Wednesday, January 11, 2012

MIT's Ross on How Enterprise Architecture and IT More Than Ever Lead to Business Transformation

Transcript of a BriefingsDirect podcast in conjunction with The Open Group Conference in San Francisco on how enterprise architecture can lead to greater efficiency and agility.

Register for The Open Group Conference
Jan. 30 - Feb. 3 in San Francisco.

Listen to the podcast. Find it on iTunes/iPod. Download the transcript. Sponsor: The Open Group.

Dana Gardner: Hello, and welcome to a special BriefingsDirect thought leadership interview series coming to you in conjunction with The Open Group Conference this month in San Francisco. I'm Dana Gardner, Principal Analyst at Interarbor Solutions and I will be your host throughout these discussions.

The conference will focus on how IT and enterprise architecture support enterprise transformation. Speakers in conference events will also explore the latest in service oriented architecture (SOA), cloud computing, and security.

Today, we're here with one of the main speakers at the conference, Jeanne Ross, Director and Principal Research Scientist at the MIT Center for Information Systems Research. Jeanne studies how firms develop competitive advantage through the implementation and reuse of digitized platforms.

She is also the co-author of three books: IT Governance: How Top Performers Manage IT Decision Rights for Superior Results, Enterprise Architecture As Strategy: Creating a Foundation for Business Execution, and IT Savvy: What Top Executives Must Know to Go from Pain to Gain.

As a lead-in to her Open Group presentation on how adoption of enterprise architecture (EA) leads to greater efficiencies and better business agility, Jeanne and I will now explore how enterprise architects have helped lead the way to successful business transformations.

Please join me now in welcoming Jeanne Ross, Director and Principal Research Scientist at the MIT Center for Information Systems Research. Welcome back to BriefingsDirect, Jeanne. [Disclosure: The Open Group is a sponsor of BriefingsDirect podcasts.]

Jeanne Ross: Thank you, Dana. Nice to be here.

Gardner: Your upcoming presentation will describe how enterprise architecture has contributed to success for such companies as Campbell Soup and Southwest Airlines, but before we go into that, it has been typically difficult to concretely link things like IT productivity and general business success. I wonder, then, how you measure or determine that enterprise architects and their practices are intrinsic to successful business transformations? How do we link the two?

Ross: That’s a great question. Today, there remains kind of a leap of faith in recognizing that companies that are well-architected will, in fact, perform better, partly because you can be well-architected and perform badly. Or if we look at companies that are very young and have no competitors, they can be very poorly architected and achieve quite remarkably in the marketplace.

But what we can ascribe to architecture is that when companies have competition, then they can establish any kind of performance target they want, whether it’s faster revenue growth or better profitability, and then architect themselves so they can achieve their goals. Then, we can monitor that.

We do have evidence in repeated case studies of companies that set goals, defined an architecture, started to build the capabilities associated with that architecture, and did indeed improve their performance. We have wonderful case study results that should be very reaffirming. I accept that they are not conclusive.

Architectural maturity

We also have statistical support in some of the work we've done that shows that high performers in our sample of 102 companies, in fact, had greater architecture maturity. They had deployed a number of practices associated with good architecture.

So we do have evidence. It’s just that if you really don’t want to believe it, you could poke holes in it. There still is a certain amount of faith attached to the link between performance and architecture.

Gardner: I certainly get your point that repeatability would be a chief indicator, that if you intend to do something repeatedly, you can point to the ways in which you would carry that out. How about the intent from the perspective of wanting to transform in a certain way that you haven’t done before? Is there something that being an architect allows that’s different from the past? Is there something that’s new about this, rather than just trying to reengineer something?

Ross: Yes, the thing we're learning about enterprise architecture is that there's a cultural shift that takes place in an organization, when it commits to doing business in a new way, and that cultural shift starts with abandoning a culture of heroes and accepting a culture of discipline.

Nobody wants to get rid of the heroes in their company. Heroes are people who see a problem and solve it. But we do want to get past heroes sub-optimizing. What companies traditionally did before they started thinking about what architecture would mean, is they relied on individuals to do what seemed best and that clearly can sub-optimize in an environment that increasingly is global and requires things like a single face to the customer.

Nobody wants to get rid of the heroes in their company. Heroes are people who see a problem and solve it.



What we're trying to do is adopt a culture of discipline, where there are certain things that people throughout an enterprise understand are the way things need to be done, so that we actually can operate as an enterprise, not as individuals all trying to do the best thing based on our own experience.

