Enterprise Architecture for Business Model Innovation

in a Connected Economy

Sergio Compean – March 19, 2014

Executive Overview

The constant tension between profiting from operational excellence and searching for new ways to deliver value need not be

an unresolved dissonance for enterprise executives. Creative harmony between the two types of activities begins with an

understanding of how to design a solid foundation for an operating model and knowledge of platform capabilities that serve to

support the underlying enterprise architecture. Using a systems thinking approach, i t is possible to holistically map out th e

various facets of a business model into the components of an enterprise architecture which can then be implemented with

capabilities offered by ubiquitous and cloud computing, collaboration platforms, as well as Big Data.

This paper will describe an approach to perform the mapping from the business model to an enterprise architecture which is

manifested in a platform ecosystem. The Business Model Canvas will provide a visual representation of the key components of

the business model and serve to anchor discussion on how an enterprise creates, delivers and captures va lue. The next step in

the process is to identify an Operating Model that is well-suited for the business model characteristics. Several types of

Operating Models will be introduced to present options in the mapping process. Once the Operating Model i s selected, a Core

Diagram is produced that illustrates the platform ecosystem which delivers the capabilities needed to support the enterprise

architecture. The Core Diagram’s main purpose is to graphically represent the systems capabilities and connectivi ty in a single,

comprehensive reference. The focus of this part of the paper will be to provide a clear vision of how these platform capabilities

come together in the ecosystem to implement a particular class of Operating Model.

The paper will end by discussing how the platform capabilities enable an unprecedented level of business agility which allows

an enterprise to maintain core operations for profitability while experimenting on the edges of its Operating Model to seek out

new va lue streams. This dynamic nature of the enterprise architecture will then be shown to empower executives with

s ignificant degrees of business creativity in adapting the business model using the Business Model Canvas in an i terative fashion

to respond to market feedback and opportunities to maximize va lue creation.

Succeeding in the Global Connected Economy

Achieving success in the new global market environment requires modern enterprises to consider powerful trends and

dynamics in order to be able to adapt and respond at velocities much more rapid than ever before in history. These market

events and forces are having an effect of tearing apart the traditional enterprise that does not have the architecture to

withstand the constant flux of change, competition, and customer demands. Disruption can happen at any time, in any

industry, in any market and can threaten market leaders to such a degree that they can be replaced in a few years’ time. In his

book, The Business Model Innovation Factory: How to Stay Relevant When the World is Changing, Saul Kaplan uses the

dis ruption Blockbuster experienced due to Netflix’s business model innovation to coin a term to describe the phenomena:

Blockbuster was “netflixed”1. Kaplan offers other examples of entire industries being netflixed by companies with innovative

bus iness models such as Apple, Google, and Amazon.

In this environment, there is increasing pressure for enterprise executives to develop dual strategies to preserve the profitable

core business while innovating with new products and services on price, capabilities, and va lue for customers. The two types of

s trategic development require distinct set of lenses with which to identify the set of challenges and opportunities that must be

addressed. One the one hand, robust analytical thinking is essential for optimizing the core but on the other, bold creativity is

needed to generate additional market va lue to facilitate the reinvention and evolution of the next generation enterprise.

Personalization for Mobile, Empowered Consumer

The exponential proliferation of mobile devices and adoption by consumers has led to a phenomenal surge in the levels of

interactivity on the Web. The interactivity enables new forms of va lue creation and social connectivity but also changes the

expectations for how enterprise platforms need to be designed to support these emergent behaviors. More than ever,

consumers gravi tate to content and services that are especially suited to their needs in the context they desire. Preferences

and recommendations are common place but consumers’ demands for more social intelligence in service offerings drive the

level of analytical sophistication required in enterprise capabilities even higher. Consumers are expecting service providers to

not only understand their individual identity but also their social graph and the open world around them. In the open world of

consumers, time is a lso of the essence for delivery of those insights and capabilities to help manage uncertainty and maximize

outcomes. Personalized content, capability, and context are a ll important to deliver i f an enterprise seeks to gain competitive

advantage in the consumer market.

Long Tail on the Demand Side

The long tail on the demand side illustrates the need for even further personalization in not only the product delivery but also

marketing. Consumer segments must be targeted with specialized messaging to drive demand for niche products and services

to capitalize on additional opportunities. However, the challenge for developing marketing campaigns for these segments i s

centered on cost. Enterprises need to build out analytical capabilities to execute these highly ta ilored marketing initiatives fo r

each consumer segment in an efficient manner. The days of broadcast advertising to the mass market are history and new

marketing models based on participatory engagement and social advocacy must be identified in order to enhance innovation

possibilities in the long ta il. Businesses a lso need to understand how to cultivate niche markets to gain greater traction in

segments that are adjacent or lagging to the target. Transitioning across this chasm is key for enterprises that want to achieve

s ignificantly greater market share for their products and services.

Collaborative Real-Time Context for Distributed Enterprise

The massive influence the consumer feedback loop is having on enterprise information technology i s evident in the increasing

velocities with which data insights need to be delivered. In the digital supply chain, events processed from the consumers’

open world must be handled collaboratively across departments, business units, and even partners at a speed approaching

rea l -time. The collaborative group must observe the context and data associated with the event, become oriented to the

s i tuation, decide upon a course of action, and then execute the response. The collaborative entities may consist of knowledge

workers, information systems, or a combination of both – and in some scenarios, ubiquitous smart devices. To enable this type

of high-speed collaboration and event processing, enterprises need to consider business process s tandardization and

integration in their operating model. The degree of standardization and integration depends on the architecture that best

a l igns with the business model. The path to this desired state involves an evolutionary process that builds out an ecosystem

which satisfies key architectural principles to realize the necessary characteristics and capabilities to enable the collaborative,

event-driven, real-time distributed enterprise.

