How do you know your architecture plans are meeting business needs
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How do you know your architecture plans are meeting business needs How do you know your architecture plans are meeting business needs Document Transcript

  • William Wimsatt, Wells Landers Group How Do You Know Your Architecture Plans are Meeting Business Needs?   Introduction   To be a success, any proposed new or changed activity, process, system or asset for any commercial and government organization accountable to stakeholders must demonstrate business value to its stakeholders. Stakeholders must see this value as obvious, tangible and relevant to them or the enterprise, and provides some personal or professional need for their investment. This is especially the case if the price tag guarantees a strain on already scarce resources of time, people, and money. Further, the value proposition must be easy to grasp for these stakeholders, who often include investors, financiers, business sponsors, C-level executives, marketing and sales, government oversight organizations, taxpayers, and the general public. Today most organizations perceive Enterprise Architecture (EA) as a complex practice for which most business stakeholders find it difficult to grasp its corresponding value proposition. These stakeholders are requested to commit time, money or their reputation for building and implementing the EA system. It thus is imperative for the IT department to understand value motivations of the business, how EA can drive business value expectations, how to demonstrate success, and how to convey the messages appropriately. Thus, to define and measure the value Enterprise Architecture can provide for our organization requires us to understand how our stakeholders perceive value, how our business creates and measures value, and what our current Enterprise Architecture maturity level is. Valuing  Enterprise  Architecture   Many Information Technology professionals struggle with defining and identifying value for Enterprise Architecture. For those who attempt to value EA solely from the perspective of the benefits it provides to IT, this article will describe the reasons fro their difficulty. Asking executives from Sales and Marketing, or maybe from Finance or Human Resources to define what is Enterprise Architecture and you’ll likely get few responses. However, asking these same people what is a Customer Relationship Management System or an Enterprise Resource Planning System and you’re likely to get an entirely different answer. Asking specifically what value do those other systems provide will shed even greater light on the underlying issue – to most Business stakeholders, those other systems provide tangible business value in quantifiable terms. In comparison, the quantifiable business value Enterprise Architecture likely is unknown to the majority of these stakeholders outside of the IT world. Thus, to be successful and to be valued by the business, Enterprise Architecture must create value outside the strict confines of the IT world. In the following paragraphs we’ll explore perspectives of value, explore the drivers and determinants of business value, and identify means for demonstrating success by achieving this value. Perspectives  of  Value   Value is a complex measure depending on dimensions of personal, social and professional perceptions. Personal value means something different to each stakeholder. Drivers of individual value decisions often derive from a mix of ego-centric needs, personal convictions, and social norms engrained in each of us. The ego-centric dimension refers to our inherent “what’s in it for me” mentality – how can one maximize benefits or minimize detriments to the self. Examples of personal benefits and detriments include changes in personal wealth, health, status, and recognition, and often extend to immediate family members. Personal beliefs tend to influence our moral convictions, while social norms tend to influence our innate need for social conformance. Risk and degree of difficulty has the effect of amplifying value expectations. The greater the personal risk and difficulty to achieve something is only justified by need for greater returns. Table 1 provides examples of Stakeholder value drivers. Embedded in each is a combination of personal social and professional drivers. Note that most of these stakeholders who control the flow of money within most companies lie outside the IT world. How Do You Know Your Architecture Plans are Meeting Business Needs? Page 1 of 15
  • William Wimsatt, Wells Landers Group Table 1 - Stakeholder Value Drivers Stakeholder Value Drivers Shareholders - Is the company’s share price and value meeting my investment objectives? Bankers - Is our loan to the company being paid on-time and is the interest rate appropriate for the risk we’ve taken? CEO - Is our strategy driving the value creation and share price as we expected? - Are our shareholders satisfied? - Will I get my negotiated bonus this year? CFO - Are we cash-flow-positive? - Are our profits meeting or exceeding strategic expectations? - Are we managing costs appropriately? - Are our capital investment returns meeting plans? - Will I get my negotiated bonus this year? COO - Is our infrastructure (plant, property and equipment – PP&E) meeting or exceeding strategic expectations? - Are our PP&E investment projects on target? - Are our operations running as expected? - Will I get my negotiated bonus this year? IT - Are we meeting SLAs? - Are our IT investments providing expected ROIs as