Sunday, August 24, 2014

Perspectives of Business Reference Model

We are all witnessing the steady progress of the Enterprise Architecture(EA) discipline and it is now well understood that the EA is not just about IT infrastructure and the Business Architecture(BA) forms an integral part of EA. Unlike in the past, when Business Architecture was used for the purpose of eliciting the requirements for the IT systems, BA is used to develop and describe the targe business model and work on a road map that will get the business towards the target. The Open Group, as part of its "World Class EA" series, has published a White Paper on the Buiness Reference with an objective of providing the need help to organizations in developing BA assets and plan for the future.

The Open Group has developed the Business Reference Model to facilitate description of a business model through the five perspectives. The following diagram provides an overview of the structure and content of the BRM:

Image Source: The Open Group's World Class EA: Business Reference Model white paper.

Environment Perspective:

The Environment perspective addresses the context within which an organization must operate. It describes the external factors, such as the competitors and customers for an organization, in addition to the pre-established strategy defined by the organization for market positioning. This perspective is intended to describe why an organization is motivated to undertake particular courses of action.

The goal of understanding the business environment is to provide a good contextual knowledge base that informs the creation of effective architectures in the Value Proposition, Operating Model, and Risk perspectives.

The business challenge is to gain and exploit insights into the market, competition, and customer base that allow the organization to position itself optimally (described through strategy).

Value Proposition Perspective:

The Value Proposition perspective describes the offering produced by the organization in terms of products, services, brand, and shareholder value. It creates a belief from the existing customer, prospective costumer, stakeholder, or other constituent groups within or outside the organization where the value will be experienced – usually in exchange for economic value or some form of compensation.

The goal of understanding the value proposition is that it defines the customer experience and sets shareholder expectations. The value proposition also provides a baseline set of needs that need to be fulfilled by the Operating Model perspective. 

The business challenge is to develop a value proposition that is able to attract a suitable customer base, fulfil the needs of the customer base effectively, and generate sufficient benefit to satisfy shareholder expectations. All this needs to be achieved in a way that is consistent with, and reinforces, brand image and brand values.

The Operating Model Perspective:

The Operating Model perspective describes the resources at the disposal of the organization that will be deployed to generate the value proposition. This perspective is intended to describe how an organization will be able to deliver on its value proposition. Capabilities are the core enablers to operate the business from the perspectives of people, process, technology, and information.

The goal of operating model design is to allow executives and planners to evaluate the business through a wide variety of lenses and viewpoints in order to identify desired and enhanced states of the organization.

The business challenge is to identify the correct alignment of resources that will deliver the necessary customer and shareholder experience. Typical trade-offs to evaluate when structuring capabilities include centralization versus federation, matrix organization structures versus vertical integration, core versus context analysis, and process alignment versus competency alignment. The results of these trade-offs will produce different levels of efficiency versus agility versus stakeholder experience across different areas of the business.

The Risk Perspective

The Risk perspective identifies the uncertainties that may surround an organization in its delivery of the value proposition. This perspective is intended to describe the threats that face an organization from within and without. Typically, organizations model their architecture around the known, repeatable aspects of business operations. However, within a complex and volatile environment, unforeseen circumstances frequently occur in ways that may be extremely damaging to the business.

The goal of risk analysis is to gain a full understanding of potential scenarios that may adversely impact the business and then to prepare appropriately to address those risks in the event that they occur.
The business challenge of risk modelling is to ensure that risks are adequately understood (it is a great challenge to test for completeness in an exercise of identifying unlikely or unforeseeable scenarios), the impact of risk is appropriately quantified (again, challenging to accurately determine when there is limited precedent), and the mitigation steps for risks are appropriate to the risk level (in many organizations, over-compensation for risk can be as damaging as under-compensation, as valuable business activities are curtailed due to risk concerns).

The Compliance Perspective

The Compliance perspective represents activities that the organization must carry out in order to assure that the value proposition is delivered using an acceptable standard of business practice. This perspective is intended to describe the constraints that prevent an organization from acting in negative, destructive, or inappropriate ways. In many cases, compliance can offer opportunities for organizations to differentiate, by being first to access new markets by being compliant with new legislation.

The Compliance perspective acts in a similar manner to the Environment perspective in that it influences across value proposition, operating model, and risk, constraining all activities of the business to be in compliance with standards of acceptability.

The goal of the compliance architecture is to adequately understand the compliance requirements that exist and to ensure that appropriate mechanisms are in place to ensure they are met.

The business challenge of compliance is to appropriately translate commercial, quality, ethical, legal, and regulatory constraints (which tend to be complex and open to interpretation) into a set of clear, unambiguous operational policies that can be followed consistently and at scale within a large organization. Interpretations that are too risk-seeking in nature will tend to generate compliance breaches, with associated financial and reputational penalties. Interpretations that are too risk-averse will tend to stifle business activities and reduce the ability of the business to change quickly to meet new environmental circumstances.

This blogs contains excerpts from the white paper "World Class EA: Business Reference Model" published by The Open Group and this white paper is available for download.

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