EAEC High Impact Capability Roadmapping Merck

Enhancing Roadmap Actionability 69

ENTERPRISE ARCHITECTURE EXECUTIVE COUNCIL™IT PRACTICEwww.eaec.executiveboard.com

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HIGH-IMPACT CAPABILITY ROADMAPS

Source: http://www.hoovers.com.

OVERVIEW

An approach to align technology solutions to strategic business objectives through capability roadmapping

EXECUTIVE TEACHING

Leverage the process used to create capability roadmaps to obtain a deeper shared understanding of strategic business goals and shift the dialogue with business partners away from short-term, project-based discussions. By broadening the conversation to include people, process, and technology, capabilities can achieve a more holistic understanding of the underlying need.

COMPONENT TEACHINGS

1. Linking Business Strategy to Capabilities—Shift the dialogue between the IT liaison and business owner away from projects and toward long-term plans.

2. Establishing Capability Targets—Put capability target choices into financial terms to help business partners make better investment trade-o� decisions.

3. Setting Capability Realization Horizons—Help business partners understand the business and technology implications of di�erent paths to the target state.

4. Driving Application Rationalization—Explicitly link programs to business capabilities to ensure application retirement goals are being met.

5. Managing Demand—Use the capability roadmap to manage demand by reconciling new project requests against established goals.

IMPLEMENTATION GUIDES

■ The Master–Planning Process, pp. 82–85 ■ Linking Business Strategy to Capabilities, pp. 86–87 ■ Establishing Capability Targets, pp. 88–92 ■ Managing Demand, pp. 93–94

COMPANY SNAPSHOT

Merck & Co., Inc.

Industry: Pharmaceuticals Through medicines, vaccines, biologic therapies, and consumer and animal products, Merck works with customers and operates in more than 140 countries to deliver innovative health solutions. Merck also demonstrates a commitment to increasing access to health care through far-reaching programs that donate and deliver products to the people who need them.

2009 Revenue: US$27.4 Billion

-CEB

Please note that the CEB program names referencedin this document have changed since the time of publication.

Building Better Roadmaps 70


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ENABLING BUSINESS OUTCOMESTo make the most progress on portfolio simplification e�orts, use capability roadmaps to align technology investments with business priorities.

Challenge

In a complex environment with more than 5,000 applications, more than 10,000 interfaces, and 35 di�erent technical environments, Merck was challenged to reduce IT maintenance and operations costs to increase funds available for strategic projects the business required.

Approach

Merck develops a master-planning process that EA provides to business units. The process uses capability roadmaps to identify consolidation opportunities and align new technology investments to strategic priorities.

Results

Merck reduces the total number of applications by 20% and increases the portion of the IT budget devoted to strategic investments by 50%.

-CEB



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THE MASTER-PLANNING PROCESSLeverage the process used to create capability roadmaps to obtain a deeper shared understanding of strategic business goals.

6–12 Weeks (Depending on Business Area Scope)

Current BusinessCapability

Current Solutions

Capability Roadmap

Strategy Identification

Future Business Capability

Future Solution

Business Value AddStrategic discussions are focused on long-range business priorities.

Business Value AddCurrent state evaluation enables capability prioritization.

Business Value Add Consensus and buy-in on future state solutions are achieved.

Business Value AddIT investments are clearly aligned with business priorities.

Output ■ Strategy on a Page

Outputs ■ Solution Evolution Plan ■ Capability Roadmap

Outputs ■ Capability Model ■ Capability Prioritization

Output ■ Current State Architecture

Outputs ■ To-Be Capability Map ■ Capability Gap

Assessment ■ To-Be Process Framework

Outputs ■ Solution/Capability Map ■ Target Architecture

See Implementation Guide, pp. 82–85.

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1. LINKING BUSINESS STRATEGY TO CAPABILITIES

Illustrative

Shift the dialogue between the IT liaison and business owner away from projects and toward long-term plans.

■ Merck’s EA group uses the Business Journey Storyboard to surface pain points.

■ The Strategy on a Page Template articulates a set of business imperatives that EA can map to relevant capabilities.

