Using Business Architecture to enable customer experience and digital strategy

| USING BUSINESS ARCHITECTURE TO ENABLE CUSTOMER EXPERIENCE AND VALUE STRATEGIES | ENTERPRISE ARCHITECTS © 201 41
PRESENTEDBY:
Craig Martin
ChiefArchitect,Enterprise Architects
An overview of the affect of digital
disruption upon business and where
business architecture can provide value
USING BUSINESS ARCHITECTURE
TO ENABLE CUSTOMER EXPERIENCE
AND VALUE STRATEGIES

Digital disruption is shifting business model design from a focus on
product profitability to a stronger focus on customer experience and
value.
This webinar will look at environmental pressures and identify how to
use business architecture and business design to address these
changes. It covers business architecture for digital strategy, customer-
driven value chains, re-writing of the 4Ps of the marketing mix, and
the nine laws of disruption and how they affect business model
design.
Craig also investigates the changes afoot with strategic business
planning and Enterprise Architecture, which are experiencing their
own form of disruption. Will Enterprise Architecture as we know it
become a commodity too? Join us for this informative and
enlightening look into the future of the Enterprise Architecture
discipline.

Craig Martin, Chief Architect
twitter @eatraining
email craig.martin@enterprisearchitects.com

Our topics today
A shake-up is occurring
The result of disruption
Architecting for disruption
Where to from here?

ABOUT ENTERPRISE ARCHITECTS
Enterprise Architects (EA) is an international
professional services firm specialising in business
design and enterprise architecture.
Established in Melbourne in 2002, our mission is
to “design and renew great organisations”.
Our History
Enterprise Architects (EA) was founded in
Melbourne, Australia in 2002 by Hugh
Evans, our CEO. With his background in
traditional architecture, Hugh was
motivated to bring the benefits of
Architecture Thinking to business
strategy and transformation.
EA soon became a magnet for enterprise
architecture talent, providing the ideal
environment for architects to access
strategic projects with some of the
world’s most ambitious and forward
thinking organisations.
A decade on, EA stands as one of the
world’s premier employers in enterprise
architecture and remains a pioneer in the
growing practice of business design.
We’re delivering a new kind of enterprise
architecture capability, one that drives
richer business engagement, strategic
coherence and fast-paced change.
Our Philosophy
Being a services firm we are centred on
the needs and experiences of the people
we impact. We believe good strategy
requires participants to discuss
opportunities and issues on common
ground – comparing apples to apples.
Through our advanced business
architecture-oriented methods we bring
together all parties and build consensus
and real belief for the strategic roadmap.
Our Approach
Our strength is more than just world-
class practice in business design,
capability-based planning and strategic
enterprise architecture.
It’s about how we engage with clients,
offering a seamless extension to their
existing capability, however mature, and
defining the roadmaps that will bring
ground-breaking competitive strategies
to life.
Our Experience
Many of the world’s leading brands trust
EA to extend their business design and
strategic architecture capabilities.
We are experienced across most major
industry sectors including, Banking &
Finance, Insurance, Tech, Energy, Oil &
Gas, Telco, Health, Retail, Transport &
Logistics, Professional Services, and
Higher Education, as well as a broad
range of government departments and
agencies at local, state and federal levels.
Over the last 11 years we've developed
architectures and supported capability
for organisations across 5 continents.

OUR SERVICES
Servicing the Strategy and Architecture needs of
major corporates.
› SPECIALISING IN ARCHITECTURE CAPABILITY AND DELIVERY
› ACTIVE TRACKING OF INDUSTRY WIDE ARCHITECTURE TALENT
› PROVEN TOGAF® METHODS
› EXTENSIVE INDUSTRY REFERENCE MODELS AND BUSINESS VIEW POINTS
› FOCUS ON SKILLS AND KNOWLEDGE TRANSFER
› VENDOR AND TOOL NEUTRAL
› EXTENSIVE INDUSTRY RELATIONS AND PARTNERSHIPS
› COMPLETE INDEPENDENCE IN CLIENT OUTCOMES AND RECOMMENDATIONS
Strategy & Architecture Delivery
› Business Architecture
› Capability-based Planning
› Information Management Strategy
› Digital Investment Roadmaps
› I.T Strategy and CIO Baseline
› Application Strategy and Roadmaps
› Infrastructure Strategy and
Roadmaps
› Information Security Strategy
Architecture Capability Improvement
› Maturity assessment
› Service model definition
› Architecture operating model
› Staff capability assessment
› Team training and mentoring
› TOGAF® Kick-start and mentoring
› Resourcing and talent management
services
Architecture Accelerator Frameworks
› Enterprise business architecture
framework
› Enterprise security architecture
framework
› Enterprise cloud framework
› TOGAF Accelerator
› Enterprise architecture foundation
pack
Managed Services
› Blueprint and roadmap maintenance
› Transformation blueprint
management
› Managed architects and architecture
teams
› Repository and tooling as a service
› Diagramming as a service