planned? - Are our IT projects on target? - Are our expenses within plan? - Will I get my negotiated bonus this year? Sales & Marketing - Are our sales volumes and revenues meeting or exceeding strategic expectations? - Are we moving product, expanding market share, expanding product offerings, and managing demand to strategic expectations? - Are we delivering the appropriate level of customer service? - Will I get my negotiated sales and marketing bonus this year? Employees - Am I getting paid a fair compensation for my efforts? Customers - Am I getting more from the product than I expect for the money I’ve paid for it? - Am I getting the service I demand from the company? Government Auditing - Is the engagement, program, or project meeting expectations? Organizations - Are financial goals being met? - Are performance goals being met? - Are all major risks being mitigated? - Is the engagement, program, or project on-track for delivering intended public benefits? Business  Value  101   The title is not meant to be condescending or insulting. Rather, I’ve found many IT professionals who seem to lack a clear understanding of how their company or organization creates value. A basic understanding of how businesses make money, or how non-profits and governments consume money and provide services will provide the foundation for valuing Enterprise Architecture. With few exceptions, all organizations require cash to function and be viable. Investors, employees, beneficiaries, tax payers, etc., value how well the organization manages and uses their cash. Therefore, it’s no coincidence the flow of cash through an organization is of primary concern to most CEOs and CFOs. Anyone familiar with corporate finance will recognize the three categories of cash flow as Operational, Investment, and Financing. How Do You Know Your Architecture Plans are Meeting Business Needs? Page 2 of 15
  • William Wimsatt, Wells Landers Group Financing cash flow usually originates from banks and other similar debt holders who don’t want a share of equity of the organization. Organizations generally use debt financing to bridge the gap between the time they need to pay employees, suppliers, utilities, lease holders, etc., and the time when customers finally pay their bills. These lenders are interested only in lending money to organizations and being paid back with interest. The willingness to lend money and the interest rate the financier sets depends on the company’s perceived ability to pay and risk of not being able to pay. For example, a computer manufacturer will use the cash from a local bank’s short-term loans to buy all the computer components, chasses, power supplies, keyboards, monitors, etc., to build inventory. They may also use this cash to pay utilities and building leases. Some of the premium the company charges for the custom built computer will be used to pay back the local bank’s loan, plus interest. Because this business is in relatively high demand, the financier charges a reasonable interest rate. This cash flow normally is always negative – the bank expects to get back more than it loaned through interest. Investing cash flow originates from many sources, and carries with it a promise to own an equity share of the company and its profits. The most common type of investments are stocks, venture capitalist, and Angel investments. These investors are interested in appreciation of their investment. The willingness to invest and their expected rate of return on the investment determines the cost to the Company for accepting the investment. Companies generally use this cash for building infrastructure and developing products, generally using the cash to build value. For example, the computer company may use angel financing to build a manufacturing and shipping system for storing and picking parts, a conveyer system for moving parts through a line to assemble parts into finished products, and for packaging the finished products for shipment. Because this company is a steady operation with low risk, the investor’s required rate of return is comparable to other income investments. This cash flow normally is also negative – the investor expects to get back more than it invested through investment appreciation and dividends. Operational cash flow is the essence of the organization. This is the net sum of cash inflows from sales and outflows attributed directly to creating the finished products. The company sells products and is paid cash in return by the customer. This cash is recorded as revenue. The company pays suppliers for the parts, employees and consultants for their time, and shipping companies to deliver the product to customers. The net of these revenues and expenses is a type of profit. From these three types of cash flows one can quickly surmise the only way to make money is for customers to willfully buy products and pay a premium in excess of expenses, investment and financing outflows. Companies create value by achieving this and earning a profit that exceeds expectations. Customers buy the product or service from the company because they feel it is of greater value than the price they paid. Bankers value the company because they always get paid and paid on-time. And investors value the company because the company consistently earns a profit that meets and exceeds expectations, thus building value. Companies increase value by achieving one or more of the following: • Increase Revenues. Revenues are generated by the sales of products and services. Increasing revenues without increasing costs will naturally increase profits. Revenue