Business Culture: Part 6, An Abstract Model of Culture

This is the sixth and last part in a series of blog posts on Business Culture.  This part incorporates the concepts discussed in earlier parts to define concepts and relationships used to model a culture or a cultural architecture.

In order to clarify the meanings of the concepts, I will present a series of conceptual model segments that build to an overall business culture conceptual model. I offer this model, not as a final solution, but as a useful basis for understanding culture and for further discussion.  This model should be helpful for considering approaches to development, adaptation or alignment of culture with business goals. It is not an architecture of culture, but rather it defines the elements that might be composed into patterns that represent a particular cultural architecture or composed to represent a business culture with or without awareness of architecture.

Figure 1, Collaboration activities

Figure 1, shows the basic elements of collaboration.  Participants fill roles to perform activities.  The participants provide capabilities that enable performance of the activities.  A capability is the ability to perform a particular kind of work that may include knowledge, skills, tools and resources.  A role may be associated with multiple activities, and each activity may require that the same participant have different capabilities.

Figure 2, Practices and related collaborations

Figure 2 extends the basic elements to identify business practices and recognize relationships with other collaborations.  Business practices are commonly occurring patterns of activities and participant roles.  These patterns enable the collaboration to quickly respond to a situation without a lot of analysis and discussion because they do what has worked before.  Where the situation is a bit different, a business practice may be used as the basis for tailoring the activities to the new situation.  Business practices may not be documented but are understood by the participants.  As circumstances change, old practices may be adapted or abandoned.  Business practices are “the way we do things.”

A role and thus the activities it performs in a collaboration may be filled by another collaboration.  This occurs when the primary collaboration requires skills or resources that it does not have, or the engaged collaboration manages shared resources for economies of scale.  Delegation to such a collaboration occurs in each activity of the same role.  Each activity defines the specific objectives/requirements to be achieved by the engaged collaboration.

Participants in the primary collaboration may also participate in other collaborations.  An engineer may participate in a design review or a professional society.  The interests of participants may be affected by values of other collaborations such as technical guidelines, ethical standards or ideals.  This can influence the participant’s performance in the primary collaboration.   

Figure 3, Participant Motivation

Figure 3 extends the model to consider motivation.  Participant interests are aspirations and concerns that may inspire the participant to take (or oppose) some action.  Participants have interests that provide motivation to engage in collaboration activities.  In order to engage a participant, some of the participant interests must align with goals, objectives or values of the collaboration.  In addition, the relevant interests of different participants must not be in conflict. 

For example, if representatives of multiple software companies come together to develop an industry standard, each of them has an interest in minimizing the adverse impact of the standard on their product(s).  The collaboration will only be successful if either they can reconcile their different interests in a consensus solution, or they individually recognize that they must participate to mitigate and plan for the consequences to their products in order to compete in an emerging market. 

The synergy of a collaboration may also be affected by the similarity of interests of individuals that go beyond their interests in the goals and incentives of the collaboration, and extend their relationships to a social context—personal relationships.  The social context may improve cooperation, but it may also increase resistance to change.  This reconciliation of interests is part of the formation and evolution of culture.

If a role is filled by another collaboration, the interests of that collaboration are reflected in its own goals and objectives (discussed later). 

Participants  may also have interests that are not relevant, or interests that conflict with the collaboration goals or activities.  A collaboration may include incentives that leverage relevant participant interests to enhance motivation.  Typically, the primary business incentive is financial compensation.  Without incentives, the participant may not be motivated to contribute, although some interests may be strong enough to provide motivation without incentives.

Motivation is a net effect of multiple interests and incentives. Incentives can offset the effects of conflicting interests.  For example, a participant may have an interest in family activities, but will forego some family activities if paid overtime or offered a bonus. 

Figure 4, Work products and values

Figure 4 extends the model with work products and values.  Some work products may be external inputs to the collaboration.  Many of the work products may be used internal to the collaboration as inputs to other activities.  Some of the work products become output products of the collaboration.

Values are properties of work products that affect the desirability of the work product or the activitiy that produces it.  The cost, timeliness and quality of a work product are included as values.  Values may also be negative, depending on the recipient’s perspective.  So the creation of pollution or toxic waste may be of concern to participants as well as to others outside the collaboration.  External incentives, such as laws and regulations, may be created to mitigate the environmental impact.  The collaboration may also have social or economic impacts that are of interest to participants and affect their motivation.  In some collaborations, these are the primary sources of motivation.

