Enterprise Architecture - What is Business Architecture?

1. Enterprise Architecture - What is Business Architecture? March 26, 2012 Siamak Amjadi

2. What is BU$IN€$$ all about?

3. Where / how does BU$IN€$$ Architecture Fit in Enterprise Architecture

4. Change Requirements Technologies A Simplified Demand Chain; mapped to EA Corporate Goals Demand Chain Business Vision Improve Time to Market Example Business Strategy Changes in Business Strategy Improve Product Design Process Business Approach Business Model Business Operations Changes in Business Model Reduce Process Change Time Business Architecture Improve Solution Delivery Time IT Strategies Information Architecture Solution Strategy Platforms & Patterns System simplifications And SOA Example Solution Architecture Technology Architecture Technology Architecture

5. Scattered Information EverywhereYet, lacking an overall Enterprise Architecture Information • (How well do) We know our company • There are stacks of Information available everywhere • But . . . • Not all information are related • Not all are equally verified • Some need better structure • Others should be documented • Some should be defined • Others need be harmonized • Enterprise Architecture is meant to provide interrelated verified information for Business Ma'nagers and IT Managers . . . • . . . Putting pieces together Time

6. A model? So simple? Enterprise Architecture is a Model to create this overall overview

7. EA is to link the architecture of the Business (processes, products, operations etc), Business Information, the business supportingIT Solutions and Technologies to host the solutions. Its role is to provide a more intelligent basis for Application Decisions and yield to streamline the Application Portfolio, thereby strengthening the working relationship between Business Management and IT Management. It will assess and provide overview of compliance to Business Domains, Drivers, Requirements, Direction and Principles. EA governance links EA plans to IT actions, hence ensuring that, IT Planning, Project Portfolio Management and Project Execution align with business and enterprise goals. Business Domain Business Domain Business Domain Business Architecture Gap Analyses Information Architecture AS IS descriptions TO BE descriptions Solution Architecture Enterprise Architecture (EA) as a Concept • EA is to link the architecture of the Business (processes, products, operations etc), Business Information, the business supportingIT Solutionsand Technologiesto host the solutions. • Its role is to provide a more intelligent basis for Application Decisions and yield to streamline the Application Portfolio, thereby strengthening the working relationship between Business Management and IT Management. • It will assess and provide overview of compliance to Business Domains, Drivers, Requirements, Direction and Principles. • EA governance links EA plans to IT actions, hence ensuring that, IT Planning, Project Portfolio Management and Project Execution align with business and enterprise goals. • EA is to link the architecture of the Business (processes, products, operations etc), Business Information, the business supportingIT Solutions and Technologies to host the solutions. • Its role is to provide a more intelligent basis for Application Decisions and yield to streamline the Application Portfolio, thereby strengthening the working relationship between Business Management and IT Management. • It will assess and provide overview of compliance to Business Domains, Drivers, Requirements, Direction and Principles. • EA governance links EA plans to IT actions, hence ensuring that, IT Planning, Project Portfolio Management and Project Execution align with business and enterprise goals. • EA is to link the architecture of the Business (processes, products, operations etc), Business Information, the business supportingIT Solutions and Technologies to host the solutions. • Its role is to provide a more intelligent basis for Application Decisions and yield to streamline the Application Portfolio, thereby strengthening the working relationship between Business Management and IT Management. • It will assess and provide overview of compliance to Business Domains, Drivers, Requirements, Direction and Principles. • EA governance links EA plans to IT actions, hence ensuring that, IT Planning, Project Portfolio Management and Project Execution align with business and enterprise goals. • EA is to link the architecture of the Business (processes, products, operations etc), Business Information, the business supportingIT Solutions and Technologies to host the solutions. • Its role is to provide a more intelligent basis for Application Decisions and yield to streamline the Application Portfolio, thereby strengthening the working relationship between Business Management and IT Management. • It will assess and provide overview of compliance to Business Domains, Drivers, Requirements, Direction and Principles. • EA governance links EA plans to IT actions, hence ensuring that, IT Planning, Project Portfolio Management and Project Execution align with business and enterprise goals. Align with Enterprise Goals Technology Architecture

8. B u s i n e s s Architecture Information Architecture S o l t u i o n Architecture Technology Architecture Business Model & Business Processes Key Information Entities & Flows IT Solution Portfolio Overview Technology Strategies/ Infrastructure Patterns

