business architecture framework

The business model matrix: Only the combination of business capabilities and organization architecture provides a true picture of a company’s business model Download the full document at: www.gazhoo.com Level of Business Capability Business Architecture/Organisation Characterised by a number of initiatives (ERP, CRM, Supply Chain) implemented in isolation or with no pan-region vision or end result in mind Legacy capabilities, poor or outdated processes and/or technology, few process improvement initiatives - or possibly a start-up position, with nothing in place. Fragmented organisation Characterised by a number of integrated initiatives that create high process capability and support a strategy of regionalised (e.g. pan-region) or globalised operations. Strategic intent to move to a regionalised or global business business model is not supported with the appropriate business capability Fully optimised and tax advantaged business architecture Higher Lower Least Integrated Most Integrated Quadrant 1 Quadrant 4 Quadrant 2 Quadrant 3 “ Quadrant” (5)

The organization's position on the matrix will determine the action it needs to take to achieve an optimal business model Level of Business Capability Higher Lower Least Integrated Most Integrated Tax advantaged zone Integration Move to single integrated regional structure Total Transformation Transform organisation and capabilities simultaneously Process re-engineering Improve capabilities Optimisation Move to fully optimised regional organisation through tax advantaged structure There are 4 typical journeys an organisation may take to achieve a fully integrated tax advantaged business model: (1) Integration (2) Process re-engineering (3) Total Transformation (4) Optimisation Business Architecture/Organisation (1) (2) (3) (4) Download the full document at: www.gazhoo.com

Introduction to the five “quadrant” capability blueprints Level of Process Capability Business Architecture/Organisation Characterised by a number of initiatives (ERP, CRM, Supply Chain) implemented in isolation or with no pan-European vision or end result in mind Legacy capabilities, poor or outdated processes and/or technology, few process improvement initiatives - or possibly a start-up position, with nothing in place. Fragmented organisation Characterised by a number of integrated initiatives that create high process capability and support a strategy of regionalised (e.g. pan-European) or globalised operations. Strategic intent to move to a regionalised or global business business model is not supported with the appropriate process capability Fully optimised and tax advantaged business architecture Higher Lower Least Integrated Most Integrated Quadrant 1 Quadrant 4 Quadrant 2 Quadrant 3 Quadrant (5) A company’s current combination of business capabilities and organisation architecture will place it in one of the five “quadrants” Download the full document at: www.gazhoo.com Performance Measurement Location/ Facilities Process Process Strategy Strategy Organisation, Culture and Competency Technology Architecture Performance Measurement Location/ Facilities Process Process Strategy Strategy Organisation, Culture and Competency Technology Architecture Performance Measurement Location/ Facilities Process Process Strategy Strategy Organisation, Culture and Competency Technology Architecture Performance Measurement Location/ Facilities Process Process Strategy Strategy Organisation, Culture and Competency Technology Architecture Performance Measurement Location/ Facilities Process Process Strategy Strategy Organisation, Culture and Competency Technology Architecture

Business Architecture Framework: Quadrant 1 Performance Measurement Location/Facilities Process Strategy

Strong desire to regionalise but with mixed implementation results (operate as a European company)

Reduce costs through use of common approaches and standards (spread processes across Europe)

Performance measurement has a local focus. There is no desire to compare and contrast performance across the Region by process or function even though the capability exists (top down approach)

Scorecard likely to be implemented, but will have local market focus, strong local P&L ownership and general region KPIs

Local presence in every market

Under leveraged asset base

Organisation, Culture and Competency

Decentralised

All functions exist in all geographies

Local market focus

Local agendas

Lacks wider corporate/regional culture

Strong sense of local ownership (e.g. brands)

Complex legal entity structure

Clear staff allegiance to local entity

Technology Architecture

Latest ERP solutions

Integrated platforms

Enterprise application integration (EAI)

Web architecture

Robust infrastructure

Flexible applications

EDI

Portals/Exchanges

Duplicated processes on integrated platforms (local input)

High level of standardised processes and standardised data

Standardised KPI and financial reporting Common chart of accounts

High volume of intercompany transactions due to complex Buy-Sell structure

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Business Architecture Framework: Quadrant 2 Performance Measurement Location/Facilities Process Strategy Organisation, Culture and Competency Technology Architecture

Decentralised

All functions exist in all geographies

Local market focus

Local agendas

Lacks wider corporate/regional culture

Strong sense of local ownership (e.g. brands)

Clear staff allegiance to local entity

Organic growth through acquisition

Focus on local markets, no view of Region

Local presence in every market

Under leveraged asset base

Local focus

No scorecard capability

No desire and no capability to compare and contrast performance across the Region by process or function.

