What is Business Architecture?

1. What is Business Architecture? Siamak Amjadi February 2012

2. What is BU$IN€$$ all about?

3. How to respond … using one model?

4. A model? So simple? Business Architecture is A Model

5. How Simple? A Model is a simplification

6. World … a map of the world … a model

7. The Context decides the level of simplification

8. Mission Vision Business Strategy Business Models Business Processes Organization Management & Governance Conceptual Business Architecture

9. The Vision

10. Vision . . . .

11. Mission Vision External Demands Strategic Direction The Market Promise Customer Value BusinessStrategy Supply Supply Supply Value Proposition Value Proposition Value Proposition Value Proposition Value Proposition Value Proposition Demand Demand Demand Cost Cost Cost Income Income Income Profit Profit Profit Profit Profit Profit Business Models Business Processes Organization Management & Governance Business Architecture spans the whole business Business Strategy Customer Q2 Business Models D P Q1 Q3 Business Processes getCustomer Customer Mgmt C A Management IT Organisation Q4 Network Skills &Competencies Goals &Metrics BusinessPlanning Performancemanagement Organisation Services Solutions Information

12. External Demands Strategic Direction The Market Promise Customer Value Market Promise Key Characteristics Feelings Emotions Benefits Q4 Supply Supply Supply Offerings Offerings Offerings Value Proposition Value Proposition Value Proposition Demand Demand Demand Q3 Q1 BC Q2 Cost Cost Cost Income Income Income Profit Profit Profit Profit Profit Profit Plan Do Act Check Network Skills &Competencies Goals &Metrics BusinessPlanning Performancemanagement Organisation Business Architecture spans the whole business Business Strategy Business Models Business Processes Management Organisation

13. The Strategy

14. Strategy Canvas … Value Curves • Strategy canvas achieves 3 main objectives: • First, it displays the present and tries to predict future factors that affect competition in an industry thereby showing the industry’s strategic profile. • Second, it presents the strategic factors that are present and that potential competitors invest in, thus giving their strategic profile. • And finally, it illustrates the company’s strategic profile (also known as the Value Curve) by showing which factors of competition the company invests in currently and possibly in the future. • This value curve is the basic component of the strategy canvas. Market Promise Key Characteristics Feelings Emotions Benefits The Strategy Canvas and the Value Curves Strategy • Price • Openning hours • Expertice and product knowledge • Transparency of products and services • Personlised Services • Friendly service • Risk Management consultancy • Corporate dealers • Speed • Flexible payment terms • Relationship management • Ease of use • Responsiveness • Knowledge

15. The Five Forces • The forces can be divided into two dimensions: • Existing soruces: • Suppliers • Customers • Emerging Sources: • New Entrants to the market • Substitute Products & Services Threat of New Entrants Bargaining Power of Suppliers Bargaining Power of Buyers Emerging factors & their impact . . . . Existing Players & their impact . . . Threat of Substitute Products and Services:

16. Business Architecture spans the whole business External Demands Strategic Direction The Market Promise Customer Value What is Strategy Market Promise Strategy is profoundly different from tactics. In military terms, tactics is concerned with the conduct of an engagement while strategy is concerned with how different engagements are linked. In other words, how a battle is fought is a matter of tactics: whether it should be fought at all is a matter of strategy Key Characteristics Feelings Emotions Benefits Focus A Compelling Tag Line Divergence Nordea 975 368 168 159 81 345 Business Strategy A good Strategy has three aspects, and it is all about positioning and positioning ... A good Strategy has three aspects, and it is all about positioning and positioning ...

