Archive for the ‘Element’ Category

High Level View of the EBMM

Wednesday, April 8th, 2009

When first approaching the Enterprise Business Motivation Model, it helps to start with the highest level objects and to see the model as a fairly simple construction.

The EBMM is, first and foremost, a way to describe a complex business that allows interesting insight to be gained.  It is a tool, a competitive weapon, to be wielded by any business leader that is interested in moving his or her business from simply being “good” to being truly great.

Understanding about a business does not emerge from a single method or approach.  It emerges because the basic information about the business is so well organized that a hundred different methods can be applied, each to refine or improve the business in some key way. 

That can only happen if the information is well assembled, in a structure that is complete and scientifically created.  The EBMM provides the structure for information about your business that allows a wide array of analysis and improvement methodologies, from process management to enterprise architecture, to provide rapid and valuable returns in your business.

In most large enterprises, the information about a business takes many forms.  Some context can be found in well reasoned strategy memos, while other details may be barely described at all, existing only in the traditions and memories of key employees.

The information structure for describing a business must, therefore, cope with information that may exist in many forms, and different levels of detail.  The EBMM provides this flexibility, because the various elements of a business can be described and refined independently, producing interesting observations and ideas for enhancement, without the need for every detail to be captured first.

The EBMM itself is not complex.  Yet it is more complex than many of the models in use by business consultants.  In developing this model, we took the advice of Einstein: Make everything as simple as possible, but not simpler.  That is precisely what the Enterprise Business Motivation Model is, and does.  It is a simple model, but not too simple.  Interesting and useful illustrations can be created specifically because of this rich balance between simplicity and completeness.

The high level model is illustrated twice below: once in a graphic layout suitable for PowerPoint presentations, and the other in a technical layout suitable for business and enterprise architects.  (Note that the technical illustration differentiates core elements by both color (pale green) and the thickness of the borders around each term). (click images to view them full size).

Business Illustration

HighLevelView

Technical illustration

Core Elements Only View

The core elements of the EBMM are listed below, along with an informal description of each one.  (For more formal descriptions, see the detailed section dedicated to each of the areas).

Influencer – something outside the enterprise that has the potential for impacting, for better or worse, its business fortunes.  These are not people.  They are situations, like competitive pressures and regulations.  Note: analysts are not influencers, but a business trend (potentially started by an influential person, like an analyst) can be.

Assessment – A collection of judgments about the fundamental business model(s) of the enterprise.  Strategic planning units (and Business Management consultants) frequently provide these assessments in order to help executives make informed and well-reasoned decisions.  A business model assessment evaluates a business model, describes the impact of an influencer, and may provide the impetus for the creation of a driver.

Driver – something inside the business that motivates people to make a change.  This can include a person who shares a consistent opinion, but more frequently this would be things like strategies, objectives, and roadmaps.  A driver responds to an influencer and either makes changes to the business model itself, or encourages a change in the business that supports the optimum performance of the existing business model.

Business Model – a description of  the way that an enterprise hopes to make money.  Synonymous with a “business plan,” a business model represents and describes each of the elements needed for a business to provide a valuable product or service to a customer, through the application of resources, the engagement of partners, and the expenditure of capital.

Business Unit Capability – A description of a responsibility of a business unit, as required by the business model.  For example, if the accounting group is responsible for paying creditors, then we’d describe a single business unit capability as such: “the accounting business unit requires the capability to pay creditors.”  A business unit capability is implemented through one or more business processes and is described only in the context of a business unit.

Business Unit – A group of people that employ tools, processes, and information to perform their responsibilities.  Usually organized in a hierarchy (which means that one business unit can include a number of sub-units, and so on).  Business units perform business processes.

Business Process – Informally, a business process is a description of the things that people (and sometimes machines) do in order to run the business.  A process may include subprocesses, to many levels of depth, and the activities of a process are “governed” by directives.

Directive – The rules that people follow when performing business processes.  This includes business policies (at a higher level) and business rules (at a more detailed level). 

Note that the technical illustration above shows a couple of concepts that are not core concepts, but which relate directly to more than one core concept.  This allows us to describe additional ways in which these core concepts are related. 

The concept of a business service is described in the detailed section on business units.  The concept of a capability roadmap is described in the section on drivers.

Business Process and Directive

Monday, March 30th, 2009

This view of the Enterprise Business Motivation Model is concerned with the operations of a business.  When change occurs, it nearly always plays out through impacts in the operations of a business: in the business processes executed by the business and the business policies and rules that govern those processes.

The following diagram illustrates the various elements of the operational aspect of the EBMM.  (Click to enlarge).