The fundamental difference of being an architected firm is that there is some underlying discipline. I'll caution you that what tends to happen is great architects really embrace the discipline. They love the discipline. They understand the discipline, and there is a reluctance to accept that that’s not the only thing we need in our organization. There are times when ad hoc behaviors enable us to be much more innovative and much more responsive and they are exactly what we need to be doing.

So there is a cultural shift that is critical to understanding what it is to be architected. That’s the difference between a successful firm that’s successful because it hasn’t gotten into a world of really tough competition or restrictions on spending and things like that and an organization that is trying to compete in a global economy.

Gardner: It’s interesting to me that we're focusing not so much on the individual, the enterprise architect, but more the office of the enterprise architect.

Ross: Right. Would you like me to speak to an architect instead? Would that help?

Cultural phenomenon

Gardner: No, the point is that the champion that is important is not just an individual. It’s that putting into place a repeatable office of the enterprise architect that is a cultural phenomenon, rather than a charismatic one.

Ross: Yes.

Gardner: What then is the role of the architect, if this isn’t just about a champion, but really about change that’s repeatable and that’s culturally inculcated? What, then, is the role and what should they do?

Ross: The architect plays a really critical role in representing the need for this discipline, for some standards in the organization, and for understanding the importance of shared definitions for data. The architect should be able to create a very constructive tension in the organization, and that’s the tension between individuality, innovativeness, local responsiveness, and the need for enterprise thinking, standardization, and discipline.

Normally, in most companies, the architect’s role will be the enforcer of discipline, standardization and enterprise thinking. The tension will be created by all kinds of people who are saying, "Wait, I'm different. I need this. My customer insists on that." When the tension is working effectively, you get just enough architecture.

One thing we've learned over the years, as we've studied architecture, is that’s actually what we want. We don’t want to be a tightly architected organization, because tomorrow we're going to wake up and the world is going to change, and we have to be ready for that. We want to be architected enough to be efficient, to be able to reuse those things we need to reuse, to be agile, but we don’t want to start embracing architecture for architecture’s sake or discipline for discipline’s sake.

We don’t want to be a tightly architected organization, because tomorrow we're going to wake up and the world is going to change, and we have to be ready for that.



We really just need architecture to pull out unnecessary cost and to enable desirable reusability. And the architect is typically going to be the person representing that enterprise view and helping everyone understand the benefits of understanding that enterprise view, so that everybody who can easily or more easily see the local view is constantly working with architects to balance those two requirements.

Gardner: Let’s take a contextual view here. It’s 2012 already and there's a lot happening in IT with disruption in the form of cloud computing trends, an emphasis on mobile computing, big data, and the ability to harness analytics in new and interesting ways, all sort of churning together. We're also still faced with a difficult environment, when it comes to the economy. Is this a particularly good time, from your vantage point, to undertake enterprise architecture, or is this perhaps not the best time?

Ross: It’s a great time for most companies. There will be exceptions that I'll talk about in a minute. One thing we learned early on in the research is that companies who were best at adopting architecture and implementing it effectively had cost pressures. What happens when you have cost pressures is that you're forced to make tough decisions.

If you have all the money in the world, you're not forced to make tough decisions. Architecture is all about making tough decisions, understanding your tradeoffs, and recognizing that you're going to get some things that you want and you are going to sacrifice others.

If you don't see that, if you just say, "We're going to solve that by spending more money," it becomes nearly impossible to become architected. This is why investment banks are invariably very badly architected, and most people in investment banks are very aware of that. It’s just very hard to do anything other than say, "If that’s important to us, let’s spend more money and let’s get it." One thing you can't get by spending more money is discipline, and architecture is very tightly related to discipline.

Register for The Open Group Conference
Jan. 30 - Feb. 3 in San Francisco.

Tough decisions

In a tough economy, when competition is increasingly global and marketplaces are shifting, this ability to make tough decisions is going to be essential. Opportunities to save costs are going to be really valued, and architecture invariably helps companies save money. The ability to reuse, and thus rapidly seize the next related business opportunity, is also going to be highly valued.

The thing you have to be careful of is that if you see your markets disappearing, if your product is outdated, or your whole industry is being redefined, as we have seen in things like media, you have to be ready to innovate. Architecture can restrict your innovative gene, by saying, "Wait, wait, wait. We want to slow down. We want to do things on our platform." That can be very dangerous, if you are really facing disruptive technology or market changes.

So you always have to have that eye out there that says, "When is what we built that’s stable actually constraining us too much? When is it preventing important innovation?" For a lot of architects, that’s going to be tough, because you start to love the architecture, the standards, and the discipline. You love what you've created, but if it isn’t right for the market you're facing, you have to be ready to let it go and go seize the next opportunity.

