The use, disclosure, reproduction, modification, transfer, or transmittal of this work without the written permission of IASA is strictly prohibited. © IASA 2010

What Is Business Value?

Dr. IT – Enterprise Architecture

Business Value

“In management, business value is an informal term that includes all forms of value that determine the health and well-being of the firm in the long run.

Business value expands concept of value of the firm beyond

economic value (also known as economic profit, economic value added, and shareholder value) to include other forms of value such as

employee value,

customer value,

supplier value,

channel partner value,

alliance partner value,

managerial value,

and societal value.

Many of these forms of value are not directly measured in monetary terms.”

Value Categories

Value Description

Financial Cost savings or new revenue.

Constituent Value Positive impact on stakeholder

interaction/enablement.

Simplification and Reuse Reduced complexity in the

enterprise.

Market Share Amount of market and mindshare in

the market.

Do Good Changing the world.

Common Objective Types

Business Objective Description

(Note: Not all are exclusive from each other so only choose those that will be directly

impacted from the investment.)

Bu

sin

ess

Eff

ec

tiv

en

ess

Increase market

share

Increase Enterprise Services’ market. share

• Example underlying KPIs to monitor progress; “# of wins”, “Geographic

penetration growth”, “Attach Rates”, or “Competitive win”.

Increase revenue Increase in sales revenue generated

• Example underlying KPIs to monitor progress; “$ Area Revenue”, “$ Project

Revenue”, “$ Utilization Rate”

Increase

customer/partner

satisfaction

Increase in customer/partner satisfaction, loyalty, or Microsoft’s brand

• Example underlying KPIs to monitor progress “CSAT”, “NSAT”, “# Services

Cross/Up Sales”, etc

Op

era

tio

na

l E

ffic

ien

cy

Reduce cost Reduction in cost such cost avoidance, licensing costs, lowered rates, etc

• Example underlying KPIs to monitor progress; “$ Avg Sub-contractor Rate”, “Sales

Costs”, “Cost of Services Sold”

Increase

productivity

Increase productivity to improve “time-to-market” of our products/solutions to

customers;

• Example underlying KPIs to monitor progress; “Cycle Time”, “# Processes

Eliminated”, “Engagement Delivery Time”

Increase quality Increase the quality of our products, processes or data.

• Example underlying KPIs to monitor progress; “% data-entry errors”, “Service

Availability”

Reduce risk Reduce the risk to achieve business objectives and/or compliance to policy

• Example underlying KPIs to monitor progress; “% Risk Exposure”, “# Policy

Exceptions”

Improve people Improve people and management skill/discipline

• Example underlying KPIs to monitor progress; “% Skills Gap”, “% Blueprint

Adoption”, “% Training Participation”

Tools by Phase

Technique Financial Customer Reuse Market Do Good

ROI/NPV/DCF

/IRR

3 1 0 2 0

Budget 3 2 3 2 3

Business case 2 2 2 2 2

Review Board 1 2 2 3 3

TCO 3 1 1 0 0

Value Chains 3 3 1 2 1

Risk 2 2 2 3 1

Benefits

Dependency

2 2 3 2 2

Strategy Maps 2 3 2 3 2

Balanced

Scorecard

2 3 2 2 2

Business

Canvas

2 3 3 3 2

Business

Capability

1 2 3 3 1

Architecture Value

• Profitability

• Constituent Value

• Reuse

• Grow Market Size

• Do Good

Value of Innovation

Financial Value

How do our customers buy from us?

When does a person ‘have’ to be involved?

How do our partners supply us?

When do our customers have to think?

When do our employees have to use a best guess or experience?

Are there times we ‘diagnose’ a problem?

How can our systems interact on long-lasting complex

transactions?

Beginning Business Case

Strategy Map

Balanced Scorecard

Describing your business modelThe business model canvas

OFFER

CHANNEL

S

RELATIONSHIPS CLIENTS

REVENUE STREAMSCOST CENTRES

KEY

PARTNER

KEY

RESOURCES

KEY

ACTIVITI

ES

Source: Canvas by businessmodelgeneration.com

Who‘s yourcustomer?

Which customer

segments do you serve?

What‘s your offer?

Which „jobs to be done“

do you satisfy?

What‘s your relationship

to the customer?

What‘s your image?

How do you reach your customers?

How do you make money?

What is driving cost?

What are your core

activities and processes?You are

your main suppliers, partners

and alliances? What are your

main assets and

competencies?

Value Designer

Business Dependency Network

Source: Cranfield University School of Management.