17. Finding the Competetive Position Positioningoptions arise from setting limits in three areas that are not mutually exclusive Variety Based Needs Based Access Based To limit the varieties of the products which are offered: Tailor activities to deliver particular varieties, features, or services across customer groups (meet a subset of their needs) Example: iPhone • To limit the customers servedbased on needs: • Tailor activities to meet the particular needs of a distinct customer group/purchase occasion • Example: IKEA • To limit the customers servedbased on means to serve • Tailor activities to reach differently accessible customers with similar needs • Example: Dell • It is difficult, if not impossible, to produce all varieties, serve all customer groups, and deliver all types of value equally well • “Positioning” without significant differences in activities is rarely meaningful

18. The neighborhood rental car business

19. Positioning and Activities • Temporary replacement cars or extra cars in the customer’s home city • Ubiquitous, small, inexpensive offices, including on-premises offices at major accounts • Open during normal business • Delivers cars to customers’ homes or rental sites, or customers to cars • Prices 30 percent below airport rates • Acquires new and older cars, favoring soon-to-be discontinued older models • Keeps cars six months longer than major rivals • In-house reservations system • Grassroots marketing with limited television • Cultivates strong relationships with auto dealerships, body shops, and insurance adjusters • Hires extroverted college graduates to encourage community interaction and customer service Set of Activities

20. FedEx . . . Guaranteed overnight delivery • “Absolutely, Positively Overnight” 1978–1983 • “It’s not Just a Package, It’s Your Business” 1987–1988 • “Our Most Important Package is Yours” 1991–1994 • “Absolutely, Positively Anytime” 1995 • “The Way the World Works,” 1996–1998 • “Be Absolutely Sure,” 1998–2000 • “This is a Job for FedEx,” 2001–2002 • “Don’t worry, there’s a FedEx for that,” 2002–2003 • “Relax, it’s FedEx,” 2004–2008 • "We Understand," 2009–present • "WeLiveToDeliver" 2009–present Frederik Smith A Compelling Tag Line

21. Business Architecture spans the whole business Market Promise Market Promise For Life Key Characteristics Key Characteristics Security Feelings Emotions Feelings Emotions Premium Benefits Benefits A car for every phase of life Cash Management Value Proposition • The customer value proposition focuses on both emotional and functional benefits • Emotional benefits are the intangible elements of the proposition and delivery that influences how the customer feels about the organization (e.g. reliable, professional and secure) • Functional benefits are tangible elements or observable outcomes that the customer perceive of the customer value proposition Business Strategy

22. Business Architecture spans the whole business Strategy Canvas … Value Curves • Strategy canvas achieves 3 main objectives: • First, it displays the present and tries to predict future factors that affect competition in an industry thereby showing the industry’s strategic profile. • Second, it presents the strategic factors that are present and that potential competitors invest in, thus giving their strategic profile. • And finally, it illustrates the company’s strategic profile (also known as the Value Curve) by showing which factors of competition the company invests in currently and possibly in the future. • This value curve is the basic component of the strategy canvas. Market Promise Key Characteristics Feelings Emotions Benefits Business Strategy • Price • Openning hours • Expertice and product knowledge • Transparency of products and services • Personlised Services • Friendly service • Risk Management consultancy • Corporate dealers • Speed • Flexible payment terms • Relationship management • Ease of use • Responsiveness • Knowledge

23. Strategy Canvas Video Gaming (for Nintendo Wii) Strategy Canvas Video Gaming (for Nintendo Wii)

24. The Business Model

25. Business Architecture spans the whole business External Demands Strategic Direction The Market Promise Customer Value Market Promise Key Characteristics Feelings Emotions Benefits Q4 Supply Supply Supply Value Proposition Value Proposition Value Proposition Value Proposition Value Proposition Value Proposition Demand Demand Demand Q3 Q1 BC Q2 Cost Cost Cost Income Income Income Profit Profit Profit Profit Profit Profit Plan Do Act Check Network Skills &Competencies Goals &Metrics BusinessPlanning Performancemanagement Organisation Business Strategy Business Models Business Processes Management Organisation

26. Who is the customer? • What does the customer value? • How do we make money in this business? • What is the underlying economic logic that, explains how we can deliver value to customers at an appropriate cost? A Business Model is to answer: • A (substitute for a) business strategy - even though many people use the terms interchangeably today. • A description of a business, a process model, a business plan, a revenue model, a pricing strategy, a mathematical model, a transaction model, a mandate or a list of products. A Business Model is not: Supply Value Proposition Demand Cost Income A Business Model describes the rationale of how an organization Creates, Delivers, and Capturesvalue.