Business Process View (2)

For the sake of the Enterprise Business Motivation Model, a business process is defined as a collection of activities that take one or more inputs and transform them into process outputs in support of a valuable business outcome. 

Business units are responsible for performing the Business processes.  For businesses that take a process-centric view, the process is something that the business unit is responsible for, but it exists to serve the needs of the business, not the particular unit that happens to have control over it.  This is an important distinction, and one that is critical for businesses to truly improve their internal business process efficiency and effectiveness.

The capabilities of a business unit are implemented through a business process.  Note that the business process itself can be outsourced to a different company.  This fact does not relieve the business unit of its responsibility for the performance of the process, just the activities involved in doing the work.

A process metric is a measurement collected during the operation of a business process.  Typically these measurements can be used to track the flow of materials in or out of a process, or the resources consumed, but a process metric may measure any aspect of a process.  Typically, a Key Performance Indicator is a process metric that is selected for its relationship to the value chain.

A success metric is not necessarily a measurement of a process, but rather a way, devised by business stakeholders, to measure the value that a process provides. 

For example, let’s say your company attends a convention and sets up a booth.  You hand out swag and talk about your product.  At the same time, you collect business cards.  Let’s say that you have created a business process for entering those leads into a database and flagging the ones that should be followed up on. 

A valid process metric may be “number of unique lead records collected from each conference.”  A success metric, on the other hand, may be “number of product demonstrations to qualified prospects that originated from conventions.”

The business policy and business rules relationships are derived from our understanding of the OMG models at a very high level.  The only elements included in the EBMM are Policy Type, Business Policy, and Business Rules and Facts.

Policy Type is a classifier for the type of policy.  Different types of policies may have different levels of governance or compliance attached to them.  For example, a required corporate policy may be non-negotiable, while a corporate standard may allow for exceptions.  The EBMM does not specify a standard list of policy types.

The distinction between “business policy” and “business rule” is designed to allow flexibility between policies, which are designed for people to comply with, and business rules, which can be understood both by people and by computer systems. 

The detailed description of business rules and facts is a practice that is recognized by the EBMM yet remains outside the scope of this model.  The “Business Rules and Facts” entity provides an anchor point for the connection of business rules to the rest of the motivation model.

Business Model

Wednesday, March 25th, 2009

The business model is a collection of elements that represents one way in which an enterprise makes (or intends to make) money.  It is a combination of factors, not a single element, that together represent each of the key interactions that the enterprise will have with its environment. 

Those interactions are illustrated in the diagram below. (Click the image to enlarge it).  See Business Model Elements for the definitions of each of these elements.

Business Model Diagram

Special Note: The notion of representing a business model as a stand-alone element in a business motivation model is derived from the work of Dr. Alexander Osterwalder.  However, the EBMM 1.0 did not adopt his generic model for the relationships between elements.  This area is up for discussion, and we welcome contributions and ideas.

The elements of the business model come together to create a single entity within the overall motivation model called the ‘business model.’ The other parts of the motivation model then interact with the business model, to either react to it, provide insight on it, or attempt to improve it.

The following diagram shows each of the elements of the model above deriving from a supertype called Business Model Element.  The business model is composed of business model elements. (click the image to enlarge it).

Business Model Context View

One key concept, illustrated in the diagram above, is the notion of an Enterprise.  The EBMM differentiates between an Enterprise and a Company.  An Enterprise is a collection of one or more business models that describe how various entities come together to provide value and make money.  A company represents a legal entity that contains business units that may interact in one or more enterprise.

The distinction between an enterprise and a company has nothing to do with the size of either one.  Small enterprises may have 10 employees, and a large company may have tens of thousands. 

The difference has to do with the way that the value-adding potential of an enterprise is understood in the context of business units.  A business unit is a part of a company.  Companies tend to be hierarchical in nature and they are nearly always legal entities.  A company can be a plaintiff in a lawsuit, a party to an agreement, and a creditor to a loan.  An enterprise is none of those things.

An enterprise is basically an abstract notion that describes a set of business models that come together, often in an ownership structure that owns many companies.  For example, Microsoft is both an enterprise (with many business models) and an ownership structure.  Microsoft owns many companies around the world, with each company chartered to do business in some specific legal context.  For example, Microsoft owns a subsidiary company, Microsoft KK, that does business in Japan.

An enterprise does not have to have a single ownership structure that manages all of its resources.  For example, it would be valid to describe the Apache Software Foundation as a company, but to describe the entire Apache enterprise would require the inclusion of resources that are outside of the control of the Apache foundation: specifically including open source developers.  The business model includes these resources, and describes the business partners and customers of Apache.  The company itself is quite small.