Disruptive Economics on the Supply Side

Another major force that every enterprise must contend with is disruptive innovation within their market segments. Using

open source technologies and platforms, smaller and, often stealth, startups achieve significant efficiencies and time-to-market

acceleration to deliver their innovative products and services that are faster, cheaper, or better than those produced by the

market leader. The important economic factor with open innovation is the fact that those technologies can be acquired and

integrated at no cost to the startup or enterprise. These disruptive economics lead to the reality that enterprises must be able

to adapt their supply chain to counter threats presented by more agile and fast-moving competitors. The most immediate

capability that can be leveraged to respond to these potential disruptors i s cloud computing. Cloud computing enables the

supply chain to integrate external capabilities into the enterprise core to achieve increased agility, velocity, and efficiencies with

reduced capital expenditures typically associated with such initiatives.

Sustainability

Sustainability is the corporate responsibility of every modern enterprise to seek ways to minimize the environmental footprint

and cost of doing business. Regulations related to sustainability impact the decision-making enterprise executives must

undertake on a global basis and often lead to necessary changes in the business model as well. Executives may initially cons ider

these changes as overhead but when viewed with opportunistic lenses the business model can be adapted so that overall

energy costs are reduced thus contributing to longer-term profitability. Business model innovation to achieve greater

sustainability provides the enterprise with many benefits including enhanced consumer perception, more efficient supply chain,

and more va luable products and services. Consumers are very informed about sustainability when making buying decisions so

enterprises’ top l ine are improved with greener products and services.

Innovation Process and Design Thinking

The process and organization needed to take on a business model innovation initiative must be considered on a holistic,

s trategic level. Ad-hoc exercises do not yield the potentially transformative results that are achievable using a design thinking

approach. Design thinking leverages a set of design practices within an informing over-arching framework that considers the

l inkages and interactions of the various components of the organizational and information technology s tructures. Design

thinking is especially suited to address the context-driven, user-centric nature of the challenges posed to succeed in the

connected global economy. These skillsets are cri tical to developing a robust foundational operating enterprise core that can

be extended or specialized at the edges to support iterative innovation cycles with accelerated cadences. Design thinking can

a lso empower creativity at the edges of the operating model as well as provide a mechanism to va lidate hypothesis to ensure

the new business model design i s achieving the desired outcomes.

Execution versus Search Paradigms

Bus iness model innovation should follow a search paradigm that creatively experiments and tests hypothesis in the elements of

the new design to determine whether a new product or service is commercially viable. The search paradigm is inherently

ri skier and more feedback-oriented compared to the execution mindset necessary when optimizing an established business

model. Modern enterprises need to excel at not only improving existing elements of its current business model but inventing

enti rely new business models whose exact s tructure and dynamics are emergent. The business model innovation initiatives

may be organized as a set of ventures that operate outside of existing business units but leverage their resources. The

management of shared resources across the portfolio introduces new requirements in the organizational and information

technology architecture. The successful new business ventures may eventually become integrated into the core operating

model so that they can be scaled and optimized to maximize value generation.

Intrapreneurs

Enterprise executives must consider that the management philosophy necessary to run these ventures i s considerably different

than what is expected for existing business units. Instead of applying a discipline for optimizing execution of operations, the

team running a business model innovation venture i s highly entrepreneurial, comfortable with ri sk, challenges the established

modus operandi, and creatively pivots based on findings from market feedback. These intrapreneurs are essentially leading

s tartups on the edges of the enterprise to find new market opportunities for va lue creation. Intrapreneurs apply design

thinking to realize innovation for customers.

Enterprise Architects

The team setting out to develop the new enterprise architecture consists of individuals knowledgeable with a systems thinking

approach for design. Enterprise architects apply design thinking to deliver transformational capabilities to executive

management. The team establishes a clear vision that enterprise architecture i s the organizing logic for business processes and

IT infrastructure reflecting the s tandardization and integration requirements of the core operating model as well as the new

venture entities. The designers must work closely with both management teams in the established business and new ventures

to identify the architecture elements that can be shared and extended to support innovation beyond the operating core. The

enterprise architecture team excels at creating the s tandardization and integration necessary to exploit resources to provide

management with the capabilities for optimally running their business unit or venture while supporting innovation processes.

The design team must also be able to communicate the benefits of enterprise architecture which include:

reduced IT costs

increased IT responsiveness

improved risk management

increased management satisfaction, and

enhanced strategic outcomes.

Business Model Design

Bus iness model design sets out to define how an enterprise creates, delivers and captures market va lue. The interrelationship

between those three facets is key to understanding how a business model can be invented to define a new venture.

Intrapreneurs exercise the ideation component to produce novel products or services to potentially create a new market with a

compelling value proposition for target customer segments. The activities and processes that need to be executed together

with partners and suppliers to ship the product or service to customers define the va lue fulfillment mechanism. Lastly, the

enterprise captures va lue when customers pay for the product or service contributing to the revenue stream. Implementing

this value generation cycle is the essence of business model design.

Business Model Canvas

A va luable tool to use for prototyping a business model i s the Business Model Canvas. The Business Model Canvas i s a strategic

management asset to describe, design, and invent business models using an ontology developed by Alexander Osterwalder2.

The Business Model Canvas provides a visual representation for the main aspects that define how an enterprise creates,

del ivers and captures va lue.

The canvas can be developed using paper prototyping techniques where each of the elements are represented by n ote cards

and modified easily during the design process3. The tactile nature of this technique induces collaboration and intense feedback

to establish a shared vision for the innovation in business model design. Al ternatively, the Business Model Toolbox i s an iPad

application available in the Apple AppStore to develop the aspects of the Business Model Canvas in digital form.