has the greatest impact on cash flow and profits • Decrease Costs. Costs include expenses from the creation and sale of products and services, utilities, maintenance fees, interest expenses, leases, taxes, etc. Decreasing costs without increasing revenues will naturally increase profits. One draw-back of cost cutting – only so much cost can be cut before impacting the ability to create quality products or services. • Increase Efficiencies. By performing more work toward creating products and services without increasing costs will increase efficiency. Increasing efficiencies usually involves decreasing the cost per unit of product or service, thus allowing the company to perform more work toward producing end products/services without increasing costs. Similar to cost cutting, efficiency increases aren’t infinite. • Increase Sustainability. Sustainability refers to increasing the life of assets used for creating end products and services. By extending the life of an asset, the company can put off a costly system upgrade that offers few advantages over the current system. At some point however, a new version or different asset may be required to maintain competitive advantages. • Increase Governance. Although not necessarily a direct contributor to value, government regulations, audits, and investor and financier covenants often require a degree of control and visibility to assure investment and financing decisions are sound, and vital information is protected. Examples of governance How Do You Know Your Architecture Plans are Meeting Business Needs? Page 3 of 15
  • William Wimsatt, Wells Landers Group include regulations on banks, Sarbanes-Oxley act compliance, HIPAA. Stakeholders generally favor companies that can meet or exceed governance requirements while minimizing the implementation and maintenance costs. Business  Value  and  the  Value  Chain   For any new system, service or process to be of value to the company, it must help the company create value for customers and shareholders. Michael Porter devised a methodology for measuring value creation which he calls the Porter Value Chain1. Figure 1 shows a rendition of the Porter Value Chain. This model describes how value is created by core business areas as raw materials move from left to right through the model. Value is created or enhanced as raw materials are transformed into finished products; and customers buy the products and request service. The end result is “margin”, which is the value created above and beyond the sum of all raw materials consumed, processes and employee services rendered, and capital equipment used for creating the end product. A similar value chain exists for the services industry, including government services. Figure 1 - Rendition of Michael Porter’s Value Chain Supporting the core business areas are services including Finance, HR, infrastructure, procurement, and IT. These other services support all the core value chain areas that create the final product and value for the company. With the exception of software development companies, IT usually is not part of the primary (core) value creation chain. This is part of the problem with Enterprise Architecture today in most companies – not only is IT considered not part of the core value-creation activities, IT departments also tend to treat EA as a supporting service to IT. Thus, EA is often twice-removed from the business – supporting IT infrastructure, of a support group which supports the 1 Porter, Michael E., "Competitive Advantage". 1985, Ch. 1, pp 11-15. The Free Press. New York. How Do You Know Your Architecture Plans are Meeting Business Needs? Page 4 of 15
  • William Wimsatt, Wells Landers Group business and not a direct contributor to production. Thus our contention – to demonstrate true value for Enterprise Architecture, IT must demonstrate how it contributes to elements of Core Value Chain activities. Summarizing  Business  Value   Summarizing what we discussed in Business 101 and Business Value and the Value Chain, business value is achieved by: • Increasing customer demand for a company’s products, increasing the price customers are willing to pay for products, and decreasing costs to produce products leads to increasing cash flow and profits • Increasing cash flow and profits leads to increasing value of the company • Increasing value of the company leads to increasing investment and financing opportunities • Increasing investment and financing opportunities leads to company growth • Increasing company growth can lead to even greater increasing cash flow and profits and an upward spiral. Aligning Enterprise Architecture to this business value model will help with determining Business Value for EA. Enterprise  Architecture  Maturity   Identifying the Business Value potential of Enterprise Architecture cannot be complete without a discussion of EA maturity. In reality, the examples of EA business value in Table 3 are insufficient by themselves as there is no indication of required maturity EA program maturity. Since EA is a methodology and a discipline that ideally spans the entire enterprise, completely embracing the methodology takes time, energy and resources, not to mention potential organizational changes. A company doesn’t implement all aspects of EA overnight. To achieve some of the business value expectations listed requires an understanding of this maturity. Most companies haven’t implemented an ideal Enterprise Architecture methodology where all processes, applications, data, technology and solutions are modeled. Most are at an early stage of maturity identified in Figure 2. How Do You Know Your Architecture Plans are Meeting Business Needs? Page 5 of 15
