AlphaChat: What is Business Architecture and how can it help your organisation?

AlphaCert Head of Customer Transformation Bryan Stephens and Independent Consultant and Advisor Stephen Huppert explain the framework of Business Architecture and the value for businesses in our latest AlphaChat.

Transcript below.

Bryan Stephens:

It’s good to have the opportunity to be here and talk with you about business architecture.

Stephen Huppert:

Tell me a bit about yourself and your role at AlphaCert, and then we can get stuck into the topic.

Bryan Stephens:

My role at AlphaCert is Head of Customer Transformation, and what that really means is that I work with our clients and our prospective clients and help them achieve their strategic goals. So, often, a strategic goal requires multiple initiatives. They’re coordinated by a program or several programs at work, and that all needs to come together in a sequence for the best possible outcome to be achieved. I’ve spent around 20 years in projects and around projects, mostly with investment management, and got a lot of experience to bring to our customers around best practice and ways to govern and execute transformational change. And so at AlphaCert, we help with the boots-on-the-ground in terms of people who do the work, but we also help with business and technology, strategic alignment, and so that’s what we call business architecture.

Stephen Huppert:

That’s interesting. So I’ve heard a lot about enterprise architecture. I know information architecture, but where does business architecture fit into that landscape? Is it different? How different is it from enterprise architecture and what do you do with clients around it?

Bryan Stephens:

Yeah, sure. You raise a good point there, Stephen. Most people have heard of enterprise architecture, but the term business architecture is arguably less well known. Yeah, I’ll start by talking about enterprise architecture and then talk about its relationship to business architecture. So in a nutshell, enterprise architecture exists to bridge that gap between business planning and IT planning. So in an organisation you’ll have your execs, your board, your strategy team, and they’re all working together on that sort of three, five, 10-year strategic plan. On a more near term basis, you need to execute on what you’re going to do over the next 12 months or so.

And so that change activity gets carried out by resources in the PMO or the change team, business change team, and also your technology team. And so you can see from that description that you’ve got a number of different people fulfilling different roles, and everyone needs to come together to implement that, envisage change. So here’s a diagram that’s got a subset of roles, and depending on the project, there can be many more. Now all these people have different perspectives, different experiences, and can interpret the same information quite differently, even from the person sitting next to them.

So enterprise architecture and business architecture sits right at the intersection of these three groups, and it creates clarity between the business transformation and technology teams on what the business require in order to enact their envisage strategy, and it helps the strategy and executive team equally understand what’s the business impact, what’s the feasibility, what are the solution options, the timelines, the costs involved with this sort of change that we’re envisaging that’s part of our strategy.

Stephen Huppert:

Most organisations will be familiar with enterprise architecture, looking very much top down. So where does business architecture fit into that framework?

Bryan Stephens:

Yeah, so you’re right there, Stephen. A lot of organisations have heard about enterprise architecture, and business architecture arguably a little less known. I guess the best way to think about them is probably to think about business architecture … When you’re initially starting out, think about business architecture as a discipline or one part or one half of enterprise architecture and the other half being IT architecture itself. So business architecture and IT architecture are two disciplines that can equally stand on their own. And so you can have business architecture in an organisation and practise that without it being connected to your IT architecture, but there’s just a huge amount of value in actually bringing it all together.

So yeah, effectively you can think of business architecture on one side, IT architecture on the other, and both of them actually being part of enterprise architecture. I think that’s a good way to start initially thinking about the concept of business architecture. But for more mature organisations, what you tend to see is that your business architecture team will often report into your corporate strategy team. So there’s a lot of artefacts that business architecture has that has great overlap with IT architecture, but then there’s also a number of perspectives and ways of looking at data from the organisation that is really relevant to the corporate strategy team. And so there’s equally as much value to corporate strategy around using business architecture and the different perspectives that it has.

Stephen Huppert:

So that’s interesting. So it sounds like it’s that connection between the corporate strategy and getting stuff done in the business, and that’s a gap we often see, isn’t it? That gap between developing the strategy and executing on that strategy. And so is that where business architecture can be very valuable for an organisation?

