isrc architectingfor agility j.ross
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© 2008 MIT Sloan CISR – Ross
Center for Information Systems Research
Jeanne W. Ross Center for Information Systems Research
(CISR) MIT Sloan School of Management
Phone: (617) 253-2348, Fax: (617) 253-4424
jross@mit.edu http://mitsloan.mit.edu/cisr/
University of Houston ISRCFebruary 21, 2008
Architecting AgilityArchitecting Agility
This research was made possible by the support of CISR sponsors and patrons. The research team included Cynthia Beath (University of Texas) and Donna Pitteri and Stephanie Woerner (CISR).
© 2008 MIT Sloan CISR – Ross
Center for Information Systems Research
CISR’s 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
2008 CISR Research ProjectsIT and Business Strategy:
• Achieving Superior Business Value from IT—A Single Framework of What Matters
• Managing IT for Efficiency and Growth• Benchmarking and Building Risk Management
Capabilities*• Business Models*
The Digitized Business:• Distributed Collaboration• Building Innovative Capabilities through IT• Building a Platform for Agility• Enterprise Architecture as Strategy*• IT-Enabled Business Change*
IT Governance and Leadership• Maturing and Globalizing IT Governance• Redefining the CIO; Introducing the SEO• Enhancing Engagement• IT Portfolio Investment Benchmarks, IT Savvy &
Links to Firm Performance*• Strategic Outsourcing*
* Projects previously conducted by MIT CISR that are regularly updated to include new data and publications.
– Boston Consulting Group– BT Group– Diamond Management &
Technology Consultants– Gartner
Contact Information:3 Cambridge Center, NE20-336
Cambridge, MA 02142Ph. 617-253-2348; Fax 617-253-4424
E-mail cisr@mit.edu; http://mitsloan.mit.edu/cisr/CISR gratefully acknowledges the support and contributions of its Research Patrons and Sponsors.
MIT
Slo
an C
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r fo
r In
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Rese
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h (C
ISR
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– Aetna Inc.– Allstate Insurance Co.– AstraZeneca
Pharmaceuticals, LP– BancoABN Amro Real
S.A. (Brazil)– Banco ItaúS.A. (Brazil)– Biogen Idec– BP– Campbell Soup Co.– CareFirst BlueCross
BlueShield– Care USA– Caterpillar, Inc.– Celanese– Chevron Corp.– Chubb & Son– Commonwealth Bank
of Australia– Credit Suisse
(Switzerland)– Det Norske Veritas
(Norway)– Direct Energy – EFD
– Embraer– EmpresaBrasileirade AeronauticaS.A. (Brazil)
– EMC Corp.– ExxonMobil Global
Services Co.– Family Dollar Stores,– Guardian Life
Insurance Co. of America
– HBOS Australia– Hartford Life, Inc.– ING GroepN.V
(Netherlands)– Intel Corporation– Int’l Finance Corp.– Liberty Mutual Group– Marathon Oil Corp.– Mars, Incorporated– Merrill Lynch & Co.,
Inc.– MetLife– Mohegan Sun– News Corporation
– Nissan North America– Nomura Research
Institute, Ltd. (Japan)– PepsiAmericas, Inc.– PepsiCo International– Pfizer Inc.– PFPC, Inc.– Procter & Gamble Co.– Quest Diagnostics– Raytheon Company– Renault (France)– Standard & Poor’s– State Street Corp.– TD Banknorth– Time Warner Cable– Trinity Health– TRW Automotive, Inc.– UnibancoS.A. (Brazil)– United Nations–DESA– VF Corporation– World Bank
– IBM Corporation– Microsoft Corporation– Tata Consultancy Services
Research Patrons
2/15/2008
© 2008 MIT Sloan CISR
Center for Information Systems Research
Research Sponsors
© 2008 MIT Sloan CISR – Ross
Center for Information Systems Research
Definition: the use of existing IT and business process capabilities to rapidly generate new business value while limiting costs and risks.
Agility is the “respond” in “sense and respond.” The key to agility is reuse. Agility leads to profitable growth. The Agility Paradox: more digitized and standardized
business processes and platforms tend to make a company more agile.
A platform for agility (reflected in a mature enterprise architecture) simultaneously enhances a firm’s ability to launch new products, increase efficiency, redesign a business model, and span boundaries.