Business Model Canvas (Business Model Generation, Osterwalder et al, 2010)

Value Propositions

On the Business Model Canvas, Value Propositions are the product or service that will offer va lue to customers based on

novelty, performance, ri sk reduction, cost efficiencies, customization, or other desired outcomes. Essentially, these are the

reasons customers will pay for an enterprise’s offering that solves a problem or satisfies a particular need and serve as the basis

for Revenue Streams.

Customer Segments

Customer Segments identify the target market which realize benefits from Value Propositions that are specifically designed that

intended audience. Each segment will have a corresponding level of profitability so it is important to understand how this

impacts the business model design.

Customer Relationships

Customer Relationships define the nature of the ongoing engagement between the enterprise and customers. They define the

frequency of interaction as well as the mechanisms by which customers will derive va lue from doing business with the

enterprise.

Channels

Channels are the distribution modes by which demand for products and services is generated in target Customer Segments as

wel l as how fulfillment i s delivered.

Revenue Streams

Revenue Streams capture the options and mechanisms by which Customer Segments pay for products and services. Options

may include flat fees, subscription models or auctions. Payment mechanisms may involve online portals, mobile applications,

or reta i l locations.

Key Activities

Key Activi ties are the business processes and operations required to support the business model. These processes may involve

partners, suppliers and alliances to deliver the va lue to customers. Operations include platform capabilities required to support

the data and interfaces to enable the collaboration between these organizations as well as customer-facing channels.

Key Resources

Key Resources are the physical and digital assets used to provide capability for the various components in the business model .

Resources needed to fulfill demands in Key Activities, Channels, Customer Relationships and Revenue Streams should be

cons idered to ensure va lue is created, delivered, and captured efficiently. The resources may involve intellectual property,

financial instruments, and human capital.

Key Partners

Key Partners indicate suppliers, service providers, and alliances that support Key Activities and Key Resources to deliver on the

Value Proposition to Customer Segments.

Cost Structure

The Cost Structure describes the fixed and variable expenditures required to support Key Activities and Key Resources. It is

important to consider whether the business model is cost or va lue driven. A cost-driven business model is more concerned

with efficiencies such as automation and price-based va lue proposition. A va lue-driven business model is focused on maximum

value creation offered by a premium value proposition.

Design Process

Starting a new venture within the enterprise for business model innovation begins with a mobilization of team consisting of

intrapreneurs, enterprise architects and executives from existing business units. Executives from these business units work

together with enterprise architects to identify shared services and data that would support the new ventures. Intrapreneurs

ini tiate the ideation activities to identify possibilities for new va lue propositions for Customer Segments.

The team next seeks to understand the viability of the va lue propositions by conducting market research and identifying how

they can take shape with new products and services. These activities require the team to analyze customer contexts and

feedback to gain a deep understanding of the needs and problems that present an opportunity.

In the design phase, the elements of the business model are discussed and defined with the innovation team. Business model

prototyping is the key activity to experiment with various designs on the Business Model Canvas. The team can use post-it

notes on a wall in the design room to rapidly change the elements in the Business Model Canvas. Di fferent versions of

proposed business model prototypes can be evaluated to determine best fit and optimal viability for the target Customer

Segments. Other factors such as Key Resources and Key Activities can be assessed to support Channels, Customer

Relationships, and Revenue Streams. The deliverable from this design phase i s a Business Model Canvas that has been selected

with the highest evaluation determined by the innovation team. In fact, it i s in the design phase that enterprise architects

begin the process of mapping the business model to an operating model. Enterprise architects collaborate with intrapreneurs

to identify the data and processes to enable the elements in the business model. The mapping process is described further in

Identifying an Operating Model and Mapping the Business Model to an Operating Model.

A plan to deploy the selected Business Model Canvas is then developed to begin delivering the Value Propositions in the

market. The plan should include a roadmap to keep Key Partners synchronized with the deployment timeli ne and to ensure

dependencies will be met. Enterprise architects work with Key Partners to facilitate the integration of services and data to

enable the processes in the new business model design. Intrapreneurs a lso begin working with Channels to drive demand for

the offerings in the target Customer Segments.

After the business model is deployed, a program to manage the adaptations in response to market feedback should be

operationalized. The program should include tracking the va lidity of business model hypotheses and measuring performance.

The components of this program are discussed in greater detail in Eva luating Business Model Performance.

Identifying an Operating Model

An operating model is the first layer in the foundation for execution in an enterprise architecture. The operating model i s the

bus iness process standardization and integration necessary to deliver va lue to Customer Segments. It i s the conceptual

component in the organizing logic that defines an enterprise architecture. In this sense, the operating model is the initial

manifestation of the business model when it is deployed as it indicates how va lue is created, delivered and captured by the

bus iness units in the enterprise. Research conducted by MIT’s Center for Information Systems Research found that enterprises

implementing an operating model reported the following:

17% greater s trategic effectiveness,

31% higher operational efficiencies,

33% more customer intimacy,

34% higher product leadership, and

29% greater s trategic agility than those companies that did not.4

Based on survey and case study research at more than 200 companies in the United States and Europe, MIT’s CISR developed a

quadrant based on the two dimensions of business process s tandardization and integration in which high performing

enterprises that had implemented an operating model could be classified.

Operating Model Quadrant (Enterprise Architecture as Strategy, Ross et al, 2006)

Coordination Operating Model

The Coordination Operating Model is characterized by shared customer, product or supplier data but operationally unique

bus iness units that can impact each other’s transactions. These autonomous business units have a high degree of control over

bus iness process design to adapt to i ts specific operations. Visually a Coordination Operating Model i s represented in the

fol lowing diagram.

