change management
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An Architectural based Methodology to determine impact of new Legislations
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17-01-2008
Author:
M.R de Graaff (s1495593) Master thesis Business & ICT (Business Administration)
Faculty:
Economics and Business
Supervisors:
Ir. R. Verver (Business Architect) Drs. J. Welmers (Inf. Manager)
First supervisor: Dr. T.W. De Boer
Preface
This thesis represents my master graduation research (University of Groningen) for creating a methodology to implement new legislations and determine impact in to the business of the Friesland Bank. This research is performed in a time scope of five months as trainee of the
Friesland Bank, which is located in Leeuwarden (The Netherlands).
This research was not always easy and sometimes it was indeed hard to get a bright picture of the
matters within the scope of this research. Fortunately, I had support from my supervisors, Rob Verver and Hans Welmers, which gave the needed insights about the Friesland Bank organization and methodologies, like the architectural concepts, which are used within the Bank.
My special thanks to both supervisors for giving me the opportunity to fulfil my master research for the Friesland Bank.
I want to make some special thanks to various stakeholders who had a special role to fulfil this
research. First of all I want to thank Wiebe de Roos and Wouter van der Meer for their contribution to the Information Quality issues. Secondly, I would like to thank Ralph van Raaij
and Niek Hagoort for giving me insight in the CDD case and, thirdly, my regards to the compliance department, and in special Wiesje Beukelaar-Ten Jet Foei, who where prepared to give me the information about legislations and to test the new methodology. Also my thanks to
Rob Walters and Marten Talma who give me a lot information about process management within the Friesland Bank.
Last, but not least, I also thank my brother Guido de Graaff for monitoring the English language in the main sections of this research thesis. Because I had to travel one hour to the bank, I also want to mention my travel mates Rinus Wiskerke, Jos Admiraal and in special my colleague Rob
Walters, who had to listen to all aspects of my research progresses or the lack of it.
Management Summary
This research focuses on creating a legislation implementation method, based on available enterprise architecture concepts, and which is able to neutralize problems encountered during an earlier legislation implementation project. As implementation case the implementation of the
Customer Due Diligence (CDD) legislation is used to mention those faced legislation implementation problems.
The issues encountered can be measured with three important attributes (completeness, topicality
and accuracy) of Information Quality (IQ), related to the customer information of Friesland Bank. With a new conceptual model the thirteen main issues are translated to these three IQ attributes and related to the implementation level of the Pyramidal Enterprise Architecture (PEA) of the
bank.
This case investigation confirmed the assumption that the earlier implementation of the CDD legislation had as its main focus technical aspects, such as software solutions, and barely
addressed process management and practical work - which is needed to execute the legal demands. Most of the main issues occurred through a lack of attention given to securing the fit
between those two aspects and the altered applications.
It is argued in scientific literature that alignment and fit are needed between different implementation aspects for a successful execution of a chosen business strategy. This research
positions legislation as ‘environmental influence’ within the strategy premises of Friesland Bank. It is also suggested in the literature that Enterprise Architectures can bring alignment into practice.
These results, together with a case investigation (based on interviews with key players of the case), are used in order to formulate points of interests for a new architecturally based methodology which secures the issues identified earlier:
1. The methodology is based on the pyramidal architecture of Friesland Bank; 2. Legislation such as compliance is taken to be part of the strategic layer of PEA;
3. The methodology provides the possibility of translating legislation/framework laws
(kaderwetgeving) to the strategy and implementation principles of Friesland Bank; 4. The methodology should provide a better overview of the impact on the bank
5. The methodology should contribute to produce less implementation errors, which results in implementation cost cuttings;
6. With the architectural basis of the methodology, alignment should be reached between different implementation aspects;
7. Legislation should be assessable with architecture;
8. The methodology should adhere as closely as possible to the current implementation standards of Friesland Bank.
With these eight points of interest this research developed a five steps methodology in order to determine the impact of new legislation within Friesland Bank. Characteristic for this methodology is the use of an Implementation Independent Environment (IIE). This IIE consist in
the abstract models of the Pyramidal Enterprise Architecture (PEA) of Friesland Bank, which are separated from the implementation aspects of the architecture. This new method implies that IIE
is made compliant with new legislation first; only after the IIE has been adapted, the changes are translated into the implementation layer of the bank, resulting in an impact phase for technical and organizational implementations. This separation between the IIE and the practical
implementation enables one to distinguish practical and technical questions from logical questions during the process of implementation.