27. Supply / Capabilities Offering Demand / Opportunities • The Network of suppliers & partners that, make the Business Model work • Who are our Key Partners? • Who are our key suppliers? • Which Key Resources are we acquiring from partners? • Which Key Activities do partners perform? Value Network Value Proposition • Types of relationships, we establish with specific Customer Segments • What type of relationship does each of our Customer Segments expect us to establish and maintain with them? • Which ones have we established? • How are they integrated with the rest of our business model? • How costly are they? Customer Relations • The bundle of products and services that create value for a specific Customer Segment • What value do we deliver to the customer? • Which one of our customer’s problems are we helping to solve? • What bundles of products and services are we offering to each Customer Segment? • Which customer needs are we satisfying? • Characteristics: Newness, Performance; Customization, “Getting the Job Done”, Design, Brand/Status, Price, Cost Reduction, Risk Reduction, Accessibility, Convenience or Usability • The most important assets required to make a Business Model work • What Key Resources do our Value Propositions require? Our Distribution Channels? Customer Relationships? Revenue Streams? Core Resource Core Processes • Key Activities and Processes, to make its Business Model work • What Key Activities do our Value Propositions require? Our Distribution Channels? Customer Relationships? Revenue streams? Distribution channels • How do we communicate with and reach our Customer Segments to deliver our offerings. • How are our Channels integrated? • Which ones work best? Most cost-efficient? • Integrated with customer routines? • Groups of people or organizations, which we aim to reach and serve. • For whom are we creating value? • Who are our most important customers? • Mass/Niche Market? Segmented? Diversified? Multi-sided Platform? Customer Segments • All costs incurred to operate a Business Model. • What are the most important costs inherent in our business model? • Which Key Resources are most expensive? • Which Key Activities are most expensive? • Fixed & Variable costs, Economies of scale, Economies of scope Cost Drivers € Risk Adjusted Profit Profit • The cash we generate from each Customer Segment. • For what value are our customers really willing to pay? • For what do they currently pay? • How are they currently paying? • How would they prefer to pay? • How much does each Revenue Stream contribute to overall revenues? Income streams

28. Relationship strategy • Customer involvement model in Product/Service development Customer Relations • Nordea: • Nordea Operations Centre • Markets • Trade Project Finance • Nordea Finance • External: • Correspondent banks • CM partner banks (HSBC, BNP Paribas, …) • EBA, Nets, BGC • SWIFT Value Network • (Branch Offices) • (Contact Centres ) • Corporate Netbank • SME Netbanks • File based channels • Corporate eGateway Distribution channels • CMB customers • Segment Large • Segment Medium • Segment Small • Institutional & International • Banks Customer Segments • Human capital • Financial assets • IT Core Resource Core Processes • Customer Oriented • Sales & Advisory • Customer onboarding • Customer service • Product Oriented • Product dev & mgt • Operations • Mgmt & Support • Competence & Process dev • Etc. € Risk Adjusted Profit Profit Example Example - Cash Management Supply / Capabilities Offering Demand / Opportunities • House Bank for our corp custm. • Maintain Transaction Accounts that the customer needs for running the business • Process transactions and provide information on them • Provide facilities for the customer to manage liquidity • Provide facilities for the customer to manage financial risk • Provide a set of secure channels for exchange of information between the customer and Nordea • Supply chain & working capital services • E-invoicing services: connect companies to their suppliers • Complex offerings in cooperation with other Nordea units Value Proposition • Staff Cost • IT running costs • IT development • Commission expenses • Other costs Cost Drivers • Account: • Net and Float Interest (corporate transaction accounts) • B • Transactions • Commission income • Channels • C Income streams Revenue – Cost = Operating Profit • Transaction accounts • Domestic payments • International payments • Channels • Treasury services • Fees • Interest • Total transactions • Account • Transactions • Channels

