Case Study: Danforth Manufacturing Company Scene 1: Possible Need for an EA Program The Danforth Manufacturing Company (DMC) develops, produces, and sells several lines of photovoltaic storage cells (solar-powered batteries) for use in various consumer, business. and aerospace products. Robert Danforth, the President and Chief Executive Officer (CEO) of DMC, has called a mecting of the Executive Committee to review several recent capital investment requests. The largest two of these was a request by Kate Jarvis, the Chief Operating Officer ( COO), for a new sales and inventory tracking system and a request by Jim Gurman, the Chief Financial Officer (CFO) to invest in a new cost accounting system. Also invited to the meeting were Sam Young the company's first Chief Information Officer (CIO) who joined the company two weeks before, and Gerald Montes, the company's Chief Counsel. Robert Danforth was the last one to enter the executive boardroom. He smiled at his top management leam and said, "Thank you all for coning by to talk a bit more about several investment requests that came out of our annual planning meeting last month. Sam, you hadn't joined the company yet, so I'm particularly interested in your thoughts today. Mainly, I want to better understand from the group why our current capabilities are insufficient and how these new systems will help bottom-line performanee. Kate, why don't you go first and then we'll hear from Jim." Kate rose and walked to an easel that held several charts and diagrams, "Gentlemen, as mentioned at the planning meeting, my request for a new Sales and Inventory Tracking System (SITS) is based on an insufficient current ability to match inventory and production information with customer orders. We are also experiencing excessive turnaround time for orders in the industrial product lines, as compared to our competition. Our sales representatives in the field are beginning to lose orders. They can't provide on-the-spot quotes based on real-time checks of available inventory and current pricing. The same goes for our representatives. They are not able to see when the custom and small job production runs are being scheduled. This would help sales in this high-profit area which we will be expanding. Our major competitor fielded this information capability almost a year ago. While I was skeptical at the time about the impact it would have on their sales, I now believe that it's a successful model for them and therefore is going to make or break us in the industrial product line." Robert leaned forward. "Kate, this sounds quite serious. Even so, from a cost perspective I am concemed about the return on investment (Ra I) for SITS. Last month you stated that initial cost estimate for the development of SITS was over three million dollars. We have tight budgets for the next two years ... have you looked at Ra!? "Yes," responded Kate. "These charts show the level of investment and payback period for SITS. which I estimate to be two years, depending on bow quickly and thoroughly the sales force adopts it. The lifecycle for SITS should be seven years, with positive ROI seen in years three through seven, and an average of about twelve percent per yeak." Robert turned to Sam, "What do you think Sam? Isn't part of the problem here that many of our information systems don't talk to each other?" Sam grimaced slightly and said, "I think you're right, from what I've seen in my initial survey of information technology (IT) capabilities, a lot of our systems were built as individual projects based on what then were unique requirements. We now bave some duplication of functionality and evidenee of inefficient support for evolving business processes." Robert responded quickly, "Isn't the SITS proposal just more of the same?" "Perhaps" said Sam, "I'm bearing that Kate wants to integrate information exchanges across the sales, inventory, and production lines of busibess. This represents a somewhat higher-level approach to meeting several business requirements," Robert turned to Jim, "What do you think about Kate's problem? Jim answered with a pensive look, "Well, I agree that we need to address our competition's capability. While our acrospace product line is the most profitable, the industrial product line brings in the most revenue, so there would be a significant impact on the entire company if we lose market share in the industrial product area." Robert then turned to Gerald, "So what does the Chief Counsel think?" Gerald paused for a moment and then said, "I think that we must act decisively to protect market share in the industrial product line, but I'm not sure that SITS is the answer. You might be right Robert, the proposal that Kate is making might be more of the same type of technology solution that Sam says got us in this situation." Robert leaned back in his chair and said, "Before going further on this proposal, let's talk about Jim's investment request. I wonder if there are any parallels." Jim activated the conference room's projector and brought up a set of briefing slides. "My request is for a cost accounting system that would replace the current accounting system. As Robert mentioned, there are tight budgets the next two years, and having the ability to more readily see spending and profit generation within each line of business will help us to manage the budget more cffectively. This system is one module of "WELLCO" a proven commercial enterprise resource planning (ERP) product. We can utilize this product by expanding it if other back office requirements emerge. The cost of the investment is just under $600,000. According to the vendor, the historical payback period for this cost accounting module is eighteen months, with an average annual ROI of sixteen percent during the subsequent years." "Jim, can this new accounting capability suppont what Kate is looking for?" said Gerald. Jim responded, "The WELLLO module can handle some of the things Kate is probably looking for, including price and volume information in sales, inventory, and production activities, but this module is not configured to specifically support all of the information I believe she will need." "Can it be modified?" Interjected Robert. "Possibly so," said Jim, "and if not, I would think that other modules of WELLCO could handle it. Sam, help me out with this one if yoa can." Sam responded, "I know that WELLCO is one of the leading ERP products designed to support many front and back office functions. It might be possible to get enough functionality to support both Jim's and Kate's requirements. I am