Gardner: Perhaps this environment is the best of all worlds, because we have that discipline on the costs which forces hard decisions, as you say. We also have a lot of these innovative IT trends that would almost force you to look at doing things differently. I'm thinking again of cloud, mobile, the big data issues, and even social-media types of effects. So is that the case from your perspective?

Ross: Absolutely. We should all look at it that way and say, "What a wonderful world we live in." One of the companies that I find quite remarkable in their ability to, on the one hand, embrace discipline and architecture, and on the other hand, constantly innovate, is USAA. I'm sure I'll talk about them a little bit at the conference.

This is a company that just totally understands the importance of discipline around customer service. They're off the charts in their customer satisfaction.



This is a company that just totally understands the importance of discipline around customer service. They're off the charts in their customer satisfaction.

They're a financial services institution. Most financial services institutions just drool over USAA’s customer satisfaction ratings, but they've done this by combining this idea of discipline around the customer. We have a single customer file. We have an enterprise view of that customer. We constantly standardize those practices and processes that will ensure that we understand the customer and we deliver the products and services they need. They have enormous discipline around these things.

Simultaneously, they have people working constantly around innovation. They were the first company to see the need for this deposit with your iPhone. Take a picture of your check and it’s automatically deposited into your account. They were nearly a year ahead of the next company that came up with that service.

The way they see it is that for any new technology that comes out, our customer will want to use it. We've got to be there the day after the technology comes out. They obviously haven't been able to achieve that, but that’s their goal. If they can make deals with R&D companies that are coming up with new technologies, they're going to make them, so that they can be ready with their product when the thing actually becomes commercial.

So it's certainly possible for a company to be both innovative and responsive to what’s going on in the technology world and disciplined and cost effective around customer service, order-to-cash, and those other underlying critical requirements in your organization. But it's not easy, and that's why USAA is quite remarkable. They've pulled it off and they are a lesson for many other companies.

Gardner: And as you pointed out, being able to repeat this is really essential. So that gets back to that discipline. But you've mentioned that you've got ongoing research, and you've mentioned a company, USAA that you're working with and you're familiar with. I suppose this gives us a chance then to step back and take a look at what the MIT Center for Information Systems Research is and does and your role there.

Value from IT

Ross: The Center for Information Systems Research is part of the Sloan School of Management. We were formed in 1974 to study how companies get value from information technology.

In 1974, we were studying mainframes and IT directors. There was no such thing as a CIO yet, but we have certainly gone through the stages of the increasing importance of IT in organizations. We went through the end-user computing. We went through enterprise resource planning (ERP) and e-business. We've followed, and hopefully led, thinking around how IT adds value in organizations.

You mentioned this is a good time to be introducing architecture. This is a good time to be at the Center for Information Systems Research, because IT is so central now to business success, and many companies that didn't start as digital companies are really struggling to understand what it means to transform for the digital economy, and that's exactly what we study.

Gardner: You've mentioned one company, USAA. Let’s take a look at a number of companies. I know you're going to be mentioning several during your presentation. Are there any salient lessons that are common among them? Are they all different and therefore you can't draw such common denominators, or are there a couple that jump out?

Ross: Well, our established research on this, and this is the work that appeared in the Enterprise Architecture as Strategy book. We find that the things we learned as we prepared that book are still very true. Companies indeed go through stages, and they're very predictable -- we've not yet seen an exception to this -- and they're hard.

You have to respond to the marketplace. You have to do whatever it takes.



Stage one is the stage of, don't worry about the discipline, just have fun, learn how to use IT, apply it to any strategic need where it makes sense, and go out there and do your thing, but eventually all of that will lead to a fairly messy legacy environment.

We saw, when we studied these stages, that as companies understood these stages, they would avoid stage one, but it turns out that, if you are a fast growing innovative company, you can't avoid that stage. You actually don't know how you're going to make money. You have to respond to the marketplace. You have to do whatever it takes. Then, as you get really good at things, you start to establish yourself in what is often now a new industry.

You've created an industry. That's how you succeeded. But because you're making money, you're going to attract competitors. When you get to the stage that you actually have competitors, then you look at what you created and you say, "Oh no, we really have to clean up some of this legacy." That’s really what stage two is about. It's the underlying technology.

Now, we're learning how to not make quite as big a mess, but there is still this stage of, "Okay, let's refrain from kind of the crazy innovation and be more disciplined about what we put in and how we reuse" and all that kind of thing.

