Bala Iyer

My colleague John Henderson and I are convinced that we need a new type of IT person within organizations. We call this person a business architect.

 A central tenet for gaining competitive advantage in the 1990s was the use of information systems and information to understand the internal workings and external context to support decision making. The basic assumption was that good information led to better decisions. This meant that companies invested in hardware and software to support building systems that harnessed the power of information. The role of the IT organization was to deal with the complexities of managing varied systems within an enterprise. IT organization needed competencies in information design, software development and infrastructure management. This need gave rise to the concept and methodologies of the Enterprise Architect (EA). An EA recognized the need to go beyond the realm of technology and address the need for architectural strategies of process solutions that spanned the enterprise.

 In the late 1990s and early 2000s, enterprise architecture extended its reach to include concepts of end to end processes that not only crossed functional silos but reached out to connect directly with suppliers and customers in the extended enterprise. These initiatives have led to the implementation of global processes in areas such as supply chain management, product design and development and customer service. These processes generated huge amounts of data and the challenge for most organizations was to manage this data and generating reports. As organizations got better at this, they started questioning if they had the right processes and used the data generated by the processes to understand their business and the competitive landscape.

 As we enter the 21^st century, companies compete as ecosystems, which include entities like competitors, complementors, infrastructure providers, platform providers and orchestrators. Ideas like modularity, networks and design rules prevail. Every product or service has an informational component to it. Instead of thinking about IT just as a support to the product, IT has become a part of the product. As a result, the role of IT has expanded beyond just capturing information for decision making to building an infrastructure for innovation and business model experimentation. The underlying informational technologies have also changed. Instead of building everything from scratch, companies are engaged in reusing what is available internally and externally to build systems. Instead of dealing with hardware, software and maintenance issues, companies are involved in picking platforms, developing apps and orchestrating the ecosystem.

 Prior to this development, CIOs had to deal with building systems and dealing with change management within their corporate firewalls. Now CIOs are faced with a challenge of building an infrastructure that allows every employee to be entrepreneurial and innovative using information technology. The challenges that they face are now quite different and involve managing the complex set of dependencies that arise between entities in the ecosystem. If not properly managed, this complexity may result in your enterprise being unable to appropriate value from the ecosystem. We call this new responsibility to undertake this challenge as Business Architecture.

 The business architectural perspective rises above the process as the focus of design and addresses the emerging competitive reality of using business networks to create new business models. We define business architecture as the set of principles or design rules, policies and key design decisions that position the firm in a business network in such a manner that allows them to maximize their current and future information assets. The role of the Business Architect is to collaborate with the leaders in the firm to interpret how business architecture both creates or constrains the ability of the firm to achieve their business network strategy.

 From a skills perspective, a business architect can deal with strategic, technical and change management issues. This person is able to understand and make design choices that fit the strategic context while keeping in mind the company culture.

 Without question, the concepts and methodologies of business architecture will build upon the best practices and standards currently delivered by Enterprise Architecture. However, just as in the 1990s leaders saw the need for Enterprise Architecture to evolve from the base of technology architecture, the challenges of the business architect as compatible but distinctive set of concepts, tools and methodologies to evolve. Some of these concepts like platforms, network effects, etc have begun to emerge. But how does one make sense of it all?

 This challenge will require the CIO to address at least three core issues;

1. Understand and deploy the economics of networks, clouds and business platforms as an essential element of the justification in business networks. The rise of business strategies based on direct and indirect network effects is a direct result of the competing in a global, fully connect network. Concepts such as two-sided markets, global collaborative platforms and network centric strategies for innovation have dramatically changed how the business strategists understand market pressures and invest in new capabilities. The CIO must incorporate this economic perspective in their development of business architecture.
2. Define a coherent architecture control strategy that is both feasible and defendable in a complex business network. While much of the focus in business network strategies centers on how new capabilities will create value, the business architect must also address how the firm will capture their fair share of the value. Increasingly, the architectural control point lies not in the control of physical resources or geographical location, but rather in the control of information assets, standards and intellectual property rights. Again, the business architect must understand these complex issues and translate them into management architecture. In essence the business architecture must design the 21^st century cash register into the business network solution.
3. Redefine what constitutes core systems of the firm.  Every platform strategy has a core. The complexity of a business network strategy and the need to exploit network economics will require the architect to rethink what constitute the core systems of the firm. It is in these systems that the architectural control point will likely be deployed. The core concept enables the firm to realistically harden the security strategies in the faces of a many to many dynamic set of business solutions. The core systems will serve as a stable base from which innovation and experimentation with partners can occur at scale. And eventually, the core will call the firm to “plug and play” processes and services at the edge in an efficient and effective manner. To date the dominate perspective for defining the core systems of the firm has been intertwined with the definition of end to end core processes. We believe this perspective must evolve allowing the end to end solution to exists but within a broader business network strategy.