Enterprise Governance and Enterprise Engineering

We will start by arguing the importance of enterprise governance and enterprise engineering in addressing the organized complexity of enterprises. This demonstrates the essential purpose of these themes, and clarifies the notion of design. Anticipating the specific subject chapters, the governance topics currently discussed in the literature will be introduced briefly, providing an initial sketch of the essential characteristics of these topics and the manner by which governance is generally effected. The brief introduction will also provide sufficient insight to appreciate the close mutual relationships between the various governance topics. This offers the rationale for the argued integrated approach, whereby each governance topic is not treated in isolation, but addressed jointly in a mutually coherent and consistent manner within the overall concept of enterprise governance. As our starting point, governance will be positioned as an organizational competence, with central attention to enterprise design. Finally, the setup of the further chapters will be elucidated.

Two fundamental perspectives on organizing are discussed comprehensively in this chapter, since these perspectives have an all-determining influence on the way governance is perceived and operationalized. It will be shown that the dominant perspective on governance can be related to deep-seated characteristics of Western thought that are deeply ingrained in the Western managerial ‘mental map’. This mental map thus has a high tenacity and impedes the recognition of its limitations. In view of these limitations, the myth of traditional control in enterprises is sketched. Foregoing reflections form the basis for presenting the alternative perspective, which is reminiscent of the contrasting aspects of Eastern thought. As will be illustrated, this perspective centers around employee involvement and their creative, self-initiating potential. Reflections on enterprise productivity, quality, service, and learning and innovation, aim to argue the importance of employee involvement and self-organization. Ultimately, enterprise success — also with respect to governance — rests on employee competencies, even more so within the modern enterprise context. Some fundamental organizational choices are presented. Appreciably, the views outlined in this chapter determine our approach to governance discussed in later chapters.

Since enterprises (companies, organizations, institutions) are the central focus of corporate, IT and enterprise governance, this chapter will discuss some core aspects of enterprises. This concerns the essential notion about enterprises, when they initially emerged, and the important (design) characteristics of enterprises. Some non-trivial problems facing every enterprise will be identified. In doing so, the question addressed is if, and to what extent universally-applicable — not culture-bounded — theories about enterprises are possible. Various facts of enterprise development are subsequently reviewed. Important changes concern the context in which modern enterprises operate. Such a context appears to be highly dynamic and complex, which implies significantly different views on enterprises and their development, and provides further grounds for the employee-centric, competence-based governance approach. Two principal perspectives on strategic choices will be reviewed, including the conditions for implementing strategic choices successfully. These conditions necessitate positioning governance as a central organizational capacity, which raises the issue of central governance versus local freedom. Under the labels ‘enterprise alignment’ and ‘enterprise enablement’, different views on the relationship between enterprise strategy and design are introduced, which are associated with the mechanistic and organismic perspective on governance respectively. In view of the employee-centric organismic governance perspective, core aspects of employee behavior and the behavioral context are outlined. Finally, important paradigm shifts concerning the views on enterprises are resumed.

The importance of unity and integration — the consistency and coherence between various enterprise aspects — has been argued in previous chapters. This appeared to be a crucial condition for implementing strategic choices successfully. Such a condition necessitates viewing the enterprise as a system. Comparable considerations hold for unity and the integration of IT systems individually, and for these systems in the context of the enterprise as a whole. Therefore the approaches outlined in the chapters about IT and enterprise governance rest for a substantial part on system thinking. For that reason, this chapter will outline some essential aspects of system thinking, whereby unity and integration will be emphasized as important system characteristics. References to enterprise system aspects will be given as illustrations. In order to safeguard unity and integration during system design, architecture is shown to be an essential concept. We will outline what architecture essentially is, and the difference between architecturing and designing. The reference context for architecturing is also discussed and we will devote attention to the formulation of architecture principles and to the meaning and significance of an architecture framework. Since we have emphasized the emerging nature of various enterprise developments, finally we will address the issue of whether such developments are consistent with the systemic perspective on enterprises.