Consequently, values reinforce some motivations, and fulfill the intent of some incentives.  A value achieved may fulfill an incentive to become the basis for some benefit such as a bonus or recognition of achievement.  Of course some values may have negative effects on motivation and incentives.

Figure 5, Goals and Objectives

Figure 5 Adds Collaboration goals and objectives.  Goals are general aspirations for the effects of the collaboration over time.  Objectives are specific, measurable accomplishments.  Goals are the basis for the participants to form or join the collaboration.  Objectives are specific to particular undertakings and may be different for different undertakings, but not inconsistent with support for the goals.  Some objectives are internal to adapt or improve the collaboration capabilities.

For example, if the collaboration provides services, the goals would characterize the general purpose and capabilities of the collaboration.  Objectives would define the results to be provided in response to a particular service request.  Consequently, the objectives must be satisfied by values achieved in response to that particular service request.

Incentives are designed to promote the goals and objectives of the collaboration.  Consequently, some incentives may be designed for long-term effects, and others may be designed to affect more specific results of a series of actions by the collaboration.

Relationship to VDML

This culture model aligns with some elements of VDML (Value Delivery Modeling Language).   VDML is a modeling language (a metamodel) under development at OMG for representation of enterprise architecture and business design.  See Outside-In Business Architecture with VDML and earlier posts about VDML on this blog.  The core structure of a VDML model is a network of collaborations, roles and capabilities that contribute to the success of an enterprise.  The modeling elements include collaborations, roles, activities, capabilities, methods, deliverables, flows, values and resources to specify and support analysis of the operation of an enterprise.  Some of these concepts correspond to concepts in the culture model discussed above.  Concepts of the culture model could extend the VDML metamodel to represent the impact of culture and incentives, as well as personal interests, on the operation of an enterprise. 

A final version of the VDML specification is expected to be submitted to the OMG in November, 2012.

Summary

The culture model, above, aligns with the collaborations, the roles, the capabilities, the activities and the value delivery of VDML, including the intangibles of VNA (Value Network Analysis).  It adds objectives, individual interests, incentives and motivation that affect how well and efficiently the work gets done, as well as the feedback that leads to further refinement.  Thus we can see how culture fits into a business model and how it affects the delivery of value.

This model does not define a cultural architecture, nor does VDML define a business architecture, but the elements provide the basis for describing architectures.  An architecture can be expressed as particular patterns of elements and relationships between elements.  By analogy, houses are built, using generally available construction components.  Patterns of configuration and particular features of those elements express an architecture.

While the foregoing discussions and the culture model described above still require more work, I hope they can provide a basis for a better understanding of culture, additional discussion and development of a computer-based, culture modeling capability.

Business Culture: Part 5, Cultural Inertia

This is the fifth part in a series of blog posts on Business Culture.  In this part I explore cultural inertia—resistance to change.

A culture evolves to a relatively stable, synergistic state.  Each member relies on group acceptance of their role and contributions, on the contributions of others and on the synergy of the group to achieve their shared goals.  The strength of a supportive culture will grow over time as the collaboration endures challenges and experiences successes.  The relationships and expectations will become increasingly intertwined and strengthened.  Participants will perceive the collaboration as making their jobs easier and more successful.  Challenges to “the way we do things” may be perceived as threats to the job security of the participants.

If a new person joins the group, that person will be under pressure to adapt to a compatible role.  The group may also adapt, but the adaptation must be consistent with the shared goals and relevant interests with minimal disruption to other roles.  Over time, the members resolve their differences, invest in refinements and rely on their roles and relationships to drive their individual participation and achieve success as a group. 

However, in a corporate context, this culture and the associated business practices may be sub-optimal, if they do not adapt to changes in the business, the marketplace, the technology or applicable regulations.  Such disharmony also is highly likely when groups are consolidated for reorganization, outsourcing, merger or acquisition.  This will lead to efforts to transform the affected collaborations using formalized business practices.  These prescribed practices may have significant impact on the perceived roles and relationships of the people involved as well as alignment of assignments with the interests, beliefs and capabilities of individuals.  At risk is not only the efficiency and effectiveness of the organization, but the loyalty and commitment of employees that go beyond just getting the job done.

Changing culture includes not only organization structure, but setting goals, objectives and incentives to address requirements and to align with the interests of participants.  In some cases, incentives are not enough, and interests can only be aligned by replacing people.

