Enterprise Architecture Is Not Just for Architects

For many years, MIT CISR has been studying how organizations design and build valuable business capabilities—specifically digitized process platforms—by maturing their enterprise architecture. Since 2004, our case studies and surveys have shown a significant direct link between architecture maturity and business outcomes. However, the results from our 2011 survey[foot]MIT CISR survey of 146 senior IT leaders, Fall 2011.[/foot] challenge those earlier findings: they indicate that more mature architectures do not necessarily lead to business value. Rather, business value accrues through management practices that propagate architectural thinking throughout the enterprise. 

In this briefing we discuss the management practices that distinguish companies driving value from their digitization initiatives. We then describe how one company, USAA, has implemented those management practices. 

In prior research, we defined enterprise architecture maturity as the development of increasingly robust technology and process platforms. Companies build these platforms in stages. In stage 1, companies have no platforms, only IT solutions. Stage 2 companies have platforms of standard technologies. Stage 3 companies are building platforms of digitized processes, which implement the companies’ target operating model.[foot]J. Ross, “Forget Strategy: Focus IT on Your Operating Model,” MIT CISR Research Briefing, Vol. V, No. 3C, December 2005, https://cisr.mit.edu/blog/documents/2005/12/09/2005_12_3c_operatingmodels.pdf/[/foot] Stage 4 companies reuse their stage 3 platforms to respond quickly to new business opportunities.[foot]J. Ross, “Maturity Matters: How Firms Generate Value from Enterprise Architecture (Revised February 2006),” MIT CISR Research Briefing, Vol. IV, No. 2B, July 2004, https://cisr.mit.edu/blog/documents/2004/07/16/2004_07_2b_maturitymatters.pdf/. [/foot]

When we conducted our first survey in 2004, nearly half of responding companies were in stage 2, and we found a statistical correlation between architecture and business profitability. However, the most significant outcomes of maturity were lower IT unit costs and increased IT reliability—the expected benefits of building technology platforms. By 2011, we sensed that more firms were moving into the later stages of architecture maturity, so we distributed a survey to better understand the business impacts of digitized process platforms. 

 As expected, the 2011 survey found that companies are in general more mature—the percentage of companies in stages 3 or 4 is up from 29% of respondents in 2007 to 49% in 2011—with companies in stage 4 increasing from 2% to 15% (see figure 1). In short, more companies are building and reusing digitized process platforms. But the statistical relationship between architecture maturity and business outcomes has been lost. In other words, it is possible to become more architecturally mature without getting more value from IT.  

Figure 1: Firms Are Moving to Higher Stages of Architectural Maturity[foot]Because the 2004 survey pre-qualified respondents and only accepted those who said their firms were actively engaged in enterprise architecture, we compare 2011 maturity data with our 2007 survey. These latter two surveys drew from similar populations.[/foot]

We are not suggesting that enterprise architecture no longer matters. On the contrary, the presence of digitized platforms that help companies standardize and integrate business processes is statistically correlated to business outcomes. But standardization and integration are not enough. To drive value from their digitization initiatives, companies must implement management mechanisms that help people throughout the enterprise learn how to continuously improve their platforms—which increases the business value they can drive from them.

Enterprise Architecture as a Learning Mechanism

In our survey, four architecture-related management practices emerged as particularly valuable to helping enterprises learn how to build and drive value from digitized platforms: 

1. Making IT costs transparent. When IT operations are delivered as services with transparent unit costs, the IT unit learns how to control costs, and business leaders learn the true costs of using technology. Without transparent IT costs, business leaders struggle to understand the value proposition of digitization, and IT units struggle to gain management support for the robust technology platforms needed for digital business. Transparent IT costs, as well as IT services management, have become table stakes for building commitment to enterprise platforms. 
2. Debating architecture exceptions. An effective architecture exception process grows out of company efforts to implement standard technology and business process platforms that support business efficiency but do not limit innovation and growth. Exception decisions always involve tradeoffs, but a well-designed architecture exception process can help decision makers continuously improve their understanding of when and how standards do—and don’t—help the firm achieve its strategic objectives. 
3. Performing post-implementation reviews. Systematic reviews of projects—before, during, and after implementation—are a powerful learning tool. During a project, constantly reassessing whether the enterprise is positioned to realize the project’s expected short and long-term benefits allows leaders to redirect projects in progress. Similarly, a rigorous post-implementation review habit helps leaders assess impacts and, when appropriate, invest more resources toward driving expected benefits. Alternatively, if outcomes fall short of expectations, post-implementation reviews help companies learn to develop more realistic business cases and improve investment choices in the future. 