Coordination Operating Model

Unification Operating Model

The Uni fication Operating Model is based on a globally integrated set of business processes where customers and suppliers are

dis tributed geographically. Business units have s imilar operations where process and data are designed centrally so they can be

shared. Centralized management of these processes typically leverages a matrix approach to keep track of the business unit

composition. Al though the business units have distinct operations, high -level business process owners work to standardize

bus iness processes across the business units. Essentially, Unification is based on a canonical set of processes and data that can

be dynamically configured to execute within each business unit’s operations.

Unification Operating Model

Diversification Operating Model

Diversification is based on the fact that business units have few, if any, shared customers or suppliers. These business uni ts also

are operationally unique and have transactions that are independent. There is minimal business process s tandardization and

integration in a Diversification Operating Model. Most IT decisions and business process design are made at each business unit.

However, these business units do leverage a common set of shared services that can be integrated into their specific

environment.

Diversification Operating Model

Replication Operating Model

The Replication Operating Model a lso has few, if any, shared customers or suppliers. The autonomous business units in a

Replication Operating Model leverage a federated approach to business process integration and s tandardization. Business

process design is centrally managed as are IT services. The information architecture i s standardized with canonical data

definitions but the actual data is locally owned with some aggregation to the enterprise. From an operations perspective, the

bus iness units are very s imilar in execution.

Replication Operating Model

Mapping Business Model to Operating Model

The next s tep in the process is to identify an Operating Model that is well-suited for the business model characteristics. The

process is defined by evaluating s tandardization and integration necessary in certain elements in the business model. Elements

in the business model that play a s ignificant role in determine the operating model include Customer Segments, Key Activities,

Key Resources and Key Partners. The mapping presented here provides insight into the rational for selecting an operating

model as well as a structured matrix for organizing the logic in the process.

The mapping activity should be conducted in a session including the intrapreneurs and enterprise architects. The intrapreneurs

can provide data and characteristics from the business model to the mapping matrix. Enterprise architects can analyze the

bus iness processes, system linkages, and data necessary to support that aspect of the business model to lead to a choice for the

operating model. The mapping process and cri teria can be adapted to suit the enterprise’s particular business model

innovation parameters.

Bus iness Model Element

Mapping Cri teria Operating Model

Customer Segments Small number of segments, shared across bus iness units

Coordination

Large number of segments, not shared across bus iness units

Uni fication, Diversification, or Replication

Key Activi ties Shared processes between business units

Coordination

Shared processes between partners

Coordination

Centra lized management of business process and data

Uni fication

Bus iness unit control of processes and data

Diversification

Transactions aggregated at enterprise level

Replication

Key Resources Globally shared process and data

Uni fication, Coordination

Bus iness unit specific processes and data

Diversification

Federated processes and standardized data schema

Replication

Key Partners Small number of partners, shared across bus iness units

Coordination

Large number of partners, not shared across

bus iness units

Uni fication, Diversification or Replication

Mapping Matrix

Designing an Ecosystem to Support the Operating Model

In order to begin implementing an enterprise architecture to support a foundation for execution, i t is important to consider the

composition of the types of architectural practices, standardized technologies, and platforms in the ecosystem. Technology

s tandardization is part of the evolution of the enterprise system landscape toward an optimized, agile ecosystem that provides

the responsiveness needed to enable strategic initiatives to b e implemented at higher velocities. Identifying the set of services

and platform capabilities in a holistic manner allows a systems thinking approach to support design initiatives for the enterprise

architecture. The cost benefits are also s ignificant as it gives enterprise architects a roadmap to perform technology and

platform evaluations that are compliant with the ecosystem governance model to avoid redundant deployments and wasted

resources.

Architecture Principles

Enterprise architecture principles that inform program portfolios related to the core operating model and new ventures can

serve as va luable guides to building out the ecosystem in a cohesive, consistent manner. These principles also facilitate

increasing organization capability to design, develop, test, and deploy solutions with higher quality and high velocities.

Es tablishing a set of architectural principles for enterprise architecture development underscores the important consideration

that process is just as important as technology for creating world class solutions. Besides agility, economies of scale and scope

can be achieved by leveraging or extending existing architectural components and subsystems to deliver new solutions required

to support a new venture. These architectural principles specifically help address the challenges needed to succeed in the

global connected economy.

Architecture Principle Objectives Responsive Mobile First Design Responsive Mobile First Design i s the principle to design interfaces as if they were

targeting a mobile audience that may be using various types of devices such as smart phones or tablets. The objectives of this principle are:

Personalized content, capabilities, context delivery

Enhanced customer relationships

Support for ambient awareness

Optimized channel distribution for demand generation or service delivery OODA Loop5 The Observe-Orient-Decide-Act Loop principle is a paradigm that informs

des igning analytical and event-processing capabilities into the operating core as wel l as new ventures. The OODA Loop includes components for decision modeling. Some of the objectives driving this architectural principle include:

Open world decision support for consumers

Real-time data insights

Complex event processing Distributed enterprise collaboration and decision support

Service-Oriented Cloud First Design Service-Oriented Cloud First Design is the principle to design all services with

bus iness modularity and cloud computing capability to maximize utility of network effects. The principles helps to achieve these objectives:

Global class integration

Partner and supplier plug-n-play

Supply chain agility Ecosystem Architecture Principles

Ecosystem Architecture

Technology and Platform Capabilities

In addition to standardizing the process for designing the ecosystem, the technology infrastructure and platform capabilities

a lso need to be classified to facilitate deployment decisions. These categories are essentially the toolbox for the enterprise

architect to use to create solutions to power new ventures launched from business model innovation initiatives. The categories

have been defined as they help address specific aspects of the types of capabilities needed to succeed in the global connected

economy. It should be noted, however, that the ontology presented in the table below is not exhaustive. Enterprise architects

should develop a more comprehensive catalog of the technology and platform capabilities needed to support the operating

model and any extensions for new ventures.

