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Procedia CIRP 67 (2018) 540 – 545

11th CIRP Conference on Intelligent Computation in Manufacturing Engineering - CIRP ICME '17

Enterprise architectures for the digital transformation

in small and medium-sized enterprises
David Goerziga,*, Thomas Bauernhansla,b
a
Institute of Industrial Manufacturing and Management (IFF), University of Stuttgart, Nobelstrasse 12, 70569 Stuttgart, Germany
b
Fraunhofer Institute for Manufacturing Engineering and Automation IPA, Nobelstrasse 12, 70569 Stuttgart, Germany
* Corresponding author. Tel.: +49-711-970-1995 ; E-mail address: [email protected]

Abstract

The transformation towards smart connected factories causes enormous changes in mechanical engineering industry starting from the
development of cyber-physical production systems up to their application in production. Enterprise architectures already offer suitable methods
to support the alignment of the internal IT landscape. New demands like customer involvement, iterative development and increased business-
orientation arising with these digitized products require new approaches and methods. This paper presents the foundation and the first steps
aiming at the development of a method for the holistic planning of the digital transformation in small and medium-sized mechanical
engineering enterprises.
©©2017
2017TheTheAuthors. Published
Authors. by Elsevier
Published B.V. This
by Elsevier is an open access article under the CC BY-NC-ND license
B.V.
Selection and peer-review under responsibility of the International Scientific Committee of “11th CIRP ICME Conference".
(http://creativecommons.org/licenses/by-nc-nd/4.0/).
Peer-review under responsibility of the scientific committee of the 11th CIRP Conference on Intelligent Computation in Manufacturing Engineering
Keywords: Digital transformation; Digitization; Industry 4.0; Enterprise architectures

1. Introduction features and information for machine operators that support

manufacturing to adapt rapidly changing customer needs. To
Currently, customers increasingly strive for maximization realize such use cases a close collaboration of manufacturers
of personalized value. This becomes particularly obvious in and mechanical engineering enterprise is required. Through
the demand for individualized products and the increasing this development, IT is not any longer just a technological
influence of customers on the development and the production tool to improve the efficiency of internal processes. By
processes [1]. Factories can only meet this challenge by the becoming an essential part of the value creation it grows up to
application of digital technologies. In Germany, the term a new source of competitive advantage and thus takes a
Industrie 4.0 represents the aspired target state. Through transformative role [5]. The required extension of products by
improvements in information, communication and automation digital components to the point of cyber-physical systems and
technology live information is available over life cycles of their integration into service systems leads enterprises in
products, processes and factories. Production systems, mechanical engineering into a fundamental change process –
products and humans are closely networked. Moreover, the the digital transformation. Besides mechanics and electronics
resulting big data is used for holistic optimization. [2, 3, 4] they now need to develop digital capabilities and implement
This special situation gives rise to opportunities and risks for them into fast-changing, cross-company processes and
mechanical engineering enterprises. Based on customer data structures. Especially for small and medium-sized enterprises
there are numerous new possibilities for product and process (SMEs) this is an enormous challenge [6].
improvements including the optimization of the machining With the help of business model appraoches, many
process or spare part forecasting services. At the same time, enterprises already started to design digital value creation
they are confronted with new demands. Customers not just concepts. But these means are very limited when it comes to
want to buy a physical machine but service systems, deriving and implementing processes and IT services. In
consisting of hard- and software, that offer additional value in contrast to existing IT-based products, the new service logic
their unique context [1, 4, 5]. Examples are context-based requires a holistic process view. To take full advantage of the