A SHAKE-UP IS
OCCURRING
…AND IT’S QUITE
DISRUPTIVE

WHAT IS DISRUPTION?
› Innovation that creates a new
market
› Innovation that creates a new
value network
› Eventually disrupts an existing
market and value network
› Displaces an earlier offering or
technology

… DISRUPTION Rips
through an existing market…
DIFFERENTIATION
on its own does not cause disruption…
… combining DIFFERENTIATION
+ LOW COST

BLUE OCEAN
 Create uncontested markets
 Make competition irrelevant
 Create & Capture new
demand
 Break value / cost
trade-off
 Align with differentiation
AND low cost
RED OCEAN
 Compete in existing
markets
 Beat the competition
 Explore existing demand
 Make the value/cost
trade-off
 Align with differentiation
OR low cost
WHY DOES DISRUPTION OCCUR?

WHEN DOES DISRUPTION OCCUR?
› First stage of disruption, an innovator
makes a product much more affordable
and simpler to use (for the user) than
what currently exists.
› The second stage of disruption is when
additional technological change is
added which makes it simpler and less
expensive to build and maintain the
products.
› The new change eventually displaces
the existing market and value network,
resulting in a radical improvement in
performance
Disruptive technologies take a while to change the market
Christensen, Clayton M. (2010-09-06).
Disrupting Class, Expanded Edition: How Disruptive Innovation Will Change the Way the World Learns
PERFORMANCE
TIME
Market for old
technology
Market for new
technology
New replaces
old technology

What have these brands got to do with disruption?
DISRUPTION AND DIGITAL
DISRUPTION

DISRUPTION AND DIGITAL DISRUPTION
Larry Downes - Three laws direct the revolutionary changes wrought by computer technology.
Digital technologies are the disruptive innovation creating a sweeping revolution
The digital and material economies function differently.
The laws of supply and demand are different for digital disruption than
what they are for physical disruption
Most material products are “rivalrous goods.” If one person uses them,
another cannot - two people can’t build a house on the same site.
Digital goods are “nonrivalrous”: Multiple people can use them
simultaneously. Copying a song doesn’t use it up, destroy it or keep
anyone else from using it

DIGITAL ECONOMY
General Principles of the Digital Economy. These are the principles of Digital Strategy
Enablement
“RENEWABILITY”
You can renew data, but not exhaust it. Once created it can be
used over and over again. It is a renewable resource
“UNIVERSALITY”
Everyone can access the same data simultaneously, and use it
for a completely different reason
“MAGNETISM”
Information grows in value as more people absorb it, which, in
turn, creates a network effect, drawing more people who want
to learn. Metcalfe's law
“LACK OF FRICTION”
The more smoothly information flows, the more valuable it is.
“VULNERABILITY”
Criminals can harm or misuse information. They can destroy it,
ruin it or steal it (as in identity theft). In this one sense, data
is like physical goods

“THE LAW OF DISRUPTION”
The dissemination of change is “uneven.” Various elements of society
struggle to keep up with rapid technological change.
Technology changes exponentially, but social, economic and legal
systems change incrementally” and struggle to keep up.

“METCALFE’S LAW”
“Networking pioneer” Robert Metcalfe said that networks become
more valuable the more people use them.
Every time someone joins Twitter, Facebook or, by implication, the
Internet, that network becomes markedly more constructive.

“MOORE’S LAW”
In 1965, Intel’s founder, Gordon Moore, predicted that computer chip “processing
power” would double every 12-18 months without a rise in users’ costs.
This has held true since.
While inflation harms other goods, deflation rules computer technology.
Because software is manufactured and distributed electronically, it has “zero
marginal cost,” unlike the carrying costs of older consumer goods - time is right.

WHAT HAS BEEN
THE RESULT OF THIS
DISRUPTION?

DISRUPTION ALTERS ENTIRE VALUE
NETWORKS
Example: Disruption will alter the entire value chain and place the student at the
centre
Faculty
& Staff
CONTENT
CLASSES
SOCIAL
INTERACTION
LECTURERS
STUDENTS
Students
& Social
Interaction
CONTENT
CLASSES
FACULTY
STAFF
FACILITATORS
Teach at SCHOOL and do Homework at HOME Teach at HOME and do Homework at SCHOOL

DIGITAL
DISRUPTION
IS REDUCING
THE DELAY Action Reaction
Immediate
Feedback
Delayed
Feedback
B
R
“Life is indeed speeding up,
but mans ability to deal with
it, is slowing down”

THIS
ACCELERATION
IS PUTTING
PRESSURE ON
CURRENT
BUSINESS
MODELS
Technology
commoditising
from below
Business roles taking on
more architecture
accountabilities

