The Business Architecture Approach - An Important Part of Modern Strategic Planning

Most organizations have yet to integrate the Business Architecture Approach (BAA) in their strategic planning approach. In most cases, this is due to a lack of knowledge about this new approach. The purpose of this article is to fill this gap and demonstrate that BAA is an important part of modern strategic planning. To do so, we: demonstrate that the main purposes of BAA are a subset of those of strategic planning; demonstrate that BAA helps organizations better achieve this subset of purposes; and clear two important misconceptions about BAA.

Some months ago we published an article entitled “Does the Use of the Business Architecture Approach Enable Organizations to Improve their Performance?” (Gagnon & Hadaya, 2019a). In it, we describe the business architecture approach (BAA) as “a new strategic planning method for setting long-term organizational transformation goals and formulating plans for their achievement.” Although the Gartner global research and advisory firm have also described BAA in a similar fashion (Allegra, 2017), most organizations have yet to integrate it in their strategic planning approach, despite its advantages. In most cases, this is due to a lack of knowledge about BAA. The purpose of this article is to fill this gap and demonstrate that BAA is an important part of modern strategic planning. To do so, we: demonstrate that the main purposes of BAA are identical to a subset of those of strategic planning; demonstrate that BAA helps organizations better achieve this subset  and other purposes of strategic planning; and dispel two important misconceptions that slow the progress BAA is making in taking its rightful place within strategic planning.

Strategy and Its Link to the Functioning of an Organization

To lay the foundation for the rationale presented in this article, let’s look first at what a strategy is and its link to the functioning of an organization. A strategy is not a product, a set of goals or an action plan. A strategy is the pattern of behavior — i.e., the recurring way of acting — an organization adopts towards its stakeholders or a situation in order to achieve some ultimate goals (e.g., win a war, increase revenues and profitability, win a soccer match). In the business world, an organization’s strategy is thus the pattern of behavior it employs to create value for its owners, customers, partners, and employees, and preferably to differentiate itself positively from its competitors. The core of this pattern of behavior is the customer value proposition which defines using eight key characteristics (e.g., product types, price, quality)the behavior an organization intends to have towards its customers (Kaplan and Norton, 2004). Indeed, when an organization decides as part of its strategy to manufacture certain types of products, it actually defines a part of the pattern of behavior it will adopt to create value for its customers.

Since the functioning of an organization determines how it behaves, it must be purposely designed for the organization to behave as per its strategy. In other words, the activities an organization conducts and the way they are performed (i.e., the way an organization functions) must be selected and conceived so they result in the organization behaving in accordance with its strategy (Porter, 1996). For example, as part of its strategy, a car company may decide to offer cars that are more reliable, but slightly more expensive, than those of its competitors. To do so, it must perform design, testing, manufacturing and sales activities, and carry them out in a manner that results in cars that are more reliable but only somewhat more expensive than those of its competitors.

When organizations formulate a new strategy, in the vast majority of cases, they select one that leverages an important part of their current functioning. This enables them to behave in partial agreement with their new strategy immediately after its adoption. To behave in greater agreement, they must carry out transformation initiatives to change their functioning. In other words, they must make changes to be able to perform new activities, to conduct existing activities differently, or to stop performing old ones.

The Main Purposes of Strategic Planning

Let’s now turn our attention to what strategic planning is. There are nearly as many definitions of strategic planning as people who have written about it. However, a number of ideas commonly appear in these definitions. These are that strategic planning is a process whose purposes are to:

A) Formulate the strategy

Strategy formulation entails: (i) clearly stating the ultimate goals to be achieved; (ii) analyzing the internal and external environments of the organization to identify its strengths, weaknesses, opportunities, and threats; (iii) defining strategic alternatives; (iv) analyzing the acceptability, feasibility, and suitability of each of these alternatives; and, (v) choosing the alternative most conducive to the achievement of the ultimate goals.

B) Create a goal cascade that stems from this strategy

The goal cascade is made of interconnected layers of goals. The upper layers are made of goals that pertain directly to the strategy. They relate to the pattern of behavior the organization has decided to have towards its owners, customers, employees, and partners. Increased revenues, improved customer experience, increased product quality and greater employee engagement are examples of such goals. The lower layers, for their part, are composed of transformation and operational goals. They relate to changes that are necessary for the organization to behave in full accordance with its strategy. Their realization is prerequisite to the attainment of the goals of the upper layers. Goals linked to process, information systems and production asset changes are examples of those included in the lower layers. Kaplan and Norton’s balanced scorecard (Kaplan and Norton, 2000) and the Capability-Based Strategy Map (Hadaya and Gagnon, 2017) exemplify such goal cascades.

