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28 sep 2020

Three principles for organizational redesign of an enterprise architecture

Enterprise Management

Digital technologies have raised customer expectations for responsive, seamless online services and information-enriched products. Many companies are struggling to meet those expectations and will continue to struggle unless they embrace enterprise architecture. This is what Jeanne Ross and Cynthia Beath write in a publication in MIT Sloan Management Review. In the article the authors shed their light on the importance of an enterprise architecture and what this means for business.

Many companies have this challenge, as highlighted in the article of Jeanne Ross and Cynthia Beath. Their businesses are designed around product verticals. The focus is on optimising profits and defining a customer experience for that specific product, independently of the rest of the organization. However, in the digital economy it is all around integrated solutions requiring people to work across product lines. “To meet these demands, companies must rethink how work gets done and how that work relies on people, processes, and technology”, they state.

To achieve this. business need to evolve into a digital company. “To take advantage of new technologies, they need to become flatter, more evidence-based, more automated, and more digitally aligned both vertically and horizontally”, Ross and Beath advice. “These design changes will allow them to respond faster to both operational problems and new business opportunities.”

Three principles for organizational redesign

Enterprise architecture provides a road map for organizational redesign built around three principles for organizational redesign: 1) enterprise architecture breaks processes and products into components, 2) empowered cross-functional teams implement enterprise architecture and 3) enterprise architecture influences strategy the article clarifies.

Principle 1: enterprise architecture breaks processes and products into components

The enterprise architecture of today is around componentizing a company’s key outcomes like products, customer experiences, and core enterprise processes. Key is to assign clear accountability for each component. The enterprise architecture designs the critical people-process-technology enabling both operational excellence and adaptability to change, the authors explain.

“For example, in many companies, payment processing is built into many different products. Instead of designing payments into each product separately, a single team could design the technology and processes required for payment processing for all products. That turns payment processing into one of these people-process-technology bundles, which is a reusable component. Staff members can continually improve processes and technologies in response to the changing needs of the customers and product owners who are the components’ stakeholders. The component becomes a living asset in the company.”

Early research findings indicate that componentization helps organizations use data more effectively and respond to business opportunities faster. “Each new component adds value when implemented. Companies can stage the development of new components when it’s clear that they will create value”, according to the authors.

Principle 2: empowered cross-functional teams implement enterprise architecture

Creating people-process-technology requires a shift from traditional management approaches. For this new model to work, it requires teams with members responsible for the processes and technology defining their goals, Jeanne Ross and Cynthia Beath write. “Leaders hold teams accountable for meeting those goals and, just as important, grant them the autonomy to do so.”

To fulfil their missions, component teams usually need diverse talent, the authors continue in the publication. “The enterprise architecture effort thus requires not only componentizing the business but also assigning cross-functional teams of experts to each unit. Staff members need to understand the component’s process and technology requirements, so most teams will need product experts, software developers, and user design specialists.”

Principle 3: Enterprise architecture influences strategy

In responding to customer demands, empowered teams naturally identify new opportunities inspired by the capabilities of digital technologies, they write. “They address strategic objectives, simultaneously reformulate strategy based on continuous learning about what customers want and what digital technologies make possible.”

In this context, strategy becomes both a top-down and bottom-up exercise, can be read in the article. “Leaders create new teams to seize emerging opportunities. When companies fund teams rather than strategic initiatives or systems development projects, those groups can respond almost instantaneously to what digital music service Spotify, for one, refers to as the company’s ‘bets’. Meanwhile, component teams can restate goals aimed at implementing high-level strategy.”

About the authors:
Jeanne Ross and Cynthia Beath are co-authors of Designed for Digital: How to Architect Your Business for Sustained Success (MIT Press, 2019). Ross was principal research scientist for MIT’s Center for Information Systems Research for almost 27 years. Beath is professor emerita of information systems at the McCombs School of Business at the University of Texas at Austin.

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