Mary E. Johnson

Enterprise Integration Frameworks Program Coordinator

Automation & Robotics Research Institute

Laura M. Meade

Graduate Research Associate

Automation & Robotics Research Institute

K. J. (Jamie) Rogers, Ph.D.

Assistant Professor

Industrial & Manufacturing Systems Engineering Department

The University of Texas at Arlington

Rapid, unanticipated, and often dramatic changes characterize the current business and technical environment. Individual processes may be better, faster, and cheaper than ever before, but the enterprise as a whole may not see all the expected benefits from these islands of excellence. Continued competitiveness depends upon the ability of enterprise engineers to holistically view and design the enterprise to achieve its goals while realizing the complexity of system interaction with the business, technical, and social environment in which the enterprise exists. The impact of enterprise engineering should be assessed in terms of enterprise processes and strategies. This paper presents a framework for enterprise engineering, categories of enterprise strategies, and a methodology for assessing the impact of these strategies on the enterprise.

Within an enterprise, there are usually a number of processes that can be considered islands of excellence. Looked upon as benchmarks, these processes produce better, faster, and cheaper than competitive processes. However, the enterprise as a whole may not be realizing all the expected benefits from these individually excellent processes. In this paper, the enterprise is considered to be a vision-guided system of processes, where system is defined as:

These islands of excellence need to be networked into a vision-oriented system of excellence for the enterprise to realize its full competitive potential. Therefore, enterprise engineers must holistically view and design the enterprise to achieve its goals. Enterprise engineers do this under the complex system of constraints within the business, technical, and social environment. The enterprise is vision-guided with goals that support the vision. As a complex living system, the enterprise must pursue both self-instituted goals and externally directed goals, or be deprived of needed inputs for survival (Barnett et al, 1995). Strategies determine the ways an enterprise achieves its goals.

This paper presents a framework for enterprise engineering including categories of enterprise strategies. In this framework, enterprise engineering is viewed as the process of managing change from the strategic perspectives of corporate culture, enterprise processes, and technology. Change should be purposeful and guided by enterprise vision and strategies. Understanding the potential impact of change can be useful for the successful management of change. Knowledge of the potential impact to the enterprise requires prior assessment.

A methodology for assessing impact on the enterprise is presented. The methodology is based on the generic activity-based business case methodology developed by the Automation & Robotics Research Institute for the National Center for Manufacturing Sciences (NCMS, 1994). In addition to being useful for justification of enterprise technology, this methodology provides concepts which aid the deployment of strategies throughout the enterprise (Barnett et al, 1995). Five basic activities comprise the methodology: Identify System Impact, Identify Transition Impact, Estimate Costs and Benefits, Perform Decision Analysis, and Audit Decision. An example of how this methodology aids the assessment of enterprise engineering impact is discussed.

Enterprise engineering may be viewed as the process of designing, analyzing, and implementing enterprise-wide change. Enterprise engineers desire to transform the enterprise in a structured, logical way and realize that this transformation may require both radical and continuous changes. A framework is needed to organize the understanding of enterprise engineering.

The enterprise engineering framework presented in Figure 1 includes vision and strategic planning, an enterprise architecture, and a planned transformation path (Johnson et al, 1995). In this framework, enterprise engineering is viewed as the process of managing change from the strategic perspectives of corporate culture, enterprise processes, and technology (ARRI, 1991), and appears consistent with the views of the Society for Enterprise Engineering and that of the Agility Forum (Agility Forum, 1994a). The strategy-driven change is directed at processes within the enterprise architecture. The path for enterprise engineering is based upon requirements derived from corporate strategies to ensure that corporate objectives and strategies are fully developed, understood, and deployed. Metrics are used as a means to measure progress towards enterprise-wide strategies.

