Summary: Business Architecture & Transformation
RSM Erasmus University Rotterdam: BM03BIM
This summary contains lectures + videos for Session 1-7 for the end term of BAT 2023 taught
by Martin Quinn.
You can always text me if you have any comments or questions! Good luck! – Maaike
Table of Contents
Week 1: Introduction to BAT + Classic BAT Principles .................................................................................... 2
Week 2: Transforming Healthcare (Edgar van Zoelen) ................................................................................... 9
Week 3: Business Architecture Principles (continued)................................................................................. 12
Week 4: Modern Business Architecture ..................................................................................................... 19
Week 5: Business Processes ...................................................................................................................... 26
Week 6: Digital Transformation Enablers ................................................................................................... 27
Week 7: Risks and Challenges in Digital Transformation.............................................................................. 30
Exam Q&A................................................................................................................................................ 33
1
,Week 1: Introduction to BAT + Classic BAT Principles
Digital Camera example:
- Fotoman: one of the first digital camera’s: expensive and difficult to use (need to
download software, low quality etc).
- Kodak failed to transform to digital photography and therefore lost market share;
digital cameras took over > failure to transform can endanger firms
- It is difficult to transform when you’re already huge (Kodak was market leader)
The bigger you are, the harder to transform / innovate. You will fail in the end.
For incumbents: transformation is hard.
For new entrants: establishing as a solid competitor takes
time.
Overall, firms need to transform to survive.
Sum-up: Transformation and architecture
Firms need to transform and innovate in order to survive
- If a business is to transform, he can only do so after understanding/adapting its
architecture
- How to manage a transformation?
1. Map architecture and current capabilities (very difficult)
a. You need to understand your architecture, your type,( your investors and what is
making your product unique)
b. What are your capabilities and makes unique
2. Adjust your architecture depending on the transformation.
3. Implement the transformation (requires a lot of resources).
Digital masters → companies that harness significant benefits from digital technologies, they
are 26% more profitable than industry competitors and show more efficiency in their physical
capacities, production, and processes.
- Digital masters are rare, because companies:
Fail to develop an adequate architecture.
Fail to develop an adequate business vision.
WHAT IS BUSINESS ARCHITECTURE?
(Simon, Fischbach, & Schoder, 2014).
Business Architecture Framework
1. Business motivation (strategy layer)
→ captures strategic context (why it operates in
a certain way)
o Business end → elements of aspiration
(mission, vision, values, goals)
2
, o Business means → instruments employed to achieve the ends
o Business influencers → internal and external factors influencing means and
ends.
2. Business model
→ blueprint of business, expresses fundamental business logic through creating,
delivering and capturing value.
o Offering perspective (value proposition)
o Customer perspective (customer segments, relationships, channels)
o Supplier perspective (supplier segments, supplier relationships, supplier
channel)
o Activity perspective (operating model, value chain configuration/coordination)
o Financial perspective (cost/revenue model)
o Sustainability perspective (design themes)
3. Business execution (organization layer)
→ capabilities, business process, structures, people, culture that help execute the
strategy.
WHAT IS BUSINESS TRANSFORMATION?
(Venkatraman, 1994)
Five levels of IT-enables business transformations
1. Localized exploitation → decisions are decentralized to functional manager for
deployment of IT systems.
o Disadvantage → competitors can easily imitate standard technical applications with
minimal changes
2. Internal Integration → more systematic attempt to leverage IT capabilities involving
two integrations:
o Technical interconnectivity (common IT platform to align different systems)
o Business process interdependence (deal with employees’ roles across functions)
3. Business Process Redesign → IT is used for designing the new organization and
business processes (in which boundaries of firm are fixed). Three critical aspects for
exploiting IT benefits at business process redesign:
o Rational for current organizational design (strength & limitations current
design)
o Significant changes in competitive marketplace (competitor analysis)
o Cost of continuing the status quo (cost & benefit analysis)
3
, 4. Business Network Redesign → redesign of exchange among stakeholders in network
(boundaries of firm are open). Restructure relationships to leverage more competencies
to deliver better services and products.
5. Business Scope redefinition → use IT to redefine scope of business (joint ventures,
alliances, partnerships), with an emphasis toward more flexible/fluid corporate scope.
It restructures activities within a value chain.
Levels 1 & 2 are evolutionary → incremental changes
Levels 3,4,5 are revolutionary → bigger scope of changes
How to address a digital transformation?
The foundation of Business architecture revolves around mapping:
1. Business/IT strategy
2. Business/IT capabilities
3. Value streams
4. Business/IT processes
1. IT Strategy
What is Strategy?