Unfortunately, cultural inertia also goes beyond the scope of a specific organization to include relationships with people in other organization units, suppliers and customers including informal collaborations where intangible values are exchanged.  Disruption of a culture affects not only the specific organization, but collaborations involving some of the participants in related cultures.  These may be based on friendships, professional associations, past work groups, or other interactions both formal and informal. Changing an organizational culture affects not only that organization, but potentially many other organizations in invisible ways.  Every culture is part of a larger ecosystem of related cultures.

Business Culture: Part 4, the Corporate Cultural Network

This is the fourth part in a series of blog posts on Business Culture.  While we hear about corporate culture, a corporation, or any large organization consists of a network of related cultures.  VDML (Value Delivery Modeling language) under development at OMG, supports modeling of the network of collaborations, but does not address culture.

A corporation—or other agency or institution— is a potentially very large group of people, collaborating for a shared purpose. The corporation will have a broad culture derived from the corporate products, image, policies and relationships, but the corporation will have a complex network of more specific cultures of the many collaborations by which people do the work—both formal and informal collaborations.  The shared interests and beliefs, including relationships with customers, business partners and employees, along with concerns about the environmental, social and economic impact of the corporation, are elements of the umbrella culture that will affect the success of the corporation and provide a broad context for the more specific cultures of subordinate organizations. 

In an organization hierarchy, the goals of each collaboration will be defined by the organizational context. VDML defines an organization as a network of collaborations where certain, formal collaborations form the organizational hierarchy.  Different business functional groups will develop different cultures that, hopefully, complement the corporate culture.  Accountants will have a culture, engineers will have a culture, sales people will have culture, field services people will have a culture, and so on.  Furthermore, individual work groups will establish their own sub-cultures.  Other collaborations may cross traditional organizational boundaries and include informal relationships that may extend outside the organizational entity, including customers, suppliers and professional associations.  Success of the enterprise depends on success of the network of collaborations.

Corporate goals and incentives will be propagated down the corporate hierarchy and to other supporting collaborations.  The goals and incentives will be recursively translated to more specific goals and incentives of the collaborations where specific work is done.  The corporate hierarchy (typically) assembles people in subordinate organizations based on specific goals and required capabilities.  These goals are not culture.  Culture is the interests, beliefs, roles and relationships, mostly informal, that influence how these goals and associated operating objectives are addressed. 

The board of directors will have a culture, and the executive team will have a culture.  These have more to do with corporate strategy, governance and how they manage the business than how the operational work is accomplished.  The culture of the executive team will have the greatest impact on the rest of the enterprise due to their influence through the chain of command and control of incentives.  For success, the goals and incentives for each subordinate collaboration must be compatible with the culture of each parent collaboration.  Corporate policies and goals should also foster formation of informal collaborations and associated sub-cultures that cross formal organizational boundaries to enhance overall operation of the business.

From an enterprise perspective, employees are motivated primarily by the employment relationship and associated incentives.  Contributions are determined by required objectives, individual competencies and roles within the collaboration.  The commitment of the individual to success of a collaboration will depend on the goals, objectives and incentives of the collaboration and their compatibility with the individual’s interests and incentives that may be influenced by his or her participation in other collaborations, both formal and informal.  However, employees may also be motivated by their interests in the corporate products or the social, economic, environmental or political impact of the corporation.

Business Culture: Part 3, Evolution of Culture

This is the third part in a series of six blog posts on Business Culture.  Cultures are rarely designed, but emerge from sustained human relationships.  This part explores the evolution of culture as a product of collaboration with flexible roles and shared goals.  VDML (value Delivery Modeling Language) under development at OMG, provides for modeling the formal context and informal collaborations of an enterprise, but does not include culture that drives participation and supports agility.

When people come together to collaborate, they have a shared purpose, but they do not have a shared culture that is aligned with that shared purpose.  They have personal interests, beliefs, capabilities and experiences along with personal relationships from other cultures and activities in their lives.  The personal interests of participants must be compatible with respect to the goals, objectives and methods of the collaboration, and they will be more comfortable with other participants who have similar interests outside those that are pertinent to the collaboration. 

Note that under my definition of collaboration, I include citizens of a country, professional associations and members of a religion as well as corporations, departments, committees, task forces and personal relationships.  Any collaboration can develop a culture.