Business Model Elements

Wednesday, March 25th, 2009

The elements that make up a business model are briefly described in the table below.  See Business Model to for a description of how these elements come together to form the business model(s) within the Enterprise Business Motivation Model.

Element Description
Required Competency An area or group of business capabilities where the business must excel in order for this business model to be successful. 

This is a general concept, not a specific grouping of business capabilities.  This part of the business model drives the need for specific business unit capabilities to perform at higher-than-average levels of effectiveness and efficiency.

Value Configuration The central notion of a business model, the value configuration describes how the business, through its activities, adds value to the consumer or marketplace.  The Value configuration binds together the notions of customer demands, required competencies, revenue models and business partnerships.
 
Assessments of a business model often focus on this element.  Many businesses make the mistake of “chasing money” by offering products and services that they are ill-suited to develop, support, or make money from.  By focusing on the value configuration, many businesses can clarify their objectives and focus their energies on those opportunities that are most likely to deliver value to their customers and themselves. 
Finance and Revenue Models It is not enough to know that a business can create value.  A functioning business has to be cognizant of where, and when, money will flow into and out of the business’ accounts.  The finance and revenue models represent a description of the ways in which the business will collect funds, extend credit, pay creditors, and manage financial assets. 
Customer Demands and Relationships The customer demands and relationships element of the business model describes in precise terms, the motivations that lead customers to buy products and services from the business, and how the business nurtures those motivations through marketing and support activities.

The most important relationship any business can have is the one with their customers, and a failure to precisely describe the motivations that lead a customer to connect with the business can lead to errors in judgment that can ultimately cause the business to fail.

The customer demands and relationships element can be further broken down into market segments, with a detailed analysis of the buying habits or expectations of various types of customer within a particular segment.  That detail is supported by the EBMM but is beyond its scope.

Products and Services This element of the business model describes the specific products and/or services offered by the business.  It is important to recognize that the specific products or services developed must derive from customer demands in order to effectively provide revenue.   This relationship, between customers demands and the products offered, is the central focus of marketing in many organizations.
Distribution Channels Distribution channels are the mechanisms by which the customer’s product or service reaches the customer.  For products, the distribution channels element will describe the flow of goods from manufacturing to market, including inventory and retailing.  For manufacturing organizations, this element also describes the sourcing of parts and construction of the product or products themselves.  For services, this element describes the location, management, and provisioning of service resources to the customers on an as-needed basis.
Business Alliances / Partnership The business alliances and partnerships element describes the connection that the business has with other business entities, including suppliers, vendors, sales partners, agents, service providers, distributors, retailers, and value-added resellers.  These connections can define success for a business by allowing for specific efficiencies of capital, resources, and shared risk.  They can also constrain the activities of a business by providing a motivation against competing with key partners.
Geographies and Locales The geographies and locales element describes the specific physical locations and contexts in which the products and services will be offered.  This is a critical and necessary part of the business model as it is both enabled by, and directly impacted by, the abilities of various business partners as well as the demands of the customers.  Many evaluations of a business model will focus on opportunities to extend the business through the consideration of additional geographies.

Business Unit and Business Unit Capability

Thursday, March 19th, 2009

A business unit is a coherent set of teams and departments, usually structured in a hierarchy.  Typically, a business is divided into business units, each with their own set of responsibilities.
The role of a business unit is to provide resources (money, staff, infrastructure, governance) to enable business processes to occur.

A business unit capability represents a single capability that a single business unit is required to perform in order to meet the needs of a business model. This element is created by mapping the shared taxonomy of business capabilities to a specific business unit.   

The view below illustrates both of these concepts in relation to surrounding concepts.

Business Unit View

There are many interesting concepts included in this view of the Enterprise Business Motivation Model. 

There are two relationships between business units that are captured.  The first is a hierarchical parent-child relationship typical of most organizations.  In this sense, each department in a business can be considered to be a business unit, within a larger business unit.  Normally, the business model will place expectations on a business unit at the higher (more general) levels. 

The second relationship between business units comes in the form of services, provided by one unit and consumed by another.  This is a key concept in the EBMM: that any use of one business unit by another takes place through a business service.  The business units that offer the service are said to “provide” it while the business units that rely upon that service are said to “consume” it.  In smaller organizations, it is uncommon to see a single business service provided by more than one business unit.

A business service is defined as “a collection of business capabilities, offered as the external offerings of a single business unit, and made available to one or more customers.”  The customers may be internal (within the enterprise) or external. 