Technology/Platform Objectives/Candidates

Mobi le Mobi le platforms produce responsive interfaces for consumers using smart phones or tablets. Platforms should facilitate deploying context-aware,

personalized content and capabilities in the various relationships, channels, and revenue s treams the consumer is engaged. Candidate platforms include:

Apple iOS

Google Android Windows Phone

Ubiquitous Computing Ubiquitous computing is driven by need to capture more open world contextual

data via sensors to develop enhanced situational awareness to empower the decision modeling in the enterprise. Candidate platforms include:

RFID

iBeacon

Arduino Raspberry Pi

Big Data and Machine Learning Big Data is the collection of large volumes of data from diverse sources at high velocities. Big Data can enable business context insights to move with high

velocities across business units and/or partners in the operating models as well serve as the source for shared data. Candidate platforms include:

Windows Azure HDInsight Amazon Elastic MapReduce

Apache Hadoop To unlock va lue from vast amounts of data over large numbers of dimensions,

machine learning platforms can provide the numerical analysis to develop ins ights based on classification, regression, and predictive analytics. As such,

these platforms can also drive personalization for products and services and faci litate open world decision modeling in the consumer customer segments.

Technology/Platform Objectives/Candidates Cloud Computing Cloud computing provides elastic computing resources for scalability and also

relay mechanisms for enabling linkages between business units and enterprises. This platform capability i s especially va luable for business model innovation since

these services can be used in an on-demand basis and can be disconnected if the new business model does not perform well. These connections can be made as part of a new venture or in response to market feedback or competition. Candidate platforms include:

Windows Azure

Amazon Elastic Compute Cloud (EC2) OpenStack

Complex Event Processing Complex event processing is necessary to capture rich context information in rea l -time. Events occurring in the consumer’s open world or in the collaborative dis tributed enterprise contains contextual data that should be incorporated into decision modeling for determining how to respond. Candidate technologies include:

Microsoft .NET Reactive Extensions

Microsoft StreamInsight

TIBCO StreamBase CEP Enterprise Service Bus In modern enterprise architectures that have successfully evolved to support

composite services and applications, an enterprise service bus is often a key enabler for reaching the data velocities required for business agility. An enterprise service bus provides key capabilities to support high data velocity at the operating core such as message routing, service brokering, mediation, and message processing including transformation and enrichment, operations

management, as well as quality of service. Candidate platforms include:

Neudesic Neuron ESB

MuleSoft Mule ESB

Microsoft BizTalk Server

Enterprise Collaboration Portals Enterprise collaboration portals are the interface for group collaboration within and across business units in the enterprise. These platforms include social

network and vi rtual teaming capabilities to support s tandardized business processes and accessing shared data. Candidate platforms include:

Neudesic Pulse Microsoft SharePoint

Ecosystem Technology and Platforms

Core Diagram, A Visual Model for an Ecosystem

Once the Operating Model is selected, a Core Diagram is produced that i llustrates the platform ecosystem which delivers the

capabilities needed to support the enterprise architecture. The Core Diagram’s main purpose is to graphically represent the

systems capabilities and connectivi ty in a single, comprehensive reference. The Core Diagram is the blueprint that answers the

question: “What does an enterprise architecture look like?” The Core Diagram components include the following:

Core Bus iness Processes

Shared Data Driving Core Business Processes

Key Linking and Automation Technologies

o Middleware

o Porta ls

o Integration Interfaces

Employees

Customers

Partners

Suppliers

Key Customer Segments

Core Diagram Design Process4 (©2005 MIT Sloan Center for Information Systems Research and IMD)

Each type Core Diagram can be designed using a process that is aligned with the characteristics of the operating model. In the

example diagram above, the major activities in the process are indicated in the sequence in which they are performed. For

instance, in the diagram, key customer segments are first identified so that the business processes that are to be standardized

and integrated can be determined. Once these processes have been selected, the shared data needed to execute them is

synthesized to develop into the Core Diagram information architecture. In the diagram, the technology and platforms enabling

the s tandardized integration are optionally included in the model.

The visual model produced by the process is the Core Diagram that includes a ll the elements of an enterprise architecture that

can be exploited as a robust foundation for execution. The Core Diagram becomes an essential reference for executive

management when developing new business s trategies and business model innovation ventures . The Core Diagram enhances

s trategic thinking for executive management by facilitating business creativity at a glance.

Coordination Operating Model – Core Diagram

Coordination Operating Model Core Diagram4 (©2005 MIT Sloan Center for Information Systems Research and IMD)

The Coordination Operating Model Core Diagram is designed by first considering the key customers shared among the business

units in the enterprise. The business units in this case offer different products and services but all depend upon a set of shared

data to deliver va lue to the customer segments. Business processes in the Coordination Operating Model are highly integrated

s ince those products and services may involve transactions that span business units. The key objective is for each customer

segment to have a cohesive experience across all the channels and relationships. The integration technologies and linked

processes that enable these business processes are optionally included in the diagram.

To begin to understand the design of the enterprise architecture ecosystem, the table below maps out the enabling

technologies and platforms that can be considered for each aspect of the operating model.

Core Diagram Component Ecosystem Technology/Platforms

Shared Customers Apple iOS Google Android

Windows Phone Shared Data Windows Azure HDInsight

Amazon Elastic MapReduce Microsoft .NET Reactive Extensions (CEP) Microsoft StreamInsight (CEP)

TIBCO StreamBase CEP Integration Technology Neuron ESB

MuleSoft Mule ESB Microsoft BizTalk Server

Windows Azure Service Bus RFID, iBeacon, Arduino, Raspberry Pi

Linked Processes Neudesic Pulse Microsoft SharePoint

Coordination Operating Model Ecosystem

In this operating model mobile-first responsive design can play a major role in the implementation of the enterprise

architecture capabilities. I t is important for the shared customer segments to have a consistent yet context-driven presentation

as they engage across the various interfaces of each business unit and channel using either a Windows Phone, Apple iOS or

Google Android device.