If given the opportunity, individuals that join a collaboration with a compatible culture will look for ways they can contribute to the shared purpose in a way that is consistent with their personal interests and beliefs, and where they can best use their capabilities, experiences and personal relationships.  They will evolve their individual roles by working with others and developing consensus on how they and others communicate and contribute.  Their roles will be influenced by successes of the group, reinforcement they receive for their individual contributions, and satisfaction of their personal interests.

Patterns of activities and interactions—business practices—will emerge to address recurring undertakings.  These will become accepted practices of the culture.  Successes will shape the related patterns of work and individual contributions, but these patterns are not cast in stone—they may not be documented.   The roles defined by these practices tend to reflect the individual characteristics of the members who were part of the original collaboration.  Thus when membership changes, the roles and associated practices may need to be adapted, or else the new members may not fit in, and the contributions of departing members may be lost.  The participant interests, beliefs, experiences, capabilities and relationships are less likely to change than the roles and practices.

As collaboration continues, the group will encounter different situations and adapt to improve their effectiveness.  This will drive adaptations of roles, activities and contributions, but it will also influence interests, beliefs and individual commitment.  Some members may increase their commitment and loyalty while others may lose interest and become less committed or leave.  The departure of less committed individuals strengthens the culture.  The resulting synergy is the real strength of culture. 

Culture supports and adopts certain business practices but it provides a complementary source of resilience and flexibility that transcends any given practice. A business practice can be formalized as a business process, but the rigidity of a business process may undermine the ability of the group to respond to exceptions or changes of participants.  A formal business process may also limit the roles and expectations of participants to the lowest common denominator—failing to utilize the unique talents and interests of individuals.

For example, a production line engages a number of individuals in well-defined roles.  Their behavior and relationships are tightly prescribed.  Culture has little effect on what work is done and how it is done.  However, the culture of the production worker community may affect absenteeism, grievances, responses to changes in production rates, effort to reduce defects or support for operational improvements.  The production workers have shared interests and expectations and probably have practices for dealing with these issues.  Culture clearly can be a blessing or a curse.

As another example, information systems development requires much more judgment, individual initiative and collaboration.  An application development team may be assembled for a particular project with little common experience.  The team will go through a period of adjustment for getting to know each other and their respective roles and capabilities.  A team that works together harmoniously for an extended period of time will evolve its own culture that will enable its members to organize a response to a problem or new situation with minimal discussion.  Each of them knows what to expect from the others—including their strengths and weaknesses. They can be highly efficient and fulfilled by their work.  The experienced team may be highly effective in dealing with a variety of circumstances and adapting to new challenges.  They will develop business practices that are more like Lego blocks, to be assembled in different patterns to address particular circumstances.

If directed to use a prescribed methodology, an established team could become less effective than a newly formed one.  They will be disoriented by a methodology if it appears to conflict with their cultural roles, their relationships with others, their personal interests, their successful past experiences or their “Lego blocks.” 

On the surface, culture for a particular collaboration may be evidenced by accepted business practices, or “the way we do things,” but culture is much more than a collection of practices.  Culture includes “who we are, what we do, and why we do it,” both individually and collectively.

Business Culture: Part 2, Examples of Cultural Challenges

This is the second part in a series of six blog posts on Business Culture.  My perspectives on culture are shaped by many years of experience in a variety of situations.  In the following paragraphs, I will use some of these experiences to illustrate some cultural challenges.

EDS Outsourcing and Application Delivery

In my many years with EDS, I observed the consequences of many reorganizations, mergers and acquisitions.  EDS (and now HP Enterprise Services) is in the business of outsourcing information systems activities—the information systems activities of a client are acquired by HPES.  Every new account involves challenges of reconciliation of cultures.  Data processing operations and application maintenance activities tend to be prescribed tasks with much of the knowledge work performed within the scope of individual tasks.  Application development work, however, is non-repetitive and requires much more collaboration and knowledge sharing.  Thus it is more affected by culture. 

As an EDS Fellow, I had an ongoing interest and participated in a study of the EDS application delivery business model to identify opportunities to improve quality and productivity and thus become more competitive.  Project over-runs, under-utilization of individual capabilities, non-competitive pricing, slow response to advances in technology, and employee dissatisfaction were commonplace.  Each new application development account or major project would be staffed with people drawn from other accounts or pools of developers along with transitioned client employees.  The challenge from my perspective was to develop an umbrella culture and individual team cultures that inspire excellence of timeliness, quality, productivity and personal satisfaction.  Teams for substantial projects were assembled for each new project so each team required formation of new, informal roles and relationships.  This was often addressed with some “team building exercises.”

