Using Benchmarking to Drive EA Progress

Robert A. Handler

When faced with resistance to enterprise architecture change, consider using

benchmarking. Benchmarking can be a powerful tool to drive enterprise architecture
change.

Key Findings
• To effect change, enterprise architects must present compelling value propositions.
• Benchmarking is a technique that can, in many cases, present a compelling value
proposition to drive change.
• Enterprise architects must include benchmarking in their toolkit and use it appropriately.

Recommendations
• Identify if benchmarking is a necessary tool for your EA effort.
• Identify and secure resources capable of performing requisite benchmarking for EA.
• Leverage benchmarking results to drive positive change.

A Future-State Conundrum — Managing Change

Enterprise architecture provides an approach to designing change; however, most people are
change-averse. In the past, organization change management or just good people skills might
have been sufficient enough to justify commitment to change. Today, however, times are
extraordinary. Change is avoided unless it can provide demonstrable value. One proven way to
provide demonstrable value that not only makes sense but already has been used for enterprise
architecture is benchmarking.

What Is Benchmarking?
The term "benchmarking," derived most likely from cobblers marking their benches with feet to
serve as patterns for shoes, refers to comparing a process with an industry standard or best
practice, using process metrics to aid in the analysis. The general term, "process," refers to "a
systematic series of actions directed to some end" (source: Dictionary.com). Common process
metrics include cost, cycle time, defect rate and output rate. Process metrics of best-practice
processes are often referred to as "benchmarks."

Within IT, benchmarking is often confused with technology "benchmarks" (such as SPECmark,
TPC-C and TPC-App). This confusion is valid, as system processes are being compared with
standards or best practices. Furthermore, within EA, "benchmarking" may be confused with the
act of comparing one program's enterprise architecture maturity assessment results with another
program or an industry average. This is also a valid form of benchmarking as it, too, compares
process performance. When using benchmarking to further EA, however, it is intended to refer
generally to comparing a process owned with an industry standard or best practice. A broader
definition affords the opportunity to leverage benchmarking as an EA tool for many viewpoints
and domains.

When to Use Benchmarking for EA

There are several triggers that lead an enterprise architect to consider using benchmarking as a
tool. These are:
1. When resistance to change stalls the implementation of a future-state design
2. When an EA effort needs to cost-justify itself
3. When permission is required, or proof of value is needed, to drill down into an area

PDF Created with deskPDF PDF Writer - Trial :: http://www.docudesk.com

 outside the span of control of EA or IT

Assuming there is the potential need for benchmarking, determine the viability of the technique
for your situation. Since benchmarking is about comparing an internal process to a standard or
best practice, there must be sufficient access to both the internal process and a standard or best
practice. Provided there is, benchmarking is a good tool to demonstrate the importance of EAdriven
change.

How to Use Benchmarking for EA

While there are several proven approaches to benchmarking, they all incorporate the same basic
steps:
1.Identify the scope of the area to be benchmarked.
2. Identify what to benchmark against.
3. Collect internal information for comparison.
4. Collect information on standard or best practice for comparison.
5. Analyze internal area in scope against standard or best practice.
6. Move toward implementing appropriate best practices to derive benefits.

An Example
An EA team, with initial approval to progress from business and IT leadership, designed the
future state for its organization's supply chain. This future state involved cleaning up the
processes, adopting standard or best practices for supply chain management, and removing 50%
of the application from the supply chain. After initially agreeing to the future-state design, the
business subsequently rejected it, largely because of "change-pain fear"; the business stated that
things were "really not that bad" and suggested sticking with the status quo.