Big Data platforms, such as Windows Azure HDInsight or Amazon Elastic MapReduce, are a lso key in this model since the

volume, variety and velocity of shared customer-related data that is generated across business units and channels can be very

s ignificant. Developing sophisticated analytical capabilities such as machine learning algorithms can yield data insights over a

large number of dimensions that can be capitalized on an enterprise-wide basis.

Being high on the integration scale, the operating model will have to make effective use of platforms that can create system

l inkages while enabling business process customization. Each business unit may execute a variant version of a business process

that must be supported with agile and flexible integration platforms that can deliver data at high velocity. Some of the

integration platform enablers include Neuron ESB, Microsoft BizTalk Server and Windows Azure Service Bus.

New Venture in Coordination Operating Model

The core diagram facilitates the envisioning process for how the new venture will be able to exploit the enterprise architecture

to del iver on the business model innovation. Executive management can use the core diagram produced by the enterprise

architects as a means to build shared vision with the intrapreneurs for how the venture will operate. The core diagram informs

the innovation team how the venture would leverage shared customer data while creating the linkages via ecosystem

integration platforms into enterprise resources and services, such as Big Data analytics.

Unification Operating Model – Core Diagram

Unification Operating Model Core Diagram4 (©2005 MIT Sloan Center for Information Systems Research and IMD)

The Uni fication Operating Model is designed by fi rst identifying the key customer segments or channels that need to be served.

The enterprise architecture team along with executive management work to select the key s tandardized processes that should

be executed on a consistent and scalable basis throughout the business. The processes may be defined around core

competencies by which the enterprise delivers va lue to the customer segments. The processes are dependent on a set of

common master data that are used across coordinated high-velocity transactions. This type of operating model i s especially

wel l-suited to respond to customer and channel events in real-time to enable the OODA loop to power the collaborative

decision-making within the enterprise. The technology ecosystem to support this operating model consists of a standardized

set of integration technologies and platform capabilities that exhibit robust reliability and high scalability.

For customer segments, the key to delivering exceptional experiences across relationships and channels is the architecture’s

abi lity to scale elastically as the core business processes and their associated workflows are performed. Moreover, the

interfaces to these customer segments should be addressed with a mobile-first driven design to facilitate a consistent, context-

driven interaction with the core standard processes. These interfaces enable communication of real-time open world events

into the operating core and the response must be presented reliably throughout each process.

The elastic computing necessary to support s tandardized core processes can be achieved via cloud-based integration platforms

such Amazon EC2, Windows Azure, or open-source platforms such as OpenStack. The economic justification for considering

these options are based on the fact that capital expenditures related to ad ditional data center capacity need not be incurred to

del iver the service level outcomes desired by the enterprise. During peak periods, cloud computing resources can scale to meet

the event-based transaction processing to ensure the customer experience is smooth and seamless as they engage in the

various relationships and channels.

To surface the standardized business process, enterprise portals provide the collaborative capabilities to perform them in a

cons istent and repeatable manner. Neudesic Pulse is designed especially well for this enablement since i t also includes social

networking features built on a Windows Azure cloud infrastructure. Microsoft SharePoint is another option since the platform

provides rich support for incorporating shared enterprise information in collaborative workflows. These platforms help address

the emphasis in the Unification model on creating highly collaborative environments to enable scalable processing as well as

group-based decision modeling.

Shared data in this operating model, as in the Coordination model, also introduces an emphasis on Big Data technology and

platforms due to the volume, variety and velocity by which the data can be generated and collected throughout the enterprise.

The centralized data aspect to the Unification model prioritizes the need to create a solid foundation for advanced analytics

such as classification, regression and prediction to support integrated decision modeling. Apache Hadoop and Windows Azure

HD Insight are two platforms that serve as viable candidates for these capabilities in the operating model to support Big Data.

The table below i llustrates the ecosystem technology and platform emphasis mapping for each aspect in the Unification

operating model.

Core Diagram Component Ecosystem Technology/Platforms

Key Customers Apple iOS Google Android Windows Phone

Linked and Standard (Core) Processes Neudesic Pulse Microsoft SharePoint

Shared Data Windows Azure HDInsight Amazon Elastic MapReduce Microsoft .NET Reactive Extensions (CEP) Microsoft StreamInsight (CEP) TIBCO StreamBase CEP

Linking and Automating Technologies Neuron ESB MuleSoft Mule ESB Microsoft BizTalk Server Windows Azure Service Bus

RFID, iBeacon, Arduino, Raspberry Pi

Unification Operating Model Ecosystem

A new venture can fully exploit the scalability offered by the Unification Model by incorporating the standardized processes and integration interfaces into i ts business model. Enterprise architects use the Core Diagram to illustrate the business agility to intrapreneurs as well as executive management and to create a shared vision of the specialized processes and integration

needed to support the innovation at the edge of the enterprise.

New Venture in Unification Operating Model

Diversification Operating Model – Core Diagram

Diversification Operating Model Core Diagram4 (©2005 MIT Sloan Center for Information Systems Research and IMD)

The Diversification Operating Model places the emphasis on the shared technology and platform stack instead of business

process s tandardization and integration. To begin designing the Core Diagram for a Diversification model, the shared

technology architecture services are identified then the corresponding platforms are selected. The business uni ts in this type of

enterprise can then leverage the shared services to execute highly specialized business processes to deliver value to their

specific customer segments. The business units also own the data to serve their customer segments lowering the n eed for a

common master data set. However, the design of the operating model can allow for a common set of business processes that

can be leveraged and then customized by each business unit.

