How effective enterprise architecture contributes to greater competitive advantage
Is it possible for an organization to align in tandem with the rhythm of its strategy process that enabled it to continuously renew the capabilities that differentiate it and enable it remain at the forefront of the competitive order? Yes; through a concept referred to as enterprise architecture (EA). EA refers to a conceptual blueprint that defines an organizations’ structure and operation (Bernard, 2012). EA aims at determining how the organization can achieve its present and future goals and objectives in the most effective manner. EA has its origins in information technology (IT), even though the strategic importance of IT to an organization having a competitive edge to achieve its objectives has at times been in dispute. Yet overlooking and downplaying the importance of IT in an organizations’ competitiveness can be dangerous (Bernus & Schmidt, 2010) . For instance, Wal-Mart has demonstrated that whatever merchandise that can be sold through distribution can be done so well that by itself that becomes a competitive advantage. This is because Wal-Mart competitors can also access pretty much all that Wal-Mart uses, including the labor pool, technology, and value network, which the company has combined so well to have an almost insurmountable competitive advantage.
IT is used as the basis for various technologies, from industry beating cost reductions to improving the customer experience and new services and products that shake the competition. Therefore, technology is fundamental to the ability to differentiate, either through operational excellence, innovation, consumer intimacy, or competition. Further IT is essential for the activities of a business in which organizations are not really after excelling, but doing well, such as in inventory management (Reynolds, 2010). This implies that IT is a tool that can be used to build capabilities crucial for the differentiation strategy or to remain at par with competition. However, there is a gap in alignment between IT and business because there is a prevalent assumption that technology is a tactical concern rather than being a strategic concern (Lankhorst, 2013). This paper discusses the concept of EA, its evolution, and its role as strategic differentiator and whether it is an IT practice. This paper expands the EA concept to business capability architecture (BCA) and looks at EA in a new strategic angle where capabilities, and not just processes into the realm of strategy creation and execution. The importance of capabilities for shaping the identity of the organization and in the delivery of differentiating value propositions that confer an organization advantages that are highly leveraged in its competitive environment is highlighted during the discussion. The paper then closes with a conclusion summarizing the main points
The role of architecture is optimization across various boundaries to achieve its goals system-wide; it entails the translation of strategies into actions (implementation). The architecture provides the link between technical components and the business. Strategic differentiation is concerned with competitive distinction at the product level and forms the domain of product strategy. It (strategic differentiation) is what makes organizations across their service and product offerings different and enables a broader leverage beyond just differentiation for every product (Minoli, 2008). Strategists in general look to constantly edge out their competition on a feature by feature and product by product basis; however this seldom works in the long term as it is easy for competitors to imitate these. For long term strategic advantage, an organization must seek leverage across the product line and create capabilities difficult to imitate since they rely on a combination of technology,processes, skills, facilities, resources, culture, and in some cases history. Differentiation at company level depends the capabilities chosen by the company to excel in so that a compelling value can be created that surpass those of individual product offering release (Cretu, 2014). Therefore, building strategic differentiation requires making it the focus of the business strategy, and go ahead and execute the strategy effectively.
There is always concerns by business executives that IT is not well aligned with business, creating a point of departure with the organizations’ strategic direction. Maintaining systems that support daily business operations is taking a lot of resources and held back by legacy systems, IT is unable to adapt to the ever changing business needs that occur in increasingly short time scales due to intense competition (Norton & Kaplan, 2005) The limitations of IT in aligning with business needs has its roots in the fast changing pace of IT itself; a lot of the IT technology in place ten years ago is presently obsolete even though the business processes supported by these systems are still around, and being built around or re-shaped. Sometimes, even IT systems less than five years in age are often a quagmire that create a huge burden of maintenance on the organization. SO changes at a given point within the business environment is responded to by point changes in IT systems, without taking into consideration that the point environmental change also causes changes at other points in the IT system. The result is systems that are incompatible, inconsistent definitions of data, a deteriorating software architectures , collectively leading to change that is hard, slow, and costly. The consequence is old, brittle, inflexible, and aging disparate IT systems yet this is the information lifeblood of an organization; the very system that is supposed to be aligned with business objectives (Barshop, 2016).
