In this series of blogs, we describe the use of the new ArchiMate 3.0 standard in practice. We use a fictitious but realistic example company, ArchiSurance, well-known to the users of ArchiMate as this is the company from the standard case study provided by The Open Group.
Insurance companies operate under challenging circumstances. The ultra-low interest rates in financial markets make it very difficult for them to fulfill their financial obligations, and digital disruption threatens their business models and market share. What’s more, profit margins are declining and market shares are shrinking.
Our example company ArchiSurance is also dealing with these issues. How does it make enough money to survive in the short term and sustain the business in the long term? The company made a strategic analysis of the main ways in which it can improve returns, depicted in the figure below.
To sustain profitability, the company needs to increase revenue, which requires higher customer retention and/or increasing market share. To this end, it wants to achieve improved customer satisfaction and a more competitive premium setting.
Based on this analysis, ArchiSurance sees two different strategic options to address these issues. The first option is to maximize operational excellence by cutting costs, increasing self-service options, and streamlining and standardizing its product portfolio.
ArchiSurance sees the rapid pace of technology innovation as both a challenge and an opportunity. This has led it to identify a second strategic option based on ‘digital customer intimacy’, which employs a combination of big data and the Internet of Things (IoT). According to this strategy, they intend to use more detailed customer data to improve customer interaction and satisfaction, and to determine customized insurance premiums.
Next to this strategic analysis, it’s also important to create a capability map of the organization to successfully transform the company. The figure below outlines the current capabilities of ArchiSurance, using the new capability concept of ArchiMate 3.0.
Digital Customer Intimacy strategy
In its digital customer intimacy strategy, ArchiSurance takes a two-pronged approach. First, it wants to engage with its customers more intimately through various social media channels. Second, it aims to use various kinds of external data. For insurance products sold in the consumer market, this entails data from smart, connected devices such as fitness trackers, black boxes in vehicles, or home automation gateways; in various b2b markets it wants to use data from sources such as fleet management, energy networks, in-store RFID devices, or smart building sensors. Ultimately, this may result in real-time insurance products where customers receive direct feedback on the financial consequences of their behavior, and advice on adjusting this behavior to lower their insurance premium.
The figure below shows the main new capabilities needed to realize this strategy, how they relate to the current capabilities, and how they contribute to the business outcomes ArchiSurance wants to achieve.
These elements of your strategy can also be linked to, for example, a higher level description in the Business Model Canvas, where your capabilities may figure as key activities. Enterprise Studio fully supports this integrated approach.
In the next few blogs, we will further explore how ArchiSurance can realize its strategic goals. We will also address the differences between capabilities and business functions and how you can create useful analyses to support capability-based planning. Stay tuned for more!
Next blog post: ArchiMate® 3.0 – Capability Mapping