Business-Agile Enterprise


Business-Agile Enterprise

A Business-Agile Enterprise (B-AE) is a new Business Architecture that maximizes asset reuse and horizontal integration across lines of business. A B-AE is a company that has mastered the interrelationships between business and Information technology (IT) of resiliency, agility and innovation, and understands that these interdependencies are today's best way to attain competitive advantage, industry leadership and improved financial results.

More definitively, a Business-Agile Enterprise is a company whose business leaders;
# wholeheartedly & enthusiastically embrace business agility doctrine
# have totally converged (i.e., mega-alignment) business & IT
# have defined simple and clear Information technology governance
# encourage and reward asset reuse across lines of business
# recognize the power and necessity of a sophisticated IT infrastructure

As an analogy, think of the Internet. It was created to make national defense communications "resilient", i.e., able to bounce back from a shock. Yet it allows organizations to be "agile", i.e., able to act nimbly to seize opportunities. And it has been the enabler of endless "innovation" in business models, processes and global collaboration.

This new modus operandi for business is an amalgam of recently matured business & IT methods that can now effectively work together to create a new business model exuding agility and competitiveness. These disciplines include Business Technology Management, Service Oriented Architecture, IT Governance, SOA Governance, IT Portfolio Management, Business Process Management, Control Objectives for Information and related Technology (CobiT), Enterprise Architecture, Business Architecture, Project Management, Information Technology Infrastructure Library, ITIL V3 (Alignment of IT to business), IT Service Management, Information Management, Matrix Management, Business Process Modeling, to name a few.

A Business-Agile Enterprise is a company that has attained a level of business-performance sophistication where they can execute all of the company-controllable, business & IT joint endeavors that result in significantly increasing the firm's bottom-line financial numbers. Recent primary research from world-renowned universities and business institutes validate the B-AE principles with increased financial measurements such as;
* Margins
* Profitability
* Time to Market
* Revenue Growth
* Earnings per Share
* EBITDA (Earnings Before Interest, Taxes, Depreciation & Amortization
* Return on Equity
* Return on Assets
* Return on Investments

Agile companies make more money with less resources and lower costs

There are relatively few institutions that have undertaken primary research into agility. This is understandable since many of the benefits of agility have been perceived as intangible and therefore difficult to measure. However, there are two groups that have attained international recognition for the accuracy, scope and range of their primary researach in this area. These groups are the [http://www.btminstitute.org/Home/ Business Technology Management Institute] and [http://mitsloan.mit.edu/cisr/ MIT Sloan School of Management's Center for Information Systems Research] [Note: The author is not an employee of BTM or MIT CISR] .

Agility Primary Research - Business Technology Management Institute

In the mid-90s Faisal Hoque left his senior management position at GE to pursue research in business/IT convergence and agility. He has become an internationally known, visionary entrepreneur and award winning thought leader, for example, in April 2008 he was named as one of the top 100 most influential people in technology by Ziff Davis Enterprises/eWeek.The full list can be found at http://www.eweek.com/c/a/IT-Management/100-Most-Influential-People-in-IT/] Mr. Hoque and his colleagues at Business Technology Management Institute, have recently published a ground-breaking document, titled the "Business Technology Convergence Index," that summarizes 5 years of global research across 50 industries. The results provide significant insight into the large financial benefits a firm can accrue in converging their business & IT groups.Business Technology Convergence Index Hoque, Fillios, Cash, Kirkpatrick, Mimms, Palepu, Sambamurthy & Zmud, Business Technology Management Institute, pp.8-17, June 2007. A copy of this report can be obtained at http://www.btminstitute.org/pdf/Business_Technology_Convergence_Index_Final.pdf ] . The substantial increase in bottom-line numbers seem to justify all companies seriously considering business & IT convergence - a staple of the Business-Agile enterprise.

Agile Companies have converged their Business & IT worlds and consistently exhibit superior revenue growth and net margins relative to their industry groups.

