Value Chains & EA

Preamble

The seamless integration of enterprise systems into digital business environments calls for a resetting of value chains with regard to enterprise architectures, and more specifically supporting assets.

daniel-jacoby-tecnopor
Value Chains & Support (Daniel Jacoby)

Concerning value chains, the traditional distinction between primary and supporting activities is undermined by the generalization of digital flows, rapid changes in business environments, and the ubiquity of software agents. As for assets, the distinction could even disappear due to the intertwining of tangibles resources with organization,  information, and knowledge .

These difficulties could be overcome by bypassing activities and drawing value chains directly between business processes and systems capabilities.

From Activities to Processes

In theory value chains are meant to track down the path of added value across enterprise architectures; in practice their relevancy is contingent on specificity: fine when set along silos, less so if set across business functions. Moreover, value chains tied to static mappings of primary and support activities risk losing their grip when maps are redrawn, which is bound to happen more frequently with digitized business environments.

These shortcomings can be fixed by replacing primary activities by processes and support ones by system capabilities, and redefining value chains accordingly.

SOAb_P2Caps
Substituting processes and capabilities for primary and support activities

From Processes to Functions & Capabilities

Replacing primary and support activities with processes and functions doesn’t remove value chains primary issue, namely their path along orthogonal dimensions.

That’s not to say that business processes cannot be aligned with self-contained value chains, but insofar as large and complex enterprises are concerned, value chains are to be set across business functions. Thus the benefit of resetting the issue at enterprise architecture level.

Borrowing EA description from the Zachman framework, the mapping of processes to capabilities is meant to be carried out through functions, with business processes on one hand, architectures capabilities on the other hand.

If nothing can be assumed about the number of functions or the number of crossed processes, EA primary capabilities can be clearly identified, and functions classified accordingly, e.g: boundaries, control, entities, computation. That classification (non exclusive, as symbolized by the crossed pentagons) coincides with that nature of adjustments induced by changes in business environments:

  • Diversity and flexibility are to be expected for interfaces to systems’ clients (users, devices, or other systems) and triggering events, as to tally with channels and changes in business and technology environments.
  • Continuity is critical for the identification and semantics of business objects whose consistency and integrity have to be maintained along time independently of users and processes.
  • In between, changes in processes control and business logic should be governed by business opportunities independently of  channels or platforms.
SOAb_BP2VaCh
Mapping Processes to Architectures Functions & Capabilities

Processes, primary or otherwise, would be sliced according to the nature of supporting capabilities e.g: standalone (a), real-time (b), client-server (c), orchestration service (d), business rules (e), DB access (f).

Value chains could then be attached to business processes along these functional guidelines.

Tying Value Chains to Processes

Bypassing activities is not without consequences for the meaning of value chains as the original static understanding is replaced by a dynamic one: since value chains are now associated to specific operations, they are better understood as changes than absolute level. That semantic shift reflects the new business environment, with manufacturing and physical flows having been replaced by mixed (SW and HW) engineering and digital flows.

Set in a broader economic perspective, the new value chains could be likened to a marginal version of returns on capital (ROC), i.e the delta of some ratio between value and contributing assets.

Digital business environments may also made value chains easier to assess as changes can be directly traced to requirements at enterprise level, and more accurately marked across systems functionalities:

  • Logical interfaces (users or systems): business value tied to interactions with people or other systems.
  • Physical interfaces (devices): business value tied to real-time interactions.
  • Business logic: business value tied to rules and computations.
  • Information architecture: business value tied to systems information contents.
  • Processes architecture: business value tied to processes integration.
  • Platform configurations: business value tied to resources deployed.
SOAb_P2TAssets
Marking Value Chains in terms of changes

The next step is to frame value chains across enterprise architectures in order to map values to contributing assets.

Assets & Organization

Value chains are arguably of limited use without weighting assets contribution. On that account, a major (if underrated) consequence of digital environments is the increasing weight of intangible assets brought about by the merge of actual and information flows and the rising importance of economic intelligence.

For value chains, that shift presents a double challenge: first because of the intrinsic difficulty of measuring intangibles, then because even formerly tangible assets are losing their homogeneity.

Redefining value chains at enterprise architecture level may help with the assessment of intangibles by bringing all assets, tangible or otherwise, into a common frame, reinstating organization as its nexus:

  • From the business perspective, that framing restates the primacy of organization for the harnessing of IT benefits.
  • From the architecture perspective, the centrality of organization appears when assets are ranked according to modality: symbolic (e.g culture), physical (e.g platforms), or a combination of both.
SOAb_BP2Assets
Ranking assets according to modality

On that basis enterprise organization can be characterized by what it supports (above) and how it is supported (below). Given the generalization of digital environments and business flows, one could then take organization and information systems as proxies for the whole of enterprise architecture and draw value chains accordingly.

Value Chains & Assets

Trendy monikers may differ but information architectures have become a key success factor for enterprises competing in digital environments. Their importance comes from their ability to combine three basic functions:

  1. Mining the continuous flows of relevant and up-to-date data.
  2. Analyzing and transforming data, feeding the outcome to information systems
  3. Putting that information to use in operational and strategic decision-making processes.

A twofold momentum is behind that integration: with regard to feasibility, it can be seen as a collateral benefit of the integration of actual and digital flows; with regard to opportunity, it can give a decisive competitive edge when fittingly carried through. That makes information architecture a reference of choice for intangible assets.

SOAb_P2OAssets
Assets Contribution to Value Chains

 

Insofar as enterprise architecture is concerned, value chains can then be threaded through three categories of assets:

  • Tangibles: operational resources supporting processes execution
  • Organization: roles, tasks, and responsibilities associated to processes
  • Intangibles: data mining, information contents, business intelligence, knowledge management, and decision-making.

That approach would simultaneously meet with the demands of digital environments, and add practical meaning to enterprise architecture as a discipline.

Further Reading

 

Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out /  Change )

Google+ photo

You are commenting using your Google+ account. Log Out /  Change )

Twitter picture

You are commenting using your Twitter account. Log Out /  Change )

Facebook photo

You are commenting using your Facebook account. Log Out /  Change )

Connecting to %s

This site uses Akismet to reduce spam. Learn how your comment data is processed.