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.
• A company's reasons, premise, or desire might be achieved by factors that can make the business strategy became a reality (enablers).

Drivers are classified into three (3) levels:

• Strategic: strategic factors that impact the entire company, such as market growth, market share, and competitive advantage.
• Tactical: factors include several company’s functions or capabilities, such as service level account opening (bank), new product or service development (e.g., product or service 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 required to realize business strategy are hoped to take the form of sustainable or disruptive innovations, allowing businesses to be more competitive and in line with current business conditions. Innovations are based on defined drivers or driving factors.

• Portfolios, Resources, and Budgets:

Business initiatives as outlined in portfolios and projects, resource requirements, including both human resources, technology, and infrastructure, as well as the investments required to implement initiatives.

• Data & Applications:

Technology domain which includes Data, and Applications that process business information and digital processes

• Infrastructure:

The technology domain includes infrastructure to support applications. So, they can carry out business activities digitally.

• Security:

Security or security factors that features Confidentiality, Integrity, and Availability can be maintained.

• Organization & Talents:

An organizational structure that supports business strategy and business activities as well as the existence of personnel within the company whose skills and knowledge have been defined to be able to carry out business activities.

• Policies & Procedures:

Policies and procedures that enable business activities to be managed, directed, and supported the business activities.

• Plans & Roadmaps:

Planning is outlined in the form of initiatives, portfolios, projects, and project implementation roadmaps.

All the above aspects involve three main (3) dimensions, i.e.: human resources (people), technology, and processes to enable the implementation of business strategies, which are referred to as enablers or factors that can manifest business strategies:

• People

Particularly, human resources (structured in the form of a company organization) who will realize the business strategy as well as the skillset and experience required to carry out business processes.

• Process

Business processes enable the achievement of the business strategy.

• Technology:

Technology is used to force business processes and in this digital era, technology can even create entirely new business processes.

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

• Business Models:

The required business model includes relationships with external parties that are important to the business (e.g., suppliers, customers, regulators, and business partners) to form an ecosystem.

• Capability Models:

The company's capabilities are required to provide services and products to customers and other related external parties.

• Operating Models:

The capability model is broken down into functions, roles, organizational structures, processes (both internal and externally related), 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. The Corporate Strategy function, for example, stores high-level drivers and business strategies. The updated revenue and market targets will be stored in the Sales and Marketing function. Similarly, the ICT function stores the plans and implementation and the updated technology utilization topology.

Furthermore, from all this information, the alignment of business strategy between functions is not optimal. What is defined in the business strategy at the outset can become a barrier to getting business goals according to the strategy.

It requires a point of truth or repository that can represent the business. So that, all information will align in all aspects, and it can be done dynamically if one or more aspects change.

Business representation and its aspects related to this business strategy can be realized in the form of enterprise architecture (EA), and these EA practices are very close and can be implemented alongside business strategy implementation.