Bob Ivkovic, Principal of IT Architects
February 4, 2018
Business Reference Models illustrate the functional and organizational composition of the core business of an organization. We sometimes call them industry reference models because they may pertain to a specific industry. You can find industry-specific business reference models for all kinds of industries, including aerospace & defense, airline, automotive, banking, broadcasting, government, consumer products & electronics, energy & petroleum, education, health, insurance, life sciences, retail, telecommunications, utilities…..I think you get the picture. So, if you’re a company that belongs to any one of these industries and don’t have an understanding of your business functions or processes, I’d recommend that you get your hands on a business reference model. And trust me, many organizations don’t have a clue of everything they do, and even if they do, they don’t know how it’s all put together. Dependencies and relationships between its processes is a mystery.
This is where I come in. For those of you who don’t know me, I’m an Enterprise Architect and my job is to help an organization understand its business before we can understand all its business problems, system deficiencies, or any other issues at the forefront of meeting its corporate goals and objectives. Thus, when I visit a client and start talking about optimizing business processes and the systems that support them, I nonchalantly ask if they understand their business processes (i.e. I want to know if they have defined their business processes). Most of them say no or that they have a high-level understanding. I explain that I can define their business processes within a month. That’s when they decide whether to fire me before I start, or phone the mental health help line to put a stop to such flagrant promises. I eventually get their buy-in by convincing them that I can map out the processes for their company by leveraging an industry reference model. It’s just a matter of interviewing the staff in every department or functional area within their organization and identifying the processes that pertain to their area of work. You’ve rightly assumed that I have an industry reference model to give me a head start, so this should make things simple. As we go through the list of processes in the industry reference model and start checking off which processes they do [and crossing out the ones that they don’t], we start developing a good process understanding of their organization. Actually, by the end of the month, they have a good handle on their business processes. And for those of you who are process experts, I can define a business process architecture at a Level 3 based on an industry reference model, which represents the work-level processes. As we start getting into more detailed operational processes and work activities, we define their Level 5 and 6 processes, which is easy once we get the Level 3s in place. In fact, this allows the executive team to start identifying all their business problems, issues, and concerns, not to mention the opportunities. And that’s when the same executive team sends out an email that announces me as their process champ. OK, I’m kidding about the email, but they do take me out for a free lunch and a few beers, and pay me handsomely for doing something that they couldn’t have dreamed possible.
What is a Reference Model?
According to OASIS (Organization for the Advancement of Structured Information Standards) a reference model is “an abstract framework for understanding significant relationships among the entities of some environment, and for the development of consistent standards or specifications supporting that environment. A reference model is based on a small number of unifying concepts and may be used as a basis for education and explaining standards to a non-specialist. A reference model is not directly tied to any standards, technologies or other concrete implementation details, but it does seek to provide a common semantics that can be used unambiguously across and between different implementations.” Please don’t hold this against me, it wasn’t me who came up with the definition although I can appreciate the challenge of defining a reference model. In simple terms, a reference model represents the component parts of any consistent idea, from business functions to system objects. And if we’re going to be serious about using reference models, it should represent a complete set of business artefacts if it is to represent the entire scope of our business, and communicate ideas clearly among an organization’s employees, partners, vendors, clients, and all its stakeholders.
From a business standpoint, a reference model embodies the basic goal or idea of an organization existence and can be consumed as a reference for different purposes. A business reference model is a means to describe the business operations of an organization, independent of the organizational structure that performs them. Other types of business reference models can also illustrate the relationships between the business processes, system functions, data needs, and the organizational entities within (i.e. departments, business units, functional areas, work groups, etc). These reference models may be constructed in layers, and offer a foundation for the analysis of business services, process performance, data needs, system/application support, and technology infrastructure requirements.
A popular reference model is known as the “Business Reference Model”, only one of five reference models of the Federal Enterprise Architecture of the US Federal Government. This model provides a function-driven framework for describing the business operations of the Federal Government independent of the agencies that perform them. The model provides an organized, hierarchical construct for describing the day-to-day business operations.
In context of the enterprise or entire organization, a business reference model is part of an Enterprise Architecture Framework. An Enterprise Architecture Framework defines a series of reference models (process, work activities, data, organizational entities, systems/ applications, and technology), and how to organize the artefacts within these models and their relationships (structure and views). Enterprise architecture applies architecture principles and practices to guide organizations through the business, information, process, and technology changes necessary to execute their strategies.
Reference Model Concepts
There are four key concepts which characterize a reference model as described below.
1. Abstract: A reference model is abstract providing information about environments of a certain kind. A reference model describes the type of entities (processes, data, org units, systems/application, technology components) that may occur in an environment of a certain kind, and not the particular entities occurring in a specific environment. For example, when describing the architecture of a particular house, an actual exterior wall may have dimensions and materials, but the concept of a wall (type of entity) is part of the reference model. One must understand the concept of a wall in order to build a house that has walls.