C) Elaborate an Action Plan for the Achievement of These Goals

The achievement of the goals in the cascade requires that transformational, R&D, marketing and other initiatives are carried out. The purpose of elaborating the action plan is to identify these initiatives and to sequence their execution in a manner that is conducive to the effective and efficient achievement of the goal cascade.

Comparing the Purposes of BAA to Those of Strategic Planning

BAA’s two main purposes each correspond to a subset of purposes B and C of strategic planning. BAA’s first purpose is to define  transformation goals. To do so, it identifies the changes needed to align the functioning of the organization with its strategy, documents the results in a plan called the target business architecture — sometimes called the target operating model — and derives the transformation goals from this plan. This corresponds to an important part of purpose B of strategic planning. The second purpose of BAA is to create an action plan for the achievement of these transformation goals (i.e., to elaborate the transformation plan). The transformation plan defines the initiatives  — projects and programs — to be undertaken in the coming years to transform the organization. It also determines their respective scope (i.e., which parts of the target business architecture each initiative shall implement) and the order in which they need to be carried out. When correctly elaborated, a transformation plan defines the most efficient and effective path to align the organization’s functioning with its strategy. BAA’s second purpose therefore corresponds to a subset of purpose C of strategic planning.

BAA: A Better Approach

As described above, BAA’s main purposes correspond to parts of those of conventional strategic planning, but the manner in which BAA achieves them is superior. Indeed,  conventional strategic planning has limitations that can be overcome with the help of BAA. Conventional strategic planning can only set broad transformation goals and summarily describe the scope of the associated initiatives. It is also very limited in its ability to determine how the resources of the organization must be integrated together to enable its activities to be conducted in accordance with its strategy. As a result, the goals and the scope of the initiatives it identifies are often misinterpreted and stakeholders, having no directives on how the resources they are transforming should be integrated together, make changes in silo mode. Changes are therefore not made as they should and important synergies are foregone. In addition, efforts are wasted on changes of little relevance, unnecessary complexity is created, and alignment with the strategy is delayed and may never be achieved.

Because of its rigor and granularity, BAA overcomes the above limitations of conventional strategic planning. BAA identifies the changes to be made by describing in the target business architecture — the “To-Be” state of the functioning of the organization. This plan identifies the resources — capabilities, processes, functions, organizational units, information, knowledge, brands, technology assets (ex., manufacturing plants, information systems) and natural resource deposits — the organization will need to fully behave as per its strategy. It also identifies the key characteristics these resources must have and how they must be integrated together (ex., process A must be modified to take advantage of the new information captured by new process B). The target business architecture does not fully describe the changes to be made — this is done during their realization — but just enough to provide clear guidance to those who will carry them out. The design of the target business architecture is the perfect occasion to collect change ideas from people across the organization, to sort through them, to integrate them to create synergies, and to retain only those that will truly increase the organization’s ability to behave as per its strategy. BAA is thus better equipped to define clear transformation goals and the ensemble of associated changes (an important part of purpose B of strategic planning). 

BAA is also superior in the manner in which it creates the transformation plan (parts of purpose C of strategic planning). Indeed, the greater wealth of information provided by the target business architecture allows BAA to better determine the transformation initiatives to be done, to better define their respective scope and to sequence their execution so important synergies can be captured. Because people from across the organization participate in the design of the target business architecture and transformation plan, BAA is also better from a change management perspective, and especially so for changes that impact multiple areas of the organization. Indeed, people are much less likely to resist changes they have helped design than those that are imposed on them.

BAA can also support the achievement of the first purpose of strategic planning. Indeed, it can help strategy formulation in two ways. First, it can contribute to the internal environment analysis of the organization by providing a complete and rigorously constructed map of organizational capabilities together with an analysis of their strengths and weaknesses. Second, it can help analyze the feasibility of the strategic alternatives considered by outlining the changes they each entail and estimating the time, efforts and costs to carry them out. Having a better understanding of the changes needed for each of these alternatives reduces the risk of selecting a strategy that is too ambitious for the organization — as too many have done in the past. For example, the business architecture team led by Éric Thompson at Desjardins General Insurance (a subsidiary of a major Canadian bank) conducts such analyzes.

