Business architecture helps portfolio managers prioritize IT-based projects by mapping projects to a business capability model. A capability model can aggregate what’s important, urgent, and doable in an organization which can then be used to prioritize projects. Project portfolio managers may use several approaches to portfolio analysis (see Schuurman & Powell, 2008) but a capability-based portfolio analysis adds additional rigor and discipline to prioritization.
Portfolio analysis or more specifically, information technology (IT) portfolio analysis is a sub-domain of portfolio management which systematically analyzes IT investments in planned initiatives, programs, projects, and ongoing IT services to rationalize investment evaluation. Similar to managing a financial portfolio, an IT portfolio manager seeks to find a healthy balance between IT project risk and benefits in order to maximize the original investments (Jefferey & Leliveld, 2004). A key question that portfolio analysis tries to answer is “How do we maximize the business value of IT investments?”
One helpful dashboard for portfolio managers is to track the number of projects & ideas that impact KPIs and their relative contribution to value. This validates whether the organization is working on the right things (that is, it measures effectiveness) as planned. Historical data are helpful to identify areas of inefficiencies but a mapping of a database of project ideas that are in the early stages of discovery against value drivers may proactively identify areas of synergy, consolidation, risk mitigation & avoidance, and process improvement.
It’s relatively straightforward to link a project’s goals to a KPI. However, it’s not that easy to validate the accuracy of that linkage against other project linkages. Some idea managers categorize their project as part of a hardware and software maintenance program, for example. However, if you look closer “under the hood” you’ll discover that a bulk of the features requested introduces significantly new functionality. This “error” can sometimes be intentional since maintenance or “keep-the-lights-on” types of projects are less scrutinized by management.
When and where does the business architect come into the picture?
Let’s describe what is typically considered a role of a business architect in the context of a large US-based financial organization. According to the bank’s job description of a business architect, a key responsibility is “to provide business consulting… by translating business strategies into business capabilities needed to implement efficient and long term solutions.” This responsibility is most apparent when a product manager requests assistance from a business architect to identify high level business requirements or build a business case.
In essence, a business architect is similar to a management accountant (Guitarte, 2009). An accountant looks at historical data to help inform the future. A company hires a management accountant to analyze information and present these as actionable insights. Similarly, a business architect presents research results and analysis in a form that compels a decision-maker to act. This is most true in project portfolio management where there is a clear balancing act among project business drivers, resource constraints, and customer needs.
A business architect can build a business capability model and use a formula to determine a business capability’s rank by taking into consideration the following factors, namely core competency, contribution to business value, and complexity. Project portfolio managers can map their projects to this business capability model to establish an initial ranking of projects in a portfolio.
The core competency value is a proxy of the business model. It illustrates how the business structures its business capabilities to create a unique value proposition. Every successful venture or enterprise has a business model, whether articulated or not, that differentiates itself from its competitors. Moreover, the metric for contribution to business value is a key indicator of the organization’s overall contribution to the enterprise. One way to measure value contribution is to examine the finance-related activities that customers perform that generate tangible value for the bank. Tangible value can be expressed in terms of fee revenues, fee income, losses mitigated, or cost saves.
One way to measure complexity is to do a simple of count of the number of information systems impacted by a value-generating activity. With enough time and subject matter expert resources, the complexity measure may be extended to take into consideration the maturity, cost of ownership, number of interfaces and interdependencies, and processes supported by each impacted system.
Business capability and value mapping allows stakeholders to consider both business needs and IT constraints in a single mechanism to establish project and idea priorities. The best way to address the proverbial “business and IT misalignment” is to bring all the stakeholders’ interests to the table, incorporate these interests into a mechanism to help prioritize project and ideas across the portfolio, and together create a roadmap that truly reflects that priorities of the overall organization. A mechanism that aggregates the organization’s core competencies, business priorities, and technology constraints can bring harmony to the project and idea prioritization process which is the key step in IT project portfolio management.
References
Guitarte, A. (2009). What is the business of Business Architecture? Business Architecture Institute.
Jeffery, M. and Leliveld, I. (2004). Best Practices in IT Portfolio Management. MIT Sloan Management Review. 45(3), 41.
Schuurman, P., & Powell, P. (2008). Working Papers on Information Systems Calculating the Importance of Information Systems : The Method of Bedell Revisited, 8(2008).