In Figure 1, the framework consists of a system of templates describing the state of processes during planned change in pursuit of enterprise vision. The vision is used to develop three sets of strategies required to achieve the vision: cultural change, process improvement, and technology. All three of which must be integrated into a single plan supporting the enterprise vision. The engineered enterprise transforms in a structured, logical way. This transformation may require both radical and continuous changes. Enterprise transformation is similar to a series of snapshots describing the states of the enterprise processes. This series of snapshots is represented by the layered series of templates seen in the Figure 1. The definition of "states" is incomplete. However, several scenarios or viewpoints may be possible. One possible scenario is to develop templates describing a manufacturing enterprise in terms of the types of manufacturing technology used. For example, a manufacturing enterprise may use a combination of craftsmen, standardization, mass production, lean, or agile technologies in processes. Another possibility is to consider the strategies driving how the enterprise is designed and managed. This approach would take into consideration the evolution of strategies from cost to market variability to product variability to time based competition to agile manufacturing. A third scenario is to consider the transitioning of inter-organizational relationships from a commodity to a partnership to an alliance to a virtual enterprise (Agility Forum, 1994b). The manufacturing technology used will naturally be related to the strategy chosen. In any of these scenarios, it can be seen that processes in all three categories shown in Figure 1 will be performed in particular, well defined ways. The templates describe the processes for each state and include relevant benchmarks and metrics.

Figure 1. Enterprise Engineering Framework Concept

Vision and strategies are used to develop metrics that measure the progress shown by the Transformation Path arrow in Figure 1. The transformation must be governed by an overall vision and three component strategies: Cultural Change, Process Improvement, and Technology (ARRI, 1991). The framework will be used to describe the strategies at each of the states. It should be pointed out that an enterprise may not need to be at "pure" states. For example, a manufacturer may perform its customer service processes in a manner which could be categorized as agile while practicing lean or even mass production manufacturing processes (Johnson et al, 1995).

The development of the enterprise engineering framework is based upon several assumptions. The primary assumption is that the enterprise is a system that can be analyzed and designed. Second, it is assumed that the enterprise can be described as a system where a collection of activities are arranged into coherent business processes falling into three categories: planning processes, resourcing processes, and product design and production processes. Enterprise processes cooperate to produce desired enterprise results. The third assumption is that an enterprise transformation strategy must have three basic elements: a cultural change element, a process improvement or redesign element, and a technology utilization element. The framework builds upon the Automation & Robotics Research Institute's (ARRI) extensive on-going development work and experience in enterprise analysis, design, and transformation, as well as research currently being accomplished by ARRI’s Agile Aerospace Manufacturing Research Center (AAMRC). Five methodologies and concepts are integrated in the framework: a comprehensive enterprise transformation methodology, an enterprise architecture, the strategic justification tool for enterprise technology, a template based virtual enterprise configuration tool, and a metric development methodology.

The Enterprise Excellence Methodology, developed in IDEF0, is a proven comprehensive enterprise transformation methodology that has been used by ARRI for over four years at more than 20 manufacturing companies (Presley et al, 1993). The Enterprise Excellence Methodology is designed to guide the transformation of small manufacturers to world class. It describes a structured, logical, and flexible method to achieve planned change of an enterprise.

The ARRI enterprise architecture provides a structure for analysis. The architecture identifies and integrates ten typical enterprise processes, divided into three categories (Presley et al, 1995). Category 1 processes transform external constraints into internal constraints that might be expressed as a system of objectives, policies, and procedures. Category 2 processes acquire and prepare resources. Category 3 processes (such as design, marketing, manufacturing, distribution) use resources to produce enterprise results. The architecture aids in the development of an integrated transformation path that considers impacts on enterprise processes.

The strategic justification of enterprise technology (SJET) methodology and tool comprehensively was developed to evaluate the impact of investments in enterprise technology having pervasive, enterprise-wide, and strategic impact. In addition to being useful for evaluating the impact of technology (Sarkis et al, 1995), the SJET provides concepts useful for the deployment of strategies throughout the enterprise. The IDEF0 diagram shown in Figure 2 depicts the high-level SJET methodology (NCMS, 1994).

The template-based virtual enterprise configuration tool will include a set of business process templates and accompanying methodology enabling the rapid configuration of an enterprise. The template work provides a standard approach for describing the characteristics of a process. The prescriptive nature of the template is especially important for deployment purposes.