Enter enterprise architecture; it begins typically as a tactical response to a burning desire to lay foundation for technology standards that will enable enterprise concerns such as improvements in productivity, reduction of costs, and system integration to be achieved. Once these are in place, a vigilant ‘watchdog’ process is still required to ensure the organization does not loose track and also ensure the technology environment in the business remains coherent. There is a shift, using EA, to create a closer synergy between technology and the business (Ross, Weill, & Robertson, 2013)
Evolution of EA
EA has evolved, in the past decade, from EA as a TA (Technology Architecture) to EA as an EWITA (Enterprise Wide IT Architecture), and further to EA as the architecture of the entire enterprise encompassing EWITA and BA (business architecture) so that;
EA + EWITA + BA (Bernard, 2012)
Concurrently, EA groups in leading organizations have progressed through a similar pattern of evolution shaping the thinking of analysts in the industry. At each stage of evolution, benefits have been gained as the EA practice expanded (Aier, Ekstedt, Matthes, Proper, & Sanz, (2012).
Enterprise Architecture as technology Architecture (EA=TA)
Using the narrow TOGAF (The Open Group Architecture Framework) infrastructure, focus was placed on establishing technology principles and standards to create the EA. This has important implications for cost management, improving productivity, and lowering training costs while laying the foundation for expanding the EA scope so greater benefits can be achieved (Aier, Ekstedt, Matthes, Proper, & Sanz, (2012).
Enterprise Architecture as Enterprise Wide IT Architecture (EA = EWITA)
Although making gains, the goals of EA required expanding and tackling in a more broad sense; to encompass the architecture of information and information solutions, not just the TA. This approach enabled addressing of IT concerns cutting across different business units on aspects like interoperability, security, and integration. This allowed creating applications such as a ‘single customer view’ and saving costs through the reduction of duplication company-wide. While this looks straightforward, it is a process fraught with organizational challenges such as politics and change resistance (Aier, Ekstedt, Matthes, Proper, & Sanz, (2012), (Forni, 2017).
Enterprise Architecture as technology Architecture PLUS Business Architecture (EA+EWITA + BA)
To come closer to aligning IT with business, the EA approach must be further broadened to include BA, over and above consolidation, setting of standards, and a disciplined approach to planning the system. Enterprise systems are not purely technology; essentially socio-technical systems that rely on people. Further,people do not exclusively conduct business processes; they rely upon IT, showing why business process engineering wavered, until technology was introduced into the equation. On its own, EA capabilities are limited until BA is incorporated into it, along with EWITA (Gartner, 2010)
The Scope of EA Creates Opportunities (and Challenges)
This is one reason why EA contributes to greater competitiveness by a business; enterprise is the scope of EA, encompassing the various organizational units in the business, such as marketing, R&D, and manufacturing, among others. As it works across the boundaries of the organization, EA makes it possible for the organization to tackle issues such as shared information access, common tools and processes, and reduced redundancy during development, consequently lowering development costs while increasing IT organization efficiency. However, working across organizational units that are different and having their own vested interests, challenges arise, such as politics and acceptance (Nagesh & gerard, 2011), (Horkoff, Jeusfeld, & Anne, 2016)
Enterprise Architecture and Business Capabilities
Architecture addresses the whole infrastructure, crating a big picture view of a system (the enterprise); architecture identifies the primary system elements and how these elements are interrelated while also addressing cross-cutting concerns. These elements include organization structure, business processes, information, and technology systems and solutions; all components of business capabilities. Processes deliver capabilities through a mixture of skills, knowledge, technology, physical and financial resources (Capital). Capability design is focused on the effective use and outcome of resources to generate a differentiating capability or a necessary supporting capability. Competitive advantages are created through differentiation while the business is enabled to function by supporting capabilities. That the organization is a system is well recognized by EA; it is made up of constituent elements, which interact to attain goals that could otherwise not be achieved by the elements on their own (Cruz-Cunha, Cortes, Putnik, 2007).
How Strategy is Related to Enterprise Architecture
How and where a business will compete is determined by the business strategy; everything can not be done by a business; to be great, an organization must decide where it will differentiate and where parity with others will be accepted. This way, the organization focuses on what matters to achieve its goals, not everything. Executing strategies effectively implies that choices made during the strategy process guide decisions made organization-wide so the whole business behemoth moves I the direction the strategy sets. Therefore, to be competitive, the strategy must be the same across the organization effectively communicated to th technical team; this is what EA does (Gartner, 2010). EA makes it possible to develop a strategy process informed by the business capabilities and it requires input from those with insight on what it takes to re shape old ones and introduce new ones, so enterprise architects need to inform the enterprise architecture.