9. Business Architecture Information Architecture Solution Architecture Technology Architecture The Relevance of EA • Single source of information to (competing) strategic initiatives • The current and future initiatives in each enterprise, such as Project Portfolio Management (PPM), Strategic Planning processes, SOA adoptions, future Business Process Management (BPM)1, future Business Service Management (BSM)1, and application or process rationalization will be more successful if they reuse common strategic information. Providing this information is an ideal task for our EA repository. • We do face higher pressure for more rapid decision-making. • The challenge of minimizing risks from change becomes greater as our IT complexity increases. EA and our EA repository must provide capabilities for tracking interdependencies — offering Impact Analysis and Risk Analysis assisting prioritisation of the right initiatives. • Enterprises seek growth and increasing globalisation – while demanding Local Efficiency and Agility. • Organizations tend to share not only products and services between countries and regions, but increasingly also processes and applications — in addition to the IT infrastructure that many firms have already consolidated. But standardization and consolidation are not applied blindly. Successful firms also understand the peculiarities of local markets and thus adapt global best practices to local requirements. EA repositories and modeling tools allow analysis and modification of shared processes and applications. 1) The classic Enterprise Architecture models do not in specific include Business Process Management (BPM) & Business Service Management (BSM). The author has different view. Our maturity today calls for BPM and BSM. This view will be presented later in this presentation.

10. Business Architecture Information Architecture Solution Architecture Technology Architecture Short-term Long-term Future Business Current Business Top-line growth Competitive Advantage Business Architecture (BA) The classic Enterprise Architecture models do not include Business Process Management & Business Service Management as a part of Business Architecture. The author has a different view, which will be presented later. • Communicate the business visions, strategies, priorities and needs across the business operations to provide direction and context to other architectural governance structures. • BA describes Business Operations, Value Chains and Business Processes 1. • BA presents the long-term business demands, policies, strategies and needs as well as the short-term prioritisations and budgeting. • This provides significant opportunities for understanding both long- and short-term interdependencies and implications (affecting IT decisions). Need Transformation Initiative Project Project 1) Business Organisations are dynamic and subject to (ir)regular changes. Business Operations, Value Propositions, and Value Chains (a customer centric view, hence a business process oriented view) are of a more stable nature. Thus, forming the Business Architecture based on customers centric Business Processes are more valuable than organisations.

11. One way of keeping consistency between business architecture and IT initiatives is to have a clear information architecture. The Information Architecture presents a “Conceptual Information Model”, which reflects the business concepts (It supports the scoping and planning of projects.) The more descriptive “Logical Data Model” offers the detailed information/data structures, which are required to support the business concepts. (It supports the documentation of the data requirements from the enterprise perspective and from the business process perspective.) One more detailed model is to be developed together with projects (i.e. the semantics of the information). This model leads to definition of the Business Services’ crossing points. Business Architecture Information Architecture Solution Architecture Technology Architecture In NTP there has been developed excessive methodologies for Business Information Modelling. They can undoubtedly add great value in the process of creation Nordea’s Information Architecture. Business Information Architecture Data is a fundamental building block of Interoperability, information management and the design of efficient, non duplicative systems

12. IT Solutions are to provide the business information, which is specified by the Information Architecture. Solution Architecture provides the “Infrastructure of applications and the IT solutions”, depicting the “logistics of business information” and the affiliation of business logic. This dimension of EA also illustrates the interrelations between business operations, business information and business logic. This knowledge will improve the consistency, quality, and interoperability of business solutions. Business Information and Business Logic can also be presented in terms of Business Services (often common cross business unit or Nordic services). This makes BSM – Business Service Management – an increasingly relevant topic in line with growing number of Services in NTP, Master Data Management, Document Management, CMS services plus others to come. (Se this slide.) BSM supports Business AND Information Architecture. Steps of executable business processes (in a process engine) are presented as business services (on a service bus). This makes BPM (Business Process Management – from an execution perspective) an emergent important part of Solution Architecture. BPM supports Business AND Information Architecture. Maintaining the appropriate role of each system Business Architecture Information Architecture Solution Architecture Technology Architecture The classic Enterprise Architecture models do not include Business Process Management & Business Service Management as a part of Solution Architecture. The author has different view, which will be presented later. Solution Architecture