With the IIE as central source for adapting new legislations it will be easier to secure alignment
Index of Research Paper
PREFACE ...3
MANAGEMENT SUMMARY...4
CHAPTER 1: INTRODUCTION TO FRIESLAND BANK N.V...9
HISTORY FRIESLAND BANK...9
MISSION FRIESLAND BANK...10
CHAPTER 2: PROBLEM DEFINITION ...12
2.1INTRODUCTION...12 2.2MANAGEMENT QUESTION...13 2.3RESEARCH APPROACH...14 2.4PROBLEM STATEMENT...17 2.5CONCEPTS...19 2.6DATA RESOURCES...20
2.7MEASUREMENT AND OBSERVATIONS...20
2.8ANALYSIS...21
2.9RESEARCH METHODS...21
2.10CONSTRAINTS...21
CHAPTER 3: THEORETICAL BACKGROUNDS ...22
3.1BUSINESS STRATEGY...22
3.2ALIGNMENT ISSUES CONCERNING BUSINESS STRATEGY AND INFORMATION MANAGEMENT...24
3.3ENTERPRISE AND INFORMATION ARCHITECTURES...27
3.4INFORMATION QUALITY...32
3.5CONCLUSION...34
CHAPTER 4: FRIESLAND BANK ARCHITECTURE ...36
4.1INTRODUCTION...36
4.2THE PYRAMIDAL ENTERPRISE ARCHITECTURE (PEA)...36
4.3ARCHITECTURAL REIMPLEMENTATION AND ALIGNMENT...39
4.4SECOND LAYER:ABSTRACT BUSINESS MODEL...41
Data Model...41
Function Model ...42
Policy or Business Rules...43
4.5THIRD LAYER:BUSINESS IMPLEMENTATION...44
Organization...45
Applications...45
Infrastructure...45
4.6REVIEW OF FRIESLAND BANK ARCHITECTURE (CONCLUSION) ...45
CHAPTER 5: EXPRESSING IQ PROBLEMS WITHIN ARCHITECTURE ...47
5.1ARCHITECTURE IQRELATION MODEL...47
5.2ASSUMPTIONS CONCEPTUAL MODEL...48
5.3INFLUENCES CONCEPTUAL MODEL...49
5.4CONCLUSIONS...50
CHAPTER 6: COMPLIANCE IMPLEMENTATION: CASE CDD ...51
6.1INTRODUCTION...51
6.2IMPLEMENTATION PROCESS CDD ...52
6.3REMARKS AND OBSERVATIONS BY THE CDDPROJECT LEADERS (CDD1 AND 2) ...54
6.4PROBLEMS EXPERIENCED AFTER THE CDDIMPLEMENTATIONS...55
6.5THE RELATION OF THE THIRTEEN ISSUES OF INTEREST TO THE BANK ARCHITECTURE...57
6.6ANALYTICAL REVIEW OF CDDIMPLEMENTATION...59
6.7CONCLUSION...60
CHAPTER 7: ARCHITECTURALLY BASED METHOD FOR COMPLIANCE IMPLEMENTATION ...61
7.1INTRODUCTION...61
7.2CONDITIONS FOR THE IMPLEMENTATION METHODOLOGY...61
7.4METHODOLOGY ESSENTIALS...64
7.5ADHERING TO FRIESLAND BANK STANDARDS...66
7.6BUILDING A FRAMEWORK FOR IMPLEMENTING COMPLIANCE...66
7.7CONCLUSION...69
CHAPTER 8: FIVE STEP METHODOLOGY ELABORATED WITH CDD EXAMPLES ...70
8.1STEP 1:STUDY THOROUGHLY LEGISLATIONS...70
8.2STEP 2:TRANSLATE LEGISLATIONS TO CONTEXT FRIESLAND BANK...72
8.3STEP 3:MODULATE TRANSLATION INTO THE IIEENVIRONMENT AND DEFINE IMPACT...73
Create building blocks...73
Define impact...74
8.4STEP 4:DEFINE IIE IMPACT INTO ORGANIZATIONAL ENVIRONMENT (OE)...78
8.5STEP 5:DEFINE IIE IMPACT INTO TECHNOLOGIC ENVIRONMENT (TE) ...81
REFERENCES ...87 APPENDIX A: QUOTES FROM CUSTOMER DUE DILIGENCE...91 APPENDIX B: HANDREIKING VOOR HET GESTRUCTUREERD DOORVOEREN VAN
Chapter 1: Introduction to Friesland Bank N.V.
This chapter will introduce the Dutch financial institution Friesland Bank and in its basis highly informative. First section give some information about the Friesland Bank history and second section will introduce the new strategic choices which are mad by the Friesland Bank.
History Friesland Bank
The following history description of the bank is a direct quote from the Friesland Bank website to secure the completeness of the story:
Friesland Bank N.V. was founded in 1913 as Cooperatieve Zuivelbank by a number of local Frisian co-operative dairy industries to regulate their cash positions and to provide them with short term credits. From the start, the bank was a member of the Raiffeisen-organisation at Utrecht (later transformed into
Rabobank). The bank extended its operations to all agricultural businesses in Friesland organized in a co-operative structure, and to local authorities such as the water-boards. The bank undertook virtually no retail activities.
In its first fifty years, the bank operated exclusively from its offices at Leeuwarden. In the late 1950s, increased demand for credit and a lack of funds led to a strategic repositioning of the Zuivelbank. It broke
up its ties with Raiffeissenbank and started a branch network of its own to attract savings and deposits from the retail sector. Business banking was extended to all types of industry.
In 1970 its name was changed to Friesland Bank to reflect both its regional identity and its character as a general bank. The rapid concentration in the Dutch banking industry and the introduction of the all-finance concept led to a fundamental change of the bank’s strategy in 1992. It seemed probable that a continuation of its banking operations strictly in a provincial setting would in the foreseeable future lead to
a forced merger or take-over due to lack of scale. Therefore, it was decided to develop the bank into a medium sized general bank operating in the Netherlands, to enter into strategic alliances with other Dutch institutions, and to modernize its legal structure.
As a direct result in 1993 an office was opened in Groningen, the largest city in the North, followed by offices in Alkmaar (1995), Assen (1997), Zwolle (1999), Enschede (2002) and Amsterdam (2006). To
improve efficiency, twenty smaller branches in the province of Friesland were closed in 1999 and in 2000/01 three further branches were closed. From 1994 onwards the legal and ownership structure of Friesland Bank was changed to make it more transparent to the financial markets and to open up the
possibilities of attracting external tier-1 capital. The most important amendment was the transformation from a co-operative company to a Dutch public company with limited liability, effected in 1995. The share capital of the bank is held by Friesland Bank Holding NV, a holding company without a banking status.
The main shareholder, Vereniging Friesland Bank, has the statutory obligation to maintain the integrity and autonomy of the bank, which implies that it cannot and may not sell its shareholding in Friesland Bank (Holding) otherwise than within the framework of a merger of Friesland Bank with another entity if such a
merger would be in the best interest of Friesland Bank, and only if the shareholding in Friesland Bank would be exchanged for a shareholding in the new entity.
Mission Friesland Bank
As result of history the Friesland Bank (FB) contains a highly decentralized organization
structure, what leads to different work methods and techniques at different FB site locations. The company started in preceding years an investigation to map her internal structure and her
The issues of the investigation results are related to efficiency, margin of profit and the increase in scale. In the FB history part of this chapter is already issued about the local character of FB bank:
the small-scale focus on the province of ‘Friesland’. However, the trend globally and especially in the banking world is one of up scaling; banks become more international oriented and take over competitors nationally but also internationally. Results of the investigations by FB don’t warn for
a direct annex danger (the bank has a structure what prevents a direct annexation), but shows the necessity of an important structural change.