In this type of operating model, the technology and platform stack needs to have a flexible foundation for business process

agi lity so that each business unit can perform their customizations. Integration platforms, such as Neudesic ESB and Microsoft

BizTalk Server, which support business process and workflow design, can serve as the enablers for this capability in the s tack.

Enterprise architects can work with business process owners in the business units to deliver the particular integrations and

system l inkages with customers and partners for execution based on the common integration platforms. The custom business

processes may leverage features such as message-based routing, service brokering and transformation services in these

platforms. It should be noted, however, that business units can make decisions to deploy other platforms based on their

specific integration needs.

To surface the set of shared business processes available to the business units, enterprise collaboration portals like Neudesic

Pulse and Microsoft SharePoint, can address this aspect of the operating model. Business units are free to design the

information worker experience using these portals to perform the specialized business processing activities. In fact, using a

composite application design approach, common enterprise services may be used to develop flexible and adaptable user

interfaces ta ilored specifically to the information worker needs in a given business unit. Virtual teaming is another important

service provided by these platforms that enable mobilization of individual resources with the required skillsets to execute a

specialized process. The ability to search and discover the information worker resources available with a given skillset pro file

a l lows business units to focus on producing and maintaining the data to optimize vi rtual team formation.

The table below shows the ecosystem emphasis mapping to each aspect in the Diversification Operating Model. The Core

Diagram is designed to illustrate how this mapping is manifested in the enterprise architecture.

Core Diagram Component Ecosystem Technology/Platform

Shared Technologies Neuron ESB MuleSoft Mule ESB Microsoft BizTalk Server Windows Azure Service Bus

Shared Processes Neudesic Pulse Microsoft SharePoint

Bus iness Unit-Specific Data Windows Azure HDInsight

Amazon Elastic MapReduce Microsoft .NET Reactive Extensions (CEP) Microsoft StreamInsight (CEP) TIBCO StreamBase CEP

Bus iness Unit-Specific Customers Apple iOS

Google Android Windows Phone

Diversification Operating Model Ecosystem

In the Diversification operating model, the shared services are exploited by the new venture in business model innovation. T he

new venture can be accelerated by developing specialized business processes to deliver va lue to i ts specific customer segments

us ing the foundational technology stack. The new venture can focus on proving out is business model without the need to

deploy the pre-requisite technology infrastructure. In fact, in this operating model, using a common collaboration platform can

faci litate the mobilization of information worker resources from established business units into the new venture. Information

workers familiar with the user interface can more readily execute the specific activities involved in the new processes.

New Venture in Diversification Operating Model

Replication Operating Model – Core Diagram

Replication Operating Model Core Diagram4 (©2005 MIT Sloan Center for Information Systems Research and IMD)

The Replication Operating model emphasis i s on business process scalability and accelerated time-to-market for new ventures.

The design of the Core Diagram begins with the identification of standardized business processes that are to be executed by a ny

new ventures in business model innovation. Business modularity i s a key characteristic of this operating model. The business

processes are designed by a centralized team which may include enterprise architects and executive management. This

operating model is advantages where business units need to be deploye d rapidly on a global basis but need to maintain

cons istency with other parts of the enterprise to capitalize on established business model components in new contexts. The

autonomous nature of business units in this operating model is a lso advantageous in the global environment. The supporting

technologies and platforms used to automate these s tandardized business processes are then identified and bundled to

faci litate planning and deployment when a new venture is formed.

In this operating model, predefined business processes can be enabled using enterprise group collaboration platforms such as

Neudesic Pulse and Microsoft SharePoint. Packaged workflows and group workspaces or sites can be created to be deployed

and operated in an independent manner in each business unit. In essence, these deployments are of turnkey collaboration

solutions that can then be customized to meet the specific needs of the business unit in i ts operating context or region. These

technologies and platforms automate business processes that are known to be efficient and profitable so the top line benefits

to the enterprise can be significant from an investment perspective. The business modules and associated packaged

deployment reduces ri sk and accelerates the time-to-value for the enterprise when a new venture is launched.

In addition to the portal interfaces in these bundled solutions, the underlying integration technologies that facilitate the

l inkages between internal systems and external services are also included as p art of the automation deployment to support the

s tandardized processes. Platforms in the ecosystem that can serve these purposes are Neuron ESB, Microsoft BizTalk Server as

wel l as Windows Azure Service Bus. Components representing the codification and e ncapsulation of the business modules can

be developed in either Neuron ESB processes or BizTalk Server applications. Deployment in a specific business unit will involve

fol lowing a standard procedure with configuration management reflecting the specific b usiness unit IT environment. Windows

Azure Service Bus can be used to enable linkages between business units, partners and channel service interfaces. Hybrid

solutions could play a major role in these deployments s ince the business units need to exploit a federated infrastructure for

autonomous operation. Considering Azure Service Bus also enhance ability in the enterprise to perform global class

deployments for new ventures.

The table below indicates the ecosystem technology and platform emphasis mapping to the Replication operating model design

aspects. Note that the ecosystem components that are directed at the business unit level are also mapped in the ta ble to

i l lustrate the relationship in the enterprise architecture.

Core Diagram Component Ecosystem Technology/Platform Standardized Processes Neudesic Pulse

Microsoft SharePoint Automating and Linking Technologies Neuron ESB

MuleSoft Mule ESB Microsoft BizTalk Server Windows Azure Service Bus RFID, iBeacon, Arduino, Raspberry Pi

Bus iness Unit-Specific Data Windows Azure HDInsight Amazon Elastic MapReduce Microsoft .NET Reactive Extensions (CEP)

Microsoft StreamInsight (CEP) TIBCO StreamBase CEP

Bus iness Unit-Specific Customers Apple iOS Google Android Windows Phone

Replication Operating Model Ecosystem

New ventures in the Replication Operating Model can be deployed globally in accelerated fashion by exploiting the business

process modularity and turnkey solutions used for automation and integration. In this scenario, enterprise executives are

adapting a successful and profitable business model to capitalize on opportunities in new markets using a very s imilar va lue

proposition, or product-service market fit. Intrapreneurs in business model innovation can also analyze how these solutions

can be adapted to ensure success within the specific context or region the business unit will be operating. Enterprise architects

can then work together with the intrapreneurs to identify linkages across business units that may be necessary to coordinate

federated business processes.

