More on Enterprise Business Motivation Model

Nick Malik of Microsoft kindly wrote back a comment to my (as he put it) “not flattering, to say the least” earlier post on his Enterprise Business Motivation Model (EBMM)

First off, many thanks, and I do acknowledge that, to quote Malik, “the fact that the EBMM is property of Microsoft is an indirect effect of the fact that I work at Microsoft”. My response is that the fact that it can even be described as ‘the property of Microsoft’ is a very good reason for posting my reply here rather than on the EBMM website: something that aims to be a shared standard should never be described as or purported to be the exclusive property of any individual or corporation, because by definition private possession indicates that it is no longer shared. That’s what standards-bodies are for: to resolve that specific dysfunctionality of the possession-economy. (This isn’t an ‘anti-Microsoft rant’, by the way 🙂 – the same would apply to every ‘exclusive property of’ assertion in this context, whether by Microsoft, Oracle, the US Federal Government or Pope John Paul. The only time that ‘property of’ assertions work for standards is where the property-assertion is responsibility-based, often for the purpose of ensuring that the standard is publicly shared and adhered: Philips’ patents on the audio-cassette and the CD format are good examples of the latter – and note, too, that Philips explicitly treated several forms of would-be copy-protection as a breach of the CD format, and hence enforced the removal of the ‘CD’ logo from non-compliant products.)

Malik also comments:

Your post implies a certain lack of affinity for the “possession economy.”

Well, yes, but it’s for good business reasons: it’s off-topic for here, but to put it at its simplest, the complaint is not that the possession-economy is morally or politically ‘wrong’ or suchlike, but that it doesn’t work from a business-model perspective. It’s possible to operate a possession-economy – property as ‘right of exclusion’ – when the asset-base of the economy is solely physical and ‘alienable’: land or physical ‘things’, as in classic economics. But it falls apart when we try to apply the same business-principles to assets which, by their nature, are not amenable to the same ‘alienable’ exclusions. Ideas and information are ‘non-alienable’: if I give it to you, I still have it – which is fundamentally different from what happens with physical objects. And to use the classic Open Source slogan, “information wants to be free” – it’s not ‘free’ in the sense of cost, but in the sense that it will naturally tend to replicate itself. Hence an exclusion-based model – the possession-economy – will only work for information-assets when we can rigidly bundle them with an excludable physical item – for example, a physical object such as a printed page or a disk, for the music, or a physical location such as a theatre or cinema, for film. As soon as we drop the physicality, and shift to pure information, the possession-economy model becomes non-viable – as the music and film industries are finding to their cost, in trying to force the real world to fit their existing business model rather than adapting their business model to fit the real world. Same applies to copy-protection schemes for software: ‘digital rights management’ and other access-controls introduce vast complexities into system-designs solely to try to overcome the natural tendency of information to replicate itself. If we want to remove that redundant complexity (and cost) so as to do business with information in ‘unbundled’ form – or for that matter with other non-physical assets such as relational or aspirational assets – then we need business models that play by the respective rules for those asset-types: an exclusion-based model (the possession-economy) will only work with assets that can be excluded, which means it will only work with physical objects or physicalised ‘bundles’. (Whether the ‘possession’ metaphor works well even with physical assets is another question entirely: personally I believe it doesn’t, but that’s another topic for another time. 🙂 )

For the rest of Nick’s comment, there’s several hours’-worth of explanation that I’d need to do, but I’ll select a few key themes and specific points.

“The key innovation in the EBMM is the addition of the Business Model element”

But as it stands, the definition of Business Model in the EBMM applies only to for-profit enterprises, and probably only that (relatively small) subset of for-profit enterprises which use finance as their primary or sole value-measure (i.e. those to which US stock-market rules apply). Because of those constraints, it would be incomplete, inappropriate and possibly dangerously misleading to use outside of that fairly narrow context: it would be unusable for government, for not-for-profit, for for-profit organisations in stakeholder-model rather than shareholder-model legal contexts (i.e. most of Europe), or for any for-profit organisation which either chooses or is required by law to use multi-axis value-measures such as Triple Bottom Line or Balanced Scorecard. To be usable as a true generic business-motivation model, the EBMM’s Business Model component must be extended to cover the full range of enterprises – not solely the small subset of for-profit enterprises it serves at present.

“I do define an enterprise in a different manner, as a collection of business models. I also define a company in another part of the model, leaving open the possibility that an enterprise is not the same as a company (a fact that I have observed many times, but which most metamodels have no way to reconcile).”

There is a simple response to that comment in parentheses: if you’ve observed a problem with the existing metamodels, why did you make no attempt to resolve that problem in this one? – because if you don’t, the effect is that the architectural flaw is further enshrined in architectural practice, which is not a good idea… That aside, we clearly differ in our definition of ‘enterprise’, or rather our definition of its scope. Your definition, like that in the OMG BMM, is essentially organisation-centric: the world as seen from the perspective of the organisation. From this, ‘Business Model’, in essence, is how the organisation will ‘make money’ from its milieu. In turn, ‘the enterprise’ is seen solely in terms of how it feeds into the business-model. This is easy for business-folk to understand, especially if your focus of concern is the organisation and its business, but functionally and architecturally it is the wrong way round: it’s exactly the same as the mishandling of ‘business architecture’ in TOGAF, as ‘anything not-IT that might impact on IT’. To understand how business does impact on IT, we need to understand the business in its own terms; and then separate out the interfaces with IT at the respective levels (strategic, managerial and operational) – because those interfaces will change over time and with changing technologies, whereas the business itself will not (or not change as much, anyway, especially at the strategic level). The same is true here: to understand the business milieu, we need to understand the enterprise – that milieu – in its own terms; and then explore the interfaces with the business. Otherwise strategy will be solely organisation-centric – which is a guaranteed recipe for business failure in the longer term. Key definition: the enterprise is always at least one step larger than the organisation in scope: the organisation as player within a supply-chain, for example, or within an environmental or social milieu.