The FB was in the last decades an all-purpose bank, what means that they provide all common
bank products and service to the customer. But with the increase in scale trends in the banking world, it becomes more and more difficult to keep healthy profit margins. After a SWOT analysis as part of the investigation, the master plan concludes to drop the all-purpose identity and choose
a strategy that includes the strengths of the bank. The master plan documents the following strengths:
1. Be a human relations bank: stay involved with the customer; 2. Do what is promised to a customer and maybe more;
3. Believe in the idea of confer between the bank and customer;
4. Be an enterprising bank with courage.
A structural change encloses the need to make the processes more efficient to increase the profit
margin in the chosen strategy. Therefore the master plan issues the need of standardization of work methods, the use of information and techniques.
Chapter 2: Problem Definition
2.1 Introduction
This research paper discusses the question as to how changes at the strategic level of a business,
like environmental changes, are to be implemented in the practice of that business. Before dealing with this question (management question), however, I will give a short introduction in the
context.
The current developments of increase in scale are typical for the present business world. Worldwide, organizations are becoming bigger and more effective in handling their competitive
position. For example, in the bank business we have recently seen the take-over of ABN Amro by a consortium of banks (2007). Compared to the past, when bank employees dealt with customers on a personal basis, how impersonal do banks nowadays look, scaling up as they do, and
merging into huge consortiums.
In order to resist the threat of becoming too impersonal (knowing your customers is especially for smaller banks a necessity to survive against bigger competitors) it is necessary to maintain a
deliverance of personal approach in a bank’s products and services. Admittedly, it is almost impossible these days for a bank employee to know customers personally. Yet information systems (process management included) should prevent the up-scaling and take-over of
responsibility to secure that a bank employee has all necessary information available when a customer enters the branch. With the right business implementation it is possible to gather information of each customer and generate with those data a client profile, which can then be
used to create a product or a service adapted to that specific customer. What in the past was a bank employee’s tacit knowledge depends nowadays on having the right information systems
and business intelligence systems which process data into knowledge.
Restriction in using data as knowledge about each customer is the basis of the right implementation of processes, applications and workarounds. These must be implemented in such
a way as to support the proper way of storing data to use data actually as knowledge. This means that he business implementation must secure that stored information is qualitative and accessible to guarantee customer intimacy.
Strategic choices, such as defined by Porter, need to be implemented in all implementation layers of a business in order to benefit from the chosen strategy. Otherwise this strategy will exist only
on paper.
2.2 Management Question
It is a fact that a business strategy is not only a adopted assumption of a company to execute their business. As we will see later on in this paper, strategies like customer intimacy are not the only
ways in which a bank chooses to operate. Indeed, for the Friesland bank strategy comprises not only business goals, but is also related to given environmental factors which can change over time and cannot be influenced by the business. The strategy of Friesland bank is also related to
the needs of customers, human habits and values (sometimes related to districts etc.), competition and governmental and European legislations. For banks, legislation is an important issue at level of strategy. The reason is that these legislations have a direct impact on those processes which
secure a deliverance of products/services and customer intimacy combined. In the case of customer intimacy, legislations that the bank force to check of a specific customer is a crook have
an negative contribution to the customer intimacy part of the strategy.
- Paragraph left out for confidential reasons -
[Paragraph outline]
At present, Friesland Bank is facing difficulties in implementing compliancy issues, which have impact on several aspects of the bank.
New legislation implementations should not have a disturbing or negative impact on the strategy values of the bank, such as the customer intimacy policy of the Friesland Bank; that is, to provide
high services and quality advice on the basis of as much available information as possible, generated from data stored after previous contacts with the customer. The bank needs a legislation implementation strategy that focuses on a high quality implementation of legislation
quality of information of their core business. At this time the bank is working hard to re-implement their business with architectural methods to perform their customer intimacy better.
However, the force of new legislations disturbs these customer intimacy implementations. Therefore Friesland Bank seeks to develop an implementation standard that is based on their implementation methods and can be relied on for handling any strategic level legislation changes
in the future.
2.3 Research Approach
The management question needs to be modified into a structured and feasible research approach.
To secure a correct modification, this research uses the research methodology of De Leeuw (De Leeuw, 2001), namely for the following two reasons:
1. this methodology has been developed for scientific research in the area of business
management;
2. previous master thesis research shows that this methodology can be used successfully for
structuring scientific research.
The most notable element of this methodology is the research model which conceptualizes the
Figure 2, Research methodology De Leeuw
The first phase (1) constitutes the core of the model which navigates the research intention. The problem statement formulates the various research (sub-) questions that are relevant,
researchable and effective (De Leeuw, 2001). The problem statement of this research will be formulated later on in this chapter. This methodology uses various concepts for definitions and models: definitions to build ‘terms’, models to relate definitions, opinions and methods. The goal
of this concept methodology is to make the problem operational and understandable as a resource for doing research. In the section ‘Concepts’ all various concepts of this research are described.
The second phase (2) visualizes the manner in which the problem is to be answered. In this model ‘data recourses’ represents all data resources (e.g. databases, documents, cases, simulations, tacit knowledge) that are needed to collect information relevant to the research problem.
‘Measurement and Observations’ represents that stage of the research where it is to be decided which methods will be used to unlock these data resources. The most common ways of disclosing
data sources are interviews, enquires, statistical methods and modeling.
be analyzed and summarized in order to reach conclusions about the results. Later on in this chapter, I will elaborate on the sources and methodologies related to this research.
Figure 3, Research flow focused on concepts
Generally, this research method is a concept-focused methodology with the aim of framing research both in the development and in the execution phase. In practice, a research methodology
2.4 Problem Statement
The first part of the research methodology consists in the elaboration of specific research questions. The previous section (‘Management Question’) formulated the structural problems
concerning the securing of information quality within the Friesland Bank. Especially the continually changing compliance legislations concerning the relation between the bank and its customers put pressure on the total quality of data and on the business implementation of
customer intimacy.
Customer compliance changes are not implemented on a structural basis like enterprise architecture. As Friesland Bank intends to use architecture for improving the business with
regard to customer intimacy, it is necessary to implement legislation changes in the architecture too. For Friesland Bank, customer intimacy is an important goal to be achieved with data quality. Therefore, in defining the question how legislation changes can be implemented in a systematic
way, this research will focus on the customer data quality aspect of such changes. This leads to the following research question:
How can specific customer compliance changes be implemented systematically in the business structure of the Friesland Bank and facilitated with enterprise architectural alignment, without loss of information quality?