Company scandals have recently placed the corporate governance theme strongly within the area of general interest. This chapter will sketch the underlying roots of the ultimate emergence of the corporate governance issue, also from a historic perspective. Important suggestions for corporate governance reform will be highlighted and commented upon. It will be argued that the suggested reforms are partly meaningful, and partly problematic: bureaucracy, high costs, questionable value, or even risky from a business point of view. Paradoxically enough, the financial/economic focus of corporate governance makes this approach unsuitable for addressing the intended interests of shareholders effectively. For that, the necessary wider perspective of enterprise governance will be argued. In view of this, the adequacy of the well-known COSO framework for corporate governance will be analyzed. Finally, we will discuss how corporate governance requirements (compliance) can be addressed effectively. This will illustrate that effectuating corporate governance must occur in the context of overall enterprise governance and enterprise design.

After introductory remarks about the reasons for information technology (IT) governance, we will illustrate briefly that IT has developed into a technology affecting virtually all facets of society fundamentally. The developments sketched show how IT governance could grow into a problematic phenomenon, and makes it plausible why the theme of ‘business and IT alignment’ is addressed frequently in the literature. This theme and a number of IT governance perspectives will then be discussed. We will show that IT governance approaches presented in the literature are primarily structurally oriented, with a strong focus on control and decision-making arrangements. The limitations of such an approach will then be argued. These limitations provide the context for arguing that the realization of real business value through IT applications can only be established through a focus on design, whereby IT architecture provides the normative, guiding support. This will be emphasized as a core aspect of the competency-based IT governance vision. Three essential IT governance core competencies are discussed. These competencies provide the answer to the limitations of the structural approach to IT governance, as well as providing the answer to the necessary design focus. Pertinent to the IT governance core competencies, the overall governance process will be illustrated, and related formal meetings are indicated. Support competencies are mentioned briefly. In view of the tasks of these core competencies, the necessary central position of the IT governance competence is stressed, also in view of reducing IT legacy complexity. Finally, the often mentioned CobiT framework for IT governance is discussed, and our own perspective on IT governance maturity will be presented.

After a short reiteration of the need for enterprise governance argued in previous chapters, and the necessity for a competence-based, design-focused approach, core aspects of the enterprise engineering theory and methodology will be presented. This is essential ‘tooling’ within the enterprise governance competence for unified and integrated design of enterprises. Two foundational topics of the enter prise engineering approach are introduced: enterprise ontology and enterprise architecture. Within the enterprise ontology approach we will focus on essential transactions and their associated processes. In relation to processes, the notion of business rules is discussed and distinguished from enterprise architecture. Special attention will be given to enterprise architecture and enterprise design domains. Four main enterprise design domains are discussed: business, organization, information and (information) technology. Within these four main design domains, examples of (sub)design domains and architecture are presented. The enterprise governance core competencies will be discussed subsequently. They are comparable in nature with the IT governance core competencies, and can be considered as their complement. The importance of the enterprise governance core competencies will be illustrated, and levels of enterprise governance maturity are introduced. It will be shown that the service-oriented architecture theme that is gaining increasing attention, necessitates enterprise governance, and fits within the argued competence based governance approach. Finally, we will introduce personal competencies on which the enterprise organizational core competencies rest. The competencies of the enterprise architect are our primary concern.

Previous chapters presented examples elucidating our theme of discussion. In addition to these examples, this chapter provides further illustration of the inherent character of enterprise governance and enterprise engineering, showing some core facets about the praxis of these concepts within the context of a fictitious company called EnerServe, which needs a considerable transformation. Ener-Serve is a longstanding energy company. They have power plants for generating electrical energy, a distribution network and meters installed at customers’ premises for measuring energy usage. EnerServe is affected by the development of Europe’s open energy market which enables customers to select their supplier for delivering electrical energy and gas, independent of the geographical location of the customer and supplier. So suppliers are not necessarily associated with a certain geographical activity domain, but can (in principle) supply throughout Europe. EnerServe must change fundamentally because of the open energy market. An essential question within EnerServe’s enterprise governance competence thus concerns how EnerServe must adapt to the new situation. The EnerServe case aims to show that it is not so much the top-down, management and planning oriented governance approach which is crucial for making sense of the new situation and its consequences, but the enterprise governance competence, and more specifically the enterprise strategy and architecture competence. It is this competence that identifies and addresses the topics discussed in this chapter. Without the ability to discuss all facets of EnerServe’s transformation comprehensively, the case aims to illustrate how the core concepts discussed previously can be applied. The case also corroborates the importance of the competence-based perspective on governance within which design occupies a central place, and whereby developments occur in an emerging fashion. As such the innate nature of enterprise governance and enterprise engineering is illuminated.