29. Business Model Template … and how to use it …

30. The Business Processes

31. Business Architecture spans the whole business External Demands Strategic Direction The Market Promise Customer Value Market Promise Key Characteristics Feelings Emotions Benefits Q4 Supply Supply Supply Value Proposition Value Proposition Value Proposition Value Proposition Value Proposition Value Proposition Demand Demand Demand Q3 Q1 BC Q2 Cost Cost Cost Income Income Income Profit Profit Profit Profit Profit Profit Plan Do Act Check Network Skills &Competencies Goals &Metrics BusinessPlanning Performancemanagement Organisation Business Strategy Business Models Business Processes Management Organisation

32. Enterprise typical Process Types L1 Manage Enterprise L1 Develop Enterprise L1 Sales and Delivery L1 Manage Assets L1 Support the Enterprise

33. Process Architecture – Swedish Apotekets

34. The People and the Governance Players ... and rules of the game

35. Business Architecture spans the whole business External Demands Strategic Direction The Market Promise Customer Value Market Promise Key Characteristics Feelings Emotions Benefits Q4 Supply Supply Supply Value Proposition Value Proposition Value Proposition Value Proposition Value Proposition Value Proposition Demand Demand Demand Q3 Q1 BC Q2 Cost Cost Cost Income Income Income Profit Profit Profit Profit Profit Profit Plan Do Act Check Skills &Competencies Goals &Metrics BusinessPlanning Performancemanagement Organisation Business Strategy Business Models Business Processes Management Organisation Network

36. Oh yeah ... all this ... so what How to assist an intelligent business change ... intelligently

37. Create Eliminate Market Promise Key Characteristics Feelings Emotions Benefits Increase Decrease Business Strategy Business Strategy ... and then what ....

38. Business Strategies P l a n s Supply Supply Value Proposition Value Proposition Demand Demand Cost Cost Income Income Q4 Supply Supply Supply Value Proposition Value Proposition Value Proposition Value Proposition Value Proposition Value Proposition Demand Demand Demand Eliminate Create • Strategy • The Business Idea • Vision & strategic goals • Main Strategies • Long-term goals & KPIs • Business Plan (this year) • Set goal and main activities • Break down goal and activities per opr. unit • Distribute resources to units • Result, balance and cash book Q3 Q1 BC Decrease Increase Plan Do Q2 Cost Cost Cost Income Income Income Profit Profit Profit Profit Profit Profit Act Check • Feedback and Measure • Meetings and feedback • Identify and establish rectifying measures • Follow-up and reporting • Follow-up and align with the plan • Report People Business Strategy Business Models Process Business Processes Management Organisation Plan Do Act Check Change and Transform toachieve the desiredfuture ... Current BM Strategies Plans New BM Current Business Model Business Plans New Business Model Tranformation Execution Orgn Execution New BA Transformation Scope and Plan Execution Organisation Execution & Implementation Innovated Business Architecture

39. Making the Business Competetive The Current Business Architecture Goals and targets to meet the market & customer expectations The Target Business Architecture Business Strategies New Vendor Customer Substitute Q4 Q4 Supply Supply Supply Supply Supply Supply Value Proposition Value Proposition Value Proposition Value Proposition Value Proposition Value Proposition Value Proposition Value Proposition Value Proposition Value Proposition Value Proposition Value Proposition Demand Demand Demand Demand Demand Demand Eliminate Create Q3 Q3 Q1 Q1 BC BC Decrease Increase Q2 Q2 Cost Cost Cost Cost Cost Cost Income Income Income Income Income Income Profit Profit Profit Profit Profit Profit Profit Profit Profit Profit Profit Profit • A Business Capability defines the organization’s capacity to successfully perform a unique business activity. Capabilities: • Are the building blocks of the business. • Represent stable business functions. • Are unique and independent from each other. • Are abstracted from the organizational model. • Capture the business’ interests. Capability Map Business Strategy Business Strategy Business Models Business Models Business Processes Business Processes Management Management Organisation Organisation Plan Plan Do Do Act Act Check Check Changing the Business Target Business - CurrentBusiness = Change Needs Using a Capability Map offers the ability to compare/match-up various change initiatives – across operational units and countries. Such maps placed on the timeline provides a substantial foundation to plan intelligently and proactively in order to synchronize the right investments at the right parts of the Business. Capability Map ۩ ۩ ۩ ۩ ۩ ۩ ۩ ۩ ۩ ۩