To drive change forward, the EA team used pragmatic benchmarking. Fortunately, this company
(Company A) and its biggest competitor (Company B) were both public, making access to usable
benchmarking information easier. Opting for a path of least resistance, the company selected
"inventory turns" (or turnover) as a benchmark to represent supply chain effectiveness. While not
a complete measure of supply chain efficiency/effectiveness, it is adequate for generating a
benchmark-driven improvement scenario. Inventory turn is a ratio of two items on a company's
balance sheet — cost of goods sold divided by average inventory. It shows how well
management is allocating capital and managing inventory. It is also a reasonable indicator of
supply chain effectiveness — especially when compared to a benchmark or competitor (see
Table 1). A higher number is generally better, as it indicates more efficient use of capital —goods
flow out faster. Company A's inventory was turning four times per year while Company B's
inventory was turning nine times per year — 2.25 times faster. Another way to look at it is days of
inventory on hand, which is derived by dividing 365 by the company's inventory turns. In this
example, Company A had 91 days of inventory on hand, while company B had 41 days of
inventory on hand. The implication was simple. Either management was poorly allocating capital,
the supply chain processes, or at least the inventory management component and supporting
infrastructure were inefficient, or both.

PDF Created with deskPDF PDF Writer - Trial :: http://www.docudesk.com

A scenario was presented whereby Company A's future-state design attained, among other
things, inventory turns of 9 — the same as its biggest competitor. This would mean the average
inventory of Company A would now be $167 million, freeing up $208 million in capital for
investment elsewhere. That's real money. Even if it were merely placed in a money market
account at 2% interest, it would be generating over $4 million per year. Presented with this
information, management opted to proceed with the implementation of the future-state design.

Currently, the inventory turns are in line with the competition, and capital is being allocated
efficiently, which positively impacts the company's bottom line.
In this straightforward but real-world example, inventory turns sufficed. Some situations, however,
require a balancing benchmark or metric to offset potentially spurious results of negative
behavior. For example, inventory turns can actually be improved by lowering inventory levels,
relying on back-ordering, most probably at the expense of customer satisfaction. Understand the
area in question, and approach it appropriately. If, in this example, it was deemed appropriate to
use an offsetting benchmark or metric, something like on-time delivery, order-fill rate or even
customer satisfaction level would have been included.

Applicability Throughout the Enterprise

Benchmarking can be applied anywhere in an organization. Christopher E. Bogan and Michael J.
English present a benchmarking design architecture in their book "Benchmarking for Best
Practices: Winning Through Innovative Adaptation" (New York: McGraw-Hill, 1994), which
provides 10 generic categories:
• Customer service performance
• Product/service performance
• Core business process performance
• Support process and service performance
• Employee performance
• Supplier performance
• Technology performance
• New product/service development and innovation performance
• Cost performance
• Financial performance

These categories show the breadth of applicability of benchmarking, and can be used to search
for benchmarks.

Sources of Benchmarking Information

Benchmarking information is readily available — some for free and some for fee. Gartner
provides technology performance benchmarks (see "IT Key Metrics Data 2009: Executive

PDF Created with deskPDF PDF Writer - Trial :: http://www.docudesk.com

Summary"). Other sources include, but are by no means limited to, Hoover's for financial
performance benchmarks, The Association for Operations Management (APICS) for new product
development benchmarks, and the Supply-Chain Council for supplier performance benchmarks.
Another source can be found by going directly to a firm known for being best in class in a specific
process and using its process data for benchmarking.

Final Thoughts and Caveats

While this is a proven approach that is wholly appropriate, it is not without risk. First and foremost,
exercise discretion when using benchmarking and/or benchmarks to drive change. Avoid public
humiliation, and ensure that they are used as constructively as possible.

Recognize that, while benchmarking is synergistic with an EA metrics program, it is not a

replacement for an EA metrics program (see "Enterprise Architecture Measurement Program,
Part 2: Defining What and How to Measure"). Furthermore, benchmarking is synergistic with and
not a replacement for an IT value metrics program (see "The Gartner Business Value Model: A
Framework for Measuring Business Performance").

Finally, know thyself. Benchmarking is intended to identify process improvement opportunities by

comparing one of your processes with a standard or best in class. If, however, your firm is
considered best in class, although you could consider looking at other industries known for
exemplary performance in a particular process, you may also wish to consider a tool other than
benchmarking.

PDF Created with deskPDF PDF Writer - Trial :: http://www.docudesk.com