Digital Transformation of Enterprise Architecture

Vivek Kale

• Publisher: CRC Press
• Year: 2019
• ISBN:
  9781351029124
• Edition: 1
• Topic: Mathématiques
• Subtopic: Mathématiques générales

"In this book, Vivek Kale makes an important contribution to the theory and practice of enterprise architecture … this book captures the breadth and depth of information that a modern enterprise architecture must address to effectively support an agile enterprise. This book should have a place in every practicing architect's library."

—John D. McDowall, Author of Complex Enterprise Architecture

Digital Transformation of Enterprise Architecture is the first book to propose Enterprise Architecture (EA) as the most important element (after Business Models) for digital transformation of enterprises. This book makes digital transformation more tangible by showing the rationale and typical technologies associated with it, and these technologies in turn reveal the essence of digital transformation. This book would be useful for analysts, designers and developers of future-ready agile application systems.

This book proposes that it is the perennial quest for interoperability & portability, scalability, availability, etc., that has directed and driven the evolution of the IT/IS industry in the past 50 years. It is this very quest that has led to the emergence of technologies like service-oriented, cloud, and big data computing. In addition to the conventional attributes of EA like interoperability, scalability and availability, this book identifies additional attributes of mobility, ubiquity, security, analyticity, and usability.

This pragmatic book:

• Identifies three parts effort for any digital transformation: Business Models, Enterprise Architectures and Enterprise Processes.

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• Describes eight attributes of EA: interoperability, scalability, availability, mobility, ubiquity, security, analyticity, and usability.

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• Explains the corresponding technologies of service-oriented, cloud, big data, context-aware, Internet of Things (IoT), blockchain, soft, and interactive computing.

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• Briefs on auxiliary technologies like integration, virtualization, replication, spatio-temporal databases, embedded systems, cryptography, data mining, and interactive interfaces that are essential for digital transformation of enterprise architecture.

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• Introduces interactive interfaces like voice, gaze, gesture and 3D interfaces.

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• Provides an overview of blockchain computing, soft computing, and customer interaction systems.

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Digital Transformation of Enterprise Architecture proposes that to withstand the disruptive digital storms of the future, enterprises must bring about digital transformation, i.e. a transformation that affects an exponential change (amplification or attenuation) in any aspect of the constituent attributes of EA. It proposes that each of these technologies (service-oriented, cloud, big data, context-aware, IoT, blockchain, soft, and interactive computing) bring about digital transformation of the corresponding EA attribute viz. interoperability, scalability, availability, mobility, ubiquity, security, analyticity, and usability.

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Agile Enterprise Architecture

Agility is the ability to respond to (and ideally benefit from) unexpected change. We must distinguish between agility and flexibility: flexibility is scheduled or planned adaptation to unforeseen yet expected external circumstances, while agility is unplanned and unscheduled adaption to unforeseen and unexpected external circumstances. The enterprises that can best respond to the fast- and frequently changing markets have better competitive advantages than those that fail to sustain the pace dictated by the process of globalization. And this can be realized through enterprises acquiring better control and efficiency in their ability to manage the changes in their enterprise models, architectures and processes.

1.1 Age of Transformation

1. Agricultural economy: In the agricultural economy, people made a living by growing and selling crops and livestock at the market; they were largely dependent on the seasons and climate influences, and it kept man in touch with living nature.

If agriculture were to be assumed as the production of food, then if the production of those goods was in line with consumer demand, farmers could have a good living. But this came to an end when the drive to increase productivity led to investments in machinery, and ultimately to overproduction. Prices dropped, and the necessary investments drove the costs higher. It became harder to make a good living with farming. With a shift to an urban economy, for many farmers it looked sensible to abandon their farms and move to the city in pursuit of jobs in industry.

2. Industrial economy: The industrial economy focused on production of non-perishable goods and commodities such as textiles, coal and metal, and it meant larger volumes could be produced and kept in stock or be distributed over larger distances. Investments in technology such as steam power, together with the availability of cheap labor from farmers migrating to cities, made it possible to achieve economies of scale that allowed both greater quantities and higher quality at the same time. The revolution in transportation through the construction of canals and roads, as well as the railway system, increased the ease and speeds with which raw materials and finished goods could be transported to and from the urban centers.