Strategy on a Page

FINANCE

DO frame business goals in key stakeholder experiences to help business partners articulate pain points.

DON’T let the absence of documented strategy serve as a barrier to capability roadmapping.

Business Journey Storyboard

2012 Experience I have one source I can go to for my annual-planning needs, and I know the data is correct.

Strategic and Tactical Financial Planning

2010 Experience It’s di¤cult to create annual plans because the budget data I need comes from multiple sources, and I’m not always sure it’s accurate.

Optimize corporate performance through strategic financial planning.

What we desire to accomplishBusiness

Drivers and Goals

Business Capability

Annual-planning time reduced while increasing accuracy in forecasting.

How we know we’ve achieved the goal

Outcomes

Define and adopt a standard global-planning, budgeting, and forecasting process utilizing a common data source.

Actions we need to take to accomplish the goal

Business Imperatives


-CEB



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2. ESTABLISHING CAPABILITY TARGETS

Finance Capability Realization (Total Budget $9 M)Illustrative

Put capability target choices into financial terms to help business partners make better investment trade-o� decisions.

■ Merck’s EA group researches industry capability models and standards to help business partners assess current maturity and identify targets.

■ Rely on business partners’ internal assessments and maturity goals when industry benchmarking is not warranted.

“Business partners always want more than budgets allow. It’s our

job to help them assess where they need to be industry leaders and where it’s okay to meet the industry standard by illustrating the business costs and technical costs.”Paula KowalczykSenior Director, Business and Solutions

ArchitectureMerck & Co., Inc.

Capability Target Assessment Criteria

Merck’s EAs work with business partners to force trade-o�s between cost and capability targets across the following four dimensions: 1. People: Skills needed to support new capabilities and/or process improvements 2. Process: Level of process maturity and standardization required 3. Information: Quality and completeness of data required 4. Technology: Availability of tools that provide end-to-end support

Current Range of Capability Maturity

Average Capability Maturity

Initial Capability Target

Reset Capability Target

CapabilityBelow Industry Standard (IS-)

Industry Standard (IS)

Industry Leader (IL)

Distinctive Leader (DL)


Accounting to Reporting

Treasury and Capital Management

$2.5 M $4 M

$3 M$1.5 M

$5 M


-CEB




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3. SETTING CAPABILITY REALIZATION HORIZONS

Implementation ScenariosIllustrative

Help business partners understand the business and technology implications of di�erent paths to the target state.

■ Create implementation scenarios that enable certain capabilities before the target state is reached.

DO present business partners with alternative paths to reaching the target state that they can choose from.

DON’T assume there’s only one right path to the target state.

Year 0 Year 1 Year 2 Year 3

Current State Interim State Interim State Target State Feasibility Assessment

Scen

ario

A

■ Current state evaluation

■ 100% of capabilities realized

■ New applications rolled out

■ Legacy applications decommissioned

L M H

Cost

Legacy Life Span

Complexity

Business Urgency

Time to Delivery

Scen

ario

B


■ Capability 1 urgency: low

■ Capability 2 urgency: moderate

■ Capability 2 realized



Cost

Legacy Life Span

Complexity

Business Urgency

Time to Delivery

Scen

ario

C


■ Capability 1 urgency: high

■ Capability 2 urgency: moderate

■ Capability 3 urgency: low

■ Capability 1 realized ■ Capability 2 realized



Cost

Legacy Life Span

Complexity

Business Urgency

Time to Delivery

-CEB



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4. DRIVING APPLICATION RATIONALIZATION

Business Unit Roadmap—Program and Capability ViewsIllustrative

Explicitly link programs to business capabilities to ensure application retirement goals are being met.

■ Key program milestones mark occasions for major reductions in now redundant applications.

■ The roadmap identifies all applications supporting a business capability.

■ Interim and target state goals for application retirement are captured in the out years.

