What Role Does Enterprise Architecture Have in Business Strategy?

Some of us may hear statements about how enterprise architecture has an important role in achieving business objectives occasionally or frequently. Furthermore, in this digital era, the presence of new companies that use technology as an important part of their business model disrupts many companies with traditional business models and strategies. To deal with this disruption, a new strategy based on digital transformation is required.

The article attempts to represent an author's viewpoint on the role of enterprise architecture (shortened as EA) in business strategy in the following paragraphs. This article is based on the author's experience in IT strategic planning, IT governance, IT service management, enterprise, and IT architecture work.

First, the author will explain the aspects of business strategy based on the author's experience in IT strategic planning and enterprise architecture implementation work.

The business strategy should be implemented through two (2) major components, such as:

• Driving factors (drivers) are the aspects that motivate a corporation to operate and expand the enterprise.
• Enablers are factors that make the business strategy become a reality — reasons, premises, or desires achieved through tangible actions.

Drivers are classified into three (3) levels:

• Strategic: Factors that impact the entire company, such as market growth, market share, and competitive advantage.
• Tactical: Factors that include several company functions or capabilities, such as service-level account opening (bank), new product or service development (insurance, transportation).
• Operational: Driving factors at the operational level are typically processes or tasks, such as fast response time.

Drivers are reviewed and processed, and the outcomes are compiled in the form of a Business Strategy in the following aspects:

• Motivation and Innovation: Business initiatives to realize business strategy should take the form of sustainable or disruptive innovations, enabling competitiveness aligned with current business conditions.
• Portfolios, Resources, and Budgets: Business initiatives outlined in portfolios and projects, including human resources, technology, infrastructure, and investments required to implement initiatives.
• Data & Applications: Technology domains including data and applications that process business information and digital processes.
• Infrastructure: Technology infrastructure that supports applications to carry out business activities digitally.
• Security: Security factors ensuring confidentiality, integrity, and availability.
• Organization & Talents: Organizational structures and personnel with defined skills and knowledge to execute business activities.
• Policies & Procedures: Policies and procedures that manage, direct, and support business activities.
• Plans & Roadmaps: Initiatives, portfolios, projects, and implementation roadmaps that translate strategies into action.

All the above aspects involve three main (3) dimensions — human resources (people), technology, and processes — which enable the implementation of business strategies and are referred to as enablers:

• People: Human resources structured within an organization, with the skillset and experience required to execute business processes.
• Process: Business processes that enable the achievement of business strategy.
• Technology: Technology that empowers business processes, and in the digital era, creates entirely new ones.

The formed business strategy is then broken down into several components related to the business strategy implementation model:

• Business Models: Includes relationships with external parties (suppliers, customers, regulators, business partners) to form a business ecosystem.
• Capability Models: Represents the company’s capabilities required to deliver services and products to customers and external stakeholders.
• Operating Models: Breaks down the capability model into functions, roles, structures, internal and external processes, and technology utilization.

According to the author, if all the information above (drivers, enablers, business aspects, and business strategy implementation models) is not formed in a single system or repository, it will not be optimal. Information related to developing and implementing business strategies is often dispersed through multiple functions.

For example, the Corporate Strategy function stores high-level drivers and business strategies. Updated revenue and market targets are stored in the Sales and Marketing function. Similarly, the ICT function stores plans, implementation, and updated technology topology.

As a result, business strategy alignment between functions is not optimal. What is defined at the outset can become a barrier to achieving strategic goals. A single point of truth or repository is required so that all information remains aligned and dynamically updated when one or more aspects change.

Business representation and its related aspects can be realized through Enterprise Architecture (EA). These EA practices closely align with and support business strategy implementation.