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). Architecting 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 firm’s ability to launch new products, increase efficiency, redesign a business model, and span boundaries.
Four Stages of Architecture Maturity Standardized Enterprise Processes/Data Standard Interfaces and Business Componentization Enterprise-Wide Technology Standards Locally Optimal Business Solutions Source: Enterprise Architecture as Strategy: Creating a Foundation for Business Execution , J. Ross, P. Weill, D. Robertson, HBS Press, 2006. Business Silos Standardized Technology Optimized Core Business Modularity Strategic Business Value 12% 48% 34% 6% % of Firms
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 S&P and Moody’s 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)
The Agility Journey at Swiss Re Source: “Information and Transformation at Swiss Re: Maximizing Economic Value”, C. Beath and J. Ross, MIT Sloan CISR Working Paper No. 373, Dec. 2007.
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. 1990–1995
Introduced technology standardization in North America
Implemented technology standardization globally
Implemented common processes and tools for underwriting and pricing of each product category; changed pricing and underwriting processes
Adopted a global business model standardizing decision criteria for pricing and investing; allowed local decision makers freedom to invest assets or negotiate with customers with clear metric to assess performance
Outcomes to date
Improved ratings (S&P, Moody’s) relative to other reinsurers
Absorbed GE Insurance Solutions (more than 10% of total business) within a year
Adopted global business model without changing any code
Achieved internal metric (expected to be reflected in market value long-term) of outperforming the market on the differential between the market value of assets and the market value of liabilities
Business demands are driving the evolution of Global IT Source: “Growth in the Insurance Industry: A Reinsurer’s Prospective,” Swiss Re Future Focus 2007 Presentation, Y. Zaytsev, September 23-25 2007. Used with permission. 1997 1999 2000 2004 2005 Now Building the Technology Foundation Harmonization of Business and Information Solutions Integration and Unification of Global Operating Platform
Global technology standards
Consolidated data centers
Group-wide knowledge and email platform
Business driven IT governance
Translation of Swiss Re business model into core processes
Delivery of group-wide solutions and information
Transition from legacy processes and legacy systems towards one process/one solution
Availability of integrated operating platform
Scalable and harmonized core processes
Flexible application landscape
Information delivery supporting new business demands
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. Business Silos Standardized Technology Optimized Core Business Modularity
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. Business Silos Standardized Technology Optimized Core Business Modularity IT Capability Local IT applications Shared technical platforms Enterprise-wide hardwired processes or databases Plug & play business process modules Business Objectives ROI of local business initiatives Reduced IT costs Cost and quality of business operations Speed to market; strategic agility Funding Priorities Individual applications Shared infrastructure services Enterprise applications and data stores Reusable business process components Key Management Capability Technology-enabled change management Design and update of standards; funding shared services Core enterprise process definition and measurement Management of reusable business processes Who Defines Applications Local business leaders IT & business unit leaders Senior management and process leaders IT, business and industry leaders Key IT Governance Issues Measure and communicate value Establish local/ regional/global responsibilities Align project priorities with architecture objectives Define, source & fund business modules
Enterprise Architecture Management Competencies Management practices within each practice set are statistically significantly correlated with each other. All four competencies are significantly correlated with architecture benefits.
Architecture Planning and Design
Senior executive oversight
Enterprise architecture guiding principles
Enterprise architecture graphic
Full-time enterprise architecture team
Architects on project teams
Technology research & adoption process
Architecture exception process
Formal compliance process
Centralized standards team
Centralized funding of enterprise apps
Infrastructure renewal process
IT Steering Committee
IT program managers
Business leadership of project teams
Building Competencies in Stages Legend Architecture Planning & Design Project Management IT Funding Standards Management * Items are statistically significantly related to architecture maturity—they 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. Business Silos Standardized Technology Optimized Core Business Modularity
Architects on Project Teams
IT Steering Committee
Architecture Exception Process*
Formal Compliance Process*
Infrastructure Renewal Process*
Centralized Funding of Enterprise Applications*
Centralized Standards Team
Enterprise Architecture Guiding Principles*
Business Leadership of Project Teams*
Senior Executive Oversight*
IT Program Managers
Enterprise Architecture Graphic*
Post-Implementation Assessment *
Technology Research and Adoption Process*
Full-time Enterprise Architecture Team
Enterprise Architecture Maturity Promotes Agility (1) Process improvements and scalability (2) Process change and organizational redesign (3) Partnership and acquisition In a survey of 65 IT executives, all four types of agility were statistically significantly correlated with enterprise architecture maturity.
Senior executive accountable for the definition, design, implementation, and, in some cases, use of a firm’s digitized process platform.
In most organizations, the CIO is assuming this role, shifting the IT organization from enabler to leader.
Definition of the Strategy Execution Officer
The Role of the SEO Numbers reflect how many of 12 SEOs we studied defined each responsibility. Enterprise IT & Process Governance (11) Project Design & Implementation (10) Ongoing Operations/ Continuous Improvement (4) Designs Platform Builds Platform Components Leverages Platform
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.
Responsibility 3: Ongoing Operations
Four Stages of Architecture Maturity Standardized Enterprise Processes/Data Standard Interfaces and Business Componentization Enterprise-Wide Technology Standards 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. Business Silos Standardized Technology Optimized Core Business Modularity Strategic Business Value