Where is value created in Enterprise Architecture - Part 1

Changing the game for EA practice

Overview

It has been tradition that an Enterprise Architecture (EA) Practice has managed itself in the traditional manufacturing goods-centered way that has been common since the onset of the industrial era. This causes the architects to focus on the wrong point of value delivery to satisfy their clients. Changing the game by managing itself as a service-centered business in its own right and changing the locus of value creation to the architect-client interaction will change uninterested clients into raging fanatics.

Introduction

Enterprise Architect Practices in many organizations struggle to remain relevant and even to remain in existence. Practice leaders struggle with reporting structures and continued proof of return on investment for the headcount and funding to maintain the practice. Finding a champion in the executive ranks helps the cause, but why aren’t the stakeholders demanding the permanence of the EA practice that is supposed to advocate for their requirements? What is the value of having an EA practice? Or to be more precise, where is value created by an EA practice? Common management measurement practices have their origin in the beginning of the Industrial Revolution. These measurements are rooted in what is termed goods-dominant logic (Lusch, 2008) where goods are created away from consumers who diminish the good’s value through consumption. Employee measurement became based on how many “widgets” were produced. Value is created away from the customer in the manufacturing site. The EA practice has waited to receive a “request for architecture work” and then engaged to “manufacture” architecture artifacts, creating an architectural representation to be presented back to the client. This goods-centered approach has created a customer requirements dissonance, and often less than satisfactory results in the viewpoint of the client. Architects are commonly measured on the number of artifacts they produce and the timeliness of their delivery.

The EA practice should be organized as a service focused business (entity) within an enterprise. As the EA practice delivers a service it should be measured through application of service-dominant logic (Lusch, 2008) where value is co-created at the point of service between the architect and the client. As such, the relationship between the architect and the client should be understood, measured and managed as interdependent. Ideas of customer satisfaction need to acknowledge the emotional component of these relationships in addition to the impact that necessary information for decisions is delivered in a timely manner. Practices to encourage customer engagement with the “brand” of the EA practice should be developed along with the feedback mechanisms that encourage them.

An overview of goods-centered and service-centered concepts

The Industrial Revolution brought economies of scale and standardization to the production of goods. The field of economics soon picked up on the paradigm of goods manufacturing, placing emphasis on the possession of raw materials (wealth) and the transformation of raw materials into goods to be sold. The fundamental concepts that emerged from this goods-centered view were:

1. “The purpose of economic activity is to make and distribute things that can be sold.

2. To be sold, these things must be embedded with utility and value during the production and distribution processes and must offer to the customer superior value in relation to the competitor’s offerings.

3. The firm should set all decision variables at a level that enables it to maximize profit from the sale of output.

4. For both maximum production control and efficiency, the good should be standardized and produced away from the market.

5. The good can then be inventoried until it is demanded and then delivered to the consumer at a profit.” (Vargo & Lusch, 2004)

Personnel Management concepts soon followed in this goods-centered view, with notions of value exchange between workers and firms being the provision of labor at the lowest cost to maximize the profit of the finished good. Ideas such as attendance-based compensation, where workers were considered “interchangeable parts” that were paid to show up and perform tasks as they were instructed, soon followed.

As work became more specialized and based on information in the later half of the 20th Century, notions of services delivery as products to be sold followed the goods-centered view of industry. Marketing ideas of customers as physical resources to be “Segmented” and “Sold to” followed this view as well, and drove business strategy and marketing development.

It is not surprising that Enterprise Architecture would be organized and carried out in this goods-centered world view. “Requirements” are raw materials to be gathered from “Stakeholders”, and out of sight of these consumers, raw materials (Requirements) are transformed through the Architecture Development Method into “artifacts” and “Deliverables” that are returned to the “Stakeholders” under contractual obligation.

Progress in Economics with this goods-dominant logic came in the form of trying to make the theories into Science. Economists along the way tried to account for services in a firm as “intangibles”. The literature points several times to the inadequate nature of this treatment, particularly as work became more specialized and many jobs were carried out internally with no connection to the manufacture or distribution of goods. A service-centered view emerged as recognition of a “service economy” grew. Research has shown that standard economic practices cannot account for as much as 80% of market value of the average S&P 500 company, labeling it as “intangibles”. (Fleming & Asplund, 2007) Perhaps they have the valuation backwards!

In the service-centered view, or service-dominant logic (S-D logic) the locus of value shifts from being embedded in the goods to being delivered at the point of contact with the consumer. In fact, value is co-created with the customer as value-in-use of the service. This is not to be confused with the sale of “Services”, as in the idea of Consulting Services, but more the idea of Jobs-to-be-done for which a solution is created.

The primary unit of exchange in S-D logic is knowledge and skills, rather than goods. Goods become an appliance in the delivery of service. This difference is exaggerated in the adage. “People don’t buy a drill to own the drill, they buy it to own the holes.” Interactions between the firm and customer become crucial in S-D logic because relationships are key to a self-reinforcing value cycle. In this cycle, needs come from the customer, and the firm delivers highly customized knowledge and skills. Cash flow is the measure of success of the firm’s value proposition. An example is hours of jet engine performance which include an engine and all maintenance provided by the manufacturer.

In the service-centered world, firms differentiate themselves by their value propositions. This notion fits well with concepts of movement from “value-chains” to “value-networks”. The recognition of value networks makes ideas of competition and partnering different as well. A competitor may be a collaborator as well, as value propositions are combined to satisfy customer needs.

In service-dominant logic, the EA practice behavior looks very different. Every interaction with a stakeholder is the key to value delivery. A value proposition to deliver strategy, supply guidance for decisions, and supply other special knowledge and skills might be a good starting offer. To accomplish this change, the EA practice needs to think of itself as its own firm and the stakeholders and executives as its customers. The practice’s value proposition needs to be carefully tuned and continuously adapted. Customer engagement becomes critical to the practice.

Works Cited

Fleming, P. J., & Asplund, J. (2007). Human Sigma - Managing the Employee-Customer Encounter. New York, NY: Gallup Press.

Keirsey, D. (1998). Please Understand Me II. Del Mar, CA: Prometheus Nemesis Book Company.

Lusch, V. a. (2008). Toward a conceptual foundation for service science: Contributions from service-dominant logic. IBM Systems Journal , 47 (1), 6.

The Open Group. (2011). The Open Group Architecture Framework (9.1 ed.). Reading, U.K.: The Open Group.

Vargo, S. L., & Lusch, R. F. (2004). Evolving to a New Dominant Logic for Marketing. Journal of Marketing , 68, 1-17.