Component business models - IBM

IBM Business Consulting Services
By employing this framework, executives can begin to
envision how current business activities might function as
an interlocking set of modules.
Categorizing activities by business competency yields
a high-level view of components according to the type
of value they provide to the enterprise. Different firms
in different industries will model their competencies
differently, but, in every case, each activity should line up
under a particular competency.
Assigning each activity to one of three accountability
levels – direct, control and execute – can also help
executives begin to flesh out the component vision. The
level of a given component should be intuitive, although
exceptions will exist.
• Direct. Components at this level provide strategic
direction and corporate policy to other components.
They also facilitate collaboration with other components.
• Control. These mid-tier components serve as checks
and balances between the “direct” and “execute” levels.
They monitor performance, manage exceptions and act
as gatekeepers of assets and information.
• Execute. These “boots on the ground” components
provide the business actions that drive value creation in
the enterprise. They process assets and information for
use by other components or the end customer.
The three accountability levels imply different priorities.
At the “execute” level, for example, the emphasis is
on keeping people fully occupied and productive.
Components at this level tend to be structured in
ways that make information easily available. From a
technology standpoint, speed of data entry and realtime
availability are key. When customers go to an ATM, for
instance, they want a simple interface that provides
accurate information in a straightforward format: how
much money is in my account?
Contrast this with activities related to the “direct” tier,
where such high-level activities as launching new
products are handled. This level houses a small number
of people who have a very large impact on shareholder
value, so the design imperatives are nearly the opposite
of those at the “execute” tier. Launching a new product
requires collaboration among several elements, including
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marketing, risk, finance, regulatory and credit. Input from
all of these stakeholders is needed to make the launch
a success, so workflow is a key requirement. From a
technology standpoint, activities typically require people
to discern patterns and trends from rich, multidimensional
data, usually stored in a data warehouse. So, systems
at the direct level are not designed for speed of data
entry, but rather for ease, breadth and depth of analysis.
Realtime interfaces are not needed, as data is often
months old and processed in batches.
Embracing CBM: A strategic road map
CBM is not simply a way to imagine the future of the
organization. It can also be used to put theory into action
and drive the evolution toward a specialized enterprise,
both internally and externally. This process involves three
dimensions: one, developing a component view of the
existing organization based on analysis of the business
and the market environment; two, evolving toward specialization
based on a reinvention plan within the context
of changing industry dynamics; and three, advancing
the organizational and operational infrastructure toward
component-based enterprise optimization.
Developing a component view of the enterprise
A firm can begin to develop a component view of the
enterprise by using the CBM framework as an analytical
tool to identify the gaps and redundancies it must resolve
on the way to becoming a component-based enterprise.
A good way to start is by mapping the current business
as a network of components. As described in the
previous section, this initial analysis involves identifying
and grouping cohesive activities into discrete units and
testing the overall logic. The result is a “component map.”
Figure 6 shows an example of a component map for the
retail industry. Of course, every business will have its own,
unique perspective on its component structure, despite
substantial commonality with other players in its industry.
The component map provides a basis for developing
strategic and operating insights for the business. By
gauging the relative business value of different areas of
the map, executives can determine which components
demand immediate attention. As Figure 7 illustrates, this
type of analysis yields a “heat map” that highlights the
components that represent the greatest economic value.