  • William Wimsatt, Wells Landers Group Figure 2 - Enterprise Architecture Maturity Model In this diagram organizations range from the first stage, recognizing a state of chaos and need for managing IT assets, to the fourth stage, implementing strategic EA for business enablement and optimization. Characteristics of each stage are described in Table 2. Table 2 - Enterprise Maturity Model Stages EA Organization Characteristics Characteristic EA Activities & Benefits Maturity Stage Stage 0 Chaos – no IT architecture or architecture management; None No one person knows about, knows who is the contact, or knows where to look for finding all business processes, applications, data sources, technical components, etc. Stage 1 Basic application and data architectures are captured - Major applications modeled in using a common modeling tool or graphical Visio; Able to identify major diagramming tool. These architectures may exist in applications different files and different servers. However, everyone - Primary data sources modeled in generally knows who to contact. Some business Visio or a system architecture tool processes may be captured. IT is able to visualize major (i.e., Erwin); Able to identify major dependencies and relationships, though the data elements for information visualization step may be tedious and time consuming. consumption How Do You Know Your Architecture Plans are Meeting Business Needs? Page 6 of 15
  • William Wimsatt, Wells Landers Group EA Organization Characteristics Characteristic EA Activities & Benefits Maturity Stage Stage 2 Basic EA processes, procedures and methodologies are - Common methodologies and best now being implemented and practiced. Primary high- practices documented value applications, data and business processes are - Primary data sources and documented using more sophisticated tools. applications modeled in common EA tool; Easy Access - High value business processes documented; Easy Access Stage 3 EA now is being used by IT and the Business to Same as Stage 2 PLUS: manage assets and plan for future acquisitions. EA is - High-value business processes, implemented with clear business purpose and goals. applications and data models High-value processes, applications and data are mapped integrated and captured in common into a common EA repository, along with relevant repository; dependencies modeled architecture details; Financials are being collected on - Metadata used by IT and business to each asset. Gaps between current and desired future manage, plan states are easily displayed, and reports identify - Dashboards display EA metrics of compliance with EA initiatives and procedures. value Business processes, applications and data inter- - All EA activities have clear dependencies are mapped and displayed. purpose, add business value Stage 4 EA now is used for mapping and planning the future Same as Stage 3 PLUS: enterprise. Architecture is used to enable new business - Senior Execs use EA dashboards for ventures; new acquisitions are integrated seamlessly monitoring progress toward strategy; into the EA; Optimization is a daily activity – use for planning new strategies; identifying candidate process, application and data - IT uses EA data reports to optimize candidates for optimization; EA integrated with for revenue, cost, efficiency; portfolio management system for aligning architecture - EA reports identify gaps between to corporate strategy; processes are inventoried for current/future contribution and function association; core business - Integrated portfolio updated drivers are identified and prioritized, and correlated to instantaneously with changed contributing processes planning, strategies, applications, data, processes To achieve business value from EA, a company need not start at Stage 4. Instead, one should look first at what stage is closest to their current situation and identify what still needs to be done for achieving all the attributes of that stage. Changing stages generally requires many organizational changes while achieving the attributes within a current stage generally doesn’t. Enterprise  Architecture  and  Business  Value   Enterprise Architecture is both a discipline and methodology supported by one or more systems and processes. It is no different from any other system or processes, except for its enterprise reach. Many stakeholders within and outside an organization may interact with an EA system. But like any system or process, it must deliver some form of tangible value to each different stakeholder it affects. How the stakeholder measures value of EA depends on both personal and organizational value perceptions. EA must support or enhance each stakeholder’s ability to meet or exceed their responsibilities. Helping the Stakeholder reach incentive goals, either directly or by providing necessary business intelligence for monitoring progress, would be one way EA can provide value. EA ability to positively impact core value chain activities will further motivate stakeholders to identify with its value. Table 3offers a possible sampling of different stakeholders and their responsibilities, examples of what the stakeholders would value from an EA system, and examples of incentives driving their value expectations. As shown in the following table, value perspectives of EA differ widely within a typical organization, as do responsibilities. Each stakeholder thus finds value when EA delivers the value expectation. How Do You Know Your Architecture Plans are Meeting Business Needs? Page 7 of 15