The ITIL definition of ‘service’ is a synonym for Business Service, and is defined as: a Service that is delivered to Business Customers by Business Units. For example, delivery of financial services to Customers of a bank, or goods to the Customers of a retail store. Successful delivery of Business Services often depends on one or more IT Services. (ITIL v3)  Note that the ‘products’ offered by the business service are not the same as the ‘capabilities’ of that service.

The business model may be aware of some of the business services, and may, in fact, require that some of them exist.  For example, if a business model relies upon channel partners to provide support for Fabrikam’s products, then Fabrikam’s business model may require that a partner support business unit will provide a number of services to the partners, including training and readiness as well as the possibility of “second tier support” for product defects or issues that cannot be handled by the partner network.

A company is made up of business units.  A “company” in this context is usually a legal entity, and may not have the same scope as the enterprise.  The concept of an enterprise is part of the Business Model view, and is defined to be a collection of business models.

A Capability Roadmap is produced as the result of a maturity assessment.  A maturity assessment is an element that describes a process that takes place at a specific point in time, and which does not question if the  business is doing the right thing, but rather evaluates if the business is doing things right.  (The former is the scope of a business model assessment).

Once a capability roadmap is generated, it becomes a driver in its own right.  In order to make a change to the business, based on any driver, the business would charter a business program. 

A business program is defined as:

  1. A group of related business projects managed in a coordinated way to obtain benefits and control not available from managing them individually. Programs may include elements of related work outside the scope of the discrete projects in the program.
  2. An ongoing set of capabilities within a business unit aligned to organizational commitments. 

Both the Business Unit and the Business Unit Capability are core elements of the Enterprise Business Motivation Model.

Driver

Thursday, March 12th, 2009

A driver is an objective that the business would like to achieve, often representing a change from the status quo.  It may include principles that guide action, or more tangible and measurable goals and strategies that describe the expected results in measurable terms.

(Click on the image below to see it full size)

Driver model

The driver is not a project plan.  It does not specify how the objective is to be achieved.

A driver can exist at any level of the organization, from top level principles ("Quality is Job One") to department level objectives.("Defect rate for standard widgets to drop below 1% and stay there for three months"). 

A driver may enable another driver (If the widget department meets their objectives, then we can drop our reworking costs by 15% in the third month.)   In addition, a driver may influence another driver: ("With the push for quality in the widget division, the thingamabob division has set new goals for 2012."). 

Drivers may be inspired directly by influencers like competitive pressure or business trends or they may be suggested in a business model assessment.  It is important to know the source of the driver and what it is responding to, in order to understand relative importance and check the assumptions on which a driver is based.

Note that a stakeholder, in some cases, can be considered a driver.  In this case, the stakeholder is not an external influence, but rather a person with a level of leadership and credibility in the business sufficient to inspire goals and objectives that others will follow. 

A capability roadmap is a special case form of driver, in that it is a coordinated series of specific changes that should be met, often in a specific order, in order to meet the demands of a higher level driver.  Note that a capability roadmap is not a project plan.

At any level, a driver sets an objective for some part of the organization.  Business programs may be formed to bring these objectives to life.

A driver is a core element of the Enterprise Business Motivation Model.

Business Model Assessment

Wednesday, March 11th, 2009

A business model assessment is an artifact or document that contains an analysis of one (or more) of the business models of an enterprise.  It may be formal, with hundreds or thousands of typed pages, or informal, delivered to an executive over lunch at the golf course. 

The elements that make up a business model assessment are illustrated in the business model assessment view, below.

Business Model Assessment View

Business model assessments are composed of a set of judgments about one or more influencers that affect the organizations ability to execute on  the existing business model(s).   Business judgments are produced as the result of an assessment process, which is an examination of one or more of the business models in use in the enterprise in light of a dynamic business environment. 

Business judgments in the business model assessment may motivate the creation of principles, goals and/or strategies that either directly modify the business model or influence how the model is being executed upon. 

A business model assessment is a core element of the Enterprise Business Motivation Model.

Influencer

Tuesday, March 10th, 2009

An Influencer is anything external to the business that has the potential for affecting the ability of the organization to fulfill its business model. 

The following view illustrates the elements that derive from Influencer.

Influencer View

An influencer exists independently of the organization.  They may be direct influencers, attempting to exert direct influence over an organization, or indirect influencers.

An example of a direct influencer is a court of law adjudicating a lawsuit in which the organization is a plaintiff.  The court is aware of the organization and chooses to exercise its obligation to exert influence over it. 

An example of an indirect influencer is a business trend that affects how customers view the products of the organization.  If the organization is a retail store for music, and consumers are increasingly buying their songs over the internet, then the trend away from CD music sales is an influencer on the organization.

Influencer is one of the core elements of the Enterprise Business Motivation Model.