ANALYTICAL
THINKING
INTUITIVE
THINKING
* From Roger Martin (2009) The Design of Business
GOAL: Exploitation;
Reliability
Produce consistent,
predictable outcomes
GOAL: Exploration; Validity
Produce outcomes that
meet an objective
THE RESULTS OF DISRUPTION
A stronger focus on the exploration and intuitive aspects of business are producing
a strong drive for innovation within the business and in corresponding business
models
Unresolved
Business
Challenges
Heuristics
Rules of
thumb
Robust, repeatable
and replicable
processes
A reliable system will
produce the same test
results every time
A valid system will
produce a result that is
shown, through the
passage of time, to be
correct

THE KNOWLEDGE
FUNNEL
Non-core but complex
- Outsource
Innovation, chaos &
unresolved mysteries
HIGH
HIGH
LOW
LOW
Must be done but adds little value to
product or services
Very important to success, high value added
to products and services
STRATEGIC IMPORTANCE & VALUE
COMPLEXITYANDDYNAMICS
Complex negotiation,
design, or decision process
Many business rules;
expertise involved
Some business rules
Procedure or simple
algorithm
Non -Core
Competencies
Core Differentiating
Competencies
Everyday, highly
repeatable and
automated
Make repeatable and
reliable to gain
efficiency
Core Competitive
Competencies
THE SPEED THROUGH THE KNOWLEDGE FUNNEL IS ALSO INCREASING
Source: Adapted from “Business Process
Change” by Paul Harmon
GOAL: Reliably produce
consistent, predictable
outcomes
GOAL: Validity- Produce
outcomes
that meet desired
objectives

THE COMMODITY SPACE IS GROWING, MAKING THE DIFFERENTIATION SPACE MORE
COMPETITIVE
Non-core but complex
- Outsource
Innovation, chaos &
unresolved mysteries
HIGH
HIGH
LOW
LOW
product or services
Very important to success, high value added to
products and services
Complex negotiation, design,
or decision process
Many business rules; expertise
involved
Some business rules
Procedure or simple algorithm
Non -Core
Competencies
Competencies
Everyday, highly
repeatable and
automated
Make repeatable and
reliable to gain
efficiency
Core Competitive
Competencies
Non-core but complex -
Outsource
Innovation, chaos
& unresolved
mysteries
HIGH
HIGH
LOW
LOW
product or services
Very important to success, high value added to
products and services
Complex negotiation, design,
or decision process
Many business rules; expertise
involved
Some business rules
Procedure or simple algorithm
Non -Core Competencies
Competencies
Everyday, highly repeatable and
automated
Make repeatable
and reliable to
gain efficiency
Core Competitive
Competencies
Opportunity
or Threat?

DISRUPTION IS SHIFTING THE FOCUS TO
CUSTOMER LIFETIME VALUE
This shift is the essence of what drives the emergence of the chief digital officer (CDO). It also forces a
stronger focus on the chief marketing officer (CMO)
SELLER DRIVEN ENTERPRISE CUSTOMER CENTRIC ENTERPRISE CUSTOMER DRIVEN ENTERPRISE
“Maximize product
profitability”
Push Selectively Target Pull (collaboration)
DATA ANALYSIS
SERVICE Interactive & Proactive
UNDERSTANDING Segmented Individualized
CUSTOMER OFFERS Intra-enterprise bundles Inter-enterprise bundles
ORGANISATION Integrated Function Customer Outcome
CHANNELS Segment Driven Integrated and Seamless
“Maximize market
share”
“Maximize customer
lifetime value”
MARKETING
Passive & Reactive Interactive & Reactive
Insight as Art Factual insight Predictive insight
Broad
Product Driven
Singular
Functional Silo
Digital
Strategy
Focus

THE CUSTOMER DRIVEN SHIFT
Production Products
Selling and
Promotion
Profit
Through sales
volume
Target individual
Customer
Intention
Outcome
Marketing
Profit through
customer lifetime
satisfaction
The Selling Concept
Product Driven
The Value Concept Customer Driven
The Marketing Concept Customer Centric
Target Market
Segment
Segment
Needs
Integrated
Marketing
Profit through
Increased
Market Share
The digital
strategy
focus

4P’S ARE OUT 4E’S ARE IN
From Product to Experience
From Place to Everyplace
From Price to Exchange
From Promotion to Evangelism
› EXPERIENCE - Discover and map out the full Customer Journey on your own brand – in your own
country.
› EVERYPLACE - Develop your knowledge of new media and channels the way a chef masters new
ingredients. Try new things – do something that doesn’t start with TV or print.
› EXCHANGE - Appreciate the value of things, not just the cost. Start by calculating the value of your
customers – and what their attention, engagement and permission are worth to you.
› EVANGELISM - Find the passion and emotion in your brand. Inspire your customers and employees
with your passion.
The Change is disrupting some age old marketing fundamentals
Source: Brian Fetherstonhaugh – Ogilvy & Mather:
http://www.Ogilvy.com