  • William Wimsatt, Wells Landers Group Table 3 - Examples of Stakeholder Business Value Perspectives Stakeholder Example Responsibility Example EA Value Example Incentives Perspectives CEO Increase profitability IDs opportunities to increase Bonus plan for meeting profitability goals, investor Set, then meet or exceed IDs value chain improvements to expectations strategic goals help meeting strategic goals Meet or exceed investor Measures Corporate expectations performance; IDs what needs attention, what to do, who to call CFO Maximize return on capital Measures deployed capital Bonus plan for deployed project returns & indicates if maximizing ROI, meet or exceed expected ROI minimizing Cost of Obtain financing at IDs, prioritizes portfolio of Capital managing costs competitive rates capital projects needing funds Maximize profits through IDs possible business process increased margins on cost of improvements for increasing goods sold efficiency, decreasing costs Compliance (SOX, HIPAA, Record key processes, control etc.) points, & ID weaknesses, candidates for improvement CIO Increase sustainability Monitor asset life, operating Bonus plan for costs, efficiencies; ID candidates maximizing ROI of new needing replacement assets, minimizing costs, Decrease costs of operations ID asset, process efficiencies, delivering capital projects candidates for improvement that meet expectations Decrease time to deployments Integrate EA, ITPM, Planning to Increase quality of delivered manage portfolio of new services, systems projects, ID high business value / Increase utility and high priority projects, monitor acceptance of deployed assets post-deployment success Operations VP Increase manufacturing Analysts able to quickly identify Bonus tied to reducing through-put rate for increased business processes, systems and backlog while not demand applications which are increasing cost per constraining production through- product produced put and driving back-logs Sales & Exceed sales and revenue Implement Product Portfolio Bonus tied to maximizing Marketing goals Management to prioritize sales revenue, sales VP/Director Grow sales volumes customer-driven feature demand volumes, number of new Reach more customers for new product dev; ID product hits improvements to high-value customer business processes Service Director Increase customer satisfaction Analysts are able to quickly Bonus tied to increasing through targeted service and federate data from CRM and customer satisfaction, decreased response time Order Management System to decreasing cost per identify sophistication of service call. customer and the specific product purchased IT Project Deliver projects within budget ID actual-to-plan spend; high- Company longevity, Manager and schedule level milestone delivery success; promotions, raises, Assure quality of delivered and quality measures in one demand for expertise from projects dashboard management Customers Receive greatest value for Not for customers – but Sales & Customer perceives price paid Marketing: auto-feed customer delivered good exceeds How Do You Know Your Architecture Plans are Meeting Business Needs? Page 8 of 15
  • William Wimsatt, Wells Landers Group Stakeholder Example Responsibility Example EA Value Example Incentives Perspectives Customers Receive greatest value for demands, responses into product expectations price paid management system for Purchase products that meet advanced analytics or exceed expectations Suppliers Deliver quality materials Provide feedback on material Buying organization pays rejection rates premium for quality Get paid promptly for goods Report payment processing materials & services; delivered progress at each process step Buyer extends contracts Scanning the table above lists many potential examples where EA can deliver business value. Coupled with how the executive gets paid and the primary strategic responsibility then provides EA with a link both to the business value model and the underlying business strategy. When ideally implemented, EA can help visualize business needs and scope within different perspectives and business context, provide multiple viewpoints of business processes, applications and information, and help clearly identify gaps and needs. Defining  Enterprise  Architecture  Value   We now have the components necessary for determining EA value. The following list describes the process: • Identify the stage your organization is closest to and the value achievable when all the attributes are met. • Using the Porter Value Chain and principles of Business 101: o Create your own company’s value chain model o Identify core and support value chain areas and specific benefits EA can provide to each for improving organizational efficiency, increasing financial attractiveness, and creating Business Value. • Identify the key stakeholders within and associated with each of the value chain areas. • Map your proposed identified business benefits to each major stakeholder in the organization and level of EA maturity, to identify what value EA can realistically deliver to each Stakeholder. o Identify how that benefit can deliver tangible value in the perspective of that stakeholder within the context of your organizations EA maturity level. It’s OK if the current stage doesn’t touch on every stakeholder of the organization just yet. However, the primary benefactors and potential supporters of EA must find value. When the organization is ready to move up the maturity model, then new stakeholders impacted by the move can be enlisted, and