There are a range of conceptual pairs that I have found to be important to understand and consider when architecting enterprises. Each of these pairs constitute a duality where change of one encompasses or allows change to the other. Understanding both dimensions of each of these dualities is essential to the successful architecting and design of enterprises. Equally, changing one without appreciating the other is changing can be fraught with danger! The pairs that come to mind include:

• Self and other
• Enterprise and organisation
• Internal and external
• Information and process
• Means and ends
• Capability and outcome
• Autonomy and control

Self and other

I have listed this first because people are intrinsic to all enterprises. People conceive and pursue enterprises. Many enterprises entail collaboration with others, engaging them in the ongoing conception and pursuit of the enterprise.

From the outset of our lives, we engage in a process of understanding ourselves. The concept of “self” unavoidably entails the concept of “other” – to define “self”, we must be able to differentiate “self” from “other”. Consider the development of a child, coming to understand themselves as separate and distinct from:

• their mother and father
• the world or environment in which they live

Our understanding of ourselves is as much informed by our understanding of others, and vice versa. We communicate with others and that communication changes them. They communicate with us and that changes us.

As we collaborate with others in conceiving and pursuing enterprises, we engage in developing a shared conception of our enterprise and the manner in which we pursue it. We share our conception and others conception may be challenged, reinforced and possibly changed. They share their conception and the same may occur.

The models that we develop as part of conceiving and pursuing our collaborative enterprise inevitably entail ongoing changes to self and to others. In my experience, they are more successfully conceived and pursued when I give due attention to the manner in which others can and do contribute to the enterprise.

This duality prompts consideration of numerous dimensions, far more than can be covered in this article, providing an valuable source of topics for future articles, including:

• leadership
• emotional intelligence
• enterprise awareness

Enterprise and organisation

“Enterprise” has a number of different meanings. Often it is used as a synonym for organisation, as in:

• enterprise-bargaining and organisation-wide-bargaining
• enterprise-agreement and organisation-wide-agreement
• enterprise-development and organisational-development
• our-enterprise and our-organisation

In architecting enterprises, it is helpful to bring a different meaning into play – as outlined by Len Fehskens when I encountered him through LinkedIn and more recently through the Association of Enterprise Architects and their journal, of which he is Chief Editor. Len encourages us to consider

enterprise as an undertaking or endeavour

In doing so, it is then possible to make a clearer distinction between the organisation that we establish to pursue the undertaking or endeavour and the undertaking or endeavour itself. It also enables us to apply the concept of enterprise in a range of different ways that are not tied to the scope of an organisation, including:

• a new product or service as an endeavour
• a multi-organisation endeavour
• a project as an endeavour

Each time the conception of the endeavour changes, there will be a necessary change to the organisation established to pursue the endeavour. Each time the organisation is changed, we create the capability and opportunity to pursue different endeavours.

Internal and external

This is a more general version of self and other, but applied to any entity or system. As we create and define the boundary which “defines” the entity or system, so

the boundary creates the distinctions of internal to the boundary and external to the boundary

If we change what we regard as internal, then we are changing what we regard as external. If something changes externally, then this may cause us to change something internally.

For some enterprises, their ultimate failure has arisen through a failure to recognise the external changes that have been impacting their enterprise as each enterprise responds to external needs by making internally developed offers.

Information and process

This is probably the earliest “pair” that I encountered, as part of my role as a business analyst.

For any process, it is possible to identify:

• the information consumed by the process
• the information generated by the process

For any information, it is possible to identify:

• the generating process
• the consuming process

Hence, the view that one does not exist without the other. This has provided the basis for reviewing and assuring the quality of business requirements documents, checking that there are identified processes for the information requirements, and that there are identified information domains and entities for the process requirements.

Means and ends

This is a well known pair that comes in a variety of forms:

• means and ends
• strategies and objectives
• how and why

They can exist in a cascade where:

• Strategy A is pursued to realise objective 1
• Objective 2 reflects Strategy A
• Strategy B is pursued to realise objective 2

These elements may be used to explore:

• business objectives and business strategies
• program objectives and program strategies
• project objectives and project strategies
• system objectives and system strategies

Change the objectives and it is necessary to change the strategies. Change the strategies and different objectives may be realised.

Capability and outcome

Whenever a different outcome is required, there is a need to determine whether that demands new or different capabilities. Whenever a different capability is available, there is the opportunity to realise new of different outcomes.