Visual Strategy Framework
The unique manner in which business create value and hence the competitive advantage is largely determined by the business strategy which establishes;
A Unique identity: What the organization is and what distinguishes it from others
The Differentiating Value Proposition: The value that makes the organization stand out in the marketing
The Differentiating Capabilities: The set of capabilities that enables the organization to deliver its unique value (Cruz-Cunha, Cortes, Putnik, 2007)
The identity of the organization determines its defining purpose, its value contribution scope, and the essential characteristics of the business. The identity of the organization includes fundamental values, beliefs, and norms underscoring its culture. Identity id related and closely linked with competitive strategy; a compelling and unique identity creates a tremendous strategic advantage via strong internal alignment where there is a greater empowerment to innovate for everyone within the organization; this helps attract the right talent. It (Identity) also creates competitive advantage through strong market alignment by simplifying the customers’ choice in a market that is highly confusing resulting in strong customer loyalty. Identity creates a competitive advantage and capability, which is in turn determined by organization climate and culture; all aspects integrated in EA (Krishna, Babu & Ariwa, 2012)
Organizations don’t just compete for customers and revenue, they compete as well for stock value and capital as well as for talent. To compete effectively, an organization must articulate a unique and compelling proposition to stakeholders, employees, and customers as well as partners . This requires defining the financial strategy for shareholders; the competitive strategy which defines the unique value offered to customers; and the capabilities strategy of the value to offer channel partners, suppliers, and to attract and retain talent. The competitive strategy entails differentiating the value propositions to the customer by knowing the ‘difference that creates the difference’. Creating a unique value proposition requires an understanding of what the competition is doing and develop a strategy for distinguishing the organizations’ value proposition (Aier, Ekstedt, Matthes, Proper, & Sanz, (2012). This requires an understanding of the competition, the organizations’ customers, the industry, and the busies the organization is engaged in; these are made possible and easy through an effective EA. After establishing the value proposition to distinguish the organization from the others, the capabilities necessary for creating the value, delivering the value, and capitalizing on the value have to be identified. This creates a value added network that the organization then needs to leverage to add value and capabilities. Usually, the value network is outside the business, but are crucial for meeting its strategic objectives; these include aspects like the supply chain and the media which help in identifying opportunities and threats and responding appropriately (Aier, Ekstedt, Matthes, Proper, & Sanz, (2012).
Business capabilities Architecture and how it affects strategy execution
The strategy determines the business capabilities needed to reinforce identity and deliver the value proposition upon which the business competes; at this point, the strategy should be translated into action. The EA takes the business strategy as an input and explores the capabilities necessary for delivering the value propositions as identified in the business strategy (Ross, Weill, & Robertson, 2013). EA streamlines IT; with more effective projects and reduced costs, an organization already has an advantage over others in the competitive space that progress along the architecture maturity path less quickly. A pragmatic implementation of the EA makes it a highly effective competitive strategy. EA uses several dimensions where organizations develop strategic agility and strategies that help improve supply chains and their resilience. It also analyzes and incorporates human involvement that in turn create an organizational structure that is agile and driven by the organizational objective. To transform fragmented legacy applications as well as organizational processes and structure into an integrated environment having optimized processes responsive to change to deliver the business strategy, EA is indispensable.
EA is a conceptual blueprint that defines an organizations’ structure and operation and aims at determining how the organization can achieve its present and future goals and objectives in the most effective manner. It is different things to different organizations due to differences I when they embrace EA and in differences to what the organizations are willing to risk. EA plays a crucial role, form a conservative perspective, in lowering costs, creating a simpler but effective technology environment, becoming more effective, being better integrated and better managed. This happens through the combination, by EA,or various domains that include business architecture, data architecture information architecture, the applications portfolio, the enterprise wide IT architecture, and incorporating human beings and the external environment. EA can be broadened from its associated IT roots to a complete partnership in the business, addressing the capabilities the organization needs to build, sustain, or adapt so that it can exercise its business strategy. EA creates a better alignment between the business and IT and a more effective strategy followed by an even more effective execution. EA enables an organization to determine the capabilities it must build collaboratively at enterprise level to deliver value across the organization and establish a strong competitive advantage through synergies and leverage.
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