IT-Enabled Business AgilityIT-Enabled Business AgilityIT-Enabled Business AgilityIT-Enabled Business Agility
© 2008 MIT Sloan CISR – Ross
Center for Information Systems Research
How IT Enables (or Inhibits) Business Agility– Limitations of existing IT capabilities– Platforms for agility
The Enterprise Architecture Journey– Four stages of architecture maturity– A case study of Swiss Re– How to increase enterprise architecture maturity—
and agility
The Evolving Role of IT—Meet the SEO Agility Challenges
AgendaAgendaAgendaAgenda
© 2008 MIT Sloan CISR – Ross
Center for Information Systems Research
Traditional IT and Process SilosTraditional IT and Process SilosTraditional IT and Process SilosTraditional IT and Process Silos
Technology Platforms
Applications
Data
Corporate DataCorporate Data
Corporate Networks &Infrastructure ServicesCorporate Networks &Infrastructure Services
A Core Process
© 2008 MIT Sloan CISR – Ross
Center for Information Systems Research
Technology Platforms
Applications
Data
Corporate Data
Corporate Data
Corporate Networks &Corporate Networks &Infrastructure ServicesInfrastructure ServicesCorporate Networks &Corporate Networks &Infrastructure ServicesInfrastructure Services
Corporate Data
Corporate Data
What IT Looks Like in an Agile FirmWhat IT Looks Like in an Agile FirmWhat IT Looks Like in an Agile FirmWhat IT Looks Like in an Agile Firm
A Core Process
© 2008 MIT Sloan CISR – Ross
Center for Information Systems Research
Agility PlatformsAgility PlatformsAgility PlatformsAgility Platforms
Sources of Agility
What’s
Reused
Motivated Experts
Empowered Decision Makers Digitized
Processes
The expertise and commitment of good people
Access to transparent, granular transaction data
Disciplined, IT-enabled process platform
© 2008 MIT Sloan CISR – Ross
Center for Information Systems Research
Business Silos
StandardizedTechnology
OptimizedCore
BusinessModularity
StrategicBusinessValue
12% 48% 34% 6% % of Firms
Four Stages of Architecture MaturityFour Stages of Architecture MaturityFour Stages of Architecture MaturityFour Stages of Architecture Maturity
Standardized Enterprise
Processes/Data
StandardInterfaces
and BusinessComponentizatio
n
Enterprise-Wide Technology Standards
Locally Optimal Business Solutions
Source: Enterprise Architecture as Strategy: Creating a Foundation for Business Execution, J. Ross, P. Weill, D. Robertson, HBS Press, 2006.
© 2008 MIT Sloan CISR – Ross
Center for Information Systems Research
Background– Founded in 1863 in Zurich, Switzerland– Business model involves assuming the risks of its key customers
(insurance companies and large corporations) and insuring large assets (bridges, buildings) against catastrophes
– Operates in 90 countries; 95% of 2006 revenues earned outside Switzerland
– Huge losses due to 2001 terrorist attacks, Asian tsunami, Hurricane Katrina resulted in diminished S&P and Moody’s ratings
– Company hires very smart people who enjoy intellectual challenges Needs agility to
– Fully comprehend global risk positions (business model change)– Invest for profitability (demands 13% ROI) with sufficient liquidity
to cover claims (efficiency)– Price contracts based on customer profitability (business model
change)– Respond quickly to new product opportunities (new product)– Enable easy integration of acquisitions (boundary spanning)
The Agility Journey at Swiss ReThe Agility Journey at Swiss ReThe Agility Journey at Swiss ReThe Agility Journey at Swiss Re
Source: “Information and Transformation at Swiss Re: Maximizing Economic Value”, C. Beath and J. Ross, MIT Sloan CISR Working Paper No. 373, Dec. 2007.
© 2008 MIT Sloan CISR – Ross
Center for Information Systems Research
How Swiss Re is Building AgilityHow Swiss Re is Building AgilityHow Swiss Re is Building AgilityHow Swiss Re is Building Agility
1990–1995 Introduced technology standardization in North America
1995–1999 Implemented technology standardization globally
1999–2003 Implemented common processes and tools for underwriting and pricing of each product category; changed pricing and underwriting processes
2005–2007 Adopted a global business model standardizing decision criteria for pricing and investing; allowed local decision makers freedom to invest assets or negotiate with customers with clear metric to assess performance
Outcomes to date Improved ratings (S&P, Moody’s) relative to other reinsurers Absorbed GE Insurance Solutions (more than 10% of total business) within a year Adopted global business model without changing any code Achieved internal metric (expected to be reflected in market value long-term) of
outperforming the market on the differential between the market value of assets
and the market value of liabilities
Source: “Information and Transformation at Swiss Re: Maximizing Economic Value”, C. Beath and J. Ross, MIT Sloan CISR Working Paper No. 373, Dec. 2007.