The research question is divided in a number of sub-questions, each focusing on a specific part of the main question.
In the first place, some research of the available literature is needed to define different levels of the problem context mentioned in the management question: what does the literature say on business strategy, alignment, enterprise architecture and information quality? It is also necessary
to define the relation between strategy, alignment and architecture.
• What is a business strategy?
• What is alignment and how it is related to a business strategy?
• What is Enterprise Architecture (EA), and what is its relation to alignment?
In order to answer the main research question, it is necessary to investigate the current architecture concepts of the Friesland Bank and how these contribute to alignment within the
business and to related information quality (conceptualize relation IQ with architecture):
• How do the current architecture models (within the Friesland Bank) contribute to the alignment between the different parts of the business implementations?
• What is the opinion of Friesland Bank on how information quality is related to the business implementation?
• How can the relation between architecture and information quality be conceptualized?
The following step is to research in what way customer compliance already implemented has been integrated within the bank. What where the issues and what was the impact on information
quality (case study):
• How was earlier compliance legislation implemented, and which implementation issues can be defined?
• How do these issues relate to information quality, and how can these be related to the Friesland Bank architecture?
The next step is to design a theoretical framework for implementing customer compliance changes for use within the Friesland Bank architecture. It needs to be defined how this can be
used for assessing the compliance fulfilment.
• How can new customer compliance legislations be implemented in the business with an architecture-based methodology and secures the implementation issues as defined in the
case study?
• How can architecture contribute to assessing the compliance fulfilment?
• Which are the future possibilities of Friesland Bank by using this framework?
A methodology thus designed will be an important step in helping Friesland Bank with future
cases of new legislations on customer relations that need implementing. Therefore a practical method is needed to help the stakeholders with implementing legislations based on the following theoretical framework:
2.5 Concepts
There are various concepts within this research which can be mentioned for making this research more clear. These concepts are related to theoretical research (external concepts), practical models
(internal concepts) and new developed conceptual models for this research (new concepts).
The first four concepts are important building blocks, which are necessary to start this research
and show also the context of this research. External theoretical concepts (chapter 3)
1. Business Strategy;
2. Alignment and fit; 3. Enterprise Architecture; 4. Information Quality (IQ);
The second two concepts are available within the Friesland Bank. The Pyramidal Enterprise
Architecture is an architecture what is developed by the bank and described in this research. Furthermore, this architecture concept is an important basis for creating the new methodology. On the other hand, the CDD concept represents the investigation case about the implementation
of CDD legislation.
Internal Friesland Bank concepts (chapter 4 and 6): 5. Pyramidal Enterprise Architecture (PEA);
6. Case: Customer Due Dilligence (CDD);
The last two concepts are created by this research. The seventh concept is build to express IQ
issues to the Friesland Bank architecture and last concept is the product of this research. New research concepts (chapter 5, 7 and 8):
7. Concept framework for expressing information quality with the implementation layer of
the Friesland Bank architecture;
8. Methodology for implementing new legislations and define impact on current bank
2.6 Data Resources
To execute this research several resources are used to get the right information. Characteristic of this research are the interviewing of different stakeholders related to the case, information quality
and compliance. Next four data resources are most important for this research:
• Internal documents related to architecture, process management etc; • Information Quality interviews;
• Case study interviews;
• Interviews with compliance implementation stakeholders;
2.7 Measurement and Observations
As researcher, the author was actively involved with the daily work of business analysts and
business architects within the bank. He participated in the information plan and pre-definition study for the change of the marketing department to the new bank strategy. The task of the author was to assist the business architect to design architectural models for enabling the impact
analyses for change. With these tasks the researcher became very familiar with architecture of the bank and also with the positioning of different parts of architecture within the organization. Besides observation of the use of architecture, the researcher also studies different opinions about
the role of process management (and its position within the used architecture), and how different stakeholders did react on the use of architectural methods for making impact analyses. All these
(unofficial) observations are also used to make the best solution what adds value to almost every participated stakeholder in the implementation of compliance legislations.
Especially for reviewing the case the researcher used interviews with the involved project
managers and participated in sessions with information quality experts from the business intelligence department to research specific information quality problems as result of the specific compliance implementation.
As measurement this research used only available information and concepts which are accepted fully by the involved stakeholders which are expert on that specific information. For example, the research only used available process management documents which are accepted by process
2.8 Analysis
Main analysis of this research was to plot information quality issues on the existing architecture of the bank and to investigate the issues around what was happened during the implementation
of the specific compliance. To combine different aspects it was possible to gather a total picture as input for a new methodology.
2.9 Research Methods
This research uses different kind of research methods. In section 2.6 was already told that
interviewing was an important method to access personal experience information to investigate the case. Also section 2.7 mentioned that the author participated with desk research in the daily work to get experience with the use of architecture within the Friesland Bank. With data analyses
problems, related to the case, could be mentioned as input for a new methodology. Literature research is used to create a basis as context for this research. Therefore, the following research methods are used:
• Interviewing; • Desk research; • Literature research; • Data analyses; • Case studies;
2.10 Constraints
This research is based on existing architecture and implementation models form the Friesland
Bank and therefore the results are in the first place only usable for the Friesland Bank. The goal of this research is to help Friesland Bank to reuse there architecture concepts in a new implementation context. However, the idea behind the methodology in its essence is far more
generic and could be used for each kind of bank or business with related architectural concepts. But more research is needed to investigate the level of generalness of this method in relation to
Chapter 3: Theoretical Backgrounds
This chapter introduces a theoretical basis, taken from the available literature, for describing the context of this research. First, it provides an outline of the definition business strategy: what is a
business strategy, and which aspects are related to strategy? Secondly, it provides an outline of the alignment between business strategies and business implementations, and of how these relate. Thirdly, it gives an outline of different types of common architectural frameworks for
creating and securing alignment, as a practical elaboration of the alignment concept. The differences and similarities between these architecture frameworks will be worked out. A fourth section will attend information quality with quality attributes. The final part of this chapter will
address compliance issues.
3.1 Business Strategy
A Business Strategy formulates for a particular company what is important for them, and how to
create a particular business. Porter (1996) defines that strategy of a company rest on the unique selling points of that particular company: what makes their business different from their competitors? In that same article the author stresses the difference between his view of strategy
and operational effectiveness (OE) which, according to Porter, is not part of a business strategy.