IS/IT

Enablers

Enabling

Changes

Business

Changes

Business

Benefits

Investment

Objectives

Externally facing

Internally facing

D

R

I

V

E

R

S

Develop robust security,

authorisation, and

access procedures

Develop culture to

work across

organisational

boundaries

Develop

information sharing

culture

Delegation of approval

processes

Introduce

Document management

and sharing facilities

Develop a consolidated

structured information

store

Introduce easy to use/

change web based

admin applications

DBMS

Document

repositories

Manage information

as a valuable resource

Office

Automation

tools

Web

Based

Applications

More efficient use of

people’s time

Speedier completion

of business and

admin processes

Improved staff

satisfaction

People working

effectively across

org. boundaries

Access to all

documents

and information

required by role

Admin costs

cut by 5% pa

3rd stream revenue

increased to 30%

Reduction in online

document storage

costs

Improved, speedier

decision making

Use intellectual capital

commercially

Adopt a self-service

‘pull’ approach, rather

than ‘push approach,

to the use of

documents and

information

Develop a document

sharing, rather than a

document copying,

culture

Develop an

Infrastructure

Architecture

Develop a Data

and Information

Architecture

Develop Portal

functionality for

information/document

access

Develop a strategy and

plans to manage the growth of

structured information

Introduce UKU wide

document workflow management

facilities

Develop a knowledge and intellectual

capital management strategy and

architecture

Document

Workflow/Rights

management

Portal

Development

Functions

Improved organisational

knowledge and

best practices

Develop a self-service

personal admin

culture

How to Make the Benefits Happen

Where to Find the Benefits

Many different competitive

analysis frameworks

SWOT

Porter 5 forces

PEST

Competitive Rivalry

Threat of new

entrants

Bargaining power of buyers

Threat of substitute products

Bargaining power of suppliers

Making the plan “strategic”

Example using SWOT with PEST to

demonstrate shaping a strategic plan from a

set of projects

1. Manage Strategy

1.1.1. Define Mission

and Vision

1.1.2 Define

Objectives

1.1.4 Define Projects

1.1 Formulate Strategy

1.1.3 Identify

Process

Performance

Gaps

Draft Projects

SWOT

Strengths Weaknesses

Opportunities Threats

Strategic Projects

Projects that are deliberately designed to achieve

competitive advantage form a “strategic plan”

Process Models

When to use Process Flow views

When correlated KPIs and KPI Targets owned by business leaders

exist to processes.

During scope definition to achieve strategic themes or KPI

Targets during strategic planning processes.

When to use Capability views

When little to no KPIs and KPI Targets owned by business leaders

exist.

When rapidly identifying process flows to analyze for system

redundancy

Capability Map Example

Many Process Flow Diagrams• Describes process boundaries

and high level process steps.

• Identifies customers, key

outputs, inputs and suppliers.

• Describes process steps to

deliver value to a stakeholder

• Identifies Business Processes and

areas for improvement via

Projects

• Describes process activities with roles performing the process.

• Identifies role responsibility and interactions.

• Describes flow of work,

information, materials and also

process metrics.

• Identifies MUDA through cycle

time and yield.

• Describes physical

workflow.

• Identifies physical

workspace layout of forms.

Value Chain

A value chain is an end-to-end collection of activities that create a result for a customer, who may be the ultimate customer or an internal end-user of the value stream”

Value Chains are the sequence of actions required to put the finished product in the hands of the customer, from raw materials to finished product.

What can we do with a Value Chain?

• Focus Project investments on business strategy based on delivering stakeholder value

• Identify Business Services and IT Services

Process

Enterprise Strategic Planning

Ideation

Valuation

Prioritization

Innovation

Review: Project Engagement

Levels

The architect team should divide the number of concurrent

projects into engagement levels based on

Internal prioritization (within team)

External prioritization (with the PMO)

Annual engagement level targets

Team layout and capabilities

Each level should be assigned an engagement delivery set

(lifecycle components)

Solution architects will deliver engagement lifecycle

components and assess other lifecycle deliverables

Value Management

Value management is the most critical task of the architect

Value figures should be available from business case to business capability measurement

Value should

Represent the delta between capability pre and post delivery

Be rolled up through business, information, software and infrastructure architectures into the enterprise architecture

Business Architecture

Software Architecture

Information Architecture

Infrastructure Architecture

Plan

Build

Run

Measure

Plan

Build

Run

Measure

Solution ASolution B

Simplified Reporting Format

Solutions Technical

Value

Engagement

Level

Architect

Solution A % of

Business

Value

Total Value

Generated

Level

engagement

model

Lead

architect

Solution B 3M (30%) 10M 3 Callisto

Griffith

Simplified solution reporting structure

Value should be split by component and tied to repository meta-

data

Technology and architect ownership of value should be

established in the principles phase of the engagement

model

Phases

During selection phase potential technology profit

During selection phasemap business metrics to valuation outputs

During create phase research existing corporate patterns

During create phase evaluate choices with CBA

During deliver phaseensure value is generated

During manage phase review and communicate value delivery

Select Projects

•Create/review business case

•Calculate and communicate value

•Prioritize and select

•Assign architects

Create Architecture(s)

•Capture and analyze requirements

•Architecture master

•Generic architecture

•Product specific architecture

•Architecture prototype

•Views/viewpointsDeliver Architecture(s)

•Stakeholder communication

•Modify and update artifacts

•Delivery

Manage Architecture

•Review and analyze value

•Set architecture goals

•Update engagement model

•Communicate value

Phases Setting Up

Projects with lower priorities should have fewer architecture touch points

Lowest priority are generally maintenance – patch releases, minor bug fixes and upgrades

Architecture delivery should relate to business delivery NOT just technology delivery

Align phases to business capability development not just technology delivery – until return is measured the project is not complete

Business Architecture

Solution Architecture

Business Architecture

Plan

Build

Run

Measure

Review: Project Engagement

Levels

The architect team should divide the number of concurrent

projects into engagement levels based on

Internal prioritization (within team)

External prioritization (with the PMO)

Annual engagement level targets

Team layout and capabilities

Each level should be assigned an engagement delivery set

(lifecycle components)

Solution architects will deliver engagement lifecycle

components and assess other lifecycle deliverables

Skill Taxonomy

The use, disclosure, reproduction, modification, transfer, or transmittal of this work without the

written permission of IASA is strictly prohibited. © IASA 2009

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