Business-agile enterprise

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Business-agile enterprise (B-AE) is a field of study of different business & IT methods that work together to create an agile and competitive business model.

Overview[edit]

Business-agile enterprise (B-AE) is an amalgam of different business & IT methods that work together to create an agile and competitive business model. These disciplines include business technology management, service-oriented architecture, IT governance, SOA governance, IT portfolio management, business process management, Control objectives for information and related technology (CobiT), enterprise architecture, business architecture, project management, Information Technology Infrastructure Library, ITIL V3 (Alignment of IT to business), IT service management, information management, matrix management, and business process modeling.

Business-agile enterprise improves financial measurements such as margins, profitability, time to market, revenue growth, earnings per share, ebitda (earnings before interest, taxes, depreciation & amortization, return on equity), return on assets, and return on investments.

Agile companies make more money with less resources and lower costs

Research programs[edit]

Business Technology Management Institute, Agility research[edit]

Business Technology Management Institute (BTM) [1] conducted 5 years of business agility research across 50 industries worldwide. Their document, "Business Technology Convergence Index," summarizes the financial benefits a firm can accrue in converging their business & IT groups.[2]

BTM - Return comparisons 
BTM - Revenue and Earnings 

Agile companies have converged their business & IT worlds and consistently exhibit superior revenue growth and net margins relative to their industry groups.

  • Annual Revenue Growth – 12% growth vs 4% for their industry groups
  • Average Annual Earnings per Share – 36% growth vs 7% for their industry groups

Agile Companies not only grow at a faster pace than their peers, but they also exhibit consistently greater returns than those of their direct competitors.[2]

  • Earnings before interest, taxes, depreciation & amortization – 6% higher EBITDA than those delivered by their industry groups
  • Return on equity – 4% higher
  • Return on assets – 8% higher
  • Return on investments – 14% higher

These figures are not limited to any one area within the enterprise and are not "IT-specific." They also do not measure returns on any single project, rather, they measure enterprise-wide returns, and reflect the EBITDA of the entire enterprise. The financial effects are enterprise-wide, since the key management capabilities are interconnected, and because both the business and technology professionals in a B-AE actively share ownership of decision-making and execution.

MIT Center for Information Systems Research Agility research[edit]

In the book, "Leveraging the New Infrastructure",[3] the idea of treating IT as a portfolio of investments, just as corporate finance handles their investment portfolios, is documented as a way to assess IT business value. Agility is a major contributor to these financial benefits.

Agile companies show higher profit growth.[4][edit]

Performance Agile Staid Measurement
New products 8.8 3.2 Percent of 2004 sales from new products introduced in previous three years. Average = 5.6%
Modified products 35 13 Average percent of 2004 sales from modified products introduced in previous three years. Average = 22.5%
Growth +7 −10 Average annual percentage growth 2002–2004 (relative to industry average). Average growth = 6.8% per annum
Profit growth +37 −13 Average annual percent change in ROE 2002–2004 (relative to industry average). Average = 0.5%

Between agile and staid companies there is a 50% profit difference.

Agile Companies exhibit superior Business Value relative to their industry groups.[5][edit]

Agile companies are IT Savvy. An IT Savvy firm uses a digital platform to integrate a set of electronic business processes and the technologies, applications, and data supporting these processes. Managers in these companies elevate their firm's performance by a consistent use of IT. They use disciplined core processes and then apply the resulting data to both operational and strategic decision-making tasks.[6]

  • Business Value – firms with above average IT spending & IT Savvy had net margins 20% above their industry's median
  • Profitability via sharing – firms with above average percentage of shared applications & it savvy have return on assets 30% above their industry's median
  • Time to market – firms with above average IT infrastructure spending & IT savvy grew 3 percentage points higher than their industry's average
  • IT-enabled business investments – top-performing companies (IT savvy) can get up to 40% more value

Agility-focused businesses have reduced IT costs[edit]

Weill and Broadbent's results show;[7]

MIT - Portfolio triangles 2005.jpg

MIT has proven that IT departments that have a cost focus spend more and get less than those of an agility focus.

The business-agile enterprise approach[edit]

A business-agile enterprise is an ongoing journey to a state of greater industry competitiveness. A B-AE strives to achieve larger degrees of agility to match their industry's competitive requirements rather than using a reorganization to improve competitiveness.

Technique[edit]

The B-AE is a top–down, business approach that summarizes in one place the joint business & IT elements necessary to compete.