* Annual Revenue Growth - 12% growth vs 4% for their industry groups
* Average Annual Earnings per Share - 36% growth vs 7% for their industry groups


=Agile Companies not only grow at a faster pace than their peers, but they also exhibit consistently greater returns than those of their direct competitors.=

* Earnings Before Interest, Taxes, Depreciation & Amortization - 6% higher EBITDA than those delivered by their industry groups
* Return on Equity - 4% Higher
* Return on Assets - 8% Higher
* Return on Investments - 14% Higher

It is important to emphasize that these figures are not limited to any one area within the enterprise; they are not "IT-specific," and they do not measure returns on any single project. Rather, they measure enterprise-wide returns, and they reflect the EBITDA of the entire enterprise. The financial effects are enterprise-wide, because the key management capabilities are interconnected, and because both the business and technology professionals in an Agile company actively share ownership of decision-making and execution.

Converged company examples

There are powerful and successful companies that prove the financial value of business & IT convergence.
* FedEx
* Harrah's Entertainment
* Lockheed Martin
* UPS
* Wal-Mart

Agility Primary Research - MIT Sloan School of Management's Center for Information Systems Research

Since 1998, when Peter Weill (Peter was also recognized in April 2008 as one of the top 100 most influential people in technology by Ziff Davis Enterprises) from MIT and Marianne Broadbent from Gartner published results of their five-year study, their book, "Leveraging the New Infrastructure" ["Leveraging the New Infrastructure - How market leaders capitalize on Information Technology, Peter Weill & Marianne Broadbent, Harvard Business School Press, 1998.] , the idea of treating IT as a portfolio of investments, just as corporate finance handles their investment portfolios, has become a very popular and well documented way to assess IT business value. Agility turns out to be a major contributor to these financial benefits.


=Agile Companies show Higher Profit Growth. ["Business Agility & IT Portfolios," MIT Sloan School of Management, Center for Information Systems Research, Summer Session 3, June 2006, data from 649 firms, National Science Foundation grant number IIS- 0085725. Agile = Average of firms above sample mean on percent of sales from new products (i.e., 5.6%). Staid = Average of firms below sample mean. Copyright © Massachusetts Institute of Technology, 2006. This work was created by MIT’s Sloan Center for Systems Research (CISR)] =

Notice that the Profit Difference is 50% between Agile and Staid companies.

Agile Companies exhibit superior Business Value relative to their industry groups. ["IT Portfolio Management and IT Savvy - Rethinking IT Investments as a Portfolio," MIT Sloan School of Management, Center for Information Systems Research, Summer Session, Peter Weill, June 14, 2007. Research was conducted by MIT via the SeeIT/CISR survey of 629 firms - 329 of these firms are listed on US stock exchanges. The work was financed by the National Science Foundation grant number IIS- 0085725. Copyright © Massachusetts Institute of Technology, 2007. This work was created by MIT's Sloan Center for Systems Research (CISR)]

* Business Value - firms with above average IT spending & IT Savvy (defined just below) had net margins 20% above their industry's median
* Profitability via Sharing - firms with above average percentage of shared applications & IT Savvy have Return on Assets 30% above their industry's median
* Time to Market - firms with above average IT infrastructure spending & IT Savvy grew 3 percentage points higher than their industry's average
* IT-enabled Business Investments - top performing companies (IT Savvy) can get up to 40% more value

Agility focused businesses have reduced IT costs ["Managing the IT Portfolio," Microsoft Solutions Forum 2004, Peter Weill. File can be obtained from http://download.microsoft.com/download/4/f/3/4f33cdbb-f8c9-4edf-9bd7-6675d67d9eea/IT_Portfolio%20-%20Sept06.pdf]

Since 1998, when Peter Weill from MIT and Marianne Broadbent from Gartner published results of their five-year study their book, "Leveraging the New Infrastructure" ["Leveraging the New Infrastructure - How market leaders capitalize on Information Technology, Peter Weill & Marianne Broadbent, Harvard Business School Press, 1998.] , the idea of treating IT as a portfolio of investments just as corporate finance handles their investment portfolios, has become a very popular and well documented way to assess IT business value. Business & IT convergence through synchronization of business strategy and technology portfolios is a major contributor to agility and hence competitiveness.