A key observation was that incentives did not align with goals.  Individuals were at risk of termination when completing an assignment if they didn’t find another assignment on another account; consequently, long assignments were preferred, regardless of the ability or interest of the individual to perform the various tasks involved.  Commitments to solutions and costs were developed by sales teams without involvement of those responsible for delivery of the results.  Responsiveness to customer requests was more rewarding to individuals than change control and timely delivery.  Standard practices were implemented to reduce variability and improve accountability, but these practices failed to utilize the full potential of people.  There was little appreciation of the importance of culture.

Volunteer organization

For many years, I have been president of a volunteer, support, education and advocacy group.  Active members contribute their time to activities for which they are capable and that they believe contribute value to the overall shared, social purpose of the organization.  Except for the necessary, formal roles of a non-profit corporation, the operation of the organization is primarily based on culture.  People become engaged because they want to contribute, and they take responsibility for activities that they believe are important.  They collaborate with others on particular initiatives of shared interest. 

One of my challenges is to engage new participants to sustain and expand our efforts.  In working to engage a new participant, I try to understand their interests and capabilities, and emphasize the potential synergy and personal satisfaction of working together toward the goals of the group.

Another challenge is to maintain a non-partisan political standing.  Advocacy can involve influencing government action.  However, status as a charitable organization and, particularly, the diversity of our membership require that we not take partisan positions.  We must avoid initiatives or approaches that may be in conflict with the political interests of some of our members.

Personnel motivation model

In 2004 I submitted a patent application for a Personnel Motivation Model.  This patent application describes a computer-based model for considering the effects of incentives, personal relationships and personal interests on motivation of individuals to contribute to goals.  This grew out of my analysis of the lack of competitiveness of the EDS application development business, discussed above. 

There are many interests, relationships, and incentives that vary among individuals and teams.  The motivation model is intended to help manage the complexity of the many elements and relationships in order to define appropriate incentives and motivate individuals to strive for shared goals.  The patent is still pending.

Book

In my last book, Building the Agile Enterprise with SOA, BPM and MBM, I focused on business modeling, highlighting the modeling of extended value chains to define shared capabilities and integrate them as shared business services.  The emphasis was on design of the enterprise for agility, accountability and economy of operations.  Enterprise agility is enhanced by empowerment and individual initiatives supported by informal roles and relationships.  I did not identify this as culture in the book, but culture is key to achieving excellence of agility, accountability and productivity.  The book  led to the initiation of current work on the Value Delivery Modeling Language (VDML) as an Object Management Group (OMG) industry standard. 

Value Network Analysis

Verna Allee, another contributor to VDML, brought in Value Network Analysis (VNA).  VNA focuses on the exchange of values between participants at all levels from exchanges between business partners to technicians solving product or service problems.  Verna emphasizes the exchange of “intangibles,” those deliverables that are not part of the formal business processes but are essential to effective business operations.  I see many of these as cultural elements—extended roles and responsibilities that have emerged to solve ad hoc and less predictable problems, improve performance and achieve better results.

A challenge for users of VDML is to understand beyond the operational need for these intangibles: how are these informal relationships formed and how are people motivated to establish and participant in these exchanges.  VDML users must also recognize the difference between intangible exchanges that are well established and persistent, and those that are ad hoc, flexible, cultural practices.

Business Culture: Part 1, Why Is Culture Important

This is the first in a Six-Part series of posts about business culture:

·         Part 1, Why Is Culture Important

·         Part 2, Examples of Cultural Challenges

·         Part 3, Evolution of Culture

·         Part 4, The Corporate Cultural Network

·         Part 5, Cultural Inertia

·         Part 6, An Abstract Model of Culture

Introduction

I define culture as a collection of intangible, informal forces and ideas that influence how and why people collaborate for a shared purpose.  It includes the interests, beliefs, experiences and patterns of work that extend beyond any formally defined roles and responsibilities of the participants.  A culture tends to resist change, but at the same time it can continually evolve to address changes of membership and environment.  Culture can make the difference between success or failure of a collaboration, and thus can make the difference between success and failure of an enterprise.

The LinkedIn Business Architecture Community recently had a lengthy discussion under the topic “Architecture of Business Culture.”  Much of the focus was about how to align culture with corporate goals. Of particular interest is how to resolve culture conflicts such as those that may occur in business reorganizations, consolidations, alliances, mergers and acquisitions.  Differences in business practices in these cases are potential sources of culture conflict. As the Business Architecture Community discussion evolved to a focus on modeling business culture, I was inspired to explore modeling culture in more depth, leveraging some of my past work (discussed in Part 2).