2. Entities and relationships: A reference model describes entities (processes, data, org units, systems/application, technology components) and their relationships (how they connect, interact with one another, and exhibit joint properties).
3. Within an environment: A reference model does not describe all things but only artefacts within an environment or problem space. Thus, a reference model describes the problem it is meant to solve for all affected stakeholders.
4. Technology agnostic: A reference model does not make assumptions about the technology or platforms supporting a specific computing environment. A reference model develops understanding of a class of problems, not specific solutions for those problems. Thus, it must guide the process of assessing viable solutions. For example, if data from multiple applications is to be stored, aggregated, and distributed in real-time, a reference model will refer to an operational data store without specifying a specific solution like Oracle or Microsoft Azure.
Where Can I Get a Business Reference Model?
My favourite reference models are offered by APQC, which provides robust industry-specific process classification frameworks (a.k.a. business process reference models). Who is APQC? APQC is the world’s foremost authority in benchmarking, best practices, process and performance improvement, and knowledge management – for all kinds of industries I might add. Just Google them and you’ll get a sense of who they are and why customers may be interested in what they do. I believe these are things that any organization in any industry would be interested in. Besides, it is free and make me look super experienced when I do business with an organization whose business and business processes I don’t fully understand. But with such reference models, I can get to know their business very fast, not to mention that I can boost my reputation as a business expert in their industry. After all, an industry-specific business reference model gives me the goods to tell an organization what business functions and processes are key in their industry and how they’re all connected (i.e. how various functional areas within an organization collectively manage their work efforts and handoffs). Specifically, a business process reference model helps a company understand what processes are important in their industry and where they fit into the end-to-end business processes that span various departments and functional areas of an organization. By the way, if you don’t like free and would like someone to develop a business reference model customized for your specific needs, you can hire one of the Big Five or how many there are nowadays such as Accenture, Deloitte, KPMG, EY, and PwC to build you a business reference model. I’ve seen Deloitte build a very detailed business reference model for an oil & gas company which had three distinct areas of business: upstream (finding oil), midstream (storing & distributing oil), and downstream (marketing & selling oil). They did a great job but it wasn’t cheap.
Advantages of a Business Reference Model
There are many advantages of a business reference model. First, a business reference model is used to create standards for both the objects that comprise the model and the relationships to one another. By establishing standards, both business and technical people who define business and technical objects, such as business processes and applications/systems, can create objects that behave according to a standard making their jobs easier and consistent across the organization. Furthermore, software can be written to meet a standard, and developers can copy software objects in order to reuse them, or build a software factory that generates code pertaining to a specific software object in order to support a business process. A standard can also make use of design patterns that support key qualities of system functions, and provide the flexibility to extend system functionality in a more agile and inexpensive way.
Another advantage of a business reference model is its ability to educate. By using a business reference model, people can break down a large problem space into smaller problems that can be understood, tackled, and refined. Staff who are new to a particular set of problems can quickly learn what the different problems are, and can focus on the problems that they are being asked to solve, while trusting that other areas are well understood and rigorously constructed. The level of trust is important to allow both business and IT people to effectively focus on their work. Business reference models provide an ideal way to promote communication between people and groups, and define clear roles and responsibilities. By creating a model of business/technical objects and their relationships, an organization can dedicate specific individuals or teams, making them responsible for solving a problem that concerns a specific problem. For example, if a business reference model describes a set of business measurements needed to create a balanced scorecard, then each measurement can be assigned to a specific business leader. Thus, this allows management to delegate responsibilities to teams accountable for producing high quality results.
There are many advantages of using business reference models but one I personally consider important is giving us a platform to compare different scenarios of a solution or future-state target. By breaking up a problem space into basic concepts, a business reference model can be used to examine various solutions to that problem side by side. Thus, the component parts of a solution can be discussed in relation to one another. For example, if a business reference model describes a business system that tracks collaboration between a business and their customers, then a business reference model can be used to decide which of the three selected software products to purchase, based on their business needs, process alignment, cost effectiveness, and risk/reward ratio. Furthermore, this may empower the decision makers to compare how well each of the candidate solutions can be configured to meet the needs of a particular business process, as well as, how the solution fits within the overall technology roadmap of the organization (which could also be represented by a business reference model). Don’t underestimate the benefits of a business reference model because they can help an organization make business and technology decisions more efficiently and effectively. And don’t reinvent the wheel, get your hands on a business reference model.
Mr. Bob Ivkovic is a Principal with IT Architects in Calgary, Alberta. IT Architects (www.itarchitects.ca) is an information consulting firm specializing in business process optimization, system evolution planning, and the deployment of leading-edge technologies. If you require further information, Bob can be reached at email@example.com or 403-630-1126.