WHAT IS DIGITAL?
Digital is a participatory layer of all
media that allows users to self select
their own experiences and affords
marketers the ability to bridge media,
gain feedback, iterate their messages,
and collect relationships.
BUD CADDELL
Enterprise Architects, March 2011 Slide 28

… Consumers expect personalised product experiences
Digitization shifts POWER to the consumer
… and access ANYWHERE, ANYTIME

THE SHIFT TO CUSTOMER DRIVEN IS SHIFTING THE
FOCUS TO CUSTOMER VALUE BASED INTENTION
› Increased mobility of population
› Growing elderly population (Baby Boomers)
› Decreasing job security and increasing
educational requirements
› Increasing tendency to multiple careers
› High divorce rates
› More small businesses and outsourcing
› Increasing diversity
› Increasing travel and cross-border activity
› Broadening understanding of effects of
nutrition, exercise and vacations
› Increase in single parent families and a
growing number of dual-career families
A consumer intention is a fundamental life need or objective that requires extensive planning, decisions and
coordination across several dimensions, such as finances, health, career, family, social and other concerns.
› Moving to a New Community
› Managing for Productive Elder Years
› Upgrading Professional Career
› Changing Career
› Rebuilding Lifestyle
› Building Personal Independence
› Integrating into Culture
› Gaining Cross-Cultural Experience
› Remaining Healthy Throughout Life
› Starting a Family
Environmental Influencers Value Based Intention

VALUE BASED INTENTION - EXPAND BEYOND THE CORE BY
CREATING INNOVATIVE VALUE PROPOSITIONS AROUND A
CONSUMER INTENTION
Current New
-MARKETS-
- PRODUCTS/SERVICES -
CurrentNew
- GROWING -
Existing
Business
“CORE”

TRANSMEDIA EXAMPLE

THE LAWS OF DISRUPTION
› Law One: Convergence – When Worlds Collide” - When the physical world and the digital
world clash, society has to negotiate the chaos
› Law Two: Personal Information – From Privacy to Propriety - Personal information issues are
shifting from matters of privacy to issues of propriety
› Law Three: Human Rights – Social Contracts in Digital Life - Technological disruption has
radically changed human rights.
› Law Four: Infrastructure – Rules of the Road on the Information Highway – AT&T Use Case -
The digital world will change the existing infrastructure and its use.
› Law Five: Business – All Regulation Is Local” - Governments should fund research and
provide safety nets, but should not apply outdated, moralistic or – in the modern
marketplace
Innovative and disruptive solutions cannot be contained by social, legal and economic
systems that cannot keep up. Disruption is causing a rethink on a number of these issues

THE LAWS OF DISRUPTION
› Law Six: Crime – Public Wrongs, Private Remedies - In the digital world, “crime is
just another kind of information use.
› Law Seven: Copyright – Reset the Balance - Existing copyright law is partly
“archaic” and partly useless in a digital world, where copying files is so easy.
› Law Eight: Patent – Virtual Machines Need Virtual Lubricants - Current law tries to
treat software like a patented product. This doesn’t work because of the speed
with which software is developed and becomes obsolete.
› Law Nine: Software – Open Always Wins…Eventually - Copyright and patent laws
now protect software, but the way these laws are drafted fundamentally
misunderstands the nature of software and the digital economy.
Innovative and disruptive solutions cannot be contained by social, legal and economic
systems that cannot keep up. Disruption is causing a rethink on a number of these issues

THE RESULTS OF DISRUPTION & DIGITAL
THE BALANCE IS SHIFTING AS ACCOUNTABILITIES CHANGE
CIO
CMO
CDO
COO
ROI
TCO

THE CMO AGENDA
FOCUS ON THE HERE AND NOW…
Exploration & Validity
Produce outcomes that meet an objective
For a CMO or LOB executive focused on making his or her numbers,
getting to a solution and starting to earn margin more quickly is more
important than getting the lowest possible cost for something.
Source: CIO Magazine:
http://www.cio.co.nz/article/466738/big_shift_when_cmos_grab_it_budget_from_cios/

This CMO focus
will lead to….
GARTNER
PREDICTION
Gartner made a big splash late last year with its prediction that…
by 2017 the CMO will spend more on IT than the CIO
Likewise, IDC predicts that what it terms "line of business executives"
will control 40 percent of IT spending by 2016

EVERYONE NEEDS TO RETHINK THEIR
ASSUMPTIONS ABOUT IT BUDGETS when
considering how they're spent by CIOs and CMOs.
CIOs across Asia Pacific now directly control less than 60 per cent of
enterprise IT spending and “time is running out for CIOs to partner
with the business”, according to Forrester Research’s Dane Anderson.
IT groups across the region accounted for 58 per cent of IT
purchases in 2012, down from 2010 when they bought 74 per cent
of their organisation’s IT.

