There is growing interest at insurance carriers, financial services institutions, management consulting firms and technology platform vendors in the use of business frameworks to deliver capabilities. Whether these tools are called business frameworks, capability models or any other name, they may be defined as available industry reference models that can be used to plan, analyze, develop, manage and maintain organizations, processes and technology.
Didn't they exist in some earlier era? Sure they did, but there was limited industry awareness of their value. Did we use them then? Yes, but not to the extent that we do — or should — today. Why should we use them? Because within the industry we have common things that we need to do, and thus that we need to deliver and manage. In fact, though insurers, wealth management organizations and banks all like to dwell on their companies' unique characteristics, they all do the same kinds of things. From a "what" perspective, primarily the four following aspects differentiate one insurance company from another:
1. Forms used
2. Rules and algorithms applied
3. How business functions are sequenced into processes
4. Corporate culture
As for the rest, the "what" that is being accomplished is common to all. So what are the key benefits of using industry business frameworks and what kind of projects can they leverage?
Benefits of Frameworks
First, let's define what a business framework is: it is a representation of an organization's business composition, independent of the organization's structure, processes, people or domains. It can include a description of all the functions/capabilities, of all the information components, their structure and definitions, of the interdependencies between the functions/capabilities (business interfaces) or of the information ownership. They are used as a guide that can be changed by adding or deleting items to describe specificities of individual organizations. They are the "LEGO blocks" of the industry.
[Also in I&T this week: Top Issues of 2013: Risk Management, Strategy and Operations — Report.]
So why should we use them? Since all organizations in the financial industry have strong similarities, why not take advantage of those pre-documented "LEGO blocks" and change them to reflect what makes corporations unique. Organizations can use available business frameworks as factors to accelerate the speed of execution, to improve the quality of what is accomplished and to reduce the cost of what is delivered. For management consulting organizations or technology platform vendors to the industry, they add a business layer to their products and services and they serve as an aura of credibility to their offerings.
How do frameworks enable acceleration?
Building one's own capability model or business framework is expensive. It requires several months of work and utilizes a significant quantity of resources. Organizations that find the process of building their own capability model too lengthy and costly for the perceived benefits can purchase them. But whether it is internally developed or acquired from a provider, once a capability model or a business framework is available within an organization, it can become the reference for everything.
Use of a framework enables projects to get started much faster. It allows the identification of all aspects that need to be addressed, provides a platform for management to roadmap business and IT investments, identifies business risks that need to be managed, provides organizational components to design solutions, outlines change impacts internally and on the ecosystem — and the list goes on.
Business Frameworks as Transformation Accelerator
Business frameworks can substantially accelerate the speed at which organizations perform projects or manage their operations. Industry experience shows that all projects should start by referencing the company's business framework. The following are examples of project types and how frameworks can be used as leveraging factor:
• Enterprise or Business Architecture: as an organizational map to overlay business orientation, application portfolio, technology components, organizational structure, business rules, knowledge, etc.;
• BPM or Process Improvement: as a list functional components to start sequencing them into processes and showing the information inputs and outputs plus the business interfaces;
• Business Requirements Definition: as a list of functional components to identify the activities, their sequencing, their information needs and the interactions with the internal and external stakeholders;
• Software Evaluation: as a due diligence list so vendors can provide their answers in a complete and structured manner;
• Application Architecture: as a derived product from the enterprise architecture;
• Data Warehouse Architecture: using the information model to start designing the warehouse structure;
• Application Portfolio Management: using the various systems in the organizations and mapping them on the framework's functional map to identify system duplication, technology needs and project opportunities.
• Operational Risk Management: using the functional maps to identify corporate risks and plan for mitigation;
• Mergers: using the functional components to scope the extent of the merger and the element of change, therefore creating a thorough project plan to be managed;
• New Employee Training: used for new employees as reading material to educate them on what the organization is all about.
Business frameworks are available in different shapes and forms. They can be acquired with consulting, be tied to a technology platform or be sold separately without any other obligations and at low price points. It depends on your budget, objectives and expected benefits. You can always find one that meets your needs.
Business frameworks introduce greater efficiency and effectiveness either on single projects or at the corporate level. They will provide a return on investment in the short and long term. Get familiar with them, ask for vendor support if needed, but as you include them in your project approaches and your management thinking, they will become an extension of your assets, plus knowledge that you will be able to rely on.
About the Author: Pierre Gagne, FCIP, is president of PSG Inc. and of Insurance Frameworks Inc.. He more than 35 years in the global insurance and wealth management industry, both with business and IT organizations.