The metrics development methodology provides a vision-based structure for the creation of metrics. The metric development methodology assists the enterprise in determining appropriate and useful metrics based on the enterprise vision, strategies, and critical success factors (Adams et al, 1995). The use of appropriate metrics is essential in monitoring and controlling progress along the transformation path and for evaluating alternative paths.

Figure 2. IDEF0 Diagram of the Strategic Justification of Enterprise Technologies (SJET) Methodology

While there is great value in defining what strategies and processes look like at the various states, there is a need to define the strategy set to be used in transforming from one state to another and to understand the impact of that strategy set. A number of issues needs to be addressed, including:

• How does a lean manufacturer become an agile virtual enterprise?
• Does one have to step through each state or can a quantum leap (e.g. mass production to lean) be made?
• Are these transformation paths the same or are they different for individual enterprises?
• What is the impact of these transformations?

The assessment of enterprise engineering impact is important to successful transformation. A methodology for the strategic justification of investments in enterprise technology (SJET) has recently been developed by the Automation & Robotics Research Institute for the National Center for Manufacturing Sciences (NCMS, 1994). This methodology is an activity based business case tool to comprehensively evaluate the impact of investments in enterprise technology. SJET provides concepts which aid the deployment of strategies throughout the enterprise. SJET specifically links metrics to strategies. Five basic activities comprise the SJET methodology (shown in Figure 2). The following is a brief overview of the five activities: Identify System Impact, Identify Transition, Estimate Costs and Benefits, Perform Decision Analysis, and Audit Decision. The SJET methodology is iterative. The full methodology contains many detailed steps which are omitted in this paper. An illustrative example showing how this methodology can be used to assess enterprise engineering impact is discussed below.

The objective of the Identify System Impact activity is to identify the enterprise activities and strategies which are impacted by the system, in this example enterprise engineering. It is assumed the enterprise maintains a relevant and coherent vision, a vision-based set of strategies and objectives, and has determined the desire engineer the enterprise. The impact of enterprise engineering is determined by analyzing the relationship between the as-is enterprise and the alternative systems under consideration. Related metrics, assumptions, constraints, and the activity model are documented. Linkage matrices are created to show interaction between specific enterprise activities and the logical and physical components of the system alternative, and between enterprise strategies and the strategic attributes of the system. The resulting set of matrices identify the activities and strategies affected by the system and form the basis of future analysis.

The strategic nature of this impact assessment methodology requires the analysis team to gain an understanding of the strategic direction of the firm. Strategies should fall into at least three categories: cultural, process, and technology.

The Strategic Metric Matrix shown in Figure 3 is created. Enterprise strategies are brought into the Strategic Metric Matrix for linkage to specific metrics. Metrics are beneficial in measuring progress along the transformation path. An enterprise metric set should include metrics that relate directly to strategies, not just financial goals. The emphasis on financial metrics creates hidden barriers to achieving strategic desires (Maisel, 1992). Wisner and Fawcett (1991) stated that in order for US firms to be more competitive, "the role and scope of performance criteria must change and managers must become more adept at using these criteria to link operating decisions to strategic objectives of the firm". Linkage of metrics to strategies is evident in the assertion that metrics should track progress in executing strategies (Nanni et al, 1992).

In addition to financial metrics, quantitative and qualitative metrics need to be identified for use in the justification process. Traditional financial metrics may include net present value (NPV), payback, and return on investment (ROI). Quantitative metrics, such as job turnover rate and customer returns, refer to metrics where numerical estimates can be obtained, but are difficult to put in financial terms. Qualitative metrics, such as employee satisfaction, are used to measure the impacts difficult to measure in either financial or other quantitative terms. These are often expressed using categorical values such as Better/Same/Worse. In the example shown, the strategy of valuing employees as an asset is measured by employee satisfaction. Employee satisfaction will be rated on a scale of Dismal/Poor/Bad/Neutral/Good/Excellent, relating to the 0 to 5 scale shown as the Lower and Upper values in Figure 3.

