Why is Architecture important for Strategy and how does it impact how good a technology firm is as an investment?

The title of the post is a mouthful, and so is the connection I am trying to draw in my blog. Its a long shot, by any stretch. Let me start by breaking down the challenge.

The challenge

Understanding technology firms as an investment is tough. Most standard metrics are not easy to explain the valuation of the firm and the risk in the assumptions. Most Technology firms start off as product firms with differentiated offerings, and end up as becoming solution companies for a specific market segment, or monopolies within their markets. The latter is more true for the really successful companies.

Now, let me try and breaking down the hypothesis.

The hypothesis

The hypothesis is, that true indicator of a technology firm's future is the architecture that they adopt. This is because, the architecture determines how well the organization's offerings are aligned with their strategy.

The Evidence

There is quite a lot of evidence on this topic, though mostly anecdotal. This includes insightful blogs from ex-employee, on how Amazon's single minded focus on Services Oriented Architecture (SOA), allowed it to develop a platform for buying and selling goods, and even general computing.

Apart from that we can take apart, the firm's architecture, as well as performance in relation to that architecture.

Hopefully we will learn something along the way.....

Strategy is everything

A few days ago, I started this blog on Architecture and Investment. It has slowly dawned on me that strategy is the starting point for architecture. If the architecture supports the strategy, the organization can better meet its targets. If not, it will struggle to operationalize its strategy.

Also, by architecture, I mean the enterprise architecture, which includes business architecture, information architecture, technology architecture, product architecture and so on.....

A Strategic exercise typically starts by segmenting the marketplace to understand the motivations and buying criteria for different segments. Once this is established, the first item of business is to decide which segments to focus on.

An Architecture is then developed to ensure that the focus can be translated to a business and a technology form that can perform and provide leverage in operations, differentiation, pricing and even market positioning.

What is working and what is not, can ofcourse be eventually measured through the financial documents published by an organization.

This is the underlying theme that I will try to explore within this blog.