According to Porter, there are two different reasons why OE not is a part of business strategy. The first is that OE leads to diffusion of practice, which means that all businesses that embrace
OE will start to imitate each other. Secondly, OE leads to the destruction of competition: OE leads to hard competition which no one can win and thus results in zero sum margins. Both effects conflict with a strategy which rests on unique selling points. Therefore Porter excludes OE from
the definition of strategy.
Porter (1996)
Strategy is creating fit among a company's activities. The success of a strategy depends on doing many things well - not just a few - and integrating among them. If there is no fit among activities, there is no distinctive strategy and little
sustainability.
Porter uses his five forces model (Porter, 1979) to underline that strategy rests on unique selling
points as reflection of how current competition is positioned. Strategy is a derivative of bargaining powers of suppliers and buyers, but also of existing competitors, alternatives and possible threats by competitors. This model is based on the direct context of a company and
relates strategy only to the direct stakeholders and competition around the business, in order to secure that strategy formulations have a direct link to the current competition and stakeholders’ situation. It seems that Porter does not see a link between strategy formulations and
environmental forces such as governmental legislations, local traditions and technical developments.
Adrew developed a strategy framework which defines a wider picture of a strategy concept
(Ghemawat, 2002). The Adrew’s Strategy Framework (Figure 5) not only includes the distinctive competences which are comparable with the ideas of Porter, but also inherits environmental conditions and trends. This conceptual framework states that the combination of distinctive
competences and possible opportunities within the environment together generates business choices which constitute a business strategy. Legislation, technical developments and community
Figure 5: Adrew's Strategy Framework
3.2 Alignment Issues concerning Business Strategy and Information Management
When a business chooses a particular strategy, it is necessary that that strategy is implemented in their operations and business functions. A concept is needed for linking strategic management
and implementation with implement strategies in complex organizational structures. After all, if there is no linkage, then a strategy is only a piece of paper and the business will be out of control. The available literature mentions and defines the relation between business strategy and business
operational strategies as the ‘fit’ and/or ‘alignment’, necessary for implementing a chosen business strategy into the operations of a business.
As concept, ‘fit’ is elaborated with the proposed conceptual scheme (Venkatraman; Camillus, 1984) to address the domains and conceptualizations of fit. The domain of fit defines the external, internal or integrated focus on the relation between environment, organization and strategy.
Later on, fit is subdivided in external and internal fit (Smith; Reece, 1996). Internal concerns operational and manufacture tasks. External fit concerns alignment between operational and
manufacture task within a cooperative strategy.
The linkage between internal and external fit is called strategic fit (Henderson; Vankatraman, 1993), or business alignment (Sabherwal; Hirschheim; Goles, 2001).
Information technology has moved from its traditional orientation to administrative support towards fulfiling a more strategic role within an organization (Henderson; Vankatraman, 1993). More advanced information technologies have become capable of altering the nature of an
industry and have thus become a fundamental case for businesses (Luftman; Lewis; Oldach, 1993). As information technology has become a main issue within the fit and alignment questions, it has been added to a new alignment model and defined as functional fit next to the
strategic fit: the strategic alignment model (Henderson; Vankatraman, 1993) (Luftman; Lewis; Oldach, 1993).
The strategic alignment model defines the relations between the business and its IT strategy (external strategic integration) on the one hand, and organizational and I/S implementations
(internal functional integration) on the other, combined defined as functional integration. This framework also defines a strategic fit between the external strategy and the internal implementation.
Furthermore, the strategic alignment model uses ‘automation’ as a link between business strategy and I/S implementation, and ‘linkage’ as the relation between the business implementation and IT strategies. This means that the IT strategy is related to the issue of how the business is
implemented. With this model it is possible to address various strategic perspectives by defining IT or business strategy as driver and enablers.
The strategic alignment model is not a static picture of a business, but depicts a dynamic and
continual ‘journey’ of dealing with the internal and external environments within the business and information technology. Furthermore, this model is built to define the alignment between
internal and external environments, and not for practical use. Maes (1999) developed a general framework for clarifying the need for an information layer between strategy and information technology that can align these in practice. Information management is the hinge between
business and information technology (Boterenbrood, 2005). This framework integrates the alignment model with enterprise architectural frameworks, which will be addressed in the next section.
Figure 7: The generic framework (Maes, 1999)
Alignment models clarify the relation between strategic and implementation issues within the business, and define what kinds of fit are necessary for creating those alignments. According to
implementation. The Meas framework uses that model to relate information between business and IT. All these frameworks and models of fit do not specify how to achieve alignment.
The next section will attend to enterprise architecture frameworks in order to put these conceptual alignment models to practice.
3.3 Enterprise and Information Architectures
In 1986 J.A. Zachman anticipated the increasing implementation complexity of information
systems with the introduction of logical constructs or architecture. He introduced his framework as a logical likeness of the architectural process (table 1).
Generic Buildings Information Systems
Ballpark Bubble charts Scope/objectives
Owner’s representation
Architect’s drawings Business description
Designer’s
representation
Architect’s plans Information system description
Builder’s representation
Contractor’s plans Technology constrained
description
Out-of-context representation
Shop plans Detailed description
Machine language representation
- Object code
Product Building Information system
Table 1: Comparing information architecture with building architecture (Zachman, 1987)
The idea of this so-called Zachman framework is to integrate logically all different components of an information system, as the currently required system complexity cannot secure that logic anymore (Zachman, 1987). Business strategy and its linkage to information architecture are also
part of that framework (ballpark view), but is not further elaborated.
The main reason for this superficial concept is that this framework is a visionary model and not a ‘hands on’ practical methodology (F. Boterenbrood, 2005). It places all aspects of an organization
out these framework cells on the basis of their own design and draw methods, they only have to observe the dependencies between the cells of the framework. Other authors developed practical
methods based on the Zachman framework, such as Enterprise Architecture Planning (EAP) (Spewak and Hill, 1992) and ‘rapid delivery methods and technologies’ by Finkelstein (2006). Zachman is the founding father of the current enterprise architectures. Architectures that have
been developed since differ in degree of practice, methodology and vision. The Institute of Electrical and Electronic Engineers (IEEE) developed an architecture vision standard (IEEE 1471) in order to specify how architecture should be designed. IEEE defines architecture as “the
fundamental organization of a system embodied in its components, their relationships to each other and to the environment and the principles guiding its design and evolution” (Koning, 2006).
