Why the bottom-line doesn’t come first in enterprise-architecture
Yep, it’s red-rag time, folks… 🙂 Sometimes I really do despair of ‘enterprise’-architecture that completely fails to understand the difference between enterprise and organisation, or that mistakes the concerns of a single stakeholder group for the aims of the enterprise as a whole…
This came up yet again at the current Open Group conference in Austin. At least these days Open Group and TOGAF are making determined efforts to break out of the old IT-centric box, but unfortunately seem to be leaping straight into the next dead-end disaster-area, namely ‘business-centrism’. And that’s illustrated all too well in one of the tweets that floated up from the conference space:
- systemsflow: Business Architecture: can’t every business be boiled down to one use case name: Make Money? Drill down from there #ogaus
This came from an unnamed tweeter [update: his name’s Ben Sommer – apologies, Ben 🙂 ] at a company called Systems Flow Inc, whose Twitter summary – “We are a boutique IT consulting firm obsessed with perfecting the design and delivery of enterprise and solution architecture” – does kind of imply the all-too-usual misplaced IT-centrism. Not much about business-architecture, anyway. To which, well, yes, I fulminated once again:
- tetradian: RT @systemsflow: “can’t every business be boiled down to one use case: Make Money?” – no, it can’t: this is exactly what not to do for #entarch / #bizarch…
The response was a kind of brief acknowledgement that yes, it is possible that there might be a few rare business-models that are not solely focussed on money:
- systemsflow: forgot govmn’t: Win Mission
But to to me that still completely misses the point. In essence, it tries to assert that the enterprise-beneficiaries in effect are ‘the enterprise’ – ignoring every other player in the enterprise. (See the later part of this post and also here for an explanation of the enterprise-role of ‘beneficiary’.) To be blunt, this not only seems startling ignorant – in the literal sense of the word – but also represents an almost certain guarantee of failure of enterprise-architecture and business-architecture, delivering a model of the enterprise that in practice is so misleading and so incomplete as to be worse than useless. Hence, again, another explosion from me:
- tetradian: ‘make money’ / ‘win mission’ etc are subsidiary #entarch aims for specific stakeholders: understand whole-enterprise first! // we develop #entarch for an organisation, but about whole-enterprise – are not the same! http://slidesha.re/8wWNSq#ogaus
The reply didn’t look at that at all, but could perhaps be described as a variation on the theme of “it’s all the conference’s fault, honest”:
- systemsflow: theme for today is ‘benefit bottom line w/EA = succeed’
The reason I got cross about this – again – was that there was no questioning about what a ‘bottom-line’ might be: instead, it’s just assumed that it’s always and only about money. Which, to again be blunt, indicates some serious problems in the architecture – because in architecture-practice we must not and dare not allow any assumption to go unchallenged. And as architects we also need to ask some serious questions about way the various priorities are brought into balance within the enterprise – questions that clearly are not being asked if the only ‘bottom-line’ in focus is a monetary one. (I often wonder whether, as in so-called ‘economics’, the main reason why there’s so much focus on a monetary ‘bottom-line’ is because money is the easiest item to count? – in other words, the real problem is a particularly unimaginative form of laziness?) Anyway, another annoyed tweet from me:
- tetradian: systemsflow: “theme for today is ‘benefit bottom line w/EA = succeed'” – hmm. indicates limited model of how enterprise works…? #ogaus
To which there wasn’t a reply. (And fair enough: I admit I do perhaps go on at people a bit too much about this. Oh well. 🙁 ) Joseph Gaus did join it at this point, though:
- JWGaus: @tetradian @systemsflow #entarch there are too many nuances of ‘make money’, the next level of detail is needed. Too generic to be useful. // define vision and principles for how to ‘make money’ and define enterprise structure to that. // summarize higher than your vision and principles and you’ve lost your enterprise.
- tetradian: RT @JWGaus: define vision / principles for how to ‘make money’ , define enterprise structure to that. >wrong way round?http://bit.ly/9zU9J
In fact I’d got it wrong there in my fulminating. 🙂 Joseph was in fact agreeing, but – as he said in another tweet – the 140-character limit on tweets meant that the meaning of what he was aiming say ended up compressed just that bit too much. The SystemsFlow tweeter did come back in again at this point, though:
- systemsflow: MT @jwgaus @tetradian #ogaus #entarch too many nuances of ‘make money’ to be useful // agree, the level at which all businesses are same
- tetradian: @systemsflow: ‘make money’..”agree, the level at which all businesses are same” – whole point is they’re not the same… #ogaus #entarch
To which no doubt quite a few folks would say “Yeah… so what?” 🙂 Why does any of this matter, anyway? And anyway, if we talk about anything other than the (financial) bottom-line, that’ll get us fired, won’t it?