4. Making IT investments with enterprise architecture in mind. Building long-term process- and information-based capabilities requires very different investment habits than those used to build individual business solutions. In particular, management must clarify operational priorities to establish the critical business capabilities that enterprise architecture must deliver. Initially, management may struggle to identify which capabilities are most important and how they are best delivered. But as they experience the benefits of reusing these capabilities, business and IT leaders better understand how to direct future investments. Architecture doesn’t become strategic until it influences where the money goes. 

In our research, architecture capabilities (in the form of digitized platforms) led to better performance only when companies had also developed the above management practices. Figure 2 compares business outcomes for respondents based on both their architecture capabilities and architecture-related practices. We found that most companies tend to naturally develop these management practices as they build platforms. Indeed, while we have seen companies reach stage 2 without strong architecture management practices, it is difficult to implement (stage 3) digitized process platforms without the organizational learning that these practices foster. Similarly, it is difficult to refrain from building digitized platforms as the organization learns—from good management practices— how to drive value from IT. Thus you see far fewer firms in the off-diagonals in figure 2. 

USAA: Business Benefits from Architecture Learning[foot]J. Ross and C. Beath, “USAA: Organizing for Innovation and Superior Customer Service,” MIT CISR Working Paper 382, December 2010, https://cisr.mit.edu/blog/documents/2010/12/28/mit_cisrwp382_usaa_rossbeath.pdf/[/foot]

USAA is a good example of a firm that has instituted these four management practices as it has built digitized platforms. USAA’s mission is to address the financial needs of members of the U.S. military and their families. In pursuing that mission, USAA has focused on providing integrated and innovative financial services to its members. It has been building platforms to support that effort.

CIO Greg Schwartz has assigned accountability for managing the cost and quality of key IT services to specific managers within the IT unit. The IT unit bundles the hardware, networks, storage, vendor, and people costs required to run and maintain an application or service, so that business people can see the full cost of an integrated service. This transparency—along with IT unit automation efforts—has helped reduce IT operations costs to less than 50% of the IT budget.

USAA has adopted a philosophy of “delivering for a project but building for the enterprise.” Sixty percent of CTO Rickey Burks’ architects are assigned to projects. These architects either match business requirements to existing infrastructure or alert development heads when a project requires new infrastructure capabilities. The resulting reuse frequently reduces development time: USAA delivers new systems 24% faster than industry average. But when new infrastructure is required, building for reuse increases development time. Over time, as business leaders have seen the benefits of reuse, they have developed the patience needed for architecture debates, as well as for building new services for reuse.

USAA’s disciplined project methodology incorporates multiple review milestones before, during, and after implementation by which the organization determines if the project can deliver the expected results. If business needs change or project adjustments call the business case into question, stakeholders and program leaders may decide that a different—but still valuable— business case exists, or they may abort the project. With the accumulated learning on both business cases and project outcomes, dropping projects during development has become quite rare.

At USAA, most projects are part of multi-year programs of change. These programs are based on USAA’s enterprise architecture, which guides the high-level sequencing and timing of projects to close the gap between business goals and business capabilities. Each year, potential projects associated with a program are grouped into portfolios organized around business goals (e.g., member growth, product development, or channel management). After the funding decisions are made, program leaders can shift resources among their projects to reflect changes in project specifications or business priorities. In this way, investments remain focused on those initiatives that deliver the greatest business value.

Making Architecture a Strategic Competency

Our research findings support our long-standing assertion that it is hard to compete in established industries without some sophistication in the design, management, and use of digitized platforms. But the research indicates that organizational learning—about IT costs, architectural tradeoffs, project outcomes, and strategic IT investments—is important for converting those platforms into business success. While much of the discussion around architecture focuses on defining and building technical and business process capabilities, this research emphasizes another side of architecture: the ability of people throughout the enterprise to understand and continuously improve those platforms. If the enterprise does not embrace both sides, it may find it has matured its architecture capabilities but not generated business value. Enterprise architecture is not just for architects; everyone must rally to the cause.