Business Impact of Culture

Culture extends a formal business model with informal relationships and contributions.  The effects of culture are significant, but understanding of culture tends to be intuitive.  When describing culture, the focus is usually on the visible behaviors and artifacts rather than the underlying forces that drive the behavior of individuals and the group.

Culture has become increasingly important to business success.  The traditional business organization has been driven, top-down, with employees expected to focus on their prescribed tasks.  Over time, rote tasks have become automated and the  workforce has become a workforce of knowledge workers who can deal more effectively with non-routine challenges.  Knowledge work deals with the unpredictable, and knowledge workers must be relied upon to recognize and solve problems based on their own skills and insights rather than formally defined roles and processes.  The personal interests of knowledge workers influence their initiative and creativity in their work.  In addition, most knowledge workers rely on informal relationships and support from other knowledge workers, both inside and outside their formal group, to be most effective.  These interests and informal relationships are key elements of culture.

Not only has the nature of work changed, but reorganizations, consolidations, outsourcing, alliances, mergers and acquisitions have become frequent business events.  These require reconciliations of cultures that can ripple through an organization.  In addition to disrupting the way affected groups do things, these changes may result in conflicts between individual interests and the interests of others, as well as the goals of their organization, the incentive system or the broader corporate culture.  Compatibility of organizations is much more than the similarities of the businesses; it includes compatibility of the interests of individuals with organizational goals and the interests of co-workers as well as the willingness of individuals or their cultures to adapt to new business patterns and technologies.

Globalization of business is another factor driving concerns about culture.  In addition to obvious differences between people in different countries, people have different attitudes, interpersonal relationships and expectations regarding the way work gets done.  If done poorly, mixing people of different cultures may cause confusion and conflict along with degraded productivity and quality of work.  If done well, diversity can be an advantage.

Finally, businesses must be prepared to adapt to changes in technology and market opportunities.  An effective business culture can streamline the work of transformation if existing relationships and expectations are properly engaged.  There is less need to develop detailed plans if everybody knows what is expected of them and what they can expect from others.  However, business changes may be difficult or impossible if they challenge culture.

Purpose of this series

The purpose of this series is to explore various aspects of culture, the conceptual elements of culture and their relationships.  These discussions are intended to develop a shared understanding of business culture as a basis for a proposed reference model discussed in Part 6.  Such a model will enable us to better work with the mechanisms that develop and evolve culture and potentially shape or inspire a culture to achieve exceptional goals.  This model represents a potential extension of VDML (Value Delivery Modeling Language), a business modeling language under development at OMG (Object Management Group).  See Outside-In Business Architecture with VDML and earlier posts about VDML on this blog.

Outside-In Business Architecture with VDML

In a 2007 blog, “Unanswered Questions from Supernova 2007,” John Hagel observed that IT architectures evolved from the inside-out as the scope of automation and integration expanded over time, and he forecast that attention will shift to outside-in development that starts with an extended enterprise perspective.  Richard Veryard elaborated on the outside-in perspective in his blog post, “Outside-In Architecture,” later that year.  The topic was recently raised in the LinkedIn Business Architecture Community .  Although we have not described it as such, I believe the development of VDML (Value Delivery Modeling Language) at the OMG (Object Management Group) will provide the perspective and the modeling support for this shift in perspective.

Information technology has enabled new approaches to business architecture.  It has changed relationships with business partners and customers, enabled business operations to be globally distributed, and reduced the time and cost of business operations.  However, optimal business design can no longer be achieved by simply automating the existing business design—an inside-out approach.  An optimal architecture requires a design that takes advantage of the capabilities of modern information technology but is driven by an outside-in perspective.  The design of the business must be driven by the values and relationships of customers and other participants in the business ecosystem as well as optimization of business operations to achieve competitive cost, quality and timeliness objectives.  This change in perspective is reflected in my earlier blog, “Rethinking Business for a Changing World.”

VDML is designed as a business design language for business people.  While it will provide a business context for the application of information technology, the focus is on the operation of the business, not the application of IT.  It is based on a number of existing modeling techniques, identified in the diagram, below, and it brings these viewpoints together to provide an integrated business modeling capability.