Figure 3 shows weights assigned to strategies and metrics. Two factors are considered in assigning weights: the relative importance of each strategy to the overall objectives of the enterprise, and the relative ability of each metric to measure the realization of each strategy. These metrics are used to estimate the actual magnitude of impact enterprise engineering will have on various strategies. Weights may assigned using analytical hierarchy programming technique or other multi-attribute decision techniques. Most importantly, weights assigned must reflect the criteria of the decision makers.

Figure 3. Strategic Metric Matrix

The next matrix created is the Strategic Analysis Matrix shown in Figure 4. The primary input is the metrics (financial, quantitative, and qualitative) and their weights from the Strategic Metric Matrix. Columns are added for the utility functions, the estimated and normalized values for metrics, and the Strategic Metric Total. At this stage, only the utility functions and the metrics are filled in. Later, the estimated values, normalized values, and strategic metric total will be input and calculated. This will be discussed in more detail later.

In parallel to the Strategic Analysis Matrix, the Activity-Based Traditional Analysis Matrix (not shown) is created using the enterprise architecture process model. The level of detail of the process model is adjustable depending on the depth of analysis required. Traditional metrics are identified and linked to the enterprise strategies and enterprise processes (activities). Metrics such as inventory cost, time to market for new products, and development time are used. Cost impacts (both positive and negative) are collected for each effected enterprise process using this matrix as a structure. One matrix is created for each time period in the financial analysis. Typically, a period is one year. These cost impacts are used in traditional financial evaluations such as return on investment or net present value.

Identify System Impact is concluded when the four matrices have been created, demonstrating the understanding of how enterprise engineering will affect the enterprise. The following paragraphs show how these matrices are embellished as well as how the analysis is performed using the relevant data acquired.

Figure 4. Strategic Analysis Matrix

Identify Transition Impact is very similar to Identify System Impact. The objective of the Identify Transition Impact activity is to identify the enterprise activities and strategies impacted by the transition plan. Special attention to transition is required because it is usually the most critical and complex of any strategic project. Transition is defined as the planned implementation process required to change the "as-is" to the "to-be". Like the system itself, the transition can impact the process, culture, or technology of an enterprise. Impact is determined by identifying and analyzing the relationship between the "as-is" enterprise and the transition plan. This enterprise integration effort promotes the comprehensive and early consideration of the transition plan. This results in the augmentation of matrices originally created in Identify System Impact to include transition considerations.

The transition to enterprise engineering will have impacts on the enterprise culture, process, and technology. For example, alternative transition plans may affect the enterprise culture in different ways. To minimize potential disruption, consistency of culture is important to the enterprise in the example and is shown as a qualitative metric in Figure 3.

Now that the analysis matrices are formed, the objective of Estimate Cost and Benefits activity is to populate the matrices with the cost and benefit data necessary to perform the analysis. Data may be estimated, generated through data aggregation or segregation, or may already be in a usable form. All data should be analyzed for accuracy and validity prior to inclusion in the analysis. Activity based and other cost data can be used to accurately represent costs and benefits of enterprise engineering. Strategic data may need to be quantified through approaches such as relative importance ranking, ordinal ranking, or some form of multivariate utility modeling or fuzzy techniques. Forecasting approaches may be employed in the absence of complete data. These may include approaches from simple moving averages to advanced econometric techniques. Various effects such as disruption, learning, synergy of systems, inflation, and others could be included in the calculation of estimates. After the data has been acquired, generated, and validated, it must be documented. The estimates should then recorded on the analysis matrices in the estimated value column shown in Figure 4.

The traditional values (costs) are assigned by cost drivers effecting each activity. This assumes that an activity-based management reporting system exists to provide this information, or that the enterprise can estimate these values using other information. These values are aggregated to provide traditional financial measures such as NPV and ROI. These measures are then used in the strategic analysis in the financial metrics columns.