13. The technology architecture describes the technical platforms, infrastructure and technologies, which are required to run the business solutions. In the current setup, Nordic Processor has the overall responsibility for our TA. According to the author, Nordea has (as a part of the outsourcing to NP) lost competence and too many competencies within this area. This has resulted in a critical lack of overview and knowhow around TA. NP being a black box to our projects has been a major pain point. Business Architecture Information Architecture Solution Architecture Technology Architecture Is Half of the Agility Story Enough? Business Architecture Information Architecture Solution Archit ecture NP NP Technology Architecture Technology Architecture (TA) Nordea may be consider to bring back some of the competent resources, who moved to NP or hire some brilliant Technical Architects in the market. NP Architects have though the advantage of knowledge of and experience in our technical setup and have a valuable network in NP and IBM.

14. How to respond … using one model?

15. A model? So simple? Business Architecture is A Model

16. How Simple? A Model is a simplification

17. World … a map of the world … a model

18. The Context decides the level of simplification

19. Mission Vision Business Strategy Business Models Business Processes Organization Management & Governance Conceptual Business Architecture

20. The Vision

21. Vision . . . .

22. Mission Vision External Demands Strategic Direction The Market Promise Customer Value BusinessStrategy Supply Supply Supply Value Proposition Value Proposition Value Proposition Value Proposition Value Proposition Value Proposition Demand Demand Demand Cost Cost Cost Income Income Income Profit Profit Profit Profit Profit Profit Business Models Business Processes Organization Management & Governance Business Architecture spans the whole business Business Strategy Customer Q2 Business Models D P Q1 Q3 Business Processes getCustomer Customer Mgmt C A Management IT Organisation Q4 Network Skills &Competencies Goals &Metrics BusinessPlanning Performancemanagement Organisation Services Solutions Information

23. External Demands Strategic Direction The Market Promise Customer Value Market Promise Key Characteristics Feelings Emotions Benefits Q4 Supply Supply Supply Offerings Offerings Offerings Value Proposition Value Proposition Value Proposition Demand Demand Demand Q3 Q1 BC Q2 Cost Cost Cost Income Income Income Profit Profit Profit Profit Profit Profit Plan Do Act Check Network Skills &Competencies Goals &Metrics BusinessPlanning Performancemanagement Organisation Business Architecture spans the whole business Business Strategy Business Models Business Processes Management Organisation

24. The Strategy

25. Strategy Canvas … Value Curves • Strategy canvas achieves 3 main objectives: • First, it displays the present and tries to predict future factors that affect competition in an industry thereby showing the industry’s strategic profile. • Second, it presents the strategic factors that are present and that potential competitors invest in, thus giving their strategic profile. • And finally, it illustrates the company’s strategic profile (also known as the Value Curve) by showing which factors of competition the company invests in currently and possibly in the future. • This value curve is the basic component of the strategy canvas. Market Promise Key Characteristics Feelings Emotions Benefits The Strategy Canvas and the Value Curves Strategy • Price • Openning hours • Expertice and product knowledge • Transparency of products and services • Personlised Services • Friendly service • Risk Management consultancy • Corporate dealers • Speed • Flexible payment terms • Relationship management • Ease of use • Responsiveness • Knowledge

26. The Five Forces • The forces can be divided into two dimensions: • Existing soruces: • Suppliers • Customers • Emerging Sources: • New Entrants to the market • Substitute Products & Services Threat of New Entrants Bargaining Power of Suppliers Bargaining Power of Buyers Emerging factors & their impact . . . . Existing Players & their impact . . . Threat of Substitute Products and Services:

27. Business Architecture spans the whole business External Demands Strategic Direction The Market Promise Customer Value What is Strategy Market Promise Strategy is profoundly different from tactics. In military terms, tactics is concerned with the conduct of an engagement while strategy is concerned with how different engagements are linked. In other words, how a battle is fought is a matter of tactics: whether it should be fought at all is a matter of strategy Key Characteristics Feelings Emotions Benefits Focus A Compelling Tag Line Divergence Nordea 975 368 168 159 81 345 Business Strategy A good Strategy has three aspects, and it is all about positioning and positioning ... A good Strategy has three aspects, and it is all about positioning and positioning ...