The industrial age saw a vastly improved standard of living for many people, but there was a downside to this prosperity. The industrial revolution caused unprecedented changes in society, changing the whole way of life for many people in an unusually short period of time. Where earlier, extended families stayed in the same area for many generations, people suddenly became more mobile, and bonds with the extended family became less strong. Workers sold their labor in return for a wage or salary and were no longer free and self-sustaining. The factory working environment was often harsh: noisy and dangerous, with mind-numbing repetitive tasks.

3. Experience economy: For companies, the increasing competition from global companies caused tremendous pressure on the price and quality of their products. Availability of goods from countries with lower wages made companies in the West shift their manufacturing operations out of the Western world. Looking for alternatives where a sound business could be built, many shifted focus to create higher added value through services and experiences.

Services are considered as economic goods consisting of labor, advice, managerial skills, etc. Services differ from the production of goods in a number of respects their intangibility; the fact that customers are directly involved and participate in the delivery, and therefore the production and consumption takes place simultaneously; their perishability; and the differences in experience of different consumers.

Service industries account for an ever-increasing proportion of the national income in nearly all developed countries. Where competition is strong, and customers can choose from a wide variety of offers, it becomes important to distinguish the offering. The distinguishing factor in services is the experience.

4. Knowledge economy: It includes economic activities concerned with the acquisition, manipulation and transmission of information. The knowledge-based economy generates information, rather than goods and services, and successfully creates new knowledge as the basis for new products and services. The rise of knowledge-based services is enabled by the widespread use of information technologies. Accurate, up-to-date information from professional services such as news agencies, weather stations, national statistics institutes, etc. is put online. The amount of data that is available online is growing very rapidly, and it can be used to provide knowledge-based services or enhance existing services with additional information.

In the knowledge economy there are opportunities to build new knowledge-based services, innovate through the use of knowledge networks, and use supercomputers to make sense of the increasing amount of available data.

Knowledge workers are much less dependent on their employers than they used to be in the industrial age. It is economically feasible to become self-employed and pick the projects they want to do.

5. Digital economy: In the transition from a traditional industrial digital economy the whole process of value creation is entirely transformed. Information and knowledge play a crucial role both in the traditional and the digital economy. However, in the industrial economy knowledge generation and application processes were essentially aimed at making production more efficient through cost reductions, while in the digital economy they are mainly directed to intercepting the customer’s preferences and expand his choice. Information, in the digital economy, is an essential source of value and every business is an information business. The digital economy offers companies a variety of tools (e.g., web-based supply chain management systems, online commerce, interactive customer service) that enable the creation of value not only through the reduction of costs, but also and above all making them more capable of responding to customer needs. In fact, in a world where access to information is permanent, immediate and almost ubiquitous, value creation depends on the ability to locate, select, filter and communicate the information which the consumer perceives as actually useful (Table 1.1).

TABLE 1.1
Comparison between the Industrial and Digital Economy

	Industrial Economy	Digital Economy
Business process orientation	• Guided by offer	• Guided by demand
Economic focus	• Cost minimizing	• Value maximizing
Product policy	• Offer standardization	• Offer personalization
Value chain configuration	• Linear value chain	• Non-linear value network
Key inputs	• Raw materials, intermediate products	• Digital information
Output	• Intermediate or finished products or services	• Products or services with a high information/knowledge content
The role of information	• A supporting and connecting element during the phases of production	• A source of value

The Internet, however, proved to be a destructive force for many companies, completely transforming entire sectors, because the network is not only a tremendous source of access to data and information in a digital format, but it also constitutes a new channel of distribution and marketing. In fact, the advent of the Internet has challenged the traditional way of doing business, as it has, and still is, significantly transforming the traditional rules of competition, offer value propositions and business models:

1. The market is no longer just a physical place and geographically fragmented, but rather becomes a digital, open and transparent space.

2. The network has also intensified competition since the easier access to information and the reduction of variable costs stimulates competition on prices and therefore requires the maximization of operational efficiency. In addition, it is easier for potential entrants to access distribution channels and reach new customers.

