovation Value Institute Creating IT Enabled Business InnovationMonday, Enterprise Architecture as Strategy2 July 2007 Agenda The Operating Model as an Alternative to Business Strategy Alignment Designing a Digitized Foundation for Strategy Execution Case Studies The Four Stages of Enterprise Architecture Maturity IT investment patterns and capabilities Strategic implications of IT Organizational learning about IT Reinforcing Organization Learning with Governance Recommendations and Next StepsCenter for Information Systems Research 2007 MIT Sloan CISR Weill Key Concepts What is important for a company Operating Model: The desired level of business process integration and business process standardization for delivering goods and services to customers. How to get there Enterprise Architecture: The organizing logic for key business process and IT capabilities reflecting the integration and standardization requirements of the firms operating model. IT Governance: decision rights and accountability for effective use of IT. The Asset Foundation for Execution: IT infrastructure and digitized business processes automating a companys core capabilities The Result Better Performance: More agility, high profits, lower IT risk, more satisfied senior management Center for Information Systems Research 2007 MIT Sloan CISR Weill Professor Peter Weill Page 3 4. Innovation Value Institute Creating IT Enabled Business InnovationMonday, Enterprise Architecture as Strategy2 July 2007 Designing a Foundation for Execution StrategicStrategic StrategicStrategicInitiativeInitiativeInitiative InitiativeDefinesstrategic limits Operating Model EstablishesDefines prioritiesLearningandintegration &Enterprise Architecture exploitation standardization requirementsDefines core capabilities Foundation for Execution Core Business Processes IT InfrastructureCenter for Information Systems ResearchSource: Enterprise Architecture as Strategy: Creating a Foundation for Business Execution, J. Ross, P. Weill, and D. Robertson, Harvard Business School Press, 2006. 2007 MIT Sloan CISR Weill The Foundation for Execution at UPSFlex Global ViewUPSPackageOnlineTradeTracking Tools Mail InnovationsDirectDefines strategic limits Industrial Engineering From Modelreliability toLearningaccessibility High degree ofandintegration &Enterprise Architecture to agility exploitation standardization across businessesDefines core capabilitiesRedundant operationsSingle package databaseGlobal communications network Standard interfacesStandard infrastructureCustomer information databaseProduct development process Customer relationship processCenter for Information Systems ResearchSource: Enterprise Architecture as Strategy: Creating a Foundation for Business Execution, J. Ross, P. Weill, and D. Robertson, Harvard Business School Press, 2006. 2007 MIT Sloan CISR Weill Professor Peter WeillPage 4 5. Innovation Value Institute Creating IT Enabled Business Innovation Monday, Enterprise Architecture as Strategy 2 July 2007 Center for Information Systems Research 2007 MIT Sloan CISR Weill Pick One of Four Operating Models - how do you want to grow CoordinationUnificationBusiness Process IntegrationUnique business units with aSingle business with global processneed to know each others standards and global data accesstransactionsExamples: Delta Air Lines, Dow High Examples: Merrill Lynch, Toyota Chemical, Pepsi AmericasMotor Marketing Europe, MetLife Key IT capability: enterpriseKey IT capability: access tosystems reinforcing standardshared data, through standard processes and providing global datatechnology interfaces access Diversification ReplicationIndependent business units with Independent but similar businessdifferent customers and unitsexpertise Examples: Marriott, CEMEX, ING LowExamples: Johnson & Johnson,DIRECTCarlson Companies, GE Key IT capability: provide standardKey IT capability: provideinfrastructure and applicationeconomies of scale withoutcomponents for global efficiencieslimiting independence Low High Business Process StandardizationSource: Enterprise Architecture as Strategy: Creating a Foundation for Business Execution, Center for Information Systems ResearchJ. Ross, P. Weill, and D. Robertson, Harvard Business School Press, 2006. 2007 MIT Sloan CISR Weill Professor Peter WeillPage 5 6. Innovation Value Institute Creating IT Enabled Business Innovation Monday, Enterprise Architecture as Strategy 2 July 2007 Target Operating Models Firm-wideBusiness Process Integration High Coordination Unification 16% of firms57% of firmsLowDiversificationReplication 16% of firms11% of firmsLowHigh Business Process Standardization Data show operating models reported by IT executives at 70 companies.Source: Enterprise Architecture as Strategy: Creating a Foundation for Business Execution, Center for Information Systems ResearchJ. Ross, P. Weill, and D. Robertson, Harvard Business School Press, 2006. 