Figure 8: The conceptual model of the IEEE 1471 standard
IEEE 1471 provides a standard and regulations for business architects to build a new architectural concept. The most important part of this conceptual framework is the explicit attention given to
description’ consists of ‘views’ that are held according to the various viewpoints with which to address the specific concerns of each type of stakeholder.
With its focus on stakeholders and their specific interest this framework should cover all stakeholders’ concerns. It also stimulates architects to be conscious of the interests of the stakeholders and helps them to resist putting too much emphasis on technical aspects (Koning,
2006). IEEE 1471 is a vision of how a newly built architecture should look like. However, this standard is abstract and gives no support with practical methods for achieving the ideal description of IEEE (Koning, 2006)(Boterenbrood, 2005).
(IEEE 610.12)
Enterprise Architecture is “the organizational structure of a system or component their relationships and the principles and guidelines governing their design and evolution over time.”
In contrast to the IEEE standard, The Open Group Architecture Framework (TOGAF) is a world-wide practical standard for developing architecture. This framework (still being developed) is an
open source project of The Open Group with a focus on the practical issues for building effective architectures (Boterenbrood, 2005).
Figure 9: ADM methodology
The strength of this framework is that the Architecture Development Method (ADM) is commonly accepted and provides a workable methodology for designing architecture. As
the business and differs in terms of detail. The method is generic and is qualified for being used in any kind of business.
Furthermore, TOGAF provides repositories of elements, models and patterns for describing the internal and external environments of the architecture.
The use of enterprise architectures can be seen as the answer to the need for unity between all
aspects of a company. At the same time, the use of an architectural methodology can be a factor of delay (Wagter, 2001). When extensive methods like Zachman are used and the process of design is carried out to its proper end, it is likely that descriptions of the business get outdated in
the meantime. To solve that problem, Sogeti developed a Dynamical Architecture (DYA) as a rapid architecture tool which is a vision and methodology.
Desolation Strength Lose Barrier Low High Implementation in organization L e v e l a rc h it e c tu re L o w H ig h
Figure 10: Position architecture within organization (Wagter, 2001)
Within the DYA methodology there are two important issues to be recognized. First, the position
of architecture within the organization and, secondly, the possibility of implementing ICT solutions without the need for architecture, namely in cases when time pressure is too high.
In the first place, DYA addresses the need for including organization in the architectural activities. When organization is not included, the art of architecture will be an isolated affair (figure 10): architects are left in an ‘ivory tower’ while the business never uses their architect
Governance Business Architecture Information Architecture Technologic Architecture Dynamical Architecture Developments without architecture Architecture services Development with architecture Strategic dialog
Figure 21: DYA framework (Wagter, 2001)
Secondly, DYA defines the possibility to implement ICT solutions temporarily without a need for architecture concepts. Wagter states that in cases of extreme time pressure, it should be possible to implement a short runtime project without taking architectural steps. At the same time,
however, a structural solution should be initiated in order to integrate that solution into the architecture at a later time. The DYA model deals with the practical need, arising in some cases,
to use shortcuts with architecture processes and prioritizing the participation of business stakeholders in the architecture processes.
Enterprise Architecture is a wide definition including abstract visions and practical
methodologies: Zachman initially provided a framework for outlining the various aspects of architecture. His framework became important and has been used by others as the basis for practical methodologies. The IEEE framework represents a vision for standardizing viewpoints
and stakeholder concerns within an architectural framework, but provides no methods to work with. Therefore these frameworks can be named ‘static’: they describe no practical steps between different model views. The DYA methodology also emphasizes the participation of business
manners to use architecture. IEEE and the basis of Zachman represent a vision on architecture that focuses less on practice. In contrast, TOGAF is based on practical results, which will
probably adapt to best practice over time. However, the basic concept of theory is less clear in the case of TOGAF. It will therefore become rather an accumulation of best practices and experiences. The DYA concept is easy to understand and practical. A questionable aspect of it is the take a
shortcut around that same method in case of time pressure. Architecture frameworks refer to practice. In contrast to a conceptual model, practice is always messy and ambiguous. Therefore it is only confusing to carry over practical problems into the basis structure of a concept.
3.4 Information Quality
The quality of information is the basis for using information in the strategy of a business. Data mining can be used in order to get the advantage of saving data about the business and customer relations.
“Information quality (IQ) is critical for organizations,” state the developers of the Methodology for Information Quality Assessment (Lee; Strong; Kahn; Wang, 2001). They also reflect on the
opinion that IQ is increasingly important for an organization when data warehouses become bigger and information is accessible for different managers and information users.
Availability of data is nowadays less a problem, but to generate useful information from data sets
is much more difficult (Lee and Siau, 2001). Brown and Kros (2003) researched the impact of incomplete or missing data on data mining projects. It seems that the bigger an organization is, the greater the likelihood of problems concerning incompleteness and loss of data. Not only the
absence of data is important for using successful data mining methods; the information quality or incorrectness of data is also strongly related when it comes to the disclosure of information. Incomplete or missing data is related to procedural (technical) problems, and to the possibility of
letting data fields blank (completeness). Apart from completeness, quality of information is also related to issues such as: 1) is the imported information data correct, 2) are the users trained or informed about the right way to provide and import the right information.
Table 2: Overview of opinions about attributes related to IQ
They made a difference between four different views of IQ: Intrinsic IQ, Contextual IQ, Representational IQ and Accessibility IQ.
1. Intrinsic IQ: information has quality in its own right;
2. Contextual IQ: relevant, timely, complete and appropriate in its own context;
3. Representational and Accessibility IQ: importance of the right computer systems for
storing and accessing information.
The first two dimensions of IQ have in common that different studies shows similarities in the use of IQ attributes, while the last two IQ dimensions show a wide spectrum of different IQ
attributes. Table 3 illustrates the similarities between the attributes within the first two IQ dimensions. This table shows that most research sources agree that IQ is based on three basic
be related to correctness, time and the degree of the completeness of data. Moreover, IQ at least represents accuracy, completeness and topicality.