40. Making the Business Competetive Making the Business Competetive Making the Business Competetive Making the Business Competetive Q4 Q4 Q4 Q4 Q4 Q4 Q4 Q4 Supply Supply Supply Supply Supply Supply Supply Supply Supply Supply Supply Supply Supply Supply Supply Supply Supply Supply Supply Supply Supply Supply Supply Supply Value Proposition Value Proposition Value Proposition Value Proposition Value Proposition Value Proposition Value Proposition Value Proposition Value Proposition Value Proposition Value Proposition Value Proposition Value Proposition Value Proposition Value Proposition Value Proposition Value Proposition Value Proposition Value Proposition Value Proposition Value Proposition Value Proposition Value Proposition Value Proposition Value Proposition Value Proposition Value Proposition Value Proposition Value Proposition Value Proposition Value Proposition Value Proposition Value Proposition Value Proposition Value Proposition Value Proposition Value Proposition Value Proposition Value Proposition Value Proposition Value Proposition Value Proposition Value Proposition Value Proposition Value Proposition Value Proposition Value Proposition Value Proposition Demand Demand Demand Demand Demand Demand Demand Demand Demand Demand Demand Demand Demand Demand Demand Demand Demand Demand Demand Demand Demand Demand Demand Demand Q3 Q3 Q3 Q3 Q3 Q3 Q3 Q3 Q1 Q1 Q1 Q1 Q1 Q1 Q1 Q1 BC BC BC BC BC BC BC BC ۩ ۩ ۩ Q2 Q2 Q2 Q2 Q2 Q2 Q2 Q2 Cost Cost Cost Cost Cost Cost Cost Cost Cost Cost Cost Cost Cost Cost Cost Cost Cost Cost Cost Cost Cost Cost Cost Cost Income Income Income Income Income Income Income Income Income Income Income Income Income Income Income Income Income Income Income Income Income Income Income Income Profit Profit Profit Profit Profit Profit Profit Profit Profit Profit Profit Profit Profit Profit Profit Profit Profit Profit Profit Profit Profit Profit Profit Profit Profit Profit Profit Profit Profit Profit Profit Profit Profit Profit Profit Profit Profit Profit Profit Profit Profit Profit Profit Profit Profit Profit Profit Profit ۩ ۩ ۩ ۩ ۩ ۩ Business Strategy Business Strategy Business Strategy Business Strategy Business Strategy Business Strategy Business Strategy Business Strategy ۩ Business Models Business Models Business Models Business Models Business Models Business Models Business Models Business Models Business Processes Business Processes Business Processes Business Processes Business Processes Business Processes Business Processes Business Processes Management Management Management Management Management Management Management Management Organisation Organisation Organisation Organisation Organisation Organisation Organisation Organisation Plan Plan Plan Plan Plan Plan Plan Plan Do Do Do Do Do Do Do Do Act Act Act Act Act Act Act Act Check Check Check Check Check Check Check Check

41. The Business Plan

42. The one-slide Business plan

43. Supply Value Proposition Demand Supply Value Proposition Demand Supply Value Proposition Demand Cost Income Cost Income Cost Income The Business Strategy and the Business Model components are reflected in the business plan Example

44. Business Planning Example

45. The Business Vision . . . - How important is it?