You’ve written a book entitled Business Architecture – The Missing Link in Strategy Formulation, Implementation and Execution, Business architecture. What are some key highlights from it?
First, let me briefly explain how everything started. After many years doing mainly theoretical research at the university, I had an opportunity to work for a big bank in Quebec. This is where I met my coauthor, Bernard Gagnon, with whom I founded ASATE Group, a consulting firm whose mission is to help our clients formulate, implement and execute a winning strategy to achieve superior results.
Bernard and I were working for the enterprise architecture department. While things were going pretty well, planning the transformation of the organization was very difficult as our work was mostly IT driven. Key information was always missing (e.g., the strategy) and the various stakeholders involved in the organizational transformation used different vocabularies which made it difficult to communicate and work together.
These common but everlasting issues made us wonder: ‘how could we work better to more rapidly transform the organization and improve its performance?’ To find an answer to this question we started our research. This led us to identify three key components that can help organizations formulate, implement and execute a winning strategy. The first component is what we call the target business architecture which is a blueprint of how the organization should function in the future to be able to execute its strategy. The second component is the transformation plan which compares the target enterprise architecture (target business architecture + target IT architecture) to the current enterprise architecture. This is performed to identify and schedule the project that will enable the organization to properly transform itself (i.e., implement the strategy). The third component is the business architecture team who, in addition of creating the target business architecture and transformation plan, collaborates with the various stakeholders to drive the transformation of the organization. The sum of these three components is what we call the business architecture approach which is the subject of our book titled: Business Architecture: The Missing Link in Strategy Formulation, Implementation and Execution.
Chapter One of the book explains the problems that organizations face and provides a very high-level overview of the three components of the business architecture approach. Chapters Two, Three and Four delve into the details of what strategy is, what the target business architecture is, and what the transformation plan is. The last chapters of the book expose the best practices that exist today to support an organizational transformation and talks about the strategy management system. The strategy management system is the ensemble of activities and mechanism that an organization must have to be able to formulate, implement and execute its strategy in an effective, agile and efficient manner. Indeed, the business architecture approach will not reap anticipated benefits if it is not integrated to the strategy management system of the organization. The reverse is also true. A strategy management system cannot provide its own benefits if not integrated to the business architecture approach.
What are common points of failure organizations encounter when attempting to transform themselves?
Before answering this question, let me first define the terms strategy formulation, implementation and execution. Strategy formulation is looking at the environment, finding ways you can differentiate yourself, proposing alternatives and selecting one. This chosen strategy describes the strategic position the organization is going to adopt to become more competitive. There is a distinction between strategy implementation and execution. Implementation is doing all of the transformations required for the organization to be able to execute its strategy. Strategy execution, in turn, is about having all the operations of the organization in perfect alignment to the strategy. It is important to note that all these activities are happening at the same time, because once you’ve formulated a strategy, you can already execute part of it. And while you’re working on the transformations, you may have to make changes to the strategy. The business architecture approach’s key focus is to support the formulation and implementation of the strategy.
The reasons why organizations fail when attempting to transform themselves relate either to the formulation and/or the implementation of their strategy. Regarding strategy formulation, many people do not know what a strategy is. This is probably explained by the fact that there is no consensus in the vast and often conflicting strategy literature. In addition, many organizations do not have a strategy and if they do they do not assess its feasibility during strategy formulation. For example, an airline serving the North American market may decide to penetrate the European market during strategy formulation and then realize two or three years later, while implementing its new strategy, that it cannot do it. This could be because of a variety of reasons: a competitor penetrated this market before, they do not have the financial capacity to do it, they do not have the know how to do it, and so forth and so on. So one of the things that firms must do and don’t do is to perform a feasibility analysis which is something business architects can do during strategy formulation.
Regarding strategy implementation, I will expose some of them as the others are fairly well described in our book. First, there is a lack of communication. As you know, the strategy has to be communicated during the implementation. However, strategy communication is not a single twenty-minute presentation that’s given by the CIO or CSO once at the beginning of the implementation. There has to be constant communication and different types of communication at different levels of the organization throughout implementation. To engage people in this massive effort you need to repeatedly communicate how you’re going to transform the organization and the benefits that this transformation will provide to the organization.
The second point of failure relates to the fact that the long-term financial plan and the yearly budget are generally not aligned with the transformation plan. For example, the long-term financial plan will estimate that the organization is going to spend two million each of the first two years of the organizational transformation and then reap ten million in benefits in year three. The problem with that is usually these estimates do not consider the transformations that will be executed and when they will be executed to implement the strategy. Without considering the transformation plan, which identifies and sequences all of the projects that will need to be executed for the organization to implement its strategy, the long-term for the transformation plan is likely to be false. And this can have bad consequences including canceling projects which are essential to the strategy, and negatively affecting the moral of the troops who cannot seem to be able to attain their objectives. As per the budgeting process, many organizations have yearly budgets that take three or more months to be developed, then have a few months to rush to spend the money before starting the process again. By following such a process, organizations are actually doing transformations about half to seventy percent of the time. A lot of capacity is wasted.
A third problem that we find very often is the way transformation projects are selected. The decision is rarely based on how important it is to the actual strategy. Rather, it is based on an unhealthy fight between leaders who want to attain their own objective.