Independent country reporting. No regional consolidation (process or functional)

Basic management reporting

Duplicated processes (local input)

Low level of standardised processes

No common local reporting formats/standards

Multiple charts of accounts

Weak legacy systems

No/poor/inefficient interfaces

Diverse data standards

Fragmented infrastructure

Incompatible applications

Inflexible/bespoke applications

Poor functionality (no FX, single entity)

Aging technology

Business Architecture Framework: Quadrant 3 Performance Measurement Location/Facilities Process Strategy Organisation, Culture and Competency Technology Architecture

Local market focus

Regional culture

High degree of Region ownership, and a sense of “belonging”

Local agendas balanced against Regional goals

Some centralisation

Operates regionally, but with mixed implementation results

Regional focus with strong local input

Scorecard has strong regional elements

Desire to compare and contrast performance across the Region is hampered by inefficient data collection and analysis

Standardised reporting process, KPIs and financial reporting, but duplicated processes (local input)

Diverse process standards

Standardised Chart of Accounts for regional consolidation, but ability to capture results across the region is hampered by lack of definitions and standards

Some use of shared services

Poor “close to report” performance

Local presence in every market coupled with the use of shared resources from other locations

Some rationalisation of asset base

Legacy systems

Some interfaces

Diverse data standards

Fragmented infrastructure

Some degree of application integration

Inflexible/bespoke applications

Poor functionality (no FX, single entity)

Aging technology

Business Architecture Framework: Quadrant 4 Download the full document at: www.gazhoo.com Performance Measurement Location/Facilities Process Strategy Organisation, Culture and Competency Technology Architecture

Regional culture

Regional ownership and sense of “belonging”

Local agendas balanced against regional goals

High degree of centralisation

Less complex legal entity structure through use of common transaction processing centres (SSC)

To operate as a single regional entity

Key processes expedited and managed regionally

Scorecard has a regional focus

3D profitability analysis

Ability and desire to carry out complex and leading edge analysis to optimise regional performance

Value chain transparency

Rationalised via shared service centres

Leveraged enabling services

Smaller local presence

Rationalised asset base provides high level of asset utilisation

Wide use of shared services

High level of standardised processes

Standardised KPI and financial reporting (management packs)

Common chart of accounts

Lower level of intercompany transactions through a less complex legal entity structure

Short “close to report” cycle/”virtual close”

Latest ERP solutions

Integrated platforms

Enterprise application integration (EAI)

Web architecture

Robust infrastructure

Flexible applications

Single instance

Regional data centre

EDI

Portals/Exchanges

Business Architecture Framework: “Quadrant 5” (optimisation) Performance Measurement Location/Facilities Process Strategy Organisation, Culture and Competency Technology Architecture

Country model disappears

Local function presence streamlined

Region organisation structure is changed to reflect the new legal structure

Function heads and key decision makers are extracted from local countries in a central, low tax location (see Facilities)

Region function heads are directly responsible for pan-region (e.g. pan European) performance of their functions

Group optimises its capabilities by creating a tax advantaged organisation. This builds on its integrated organisation structure and high process capability status

New legal entity structure gives tax advantaged status aligned to strategic objectives around core processes. Local profits are repatriated to low tax holding co.

Performance mgt reporting is more efficient by reducing duplicated reporting requirements for legal and mgt purposes

Executive scorecard metrics changed to reflect the new structure, emphasising the need to act as a single operating entity across the region

Aligning legal and organisation structures results in “close to report” process efficiencies

The central (low tax) holding company takes ownership of all inventories, thus inventory reconciliation and reporting processes become more efficient, as the need to reconcile inventory ownerships across countries is eliminated