The strategic metrics may be expressed in different units or scales (e.g. dollars, volume, percentages, good/bad). To combine these differing scales, the values of the metrics are "normalized" to a common scale. A utility function is a convenient method for translating values on different scales to a common scale. The example in Figure 4 uses two simplified types of utility functions: "I" indicates a constantly increasing and "D" indicates a constantly decreasing function. A linear scale between points of indifference is used in this simple case. More complex utility functions can be created and used in this methodology. The estimated values of the metrics are converted to a zero (0) to five (5) utility scale, where five is the highest utility. The target values for each metric should be determined by the decision makers, based on the enterprise objectives, strategies, and vision. The creation of these utility functions is extremely important to the validity of the assessment as they reflect the values of the decision makers..

The objective of Perform Decision Analysis is to perform the traditional and strategic analyses based upon the estimated impact. Estimated costs and benefits are organized for analysis. The traditional and strategic approaches are integrated into a comparison matrix for inclusion in the presentation to the decision maker.

Various alternatives can be evaluated and compared. Figure 5 shows the Alternatives Comparison Matrix. The strategic weights and strategic metric totals which are calculated in the Strategic Analysis Matrix are entered into the Alternatives Comparison Matrix. The Weighted Totals for all alternatives will be between 0 and 5. The next step is to make a decision recommendation. The recommendation may be to accept a single alternative relative to a baseline, or a ranking of several alternatives. For example, Alternative 1 totals a Weighted Total (or score) of 4.02 and Alternative 2 totals 3.49. Based on the information provided in the Strategic Analysis Matrix, Alternative 1 received a higher rating than Alternative 2. The methodology suggests what-if and sensitivity analyses be performed to understand the decision model represented by the Strategic Analysis Matrix.

In Figure 5 Alternative 1, enterprise engineering, is considered to be excellent in the areas of production costs and customer involvement. Alternative 2, the remain "as-is" option, is considered to be excellent at consistency of culture. Due to the weights which were placed on the different metrics and the values of the decision makers reflected in the utility functions, Alternative 1 is the preferred choice. Even though Alternative 2 ranks better in some categories, the weights assigned to other metrics result in Alternative 2 being ranked the lowest overall.

Figure 5. Alternatives Metric Matrix

The objective of Audit Decision is to perform an audit of the decision process some time after the decision has been made and has been implemented. The purpose of the audit is to review the impact assessment process for improvement potential. The audit determines whether the parameters and metrics chosen in the assessment process accurately predicted how the system supports the enterprise strategies. The values of the estimates made and the procedures used to arrive at the values are also reviewed. The methodology itself is reviewed to determine what, if any, modifications are required for a specific enterprise in making future alliance decisions.

The impact of enterprise engineering is going to be, by definition, widespread across many organizational boundaries, both internal and external. Traditional methods either do not include strategic analysis or do not integrate strategic and traditional analyses. Traditional methods of assessing impact do not always contain a structured approach. Enterprise engineers must holistically view and design the enterprise to achieve its goals while realizing the complexity of system interaction with the business, technical, and social environment in which the enterprise exists. The impact of enterprise engineering should be assessed in terms of enterprise processes and strategies. This paper presented a framework for enterprise engineering, categories of enterprise strategies, and a methodology for assessing the impact of these strategies on the enterprise.

The framework views the enterprise holistically; as an integrated system of processes guided by an enterprise vision and strategies for cultural change, process improvement, and technology. The framework links together five methodologies and concepts: a comprehensive enterprise transformation methodology, an enterprise architecture, the strategic justification tool for enterprise technology, a template based virtual enterprise configuration tool, and a metric development methodology. The framework is useful for understanding both how to view enterprise engineering and how to assess the impact of enterprise engineering.

The SJET approach facilitates this view by collecting information that is used either implicitly or explicitly in the linkage of the enteprise strategies, the enterprise process model, and metrics. This linkage information is used in the strategic assessment of impact to the enterprise. Consistent with the enterprise engineering framework, the SJET begins with the documentation of enterprise vision, strategies, and objectives along with the assumptions and constraints surrounding the analysis.

Research for this project is funded in part by the State of Texas Advanced Technology Program Grant 003656-036 and by the National Science Foundation sponsored Agile Aerospace Manufacturing Research Center. The original development of SJET was sponsored by the National Center for Manufacturing Sciences.