Explaining EA: business architecture basics 1

Note: a revised version of these three posts is available at http://www.improving-bpm-systems.com/pubs/Explaining-EA-BA-basics_v7.pdf

The purpose of this post is to provide an explanation about Business Architecture (BA). Informally speaking, BA defines how work gets done within an enterprise. How work gets done is, of course, not completely unknown, but the knowledge is diffused throughout different instructions, strategic papers, reports, e-mails and in peoples’ heads. The aim of BA is to make this knowledge explicit, i.e. formal, externalized and operational, so it can be used for decision making, operating control, daily work, knowledge transfer, etc.

First, it is necessary to achieve a common understanding about certain concepts (and the relationships between them) used for constructing BA. Examples of such concepts are: function, process, service, capability, etc. These concepts are used to provide different views of the enterprise. It is important that these views are coherent and that interdependencies between them are explicit.

BA is a part of Enterprise Architecture (EA), and usually BA is the least understood / developed / implemented part of EA.

1 General

An enterprise creates a result which has value to a customer who pays for this result. The enterprise acts as a provider (supply-side) and the customer acts as a consumer (demand-side).

There is a (business) transaction between the provider and the consumer. From the point of view of the consumer (the outside-in view) the transaction is bounded by the pair “request and result”, e.g. from making an order to receiving goods. From the point of view of the provider (the inside-out view) the transaction is a set of several distinct activities (or units of work) which function together in a logical and coordinated manner to satisfy / delight the consumer. These activities are carried out in response to the consumer’s request which is an external business event for the provider.

2 Business functions

The collection of an enterprise’s activities serves as the foundation for the discovery of business functions (functions deliver identifiable changes to assets). Each function is an abstract and self-contained grouping of activities that collectively satisfy a specific operational purpose (e.g. management of relationships with partners). Functions are unique within the enterprise and should not be repeated. Some functions can be decomposed into smaller groups of activities, and thus the function architecture has a hierarchical structure. The structure of functions is not always the same as that of the organisation chart; in many cases, some organisational units can span several functions. Furthermore, organization charts may change while the function architecture does not.

A business function typically has the suffix "management" in its name (e.g. "Customer Relationship Management"), but it can also be a noun (e.g. "Marketing"); usually, function name specifies something that is performed continuously. Some examples of business functions (from http://www-935.ibm.com/services/us/imc/pdf/g510-6163-component-business-models.pdf) are given below.

The functional view emphasizes WHAT the whole enterprise does to deliver value to the customer (without the organizational, application, and process constraints). Usually, the hierarchical structure of business functions is very static (with a low rate of change). Meanwhile, business processes can change more frequently as a result of business process improvement or re-engineering initiatives.
The function architecture can be used in a number of ways:
  1. to understand how organisational units are supporting each function and to identify instances where a function is supported by several organisational units (or is not supported by any organisational unit);
  2. to reveal how functions are currently automated, including occurrences of where there is an overly complex use of applications (e.g. multiple applications) and when there is no automation of functions in place;
  3. to understand how assets (information) flow between functions, and to map out which functions produce information, which function(s) consume information and where there is no clear understanding of information movement and ownership;
  4. to clarify how business processes can be constructed;
  5. to determine which business performance metrics should be used.
    In some senses, functions are the players in a team (i.e. the enterprise), but it is not clear how they are going to play together.

3 Value-streams

The collective use of activities to satisfy a customer’s request leads to the notion of a value-stream which is an end-to-end collection of those activities (both value-added and non-value-added) currently required by an enterprise to create a result for a customer. Value-streams are named according to an initiating event and its result. A few examples of value streams are provided below (mainly from www.enterprisebusinessarchitecture.com):
Prospect-to-CustomerOrder-to-Cash (order fulfilment process)
Manufacturing-to-Distribution (manufacturing process)Request-to-Service
Requisition-to-Payables (procurement process)Resource availability-to-Consumption
Acquisition-to-ObsolescenceFinancial close-to-Reporting

Value-streams are directly linked to the enterprise’s aspirations – its vision and related “ends” chain (see http://www.omg.org/spec/BMM/): desired results, goals and objectives. Ideally, each value-stream should align with at least one long-range objective and its business performance metrics [key performance indicators (KPIs)]. For example, one objective of the success of the “Order-to-Cash” value-stream may be measured as “96% of orders delivered within 3 days”. If this value-stream’s actual performance is delivering only “90% of orders within 3 days” then a corrective action should be taken (e.g. a new strategic initiative is developed and its priority determined).

In addition to the reason WHY a value-stream exists, related to each value-stream there is an explicit HOW the desired results are achieved. Looking inside a value-steam reveals that there may be a few “integrated components” (or business cases – business transactions between a consumer and a provider). Usually, one of the “integrated components” is the main transaction which does the job and the others are collections of supporting/housekeeping activities. For example, “Order-to-Cash” includes “Fulfil order” (main), “Change order” (for cancellation and modification of an order by the customer), and “Review order” (for the consultation of an order by the customer).

Each “integrated component” is an ordered sequence of acts with applying functions to assets. Such a sequence is the explicit assets flow (called inputs and outputs, or I/O). KPIs and timelines associated with the sequence provide additional execution details (e.g. duration of the process from one point of I/O hand-off to another point). Thus the value-steam view provides the context (without the organisational and application constraints) for its constituent activities, e.g. what timing, level of performance, etc. are necessary to reach the objective of the complete value-stream.

An enterprise consists of a collection of value-streams. Most large enterprises can be broken down into a dozen or more value-streams. The nomenclature of value-streams differs somewhat from one enterprise to another. Within an enterprise, its value-streams are interdependent; a value-stream may rely on the results of other value-streams. An example of this interdependency is the value-chain of an enterprise, i.e. a network of strategically relevant integrated components of value-streams of the enterprise.

Two further posts will cover "Linking WHY, WHAT and HOW" and "Managing the complexity of VEB".

Continue at Explaining EA: business architecture basics 2

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