3. The ability of the network to get the manufacturer and the end user closer and in direct communication, drastically reducing the need for intermediaries in the sale of goods and services. In this sense, the network can undoubtedly be counted among the most significant radical innovations, that is those innovations that have as a fundamental trait of a total discontinuity with previous technologies, whose technical skills they tend to displace (making them in some cases so obsolete to cause their withdrawal from the market), resulting in a drastic transformation of the productive processes of economic activities they touch and producing a different distribution of wealth compared to the situation before their introduction.

The formulation and implementation of an appropriate business model are vital to meet the challenges of the digital economy, which requires a paradigm shift. Companies are called to deal with the Internet and the opportunities of electronic commerce, but, to be able to acquire the benefits, they must be able to identify the disruptive nature of these innovations in order to effectively reconfigure their distribution strategies or the entire business model.

A number of attributes that make the Internet and electronic commerce disruptive innovations:

• Open platform: The internet represents an open and public network which allows a constant flow of communication and collaboration in real time.

• Network externalities: Network externalities exist when the value of a given product/service to any single user becomes greater as the number of users of the same product/service increases.

• Connectivity and interaction: E-commerce enables the company to establish new relations and ways of interacting with their customers, suppliers and partners.

• Information sharing and exchange: The internet allows information to reach a large number of people without sacrificing the quality of the information content which it distributes.

• Production and consumption convergence: The involvement of the consumer-user in the early stages of design and production of highly customized goods and services.

• Digital resources: Information and data in a digital form, duly selected, organized and summarized, become sources of essential value that enables companies to formulate new value propositions.

• Cost transparency: Users are able to quickly and easily access a vast amount of information regarding prices and characteristics of the products and services offered by the various competitors.

• Industry extension: The value creation made possible by the internet and new digital technologies allows companies to transcend the boundaries of traditional business.

• Speed and frequency of changes: In the digital economy companies need to continually adapt to changes, which are extremely fast and frequent.

• Virtual capacity: The recent progress in networking and storage technologies has led to the creation of an extensive market place available to users.

1.1.1 VUCA Ecosystem

VUCA stands for Volatility, Uncertainty, Complexity and Ambiguity. It describes a situation confronted with in the digital economy:

1. Volatility: The term volatility is commonly used in statistics and financial theory. Volatility can be defined as a statistical measure, describing the amount of uncertainty about the size of changes. In statistics it can be quantified by the standard deviation or variance. Real life examples are increasing price fluctuations on global raw material markets or stock markets. You can see high volatility as significant jumps of values over time, which can be seen as an indicator of increasing pace of the environment.

Volatility can be understood as an observable output of a complex system that cannot be easily interpreted any more. While complex systems which are in an equilibrium or which are oscillating between two or three different equilibria are easy to interpret, a system that runs in so called deterministic chaos has no obvious pattern to be easily observed.

2. Uncertainty: With increased volatility of the environment, it is increasingly hard to predict the future. While in the past statistical regression models were able to predict the future, today it becomes more and more difficult to extrapolate future developments and link them with a probability distribution. Uncertainty can be also described as a lack of clarity to evaluate a situation properly to identify challenges and opportunities.

Uncertainty is a problem that might arise in decision making if there is incomplete information, inadequate understanding of available information or equally attractive options. Across time, there develops an increasing belief in the capability to cope with uncertainty and even to overcome uncertainty through planning and control. Decisions in business are often made based on the assumption that with enough research, collection of information and preparation for decision making, uncertainty can be avoided completely. But this is not the case and in highly dynamic environments, the speed of change in the context is higher than the speed of learning. In such a situation, it is customary to build up a certain mutually acceptable perception that is used as a reference by all concern...

Table of contents

• Cover
• Half Title
• Title Page
• Copyright Page
• Dedication
• Table of Contents
• Foreword
• Preface
• Acknowledgments
• Author
• Other Books by Vivek Kale
• Prologue: Digital Storms
• 1. Agile Enterprise Architecture
• Section I Genesis of Digital Transformation of Enterprise Architecture
• Section II Road to Digital Transformation of Enterprise Architecture
• Section III Digital Transformation of Enterprise Architecture
• Epilogue: Blown to Bits
• Bibliography
• Index