The solid boxes represent viewpoints that are currently addressed in the draft specification, and the dashed boxes represent viewpoints that are still under consideration.  The different viewpoints are supported by a shared computational model.  This shared model represents a somewhat expanded approach from that described in my earlier VDML blog posts that were driven, primarily, by a value stream perspective.  It is expected that this more robust model will support a wide range of analysis and design so that an enterprise model can be developed, maintained and evolved as the enterprise continues to adapt to changing business requirements.

Core Concepts

In the following paragraphs I will outline the core concepts of VDML that support this integrated business modeling.

Values and value propositions

A value is a characteristic of a product or service that is desired by a recipient.  Values include cost, the utility of a product or service, producer goodwill, product reliability, prestige and timeliness of delivery.  In an exchange involving two or more business partners, each will provide and receive values and each must experience a net gain for the exchange to be viable.

Values of a product or service are contributed by various activities that participate in the delivery of the product or service as well as other enterprise activities such as product design and marketing.  VDML models the contributions of activities to the end product or service such that the end values can be traced back to contributing activities.  This provides insights on where improvements will have the greatest impact on the value of a product or service to the customer.

The value contribution metrics are aggregated in a value proposition.  The value proposition transforms the more objective contribution metrics to subjective measures of expected recipient satisfaction.  These can then be combined in a weighted average to provide an overall expected level of satisfaction.  Different value propositions may be defined for different market segments.  The same concept can be applied to value propositions for other stakeholders.

Collaborations, organizations, activities and roles

A collaboration is people and/or organizations working together for some shared purpose.  Participants in a collaboration fill roles that define their involvement in activities of the collaboration.  This is similar to activities in a BPMN business process that are performed by participants in roles.  In VDML, a role may also be performed by a collaboration—people and/or organizations working together to achieve the desired result of one or more activities.  This provides for complex collaborations to be composed of collaborations that are in turn composed of more specialized collaborations.

A traditional management hierarchy may be viewed as a hierarchy of collaborations—a company, its divisions, departments, groups, etc.  These are persistent collaborations involving specific persons and persistent organizational relationships.  In addition, persons in the same or different organizations may work together from time to time in task forces, project teams, committees, as well as business processes.  These are also collaborations—people working together to achieve some shared purpose. 

In collaborations, participants perform activities and exchange business items as deliverables.  The flow of deliverables between activities forms an activity network.  The capture of value contributions and aggregation of values in a value proposition provide the basis for value stream analysis.  A value stream identifies the flow of materials from and to activities that contribute value to the end product or service.   Value stream analysis can help expose and clarify the opportunities for improvement based on their impact on value proposition(s).

An abstraction of this activity network can be viewed simply as roles exchanging values.  This is a useful abstraction for understanding the interactions of business entities in an ecosystem as well as specific work being performed by people within a company or agency.  This is the perspective of Value Network Analysis (VNA).  VNA focuses on the exchange of values that may involve some of the same participants in roles of multiple, interacting collaborations.

Capabilities and resources

A capability is the ability of a person or organization to perform a particular type of work.  The capability may include skilled people, materials, tools, machines, intellectual property and facilities.  A group of people or organizations working together to deliver a capability is another form of collaboration that we are calling a capability method.  A capability method is a template for performing the work required by a capability.  Instances of a capability method describe the collaboration of specific persons and organizations performing the capability.  Instances would occur in the operation of the enterprise, but a VDML model does not get into the specific, day-to-day assignments of individuals to capability methods.

As described above, a capability method (collaboration) may engage other capability methods (collaborations) to deliver the desired capability.  This aligns with the concepts of a service oriented architecture where a capability method defines a service that may engage other services to achieve its purpose.  This relationship is described in my book, Building the Agile Enterprise with SOA,BPM and MBM.  A “high-level” capability method may specify the activities needed to deliver an end product or service using more specialized capability methods.  This supports the services analysis viewpoint.

The purpose of each capability method is described by a capability definition. A capability definition also may be referenced by similar capabilities identified elsewhere in the enterprise.  Capability definitions are catalogued in a taxonomy.  Each capability definition describes the nature of the work and the business items as resources that are necessary to perform that type of work including people, machines, materials consumed, etc.  Note that the same business items are viewed as deliverables when they flow between activities (or VNA roles).