© 2008 MIT Sloan CISR – Ross
Center for Information Systems Research
Business demands are driving the evolution of Global ITBusiness demands are driving the evolution of Global IT
Building the Technology Foundation
Harmonization of Business and
Information Solutions
Integration and Unification of Global Operating Platform
Global technology standards
Consolidated data centers
Group-wide knowledge and email platform
Business driven IT governance
Translation of Swiss Re business model into core processes
Delivery of group-wide solutions and information
Transition from legacy processes and legacy systems towards one process/one solution
Availability of integrated operating platform
Scalable and harmonized core processes
Flexible application landscape
Information delivery supporting new business demands
Source: “Growth in the Insurance Industry: A Reinsurer’s Prospective,” Swiss Re Future Focus 2007 Presentation, Y. Zaytsev, September 23-25 2007. Used with permission.
1997
1999
2000
2004
2005 Now
© 2008 MIT Sloan CISR – Ross
Center for Information Systems Research
Business Silos
StandardizedTechnology
OptimizedCore
BusinessModularity
Architecture Maturity Shifts AgilityArchitecture Maturity Shifts AgilityArchitecture Maturity Shifts AgilityArchitecture Maturity Shifts Agility
GlobalAgility
LocalAgility
Source: Enterprise Architecture as Strategy: Creating a Foundation for Business Execution, J. Ross, P. Weill, D. Robertson, HBS Press, 2006.
© 2008 MIT Sloan CISR – Ross
Center for Information Systems Research
Learning Requirements of the Architecture Learning Requirements of the Architecture StagesStagesLearning Requirements of the Architecture Learning Requirements of the Architecture StagesStages
BusinessSilos
Standardized Technology
OptimizedCore
Business Modularity
IT Capability
Local IT applications
Shared technical platforms
Enterprise-wide hardwired processes or databases
Plug & play business process modules
Business Objectives
ROI of local business initiatives
Reduced IT costsCost and quality of business operations
Speed to market; strategic agility
Funding Priorities
Individual applications
Shared infrastructure services
Enterprise applications and data stores
Reusable business process components
Key Management Capability
Technology-enabled change management
Design and update of standards; funding shared services
Core enterprise process definition and measurement
Management of reusable business processes
Who Defines Applications
Local business leaders
IT & business unit leaders
Senior management and process leaders
IT, business and industry leaders
Key IT Governance Issues
Measure and communicate value
Establish local/ regional/global responsibilities
Align project priorities with architecture objectives
Define, source & fund business modules
Source: Enterprise Architecture as Strategy: Creating a Foundation for Business Execution, J. Ross, P. Weill, D. Robertson, HBS Press, 2006.
© 2008 MIT Sloan CISR – Ross
Center for Information Systems Research
Architecture Planning and Design Senior executive oversight Enterprise architecture guiding principles Enterprise architecture graphic Process owners Full-time enterprise architecture team
Standards Management Architects on project teams Technology research & adoption process Architecture exception process Formal compliance process Centralized standards team
IT Funding Business cases Centralized funding of enterprise
apps Infrastructure renewal process IT Steering Committee
Project Management Project methodology Post-implementation assessment IT program managers Business leadership of project teams
Enterprise Architecture Management Enterprise Architecture Management CompetenciesCompetenciesEnterprise Architecture Management Enterprise Architecture Management CompetenciesCompetencies
Management practices within each practice set are statistically significantly correlated with each other. All four competencies are significantly correlated with architecture benefits.
© 2008 MIT Sloan CISR – Ross
Center for Information Systems Research
Building Competencies in StagesBuilding Competencies in StagesBuilding Competencies in StagesBuilding Competencies in StagesBusiness
SilosStandardizedTechnology
OptimizedCore
BusinessModularity
Business Cases Project Methodology
Architects on Project Teams IT Steering Committee Architecture Exception
Process* Formal Compliance Process* Infrastructure Renewal
Process* Centralized Funding of
Enterprise Applications* Centralized Standards Team
Process Owners* Enterprise Architecture
Guiding Principles* Business Leadership of
Project Teams* Senior Executive Oversight* IT Program Managers
Enterprise Architecture Graphic*
Post-Implementation Assessment*
Technology Research and Adoption Process*
Full-time Enterprise Architecture Team
Architecture Maturity
Legend
Architecture Planning & DesignProject ManagementIT Funding Standards Management
* Items are statistically significantly related to architecture maturity—they are associated with greater value in later stages.
Legend
Architecture Planning & DesignProject ManagementIT Funding Standards Management
* Items are statistically significantly related to architecture maturity—they are associated with greater value in later stages.
Source: Enterprise Architecture as Strategy: Creating a Foundation for Business Execution, J. Ross, P. Weill, D. Robertson, HBS Press, 2006.
