by Daniel Lambert (book a 30-minute meeting)

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Structuring an enterprise and/or a business architecture model without measuring any of its key elements is a waste of time. It’s critical to any architecture model to have key performance indicators (KPIs) in place – and these strategic and tactical measurements should not be limited to IT. It’s also helpful to understand the sources of KPIs for various industries.

The Need for Useful Measurements

Enterprise and business architecture will only contribute to driving IT and business alignment if key business and IT stakeholders encourage a metrics-driven behavior (formulating KPIs and incorporating them into performance assessments).  Failure of enterprise and business architecture initiatives and projects is often because C-level management hasn’t taken the time to set the key performance indicators (“KPIs”) appropriately.

A few years ago, Diane Lebeau and Diana Krohn at United Airlines illustrated very well how measurements can be misleading in a presentation entitled “Using Business Capabilities to Make IT Metrics Meaningful” that they made at a major architecture event. Their IT application reliability metrics regarding the complex "gates management" capability were often disconnected from their business reality. Business feedback wasn’t trending with metrics used to measure IT systems and applications. It was unclear how application performance impacted business performance. Their reliability investment methodology was not consistent, and their metrics were not business impact-focused. Only by selecting measurements at the capability and value stream level was United Airlines able to align IT to business.

KPIs can be defined at all levels of a business architecture model, including objectives/strategies, customer journeys, capabilities, value streams, organizations, initiatives, stakeholders, products/services, information, physical and IT assets, requirements and processes, and especially all the actions and relationships that link the various parts of a business architecture model together.

Some business strategies may truly be ill-advised and extremely risky. Showing the differences between strategies using chosen KPIs is what distinguishes the best enterprise/business architects from the others. Good business architecture will allow management to identify the gaps between the current architecture and future state options by comparing architectures against KPIs and quantifying the risks, using impact analyses and decision trees among others.

Measuring Effectively

The set of possible measurements for enterprise and business architects is very large since enterprise and business architecture is the link between strategy and execution.  Enterprise and business architecture measurements can be grouped into strategic, tactical, and governance values.

1. Strategic Values

Enterprise and Business Architecture is the missing link between strategy and execution.  KPIs for Strategic Values should stay focused on measuring some cohesive business goals, including business strategy-execution progress measurements, business culture index(es), productivity, business communication effectiveness, business growth opportunities, and cost structure optimization.

2. Tactical Values

At a tactical level, the purpose of practicing enterprise and business architecture is to improve the efficiency of your organization’s operations. Measurements of efficiency, costs, and time will vary based on the nature of your organization’s business.

3. Governance Values

Governance is the other key area where Enterprise and Business Architecture can deliver value, by determining cost variances and examining detailed impact.

Defining measurements/KPIs can be challenging. Good KPIs must have a target value and a way to be accurately measured and reported. Ideally, good KPIs should include the following characteristics, as mentioned in this article entitled “Measuring Project Success Using Business KPIs”:

• Aligned—with the specific organization’s vision, strategy, and objectives.

• Optimized—the KPIs should be focused on providing organization-wide strategic value rather than on non-critical local business outcomes. The use of the wrong KPI can result in counterproductive behaviors and sub-optimized results.

• Measurable—can be quantified.

• Realistic—must be cost-effective, coherent with the organization’s culture and constraints, and achievable within a given timeframe.

• Achievable—requires targets to be set that are observable, achievable, reasonable, and credible under expected conditions as well as independently validated.

• Clear—clear and focused to avoid misunderstandings.

• Understood—business and IT stakeholders and relevant organizational units should know how their behaviors and activities contribute to achieving the targeted objective measured by the KPI.

• Predictive—the KPI may be compared to historical data over a reasonably long period so that trends can be identified.

• Agreed—all involved stakeholders should agree and share responsibility for achieving the KPI target.

• Reported—regular reports should be published to all relevant stakeholders, so they know the current state of the enterprise and business architecture model element and take corrective action(s) if required.

 

Sources of KPIs

There are many sources of KPI lists.  It’s easy to get lost. In the enterprise and business architecture world, I will limit myself to mentioning three:

1. The KPIs listed in section 5.3 of the Open Group’s “Strategy to Portfolio Value Stream”.

2. The customer-driven, operational, and financial KPIs mentioned in chapter 6 of this book entitled "Practical Guide to Agile Strategy Execution: Design, Architect, Prioritize, and Deliver your Corporate Future Successfully'.

3. The APQC’s Process Classification Framework Process Definitions and Key Measures contains hundreds of processes, including detailed definitions and thousands of key measures for numerous industries. It includes also a section about Developing and Managing Business Capabilities Definitions and Key Measures.