2007 MIT Sloan CISR Weill Johnson & Johnsons Multiple Operating Models1Business Process Integration Coordination Unification McNeilHealthcare US PharmaceuticalsHighEuropeanConsumerJ&J CompaniesConsumerProductsDiversificationReplicationJ&JLow Corporate EuropeanPharmaceuticalsLowHigh Business Process Standardization Center for Information Systems Research1 Source: Researcher approximation based on historical data. 2007 MIT Sloan CISR Weill Professor Peter WeillPage 6 7. Innovation Value Institute Creating IT Enabled Business Innovation Monday, Enterprise Architecture as Strategy 2 July 2007 Different Standardization Requirements of the Four Operating ModelsBusiness Process Integration CoordinationUnification Technology Technology Customer and Product DataCustomer and Product Data [Shared Services]Shared ServicesHighCore Processes such asOperations, CustomerService, Logistics [R&D,Marketing/Sales]Diversification Replication Technology Technology [Shared Services]Shared ServicesLow Core Processes such asOperations, CustomerServices, Logistics [R&D,Marketing/Sales] LowHigh Business Process StandardizationSource: Enterprise Architecture as Strategy: Creating a Foundation for Business Execution,Center for Information Systems Research J. Ross, P. Weill, and D. Robertson, Harvard Business School Press, 2006. 2007 MIT Sloan CISR Weill Toyotas Operating Model TransitionsCoordinationUnification Unique business units with aSingle business with global process need to know each others standards and global data access Required:Business Process Integration transactions Desirable:Transparency for Examples:StandardizedDelta Air Lines, DowHigh Examples: Merrill Lynch, Toyota Virtual Supply andChemical, Pepsi AmericasSystems to Motor Marketing Europe, MetLifeDemand Chain Reduce Cost Key IT capability: enterprise Key IT capability: access tosystems reinforcing standard shared data, through standard processes and providing global data technology interfaces accessDiversificationReplication Independent business units with Independent but similar business different customers and1999 Position: units expertiseDecentralizedExamples: Marriott, CEMEX, INGLowIndependent Examples: Johnson & Johnson,DIRECT Country Carlson Companies, GEOperations Key IT capability: provide standard Key IT capability: provideinfrastructure and application economies of scale withoutcomponents for global efficiencies limiting independence LowHighBusiness Process Standardization Source: Presentation by Peter Heinckiens, Chief Architect, Toyota Motor Marketing EuropeCenter for Information Systems Research to IMD OWP Program, June 30, 2005. 2007 MIT Sloan CISR Weill Professor Peter WeillPage 7 8. Innovation Value Institute Creating IT Enabled Business InnovationMonday, Enterprise Architecture as Strategy2 July 2007 MetLifes Coordination Model Application Presentation Tier Application Business Logic and Data TierPortal Security & Licensing Rates &Suitability Forms &PresentationEntitlements Calcs Requirements Integration CustomerScreen Entry & ValidationSign-on MarketingOperationalBusinessProducerACORD JLifeNavigation IllustrationsData StoreRules Search Order Entry SalesSessions UnderwritingParty Office ACORD XML IntegrationManagementHub Billing/Payment Underwriter Service Underwriting L XM Eligibility & Issue DOR ACCall Center Claims Product AdminPartner ServicePortals Events Service Workflow ProviderRecording Center for Information Systems Research Source: Adapted from MetLife documents used with permission. 2007 MIT Sloan CISR Weill Carlsons Enterprise Architecture Customer Requirements Business Initiatives Travel ManagementLoyalty Hotel Distribution CRMEnterprise Portal Business ProcessPresentation IT ResilienceApplication SecurityData Trust Common InfrastructureMiddleware Data ObjectPlatformNetwork Source: Carlson Company Center for Information Systems Research 2007 MIT Sloan CISR Weill Professor Peter Weill Page 8 9. Innovation Value Institute Creating IT Enabled Business InnovationMonday, Enterprise Architecture as Strategy2 July 2007Deltas Unification ModelOperational PipelinePrepareFlightFlight Clean/AllocateLoadMonitorUnload for FlightDepartureArrival andService Resources AircraftFlightAircraft Departureand CloseoutCloseout Aircraft E V PagersE Kiosks Hand HeldsGate Readers N TVoiceSDelta Nervous SystemVideo Electronic EventsLocation FlightScheduleMaint. BusinessEmployee Relationship ReflexesManagementEquip.EmployeeAircraft Customer Ticket Nine Core DatabasesCell PhonesPDAs P Desktops R OLaptopsFScanners Reservation ISystems L E TravelTicket CrownSkylinksSkymiles Reservations Skycap Boarding Inflight BaggageAgentCounter Room Personalization Digital RelationshipsLoyalty ProgramsCustomer Experience Center for Information Systems Research Source: Adapted from Delta Air Lines documents. Used with permission. 