The blunt answer is it’s more that, as enterprise-architects, and even as business-architects, if we don’t talk about a lot more than that single ‘special’ bottom-line, we darn well ought to be fired, because we wouldn’t be doing our jobs properly. Again, this comes back to that difference between organisation and enterprise. It’s true that the organisation pays our wages or consultancy-fees, and we’ll usually develop an architecture for and on behalf of an organisation; but the architecture we develop needs to be about the enterprise – the extended-enterprise or ‘ecosystem’ in which the organisation operates, and which defines the larger-scope strategic context for the organisation.
If we equate ‘the enterprise’ with the organisation, we have no means to describe any of the context for the organisation; and we also shut out any awareness of the reasons why other people out there in the extended-enterprise would need or even want to engage with the organisation. And doing that would also shut out any awareness of the anti-client space, which usually represents some serious kurtosis-risks for the whole organisation.
Which means that we would be missing much if not most of the information we need in order to describe how we arrive at that beloved ‘bottom-line’.
Which would not be much of an architecture, to be honest.
Not one that would be much practical use, anyway.
Which is why I rant and rage about this so much – because the usual obsessive and exclusive focus on ‘the bottom-line’ actually destroys the potential value of enterprise-architecture, and in turn damages the entire enterprise-architecture profession itself. Oops…
[An aside: an even bigger ‘Oops…’ is the ‘shareholder-only’ model of US corporate law, which to just about every other country either looks like insanity, a structure for organised theft on a massive scale, or both. The notion that ‘the shareholders’ are the sole ‘possessors’ of the entire enterprise is, frankly, anachronistic and absurd – and that’s putting it politely… For example, given that most of the so-called ‘assets’ of most corporations these days reside in people’s heads, saying that the shareholders ‘possess’ those assets means that they also claim to ‘possess’ exclusive ‘rights’ to those people’s lives – and there could be some very interesting challenges against that assertion in terms of the US Constitution, let alone anything else. Hmm… As a very minimum, enterprise-architects need to take a view of the enterprise such as that in German-style corporate law, which insists that the views of all stakeholders need to be taken into account in the organisation’s structure and its more nuanced ‘bottom-line’.]
Again, why does any of this matter, you might ask? – what’s the point? The reason why it’s not “yet another pointless ivory-tower quibbling-game” – and why it’s actually a foundational issue for enterprise-architecture and business-architecture alike – is well explained in a tweet from respected enterprise-architect Sally Bean:
- Cybersal: @tetradian @systemsflow The negative consequences of focusing on bottom line ahead of everything else http://bit.ly/oYCEiE#entarch #bizarch #ogaus
The link points to an insightful article in the British newspaper The Guardian, reporting on the current farrago around illegal phone-hacking – described as apparently ‘on an industrial scale’ – by the international Murdoch news-group. Why did they do it? Because the hacking supported their policy of tabloid sensationalism, which fed into their bottom-line. Why did they not think about any of the consequences of this, to others and, eventually, to themselves? Because they were focussed only on the financial bottom-line – so much so that they ignored all of the extended-enterprise context that could hit their bottom-line from so-called ‘left-field’. The only thing that mattered was the bottom-line, this financial year, this quarter, today, now. They built up a culture in which no-one could question the absolute and unrelenting primacy of that short-term bottom-line. In other words, they created a culture and architecture that, in the longer-term, was guaranteed to fail. Not clever…
As that Guardian article shows, Enron did exactly the same. Likewise the inanities of the banks that led directly to the ‘global financial crash’. Likewise the Ford Motor Company, with their infamous decisions around the design of the Ford Pinto. Likewise, for a somewhat different bottom-line, the NASA culture that led directly to the Challenger disaster. Likewise… likewise… likewise… the catalogue could go on, and on, and on.
To put it at its simplest, if we place the bottom-line as the first consideration – or, worse, the only consideration – then, at the very least, a lot of people are going to lose a lot of money, or more. It may well be that a lot of people lose their livelihoods, or even their lives. As enterprise-architects we have a professional responsibility to make sure that that doesn’t happen. And we would have neither right nor reason to call ourselves a profession unless we do take that responsibility seriously – for all of the organisation’s stakeholders. It’s as simple and as bald as that.