Bryan Stephens:

Yeah, exactly. Yeah, very valuable. It’s that whole strategy to execution piece that’s often a real missing link in organisations, very common for an organisation to have a strategy and very common to have an ability to execute and a team who can implement change. But what’s really difficult is actually trying to get those two parts of the business to talk together and be on the same page. Executing change is actually really hard. It looks simple on paper. You hire some people who can implement change and you have a strategy, but really, there’s just so many things that can go wrong, so many misinterpretations, so many assumptions, and just lots of gaps that can occur.

And so business architecture has really come about as a way to focus on being able to describe what the business wants, what the business needs, and in a way that your IT architecture team can really understand that. And so it’s taken some of the ways of working and the methods that occur in IT architecture and it has its own ways of having perspectives on the data and is able to present that information so it’s relevant both to business people, and so business people can understand it, and then also presents it to your IT space, and they can equally understand it. So it really helps bridge that strategy to the execution part that’s often a missing link in a lot of organisations.

Stephen Huppert:

It’s still a nice term, and you’ve explained very well why it might be valuable for an organisation, but I imagine that there needs to be some frameworks to guide an organisation through a process.

Bryan Stephens:

Yeah, correct. Correct. There’s a number of frameworks when it comes to enterprise architecture. I mean, ever since information systems became popular out of the ’50s and ’60s, we had IBM put together business systems planning, and then in the ’80s we had the Zachman Framework, we had PRISM framework, we had NIST Enterprise Architecture Model. We’ve had lots of people working towards ways that business and IT can work together better, and we’ve made huge progress in that space.

I think probably the most well-known framework, and one we’ve probably all heard of, is TOGAF. That was a framework from the open architecture group, something that popped up in the mid ’90s, and it’s still here with us today. We had the latest release version team come out in April last year. And these frameworks have been helpful in progressing us towards better alignment between business and technology, but I don’t think anyone would say that any of those frameworks are a silver bullet, so to speak.

I think what we’ve seen over the years is that enterprise architecture is not a one-size-fits-all type of fair. It really needs to be customised to the organisation because every organisation is different in terms of its complexity, its maturity, the size of the organisation, the regulatory environment, even just the culture has an impact on how you implement change. So you can see there’s many influencing factors, and this tends to evolve within an organisation over time, and they tend to do what works for them just to make sure that they’re not implementing too much enterprise architecture or too little, as the case may be.

Stephen Huppert:

Yeah, I think that’s really important. Too often when organisations adopt a framework, they become slaves to the framework, and it’s really the framework that becomes the outcome rather than the strategy or the business outcomes. And they can tick, “Yep, we’re using a framework. That’s fantastic. We’ve done our job.” So I like that what you say is about making sure it’s fit for purpose. And I think it’s really critical that organisations understand what the frameworks are because they’re very useful guides to help them, but also don’t become slaves to those frameworks. That’s really important.

Bryan Stephens:

Yeah. You’re right, Stephen. I think a lot of people remember in the ’90s, 2000s and-

Stephen Huppert:

Iit sounds like business architecture has really evolved as a discipline, and there’s more and more interesting information and more and more interesting techniques coming at how we can apply business architecture in our organisations.

Bryan Stephens:

Yeah, correct. Yeah. Look, BABOK which is the Business Architecture’s Body of Knowledge, was first published in 2011, and if you think, we’ve actually been doing information systems planning, as IBM referred to it, since the ’70s. So business architecture is probably considered more of a recent thing. If you can remember back to the ’80s and ’90s, Stephen, corporate IT was just about managing IT. It was about the mainframes, the servers, and making sure there’s enough hard disc space and your databases weren’t falling over. Probably what a lot of people would consider quite fundamental stuff, whereas nowadays, we’ve got the internet, we’ve got cloud computing, we’ve got SaaS software. Modern corporate IT just doesn’t need to worry about any of that stuff that they had to worry about a couple of decades ago. That’s all been abstracted away, and they can just really focus on what their core businesses are and how they create value in the world.

