The Need for Business Transformation

Michael Cesino
A free video tutorial from Michael Cesino
President
4.0 instructor rating • 6 courses • 2,385 students

Lecture description

Lecture 1 starts with a non-technical discussion of the problems of computer application systems development, using traditional methods that have been used since the 18###sup/sup### Century. These methods have lead us to build systems in the 20###sup/sup### Century that have much redundant data, with high annual operating costs to keep redundant data versions up-to-date when changes to the data occur. Furthermore, these systems are dangerous: as they are unable to change rapidly when the business changes and so cannot continue to support that changed business.

 

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Learn more from the full course

1) Rapid Systems Development for Business Transformation

Subset Course extracted from 2, Module 1: Enterprise Architecture for Managers and IT

01:23:15 of on-demand video • Updated September 2016

  • On completion of this Course, you will be able to:
  • Explain the historical reasons why redundant databases have evolved with our traditional systems development methods.
  • Understand the catalyst for the rapid-business-change environment of today.
  • Understand why the development of systems for the future, that are able to change rapidly as the business changes, should be based on the Strategic Business Plans defined by senior management for that future.
  • Understand how starting from a Strategic Business Plan, databases and systems for priority business processes can be delivered into production rapidly, in 3-month increments of increasing functionality
  • Appreciate the value of these methods for Business Transformation by reviewing a real-world project for a Medium–sized Regional Bank.
English [Auto] Welcome to the rapid delivery workshop for enterprise architecture in Madill one we're covering an introductory course on enterprise architecture for managers and I take Section 1 the first part of this model covers strategic modeling for enterprise architecture. And in Segment One of section one way again to address the need for business transformation. In Segment One the need for business transformation. I want to discuss with you the factors that inhibit rapid change. We'll look at how enterprise is transformed by removing these inhibitors. We'll see the benefits of doing so and what organizations this applies to in enterprise evolution. One of the major problems is due to the lack of enterprise integration and we'll see that the success in achieving enterprise integration is dependent not only on technology but it also requires a coherent integrated enterprise through business integration and this Course addresses much of the business integration methods. We will see and discuss our enterprises evolve in the industrial age and in fact the answer to this question is found in the process engineering Bible. I want to put these questions to you. Who is the author of the book. What is the title of the book and when was it published. Now those of you from a management point of view might say it was Michael Hammer of business process reengineering fame with his article in have a Business Review in August 1990 don't automate obliterate. No it was not in those of you with an I.T. background might consider that it was a Gordon or Tom DeMarco. No it was neither of them. It was not James Martin who was before them. It was not Peter Drucker from management fame that was not Sloan. It was not Henry Ford it was before. Then one bright spark said to me was it Plato. But it was after Plato. Now in fact what I'd like to do is share with you a quote of some taken from his book and you'll be able to tell me at the end of this quote it's a fairly extensive quote where this appeared. He says that it's rather quaint writing style for us at the moment to take an example therefore from a very trifling manufacture but one in which the division of labor has been very often taken notice of the trade of the pin maker. A workman could scarce make one thing in a day and certainly could not make twenty in today's terminology he's referring to serial operation but in the way in which this business is not carried on not only the whole work is a peculiar trade but it's divided into a number of branches of which the greater part of like by its peculiar traits in today's society terminology he would be referring to object oriented methods. One man draws out the wire another Streitz of the third Kappes it a fourth Poinsett a fifth grinds it at the top receiving the aid to make the head requires two or three distinct operations. He's referring to object oriented encapsulation. In today's I-T terminology. Interesting isn't it. To put it on is a peculiar business to widen the pins is another. He says it's even a trade by itself to put them into the paper an important business of making opin is divided into about 18 distinct operations using object oriented methods would be the terminology for today. He goes on to say I've seen a small manufacturer of this kind with 10 men only were employed they could when they exerted themselves make among them about 12 pounds of pins in a day upwards of forty eight thousand pounds in a day. Each person therefore might be considered as making four thousand eight hundred pounds in a day. Through object oriented re-usability in today's terminology. But if they had all wrought separately and independently they certainly could not. Each of them have made twenty perhaps not one penny in a day through serial operate operation. That is certainly not the 4800 part of what they are present capable of performing in consequence of a proper division and combination of the different operations through object oriented re-usability. So now you should be able to tell me what was the book title. Who was the author and when was it published. Some of you may have already picked up the fact that the book was Adam Smith the author of The Wealth of Nations is the book and believe it or not it was published in 1776. And yet his quote is quite current in terms of today's terminology. The principles that Adam Smith counted in his wealth of nations book was the basis for the evolution through the industrial age for the manufacture of physical products as he discussed in the quote It was also the basis through the nineteenth century for information products such as bank loan applications or insurance policy applications. Consider a bank loan application for example. The bank manager may have referred to the loan application sent in by Henry Jones to the bank. His application form would have been passed to one person for processing and that person processing the application manually would have taken down various details about Henry Jones because she would know that management would ask questions regarding Henry Jones application at some later time. So the name of the line applicant Henry Jones and his address the amount of the loan that he has requested and the security that he is going to put up as collateral would be part of his loan application. These details will be taken down for later reference if inquired by the manager. The loan application would then be passed along to someone else who would do further processing to check the credit worthiness of Henry Jones and each person would take down details about Henry Jones application to answer questions by management at some later time. So what we see with the loan application is that each person has their own version of Henry Jones application that I've noted through in application ledgers and we find that each person would redundantly have recorded particular details to answer future inquiries. The problem is that if Henry Jones subsequently changed his address and later got back in touch with the bank and wanted to make sure the details of the loan application were sent to him at his new address each of these separate applicant details would have to be updated manually in the loan application ledger for each person. So we found in the 19th century that manual application loan ledgers had a high degree of redundant data recorded for each person so they could answer the questions posed to them by