2007 MIT Sloan CISR WeillStages of Architecture MaturityStrategic Implications of IT Local/FunctionalITOperationalStrategic Optimization EfficiencyEfficiency Agility 100% 16% 15% Local 25% 36% ApplicationsPercentage of IT Investment 32% 34%Enterprise 21%Systems 18%35% 33% Shared 40% 35% Infrastructure11% 14% 17% 18%Shared Data0%Business SiloStandardizedOptimized Core BusinessTechnology(Rationalized Data orProcess)Modularity Percent of firms12 48 346 IT Budget1 100%85%75% 120% 1 IT budgets from 103 firms are corrected for industry differences. Application silo budget is the baseline. Budgets for other stages are represented as a percentage of the baseline budget. Only five firms in stage four reported their IT budgets so data is not reliable. Center for Information Systems ResearchSource: Enterprise Architecture as Strategy: Creating a Foundation for Business Execution, J. Ross, P. Weill, and D. Robertson, Harvard Business School Press, 2006. 2007 MIT Sloan CISR Weill Professor Peter Weill Page 9 10. Innovation Value Institute Creating IT Enabled Business Innovation Monday, Enterprise Architecture as Strategy 2 July 2007Enterprise Architecture Benefits by Stages5 4.5 4 3.5 3IT Responsiveness (1) CIO Rating Risk Management (2)2.5 Managerial Satisfaction (3)2Strategic Business Impacts (4) 1.5 1 0.5 0BusinessStandardizedOptimized Business(1) Development time.(2) Business risk, security breaches and disasterSilos TechnologyCoreModularitytolerance.(3) Senior management and business unitArchitecture Stagemanagement satisfaction.(4) Operational excellence, customer intimacy,product leadership and strategic agility.Center for Information Systems Research Source: Enterprise Architecture as Strategy: Creating a Foundation for Business Execution,J. Ross, P. Weill, and D. Robertson, Harvard Business School Press, 2006. 2007 MIT Sloan CISR Weill but there are tradeoffs in flexibility Architecture MaturityBusiness StandardizedOptimizedBusinessSilos Technology Core Modularity Global flexibility High flexibilityLocalflexibilityLowflexibilityCenter for Information Systems Research Source: Enterprise Architecture as Strategy: Creating a Foundation for Business Execution,J. Ross, P. Weill, and D. Robertson, Harvard Business School Press, 2006. 2007 MIT Sloan CISR Weill Professor Peter WeillPage 10 11. Innovation Value Institute Creating IT Enabled Business Innovation Monday, Enterprise Architecture as Strategy 2 July 2007 ING DIRECT: Business Efficiency Agility ING DIRECT, a subsidiary of the Dutch financial services giant, ING, was founded in 1997 as a telephone bank in Canada. Second fastest growing company in history, ING DIRECT is a direct-to- customer operation, offering simple banking products to 13 million customers of 9 country bank organizations. The #1 direct bank (in terms of retail funds entrusted) in every one of the 9 countries in which it operates. Each of ING DIRECTs country-based businesses operates autonomously, but they share a common set of standardized technical infrastructure components, as well as a set of standardized business service groupings (e.g., customer relationship services, common business services, channel access services). Standardized services has reduced operational costs to only 0.43% of assets, as compared to 2.5% for a typical full-service bank. Business efficiency agility allows the company to offer higher savings rates and lower-cost loans than other banks.Source: D. Robertson, ING Direct: The IT Challenge (A) and (B), working Center for Information Systems Researchpaper, IMD, 2003 and J. Ross, P. Weill, and D. Robertson, EnterpriseArchitecture as Strategy: Creating a Foundation for Business Execution, 2007 MIT Sloan CISR Weill HBS Publishing, 2006.ING Direct a Modular Business ModelExternal Services ProspectStatementReportsPaymentsChecksFulfillmentFulfillment Local/HQ/Tax Customer Relationship ServicesCore Banking ServicesMutualBrokerage CIFCRM Funds ContactProduct BankingCreditHistoryInfoEngine ScoreCommon Business ServicesTransactions Customers ProductsServices Channel ServicesIVR/CTIImagingE-mailWebGateway server serverserver server serverCustomer Contact:Self-Service: Call Center, IVR, E-mail, Internet, MinTel, ATM,Direct mailWAP, (WebTV) Services not implementedin all countries Source: Robertson, D. ING Direct: The IT Challenge (B), 2003, IMD-3-1345. Used Center for Information Systems Researchwith permission. 