So over the last three or four decades, technology has vastly improved. And we’ve progressed from a world where IT was pretty rudimentary to today where entire businesses are built around just how an organisation might use and manipulate data. Airbnb and Uber being two classic examples where the entire business model is just around producing value in terms of manipulating data and not from producing any physical product. So business architecture really plays well in this place, and I really see business architecture as rising out of this need to help business leaders take advantage and harness the power of technology.

Stephen Huppert:

And that’s really important, isn’t it? Because every organisation wants to be data-driven, and it’s more even the power of the data rather than technology itself. You’re right, IT departments that I remember from the ’80s and ’90s, they were just big technical shops. But you’re right, it’s now about enabling the business a lot more, and it’s that using the data, and the examples of Airbnb and Uber are great examples of how organisations have become purely data organisations. And if I think about the investment management business, that is very much a data management business.

Bryan Stephens:

It is. Yeah, it is. It is. I mean, what physical things exist in the investment management world these days? I guess we no longer have to actually sign a physical piece of paper. There’s no signatures. It’s all digital signatures, or hopefully it’s digital signatures. So everything is data-driven. We have a lot of digital products. We have, as Marc Andreessen would say, “Software is eating the world,” and it’s just going to continue to carry on that way. And I think there’s a lot of opportunities for business leaders to think about technology, how some of this new technology can really help their business or change their business model.

Some of the new technology, like generative AI and blockchain, quantum computing, that’s going to have a big impact on a lot of organisations, that’s going to have an impact on investment management firms. So it’s a really great opportunity for business leaders to think about how they can leverage technology and how might that impact their business models going forward?

Stephen Huppert:

As I talk to superannuation funds as investment management organisations, they’re all familiar with those terms generative AI, especially. Everyone’s talking about ChatGPT, but blockchain, quantum computing. But I think a lot of the business people have struggled to envisage how that can help them in their businesses. At the moment, a lot of that is still seen as shiny toys or things that the tech people like playing with. So business architecture can really play a role in helping develop new products and services. Look at different scenarios around the incoming technology, it sounds.

Bryan Stephens:

It can. It can. So one of the core things with business architecture is that it looks at an organisation as a set of maybe Lego blocks. You could think about Lego blocks. And in business architecture we call those capabilities. So when you break down an organisation into a set of Lego blocks, you can actually reassemble those Lego blocks in different ways. And so maybe you have an idea for a different type of value proposition you can offer, and so you would put together these Lego blocks or capabilities in a particular manner. And when you look at a value stream and you think about the value you’re trying to create, you can then go, “Are our capabilities in that new value stream mature enough to deliver this product or service that we need to do? If they’re not, what do we need to change? Do we have all the capabilities that we need? Are we missing a capability? Do we actually need to stand up an initiative to stand up a capability around how we use blockchain or stand up a capability around how we sort of take advantage of generative AI or AI itself?”

So business architecture can really help with that scenario of trying to re-envisage the way you do business, the way you create value, and make that a bit more concrete for people to understand. Put that into terms of what initiatives need to take place. How do we structure that work? How should it be sequenced? Yeah, that’s one of the scenarios that you can use business architecture for.

Stephen Huppert:

I really like the Lego analogy. I used to have a lot of fun. I’ve got big boxes of Legos still somewhere sitting in a basement, but it was always missing a piece if I wanted it. And I liked that analogy of you want to build some great application using some of the new technology, but you’re missing a bit of capability, and how do you find that capability? And I guess you can find that capability by hiring or by finding the right partner, too. And so business architecture is great for working out not just what you need to do, but how you’re going to do it.

Bryan Stephens:

Yeah, that’s right. Yeah. Yep. So really, in those capabilities, they describe things that an organisation does, and then you go about the process of really understanding and assessing, “Is that capability mature in terms of what we need it to do?” And once you’ve made that assessment, you can then go, “Okay, well, here’s another use case for business architecture,” is you can go, “Okay, well, actually, we think we need that capability, but we’ve only got a limited amount of CapEx this year to spend. And so actually, should we go ahead and improve that capability? Or there’s this other capability, which is tied to this strategic initiative over here. Maybe we need to think about actually diverting our money towards that and we need to put this other capability initiative on the back burner.”