Program Key

Concept/Preparation

Design

Construction

Capability Key

Current Solution (Primary/Total Number Applications Used to Support Capability)

Planned Solution

Solution Being Considered

Rollout

Multiple: Concept Through Rollout

Program Being Considered

Symbol Key

Extends Before Timeline

Extends After Timeline

Transition Between Phases

Fixed Phase Start

Fixed Phase Completion

Milestone

Program 2

Program 3

…

…

Program 5

Program 4

Program 1Geo 1 Geo 2 Geo 3 Geo 4 Geo 5

2007

Jan.Jan.Jan. Jan.Apr.Apr.Apr.Apr. Apr.JulyJulyJulyJuly JulyOct.Oct.Oct.Oct. Oct.

2008 2009 2010 2011

Capability 1 (5) (3) (2)

Capability 3 App. C (3) (2)

Capability 5 (1) ERP (1)

Capability 6 App. H (9) (2)ERP (5)

Capability 7 App. M (15) (3)ERP (4)

Capability 4 (4) (3) (1) (0)

Capability 8 App. Z (44) (19)ERP (20) (5)

Capability 2 App. A (6) (5) ERP (3) (1)

(43)

Programs

Business Capabilities

-CEB




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5. MANAGING DEMAND

Demand Management Decision Tree

Use the capability roadmap to manage demand by reconciling new project requests against established goals.

“We had new technology requests coming in from all over

the place. The roadmap allowed us to stop demand for two years. Now we have a plan, and when a new request comes in, we can assess if and how it fits within that existing plan.”Stacie Kyle IT Account Executive Merck & Co., Inc.

Already on roadmap?

Business Request: New Imperative

Yes. Adjust timing?

No. Aligned

to strategy?

No.

Yes. Forward?

No.

Yes.

Yes. Aligned to capability?

No. Review trade-o�s (what comes o�/gets delayed?) and adjust roadmap.

Yes. Review trade-o�s (what comes o�/gets delayed?) and adjust roadmap.

No.

No. Add capability?

Yes. Include capability in roadmap,

identify solutions, and make trade-o�s.

Yes. Existing solution?


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RESULTS

Net Reduction in ApplicationsIndexed

Capability roadmaps enable Merck to simplify the portfolio and shift funds from maintenance to strategic investments.

IT Budget AllocationPercentage of Total IT Spend

2003 2010 (Projected)

Strategic Investments

M&O

2008 2009 2010 (Projected)

∆ = 5%∆ = 15%100

95

81

23%35%

-CEB




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KEY TAKEAWAYS

1. Use capability roadmaps to achieve a deeper shared understanding of longer-term strategic business goals. Too often, conversations with the business focus on short-term, technology solutions. By broadening the conversation to include people, process, and technology, capabilities can achieve a more holistic understanding of the underlying need.

2. Give business partners flexibility when developing a capability roadmap by presenting them with multiple paths to the target state. To facilitate better trade-o� decisions, make sure they understand the financial implications of capability improvement choices.

3. Involve business partners in the roadmap creation process to increase their ownership of and accountability for specific roadmap outcomes. By tying roadmap milestones to application retirement and demand management objectives, getting business buy-in to more IT–centric goals becomes easier.

-CEB




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IMPLEMENTATION GUIDE OVERVIEW

The Master- Planning Process

■ Master-Planning Methodology, pg. 82

■ Master Planning—Definition, pg. 83

■ Master Planning—Deliverables and Responsibilities, pg. 84

■ Business and Solutions Architect/Strategist Job Description, pg. 85

Linking Business Strategy to Capabilities

■ Business Context Summary, pg. 86

■ Strategy on a Page Template, pg. 87

Establishing Capability Targets

■ Enterprise Business Capability Model, pg. 88

■ Capability Maturity-Level Definitions, pg. 89

■ Capability Gap Analysis, pg. 90

■ Capability Gap Self-Assessment, pg. 91

■ Capability Gap Analysis Template, pg. 92

Managing Demand

■ Business Capability Roadmap (Executive View), pg. 93

■ Business Capability Roadmap (High-Level Planning View), pg. 94

-CEB




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MASTER-PLANNING METHODOLOGY

The EA Team Engages IT Liaisons to Create the Business Capability Roadmap for Achieving the Future State Vision

Act

ivit

y

1. Understand the Business Context/ Environment

2. Assess and Prioritize Business Processes and Capabilities

3. Assess and Prioritize IT Solutions

4. Make Recommendations and Develop Roadmap

Why do we need to change? What needs to change? How do we make these changes?