In the third stage, we get much more emphasis on building platforms that wire in those core processes that enable us to do high-volume transactions. These are things around order-to-cash, human resources (HR), or finance. There will be some of that in the earlier stages, but we really worry about scale in this third stage, scaling up so that we can manage large volume transactions.

We think this third stage is going to look different in a world of software as a service (SaaS) and cloud, because in the past, third stage often meant you put in Oracle, SAP, or something like that. Nowadays, it's much more about piecing together some cloud services. It does look different. It goes in faster, but it's still pretty tricky. If you're not architected well, you can really create a mess in stage three.

Working smarter

Stage four is really about working smarter on this platform, learning how to innovate off the platform. And companies are struggling to get there, because once you get in this platform, it takes a while to really make it solid and learn how to use it well. We've been studying that for some time, and companies get there.

This is the story of Campbell Soups and the Southwest Airlines. They're trying to use the platforms they've created, even though the process of putting them in takes a very long time. So you're still putting them in, while you are trying to learn to get good at using them. It's a challenging world out there.

Gardner: So I shouldn’t reach the conclusion that the enterprise architecture kicks in, in stage three and four. It should be something that would be there and useful throughout these stages.

Ross: That's correct. What happens is that in stage one you don't think a lot about architecture. If you don’t think at all, you are going to regret it. But you just can't predict what are going to be the critical capabilities in your organization. When you can't predict the critical capabilities in your organization, it limits how much you can architect.

You can bet on some things. There are some things around finance and HR that are pretty predictable even in stage one. But that early stage is where you're really defining yourself as a company, and that can last for some years, as you grow. As long as you're under $500 million in sales or at least, let's say, $200 million in sales, you've got some leverage there, because you can only create so big of a mess.

The Open Group is great for me, because there is so much serious thinking in The Open Group about what architecture is, how it adds value, and how we do it well.



If you start growing beyond that, you're going to need more architecture. That’s when you really get into stage two and start seriously defining your standards and the processes that enable you to get them in and recognize when you need exceptions and when they're out of date and that kind of thing.

Gardner: So even as we have had this evolution in these stages that happen within these enterprises, we have also had historical evolution in the definition, standardization, and certification around the architects themselves. Where are we there? Is there a stage three or four that we are at with the architects?

Ross: I think we'll be constantly tweaking the certification processes for architects. We get smarter about what they need to know and what they need to be good at, but I don’t know that I would so much call it stages for the architect certification as just getting smarter and smarter about what great architects will excel at. We have the basics in place. I haven't been involved a lot in certification programs, but I think there is a good sense of the basics that are required.

Gardner: We certainly seem to be well into a professionalization phase and we've got a number of different groups within The Open Group that are working on that across different disciplines. So I'm curious. Is The Open Group a good forum for your message and your research, and if so, why?

Ross: The Open Group is great for me, because there is so much serious thinking in The Open Group about what architecture is, how it adds value, and how we do it well. For me to touch base with people in The Open Group is really valuable, and for me to touch base to share my research and hear the push back, the debate, or the value add is perfect, because these are people who are living it every day.

Major themes

Gardner: Are there any other major themes that you'll be discussing at the conference coming up that you might want to share with us? Did we cover them all? What did we leave out?

Ross: Well, we're still doing the analysis on our latest survey. So I'm not exactly sure what the key findings will be that I'll be sharing. One thing we have observed in our cases that is more and more important to architects is that the companies are struggling more than we realized with using their platforms well.

I'm not sure that architects or people in IT always see this. You build something that’s phenomenally good and appropriate for the business and then you just assume, that if you give them a little training, they'll use it well.

That’s actually been a remarkable struggle for organizations. One of our research projects right now is called "Working Smarter on Your Digitized Platform." When we go out, we find there aren't very many companies that have come anywhere close to leveraging their platforms the way they might have imagined and certainly the way an architect would have imagined.

It's harder than we thought. It requires persistent coaching. It's not about training, but persistent coaching. It requires enormous clarity of what the organization is trying to do, and organizations change fast. Clarity is a lot harder to achieve than we think it ought to be.

We find there aren't very many companies that have come anywhere close to leveraging their platforms the way they might have imagined and certainly the way an architect would have imagined.



The message for architects would be: here you are trying to get really good at being a great architect. To add value to your organization, you actually have to understand one more thing: how effectively are people in your company adopting the capabilities and leveraging them effectively? At some point, the value add of the architecture is diminished by the fact that people don't get it. They don’t understand what they should be able to do.

