Systemic approach towards enterprise functional decomposition

Systemic Approach Towards Enterprise Functional Decomposition

Dmitry Kudryavtsev, Lev Grigoriev

2011

Workshop “Convergence of Business Architecture, Business Process Architecture, Enterprise Architecture and Service Oriented Architecture”

Systemic Approach Towards Enterprise Functional Decomposition, CEC 11 2

About the company

BUSINESS ENGINEERING GROUP SPb

Consulting

Organizational design, strategic management, business process improvement and re-engineering, enterprise architecture management, quality management

Products

ORG-MASTER® line of software products for organizational design and analysis

GOV-MASTER ® software for public organizations design and analysis

Seminars and Trainings

Business engineering School, School of business analysts, Business ideology school

Research

Models and methods of organizational design, enterprise engineering and modeling

History: management consulting, enterprise modeling software and trainings since 1997

Customers: large and medium-sized CIS business and public organizations

Systemic Approach Towards Enterprise Functional Decomposition, CEC 11

Outline

1. What is “enterprise functional decomposition”?

2. Requirements for the decomposition

3. Currently available models and methods

4. The suggested framework– terminology,– main principles,– process / method.

5. IT support

6. Implementation

7. Framework benefits

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What is “enterprise functional decomposition”?

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What is “enterprise functional decomposition”?

“Functional decomposition identifies the high-level functions of an organization or proposed solution and then breaks down those processes into sub-processes and activities. This can be done as part of a systems development or business process analysis project. The goal is to break functions down into smaller pieces to allow for analysis of the detail processes and to ensure coverage of all significant processes” - A Guide to Business Analysis Body of Knowledge, 2006

“Functional decomposition – a technique for mastering the complexity of the function of a system. The effect of applying the technique is that a functional model of a (sub)system is replaced by a set of functional models? Also called functional subsystems, and vice versa. Where functional model is a black-box model of a concrete system and function is the set of services the concrete system is able to provide” - Jan Dietz, “Enteprise Ontology Theory and Methodology,” 2006.

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Functional decomposition role in enterprise engineering

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PurposePurpose

FunctionStructureStructure

Principles and rulesPrinciples and rules

IT-architecture,Technical architecture,People,Organizational structure

Mission, Vision,Goals, Strategies,CSF, KPI

Value chain, functions, business processes, activities

Functional decomposition


Requirements for the decomposition

System engineering driven Business practice driven

Completeness and Necessity (“Do right things”),

Correct understanding of semantics (e.g. what does “maintenance management” mean?)

Consistency (e.g. avoid overlapping activities…)

Support for management best practice:• Widely-used reference models,• Methodologies (TQM, VBM…).

Regulatory compliance (ISO, SOX…)

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Requirements for the decomposition

In more technological form:

1. Activities follow its’ purposes - alignment with the enterprise intentional model (for completeness check, prioritizing),

2. Reuse of the proven and shared normative models or knowledge (reference models, patterns, etc),

3. Consistency of principles within functional decomposition,

4. Value-based management harmonization,

5. ISO 9004:2009 harmonization.

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ISO 9004:2009 harmonization

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Value-based management harmonization

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Currently available models and methods

A. Reusable elements for enterprise functional decomposition • APQC Process Classification Framework, SCOR, ITIL, CBM…• Lifecycle models

= starter kit and building blocks,

require supplementary method

B. Methods for enterprise functional decomposition• Goal-oriented (Kavakli and Loucopoulos)• Beer’s Viable System Model (VSM) based• Normative model driven (e.g. Barros)

Need to be integrated and extended.

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The framework: terminology

Functional system – purposeful system, which consists of activity elements and has the following features:

•purpose as the main system-forming factor,

•self-regulating – it includes a management component/activity elements,

•hierarchy – it consists of other functional systems,

•isomorphism – all the functional systems have a similar structure.

where:

Activity element – any element of enterprise activities description, e. g. process, action, functional area.

Purpore - high level, overall goal of a system. The role of an object within superior system.

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The framework: main principles

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Strategy & Policy

Design & Improvement

Operational planning

Measure-ment,

Analysis, Control

Management

Natural

resources

Finance

People in the

organization

Infrastructure

Environm

ent

Know

ledge

Information

technologies

Enabling systems

Valuecreation

Functional system’s pattern


The framework: main principles

Alignment of functional system pattern with purposes and goals

Stakeholder’sconcerns

Goals of the functional system

Goals of value creation elements

Goals of managerial and enabling

behavior

help achieve

help achieve

provide Purposes

Functional system


All the pattern components are harmonized with ISO 9004:2009

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Value-based management (VBM) harmonization

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Functional system

Corporate level Business level Functional area level

FeaturesCorporate system Business system

(Functional area-level) Functional system

Beneficiary Shareholders, Investors

Customer Superior system,Internal client

Purpose area (value type)

Corporate value Customer value + Profit

Value for superior system, Value for internal clients

Key performance

indicators

Economic Value Added (EVA), Value Creation Index (VCI)

EBITDA, Return-on-Assets (ROA), Free Cash Flow (FCF)

Depend on the functional area.