LESS BUDGET VISIBILITY MEANS SPENDING
UNPREDICTABILITY
In the new, CMO-controlled world, much of the spending will be
focused on public cloud computing, where no capital investment
is required, but where all costs will fall into an OpEx category. The
fact that this spending does not require CapEx means that less
visibility into budgets will be possible on Jan. 1 of a given year.
In short, the new world moves from predictable
CapEx to unpredictable OpEx. You can expect many
more midyear budget recalculations as cloud-based
application costs move all over the map.=

THE CMO AGENDA WILL FOCUS MORE ON
EXPLORATION & VALIDITY
Budgets will further be exacerbated by the fact that
CMO-oriented applications, by their very nature,
have much higher variability of load and user base
Consider the costs of cloud hosting for a viral event

DISRUPTION OF THE PLANNING CYCLE
CMOs frequently are presented with new business
opportunities that don't fall neatly into "beginning
of the year" launch timeframes. If it's a good
opportunity, you want to pursue it right away, not
wait for the next budget cycle.
Budget cycles are affected by the “un-reliable” nature of the CMO agenda

Source: Building Bridges to the Promised
Land, The CMO Club, 2014
THE CMO’S DILEMMA

HOW DO WE ARCHITECT
FOR DISRUPTION?

‘Enterprise Lifecycle's
2014 © Enterprise Architects PTY LTD
PERORMANCE
TIME
ENTERPRISE
BRAND PLATFORM
BUSINESS MODEL
BUSINESS CAPABILITIES
PRODUCT
CONSTANT CHANGE IS MOVING UPWARDS
FASTER
ORGANIZATIONS…AND ARCHITECTS NEED TO BE ABLE TO PROVIDE THE MEANS TO
ENABLE THIS CHANGE

Improve project
performance
Improve enterprise wide
investment performance
Improve Business Performance
Improve Market Performance
A
B
VALUE
MANDATE
C
E
Improve Product and & Service
Performance D
THE CMO DILEMMA IS BEST DEALT WITH BY
ARCHITECTURE….BUT WHERE IS THE MANDATE
Business Architecture is
seen as a positive
progression away from IT
Maximize Product Profitability
Maximise Market Share
Maximise Customer Lifetime Value
…but in fact business
architecture spans
this entire curve.
Therefore the higher
the mandate, the
higher the value
*Adapted from Ruth Malan, Dana Bredemeyer

THE IMPERATIVE TO ACT
SOME INDUSTRIES ARE ABLE TO REALIZE THE VALUE SOONER
Improve Business
Model Portfolio
Performance
Ahead of the curve
Behind the curve
ARCHITECTURE
MANDATE
TIME
A
B
C
E
D
F
RETAIL
MEDIA&
ENTERTAIN’T
ICT
ACCOM.
FINANCE
SERVICES
EDUCATION
Industry distribution

THE EA DIGITAL STAKEHOLDER MAP™
A digital strategy requires coherency between the CMO and CIO as they seek to
deliver the customer driven outcomes
‘The Digital Stakeholder Map

THE EA DIGITAL STRATEGY APPROACH™
A business architecture is central to the development of a digital strategy
‘The Digital Strategy Approach

THE DISCIPLINE OF BUSINESS ARCHITECTURE
THE ROLE OF THE BUSINESS ARCHITECTURE FUNCTION IS TO FACILITATE A MORE EFFECTIVE
AND EFFICIENT MOVEMENT THORUGH THE KNOWLEDGE FUNNEL
Unresolved
Business
Challenges
Rules of thumb
Robust, repeatable
and replicable
formulas & processes
Ultimately all innovative
algorithms will become utility.
* From Roger Martin (2009) The Design of Business

THE EA APPROACH TO ARCHITECTING FOR
DIGITAL
An end-to-end view is required to enable the CMO agenda using “Architecture
Thinking”
EXPERIENCES

Improve project
performance
Improve enterprise wide
investment performance
Improve Business Performance
Improve Market Performance
A
B
VALUE
MANDATE
C
E
Improve Product and & Service
Performance D
ARCHITECTING FOR DIGITAL DISRUPTION
Business Architecture is
seen as a positive
progression away from IT
Maximize Product Profitability
Maximise Market Share
Maximise Customer Lifetime Value
*Adapted from Ruth Malan, Dana Bredemeyer
Value System Engineering the use of tools like the canvas tend to occur at a higher
mandate, but the value of business architecture at this level is much higher

BUSINESS MODEL INNOVATION IS REQUIRED
Disruptive Business Models can be found when you mix it up at the value system level
EDUCATION
POLICY &
LAWMAKERS
ENFORCEMENT JUDICIAL PENAL COMMERCIAL

