Enterprise Architecture: Operating Model

Ralph’s Rockin’ Ribs is a family-owned business that began offering franchises in the early 1980’s. Ralph and his sons maintain a tight hold on all areas of the operation from food supply and preparation to lobby and bathroom maintenance. Their current unification model is stifling to franchise owners, and as a result corporate growth has come to a halt. Franchise owners also have issues with supplies running late, and orders from Ralph’s supply house have been getting mixed up on a regular basis. Ralph acknowledges these problems and is looking for a solution that will work for everyone.

The following challenges in redefining the operating model are expected:

1. The essentials coming from Ralph’s supply house are less than fresh by the time they reach the end of the supply chain. Orders have been getting mixed up causing shortages in some areas and overages in others. Ordering, receiving, and shipping processes must be standardized, and alternative supply stations investigated.
2. Training procedures are sub par at best. The videos are outdated, and don’t allow for differences in location or clientele. Training procedures will be updated, and processes will be standardized. New compliance requirements will include mandatory training on all stations, management training, upper management training, and ownership training. This will ruffle a few feathers, but franchise owners are professionals who want to have a successful business, so it should not be an ongoing issue. Training will include ongoing support and will foster an atmosphere that encourages growth and innovation.
3. Accounting practices are outdated and insufficient for promoting growth. Accounting processes will be standardized with all arms of the business coming together to create a system that works for everybody.
4. The IT infrastructure is a hodgepodge of disparate hardware systems with various software configurations. New IT processes will be standardized, hardware will be identical across the board and formal IT support will be part of the franchise package.

Proposed Operating Model

When deciding on an operating model, Ross et al recommends asking the following two questions as a starting point in determining how much integration and standardization should be employed:

1. To what extent is the successful completion of one business unit’s transactions dependent on the availability, accuracy, and timeliness of other business unit’s data?
2. To what extent does the company benefit by having business units run their operations in the same way? (Ross, Weill, and Robertson, 2006)

When looking at Ralph’s Ribs the business units are not dependant on each other, and do not share any customer or business data. Each franchise is an autonomous entity led by the owner/operator, and although each unit operates in basically the same way, each unit operates independently. These factors indicate that a low integration model should be selected.

On the other hand, Ralph’s benefits tremendously by having each unit run their operation the same as all other units. People come to Ralph’s for the ribs, and they expect these ribs to be the same whether they’re in Billings, Montana, or Coos Bay, Oregon. Preparation procedures and customer service procedures should be the same in every franchise, as should ordering, reporting, shipping, and receiving procedures. These factors indicate that a high level of standardization is required.

Found in the lower right quadrant of figure 2-1 in the Enterprise Architecture as Strategy book, the replication model is the best fit for Ralph’s Rockin` Ribs. According to the text, this operating model offers a high level of standardization and a low level of integration. Characteristics of the replication model include few if any shared customers, independent business operations that operate following the same procedures. This model also utilizes a centrally mandated IT system, and centralized control over business procedures and design. (Ross, Weill, and Robertson, 2006)

Created by Nick Malik for his series of articles on Service Oriented Architecture, the image to the right breaks down the replication model and helps to easily define what parts of the operation are handled centrally, and which parts are handled independently. Financial reporting, corporate strategy and business processes are standardized across all units. Customers and partners, management processes, operational data, and business intelligence are each handled on an individual basis which is possible while utilizing the low levels of integration of the replication model. (Malik, 2007)

Malik then goes on to say, “Companies that use a Replication model encourage innovation in their business units but require common processes to create consistency and reduce costs.”  (Malik, 2007) Although Ralph’s has been lax in the innovation department of late, standardizing procedures and reevaluating integration needs will help in fostering an atmosphere that encourages innovation. According to McDonald’s, many of their best-selling items, including the Big Mac, the Filet-O-Fish, and the Egg McMuffin were all created by owner operators, (McDonalds, 2007) so it just makes sense to follow their example.

Ross, Weill, and Robertson (2006) tell us “Many Replication companies grow through acquisition...but most Replication companies can also build new businesses from scratch.” New franchises quickly become established through the installation of standardized practices and a common infrastructure which helps to increase profits. Standardizing processes and relying on shared processes also has the advantage of decreasing IT costs which go a long way in strengthening the bottom line.

In conclusion, Ralph’s will be best served by adopting a replication model much like the one used by the McDonald’s Corporation.  Standardized processes and autonomous management can work together to promote growth and innovation, and this in turn can produce greater profits and reduce spending.