concerned that we are still looking at requirements from a program-level and systems-level viewpoint. - essentially bottom-up planning. Wouldn't the company benefit more from a more strategic approach that evaluates requirements and proposed solutions approach that evaluates requirements and proposed solutions across the entire enterprise in the context of our strategic goals? The group was silent for a moment, and then Gerald spoke. "Our annual planning retreat is where most of the company's strategic planning happens. We look at our current strategic goals and initiatives. We look at what changes are needed to keep us competitive. As you saw from the meeting last month, new proposals are also surfaced during the retreat and then followedup on. That is to say if they merit consideration for funding and implementation." Sam asked, "Is there some model of the enterprise that is used to support these discussions?" "Well, if you mean our annual business plan, we have that" said Jim. "More than that" said Sam, "A model of strategy, business, and technology that enables you to see what we have now and what is planned for the future. Something that gives us the ability to play with the model to see what other future investment and operating scenarios would look like." "We don't have anything as fancy as that" said Kate, "Though a model like that would have helped me analyze what we could do to help the field." Robert stood up and walked to the window. "Sam, you are new to the team, but sometimes a fresh look at a situation can provide valuable insights. What I believe you are telling us is that we lack a true top-down, strategy-driven capability to surface requirements and solutions ... is that right?" "Yes" responded Sam. "DMC is not alone. Many companies have the same problem because they still support program-level decisionmaking. We tend to let it occur in a relative vacuum with few overarching goals and standards to guide analysis, planning, documentation, and decision-making. 1 am going to propose that both Kate's and Jim's proposals be reviewed through a different lens, that of an enterprise-wide architecture. If we had this type of model, we could see current capabilitics, future requirements, and gaps in our ability to meet those requirements. We could also see duplicative current capabilities and future solutions. From what I have heard at this meeting we may have some overlapping requirements which probably should not be met with separate solutions if we are to optimize our financial and technology resources." "Interesting" said Robert. "Sounds like a silver bullet, and I am wary of those" said Gerald. Robert spoke again, "Sam, would an enterprise-wide architecture really help us? If it is doable, that's great, but why haven't we heard about it before? 1 know there are no free lunches and where is the ROI in such an architecture?" Kate added "While I appreciate the idea, I don't have time to wait for the entire company to be modeled, I need a new capability now." "Well," said Sam. "You are right, establishing an enterprise architecture will not be free and it will take time. Fortunately there are approaches being used by the public and private sector that support the modeling of requirements and solutions in a standardized way between multiple lines of business, which are referred to as architecture segments. So, as each segment is completed it adds to the architecture as a whole. By treating Jim's area as the company's financial segment, and Kate's area as the production segment, we can just address these areas first, thereby reducing the time for completion of the architecture part of the larger project that may implement a combined solution. We can do this by modeling only those strategic drivers, business services, and technology solutions that apply to those two segments. Eventually though, for the architecture to be the Exercise: Read this case study carefully and summarize in a critical way by answering the following questions: 1) The company background. 2) What are the requirements of the company? Discuss both technical and business requirements. 3) What is their current environment? 4) What are the problems/ Gaps, which they realized? 5) What strategy or solution is decided at the end? Do you think the decided solution will help the company to generate more revenue? 6) How the EA THRFADS help the company 7) How the EA THREADS helps the company to improve the current architecture and continue with smooth transition "So what's the downside?" asked Gerald. "Enterpeise architecture tends to be viewed as a hostile takeover by program managers and executives who have previously had a lot of independence in developing solutions for their own requirements" said Sam. "Also, architecture brings a new language and planning processes, which like any type of change can be seen as threatening to those involved and therefore may be resisted. Strong executive sponsorship and stakeholder involvement can overcome much of this. H "Sam, the architecture approach secms to make sense, but I am not completely sold yet" said Richard. "Let's do a pilot project. I want you to work with Kate and Jim and bring me a plan and business case within two weeks to develop the part of an architecture for DMC that addresses their current capabilities and stated future requirements. We'll use this as the test for whether we want to go forward with an enterprise-wide architecture. Thank you all fot your time today, see you in two weeks, " Exercise: Read this case study carefully and summarize in a critical way by answering the following questions: 1) The company background. 2) What are the requirements of the company? Discuss both technical and business requirements. 3) What is their current environment? 4) What are the problems/ Gaps, which they realized? 5) What strategy or solution is decided at the end? Do you think the decided solution will help the company to generate more revenue? 6) How the EA THREADS help the company 7) How the EA THREADS helps the company to improve the current architecture and continue with smooth transition from current architecture to Future architecture. 8) If the company hire you to provide them with an EA Implementation. Plan using top-down manner, what type of question will ask them at each level to determine how information about the enterprise will fit within that level of the framework. (You can choose the questions from the lecture or create your own questions based on the discussion in lecture 2) 9) Do you think the company need to redefine their business strategies and procedures