And that’s why the ‘bottom-line’ does not, cannot, in fact must not come first in enterprise-architecture.
That’s my view, anyway: your thoughts, perhaps?
It’s also the people outside the corporate enterprise but in the holistic enterprise. As we watch the imploding of the Sun/Fox … the enterprise is not just the bottomline. Some individuals were willing “employees” of the corporate enterprise. Many were not and their needs were not included in the small boundaries. What we will see is how they are in the holistic enterprise boundaries and thus having the power to distroy the corporate enterprise.
Pat Yes, that’s exactly the point I’m aiming to make.
What’s happened in all of those cases is examples of kurtosis-risk. Kurtosis-risk occurs in a context where the short-gains seem high because the risk has been ignored, but costs far more than all of the short-term gains when the risk eventuates.
It’s true that we can never predict the exact cause that triggers the enaction of a kurtosis-risk, but in practice it’s quite easy to identify that the risk exists, and its probable consequences – easy to identify if we include the full extended-enterprise scope in the architecture, yet all but impossible if we don’t. That’s why I keep ranting about this! 🙂
By the way, a couple of Tweets that exactly sum up what’s missed in conventional ‘business-centric’ architectures:
RT @iansthomas: RT @tetradian RT @systemsflow Biz Arch can’t every biz be boiled down to 1 use case: Make Money? < custs or emps r more attracted to purpose
RT @rotkapchen: @tetradian @iansthomas @systemsflow It’s the make money focus that has gotten us into this mess. It’s not sustainable. A focus; not ‘the’…
A great deal is changing in business models because of the power of the consumer and the inverted marketing/sales channel. The focus on customer was outward. Now it needs to be bi-directional and expand to customers-connections. It’s why branding has become even more important and who defines it (the customer). social media is at the tipping point. It won’t be until it crosses over that businesses will recognize the holistic view…and it’s impact. It is still too early and only takes a crisis before corporations will notice the boundaries they perceive is incorrect.
UGH! Are you sure those are business architects? Or are they MBAs who … because they have an MBA are considered a business architect? (sorry…that’s my current rant on certifications)
Another comment that didn’t quite fit in the article above.
In some ways, in enterprise-architecture, the ‘bottom-line’ needs to come not first, but last. That’s why it’s called ‘the bottom-line’…
Change “bottom-line” to “sustainable bottom-line”. The enterprise architects’ (EAs’) mission is to grow the sustainable bottom-line.
I think this means that EAs recognize that all the players in the enterprise space will need to be engaged long term. This includes people and the environment/ecology as well. (e.g., a corporation that cannot neutralize the toxic wastes it produces is not long for this world.) It means being concerned about long-term employee satisfaction. Customers, regulatory agencies, shareholders, all need to be satisfied not just today and tomorrow but in the long-term.
Thus the Murdoch newsgroup was breaking the law, which is unsustainable (it ends when you get caught). The Enron, Ford, NASA examples all arise from behaviors that with a little bit of thought, are seen to be unsustainable.
Arun – all very good points, and I’d strongly agree.
Yet there’s a key catch, particularly for US corporations, in that stock-analysts and (to some extent) US corporate law demand and enforce a short-term view (‘next quarter’) at the expense of the long-term. This creates huge exposure to spiralling-collapse and, perhaps even more, to kurtosis-risk (high-impact ‘long-tail’ risk). Unfortunately, these concerns are far outside of our remit as enterprise-architects: just about all we can do is look for ways to design around them and/or to mitigate their effects.
The point I was really aiming to make in the article is that the ‘bottom-line’ is literally at the end-point – and hence is not in itself a good place to start. To understand the bottom-line (in whatever way we measure ‘final value’), we need to understand all of the themes that feed into that bottom-line, and how they feed into that bottom-line. The quickest summary is that it’s never the simple equation of ‘financial-income minus financial-cost equals financial-profit’: it invariably involves many other forms of value, often in non-linear relationships with each other, and often with non-reversible transforms (e.g. trust may bring money, but we can’t buy trust – though many marketing-managers still seem to think we can…). That’s why I said that the bottom-line doesn’t come first in enterprise-architecture: understanding all the value-types and values at play, and how they interact with each other, is what has to come first.