University of Houston ISRC

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Architecting Agility

• University of Houston ISRC
• February 21, 2008

This research was made possible by the support of
CISR sponsors and patrons. The research team
included Cynthia Beath (University of Texas) and
Donna Pitteri and Stephanie Woerner (CISR).
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(No Transcript)
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IT-Enabled Business Agility

• Definition the use of existing IT and business
  process capabilities to rapidly generate new
  business value while limiting costs and risks.
• Agility is the respond in sense and respond.
• The key to agility is reuse.
• Agility leads to profitable growth.
• The Agility Paradox more digitized and
  standardized business processes and platforms
  tend to make a company more agile.
• A platform for agility (reflected in a mature
  enterprise architecture) simultaneously enhances
  a firms ability to launch new products,
  increase efficiency, redesign a business model,
  and span boundaries.

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Agenda

• How IT Enables (or Inhibits) Business Agility
• Limitations of existing IT capabilities
• Platforms for agility
• The Enterprise Architecture Journey
• Four stages of architecture maturity
• A case study of Swiss Re
• How to increase enterprise architecture
  maturityand agility
• The Evolving Role of ITMeet the SEO
• Agility Challenges

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Traditional IT and Process Silos
Corporate Data
A Core Process
Data
Applications
Technology Platforms
Corporate Networks Infrastructure Services
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What IT Looks Like in an Agile Firm
Corporate Data
Corporate Data
A Core Process
Data
Applications
Technology Platforms
Corporate Networks Infrastructure Services
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Agility Platforms
Sources of Agility
Whats Reused
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Four Stages of Architecture Maturity
Standard Interfaces and Business Componentization
Enterprise-Wide Technology Standards
Standardized Enterprise Processes/Data
Locally Optimal Business Solutions
Source Enterprise Architecture as Strategy
Creating a Foundation for Business Execution, J.
Ross, P. Weill, D. Robertson, HBS Press, 2006.
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The Agility Journey at Swiss Re

• Background
• Founded in 1863 in Zurich, Switzerland
• Business model involves assuming the risks of its
  key customers (insurance companies and large
  corporations) and insuring large assets (bridges,
  buildings) against catastrophes
• Operates in 90 countries 95 of 2006 revenues
  earned outside Switzerland
• Huge losses due to 2001 terrorist attacks, Asian
  tsunami, Hurricane Katrina resulted in diminished
  SP and Moodys ratings
• Company hires very smart people who enjoy
  intellectual challenges
• Needs agility to
• Fully comprehend global risk positions (business
  model change)
• Invest for profitability (demands 13 ROI) with
  sufficient liquidity to cover claims
  (efficiency)
• Price contracts based on customer profitability
  (business model change)
• Respond quickly to new product opportunities (new
  product)
• Enable easy integration of acquisitions (boundary
  spanning)

Source Information and Transformation at Swiss
Re Maximizing Economic Value, C. Beath and J.
Ross, MIT Sloan CISR Working Paper No. 373, Dec.
2007.
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How Swiss Re is Building Agility
Source Information and Transformation at Swiss
Re Maximizing Economic Value, C. Beath and J.
Ross, MIT Sloan CISR Working Paper No. 373, Dec.
2007.
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Business demands are driving the evolution of
Global IT
1999
1997
2000
2004
2005
Now
Source Growth in the Insurance Industry A
Reinsurers Prospective, Swiss Re Future Focus
2007 Presentation, Y. Zaytsev, September 23-25
2007. Used with permission.
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Architecture Maturity Shifts Agility
Global Agility
Local Agility
Source Enterprise Architecture as Strategy
Creating a Foundation for Business Execution, J.
Ross, P. Weill, D. Robertson, HBS Press, 2006.
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Learning Requirements of the Architecture Stages
Source Enterprise Architecture as Strategy
Creating a Foundation for Business Execution, J.
Ross, P. Weill, D. Robertson, HBS Press, 2006.
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Enterprise Architecture Management Competencies