When and where do we make these changes?

Key InformationBusiness intent (goals, business imperatives, measures)

Key InformationCurrent, future business processes, gaps, improvement opportunities

Key InformationCurrent IT landscape, high-level IT future landscape, gaps, improvement opportunities

Key InformationRecommendations, business plan (to transition to future state), high-level business case

Bus

ines

s V

alue

Ad

d ■ Mutual agreement on goals, measures, and business priorities

■ Definition and alignment around the future business state

■ Understanding around the current solution state

■ Definition and alignment around the future solution state

■ Prioritized initiatives based on alignment with business intent

■ Investment concentrated on high-value projects

-CEB



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MASTER PLANNING—DEFINITION

Scope By Division/Business Area

Horizon Long-term, two- to five-year view

Objectives Deliver long-term view of business capabilities and processes required to meet strategic business priorities and potential solutions that meet business needs. Ensure alignment of business and IT strategies.

Major Activities 1. Understand Business Context/Environment (Business Strategy)

– Validate business strategy and priorities.

– Validate and identify business imperatives.

– Understand desired outcomes.

2. Assess and Prioritize Business Processes and Capabilities

– Identify required processes and business capabilities.

– Evaluate e�ectiveness of business processes and capabilities.

– Identify high-level information needs.

– Identify gaps and/or improvement opportunities for a process and/or capability.

– Determine business process and capability priorities.

3. Assess and Prioritize IT Solutions

– Map current IT applications to business capabilities.

– Document current IT solution landscape.

– Evaluate e�ectiveness of current IT solutions.

– Identify gaps and/or improvement opportunities for IT.

– Determine solution priorities.

– Develop future IT solution recommendation for the capabilities.

– Create high-level conceptual application landscape arranged by business capability.

4. Make Recommendations and Develop Business Capability Roadmap

– Develop business capability roadmap.

– Develop business case.

-CEB




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MASTER PLANNING —DELIVERABLES AND RESPONSIBILITIES

Activity Primary Role Deliverables

Master Planning Account Management/Business Architecture

■ Strategy on a Page

■ Gaps in Capabilities

■ Business Capability Roadmap—Two- to Five-Year View

Master Planning Business Architecture ■ Business Interaction Models

■ Process Models

■ Capability Models

Master Planning Enterprise Architecture Planning ■ Capability Gap Assessment Against Current Systems

■ Future State Solutions Aligned to Capabilities

■ Current and Future IT Landscapes (Conceptual View)

■ Business Capability Roadmap—Two- to Five-Year View

-CEB



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BUSINESS AND SOLUTIONS ARCHITECT/STRATEGIST JOB DESCRIPTION

Excerpted

Primary ActivitiesPrimary Activities Include, but Are Not Limited to the Following:

■ Serve as the senior leader of business and solutions architecture for Merck, focused on the enterprise domain.

■ Provide cross-organizational leadership to ensure that business and solution architectures developed within and by the corporation’s functional areas are aligned to a single enterprise future state.

■ Serve as a member of the Merck architecture design team providing architecture leadership and governance across the company.

■ Lead a team of senior business and solutions architects that engage with all areas of the IT and business community to develop current and future state architectures.

■ Provide solutions architecture leadership for the company’s most strategic, large, and complex business initiatives.

■ Work with and promote a community of enterprise, divisional, and international architects.

■ Study external, commercial solutions, and develop strategies for development and adoption.

■ Conduct capability benchmarking research to identify industry standards and help business partners set capability targets.

