Part 2: How to Make Enterprise Architecture Strategic

In this second part, enterprise architecture is considered from the perspective of more contemporary views of strategy such as dynamic capabilities, strategy as ecology, and core competencies. The article concludes with an analysis of the common themes that define enterprise irrespective of which strategy approach is selected.

ea strategy

EARLY RESOURCE-BASED STRATEGY (1990-)

The resource-based view of the firm emphasizes the firm’s resources as the source of competitive advantage. Competitive advantage is considered defendable and durable if the firm’s resources and capabilities can be isolated from the firm’s competitors, thereby preventing competitors from duplicating or imitating them. Differentiation is the source of competitive advantage and is measured by the VRIN characteristics—if resources are Valuable, Rare, Inimitable, and Nontransferable, they were said to be strategic.

The organization thus “owns” a narrow set of unique resources (e.g., information or knowledge) and capabilities, which are the true source of competitive advantage, and therefore must be leveraged with the most effective or efficient way across the strategic business units and areas, while being safeguarded from competitors.

Enterprise architecture supports the structures, processes, and bodies of knowledge that constitute the strategic resources. EA makes it possible to leverage these resources on an enterprise or global scale, whether this is information about consumers, a proprietary ability to automate core competencies, computer-controlled equipment for producing an output with characteristics that are unique to the organization, etc.

Enterprise architecture functions as a managerial discipline for identifying and building the organizational and technical capabilities, which are unique and strategic to the organization, by allowing the organization to exercise differentiation or cost-leadership in the view of its “customers” and relative to its “competitors.” If the organization is able to appropriate information-based capabilities for new process and product configuration before its competitors, it will be able to deliver new types of services and products to the market before its competitors.

EXAMPLE: UPS’ global parcel tracking system represents a worldwide enterprise architecture that distills strategic resources vital to UPS’ core business. By providing a global tracking database and handheld device standards as well as a tracking portal and standardized global parcel identity system, UPS created a strategic resource that could be leveraged by all country organizations and across different lines of business.

DYNAMIC CAPABILITIES

Dynamic theories of strategy are exemplified by clock speed theory (Fine) thinking, hyper-competition (D’Iansiti), and game theory. They are the capabilities that support an organization’s ability to rapidly reconfigure its products, processes, organization, and supply chain in response to changing market and value chain conditions and opportunities.

In this context, enterprise architecture identifies and builds organizational and technical capabilities for controlling and rapidly reconfiguring the value chain, organization, product and manufacturing, and delivery/ distribution process. Its role becomes expanded from the background and somewhat defensive role it played in support of the manufacturing process in the classical strategy schools, cf. part 1. Henderson and Clark argue that the failure of some established firms can be explained by neglecting the importance of architectural innovations that reconfigure the relationship (or architecture) among a set of design elements that jointly constitute a process or product system—e.g., Nokia’s inability to architect a platform operating system for mobile devices with similar attractiveness as iOS or Android.

Enterprise architecture becomes a matter of identifying the necessary structural forms and systems that make it possible to reconfigure the capabilities faster and with less cost, and then automate the activities necessary for reconfiguration.

EXAMPLE: Dynamic capabilities have played prominently into the market space defined by self-service banking, insurance platforms, or Internet brokers. By providing a single view of consumers across lines of business in a bank or credit card organization, it becomes possible to deliver an integrated self-service platform for Internet banking and to configure new product combinations into this platform with relative ease.

In automotive, defense, and airline manufacturing as well as other complex manufacturing, three-dimensional concurrent engineering marks the ability to execute product design, product manufacturing, and product supply chain management concurrently instead of as a set of discrete steps. Concurrent engineering raises the clock speed with which new products can be developed and how fast the product development process can react to new demand and supply signals. It also requires a continuous and highly efficient exchange of information and data between designers, manufacturing engineers, planners, and sellers.

CORE COMPETENCY-BASED STRATEGY (1995-)

Core competency-based strategy builds on early perspectives from the resource-based view of the firm combined with dynamic strategy setting. In this perspective, the firm’s core competencies are its key to differentiation as well as its key to adaptation. By focusing on a narrow set of core competencies, it becomes possible to differentiate activities and capitalize on new market opportunities with a relatively smaller effort.