There are several modeling techniques which enable effective exploration of this particular duality:

• Benefit realisation chains aid in understanding the chain of outcomes that are required in order to realise ultimate enterprise goals and outcomes. Once developed, it is helpful to explore the capabilities required to deliver each benefit / outcome in the chain
• Business capability models aid in reflecting the capabilities existing within an enterprise or required to pursue an intended enterprise. Once developed, it is helpful to explore the gaps in capability to inform a change or transformation program, and to articulate the outcome measures for each capability which aids in evaluating progress and degree of success.

Autonomy and control

Consideration of autonomy versus control arises in a range of situations, most commonly in relation to:

• Governance
• Management
• Process

In a governance context, there is a recognition of the separation between the governing body and management. Governance creates an environment through articulation of strategy and policy within which management are expected to operate. Strategy and policy which are too prescriptive limit the capacity of management to respond the dynamic nature of the environment in which the enterprise operates. Alternately, ill-defined strategy and policy may offer a degree of autonomy such that management pursue outcomes beyond those identified by the governing body.

In a management context, managers and staff reporting to a manager will give consideration to the degree to which the manager controls staff or empower staff and affords them a degree of autonomy. Staff with little autonomy will often speak of being micro-managed, implying a degree of control beyond that which they deem necessary.

In a process context, consideration needs to be given to the conditions within which the process operates and the extent to which these can be accommodated by a process which prescribes what should be done versus a process which relies on the knowledge and skill of staff to determine what should be done.

In each context, increasing autonomy entails decreasing control and vice versa. Careful attention is required to determining the appropriate balance between autonomy and control.

Conclusion

Each of these dualities are important to the successful architecting, operation and sustaining of enterprises.

Perhaps there are other dualities of which you are conscious and which you find important to consider?

In the article about Operating Models, one of the four primary systems is the Development System as shown in the following figure.

I have been prompted to further elaborate on enterprise development because of:

• the increasing interest in effective business transformation and business change and the related field of digital transformation
• some recent commentary on the development system element of operating models

The latter can be found on Andrew Campbell’s Operating Model blog where he comments on the representation of operating models that I have outlined.

This has led me to elaborate further on:

• the role and purpose of this system
• the increasing importance of this system
• the place of this system in the enterprise lifecycle
• the implications of ignoring this system
• a maturity view of this enterprise capability

Development System

Let me start by talking about the naming of the system, and by indicating that others may have or prefer alternate names. I chose “development system” because I believe it is helpful to consider:

• enterprises as living systems which adapt, evolve, develop and mature in response to internal and external factors
• change and transformation as processes which develop the capabilities of an enterprise to realise its goals and aspirations
• the transition from an existing operating model to an intended operating model as an enterprise learning and development process

The term also relates well to other enterprise activities such as:

• business development
• organisational development
• leadership development
• professional development

Role and purpose

The development system exists to fulfill a purpose which can be expressed in different ways, including:

• Develop the necessary enterprise capabilities to execute business strategy
• Transform the enterprise from its current to intended state
• Design, plan and implement the necessary changes to realise the intended enterprise

The system exists from the moment that the founder creates the enterprise through to its current form. It supports the development of the enterprise through its lifecycle. An interesting set of perspectives on the enterprise lifecycle is provided by Ichak Adizes in his book “Managing Corporate Lifecycles”.

Importance

In the past, I have not incorporated this system and its subsystems in my descriptions of the architecture of an enterprise. However, the importance of its inclusion has become evident over time. Contributing factors include:

• Commentary on the failure of business strategy execution. It seems to me that such failure either arises due to poor strategy or poor execution. The latter reflects a failure of the development system – and its role in establishing the necessary capabilities to fulfill the requisite business strategy.
• Commentary on change failure or project failure. Both of these are about the failure of the development system. An enterprise can have the best strategy in the world, but if it cannot be realised, then it is of no use to the enterprise. Hence, there is a need to understand the adequacy of development capabilities and address these if strategic capabilities are to be realised.
• The increasing degree of change in the market / environment in which enterprises operate means that the demand and necessity to change and develop is becoming an increasingly important aspect of any enterprise. This is reflected in an increasing allocation of resources to the development system within many enterprises.
• In John Kotter’s article in HBR – Accelerate, John outlines the concept of a “dual operating system” within enterprises – the operational system and the change / transformation / development system – which he sees emerging in response to the increasing demand for enterprise agility and the significantly different features and culture required in these two systems.