© 2008 MIT Sloan CISR – Ross
Center for Information Systems Research
Enterprise Architecture Maturity Promotes Enterprise Architecture Maturity Promotes AgilityAgilityEnterprise Architecture Maturity Promotes Enterprise Architecture Maturity Promotes AgilityAgility
1
1.5
2
2.5
3
3.5
4
4.5
5
Business Silos Standardized Technology
Optimized Core Business Modularity
CIO
Rat
ing
of A
gilit
y
Architecture Stage
Business Efficiency Agility (1)
Business Model Agility (2)
New Product Agility
Boundary Spanning Agility (3)
(1) Process improvements and scalability
(2) Process change and organizational redesign
(3) Partnership and acquisition
In a survey of 65 IT executives, all four types of agility were statistically significantly correlated with enterprise architecture maturity.
© 2008 MIT Sloan CISR – Ross
Center for Information Systems Research
Senior executive accountable for the definition, design, implementation, and, in some cases, use of a firm’s digitized process platform.
In most organizations, the CIO is assuming this role, shifting the IT organization from enabler to leader.
Definition of the Strategy Execution OfficerDefinition of the Strategy Execution OfficerDefinition of the Strategy Execution OfficerDefinition of the Strategy Execution Officer
© 2008 MIT Sloan CISR – Ross
Center for Information Systems Research
The Role of the SEOThe Role of the SEOThe Role of the SEOThe Role of the SEO
Enterprise IT & Process
Governance
(11)
Project Design & Implementation
(10)
Ongoing Operations/ Continuous
Improvement
(4)
Designs Platform
Builds Platform Components
Leverages Platform
Numbers reflect how many of 12 SEOs we studied defined each responsibility.
© 2008 MIT Sloan CISR – Ross
Center for Information Systems Research
Ensure clarity among senior executives about platform design.
Coordinate demands for enterprise change projects, most of which involve IT implementations.
Establish priorities for change projects based on multiple criteria:
– Organizational readiness– Contribution to platform– Ability to use platform– Expected benefits
Work with senior executive team which either makes investment decisions or approves SEO recommendations.
Responsibility 1: IT and Process GovernanceResponsibility 1: IT and Process GovernanceResponsibility 1: IT and Process GovernanceResponsibility 1: IT and Process Governance
© 2008 MIT Sloan CISR – Ross
Center for Information Systems Research
Ensure disciplined, effective project methodology.
Engage all key stakeholders early and often. Provide expertise on process design. Provide oversight and/or support of change
management.
Responsibility 2: Project Responsibility 2: Project Design/Implementation Design/Implementation Responsibility 2: Project Responsibility 2: Project Design/Implementation Design/Implementation
© 2008 MIT Sloan CISR – Ross
Center for Information Systems Research
Provide enterprise services, usually as a shared services organization.
Accept accountability for continuous improvement of the platform.
Ensure that the enterprise is driving value from the platform.
Responsibility 3: Ongoing Operations Responsibility 3: Ongoing Operations Responsibility 3: Ongoing Operations Responsibility 3: Ongoing Operations
© 2008 MIT Sloan CISR – Ross
Center for Information Systems Research
Business Silos
StandardizedTechnology
OptimizedCore
BusinessModularity
StrategicBusinessValue
Four Stages of Architecture MaturityFour Stages of Architecture MaturityFour Stages of Architecture MaturityFour Stages of Architecture Maturity
Standardized Enterprise
Processes/Data
StandardInterfaces
and BusinessComponentizatio
n
Enterprise-Wide Technology Standards
Locally Optimal Business Solutions
Framework Source: Enterprise Architecture as Strategy: Creating a Foundation for Business Execution, J. Ross, P. Weill, D. Robertson, HBS Press, 2006.
© 2008 MIT Sloan CISR – Ross
Center for Information Systems Research
How do we structure the IT unit to support the SEO’s responsibilities?
Who should own the change resources? (Do I need an army?)
Who should fund enterprise projects? (Do I want the budget or just influence over the budget?)
How can we get buy-in to organizational change efforts?
How do we organize to sustain vertical process excellence as we increasingly focus on our horizontal processes?*
Questions SEOs Are AskingQuestions SEOs Are AskingQuestions SEOs Are AskingQuestions SEOs Are Asking
* Architecture maturity was statistically significantly related to a greater reliance on matrixed structures in a survey of 155 CIOs.
© 2008 MIT Sloan CISR – Ross
Center for Information Systems Research
Optimizing the whole often means sub-optimizing the parts.
Building momentum requires leaders who demand change.
Building a platform requires managing horizontally as well as vertically (the SEO challenge).
Profitable growth is visible over long-term but intermediate metrics (e.g., speed to market, cost of end-to-end process) require new benchmarks.
Empowerment requires clearly articulated, centrally controlled1 decision criteria while distributing decision making at the organization’s boundaries.
Empowerment is information-dependent.
Challenges to Building Business AgilityChallenges to Building Business AgilityChallenges to Building Business AgilityChallenges to Building Business Agility
1 Centrally controlled can refer to an enterprise, business unit, geography, or function.
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