- Strategy is based on unique activities to offer a value proposition
- Successful strategies are focused and require tradeoffs
- Most basic thing you can think about are the different orders of fits
o 1st order: consistency: consistent and precise strategy and message/vision.
▪ E.g. selling croissants consistent in quality.
nd
o 2 order: reinforcement: includes echo with other industries/services.
▪ E.g. selling croissants and coffee.
o 3rd order. optimization: efficient
coordination and Information
exchanges.
What is IT strategy?
- A set of rules and documents that describe
the firm’s strategy regarding information
technology
- It’s a subset of the firm’s strategy
4
, Case Volkswagen
- What are VW’s main competitors?
o Automotive industry (Tesla, Mercedes, Honda, BMW). Volkswagen Group
operates with different brands, so they have multiple different competitors (e.g.
Flixbus, Lime, Swapfiets, Apple, Uber). It has to deal with other aspects of
mobility.
- What might be VW’s vision (why) & mission (what)?
o The VW Group has multiple brands and therefore multiple visions and mission.
These visions and mission should be aligned with the Groups’ vision.
o Vision → Make this world a mobile, sustainable place with access to all citizens
o Goal/Strategy → Sell cars
o Goal/Strategy → Sell transportation
Summary on VW and Uber
- Incumbent vs New Entrant
- VW and Uber have similar visions but different goals/strategies. Therefore, they have
different IT needs:
o Volkswagen needs IT to support the strategy
o Uber needs IT first (platform) and then builds a strategy around it.
- Cost-Based (VW) vs Differentiation-Based (Uber)
o Customers are price sensitive, or unwilling to pay a premium for quality
o vs Some customers are willing to pay a premium for quality (heterogenous)
Operating model (Ross et al, 2006)
- The strategy formulation leads to the choice for an appropriate ‘Operation model’
- In its turn, the operating model leads to different IT needs!
1. Diversification (e.g., Siemens; electronics unit, Health unit).
2. Replication: → independent business units (e.g., Starbucks; every unit offers exactly
similar coffees).
3. Coordination (e.g., Consultancies; different projects but integrate processes to get
overview of customers to coordinate it).
4. Unification (e.g., Amazon; platform company that has high standardization and the
business units AWS, prime services are highly integrated).
5
RSM Erasmus University Rotterdam: BM03BIM
This summary contains lectures + videos for Session 1-7 for the end term of BAT 2023 taught
by Martin Quinn.
You can always text me if you have any comments or questions! Good luck! – Maaike
Table of Contents
Week 1: Introduction to BAT + Classic BAT Principles .................................................................................... 2
Week 2: Transforming Healthcare (Edgar van Zoelen) ................................................................................... 9
Week 3: Business Architecture Principles (continued)................................................................................. 12
Week 4: Modern Business Architecture ..................................................................................................... 19
Week 5: Business Processes ...................................................................................................................... 26
Week 6: Digital Transformation Enablers ................................................................................................... 27
Week 7: Risks and Challenges in Digital Transformation.............................................................................. 30
Exam Q&A................................................................................................................................................ 33
1
,Week 1: Introduction to BAT + Classic BAT Principles
Digital Camera example:
- Fotoman: one of the first digital camera’s: expensive and difficult to use (need to
download software, low quality etc).
- Kodak failed to transform to digital photography and therefore lost market share;
digital cameras took over > failure to transform can endanger firms
- It is difficult to transform when you’re already huge (Kodak was market leader)
The bigger you are, the harder to transform / innovate. You will fail in the end.
For incumbents: transformation is hard.
For new entrants: establishing as a solid competitor takes
time.
Overall, firms need to transform to survive.
Sum-up: Transformation and architecture
Firms need to transform and innovate in order to survive
- If a business is to transform, he can only do so after understanding/adapting its
architecture
- How to manage a transformation?
1. Map architecture and current capabilities (very difficult)
a. You need to understand your architecture, your type,( your investors and what is
making your product unique)
b. What are your capabilities and makes unique
2. Adjust your architecture depending on the transformation.
3. Implement the transformation (requires a lot of resources).
Digital masters → companies that harness significant benefits from digital technologies, they
are 26% more profitable than industry competitors and show more efficiency in their physical
capacities, production, and processes.
- Digital masters are rare, because companies:
Fail to develop an adequate architecture.
Fail to develop an adequate business vision.
WHAT IS BUSINESS ARCHITECTURE?
(Simon, Fischbach, & Schoder, 2014).