Hence, it seems to me that the demands for enterprises to change, transform and develop in a more adaptable and agile manner for their ongoing viability and sustainability are such that attention to the development system is not just becoming increasingly important, but is becoming unavoidable.

Lifecycle

The enterprise development lifecycle is shown in the following figure.

The development system converts business strategy into enterprise operations. The performance system monitors the development system and the operations system in relation to progress and realisation of the intended outcomes. This provides inputs into subsequent cycles of strategy development.

Typically, key activities within the development system will include:

• Refinement of the intended business model(s) and operating model required to effect the business model(s)
• Development of the transformation or change strategy to realise the intended operating model
• Formation and execution of the transformation program to put the change strategy into effect

Implications

The implications of failing to give attention to the development capabilities of an enterprise include:

• Ongoing change and project failure
• Higher than anticipated costs and lower than expected outcomes in effecting business strategy
• Unnecessary revision to business strategy due to assumptions that the business strategy was deficient where it may be weaknesses in execution and deficiencies in change management capabilities
• Unnecessary risk to enterprise viability due to an incapacity to respond to market disruption in a timely and cost effective manner

Maturity

The development capability is simply another capability within the enterprise. It can be assessed in terms of its maturity, just as any other capability, identifying the different dimensions to the capability and which of these may require improvement. In part, the value of the maturity view is one of acknowledging and leveraging the areas of strength, and determining those particular dimensions where learning and/or change is required. With the increasing degree of change occurring in enterprises, early attention to the maturity of this capability will be critical for many enterprises.

In the article about Operating Models, one of the four primary systems is the Resource Management System as shown in the following figure. 

Several comments have been made about the need or value in considering the Resource Management System. This has prompted me to elaborate further on:

• the role and purpose of this system
• the increasing importance of this system and the implications of ignoring this system

Role and purpose

All enterprises rely on a range of resources as part of their enterprise capabilities, established to deliver their intended products / services. These resources include:

• Finance (a means of securing other resource types)
• People (and their associated knowledge, experience, skills, attitudes and behaviours)
• Information (both the information consumed and the information generated and consumed by other parts of the enterprise)
• Assets (fixed assets, plant and equipment, and technology)
• Materials (or consumables)

The types of resources required can vary significantly across different enterprises and different industries. All enterprises have in common the need to manage finance, people and information. Many enterprises have few assets that they require and can often access the assets on a usage basis without involving the additional activities and responsibilities entailed in asset ownership. Enterprises have varying needs for materials.

The primary role of the resource management systems is to ensure that other systems are readily able to access appropriate resources meeting their performance and other requirements. These systems attend to common activities such as those relating to:

• financial resources, including management of financial resources, financial transactions (creditor and debtor management), allocation of financial resources and reporting of financial performance
• human resources, including support for recruiting, employment conditions, training and development, workplace safety and performance management
• information resources, including sourcing, organising and supporting access
• physical assets, including the management of the asset through its lifecycle from acquisition / creation through to disposal
• materials, including supplier selection and management, sourcing, storing and ensuring they are available for immediate use so as not to impede the productivity of the people or machines consuming them

Importance

These activities emerge and develop as enterprises grow in size and complexity. They are most commonly seen in the form of Corporate Service Divisions or Shared Service Centres. Their establishment and operation enables others to focus on their core capabilities and ensures that a consistent approach is taken to management and availability of these critical resources.

In some enterprises, intermediate products and services are developed and provided to provide more effective support to the core capabilities within the enterprise. This might constitute specific value adding services around a basic resource. For example, the fleet function in a policing organisation acquires vehicles and fits them out to be an appropriate resource for patrol staff. This takes a basic resource (car) and creates a key resource for a core capability – response to incidents. It is not a core value adding process and capability, rather it is a value adding capability in providing a critical resource.

Without these capabilities, enterprises are prone to:

• duplicating these capabilities within their core capabilities
• failing to adequately manage these capabilities
• compromising overall enterprise performance

Resource development

The extent and sophistication of the resource systems vary considerably for different types of enterprise and different size and scale of enterprise.

In a small enterprise, the resource management capability is most likely to be part of the manager or director roles. As the enterprise grows, it might establish a “business manager” role, which may encompass a range of the resource management functions. Further growth will lead to a point where a Finance Manager may be appointed, or a HR Manager position established. As indicated earlier, these capabilities can grow to the point of an entire Division supporting the resource management systems.