Core competency-based strategy then demands that the use of information and technology enhance or safeguard the organization’s core competencies or allow it to extend its core competencies into new markets. Also, since core competencies ideally must be leveraged across the organization, information-based capabilities must provide all areas of the organization with the access to tap into and leverage those competencies.

Enterprise architecture becomes a matter of providing access to the information, protecting the information, and disseminating the information necessary to operate core competencies. Often this must occur on an global scale so it can serve a diverse set of constituents ranging from external customers to internal human operators and information-based processes.

EXAMPLE: In complex consumer and healthcare electronics, such as hearing aids or pacemakers, a core competency may be the ability to create micro-sized components that can be attached to or embedded in the human body, which interacts with the human and external environment. Often such components require the deep collaboration of medical specialists and software engineers, e.g., in the case of hearing aids the deep collaboration between audiologists and software engineers.

UPS’ global tracking database is an information-based capability that supports both the company’s resources and its core competence on a global scale by providing the information necessary to operate small parcel and package delivery and tracking in all countries where UPS operates and making this information accessible to the drivers of UPS trucks as well as to UPS’ customers (both shippers and receivers). It exemplifies a capability that responds to two strategy forms: diversification of UPS’ business into multiple lines of business such as parcel shipment services and consumer logistics, which all utilize the capability, and a core competency-based strategy where the capability directly automates and supports the core processes in UPS’ value chain.

STRATEGY AS ECOLOGY (2000-)

Ecosystem strategy asserts that strategic decision making must occur in the context of the firm’s relationships within a network of external stakeholder entities such as suppliers, customers, complementors, competitors, regulatory agencies, etc. Ecosystem strategy encourages the organization to view opportunities beyond the isolated perspective of the organization as a single player in its industry, instead refocusing the organization as a player among many that are co-evolving together. Make-buy (sourcing) decision making and industry disintegration are closely related to ecosystem strategy. The concept represents an important departure from the previous conventional definitions of strategic competition, in which the organization only works with its own resources and doesn’t extend its capabilities by leveraging those of others unless it is to exploit them for its own purposes.

Enterprise architecture becomes a matter of designing and building the keystone “platform services” to the ecosystem that facilitates co-evolution and allows the complementors to add new innovative services or product features to those offered by the organization. The challenge will be to do this across semi-autonomous business units or departments and to line up the organization.

EXAMPLE: Traditional ecosystem strategies include Microsoft’s Windows, Google’s Android, eBay’s seller/ buyer platform, and “open” programming platforms from computer game vendors. Social media have opened up new ways of considering ecosystem strategy and added to the number of industries that consider it. One contemporary example is government where the ability to redefine citizens as complementors in the solution of societal problems or in the development of new services increasingly is based on the use of self-service models and “open data” solutions that extend across all government departments and agencies.

CONCLUSIONS

Enterprise architecture is strategic if it is aligned with business strategic thinking. Since the mass-production perspectives of the 1960s, it has played importantly into business outcomes, and since the 1990s core competency- and ecosystem-based strategies have further underlined the importance of enterprise architecture as a means to achieve platform- or competency-based effects on competition.

Strategy has evolved to be an eclectic and multi-stringed discipline, and organizations today will usually pursue many concurrent strategies. Luckily, this means that strategic enterprise architecture will have many strings to play on but also many themes to address. Increasingly, it has become possible to move enterprise architecture away from being a pure modelling and mapping discipline to one that intersects with and directly influences business strategy. (See figure 1.)

ea strategyIn considering the different strategic forms that have emerged since the 1950s and up to current times, it seems that enterprise architecture is useful in creating a set of capabilities that are essential to several strategy schools:

  • Creating platforms for cross-disciplinary collaboration
  • Creating platforms for information sharing—making data, information, and knowledge global and available across business and functional silos
  • Automating and integrating activities in the value chain
  • Standardizing activities and processes across business units

Enterprise architecture is about breaking down the boundaries between internal organizational units and fields of expertise, between internal automated or semi-automated activities, and between the organization and its consumers or suppliers.

Jan Gravesen
About Jan Gravesen 2 Articles
Jan Gravesen is an IBM executive architect specializing in enterprise architecture and public sector transformation and strategy.