New Venture in Replication Operating Model

Evaluating Business Model Performance

Verifying Model Hypothesis

With the business model deployed, the verification process can begin to collect data and feedback to determine if the elements

of the model are performing as expected. The hypothesis forming the basis for the Value Propositions can be verified with

feedback from paying customers. This type of check can be conducted for other elements such as Key Partners, Channels, and

Key Activi ties. Al l the interactions and interdependencies between elements of the business model can also be verified.

Tracking Metrics

Metrics should be identified to quantify the verification process for the elements of the business model. This tracking make s

the task of improving the business model more concrete leverage real data based on customer feedback or market conditions.

Tracking metrics enable a program of continuous innovation where the new business model i s calibrated with minor

adaptations to gain greater market traction. When a certain trajectory of profitability or customer adoption is observed, then

the venture changes focus from verification to scalability. In sustainability innovation, metrics related to energy savings can be

tracked to determine if the business model is making the desired impact. Leveraging the full capabilities of the operating

model, the new venture can readily incorporate resources and services to begin the scaling process.

Performance Measurement Architecture

A performance measurement architecture i s needed to support verification and tracking of metrics associated with business

model hypothesis. The architecture can leverage platform analytics present in the enterprise architecture while providing

interfaces specialized for business model performance evaluation and monitoring.

Customer Development and Pivoting

Part of the task of evaluating performance relates to the process of customer development. When a new venture launches,

several key questions should be considered:

Who are the paying customers?

Are they the customers we targeted i n our business model design?

The answers to these questions may lead to a change in the new venture’s offerings to those customers to identify an optimal

market fit. At some point in customer development process, the metrics may indicate the need to adapt the business model,

or pivot, in order to enhance the viability of the business model. The innovating team can revisit the design using the Business

Model Canvas to produce an adapted version to reflect customer development analysis and findings.

Scaling and Operationalizing

If the metrics are indicating satisfactory performance and analysis projects growth in market share, the new venture needs to

cons ider scaling the components of the business model so that the venture can gradually be shifted into the operating core. In

this scenario the outcome has been a successful business model innovation venture that is producing the desired impact on

profi tability or sustainability.

The Creative Power of Business Model Innovation

The creative power of business model innova tion can boost enterprises to new levels of growth and value generation. With an

enterprise architecture that enables executive management to s trategically and creatively advance business model innovation,

the potential to unlock significant market va lue increases dramatically. Executives and intrapreneurs can collaborate to identify

new markets, partners, resources, channels, and va lue propositions to deliver new experiences or solutions to customers.

For instance, in 2003, Apple unleashed the tremendous disruptive potential of business model innovation when i t introduced

the iPod digital music player a long with a novel distribution channel for the music industry and a convenient mechanism for

consumers to legally discover a nd download music. Moreover, Apple introduced new mobile products, the iPhone and iPad,

that added to network effects of the new business model. In three years, Apple’s business model innovation became worth

almost $10 bi llion representing approximately 50% of the company’s total revenue. Apple’s market capitalization increased

from around $1 billion in early 2003 to over $150 bi l lion by late 2007. Clayton Christensen made the important observation

that Apple was not the first company to bring a portable digital music player to market. Another company ca lled Diamond

Multimedia had introduced its player, the Rio, in 1998. So what did Apple do better? According to Christensen, Apple made

the product i ts business model enabled by the technology.6 Business model innovation was the force that unlocked the value.

Apple’s Performance, Before and After Business Model Innovation7 (Amit and Zott, MIT Sloan Management Review)

Bus iness outcomes driven by business model innovation are increasingly being recognized by executive management. A recent

global survey by the Economic Intelligence Unit found that a majority of the 4,000 executives polled preferred business model

innovation over other means to create competitive advantage.7 Reinforcing this finding is IBM’s 2012 Global CEO Report which

determined that 33% of the more than 1,700 chief executive officers in 64 countries interviewed consider business model

innovation as a key source of sustained economic va lue.8 In fact, the report found that outperformers were more bolder in their

approach to business model innovation. With a ll the challenges CEOs face in the current environment, there is not a moment

to lose for setting out to build an enterprise architecture that will harness the creative power of business model innovation to

succeed in a global connected economy.

References

1. The Business Model Innovation Factory: How to Stay Relevant When the World is Changing, Saul Kaplan, Wiley Press, 2012

2. Alexander Osterwalder (2004). The Business Model Ontology - A Proposition In A Design Science Approach. PhD thesis

University of Lausanne.

3. Bus iness Model Generation, Alexander Osterwalder, Yves Pigneur, Wiley Press, 2010.

4. Enterprise Architecture as Strategy: Creating a Foundation for Business Execution, J. Ross, P. Weill, D. Robertson, H arvard

Bus iness School Press, 2006.

5. USAF Colonel John Boyd, briefings on military s trategy. (http://en.wikipedia.org/wiki/OODA_loop)

6. Reinventing Your Business Model, Clayton M. Christensen, Mark W. Johnson, Henning Kagermann, Harvard Business

Review, December 2008.

7. Creating Value Through Business Model Innovation, Raphael Amit, Christoph Zott, MIT Sloan Management Review, Spring

2012 Vol . 53 No. 3.

8. 2012 IBM CEO Study, Leading Through Connections, IBM Corporation .

The author can be reached on LinkedIn at http://www.linkedin.com/in/sergiocompean/.