In such situations, one needs to be mindful that some of these systems operate across all functions within the enterprise. So, for example, every manager in a 10,000 person enterprise will have financial management responsibilities and people management responsibilities. There may also be other roles in providing support. For example, in a university setting, when considering the HR or people management system, one needed to be mindful that this encompassed:

• every employee
• every manager
• HR support functions at School level
• HR support functions at Faculty level
• HR support functions at Corporate level

In such scenarios, any one of the resource management systems can be viewed as an enterprise in its own right, and will entail a complex set of systems and functions providing support to the entire organisation. Whilst these systems are not part of the operations system, delivering the core products and services of the organisation, they can be critical to the success of the enterprise, and the manner in which they operate may be part of the way in which the enterprise is able to differentiate itself.

This is an article in the series “Enterprise architecture – plain and simple” that I published on LinkedIn Pulse last year. In the article on elements of the description of current or intended architectures, I referenced a number of key models that I use. The first and primary model is the business model, described in another article in the series.

Whereas the description of business models seems to have become more consistent through the application of the ontology developed by Alex Osterwalder, I am not so confident that there is a clear ontology or framework for operating models.

There is research and thinking which has occurred in the area of operating model design. Andrew Campbell of Ashridge Business School runs courses on operating model design and publishes a blog on the topic – Ashridge on Operating Models. He and I have exchanged views and explored the relationship between enterprise architecture and operating model design. We have already published one article on the topic of enterprise architecture – see Why business managers should understand enterprise architecture. We have only a little further to go before we could confidently say that we have shared views in this domain. That represents for me, an interesting challenge and a great learning opportunity!

As I have explored the high level models that different practitioners develop, it has become evident that different frameworks (whether individual or commercial) adopt different ways of conceiving of the primary systems of which an enterprise is comprised. The highest level abstraction of the systems of which an enterprise is comprised, then “sets the tone” for all subsequent elaborations.

In this article, I will simply share some of the patterns and models which I have used quite successfully with a variety of clients. I do not pretend that the framework that I use is any better than any others. I will outline the rationale for the framework and leave it to readers to ascertain whether it seems to provide a satisfactory basis for further development to reflect the operating model for enterprises with which they are engaged.

Purpose

The primary purpose of an operating model is to express the means by which an organisation:

• pursues its enterprise
• realises its goals and aspirations
• achieves and sustains viable operation

Enterprise system

There are four key systems forming the expression of any enterprise-as-system that I consider:

1. Operations management system
2. Resource management system
3. Governance and management system
4. Development management system

For many years, I have only addressed systems 1 to 3. Typically, I have not addressed the development management system, because:

• I was usually part of this system
• the development management system was usually embedded in the other systems

However, with the increasing degree of change, I am finding that more enterprises are recognising the development management system as a distinct system. This can be seen in John Kotter’s article – Accelerate! – where he outlines the case for a dual operating system. It can also be seen in the increasing profile of Program Management in enterprises and in enterprises where they have established a Chief Operating Officer and a Chief Change Officer.

Operations system

This system is the core system which produces the products and/or services of the enterprise. It is most commonly represented as a value stream, reflecting the core capabilities by which the enterprise transforms inputs into outputs and delivers value to its customers and consumers.

This system may also include support systems which are not part of the primary value stream. These may be systems which require specialist capabilities and are required by different systems in the value stream and deliver internal products and services beyond those provided as part of resource management.

Resource management system

This system manages each of the resource types required for successful operation of the enterprise. At a minimum, this will encompass:

• Human resource management
• Financial management
• Information management

It may also include:

• IT management
• Asset management
• Procurement, contract and materials management
• Record management

Governance system

All enterprises require governance and management.

With respect to governance, I have drawn on the Tricker Model which is one of the models covered within the Company Directors Course run by the Australian Institute of Company Directors. By drawing on this model, I know that there are many Directors and Boards who will be familiar with the model and therefore comfortable with the subsystems that I include:

• Accountability and reporting
• Strategy
• Policy
• Performance reporting
• Strategic risk management

To date, I have not modeled the management system. It seems to be adequately covered by the management embedded in each of the systems that I consider. I have included reference in this area – governance and management – to allow for inclusion of additional capabilities that become evident and require attention beyond those evident in all other areas.