Clearing Important Misconceptions

Let’s turn now to two misconceptions that slow the integration of BAA into the strategic planning activities of organizations. The first is that BAA and strategic planning are incompatible because the former is analytical and the second creative. The reality is that they are both creative and analytical. Indeed, formulating a winning strategy demands creativity, but it must be both nourished and kept in check by analyses — including an analysis of the strengths, weaknesses, opportunities, and threats of the organization, and an analysis of the acceptability, feasibility, and suitability of the strategic alternatives considered. For its part, BAA involves analyses as well, and especially that of the costs, benefits, and risks of the changes considered. But it also demands a great deal of creativity to imagine how the functioning of the organization could be transformed to be fully aligned with the strategy. In fact, high-performance business architecture teams do not limit their recommendations to ideas and practices developed by other organizations, they are innovative.

The second misconception is that the typical timeframe allocated to strategic planning exercises cannot accommodate the level of effort required by BAA. One reason why this is not so is that the target business architecture and the transformation plan are not created in a single “ocean boiling” exercise. Instead, they are created in stages that each result in a more and more complete version of the target business architecture and transformation plan. The initial version is limited to an outline that can be created within the time allotted to most strategic planning efforts. It is developed using a scaled-down version of BAA that focuses primarily on determining which capabilities the organization will have to change as well as the key characteristics they shall have, and on estimating the investments and time needed to make these changes. This initial version can, and should, be created for each of the seriously considered strategic alternatives in order to verify, as described above, their respective feasibility. Once one of the strategic alternatives has been chosen as the new strategy, its first version target business architecture and transformation plan can be used to quickly launch a first group of transformation projects. While these are advancing, the target business architecture and transformation plan are progressively fleshed out — one part of the organization at a time — and refined through a series of further versions, starting with the parts that must be most urgently aligned to the strategy. In so doing, these iterations provide increasingly better guidance to the ongoing and upcoming transformation initiatives. 

Another reason why there is no effort incompatibility between BAA and strategic planning is that it is now best practice to conduct strategic planning in an iterative manner (i.e., rolling strategic planning). That is, it is now considered best for organizations to adapt their strategic plan regularly — at least once a year — instead of rebuilding it from scratch once every three to five years. This lets organizations quickly account for new ideas, lessons learned, technologies,  and market evolution in their strategic plan and to refresh the assumptions it is based on. By doing so, organizations become more strategically agile (Gagnon & Hadaya, 2019b).

Rolling strategic planning meshes very well with the continuous and iterative nature of BAA. Indeed, it provides frequent occasions to integrate new versions of the target business architecture and transformation plan into the strategic plan. Furthermore, because the changes made to the strategy from one iteration of the strategic plan to the next are much smaller — compared to when strategic planning is done every three to five years — the amount of work required to prepare corresponding versions of the target business architecture and transformation plan is also  reduced to a large extent.

Conclusion

As demonstrated in this article, the business architecture approach (BAA) is a new strategic planning method for setting long-term organizational transformation goals and formulating plans for their achievement. It is a better approach because it enables organizations to more effectively and efficiently align their functioning to their strategy. Organizations should thus integrate BAA into their strategic planning approach. To do so, they should create a business architecture team made up of experienced business professionals, train them in business architecture, and have this team report to the Chief Strategy Officer (Hadaya and Gagnon, 2017). This team should start with the creation of the portion of the target business architecture and transformation plan that relates to one part of the organization, demonstrate success, and grow from there. In addition, organizations should move to rolling strategic planning — if they haven’t already done so — because it has important advantages of its own and because it has many synergies with BAA.

References

Allega, P. (2017) Achieve Business-Outcome-Driven Enterprise Architecture, Gartner Webinar

Gagnon, B., and Hadaya, P. (2019a) Does the Use of the Business Architecture Approach Enable Organizations to Improve their Performance? ASATE Group.

Gagnon, B., and Hadaya, P. (2019b) The four dimensions of Business Agility, ASATE Group.

Hadaya, P., and Gagnon, B. (2017) Business Architecture: The Missing Link in Strategy Formulation, Implementation and Execution. ASATE Group.

Kaplan, R.S., and Norton, D.P. (2000) Having Trouble with Your Strategy? Then Map It. Harvard Business Review, September-October, 51-60. 

Kaplan, R.S., and Norton, D.P. (2004) Strategy Maps: Converting Intangible Assets into Tangible Outcomes. Harvard Business Publishing, Boston. 

Porter, M.E. (1996) What Is Strategy? Harvard Business Review, November-December, 61-78.

By Bernard Gagnon and Pierre Hadaya