Table 3: similarities of IQ attributes
3.5 Conclusion
This chapter shows the theoretical context of this research. In the first place a business strategy seems to be more than only the unique distinctive competences of Porter. The Andrew framework shows also that environmental conditions have influence on a business strategy.
Secondly, this chapter shows different kind of alignment concepts which relate a business strategy with a business implementation. These alignment end fit concepts became more elaborated after the introduction of information systems and strategies. The Meas framework
visionary. The last part of this chapter focused on Information Quality which is most tangible of those four subjects. This chapter defines accuracy, completeness and topicality as most important
Chapter 4: Friesland Bank Architecture
4.1 Introduction
Architectural thinking has become more important for Friesland bank since strategy became
more important for its business (see chapter 1). Enterprise architects of Friesland Bank developed an architectural framework that describes how the bank should adopt that strategy. The
enterprise architecture framework is used as a think and work model with which to position the various aspects of the bank and to compare the current situation with the desired situation. The latter feed into impact analyses, which are then taken as a basis for new projects. This
architectural framework also enables the bank to define alignment between the business and technical resources.
This chapter provides an overview of Friesland Bank’s enterprise architecture, and of of the
models that are part of that architecture. First, the chapter gives a description of the main framework pyramid and its three layers. Secondly, each layer is elaborated explained and related models are described. Finally, the architecture will be compared with the theoretical frameworks
described in Chapter Two.
4.2 The Pyramidal Enterprise Architecture (PEA)
The pyramidal framework comprises three levels: strategy, the abstract business model and the business implementation. These three levels are the basis for describing each aspect of the
company. Each aspect of the business can thus be located in one of these layers. This architecture can be used to describe the whole company, but one can also use the pyramid for one department only. Figure 10 pictures the Pyramidal Enterprise Architecture as it is divided in three layers. The
strategy layer comprises all conditions such as value-adding business choices (management), regulations from the environment, restrictions based on the type and size of the bank, and the company’s competitors. Friesland Bank’s architects do not define this strategy layer very
narrowly: it defines much more than the strategy discussed in chapter 3. For example, in the present setting ’strategy’ serves to define the reasons why Friesland Bank acts as it does (or seeks
to act as it sets out to do), and to describe the context in which the bank must operate.
strategic choices and premises. This so-called middle layer, or ‘stable layer’, consists of three models: function models, data models and policy rules. As the term ‘stable layer’ already
suggests, this layer is independent from changes at the level of implementation. When for example techniques change, the abstract middle layer will not change. It will change only when changes are made at the strategic level.
The function model represents and explains which functionality is needed for the bank or department; that is, which functionality a bank or department needs to do what it aims to do. It is important to note that this model does not explain how those functions should be embedded.
The data model describes logically how data should be related to each other, for the bank as a whole or for a department. This model, too, is abstract and does not define what kinds of data types are required. It states only that data is needed for each kind of entity that is needed to
support the functions. The relation between functions and data is important in order to acquire an abstract picture of the bank or department.
The third model, the business rules model, can be seen as a workaround of how both functions and data could be used within the frame of the strategy. Business rules tell on what way functions and data could be used and what is forbidden, or not is tolerated to do.
These three models together represent the logical blueprint of the (desired) reality. Implementations need to match with this middle layer. Later in this chapter, these three models will be explained in more detail.
The third and lowest layer in the pyramid represents the business implementation. It defines the business (processes and organization) and technical (application and infrastructure)
Processes: process management which describes all process activities, namely how all tasks and roles within the business are related to each other in order to get the desired results.
Organization: the implementation aspects in the organization: HR management, HR functions, training facilities and workarounds.
Applications: the information systems, their interrelations, and also their relation to the business.
Infrastructure: the bottom layer of the first three parts of the implementation layer as described above. In this perspective, infrastructure represents all resources necessary for making those implementations possible (cables, computers etc).
Table 4: implementation layer of Friesland Bank
That processes are placed in the third layer is a controversial issue within Friesland Bank. Process managers tend to place processes in the second layer. These issues as well as the elaboration of the third layer will be discussed later in this chapter. Process management has influence on the
organization, because processes describe how an organization should do its work. However, both (process management and organization) have also impact on how applications are used in the organization.
The Pyramidal Enterprise Architecture, as pictured in figure 12, suggests a top-down character: strategy is the starting point for designing the business model and its implementation. Theoretically, the Friesland Bank indeed tries to use a top-down structure, namely in order to
ensure that the chosen strategy is applied in all departments of the bank. However, it is aware that it is almost impossible to follow a top-down methodology in all situations, and in response to all sorts of problems. The next paragraph will discuss this issue, together with the issue of
Figure 22: Top-down Pyramidal Enterprise Architecture
4.3 Architectural Reimplementation and Alignment
While writing this thesis, the author participated in an information plan for a specific
department. The goal of that plan was to define the impact of the chosen (changed) strategy on the current reimplementation of what in the past was implemented without architectural tools. When a new strategy needs to be implemented in a specific business, it is impossible to
re-implement the complete business re-implementation. Indeed, one cannot shut down a department for a certain period in order to make the necessary changes. In reality, changes can be made in some parts of the business, but there will always be legacy reducing the scope of strategic
changes. A strictly top-down implementation is therefore inconceivable. It is more important to work on alignment (as defined in chapter 3) between the different parts of the business. When a
will counteract each other, causing the business to lose its ability to execute the chosen strategy and business goals.
With the information plan, the old department situation (IST) and the wanted implementation (SOLL) can be plotted on this pyramidal architecture. The gap can be defined between the present and desired situation: which parts of the business do, and which do not match the new
strategy? With this gap analysis it is possible to determine in which places of the business the alignment needs improvement.
This architecture is not only meant for top-down implementations, but also for
re-implementations as well as rearrangements of parts of a business. Figure 13 shows the difference between alignment with strategy (vertical) and alignment, or ‘fit’, between parts of the business (horizontal alignment). V e rt ic a l a li g n m e n t
Figure 13, Alignment issues within the business
In this architecture setting, not only strategy for alignment within the business is important, but
also the internal fit between different implementations; both are important for successful implementation changes. For example, when process management supports a typical work
4.4
Second Layer: Abstract Business Model
This paragraph focuses on the stable layer of the architectural framework. It gives, first, a more detailed explanation of the data and function model, and their interrelation. Secondly, an
observation is made on issues concerning the policy rule model.
