One of the chief goals of Business Architecture is to insure that the efforts of a business, or business unit, are aligned with their strategies and objectives. This is an important function, but one that is difficult to describe to business leaders. As a result, many business units forego the services of a business architect and attempt to align efforts without a formal scientific process behind them.
Businesses that behave in an ad-hoc fashion are everywhere. Certainly, it would appear that business architecture is optional. Personal computers were optional in 1985, but by 1995, any company that wanted to compete had no choice but to adopt personal computing. That’s because companies that adopted new ideas, and new technologies, were more successful.
A large part of success comes from spending your limited resources in a carefully managed way, performing the work that you need to perform, in the order that it needs to be performed, in order to have the desired effect. This notion of planned efforts, aligned with well described goals and objectives, is the central theme of strategy development, and the central expertise of the business architect.
The Enterprise Business Motivation Model is one of the most important tools that a business architect can leverage in developing the strategy of a business. The diagram below illustrates a slice of the EBMM (called a ‘view’) that shows the relevant concepts and how they are connected to one another. (click the image to see it full size).
When developing business strategy, it is important to start with the goal. The goal is a statement that says “this is what we are trying to achieve.” At the highest level, the goal may be something something like “increase market share of our flagship product to exceed 50%” of the market.” Note that goals may occur at many levels of the business, all the way from the top to individual business units.
For a business unit, a stated business goal may be a part of a larger business strategy, and may reflect or even specifically call out an internal metric or measure of success. For example, let’s say that your company uses web-based surveys to find out how satisfied your customers were with your products. The results of those surveys produces a value called a “customer satisfaction index.” In your case, a reasonable goal for the customer service business unit may be: “increase our customer satisfaction index for our flagship product to greater than 70%”
Determining the goal requires tradeoffs. While many businesses would like to say that they offer the best quality product, at a tiny price, in a manner that is convenient to the customer, the reality is that most businesses compete on the basis of quality, price, or location… and not on more than one at a time. This is why you rarely hear of a sale at the Lexus dealership, or why the convenience store on the corner manages to stay in business, even though they charge twice the price for a candy bar as the supermarket two blocks away.
This illustration picks up with the effort that begins AFTER the business goals have been created. This is where most business managers find themselves. The ‘big wigs’ have decided what the high level goals are. Now it is up to the business unit managers to describe the strategies and make things flow.
At this point, the business must develop a strategy. This is a specific statement and includes references to timeline, resources, and measures of success. Where goals can be lofty, objectives and strategies must be measurable and must set a course that motivates behavior.
Where the EBMM helps is by requiring that business strategies be linked directly to the objective they are trying to achieve. If a business strategy cannot be linked to an objective, then perhaps it is not a good idea to implement it! Even more importantly, if all of the business strategies succeed, but the objective is not reached, then perhaps a good deal of thought must be put into developing better strategies.
To describe a strategy means to describe how it will be measured, and the timeline where effects can be seen. For example, if the goal is to increase the satisfaction index to greater than 70%, as described above, some specific strategies may include:
- Train 90% of all customer service staff on brand and product promotion techniques by February.
- Answer 90% of all telephone incidents within 15 seconds as measured during the last week of June.
- Resolve 80% of all customer issues during the first telephone conversation by Thanksgiving.
- Produce five special offers that are offered only to customers who call with product issues, and present at least one offer to 50% of all telephone incidents, as measured during the last two weeks of December.
As you can see, well-formed strategies include a reference some form of success metric. This is a way to insure that the strategy occurs. Whether that strategy has the effect it is supposed to have on the business is not always easy to predict. For this reason, business unit managers are often heavily focused on meeting their localized success metric, as described in the strategy, leaving the “greater goal” to the concerns of the executive staff.
A success metric is not necessarily something that the business can easily measure. In fact, it may be a proxy for something else. What does it mean, for example, to resolve 80% of all telephone incidents in the first call? Is every telephone call an incident? What about hang-ups or situations where a cell phone drops out? If the agent calls back, does that count as another call? When a person calls with a wrong number, do we open and close an incident, thus making ourselves look good?
In order to get to a success metric, you often have to select some things that you CAN measure, and then “derive” or “approximate” an answer. For example, if you know that 1,000 new records are created in your incident management system each week, and that 80% of those issues are marked as “closed” when the first call is terminated, you may be able to “say” that you’ve measured up to the strategy of resolving 80% of issues during the first call.
This is where Key Performance Indicators come in. A KPI is not a success metric. A KPI is a process metric that is used to approximate a success metric. In this case, the KPIs were the number of records created in the incident management system, and the percentage of those cases that are marked as “resolved” when the first call ends. These are process metrics that approximate the success metric described in the strategy.
It can be tough to select KPIs. For one thing, you have to figure out what process metrics exist. It is rare that you get to create an altogether new measurement point in a process, so you may have to select a couple of existing metrics and create a formula that produces a number or threshold that you can use.
Thus the model above, derived directly from the EBMM, illustrates the relationships between these key concepts. By illustrating these relationships, we gain an understanding of both the structure of business strategy and the ‘gaps’ built in to the system of business management.
People fill those gaps. People decide what strategies are best suited to meet an objective and people decide what process metrics should be used as Key Performance Indicators. Modeling these relationships helps to identify who these people are, and helps you to hold them accountable for the decisions that they make. Accountability may be the only real way that a business has for insuring that good decisions are rewarded and bad ones are discouraged (or in severe cases, punished).
The model helps to create this clarity, and supports the process of “creating and aligning business strategy.”