Business Architecture Framework
1. Business motivation (strategy layer)
→ captures strategic context (why it operates in
a certain way)
o Business end → elements of aspiration
(mission, vision, values, goals)
2
, o Business means → instruments employed to achieve the ends
o Business influencers → internal and external factors influencing means and
ends.
2. Business model
→ blueprint of business, expresses fundamental business logic through creating,
delivering and capturing value.
o Offering perspective (value proposition)
o Customer perspective (customer segments, relationships, channels)
o Supplier perspective (supplier segments, supplier relationships, supplier
channel)
o Activity perspective (operating model, value chain configuration/coordination)
o Financial perspective (cost/revenue model)
o Sustainability perspective (design themes)
3. Business execution (organization layer)
→ capabilities, business process, structures, people, culture that help execute the
strategy.
WHAT IS BUSINESS TRANSFORMATION?
(Venkatraman, 1994)
Five levels of IT-enables business transformations
1. Localized exploitation → decisions are decentralized to functional manager for
deployment of IT systems.
o Disadvantage → competitors can easily imitate standard technical applications with
minimal changes
2. Internal Integration → more systematic attempt to leverage IT capabilities involving
two integrations:
o Technical interconnectivity (common IT platform to align different systems)
o Business process interdependence (deal with employees’ roles across functions)
3. Business Process Redesign → IT is used for designing the new organization and
business processes (in which boundaries of firm are fixed). Three critical aspects for
exploiting IT benefits at business process redesign:
o Rational for current organizational design (strength & limitations current
design)
o Significant changes in competitive marketplace (competitor analysis)
o Cost of continuing the status quo (cost & benefit analysis)
3
, 4. Business Network Redesign → redesign of exchange among stakeholders in network
(boundaries of firm are open). Restructure relationships to leverage more competencies
to deliver better services and products.
5. Business Scope redefinition → use IT to redefine scope of business (joint ventures,
alliances, partnerships), with an emphasis toward more flexible/fluid corporate scope.
It restructures activities within a value chain.
Levels 1 & 2 are evolutionary → incremental changes
Levels 3,4,5 are revolutionary → bigger scope of changes
How to address a digital transformation?
The foundation of Business architecture revolves around mapping:
1. Business/IT strategy
2. Business/IT capabilities
3. Value streams
4. Business/IT processes
1. IT Strategy
What is Strategy?
- Strategy is based on unique activities to offer a value proposition
- Successful strategies are focused and require tradeoffs
- Most basic thing you can think about are the different orders of fits
o 1st order: consistency: consistent and precise strategy and message/vision.
▪ E.g. selling croissants consistent in quality.
nd
o 2 order: reinforcement: includes echo with other industries/services.
▪ E.g. selling croissants and coffee.
o 3rd order. optimization: efficient
coordination and Information
exchanges.
What is IT strategy?
- A set of rules and documents that describe
the firm’s strategy regarding information
technology
- It’s a subset of the firm’s strategy
4
, Case Volkswagen
- What are VW’s main competitors?
o Automotive industry (Tesla, Mercedes, Honda, BMW). Volkswagen Group
operates with different brands, so they have multiple different competitors (e.g.
Flixbus, Lime, Swapfiets, Apple, Uber). It has to deal with other aspects of
mobility.
- What might be VW’s vision (why) & mission (what)?
o The VW Group has multiple brands and therefore multiple visions and mission.
These visions and mission should be aligned with the Groups’ vision.
o Vision → Make this world a mobile, sustainable place with access to all citizens
o Goal/Strategy → Sell cars
o Goal/Strategy → Sell transportation
Summary on VW and Uber
- Incumbent vs New Entrant
- VW and Uber have similar visions but different goals/strategies. Therefore, they have
different IT needs:
o Volkswagen needs IT to support the strategy
o Uber needs IT first (platform) and then builds a strategy around it.
- Cost-Based (VW) vs Differentiation-Based (Uber)
o Customers are price sensitive, or unwilling to pay a premium for quality
o vs Some customers are willing to pay a premium for quality (heterogenous)
Operating model (Ross et al, 2006)
- The strategy formulation leads to the choice for an appropriate ‘Operation model’
- In its turn, the operating model leads to different IT needs!
1. Diversification (e.g., Siemens; electronics unit, Health unit).
2. Replication: → independent business units (e.g., Starbucks; every unit offers exactly
similar coffees).
3. Coordination (e.g., Consultancies; different projects but integrate processes to get
overview of customers to coordinate it).
4. Unification (e.g., Amazon; platform company that has high standardization and the
business units AWS, prime services are highly integrated).
5