2007 MIT Sloan CISR Weill Professor Peter Weill Page 11 12. Innovation Value Institute Creating IT Enabled Business InnovationMonday, Enterprise Architecture as Strategy2 July 2007 Learning Requirements of the Architecture StagesStage BusinessStandardized Optimized Business Name Silos TechnologyCoreModularity IT Capability Local ITShared technicalEnterprise-wide Plug & play applicationsplatforms hardwired processes business process or databasesmodulesBusinessROI of local Reduced IT costsCost and quality of Speed to market; Objectives business business operations Strategic agilityinitiatives FundingIndividual Shared infrastructure EnterpriseReusable businessPrioritiesapplications servicesapplications and data process storescomponents Key Technology- Design and update ofCore enterprise Management ofManagement enabled changestandards; fundingprocess definition andreusable businessCapability managementshared services measurement processesWho Defines Local business IT & business unitSenior management IT, business andApplicationsleadersleaders and process leaders industry leaders Key ITMeasure andEstablish local/Align project prioritiesDefine, source & Governance communicateregional/global with architecture fund business Issues valueresponsibilitiesobjectivesmodules Source: Enterprise Architecture as Strategy: Creating a Foundation for Business Execution, Center for Information Systems Research J. Ross, P. Weill, and D. Robertson, Harvard Business School Press, 2006. 2007 MIT Sloan CISR Weill Four Critical Architecture CompetenciesArchitecture Planning and Design Senior Executive Oversight Enterprise Architecture Guiding Principles Enterprise Architecture Graphic Process Owners Full-Time Enterprise Architecture TeamProject ManagementIT Funding Project MethodologyBusiness Cases Post-Implementation Assessment Centralized Funding of Enterprise Apps IT Program ManagersInfrastructure Renewal Process Business Leadership of Project Teams IT Steering Committee Standards ManagementArchitects on Project TeamsTechnology Research & Adoption ProcessArchitecture Exception ProcessFormal Compliance ProcessCentralized Standards Team Management practices within each practice set are statistically significantly correlated Center for Information Systems Researchwith each other. All four competencies are significantly correlated with architecturebenefits. 2007 MIT Sloan CISR Weill Professor Peter Weill Page 12 13. Innovation Value Institute Creating IT Enabled Business InnovationMonday, Enterprise Architecture as Strategy2 July 2007 Reinforcing Organization Learning with GovernanceBusinessStandardized Optimized BusinessSilosTechnologyCoreModularity Business cases Project methodologyArchitects on project teamsIT Steering CommitteeArchitecture exceptionprocess*Formal compliance process*Infrastructure renewalprocess*Centralized funding ofenterprise applications*Centralized standards teamProcess owners*Enterprise architectureguiding principles*Business leadership ofproject teams*Senior executive oversight*IT Program Managers*Enterprise architecture graphic* Color Code:Post-implementation Architecture Planning & Designassessment* Project Management Technology research and IT Fundingadoption process* Standards ManagementFull-time Enterprise Architecture teamArchitecture Maturity* Reported value of asterisked items is statistically significantly related toarchitecture maturity stage.Center for Information Systems ResearchSource: Enterprise Architecture as Strategy: Creating a Foundation for Business Execution, J. Ross, P. Weill, and D. Robertson, Harvard Business School Press, 2006. 2007 MIT Sloan CISR Weill How to Succeed with Enterprise ArchitectureGovernance institutionalizes learning.Light weight governance helps firms not re-learn the same lessonMake tough choices.Enterprise architecture enables and constrains business strategy by creating astable platform for business execution. Management must specify how tooperate.Build capabilities, not solutions.This is the only way to avoid silos and create a powerful foundationfor execution.Do not skip stages.Generating value from architecture investments is a learning process.Aggressive investment in IT capabilities can be slow to generate a return.Allow time for learning.Introduce key management practices and dont give up on them.There is no substitute for strong senior management leadership.Firms getting strategic business benefits from an operating model have seniorbusiness leaders who are actively involved in its design, management andimplementation. Center