tangible value can be identified in those new stakeholders’ perspectives. • For the final step: o List the proposed benefits by core and support value chain area achievable by your organization o Identify the benefits to achieve for that stage o Identify the stakeholders to benefit from EA o Then identify the value in each of those stakeholders will receive from EA. This resulting EA Business Value Model can be in table form, and should be created with the stakeholders to help understand EA’s business value proposition, and to gain them as an ally for seeking funding. This will assure they take an active part in the EA framework that’s developed, help everyone understand and identify their value perspective, assure their value needs will be met, and will give them a stake in the outcome. By building a value “model” in this way, Stakeholders will understand early in the process how EA can help them, and thus will needed support for the EA effort. Figure 3 shows a decision tool for helping to identify the benefits and gauging the business value of EA. Ideally, the candidate benefits should lie in the upper quadrant that maximizes enterprise efficiency, financial attractiveness and business value. How Do You Know Your Architecture Plans are Meeting Business Needs? Page 9 of 15
  • William Wimsatt, Wells Landers Group Figure 3 - Business Value Decision Axes The appendix provides a template for capturing business value, and a list of candidate criteria for identifying enterprise efficiency, financial attractiveness and business value. Enterprise  Architecture  Success   The definition of success is purely in the hands of the beholders. This isn’t merely a simple rhetorical phrase. If EA is successfully implemented in your organization, the Business will be the primary benefactor. Embedded in this statement is an implied assumption - that IT is not a separate supplier of IT services, but instead an integral part of the Business and engaged in developing and implementing corporate strategy. Determining success therefore will require periodic feedback from all stakeholders identified in the EA Business Value Model, with each determining whether the assumptions remain relevant and business value goals are being met. Periodic monitoring of progress will provide feedback necessary for early problem detection and correction. In addition, this will become a living model as progress should lead the EA program up the maturity model. Enterprise  Architecture  Pitfalls   One of the major pitfalls of Enterprise Architecture is attempting to accomplish too much. As stated earlier, implementing an EA framework can be very costly. Thus, attempting to do too much would require a tremendous benefit to offset the costs. The best course of action is to progress in measured increments, geared toward delivering realistic and achievable value before progressing to the next increment. How Do You Know Your Architecture Plans are Meeting Business Needs? Page 10 of 15
  • William Wimsatt, Wells Landers Group Another pitfall is to allow Enterprise Architecture to dictate practices, policies and patterns without first gaining organizational acceptance and demonstrating value. All stakeholders must believe that EA can deliver business value, and that the group engaged in developing EA can deliver on their promises. Data  Quality  in  the  Enterprise   Data is collected in various on-line systems. From order entry screens, to customer facing portals on the web, to cloud managed partner system. This data is collected, and stored, and not always integrated together or viewed outside of the transaction context. As projects or initiatives need the data outside the transaction context, the quality of the data is called into question. It was good enough for the transaction, but not good enough for other purposes. But as you try to manipulate data, you discover that information fields are missing, they have been inconsistently filled out, they are full of wrong values and they have myriad other problems. Nothing can go forward until these problems are fixed, causing expensive delays. A benchmark study by the American SAP User Group reported that 93% of companies experienced data problems in their most recent projects. Some analysts estimate the true annual cost of data problems in the hundreds of billions. In practice, a handful of data fields contain the most important data. These are scrutinized for completeness and accuracy. But little attention is paid to the other fields, and these fields often contain incomplete and inaccurate data. Any system that uses the inaccurate data are just a processing bunch of garbage and saddled with “fixing” the data. This is the data quality disaster. At this point, some sort of clean up or redesign takes place while everyone expecting decent data makes due or develops their own work around. Definition  of  Quality  Data   • COMPLETE - The required fields are filled with data • VALID -The fields are filled with valid entries (e.g. address line 1 does not contain “TBD” or the company name is not “Unknown”) • ACCURATE - The fields do not contradict (e.g. the city is not Moscow and the country UK or the Company is BT but the address is the end user’s) • CORRECT - The fields are complete, valid, accurate data, and correct for that transaction (e.g. BT does not enter their own name and address when they intend to resell the equipment) Figure 4: Quality of Data Maturity Model "Data has quality if it satisfies the requirements of its intended use. It lacks quality to the extent that it does not satisfy the requirement. In other words, data quality depends as much on the intended use, as it does on the data itself. To satisfy the intended use, the data must be accurate, timely, relevant, complete, understood, and trusted." -- Data Quality, The Accuracy Dimension, Jack E. Olson We can measure data quality by using a continuum. The quality of data maturity model has four different criteria (see Figure 4): Complete, Valid, Accurate and Correct. To have quality data, the data must meet all four criteria. The goal is to have correct data. How Do You Know Your Architecture Plans are Meeting Business Needs? Page 11 of 15