Business Motivation
Strategic Business Models
Value Discipline Orientation
Operating Business Models
Capabilities and Resources
DISRUPTION
NORMALLY
OCCURS WITHIN
THE VALUE
SYSTEM.
IT’S THE
STRATEGIC
BUSINESS MODELS
THAT CAN
DETERMINE
WHERE VALUE LIES
O P C O P C O P C
MISSION
STRATEGIES
TACTICS
VISION
GOALS
OBJECTIVES
Pe Pr T Pe Pr T Pe Pr T
LEVERS
DRIVERSI N F O R M A T I O N

WHAT IS A BUSINESS MODEL?
Some Definitions
“A Business Model describes the
rationale of how an organisation
creates, delivers, and captures
value” Alex Osterwalder – Business
Model Generation
THE ENVIRONMENT
BUSINESS MODEL
Markets
Industries
Customers
Market Segment
Channels
Customer Relationships
Value Proposition
Offering:
Services/Products
Processes/ Value Chains
Capabilities
Business Service
Functions
Data
Applications
Technology
MARKET
MODEL
OPERATING
MODEL
SERVICE
MODEL

THE STRATEGIC BUSINESS MODEL
The canvas is a tool that is used to prototype a variety of strategic business models

THE STRATEGIC BUSINESS MODEL
Each strategic scenario can be evaluated in line with the value disciplines of the organisation
DRIVER TREES AND VALUE
MAPS & GOALS
These value disciplines will help decisions around the strategic
balance between efficiency and effectiveness
There is often fragmentation around value disciplines which results
in “competitive” forces and flawed decision making
Semi
Integrated
Universal Bank
Product
Specialist
Customer
Owner
Infrastructure
Provider

*Adapted from Geoffrey Moore’s:
Dealing with Darwin
Each industry moves along a life
cycle, with different opportunities for
competitive advantage at each stage
THE STRATEGIC
BUSINESS MODEL
Its also great for start-ups at the
early stage of the lifecycle
Introduction Growth Maturity Decline
TOTAL
INDUSTRY
REVENUE
TIME
DISRUPTOR
ENTERS
MARKET SHARE, REVENUE
& COST BECOME KEY
PRODUCT
INNOVATION
REDUCES
PROCESS INNOVATION
BEGINS
PRODUCT LEADERSHIP CUSTOMER INTIMACY
OPERATIONAL EXCELLENCE
VALUE DISCIPLINE
ORIENTATION
THROUGH THE
INDUSTRY LIFECYCLE

STRATEGIC BUSINESS MODEL MATURITY
Measuring the Maturity of a full business model is a complex task. The Key is to
look for certain heuristics to use as a litmus test.
*Rita Gunther McGrath

BUSINESS MODEL MATURITY
1. Switching costs – how easy or difficult will it be for
your customers to “switch to or from” your business?
2. Recurring revenues – how much recurring revenue
does the business model bring in?
3. Earn before spend – does the business model allow
for the organisation to earn money before it is spent?
4. Game Changing cost structures – are there cost
structures in place that create a new market
5. Shifting the burden – does the business model get
others to do the work for you, or pay your bills for you
6. Scalability – can the business scale to include massive
volumes as well as support different markets
7. Competition – how well does the business model
protect the organisation from competition
A Strategic Business Model health can be evaluated based upon 7 criteria

WHERE TO
FROM HERE?

MOVING STRATEGIC BUSINESS MODELS INTO
THE DETAIL
STRATEGIC BUSINESS MODELS CAN ONLY GO SO FAR. THE NEXT LEVEL OF
DETAILS IS REQUIRED

WHAT WE HAVE FOUND IN LARGE ACCOUNTS
Cohesion Mandate
Undefined - Enterprise Planning Ownership
An ownership gap for business architecture exists - Lines of responsibility around coherency
and business architecture, are often unclear
EnterprisePerformance
Capabilities
X-FunctionalCapabilities
FunctionalCapabilities
CONTEXT
Markets
Industries
Customers
Market Segment
Channels
Value Proposition
Offering:
Services/Products
Capabilities
Business Service
Functions
Data
Applications
Technology
MARKET
MODEL
OPERATING
MODEL
SERVICE
MODEL
Strategic
Architecture
Mandate –
Business
Ownership
IT Architecture
Mandate –
IT Ownership
Business
Architecture
Mandate
Undefined

THERE IS OFTEN A CHASM BETWEEN THE CUSTOMER EXPERIENCE
VISION, PRODUCT DEVELOPMENT AND OPERATIONAL REALITY
› Value Chain Analysis
› Cross Functional Models
› Capability/Business Anchor Models
› Process Models
› Application Models
› Data and information Models
› Technology Models
› Value Maps
› Product and Offering Maps
› Design Models
› Customer Storyboards & personas
› Journey Maps & Lifecycles
› Learning Maps
› Motivation Models
› Business Model Innovation
GAP
GAP
THE ENVIRONMENT
BUSINESS MODEL
Markets
Industries
Customers
Market Segment
Channels
Customer
Relationships
Value Proposition
Offering:
Services/Products
Processes/ Value
Chains
Capabilities
Business Service
Functions
Data
Applications
Technology
MARKET
MODEL
OPERATING
MODEL
SERVICE
MODEL