• Architecture Planning and Design
• Senior executive oversight
• Enterprise architecture guiding principles
• Enterprise architecture graphic
• Process owners
• Full-time enterprise architecture team

• IT Funding
• Business cases
• Centralized funding of enterprise apps
• Infrastructure renewal process
• IT Steering Committee

• Project Management
• Project methodology
• Post-implementation assessment
• IT program managers
• Business leadership of project teams

• Standards Management
• Architects on project teams
• Technology research adoption process
• Architecture exception process
• Formal compliance process
• Centralized standards team

Management practices within each practice set are
statistically significantly correlated with each
other. All four competencies are significantly
correlated with architecture benefits.
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Building Competencies in Stages
Legend Architecture Planning Design Project
Management IT Funding Standards
Management Items are statistically
significantly related to architecture
maturitythey are associated with greater value
in later stages.
Source Enterprise Architecture as Strategy
Creating a Foundation for Business Execution, J.
Ross, P. Weill, D. Robertson, HBS Press, 2006.
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Enterprise Architecture Maturity Promotes Agility
(1) Process improvements and scalability (2) Proce
ss change and organizational redesign (3) Partners
hip and acquisition
In a survey of 65 IT executives, all four types
of agility were statistically significantly
correlated with enterprise architecture maturity.
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Definition of the Strategy Execution Officer

• Senior executive accountable for the definition,
  design, implementation, and, in some cases, use
  of a firms digitized process platform.
• In most organizations, the CIO is assuming this
  role, shifting the IT organization from enabler
  to leader.

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The Role of the SEO
Numbers reflect how many of 12 SEOs we studied
defined each responsibility.
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Responsibility 1 IT and Process Governance

• Ensure clarity among senior executives about
  platform design.
• Coordinate demands for enterprise change
  projects, most of which involve IT
  implementations.
• Establish priorities for change projects based
  on multiple criteria
• Organizational readiness
• Contribution to platform
• Ability to use platform
• Expected benefits
• Work with senior executive team which either
  makes investment decisions or approves SEO
  recommendations.

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Responsibility 2 Project Design/Implementation

• Ensure disciplined, effective project
  methodology.
• Engage all key stakeholders early and often.
• Provide expertise on process design.
• Provide oversight and/or support of change
  management.

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Responsibility 3 Ongoing Operations

• Provide enterprise services, usually as a shared
  services organization.
• Accept accountability for continuous improvement
  of the platform.
• Ensure that the enterprise is driving value from
  the platform.

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Four Stages of Architecture Maturity
SEO Alarm
Standard Interfaces and Business Componentization
Enterprise-Wide Technology Standards
Standardized Enterprise Processes/Data
Locally Optimal Business Solutions
Framework Source Enterprise Architecture as
Strategy Creating a Foundation for Business
Execution, J. Ross, P. Weill, D. Robertson, HBS
Press, 2006.
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Questions SEOs Are Asking

• How do we structure the IT unit to support the
  SEOs responsibilities?
• Who should own the change resources? (Do I need
  an army?)
• Who should fund enterprise projects? (Do I want
  the budget or just influence over the budget?)
• How can we get buy-in to organizational change
  efforts?
• How do we organize to sustain vertical process
  excellence as we increasingly focus on our
  horizontal processes?

Architecture maturity was statistically
significantly related to a greater reliance on
matrixed structures in a survey of 155 CIOs.
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Challenges to Building Business Agility

• Optimizing the whole often means sub-optimizing
  the parts.
• Building momentum requires leaders who demand
  change.
• Building a platform requires managing
  horizontally as well as vertically (the SEO
  challenge).
• Profitable growth is visible over long-term but
  intermediate metrics (e.g., speed to market, cost
  of end-to-end process) require new benchmarks.
• Empowerment requires clearly articulated,
  centrally controlled1 decision criteria while
  distributing decision making at the
  organizations boundaries.
• Empowerment is information-dependent.

1 Centrally controlled can refer to an
enterprise, business unit, geography, or function.