Knowledge/Experience/Skills

■ Bachelor’s degree or equivalent

■ Fifteen years of relevant work experience with demonstrated expertise in complex architecture development and business change

■ Demonstrated understanding of business process reengineering (BPR) is critical; must understand the business needs and interpret data gathered for the IT organization; in-depth skills in IT architecture and business process; strong skills in information, technology, and systems development

■ Capacity to think strategically; capable of applying BPR skills to complex problems to develop, articulate, and build support around a long-term vision and deliver concepts with quantifiable business value in support of that vision

■ Demonstrated record in assessing and leveraging information technologies

■ Demonstrated leadership in achieving shared objectives in a matrixed organization, coordinating projects and services across national boundaries, and building e�ective cross-functional teams

■ Ability to quickly develop relationships with line of business executives and build credibility with domain leaders

■ E�ective communicator with a strong customer service orientation; communicate e�ectively with internal management and external providers and suppliers; ability to lead and influence senior professionals; ability to develop, articulate, and build support around a long-term vision and deliver concepts with quantifiable business value in support of that vision

■ Team player who collaborates well with peers, subordinates, and superiors

■ High personal integrity, credibility, and energy

-CEB




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BUSINESS CONTEXT SUMMARY

Business Strategy Illustrative

Business Strategy

Business Goals Business Outcomes Business Imperatives

Provide stakeholders with accurate, timely, and compliant financial information in an e�ective and e¤cient manner through the use of global standard processes, information, and systems.

Realized by

Key Measures

Deliver on the 15 measurable outcomes as defined by the Finance Strategy Council.

Delivered by

Key Actions

Eliminate complexity and redundancy in processes and systems to drive operational e¤ciencies.

Business Capabilities

Capability Priorities Solution Imperatives

Engage operational teams to enable rationalized accounting to reporting and financial-planning capabilities.

Deliver an “above market” endstate solution.

IT Investments

IT Roadmap IT Program Portfolio

2009 2010 2011 2012

US

EMEAC

A/PA

LA

MX/PR

??

Funded by

Business strategy is enabled by:

Business capabilities are enabled by:

Delivered by

Key Solutions

-CEB



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STRATEGY ON A PAGE TEMPLATE

Forecasting, Planning, and Reporting Strategy

Business Drivers and Goals (What We Desire to Accomplish)

Outcomes (How We Know We’ve Achieved the Goal)

Imperatives (Actions We Need to Take to Accomplish the Goal)

Reduce annual-planning time while increasing forecasting accuracy.

…

Optimize company performance through strategic financial planning.

… … …

… … …

… … Define and adopt a standard global planning, budgeting, and forecasting process utilizing a common data source.

… … Integrate financial-planning process with demand-planning process.

-CEB




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ENTERPRISE BUSINESS CAPABILITY MODEL

Illustrative

Sup

ply

C

hain

Tech

nolo

gy Enterprise Knowledge Management Platform Enterprise Platform

Enterprise Information Management

Infrastructure and Operations

Network Services

Bus

ines

s O

per

atio

ns

Planning

Business Transformation Legal HR Management

Strategy

Business Analytics

Corporate Services

Execution Management

Global Public Policy

Global Security and Risk Procedure Goods

and ServicesAsset Management

Global Communications IT Mgmt.

Engineering Design/Execution

Business Service Mgmt.Finance


Accounting to Reporting

Treasury and Capital Mgmt.

Financial Governance and Risk Mgmt.

Leve

l Zer

o

Level One

Level TwoLevel Three

Res

earc

h an

d

Dev

elo

pm

ent

-CEB



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CAPABILITY MATURITY-LEVEL DEFINITIONSFor formal industry benchmarking, Merck brings in outside expertise to provide an objective point of reference and identify capability gaps.

■ External consultants provide their experience working with other players in the space as well as their own views on the future of the industry.

Below Industry Standard

Industry Leader

Industry Standard

Distinctive Leader

Capabilities are not in line with industry and do not adequately support business needs.

Capabilities are on par with industry and support business needs, but there is opportunity for improvement.

Capabilities influence the future direction of the industry and support current and future business needs.

Source: Deloitte LLP.

-CEB




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CAPABILITY GAP ANALYSIS

Illustrative

Patient Recruitment and Compliance

■ Investigators primary channel for patient recruitment

■ Not leveraging technological advances to help target and retain patients

■ Use advances in technology to improve patient enrollment and increase patient compliance during trials (e.g., cellphone alerts, sensing technology).

■ Use new sources of data (EHR, claims) to target patients and boost recruitment.