FOR THE DIGITAL STRATEGY TO BE REALISED, YOU NEED TO LOOK FOR
THE MOST EFFECTIVE WAY TO ALIGN THE BUILDING BLOCKS OF YOUR
BUSINESS MODEL
› Value Chain Analysis
› Cross Functional Models
› Capability/Business Anchor Models
› Process Models
› Application Models
› Data and information Models
› Technology Models
› Value Maps
› Product and Offering Maps
› Design Models
› Customer Storyboards & personas
› Journey Maps & Lifecycles
› Learning Maps
› Motivation Models
› Business Model Innovation
THE ENVIRONMENT
BUSINESS MODEL
Markets
Industries
Customers
Market Segment
Channels
Customer
Relationships
Value Proposition
Offering:
Services/Products
Processes/ Value
Chains
Capabilities
Business Service
Functions
Data
Applications
Technology
MARKET
MODEL
OPERATING
MODEL
SERVICE
MODEL

Customer Outcome
Customer Expectations
Customer interaction map : Customer Segment ABC
Establishing my
account is quick and
simple…
Integration is quick and
easy, with the right
help available
Efficient, with choices
that make it
convenient
I know when the
goods will arrive
I can find out whether
my goods were
delivered;
I get a meaningful
resolution to my
problem
“I want to set-up my account” “I want to get ready to send goods” “I want to send a shipment”
“I need to know when my goods will
arrive”
“I want confirmation that my goods
have arrived”
“Something has gone wrong with my
goods delivery…”
KPIs
% of accounts set-up in
<X hours
% of accounts that
utilise more than X
% of orders with no
manual intervention
% of articles with at
least 4 scans
Service Delivery
Performance Metric
# of complaints per
million
Set-up Integrate Order
Track
and Trace
Receive QueryB C D E F G
FOCUSSING ON THE CUSTOMER JOURNEY AS A CROSS FUNCTIONAL
CAPABILITY PRODUCES QUICK WINS FOR THE CMO, THE BUSINESS
AND THE CIO
Map the Customer personas into a customer interaction map to come up with the journey through the
customer value chain & look for issues

Customer Outcome
Customer Expectations
Customer interaction map : Customer Segment ABC
Establishing my account
is quick and simple…
Integration is quick and
easy, with the right help
available
Efficient, with choices
that make it convenient
I know when the goods
will arrive
I can find out whether
my goods were
delivered;
I get a meaningful
resolution to my
problem
“I want to set-up my account” “I want to get ready to send goods” “I want to send a shipment”
“I need to know when my goods will
arrive”
“I want confirmation that my goods have
arrived”
“Something has gone wrong with my
goods delivery…”
KPIs
% of accounts set-up in
<X hours
% of accounts that utilise
more than X
% of orders with no
manual intervention
% of articles with at least
4 scans
Service Delivery
Performance Metric
# of complaints per
million
Set-up Integrate Order
Track
and Trace
Receive QueryB C D E F G
CUSTOMER BEHAVIOUR: THE CUSTOMER VALUE
CHAIN & EMOTIONAL DRIVERS
In light of the touchpoints understand the customer value chain and their emotional drivers
across the value chain

CUSTOMER BEHAVIOUR: UNDERSTAND THE EMOTIONAL
ROLLER COASTER OF YOUR CUSTOMERS
Incremental, significant or transformation changes required to improve the experience

THE ENVIRONMENT
BUSINESS MODEL
Markets
Industries
Customers
Market Segment
Channels
Value Proposition
Offering:
Services/Products
Capabilities
Business Service
Functions
Data
Applications
Technology
MARKET
MODEL
OPERATING
MODEL
SERVICE
MODEL
THE CUSTOMER JOURNEY OVERLAID ONTO THE CROSS FUNCTIONAL
CAPABILITY MODEL WILL HELP FOCUS THE EFFORTS OF THE BUSINESS
ON VERY SPECIFIC DIGITAL STRATEGIES
Its at this point that business begins to see the true value of using capabilities
Standard functional capabilities can
be aligned to a value chain
Cross functional capabilities assemble and mix functional capabilities to
achieve outcomes in the value map or driver tree
Cross functional capabilities each drive out
different outcomes. Underlying functional
capabilities will have varying perspectives of
capability maturity and capability uplift
You can also use cross functional models as scenarios to
test the capability anchor model validity