  • It starts with the Business-Agile Proficiencies (B-AP). The B-APs measure agility (and therefore financial performance) across the Business-Agile Enterprise Framework (B-AEF).
  • The B-APs are driven down into the business-agile enterprise framework where the practical everyday requirements needed to conduct business are referenced, executed & measured.
  • The B-AEF requires two investments;
    1. IT investments – e.g., service-oriented architecture infrastructure so stable and ubiquitous as to become a utility
    2. Business technology investments – e.g., reuse policies and new roles such as the business service champion and the business service analyst
  • The B-AE Product Categorization Template is a work product of the B-AE Framework. It contains 190 "slots" that describe the execution environment of each of the 5 dimensions (information, organization, process, technology, reuse) within each of the capabilities (e.g., strategic & tactical governance, portfolio & program management, etc...). The filled-in template;
    1. Identifies software, hardware, products & services that execute the particular capability
    2. Identifies business & technology gaps
    3. Shows business & technology redundancies
    4. Highlights where acquisitions fit

Business-Agile Proficiencies[edit]

The B-APs are a set of ten (10) practices and competencies that define agility from a practical standpoint.

  1. Business & IT Convergence (Asset Sharing & Mega-Alignment)
  2. Competencies that drive Superior Value from IT (IT Savvy) [8]
  3. IT portfolio asset class management (enterprise architecture)
  4. Governance (direction, control & distributed authority for decision making)
  5. Senior management leadership (management involvement)
  6. Business control of information (intellectual capital & information visibility)
  7. Business process understanding (component business modeling)
  8. Business case (business value documentation throughout lifecycle)
  9. Key business performance indicators (consistent & continuous benefits valuation)
  10. External relationships (external assets, skills & competencies to act on opportunities)

Business-agile enterprise framework[edit]

The business-agile enterprise framework describes how a B-AF functions in real-world operations. It highlights the big picture and shows how business and IT can work together. The B-AEF is a unifying management system that connects the business & technology sides of the company and facilitates their coordination as a whole. It addresses business & technology as one holistic, structured management system achieving consistent vertical and horizontal integration. Business-Agile Enterprise Framework.jpg

Business-agile enterprise business architecture[edit]

Business-Agile Enterprise Business Architecture.jpg

See also[edit]

Notes[edit]

  1. ^ Business Technology Management Institute
  2. ^ a b Business Technology Convergence Index Hoque, Fillios, Cash, Kirkpatrick, Mimms, Palepu, Sambamurthy & Zmud, Business Technology Management Institute, pp.8–17, June 2007. A copy of this report can be obtained at http://www.btminstitute.org/pdf/Business_Technology_Convergence_Index_Final.pdf
  3. ^ Peter Weill & Marianne Broadbent. Leveraging the New Infrastructure – How market leaders capitalize on Information Technology, Harvard Business School Press, 1998.
  4. ^ "Business Agility & IT Portfolios," MIT Sloan School of Management, Center for Information Systems Research, Summer Session 3, June 2006, data from 649 firms, National Science Foundation grant number IIS- 0085725. Agile = Average of firms above sample mean on percent of sales from new products (i.e., 5.6%). Staid = Average of firms below sample mean. Copyright © Massachusetts Institute of Technology, 2006. This work was created by MIT’s Sloan Center for Systems Research (CISR)
  5. ^ "IT Portfolio Management and IT Savvy – Rethinking IT Investments as a Portfolio," MIT Sloan School of Management, Center for Information Systems Research, Summer Session, Peter Weill, June 14, 2007. Research was conducted by MIT via the SeeIT/CISR survey of 629 firms – 329 of these firms are listed on US stock exchanges. The work was financed by the National Science Foundation grant number IIS- 0085725. Copyright © Massachusetts Institute of Technology, 2007. This work was created by MIT's Sloan Center for Systems Research (CISR)
  6. ^ "IT Savvy – What Top Executives Must Know to Go from Pain to Gain," Peter Weill & Jeanne W. Ross, Harvard Business Press, 2009, pp. 4–5.
  7. ^ "Managing the IT Portfolio," Microsoft Solutions Forum 2004, Peter Weill. File can be obtained from http://download.microsoft.com/download/4/f/3/4f33cdbb-f8c9-4edf-9bd7-6675d67d9eea/IT_Portfolio%20-%20Sept06.pdf
  8. ^ ^ "IT Savvy Pays Off: How Top Performers Match IT Portfolios and Organizational Practices," Peter Weill & Sinan Aral, MIT Center for Information Systems Research, May 2005. Document can be obtained from http://papers.ssrn.com/sol3/papers.cfm?abstract_id=779345

Further reading[edit]

  • "Agility in Information Systems: Enabling Capabilities for the IT Function," George Hobbs & Rens Scheepers, Pacific Asia Journal of the Association for Information Systems: 2010 Vol. 2: Iss. 4, Article 2. Link