Capability 2 ■ Description of current capability maturity level ■ Description of future capability maturity level

Capability 3 ■ Description of current capability maturity level ■ Description of future capability maturity level

Current State

Future State

Relative Gap

Below Industry Standard

Industry Leader

Industry Standard

Distinctive LeaderCapability

-CEB



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CAPABILITY GAP SELF-ASSESSMENT

Illustrative

Rank IS (-) IS IL DL

1 Capability A

2 Capability B

3 Capability C

4 Capability D

5 Capability E

6 Capability F

7 Capability G

8 Capability H

9 Capability I

10 Capability J

11 Capability K

12 Capability L

13 Capability M

14 Capability N

15 Capability O

Current State

Average Capability Maturity

Future State

IS(-) = Below Industry Standard

IS = Industry Standard

IL = Industry Leader

DL = Distinctive Leader

Rank = Relative Importance of Capability to Achieving Business Goal

-CEB




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CAPABILITY GAP ANALYSIS TEMPLATE

Strategic and Tactical Financial-Planning Capability GapsIllustrative

Imperative (Drivers and Pain Points) Description of Capability Gap A�ected Capabilities Rationale (Why This Is Critical)

1. Define and adopt a standard global planning, budgeting, and forecasting process utilizing a common data source.

Disparate processes and inconsistent hierarchy definitions cause ine¤ciencies and complexity during planning cycles.

Annual Budget Development


Long-Range Operating Plan Development

Financial Forecasting

Long-Range Entity Plan Development

A standard process will improve e¤ciencies and cycle times, reduce iterations, and allow for a greater focus on strategy and planning. The end result is more accurate and timely forecasts.

2.

3.

4.

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BUSINESS CAPABILITY ROADMAP (EXECUTIVE VIEW)

Illustrative

2010 2011 2012

Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4

Cap

abili

ties

Acc

oun

ting

to

Rep

ort

ing

Stra

teg

ic a

nd T

acti

cal

Fin

anci

al P

lann

ing

Financial Process Stabilization Enhancement of Close and Consolidation Capability

Inter-Company Profit Elimination

Legal Entity Integration (Tier 1)

Enablement of ERP Platform Adoption in US and NA

Enablement of Interim States (ASPAC)

Reg./Div./Corp. Financial Forecasting

Reg./Div./Corp. Budgeting Implementation

Long-Range Planning Implementation

Entity Planning

Financial and Supply Chain Forecast Alignment

Local Budgeting GSF

Local Planning Local Budgeting Implementation

Enablement of ERP Platform Adoption in EMEA

Achieving Synergies Through E¤cient Legal Entity Structure

-CEB




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Enable One Integrated System

BUSINESS CAPABILITY ROADMAP (HIGH-LEVEL PLANNING VIEW)

Illustrative

2008 2009 2010 2011 2012

Capabilities Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1–Q4 Q1–Q4


Channels

Dashboard/Analytics

Resource Planning

Enable Budgeting Capability

Enable Planning Capability

Integrated View Across Budgeting and Forecasting

Refinement of 360-View to Provide Actionable and Meaningful Data Establish Platform

Alpha for Budgeting Converge Environments and Enable Forecasting Capability

Begin Laying Foundation for Information Sharing Consolidate USP

Consumer Call Centers Consolidate FIN E-Mails to a Single Engine

Scale Web to Support Global Portfolio of Products

Evolve Web Sites (Product/Portals) to New Technology Platform

Initial Deployment of Planning, Budgeting, and Resource Management Capabilities

Alignment and Structure Integrated with New Platform

Converge Budget Analytics to Provide Consolidated View of FIN Data

One-Stop Shop for Reporting

Steward FIN Information Across Fields and Channels

Enhance Performance Metrics

New Web Strategy Enabled

Establish Analytics Warehouse

Establish Product Metrics

Realign FIN Process

Level 3 Processes Defined Integrated Strategy and Planning

Global Web Platform Selected

Dependency

Key Milestones

FIN Master Established

Establish Performance Metrics

-CEB


Documents

EAEC High Impact Capability Roadmapping Merck