Then, of course, there’s the organization’s focus on the short-term as they have to constantly produce positive numbers, especially if they’re publicly traded. However, if you focus too much on the short term, you will never transform the organization.
Another important issue is that most organizational transformation efforts are solely driven by IT. However, transforming the organization is much more than transforming IT. There are a lot of things that are complimentary to IT; things like processes, organizational units, capabilities, and information. Very often, when organizations are trying to transform themselves, they do not spend a lot of time thinking about these key building blocks. The result is that people in IT are asked to make decisions that they should not while people on the business side are disengaged from the transformation. And that creates a lot of problems, making it almost impossible to implement the strategy in an effective, agile and efficient manner.
The last two points of failures relate to leadership and governance. If you want an organizational transformation to succeed, executives have to be actively involved. They have to motivate their teams, provide them with the resources that they need to do their transformations. In addition, they have to look at what competitors are doing, what’s happening inside the firm and how it’s changing. That is rarely the case today.
You’ve said that processes, rather than value streams, should be business architecture building blocks. Would you please expand?
As we’ve discussed, the business architecture approach has three components. First, there is the target business architecture. Then the transformation plan, and third, the team that basically created these two plans and works with other people in the firm to transform the organization. The objective of a strategy is to have a high-level view of how the organization is going to compete. It is not detailed enough to start performing projects. Before launching the projects, the organization must know how it is going to function in the future. That’s the target business architecture which complements and has to be aligned to the target IT enterprise architecture. A comparison of the target enterprise architecture (business and IT) to the current enterprise architecture will then enable the elaboration of the transformation plan which will identify and schedule the project that will need to be executed to transform the organization so it can execute its strategy.
So how do we describe how the organization must function to transform ourselves? Well, we must architect it. An architecture identifies the components that describe a system (the organization in our case) and how these components are related to each other. The key is to find the limited number of components that will enable us to describe the functioning of the organization. Our research has led us to uncover nine type of components (or building blocks) that, as a whole, describe the functioning of an organization.
One of these nine types of building blocks are processes. The other types include, but are not limited to functions, organizational units, information and capabilities. So why do we use the term processes and not the term value streams? It’s because the term value stream, which comes from the lean literature, encompasses all the activities from raw material to customers in a supply chain. It extends beyond the boundaries of an organization. Another reason is that a process can belong to more than one value stream. And because our building blocks have to be unique, value streams (which we call macro-processes) would not be appropriate.
Would you share a success story or two that your company, ASATE, has achieved with a client?
I’ll give you two examples. The first was a client who knew their organization had problems but could not pinpoint them exactly and didn’t understand how to alleviate them. We used our business architecture framework, with its nine types of building blocks, to rapidly identify the root causes of the problems and propose some possible solutions to resolve them. After this assessment, we helped the organization define an actionable strategy that would allow it to be more competitive in the future.
The second example is a big organization that we are presently working with. We’ve already trained more than seventy business architects, professionals and managers involved in the transformation of the organization. What is wonderful about this initiative is that this training is providing all stakeholders with a common vocabulary and enticing them to discuss amongst themselves the different challenges they each face. We are helping break huge barriers and silos. In addition, stakeholders are increasingly realizing that the organizational transformation is not the sole responsibility of IT. They need professionals that have a holistic view of the organization and who are involved throughout the formulation and implementation of the strategy. And that is the role of the business architect. We are confident that this major training initiative will start fostering discussions and collaborations that will be required for the successful transformation of the organization.
Many organizations have the need to embrace Digital Transformation to effectively compete in today’s market and position themselves for future success. What approach do you recommend for organizations to develop a successful plan to meet these challenges?
Organizations need to conduct strategic planning. And for us, strategic planning goes beyond strategy formulation. Indeed, you need to have a holistic and rigorous plan to manage the whole transformation of the organization. Such a rigorous strategic planning approach will allow the organization to formulate, implement and execute its strategy in an effective, agile and efficient manner. The target business architecture and transformation plan will maximize effectiveness and efficiency. By doing this, they will ensure that the right transformations are properly executed the first time to implement the strategy in a timely fashion. In addition, when integrating the business architecture approach to the strategy management system as discussed above, this holistic strategic planning approach will provide the organization with the agility required to remain competitive in today’s constantly changing environment. If one the components of this approach is missing, the success of the organizational transformation is unlikely.
The Association of Strategic Planning Conference this week focuses on challenges inherent in leading, defining, and implementing strategy as part of a larger ecosystem. What will attendees of your talk expect to walk away with?
The first and main objective of the presentation is to explain what the business architecture approach is, and what are its three key components. We want to get the word out about what the business architecture approach is and the key role it plays in an organizational transformation. The second objective is to show attendees three ways that the business architecture approach can be used to leverage the business ecosystem of an organization.
Pierre Hadaya Ph.D., is a full professor at the School of Management of the Université du Québec à Montréal. His main research interests are strategic planning and management, organizational transformation, corporate governance, business architecture as well as the strategic alignment of IT. As cofounder of ASATE Group Inc., Mr. Hadaya also collaborates with organizations striving to formulate, implement and execute a winning strategy so they can develop and maintain a competitive advantage.