Development system

This system supports the development of an enterprise and effects change in any of the systems. Change may derive from strategy, as the means by which strategy is executed, or from individual systems as part of continuous improvement. It includes:

• Architecture management
• Program management
• Project management
• Change management
• Program and project support

I view change through a lifecycle lens taking change from idea to realisation. Key steps include:

• Initiative formation
• Investigation
• Acquisition
• Design, build and test
• Implement
• Review and close

Conclusion

Overall, this conceptualisation of an enterprise-as-system has enabled successful:

• development of architectural models
• formation of program strategies, plans and roadmaps

It seems to prompt reasonable coverage of the activities of any enterprise and it seems to be easily understood by stakeholders with whom I engage.  Further elaboration has been provided in relation to:

• Enterprise resources
• Enterprise development

 

Since initially publishing this article, Andrew Campbell has published Operating Model Canvas which provides a clearer articulation of operating models.  In due course, I will publish an update which outlines the elements of my thinking and practices that extend beyond the approaches outlined in Operating Model Canvas.

 

Enterprises as systems …

Enterprises as systems of systems (or systems squared) …

Makes sense! Seems reasonable! But what does it really mean? How does it help in making sense of the enterprises in which we engage and the change or transformation required to realise the goals and aspirations of our enterprises?

A system of systems sounds like it is a hierarchy of systems embedded in systems. Closer inspection indicates that it is more complex than that!

Sole trader or freelancer

An interesting starting point is provided by considering a sole trader or freelancer – a one person enterprise. That should be simple! What systems are encompassed within their enterprise-as-a-system? Likely candidates include:

• Business development system
• Contract management system
• Financial management system
• Work management system
• Service delivery system

How do each of these relate to the others? How should they relate to each other? How might they be organised to readily support enterprise development and growth?

Even for a sole trader, key principles and models are helpful in establishing an effective operating model which supports future enterprise flexibility, agility and growth.

Professional services enterprise

For several different professional services enterprises, I have used the APQC Process Classification Framework as a reference model for likely systems in their enterprise. An example of what this might look like is shown in the following figure.

Whilst this is portrayed as a systems hierarchy with systems composed of subsystems, it is evident on closer consideration that the system relationships are more complex than this.

For example, every executive, manager and supervisor exercises the people management system. In fact, every employee is part of the people management system. Hence, customer service staff and customer service managers are part of both, the customer service system and the people management system. Effective operation of the customer service system, as with all other systems, is dependent on a range of subsystems, including:

• people management system
• finance management system
• IT management system (if IT systems are relied upon as part of customer service operations)
• asset management system (for office and other assets which might be used)

Similarly, any enterprise subsystem could be subject to change and improvement. In such situations, elements of the business capability management system (eg. program management or project management) may be exercised in effecting improvements to the relevant enterprise subsystem.

With various of these system interdependencies in play, it is critical in planning and executing any improvement initiative for one or more enterprise subsystems, that clarity is established as to:

• the subsystem(s)-of-interest
• the containing system(s) of which the subsystem-of-interest may be part
• the embedded systems which may be part of the subsystem-of-interest

Supporting technology systems

Many organisations have subsystems which are dependent on supporting technology systems, where technology encompasses any entity other than people which represents and enables the application of embedded processes. Examples of subsystems using technology include:

• manufacturing production subsystems which operate production lines, robots, and other machinery
• hospital intensive care subsystems which use highly sophisticated medical monitoring and life support technology
• the vast array of organisations that use IT systems to support finance management subsystems, people management subsystems, customer management subsystems and other enterprise subsystems

This extends the system-of-systems line of thinking into addressing more complex networks of people-based-systems (soft systems) and technology-based-systems (hard systems), enabling consideration of:

• subsystems composed of a combination of soft and hard systems
• differing relationships and dependencies, where a single technology-based-system might provide support to multiple people-based-systems and a single people-based-system may be reliant on multiple technology-based-systems
• application of differing methods required to deal with soft systems versus hard systems

It is in such situations of complexity that architectural methods are applied to enable multiple stakeholders and multiple solution design and delivery roles to develop shared views and deliver solution components that can be integrated into the full system-of-systems. This is where various forms of abstraction are applied to consider the parts of the enterprise requiring change and improvement, including:

• inclusion and exclusion of subsystems
• composition and decomposition of subsystems
• generalisation and specialisation of subsystems

These issues are explored in other articles, including:

• Enterprises as systems
• Enterprises as social systems