CROSS FUNCTIONAL MODELS PROVIDE THE GLUE TO LINK
THE VALUE TOGETHER FOR THE CUSTOMERS
The Process Layer Plays a Strong Role in assembling capabilities for different outcomes
PROCESS
Sign Up & Integrate
CAPABILITY
20. Information Services Management
CAPABILITY
15. Sales Execution
PROCESS
A1. Explore and compare
potential providers and
services
PROCESS
B2. Sign up and activate
account
PROCESS
C3. Integrate my store
with Australia Post’s API’s
precedes precedes precedes precedes
BUSINESS SERVICE
Customer Sales
Management
BUSINESS SERVICE
Partner Collaboration
PROCESS
C1. Receive information on
how the systems and
processes will work
PROCESS
C2. Install the necessary
hardware / software on
my systems
is realized by
LOGICAL
APPLICATION COMP.
Customer Sales
Management
LOGICAL
APPLICATION COMP.
Enterprise Resource
Planning
LOGICAL
APPLICATION COMP.
Partner Collaboration
Management
LOGICAL
APPLICATION COMP.
Security Management
communicates with communicates with
communicates with
implements
is realized by
implements
ACTOR
Post Staff
DATA ENTITY
Sales Order
ACTOR
Post Staff
participates in participates in
is processed by
consumes
SAP - CRM SAP - ERP auspost.com.a
u
IAM - OIM
is processed by
ACTOR
Fiona
participates in
Customer
CAPABILITY
People
Process
Tools
Connecting these to projects provides valuable
insight into coherency o the capex investment
across the enterprise
Within each process flow, there are
typically four to five capabilities that make
up the process. These typically correspond
to functional silos that complete each step.
Within each capability, the model
identifies systems or applications that
are used to execute the capability. This
is where the model forms the alignment
between business and IT.
Archimate
Notation

THE CAPABILITY ANCHOR MODEL PROVIDES THE UTILITY
BUILDING BLOCKS REQUIRED
The capability anchor model represents the "map" of the organisation
THE ENVIRONMENT
BUSINESS MODEL
Markets
Industries
Customers
Market Segment
Channels
Value Proposition
Offering:
Services/Products
Capabilities
Business Service
Functions
Data
Applications
Technology
MARKET
MODEL
OPERATING
MODEL
SERVICE
MODEL

THE BUSINESS ANCHOR MODEL
The Business Anchor Model Anchors the organization on the set of blocks they can use to
drive out the digital outcomes
CUSTOMER EXPERIENCES
VALUE DRIVING CAPABILITIES
SUPPORTING CAPABILITIES
SUPPLIERS&PARTNERS
CUSTOMER TOUCHPOINTS
PRODUCTS AND SERVICES
VALUE CHAIN VALUE CHAINVALUE CHAIN
CUSTOMERS,STAKEHOLDERS
CROSS FUNCTIONAL VALUE STREAMS
VALUE BASED INTENTIONS
THE EA APPLIED BUSINESS ARCHITECTURE COURSE

Questions?

1. In the old, IT-controlled world, yearly
budgets were more or less set in stone by Jan 1.
Beyond the obvious fact that headcount costs
were more or less fixed and could be forecasted
by that date, most other spending was fixed as
well. Because non-maintenance, non-headcount
spend was primarily capital expenditure for
long-lived assets, it had to go through long
planning and budgeting exercises before the
year it would be spent, often two or more years
in advance. It's common for IT organizations to
be researching something in one year, putting it
into the budget planning the next year and
spending the following year.
In the new, CMO-controlled world, much of the
spending will be focused on public cloud
computing, where no capital investment is
required, but where all costs will fall into an
OpEx category. The fact that this spending does
not require CapEx means that less visibility into
budgets will be possible on Jan. 1 of a given
year.
LESS VISIBILITY MEANS SPENDING
UNPREDICTABILITY
This new CMO cloud world will cause IT spending within a company to be far less predictable for the following reasons:
2. This unpredictability will be exacerbated by
the fact that these CMO-oriented applications,
by their very nature, have much higher
variability of load and user base. If your
application is tied to a movie's release, and the
star of the movie experiences a personal
scandal that drives enormous interest in the
movie, your app may experience 10 times the
traffic you expected-and 10 times the cost for
your cloud computing.
3. A third factor increasing the unpredictability
of IT spending lies at the intersection of the
decision-maker profile and cloud computing
itself. CMOs frequently are presented with new
business opportunities that don't fall neatly into
"beginning of the year" launch timeframes. If it's
a good opportunity, you want to pursue it right
away, not wait for the next budget cycle.
In the past, when you had to budget capital to
pursue an opportunity, the process meant the
increased spending was quite predictable, as it
had to be planned for and slotted into the
yearly budget. Today, when cloud computing
makes resources available in minutes, there's
little to prevent you from starting right away.
Even if there's a budget forecast at the
beginning of the year, you can expect
significant variation as CMOs choose to pursue
promising new business opportunities.

DISRUPTIVE BUSINESS MODELS
Predictions…

Using Business Architecture to enable customer experience and digital strategy

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