  • William Wimsatt, Wells Landers Group While there are some exceptions, most data within an enterprise is complete. This means that the data values are filled in. Next, valid data has to be complete and has legitimate values in the data. So only approved values are being used (i.e., an address contains a valid physical address). An example of invalid data would be the storing of two different names in the name fields. Accurate data is complete and valid, and its data items do not contradict each other. For example, the city of San Francisco is associated with the state California and not Iowa. Lastly, correct data is accurate, valid and complete, but also true. So if an address is shown for a member, it is actually that member’s address. Problem  Statement   The first step on any road of change is to identify the problem. The following are examples of problem statements regarding data. The statements can be used for setting the baseline of measurement. • Non-Unique Representation of Client – Today, applications can have the same physical client represented by multiple records. So the same client could be represented in two different records, one with his membership and one with his policy. • Incomplete Product Linkage – Today, not all applications have product linkages for a customer. • Inconsistent Definitions and calculations – Not all systems use the same definitions, or they use the same definition with different calculations. • Lagging Currency and Timeliness – Data in consuming systems may not have the same values as the data providers. Today, if data is updated on a batch system, the changes will not be available until the next batch synchronization. • Data Standardization Today’s insurance data entry systems do not enforce standardization of basic policy information like phone numbers and addresses. For example, an address can be entered as 123 Main St., 123 Main Street, or 123 Main Str. All three reference the same physical location, but are entered in a way that requires complex matching. • Incomplete Business Practices. Instances have occurred where business practices did not cover all possible business scenarios. For example, a customer provided a discount when the discount card, managed in other business unit, was expired. Problem  Impact   Data quality impacts the Enterprise in many ways. These impacts affect the ability of the Enterprise to work quickly, efficiently and profitably. The following categories of impact provide the dimensions of the problems and are used to identify the true cost to the business. • Revenue Impact o Inability to identify and manage quota gaps o Increased difficulty to identify high net worth customers by location o Missing information for sales reps (products) impacts cross-selling • Exposure/Compliance Impact o Increased revenue leakage o Not meeting “Do not solicit” compliance o Regulatory audits are ad hoc and unpredictable o Increased difficulty identifying and selling customer loyalty discounts correctly • Productivity Impact o Marketing analysts spend 75-80% of their time accumulating data and building reports o Loss of manager time spent manually entering data o Inaccurate counts leads to time spent reconciling reports o No “early warning” for key indicators and metrics • Operational Efficiency Impact o Increased costs and complexity of cleansing data or processing corrections (“25 step process”) o Errors in systems introduce need for significant rewind and rework o No reduction in licensing costs for address standardization and correction o Need manual data cleanup processes outside business stream How Do You Know Your Architecture Plans are Meeting Business Needs? Page 12 of 15
  • William Wimsatt, Wells Landers Group • Customer Experience Impact o Increased time to find all information for customer due to data access o Inability to provide consistent view of billing to customers Measuring  Data  Architecture  Success   To measure how successful we are in providing quality data, metrics will be established and scored in the first and third quarters of each fiscal year. These metrics will used to determine if the data is fit for its intended use in operations, decision-making and planning. The metrics will have both subjective and objective measures. The objective measures will be based upon the definition of quality data, volume counts, and measures generated during the enterprise data processes. Data profiling process will examine the data available in the business and collect statistics and information about that data. Other metrics to be gathered will be subjective measures. These are not based upon the physical attributes of the data, but on how the enterprise perceives the data. These measures will include trustfulness, usefulness, and usability. Measurement Type Purpose Measurement Category Conformance Does the data conform to NCNU Objective architectural standards? Confidence From the user perspective, does the Subjective data provide quality results? Does the user community have confidence in the data? Under Governance Is the data under governance? Objective Is the data owner identified? Risk of Quality Corruption Does the system have constraints that Objective prevent data corruption? Does corrupt data exist according to expected values? Scoring should be done on the metrics to show over time how data quality is improving. These scores should be broken down by application by metric. Measurements should be taken semi-annually to assure status and incremental improvement.   