for Information Systems Research 2007 MIT Sloan CISR Weill Professor Peter Weill Page 13 14. Innovation Value Institute Creating IT Enabled Business Innovation Monday, Enterprise Architecture as Strategy 2 July 2007Whats Next?Stage BusinessStandardizedOptimizedBusinessDynamicNameSilosTechnology Core ModularityVenturingROI of local Cost and quality of Speed to ROI of newBusinessbusiness Reduced IT costsbusinessmarket;business ObjectivesinitiativesoperationsStrategic agilityventures Enterprise-wide Plug & playSeamlessIT Local ITShared technicalhardwired business merging withCapability applicationsplatforms processes orprocesspartners databases modulessystems Technology- Design & update Management ofCreate self- Key Core enterprise enabled of standards; reusable containedManagement process definition changefunding sharedbusiness businessCapability and measurement managementservicesprocessescomponents Senior IT, business & Who DefinesLocal business IT & business IT, business and management and industry leaders Applications leadersunit leadersindustry leaders process leaders& partners Align projectKey ITMeasure andEstablish local/Define, source Joint venture, priorities with Governance communicateregional/global & fund businesspartnership architecture Issues valueresponsibilitiesmodulesgovernance objectivesStrategicLocal Operational Strategic Rapid Recon- ImplicationsIT EfficiencyOptimizationEfficiencyAgility figuration Source: Enterprise Architecture as Strategy: Creating a Foundation for Business Execution,Center for Information Systems Research J. Ross, P. Weill, and D. Robertson, Harvard Business School Press, 2006. 2007 MIT Sloan CISR Weill Further information: MIT CISR - http://mitsloan.mit.edu/cisrEnterprise Architecture asSix IT Decisions Your IT People Strategy: Creating a FoundationShouldnt Make, Jeanne Ross for Business Execution, Jeanneand Peter Weill, Harvard Ross, Peter Weill & DavidBusiness Review, November Robertson, Harvard Business2002, Vol. 80, No. 11, pp 8491. School Press, 2006.Generating Premium Returns onPlace to Space: Migrating toYour IT Investments, Peter WeilleBusiness Models, Peter Weill &and Sinan Aral, MIT SloanMichael Vitale, Harvard BusinessManagement Review, Vol. 47School Press, Boston, 2001.No.2, Winter 2006, pp 3948. Leveraging the New IT Governance: How TopInfrastructure: How Market Performers Manage IT Decision Leaders Capitalize on Rights for Superior Results,Information Technology, Peter Peter Weill and Jeanne Ross,Weill and Marianne Broadbent. Harvard Business School Press:Harvard Business School Press: Boston, 2004. Boston, 1998.Center for Information Systems Research 2007 MIT Sloan 2007 MIT Sloan CISR Weill CISRWeillCenter for Information Systems Research Professor Peter WeillPage 14 15. Innovation Value Institute Creating IT Enabled Business InnovationMonday, Enterprise Architecture as Strategy2 July 2007 Characteristics of the Four Operating Models CoordinationUnificationShared customers, products or suppliersCustomers and suppliers may be local or globalImpact on other business unit transactions Globally integrated business processes often withOperationally unique business units or support of enterprise systemsfunctionsBusiness units with similar or overlapping operationsBusiness Process Integration Autonomous business management Centralized management often applying High Business unit control over businessfunctional/process/business unit matricesprocess design High-level process owners design standardizedShared customer/supplier/product dataprocessConsensus processes for designing IT Centrally mandated databasesinfrastructure services; IT applicationIT decisions made centrallydecisions are made in business unitsDiversification ReplicationFew, if any, shared customers or suppliers Few, if any, shared customersIndependent transactions Independent transactions aggregated at a high levelOperationally unique business unitsOperationally similar business unitsAutonomous business management Autonomous business unit leaders with limited LowBusiness unit control over businessprocess design discretion over processes Centralized (or federal) control over businessFew data standards across business units process designMost IT decisions made within business Standardized data definitions but data locally ownedunits. with some aggregation at corporate Centrally mandated IT servicesLowHighBusiness Process Standardization Source: Enterprise Architecture as Strategy: Creating a Foundation for Business Execution, Center for Information Systems Research J. Ross, P. Weill, and D. Robertson, Harvard Business School Press, 2006. 2007 MIT Sloan CISR Weill Professor Peter Weill Page 15