Data Model
The data segment of this architecture clarifies logically the way in which the various data entities are related to a specific business issue. It is important to note that these entities are not necessary linked directly to a real database description or model. It focuses on the logical relations of
entities that are necessary for designing a complete database that can maximally support the business. Thus a data model shows all logical data objects that are necessary for a correct design
of a logical data model. Figure 14 shows how the entity ‘relation’ (within the data model) is linked to other entities. The entity relation represents the various statuses (e.g. prospect, suspect and client) assigned to persons related to the bank, natural or non-natural.
Figure 14, Client entity relation
A relation has one or more addresses and consists of both a unit and a natural/not natural person entity. These segmentations are due to financial and bank rules that are beyond the scope of this
These logical connections between data entities can be categorized in different administrations. The model of figure 14 represents the relation administration. Apart from this type of
administration, there are also other administrations.
Later in this chapter these administrations will be related with the functions of the function model.
Function Model
The function model is designed to describe the logical tasks or functions of a business within the
bank. It describes all functions which are necessary for representing a bank with the chosen and non-chosen parts of a given strategy.
In our case, functions can determine logical task at different levels. Figure 15 shows a
decomposition function ‘provide services’. That function can be divided into three sub-functions, such as ‘payment order’(which, in turn, can be divided into the three sub-functions of ‘book payment order’, ‘book commission’ and ‘send payment order’).
If the bank chooses to provide that function on more than one channel, then each process will have to fulfil this function decomposition. Exactly how this is to be done depends on what
techniques and governance allow at each channel.
With this model one can describe the tasks of a business, department or whole bank without the need to link these with HR functions and organizational implementation aspects. The functions at
the lowest level can be used as input for new activities within process management, where HR functions and organizational roles are related to those functions. The exact relation between these functions and activities in processes has not yet been officially determined by Friesland Bank.
Figure 16, Functions related to administrations
The data model describes the necessary data in logical entities. The function model describes the
logical task in the same context. The data entities are used by the functions to execute tasks. Each function has one ore more relations with different administrations, namely insofar as it uses and
mutates data (figure 16). As to the relation between functions and data entities, it is possible to combine parts of the data model with function parts. This relation is relevant for later definitions, as it determines which functional Information System solutions are to be linked with to which
database.
Policy or Business Rules
These rules reformulate legislation with a view to integrating it into the business. Together with the business rules, it represents the way in which the business should operate to meet the bank
standards as well as legislation imposed by the environment.
Figure 17, impact policy rules on business implementation
Policy definitions have a direct impact on how a business is implemented. They state how the business should act, and how it should deal with external laws and rules.
The implementations of the stable layer - processes, organization, applications and infrastructure - are framed within the policy rules. These policy rules have a separate impact on one or more of these four implementation aspects.
4.5 Third Layer: Business Implementation
The third layer represents the actual implementation and translates the abstract stable layer into business processes, applications, organization and infrastructure. This section provides short definitions of these four aspects.
Processes
Friesland Bank develops a new environment for creating and managing processes. The application Mavim (IS)1 is used to map and register current processes and design new processes.
Process management is positioned in the third layer of the pyramidal architecture. It is not commonly agreed upon, however, what the exact relation is between the architecture framework
and process management. This research paper integrates the opinion of the business architects and assumes that processes are practical implementations of functions as these are defined in the abstract stable layer. Thus process descriptions implement functions and link these with
employees, roles and tasks.
According to this process management, it is possible to assign specific task to employees.
Organization
The organizational part of the business implementation has everything to do with HRM,
employees, training and workarounds. Management is also a part of this implementation. A main issue of this implementation is how the reality of the bank can be managed in such a manner that it is in line with the descriptions of the processes and business rules. There are no
clear answers as to how this issue can be solved. It is urgent that the organization finds a single voice, which will state the way things are run coherently.
Applications
The application part of the implementation focuses on the ‘application landscape’
(applicatielandschap) of the bank. It is important to know which application is used for which task, and how these applications are related to each other. With a clear overview it is possible to answer those questions. At this time the bank is still working on documenting its application
landscape.
Infrastructure
The infrastructure implementation layer is the basis for each other implementation. It represents, for example, all hardware, cables and telephones. Infrastructure is the lowest part of the
implementation layer. One could say that the infrastructure part represents the hardware inventory which makes the other three implementation parts possible in the first place.
4.6 Review of Friesland Bank Architecture (conclusion)
The Pyramidal Enterprise Architecture of the Friesland Bank has similarities with existing
Pyramidal Enterprise Architecture have in common that they describe in a static way what should be modeled, and how this should be done logically. Both describe which models are
available and which aggregation levels are possible. Both architectures are static because their basic versions do not provide methodologies to translate and connect the different models within the architecture framework (later authors, like Finkelstein, provided practical methodologies
based on Zachman). Thus the Pyramidal Enterprise Architecture is less complicated and therefore easier to use than others. (The latest version of the Zachman architecture is far more extensive than the first one1.) A positive feature of the Pyramidal Enterprise Architecture is that it
covers the whole bank without much complexity. Yet it lacks a methodology describing the practical steps between the various models. This is what makes the PEA of Friesland Bank those different from DYA, which does provide methodologies (and is therefore a good example of a
dynamic architecture). It is remarkable that DYA and other architecture frameworks, except Zachman, do not have an overview framework (like the pyramid) to position different models
and aggregation levels. The Pyramidal Enterprise Architecture does not meet the most important issues of the IEEE standard. The architecture of Friesland Bank does not support structurally the different views of stakeholders: there are no different models available to meet varying interests
of stakeholders. However, this does not mean that the framework cannot be used in various ways to meet and accentuate the stakeholders’ interests.
The conclusion must be that the Pyramidal Enterprise Architecture can be used for positioning
the various architectural parts of the bank (logically and practically). With it, logical and practical issues can be addressed separately. However, this framework does not cover the practical implementation methodologies. Of course, each architect can make models on his or her own
insights. With more than a few architects in place, however, it could become problematic to maintain consistency. Methodologies are helpful for securing such consistency.