About  the  Author:   Bill Wimsatt is a 20+ year veteran in technology management, development and deployment. He has worked as an executive, entrepreneur, technology director, and, consultant. He is currently a Technical Director for Wells Landers where I lead the western consulting practice. He has co-founded several successful companies, including 1783 Productions, which was named one of the top eCommerce companies in 2000 by Oracle. He has several U.S. patents and is the inventor of the DVD Rewinder. How Do You Know Your Architecture Plans are Meeting Business Needs? Page 13 of 15
  • William Wimsatt, Wells Landers Group Appendix   Table 4 - EA Business Value Model EA Stage Stage Benefit Value Chain Stakeholder Measurable Business Area Value to Stakeholder {List here {List here a benefit {List here one {Identify a relevant {Identify a measurable the Stage} from - Enterprise applicable Value Stakeholder from the business value for the Maturity Model Chain area} Value Chain Area} stakeholder, tied to the Stages table} value chain area and stage benefit} Table 5 - Business Value Assessment Criteria Criteria Definition Management Engagement Describes the volume and strength and influence of the request or demand Strategic Fit/Impact Level of alignment with strategic objectives End User Performance User productivity, system performance, quality, not limited to IT users Improvement New or Enhanced Capability Completely new solution to solve business problem or an enhancement or incremental improvement? Impact on Risk Improvement in business continuity, security, stability, and disaster recovery (total risk = severity of occurrence X frequency of occurrence) Level of Innovation and New technology approach/tool for customers Learning Impact on Key Business Deliverable addresses a business objective not currently in the measurement list Variables Revenue Impact Directly related to protecting or enhancing the revenue generation environment - not the magnitude of the impact Customer Satisfaction and VOC Impact on IT customer satisfaction - business units Size and Level of Customer Magnitude of population affected Impact (Visibility) Use of Current Assets Extent to which project uses existing assets (COTS or internally developed) Confidence of Success Degree of confidence, from a business standpoint, that the benefit will be delivered Table 6 - Enterprise Efficiency Assessment Criteria Criteria Definition Internal Customer Demand Describes the volume and strength and influence of the request or demand Strategic Fit/Impact Level of alignment with strategic objectives Cost Reduction Lowers the unit cost of doing business Reduced Time Increases the speed at which it products and services are deployed to customers enterprise-wide Impact on Risk Improvement in business continuity, security, stability, and disaster recovery (total risk = severity of occurrence X frequency of occurrence) Level of Innovation and New technology approach/tool for customers Learning How Do You Know Your Architecture Plans are Meeting Business Needs? Page 14 of 15
  • William Wimsatt, Wells Landers Group Impact on Key Business Deliverable addresses a business objective not currently in the measurement list Variables Employee Satisfaction Impact on employee well-being, development, commitment Size and Level of Enterprise Magnitude of enterprise’s population affected Impact (Visibility) Impact to Employee Improved efficiency, faster project throughput, higher quality solutions Productivity Confidence of Success Degree of confidence, from a business standpoint, that the benefit will be delivered Table 7 - Financial Attractiveness Criteria Criteria Definition Net Present Value NPV is a calculation that weighs an investment against its payback over time. The calculation demands four estimates; payback amount, payback period, a discount rate, and the investment amount. Negative NPVs can and do occur, both when paybacks are simply less than the investment or when paybacks are overridden by the discount factor, which is essentially the cost of money over time. Payback Period Period between initial investment and recovery of the total investment. Level of Investment Total investment required - allows an assessment of how many investments can be made against a particular budget. Includes both initial and life cycle costs. Option Value Potential future value not reflected in NPV. Cost/Benefit Ratio Total costs / total benefits. The cost/benefit ratio does not capture discount rates, but rather provides a simple ratio of all costs divided by all benefits. Smaller numbers are favorable. ROI Net benefits plus initial investment/initial investment. Net benefit is benefit less operating costs. The number 1 indicates break-even. Larger numbers are favorable. Internal Rate of Return The actual rate of return (project or realized) of the investment, taking into account the time value of money. (The IRR is the discount rate that makes an investment exactly equal to its payback over time). How Do You Know Your Architecture Plans are Meeting Business Needs? Page 15 of 15