So initiative investment planning is another use case or scenario that you can use with business architecture. In fact, that’s probably one of the most common ones it gets used for is really thinking about your capital expenditure for the year and really how you’re going to prioritise and trade off investment decisions from one initiative to another.

Stephen Huppert:

I think that prioritisation is critical with the work I do with the superannuation funds investment managers. They all know where they want to get to in three to five years, as you said earlier. They might have some roadmaps and a whole lot of initiatives, but you’re right, CapEx is limited. They can’t do it all. So how does an organisation decide how to prioritise? And there are different techniques for doing that, but it sounds like having a solid business architecture framework can really help organisations do that strategic prioritisation.

Bryan Stephens:

Yeah, definitely. Definitely. Look, specifically for that initiative investment planning, AlphaCert, we offer a service doing business capability planning. So that’s a little bit of a carve-out, I guess you would say, of different business architecture techniques. And that really helps organisations with their initiative investment planning. And so we start out thinking about, “What is the strategy? What are you trying to achieve?” And really go through a structured process of stepping through how to come up with a strategic roadmap. And we can spend a bit of time making it more detailed and take things to the next step as well. But yeah, a lot of organisations do struggle with just that first part of really, “How do I trade off the initiatives that I have? How do I prioritise? What’s the impact of doing this initiative versus another initiative?”

And being able to have overlays, so maybe heat map some of the business capabilities within your organisation, you can see, “Okay, here’s how mature all the capabilities are within our organisation, but here’s where we’re spending our money. We’re actually spending our money on things that are probably already considered mature enough where they need to be. And maybe looking at this strategic priority over here, we should really be thinking about funnelling some money to this other capability because we are really going to rely on that capability in 12, 18 months’ time.”

Stephen Huppert:

And one of the things I’m seeing happening a lot in the wealth management, investment management, superannuation space here in Australia, especially, is a lot of conversations about insourcing versus outsourcing different capabilities. I’d imagine that business capability planning can play a really important role to help organisations decide or determine, strategically, that insourcing versus outsourcing question.

Bryan Stephens:

Yeah, exactly. I mean, I guess in that business architecture space, whether this capability has been done internally or externally, it’s still just a capability to business architecture. And so whether you have a partner doing that capability or not, it still works. And yeah, there’s definitely, in business architecture, you can use the information to make decisions around “How do you optimise? Should you actually think about it, you’ve got a partner who has a number of services, maybe you’re only using one service that partner has. Is there a way to take some of the other work that’s been done or other capabilities that have been done by other partners and maybe just rationalise it to one partner?”

So that’s another scenario, a use case in business architecture. And I guess somewhat similar to this as a use case around really mergers and acquisitions, or divesting, because that really focuses on business capabilities as well. So Superfund’s very active in the whole merger and acquisition space at the moment, understanding what capabilities and organisation that they might want to merge with, and being able to see how that compares to their own organisation’s capabilities and the relative maturity of that. Definitely a big benefit. Therefore, Superfunds, or any organisation going through M&A, need to use that business architecture.

Stephen Huppert:

I was talking to somebody yesterday involved in a merger between two funds, and I can absolutely see how if both have a proper business architecture framework, got good understanding of their own capabilities, and then when they combine those capabilities and helping decide which is the best way to go forward with those capabilities. So yeah, I can understand why that could be a really useful tool.

Bryan Stephens:

Business capability planning, great technique for an organisation’s quarterly or annual initiative planning, something we can definitely help them with. Maybe first step, jump onto our website, download the white paper that we’ve got there. Some great information in there. And then the second step, just reach out to us. We’re free. We’re happy to have a free, no obligation conversation with you about how we might be able to help your organisation, specifically around business capability planning. And yeah, just feel free to reach out and talk to us about it.