Therefore, MIT has proven that IT departments that have a cost focus spend more and get less than those of an agility focus.

The Business-Agile Enterprise Approach

The rubric "Business-Agile Enterprise" is not a crest bestowed on a company after completing a certain number of tasks. Rather it is an ongoing migration to a business state where a company has reached the highest level of competitiveness for their industry for that particular moment in time. However, the concepts behind the B-AE are so flexible that it can modify itself to coordinate with ever-changing business environments. Therefore, companies will no longer strive for the latest vogue organizational structure, rather they will simply move to a new degree of agility to match their industry's competitive requirements. Since competition is always changing, the B-AE is a journey not a destination.

Technique

The B-AE is a top-down, business approach that summarizes in one place the myriad of joint business & IT elements necessary to compete.
* It starts with the Business-Agile Proficiencies (B-AP). The B-AP(s) measure agility (and therefore financial performance) across the Business-Agile Enterprise Framework (B-AEF), i.e. the company.
* The B-AP(s) are driven down into the Business-Agile Enterprise Framework where the practical everyday requirements needed to conduct business are referenced, executed & measured.
* The B-AEF requires two investments;
*# IT investments - e.g., Service-oriented architecture infrastructure so stable and ubiquitous as to become a utility
*# Business technology investments - e.g., reuse policies and new roles such as the business service champion and the business service analyst
* The is a work product of the B-AE Framework. It contains 190 "slots" that describe the execution environment of each of the 5 dimensions (information, organization, process, technology, reuse) within each of the capabilities (e.g., strategic & tactical governance, portfolio & program management, etc...). The filled-in template;
*# Identifies software, hardware, products & services that execute the particular capability
*# Identifies business & technology gaps
*# Shows business & technology redundancies
*# Highlights where acquisitions fit

Business-Agile Proficiencies

The B-AP(s)s are a set of ten (10) practices and competencies that define agility from a practical standpoint. All of the proficiencies are financially justified and proven by university and industry primary research. The Business-Agile Proficiencies are:
# Business & IT Convergence (Asset Sharing & Mega-Alignment)
# Competencies that drive Superior Value from IT (IT Savvy) ["IT Savvy Pays Off: How Top Performers Match IT Portfolios and Organizational Practices," Peter Weill & Sinan Aral, MIT Sloan School of Management Center for Information Systems Research, May 2005. Document can be obtained from http://papers.ssrn.com/sol3/papers.cfm?abstract_id=779345]
# IT Portfolio Asset Class Management (Enterprise Architecture)
# Governance (Direction, Control & Distributed Authority for Decision Making)
# Senior Management Leadership (Management Involvement)
# Business Control of Information (Intellectual Capital & Information Visibility)
# Business Process Understanding (Component Business Modeling)
# Business Case (Business Value Documentation throughout Lifecycle)
# Key Business Performance Indicators (Consistent & Continuous Benefits Valuation)
# External Relationships (External Assets, Skills & Competencies to act on Opportunities)

Business-Agile Enterprise Framework

The practical definition of Agility (Business-Agile Proficiencies) and the intellectual capital that measures it, however, still do not describe how agility fits within the company's everyday operations. We need something to describe the big picture and show where this all fits and how it works together. This is where the Business-Agile Enterprise Framework comes in. The B-AEF is a unifying management system that connects the business & technology sides of the company and facilitates their coordination as a whole. It addresses business & technology as one holistic, structured management system achieving consistent vertical and horizontal integration.

Business-Agile Enterprise Business Architecture

See also

* Business Technology Management
* Strategic planning
* Marketing strategies
* Business model

* Business plan
* Business model design
* Business process modeling
* Service-Oriented Modeling

Notes


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