28. Finding the Competetive Position Positioningoptions arise from setting limits in three areas that are not mutually exclusive Variety Based Needs Based Access Based To limit the varieties of the products which are offered: Tailor activities to deliver particular varieties, features, or services across customer groups (meet a subset of their needs) Example: iPhone • To limit the customers servedbased on needs: • Tailor activities to meet the particular needs of a distinct customer group/purchase occasion • Example: IKEA • To limit the customers servedbased on means to serve • Tailor activities to reach differently accessible customers with similar needs • Example: Dell • It is difficult, if not impossible, to produce all varieties, serve all customer groups, and deliver all types of value equally well • “Positioning” without significant differences in activities is rarely meaningful

29. The neighborhood rental car business

30. Positioning and Activities • Temporary replacement cars or extra cars in the customer’s home city • Ubiquitous, small, inexpensive offices, including on-premises offices at major accounts • Open during normal business • Delivers cars to customers’ homes or rental sites, or customers to cars • Prices 30 percent below airport rates • Acquires new and older cars, favoring soon-to-be discontinued older models • Keeps cars six months longer than major rivals • In-house reservations system • Grassroots marketing with limited television • Cultivates strong relationships with auto dealerships, body shops, and insurance adjusters • Hires extroverted college graduates to encourage community interaction and customer service Set of Activities

31. FedEx . . . Guaranteed overnight delivery • “Absolutely, Positively Overnight” 1978–1983 • “It’s not Just a Package, It’s Your Business” 1987–1988 • “Our Most Important Package is Yours” 1991–1994 • “Absolutely, Positively Anytime” 1995 • “The Way the World Works,” 1996–1998 • “Be Absolutely Sure,” 1998–2000 • “This is a Job for FedEx,” 2001–2002 • “Don’t worry, there’s a FedEx for that,” 2002–2003 • “Relax, it’s FedEx,” 2004–2008 • "We Understand," 2009–present • "WeLiveToDeliver" 2009–present Frederik Smith A Compelling Tag Line

32. Business Architecture spans the whole business Market Promise Market Promise For Life Key Characteristics Key Characteristics Security Feelings Emotions Feelings Emotions Premium Benefits Benefits A car for every phase of life Cash Management Value Proposition • The customer value proposition focuses on both emotional and functional benefits • Emotional benefits are the intangible elements of the proposition and delivery that influences how the customer feels about the organization (e.g. reliable, professional and secure) • Functional benefits are tangible elements or observable outcomes that the customer perceive of the customer value proposition Business Strategy

33. Business Architecture spans the whole business Strategy Canvas … Value Curves • Strategy canvas achieves 3 main objectives: • First, it displays the present and tries to predict future factors that affect competition in an industry thereby showing the industry’s strategic profile. • Second, it presents the strategic factors that are present and that potential competitors invest in, thus giving their strategic profile. • And finally, it illustrates the company’s strategic profile (also known as the Value Curve) by showing which factors of competition the company invests in currently and possibly in the future. • This value curve is the basic component of the strategy canvas. Market Promise Key Characteristics Feelings Emotions Benefits Business Strategy • Price • Openning hours • Expertice and product knowledge • Transparency of products and services • Personlised Services • Friendly service • Risk Management consultancy • Corporate dealers • Speed • Flexible payment terms • Relationship management • Ease of use • Responsiveness • Knowledge

34. Strategy Canvas Video Gaming (for Nintendo Wii) Strategy Canvas Video Gaming (for Nintendo Wii)

35. The Business Model

36. Business Architecture spans the whole business External Demands Strategic Direction The Market Promise Customer Value Market Promise Key Characteristics Feelings Emotions Benefits Q4 Supply Supply Supply Value Proposition Value Proposition Value Proposition Value Proposition Value Proposition Value Proposition Demand Demand Demand Q3 Q1 BC Q2 Cost Cost Cost Income Income Income Profit Profit Profit Profit Profit Profit Plan Do Act Check Network Skills &Competencies Goals &Metrics BusinessPlanning Performancemanagement Organisation Business Strategy Business Models Business Processes Management Organisation

37. Who is the customer? • What does the customer value? • How do we make money in this business? • What is the underlying economic logic that, explains how we can deliver value to customers at an appropriate cost? A Business Model is to answer: • A (substitute for a) business strategy - even though many people use the terms interchangeably today. • A description of a business, a process model, a business plan, a revenue model, a pricing strategy, a mathematical model, a transaction model, a mandate or a list of products. A Business Model is not: Supply Value Proposition Demand Cost Income A Business Model describes the rationale of how an organization Creates, Delivers, and Capturesvalue.