Value creation elements

Business system, Corporate governance,Environmental health,

safety and social responsibility management.

Inbound Logistics,Operations,

Outbound Logistics,Marketing & Sales,

Service.

Depend on functional area.


Corporate system pattern

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Legend:


Business system

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Legend:


(Functional area-level) Functional

system

Legend:


Pattern-based enterprise functional decomposition

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Corporate system

Business system

Functional systems

Functional subsystem

Business-lines

Corporate strategy /

goals

Business strategies /

goals

Functional strategies /

goals


The framework: process

1. Identify functional systems and subsystems within business system

2. Identify functional systems and subsystems within corporate system

3. Identify subsystems and processes

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The framework: process

1. Identify functional systems and subsystems within business system1.1. Describe customer-oriented value chain/stream in terms of interacting functional

systems,Usage of existing reference models (VRM, SCOR, APQC), lifecycle models and patterns.

1.2. Identify groups of managerial processes,

1.3. Identify enabling functional systems.

2. Identify functional systems and subsystems within corporate system 2.1. Describe corporate-level value chain/stream

Specify and/or fine-tune corporate system pattern

2.2. Identify groups of managerial processes

2.3. Identify enabling functional systems

3. Identify subsystems and processes3.1. Describe value creating subsystems or processes within functional systems

Usage of generic (e.g. APQC) and domain-specific reference models (e.g. ITIL), lifecycle models.

3.2. Generate operational planning processes for value-creating components of functional systems

3.3. Choose and customize the required processes from Design & improvement, Strategy & Policy and Paradigm groups of processes for functional systems.

3.4. Identify managerial processes for business system,

3.5. Identify managerial processes for corporate system.23


IT support - The ORG-Master business architecture engineering tool

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Ontology-based enterprise model

editor

Ontology-based enterprise

model

Reporting and query module

Documents

Diagrams

ORG-MASTER ®

Modeling process wizard

Integration wizard

Diagram editor

Query results

Semi-structured

data

OWL


Knowledge Process

Creation and Acquisition

Formalization Distribution Use

Knowledge acquisition forms

Analytical reports

Structured Administrative documents Y

Query answering

Internal Representation

Structured Administrative documents Х

Local knowledge acquisition

organizational models

The ORG-Master business architecture engineering tool

Ontology-based organizational

model


Knowledge Process

Creation and Acquisition

Formalization Distribution Use

Text X

Tables Y

Text Y

Graphics Y

Internal Representation

Tables X

Graphics X

Pseudo-Graphics

The ORG-Master business architecture engineering tool

Ontology-based organizational

model


Implementation

• Ilim Group, Koryazhma Branch,

• Omskiy Repair plant (RMZ Gazprom Neft-Omsk Refinery LLC),

• CottonClub

+ current clients

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Implementation example

Ilim Group, Koryazhma Branch

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Problem:

Equipment reliability dropBreakdowns happened often unplanned equipment downtime increased



Solution - maintenance system reengineering project:• Develop maintenance system concept, strategy and

measures;• Redesign organizational structure,• Identify maintenance processes and raise their maturity,• Optimize the key maintenance processes;• Information system improvement;• Formalize and enhance key maintenance operations;• Develop organizational documentation.

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Maintenance system functional decomposition



Maintenance system functional decomposition helped • to clarify responsibilities during organizational structure

redesign, • to identify maintenance processes and check their list for

completeness,• to deploy functional strategy.

Functional system pattern • provided consistent description of different systems, • helped to embed planning and improvement activities in

every functional system and to make mid-level managers responsible for these activities.

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Overall effects of the maintenance system reengineering project:

• 40 percent decrease in the unplanned equipment downtime;

• Increased manageability and performance; • Repair times reduced; • Increased equipment reliability.

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Framework benefits (1/3)

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Recursive decomposition

using single activities pattern

Similar structure of activities at different level of detail and in different

functional areas

Causal links between activity elements

(in addition to hierarchy)

Rapid management maturity growth

Ease communications between managers

Reuse of company’s internal knowledge

Corporate standards

Better organizational design



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Purposeful decomposition

“Do right things”

Realize strategy quicker with less resources

Clear priorities in decision-making

Set causal links between activity elements



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ISO 9004:2009 Harmonization

Reuse managerial best-practice

Guarantee for sustainable growth

Ease the certification process

VBM Harmonization

Better satisfy key

stakeholders

Corporate value growth

The END

Questions?

2011

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Systemic approach towards enterprise functional decomposition

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