We're going to see architects spending a little more time understanding what their leadership is capable of and what capabilities they'll be able to leverage in the organization, as opposed to which on a rational basis seem like a really good idea.

We've been studying companies, and the easiest ones to study are ones like 7-Eleven Japan and Protection One, which is a security company. These are companies that have replicated models. You look at one branch or one store and you say, "How are you doing this?" Then you say, "Okay, here is the best one. How are we going to make sure that everybody uses our technology and the information that's coming from it? How are we going to do that throughout the company?"

That’s even harder than designing and implementing an architecture. Architects are going to have to be well aware of that, because if companies are not driving value from what they have built, you may as well stop spending the money. That’s a tough thing for an architect to admit, because there’s so much you can do just on a rational basis to make the company look better. But if they are not using it, it's not worth anything.

Gardner: That might explain some of the attention that’s been given to things like cloud and mobile, because there is a sense of an organic adoption going on, and if the workers, the managers, the departments, specific functional groups like marketing, for example, are going to SaaS, cloud, mobile for "bring your own device," or consumerization of IT benefits, perhaps there's an opportunity to take advantage of that, learn from it, and then standardize it and implement as a platform. Is that somewhere close to what you are seeing?

Ross: Yes, absolutely.

Getting started

Gardner: Before we segue out, let's consider advice about getting started. When you're an organization and you've decided that you do want to be a level three or four maturity, that you want to transform and take advantage of unique opportunities for either technical disruption or market discipline, how do you go about getting more structure, more of an architecture?

Ross: That's idiosyncratic to some extent, because in your dream world, what happens is that the CEO announces, "This is what we are going to be five years from now. This is how we are going to operate and I expect everyone to get on board." The vision is clear and the commitment is clear. Then the architects can just say, and most architects are totally capable of this, "Oh, well then, here are the capabilities we need to build. Let’s just go build them and then we'll live happily ever after."

The problem is that’s rarely the way you get to start. Invariably, the CEO is looking at the need for some acquisitions, some new markets, and all kinds of pressures. The last thing you're getting is some clarity around the vision of an operating model that would define your critical architectural capabilities.

What ends up happening instead is architects recognize key business leaders who understand the need for, reused standardization, process discipline, whatever it is, and they're very pragmatic about it. They say, "What do you need here to develop an enterprise view of the customer, or what’s limiting your ability to move into the next market?"

And they have to pragmatically develop what the organization can use, as opposed to defining the organizational vision and then the big picture view of the enterprise architecture.

When they see real demand and real leadership around certain enterprise capabilities, they focus their attention on addressing those.



So in practice, it's a much more pragmatic process than what we would imagine when we, for example, write books on how to do enterprise architecture. The best architects are listening very hard to who is asking for what kind of capability. When they see real demand and real leadership around certain enterprise capabilities, they focus their attention on addressing those, in the context of what they realize will be a bigger picture over time.

They can already see the unfolding bigger picture, but there’s no management commitment yet. So they stick to the capabilities that they are confident the organization will use. That’s the way they get the momentum to build. That is more art than science and it really distinguishes the most successful architects.

Gardner: We'll be looking forward to learning more through your research and through the examples that you provide.

We've been talking with Jeanne Ross, the Director and Principal Research Scientist at the MIT Center for Information Systems Research. Jeanne and I have been exploring how enterprise architects have helped lead the way to successful business transformations as a lead-in to her upcoming Open Group presentation.

This special BriefingsDirect discussion comes to you in conjunction with The Open Group’s Conference, which is January 30 to February 3 in San Francisco. You'll hear more from Jeanne and many other global leaders on the ways that IT and enterprise architecture support enterprise transformation.

So thank you, Jeanne, for joining us in this fascinating discussion. I really had a good time.

Ross: Thanks so much, Dana, I enjoyed it.

Gardner: And I look forward to your presentation in San Francisco and I encourage our listeners and readers to attend the conference, if they're able. There’s more information available on our website and through this content.

This is Dana Gardner, Principal Analyst at Interarbor Solutions, your host and moderator throughout this Thought Leader Interview Series. Thanks again for listening, and come back next time.

Listen to the podcast. Find it on iTunes/iPod. Download the transcript. Sponsor: The Open Group.

Transcript of a BriefingsDirect podcast in conjunction with The Open Group Conference in San Francisco on how enterprise architecture can lead to greater efficiency and agility. Copyright Interarbor Solutions, LLC, 2005-2012. All rights reserved.

Register for The Open Group Conference
Jan. 30 - Feb. 3 in San Francisco.

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