38. Supply / Capabilities Offering Demand / Opportunities • The Network of suppliers & partners that, make the Business Model work • Who are our Key Partners? • Who are our key suppliers? • Which Key Resources are we acquiring from partners? • Which Key Activities do partners perform? Value Network Value Proposition • Types of relationships, we establish with specific Customer Segments • What type of relationship does each of our Customer Segments expect us to establish and maintain with them? • Which ones have we established? • How are they integrated with the rest of our business model? • How costly are they? Customer Relations • The bundle of products and services that create value for a specific Customer Segment • What value do we deliver to the customer? • Which one of our customer’s problems are we helping to solve? • What bundles of products and services are we offering to each Customer Segment? • Which customer needs are we satisfying? • Characteristics: Newness, Performance; Customization, “Getting the Job Done”, Design, Brand/Status, Price, Cost Reduction, Risk Reduction, Accessibility, Convenience or Usability • The most important assets required to make a Business Model work • What Key Resources do our Value Propositions require? Our Distribution Channels? Customer Relationships? Revenue Streams? Core Resource Core Processes • Key Activities and Processes, to make its Business Model work • What Key Activities do our Value Propositions require? Our Distribution Channels? Customer Relationships? Revenue streams? Distribution channels • How do we communicate with and reach our Customer Segments to deliver our offerings. • How are our Channels integrated? • Which ones work best? Most cost-efficient? • Integrated with customer routines? • Groups of people or organizations, which we aim to reach and serve. • For whom are we creating value? • Who are our most important customers? • Mass/Niche Market? Segmented? Diversified? Multi-sided Platform? Customer Segments • All costs incurred to operate a Business Model. • What are the most important costs inherent in our business model? • Which Key Resources are most expensive? • Which Key Activities are most expensive? • Fixed & Variable costs, Economies of scale, Economies of scope Cost Drivers € Risk Adjusted Profit Profit • The cash we generate from each Customer Segment. • For what value are our customers really willing to pay? • For what do they currently pay? • How are they currently paying? • How would they prefer to pay? • How much does each Revenue Stream contribute to overall revenues? Income streams

39. Relationship strategy • Customer involvement model in Product/Service development Customer Relations • Nordea: • Nordea Operations Centre • Markets • Trade Project Finance • Nordea Finance • External: • Correspondent banks • CM partner banks (HSBC, BNP Paribas, …) • EBA, Nets, BGC • SWIFT Value Network • (Branch Offices) • (Contact Centres ) • Corporate Netbank • SME Netbanks • File based channels • Corporate eGateway Distribution channels • CMB customers • Segment Large • Segment Medium • Segment Small • Institutional & International • Banks Customer Segments • Human capital • Financial assets • IT Core Resource Core Processes • Customer Oriented • Sales & Advisory • Customer onboarding • Customer service • Product Oriented • Product dev & mgt • Operations • Mgmt & Support • Competence & Process dev • Etc. € Risk Adjusted Profit Profit Example Example - Cash Management Supply / Capabilities Offering Demand / Opportunities • House Bank for our corp custm. • Maintain Transaction Accounts that the customer needs for running the business • Process transactions and provide information on them • Provide facilities for the customer to manage liquidity • Provide facilities for the customer to manage financial risk • Provide a set of secure channels for exchange of information between the customer and Nordea • Supply chain & working capital services • E-invoicing services: connect companies to their suppliers • Complex offerings in cooperation with other Nordea units Value Proposition • Staff Cost • IT running costs • IT development • Commission expenses • Other costs Cost Drivers • Account: • Net and Float Interest (corporate transaction accounts) • B • Transactions • Commission income • Channels • C Income streams Revenue – Cost = Operating Profit • Transaction accounts • Domestic payments • International payments • Channels • Treasury services • Fees • Interest • Total transactions • Account • Transactions • Channels