management. This is part of the origin of the problem that most enterprises find today with redundant data and lack of enterprise integration. I'll come back to that point in further segments in this section throughout the course. So let's move on now and we'll consider how the principles introduced by Adam Smith in his book applied to evolution of enterprises in the first half of the 20th century. Let's look at Henry Ford's assembly line for the manufacture of automobiles. Now of course most processes up until that point had been carried out serially step by step h of the inquiry applications was carried out by each person in turn in processing the bank loan. And similarly on Henry phones assembly line each assembly step is carried out step by step as the automobile moves along the assembly line. However Henry Ford in addition to introducing the assembly line concept also introduced the concept of parallel or concurrent assembly. For example the body of the automobile and the engine both are assembled in parallel. They are assembled concurrently independently of each other. They don't need to come together until the engine is installed in the car to drive it off the assembly line. So we saw the introduction of parallel processes or parallel steps in Henry Ford's assembly line by the middle of the 20th century. Many of our manual processes we found were operating in a state of manual chaos. This created many problems. Let's now consider the advent of the computer in the middle of the 20th century the computer had a dramatic effect. Unfortunately we took the redundant manual ledgers that we saw with a bank loan applications with each person's application details redundantly and recorded in redundant application ledgers and these were implemented as databases with the consequence that are redundant ledges became redundant databases and as we saw with Henry Jones change of address each of those redundant data versions had to be updated manually in the manual ledgers. So also the redundant data in databases on the computer each had to be updated to ensure that the latest address was consistently recorded for the databases. So as the automated data changes on paper occurred we also have a problem to keep the various data versions in our databases up to date. Most enterprises find that this lack of data integration is a severe problem. Today also we took the manual processes and we automated them and on the computer and we had a significant impact the computer had a dramatic impact because we went from manual chaos instead to automated chaos and today many of our computer systems are operating in a state of great automated chaos. We've looked much of that chaos into the back office of enterprises so that we can manage those within our backoffice systems while we present to the outside world through the front office calm and in-control appearance. From the front office very similar to the graceful Swan gliding effortlessly across the glass like like with no apparent work on the surface but furious paddling beneath the surface to keep moving and that's how most enterprises today operate. Try to present and in control exterior appearance to the outside world while a back office is furiously trying to keep things operating smoothly. With the lack of data integration with the lack of enterprise integration which has evolved in most organizations today. So the result. Today we have 21st century enterprises as we see here that are operating still with their 18th century manual processes because we took those manual processes and we automated them very much as is on the computer. We took the existing manual processes that were operating in a state of mental chaos and we automated those as automated processes. Also operating in a state however now automated chaos with not necessarily resulted in an improvement. There was a focus in the 1990s on business transformation and this was initiated by an article that are referred to earlier written by Michael Hamah in Harvard Business Review July August 1990. I've given you the reference there page 204 112 titled Don't order might obliterate what he suggested in the article was that business processes manual business processes when we automate them should be changed fundamentally. Effectively obliterate the existing manual processes and implement them quite differently as automated processes Michael Hammer and his co-author James tempy. In the manifesto for change re-engineering the enterprise focused on business processes almost to the exclusion of other factors such as Deiter locations painful events and motivation. Now these factors we've seen also can affect integration within enterprises we'll see light in this section in some of the other segments in particular segment for introduction to enterprise architecture how enterprise architecture considers these other factors Deiter process location people events and motivation and all of these have to be considered to achieve effective enterprise integration. So who has the responsibility for transformation. This is the responsibility of business managers generally senior management business managers. The level of senior managers are effectively the architects of the enterprise enterprise architecture is a business responsibility. It is not an I.T. responsibility. What is missing is the consideration by management and I.T. the enterprise architecture does not depend only on I.T. and computers. It depends on management being actively involved with the right knowledge of the enterprise and the directions in which it is moving through their involvement in strategic business planning what is needed is for senior management with knowledge of those strategic directions to become more actively involved. This does not require them to be computer experts. It does assume that have the experts of the enterprise. How the architects of the enterprise are managing its direction now and its direction into the future. Once these directions have been well-defined by management they can be implemented with computer support through I.T. people implementing systems and databases based on those strategic directions. In fact success in enterprise architecture is directly proportional to the extent to which senior management become directly involved in enterprise architecture. You see in this course how this is done with senior management and I.T. drawing on strategic plans set by management as the catalyst for change and the directions for change in the systems and databases built to support the enterprise into the future. So let me summarize the points that I've covered in this first segment. The need for business transformation. We discussed the evolution of enterprises through the industrial age and the key lessons that we've learned. We discussed the problems of redundant data versions from the redundant versions of Henry Jones bank loan application in the 19th century and the problems were when we've automated those redundant ledgers as redundant databases with the lack of enterprise integration in our organizations today. And I made the point that we now have 21st century enterprises with automated processes that are still using technologies based on the manual processes. We've automated those manual processes often without change and without being able to achieve the significant improvements that are possible through the use of enterprise architecture. We must transform to innovative processes so that we can utilize our 21st century technologies more effectively. We saw the business process reengineering in the 1990s focused only on processes almost to the exclusion of everything else. Enterprise architecture in contrast achieves fundamental business transformation and management of business change within enterprises by focusing on data processes locations people events and motivation. Motivation is represented by the strategic plans we discussed. It is the responsibility of senior management to set the strategic direction for the enterprise and say new management provide guidance for enterprise transformation based on the methods that we're going to cover in this course and the feedback that it gives management of the alternatives that are open to them in transforming the Enterprise for the future.