In the analysis of an existing enterprise, the production of a product or service requires specific capabilities to perform the activities.  Similar capabilities may be used in different lines of business.  The type of work and resources required, together, provide a basis for identification of capabilities that may be candidates for consolidation or outsourcing.  The capability taxonomy in conjunction with the analysis of value contributions can be viewed as a capability heat map used in capability analysis to identify those capabilities that require particular attention for improvement.

The more specialized capabilities are where the work of the enterprise gets done.  If properly defined, these capabilities can serve the needs of multiple lines of business and become the leveraged building-blocks for new lines of business.

Resources and stores

Capabilities require resources as inputs to activities.  Some resources such as facilities and intellectual property are static, but others are consumed or are used and reused.  The activity network of a collaboration defines the exchange of deliverables where activities produce deliverables that are used by other activities.  The business items needed to perform an activity are viewed as resources; these include business items received as deliverables. 

A resource that is consumed or reused is either received from another activity or provided by a store.  A store is a logical container of a type of business item that is accumulated in anticipation of its use.  A VDML model may represent the flow of deliverables into a store and the flow out of the store as the resource is required by an activity.

An abstraction of a VDML activity network supports an REA perspective.  In REA, activities are viewed as economic events that receive resources and produce resources with added economic value, and economic agents exchange resources for economic gain.  REA may represent a full cycle, for example, a resource is produced, stored, and consumed, the product is sold in exchange for money, some of the money, as a resource, enables production of more resource to produce more product.

Resources and stores provide the potential for VDML to support discrete event simulation or system dynamics modeling for analysis of the flow of resources and the creation and exchange of value over time.  These dynamic models are beyond the scope of the current specification, but are being considered in the current design as a future extension.

Outside-In Design

The above brief description of core VDML concepts should provide a general understanding of the focus and scope of VDML.  I believe VDML will be an important tool for achieving outside-in design.  I see this at two levels: (1) design of business operations as a basis for design and integration of supporting IT systems, and (2) design of the enterprise in the context of the extended enterprise to achieve value for customers and other stakeholders.

VDML is intended to provide a business perspective and support executive-level understanding of how the business works.  The model provides accountability for business operations in the context of value delivery.  This provides insight on the value delivery implications of potential opportunities both for development of improvements and for adaptation of the business as the marketplace and technology continue to evolve.

As with financial reporting, a VDML model supports a high-level perspective, but also supports a drill-down into particular aspects of the business operation to identify sources of concerns and support analysis of potential improvements.

The analysis of capabilities supports potential consolidation or outsourcing to improve operating efficiencies and value delivery.  Links to the organization structure provide accountability as well as better understanding of organizational dynamics, alignment of goals and incentives, and the impact of organizational changes on the operation of the business.

Finally, the structure and relationships of capabilities provides a framework for the design of business processes and services as well as automation that achieves business agility and efficiency.

Additional Work

Development of the VDML specification is still in process.  The NEFFICS project brought several industry experts to the VDML development effort.  This has provided deeper understanding of relevant, existing modeling techniques.  Additional work is required to refine the details of the VDML metamodel and to reconcile additional modeling techniques.

At the beginning of this article, I depicted VDML as a shared model supporting existing modeling techniques.  Most of these have been addressed, but further work is required to reconcile the three viewpoints in dashed boxes, discussed briefly, below.

Business models

A business model is an abstraction of the business that describes how the business is expected to be successful from the standpoint of an investor or other external stakeholder.   Examples of business models have been developed by Peter Lindgren and Alex Osterwalder.  The elements of a business model should align with an abstract view of aspects of a VDML model.

e3Value

e3Value supports analysis of Internet value constellations in which multiple parties participate in value exchanges.  To be viable, each party must realize a net gain.  This perspective should align with VDML collaborations of business entities. 

Risk analysis

Risk analysis, generally, involves consideration of the consequences of possible disruptions to the business.  Henk de Man of Cordys and I were involved several years ago in consideration of models to support risk analysis.  We believe the VDML network of activities and flow-dependencies between them provides a basis for considering the consequences of disruptions in capabilities or availability of resources—an important aspect of risk analysis.

Future Evolution

A VDML model will support a variety of design and analysis techniques.  An investment in development of a VDML model should provide a basis for on-going analysis and design of an enterprise, and the standard will enable an existing model to be imported to alternative tools that may support viewpoints and interactive features that are more suitable to particular initiatives.

We also expect the VDML standard to support the continued evolution of business modeling, design and analysis techniques.  The standard and the models developed using it will reduce barriers to entry of new approaches and associated modeling tools.