40. Business Model Template … and how to use it …

41. The Business Processes

42. Business Architecture spans the whole business External Demands Strategic Direction The Market Promise Customer Value Market Promise Key Characteristics Feelings Emotions Benefits Q4 Supply Supply Supply Value Proposition Value Proposition Value Proposition Value Proposition Value Proposition Value Proposition Demand Demand Demand Q3 Q1 BC Q2 Cost Cost Cost Income Income Income Profit Profit Profit Profit Profit Profit Plan Do Act Check Network Skills &Competencies Goals &Metrics BusinessPlanning Performancemanagement Organisation Business Strategy Business Models Business Processes Management Organisation

43. Enterprise typical Process Types L1 Manage Enterprise L1 Develop Enterprise L1 Sales and Delivery L1 Manage Assets L1 Support the Enterprise

44. Process Architecture – Swedish Apotekets

45. The People and the Governance Players ... and rules of the game

46. Business Architecture spans the whole business External Demands Strategic Direction The Market Promise Customer Value Market Promise Key Characteristics Feelings Emotions Benefits Q4 Supply Supply Supply Value Proposition Value Proposition Value Proposition Value Proposition Value Proposition Value Proposition Demand Demand Demand Q3 Q1 BC Q2 Cost Cost Cost Income Income Income Profit Profit Profit Profit Profit Profit Plan Do Act Check Skills &Competencies Goals &Metrics BusinessPlanning Performancemanagement Organisation Business Strategy Business Models Business Processes Management Organisation Network

47. Oh yeah ... all this ... so what How to assist an intelligent business change ... intelligently

48. Create Eliminate Market Promise Key Characteristics Feelings Emotions Benefits Increase Decrease Business Strategy Business Strategy ... and then what ....

49. Business Strategies P l a n s Supply Supply Value Proposition Value Proposition Demand Demand Cost Cost Income Income Q4 Supply Supply Supply Value Proposition Value Proposition Value Proposition Value Proposition Value Proposition Value Proposition Demand Demand Demand Eliminate Create • Strategy • The Business Idea • Vision & strategic goals • Main Strategies • Long-term goals & KPIs • Business Plan (this year) • Set goal and main activities • Break down goal and activities per opr. unit • Distribute resources to units • Result, balance and cash book Q3 Q1 BC Decrease Increase Plan Do Q2 Cost Cost Cost Income Income Income Profit Profit Profit Profit Profit Profit Act Check • Feedback and Measure • Meetings and feedback • Identify and establish rectifying measures • Follow-up and reporting • Follow-up and align with the plan • Report People Business Strategy Business Models Process Business Processes Management Organisation Plan Do Act Check Change and Transform toachieve the desiredfuture ... Current BM Strategies Plans New BM Current Business Model Business Plans New Business Model Tranformation Execution Orgn Execution New BA Transformation Scope and Plan Execution Organisation Execution & Implementation Innovated Business Architecture

50. Making the Business Competetive The Current Business Architecture Goals and targets to meet the market & customer expectations The Target Business Architecture Business Strategies New Vendor Customer Substitute Q4 Q4 Supply Supply Supply Supply Supply Supply Value Proposition Value Proposition Value Proposition Value Proposition Value Proposition Value Proposition Value Proposition Value Proposition Value Proposition Value Proposition Value Proposition Value Proposition Demand Demand Demand Demand Demand Demand Eliminate Create Q3 Q3 Q1 Q1 BC BC Decrease Increase Q2 Q2 Cost Cost Cost Cost Cost Cost Income Income Income Income Income Income Profit Profit Profit Profit Profit Profit Profit Profit Profit Profit Profit Profit • A Business Capability defines the organization’s capacity to successfully perform a unique business activity. Capabilities: • Are the building blocks of the business. • Represent stable business functions. • Are unique and independent from each other. • Are abstracted from the organizational model. • Capture the business’ interests. Capability Map Business Strategy Business Strategy Business Models Business Models Business Processes Business Processes Management Management Organisation Organisation Plan Plan Do Do Act Act Check Check Changing the Business Target Business - CurrentBusiness = Change Needs Using a Capability Map offers the ability to compare/match-up various change initiatives – across operational units and countries. Such maps placed on the timeline provides a substantial foundation to plan intelligently and proactively in order to synchronize the right investments at the right parts of the Business. Capability Map ۩ ۩ ۩ ۩ ۩ ۩ ۩ ۩ ۩ ۩