“All of the other negatives that you point out are negatives that exist in the source models. I did not insert a great deal of original research in the EBMM for very important reasons: I cannot show a use case where those additions would be interesting, valuable, or correct.”

All I can say there is that I’m shocked: I can only presume that the inability to perceive use-cases for alternatives or extensions arises from IT-centrism or the like. The failure to be aware of what would seem to be obvious use-cases such as government or not-for-profit indicates a surprisingly blinkered view of the business world, surely?

“I would like to hear more about the “fatal flaw” in the definition of Vision from the OMG BMM that I incorporated. You did not provide context for that comment, but it is quite interesting and I’d like to know more.”

At face-value, the BMM definition would seem valid: “A Vision is the future state of the enterprise, without regard to how it is to be achieved. A Vision is the ultimate, possibly unattainable, state the enterprise would like to achieve.” But note the danger: the world is not static, there is no state. And ‘enterprise’ is not defined – which leads straight into the ‘fatal flaw’, which is that the resultant Vision is likely to be organisation-centric rather than milieu-centric. Hence the BMM’s examples, such as “Be the car rental brand of choice for business users in the countries in which we operate”, or “Be the low-cost healthcare provider with the best customer service”, which encapsulate all of the proven ‘don’ts’ for visioning: organisation-centric, Role as Vision, and state-based. If you make a Vision organisation-centric, you literally provide no place and no reason in which customers and other stakeholders may connect with the organisation; if you make it Role-based, you lock out any means to understand relationships with the Roles of other players in the shared enterprise (i.e. mutual partnerships and mutual values); and if you make state-based, you kill motivation stone-dead as soon as the state is achieved. Strategically, these are fatal mistakes, especially over the longer term. Compare this with, say, the use of Vision in ISO9000:2000 – there, Vision is the ultimate anchor for the quality-system, ‘beyond’ the organisation itself, and is a ‘guiding star’ rather than an achievable ‘state’.

“You also mention “social context, reputation, geography or environment” as influencers for business strategy. I find that fascinating. Note that geography is part of the Business Model area, not the influencer area. The other concepts are interesting, but I’d like to hear the traceability from those concepts to a strategic influencer or driver.”

Yes, a Business Model occurs in a geography – though that ‘geography’ may be virtual as well as physical (e.g. business on Second Life etc). But there are also plenty of examples of geography as Influencer: for example, if you’re building a very large data-centre, you’re going to need a correspondingly large volume of coolant, which suggests placement close by a river or other large water-source. If you’re running an aluminium smelter, the only way to keep the costs viable is to have a huge, constant, cheap energy-supply with good infrastructure for ore-delivery, product-shipment and waste-management: which in practice at present usually means hydroelectric power, which means mountains, but with good access via road, rail or river, yet close to the ore source – which means you have very tight geographic constraints on your business-model. Geography and social context are fundamental to business-models in the fast-food industry – go ask MacDonalds or Starbucks. And you yourself gave a good example of an environmental influencer, with children selling cold drinks in warm weather. For reputation-as-influencer, consider the practical implications of starting a US-based business right now in an Islamic state: with the US’ international reputation still rock-bottom even post-Bush, that’s a significant influencer on how to set up and run that business, or even the decision as to whether or not to run it at all, regardless of other influencers. Such Influencers can only be ignored within a very narrow subset of business contexts – such as the simpler kinds of IT-centric ‘enterprise architecture’, for example.

“Note that “Brand” would be a subtype of “Products and Services” in the Business Model portion of the EBMM. If you feel that “brand” is an important concept to capture in a model at this level, I’m happy to discuss it with you.”

Brand isn’t a product (unless you’re selling a brand in its own right, in which case someone else will have done the work to develop the brand as brand in the first place). To some extent it can be regarded as an attribute of a product; but more accurately it’s the bundling of an aspirational-asset with another asset or set of assets (physical, virtual and/or relational) as represented by the product or service. (See the framework reference-sheet at http://tetradianbooks.com/2008/12/silos-frame-ref/ for a quick summary of the distinctions between physical, virtual, relational and aspirational assets.) I note you do include ‘Products and Services’ as sub-components of your Business Model entity: assets would need to link in there. I’ll admit I’m surprised to find that BMM does not not include product or service directly within the model, but does include it indirectly in its definition of Mission, and the ‘means’ set generally: assets belong in there, and also as inputs and/or outputs for Capability. Brand-value – as perceived by the customers etc, not solely from the organisation’s perspective – is also an expression of reputation, which in turn is an Influencer; like geography, it needs to be understood as going both ways.

Better stop there: it’s clear I need to write this up in book-form or the like, but my stack is already rather too full at the moment!

Hope this helps, anyway.