It all starts with the operating model

It all starts with the operating model, at least that is my belief. Since reading Enterprise Architecture As Strategy: Creating a Foundation for Business Execution by Jeanne W. Ross, Peter Weill and David Robertson I have really focused on understanding one of the foundational statements early in the text regarding the role of the operating model which includes, “The degree to which successful businesses must standardize business processes and/or integrate data to produce optimized business outcomes.” Viewed as a four square chart, this produces a range of possible states for the organization along these two lines as shown below:

Loosely grouped these essentially can be defined as follows:

• Diversification model: low standardization, low integration
• Coordination model: low standardization, high integration
• Replication model: high standardization, low integration
• Unification model: high standardization, high integration

One of the reasons why this is so important in the process of understanding how you should be looking at your organization is that it keeps you from falling into the trap of thinking that more standardized and more integrated is always good. I have heard many, many very smart and well-respected executives talk about EA as though the entire point of it was to develop a consistent mechanism for becoming more standardized and integrated. This overly simplistic viewpoint can be a value killer for many organizations. The fact is that there are numerous reasons to opt for less standardization and integration. I am going to focus on those in this post because the case for standardization and integration is so stunningly obvious and uncontested.

Specifically, process orientation and integration is the enemy of agility. I know that by saying this I will have people tell me that I just haven’t seen it implemented correctly. This misses the point. The fact that you have a standard way of doing something means almost by default that the person engaged in the process does not generally have the full freedom to do the process however they see fit. Hence, it is less agile. I’m not going to debate whether or not you can have an agile, standards-based set of processes—I’m sure you can. I’m just saying they aren’t as agile as no process almost by definition. The real world situations where less process may be good are many but may not be obvious, so I’ll share a few examples.

The first is an organization that is rapidly acquiring other organizations or has a heavy focus on M&A activity. These organizations are probably better suited to focus on less process orientation and integration, as the process of moving acquired organizations onto a specific set of processes and ensuring a tight integration of data will necessarily slow the acquisition process and may slow the time to a return on investment. If this organization is a highly diversified conglomerate, it may be that its business and technology executives should be focused on the diversification model.

The second is the organization that leverages internal competition as part of its business strategy. An example may be a real estate office where there is fairly heavy process orientation, but less of a focus on integration. The reason is quite simple. The law demands that transactions be processed a certain way. However, due to how many of the industry’s largest players are organized with individual agents vying for business against both their own organization and other organizations, most of these organizations do not place a heavy emphasis on internal data sharing because it works against this competitive dynamic. The technology and business leaders in this type of organization might want to focus on a replication model as opposed to the unification model.

For the third I think I’ll veer away from the private sector and provide a public sector example. Many public sector organizations, particularly at the cabinet level have very diversified missions. If one were to look at the Department of Agriculture closely, you will find a highly diverse set of missions served by its agencies including banking and financial, emergency response, natural resource management, etc. spread across 150,000 employees. This level of complexity almost invariably means that process standardization across these agencies (business units) will be exceptionally difficult. However, the nature of government and the impact of recent legislation is that the central organization must able to understand and share data across these units. Therefore a focus by the business and technology executives on data integration and standardization is appropriate. Many public sector organizations, particularly at the cabinet level, would be well served to look at the Coordination model and see if it wouldn’t provide a more relevant scope for EA efforts.

No matter where your organization falls in this, it is important simply to have the conversation across your business and technology stakeholders. Having run operating model workshops with clients it amazes me how divergent the viewpoints can be within just the technology organization or within just the business, let alone across both groups. A lot of the power of the operating model can be gained simply by having the conversation. There is enormous untapped value in understanding how your organizations operating model can drive how you do strategic planning and technology implementation. Simply asking these types of questions with all of the relevant stakeholders in the room will drive incredibly valuable conversation across the organization. Has your organization had the operating model discussion?