2212-8271 © 2017 The Authors. Published by Elsevier B.V. This is an open access article under the CC BY-NC-ND license
(http://creativecommons.org/licenses/by-nc-nd/4.0/).
Peer-review under responsibility of the scientific committee of the 11th CIRP Conference on Intelligent Computation in Manufacturing Engineering
doi:10.1016/j.procir.2017.12.257
 David Goerzig and Thomas Bauernhansl / Procedia CIRP 67 (2018) 540 – 545 541

digital opportunities adequate models, methods and tools are The term digital covers gathering, storing, processing,
needed [4, 7]. With enterprise architectures (EA) information providing and using information electronically with the help
systems literature already offers a well-proven solution for of information technology (IT). Through ever lower costs and
this challenge [8, 9]. The aim of this paper is to examine if the increasing pervasion of IT nowadays large information
this approach is appropriate for digital transformation in volumes can be shared worldwide at minimum costs. [3, 5,
SMEs of mechanical engineering. Therefore, digital 13] The internet of things brings this development to the next
transformation and EA are defined. Afterwards, strengths and level. By sensing and analyzing the context of the customer,
weaknesses of EA in the context of digital transformation in this approach enable enterprises to get a deep insight into the
SMEs are analyzed. In addition, this paper presents the first customer motivations and create by this personalized
steps for the development of a method for the holistic customer value. [3, 5] One of the consequences is an
planning of the digital transformation in small and medium- enhancement of the relationship between provider and
sized mechanical engineering enterprises. customer. Through the close networking of customers and
providers digitization blurs the differences between them and
2. Digital Transformation in Small and Medium-sized enables cooperative value generation, also referred to as co-
Enterprises creation. Products evolve into services which are aiming at
maximum value for both. [5, 14] Simultaneously digital
The following section outlines the state of the art in the technologies enable a fundamental reshaping of business
field of digital transformation in SMEs. First, a closer look at towards cross-functional, modular and distributed processes
the definition of digital transformation is required. In change [14]. This development increases business agility and
management, the term transformation is used to describe the empowers enterprises to act in turbulent environments like
extent of strategic change. Whereas in a realignment there is ecosystems. Ecosystems are self-containing and self-adjusting
just a slight change in the way an enterprise operates, in a systems of loosely coupled actors that jointly create value.
transformation it changes its paradigms of doing things. [10] The basis of their relationship are institutional logics from
As shown in figure 1 in enterprise transformation literature which a set of rules and principles is derived. The importance
the term is defined as a fundamental change during which of traditional, linear value chains decreases. [5, 15] A basic
enterprises reinvent themselves. This contains a change of the instrument to leverage the advantages of ecosystems are
context in which the enterprise is active. The context includes platforms. These modular structures facilitate the interaction
the way of operation and the previous sources of success. between the actors. Platforms support the installation of rules
Moreover, the enterprise substantially alters its relationships for exchange and modular architectures. [5, 14] In summary,
with its key constituencies like customers, suppliers or digital technologies become essential part of the value
employees. The initial point of transformation is a radical creation. For mechanical engineering enterprises as well as for
change in the economic or market context. This can lead new market actors this development offers chances to create
either to an experienced or an expected value deficiency and new competitive advantages. Moreover digitization offers a
thereby influence the speed of change. [11, 12] On this basis it possibility to fulfill the existing customer demands for a
can be distinguished between an evolutionary transformation highly flexible supply of individual products. By reason of
in incremental steps and a revolutionary transformation by a these significant changes the digitization can be seen as the
big bang. The speed of change depends in most cases on initial point for a new wave of transformations.
whether the enterprise is forced to or changes proactively. At the moment, there is no common definition for the
[10] Result of a transformation is a conscious and sustainable digital transformation. The following literature sources give a
change in business performance [11]. It may lead to new hint on the current discussion. Schallmo points out the
value propositions as products and services, different ways of networking of the value chain for improved decision-making.
interaction with the customer in terms of delivery and He defines digital transformation as the connection of actors
provision of offers and new organizational forms to provide over the value chain and the application of new technologies.
these offers to the customer [12]. In his view digital transformation demands capabilities for the
gathering, the exchange, processing and analysis of data. The
aim is to support decision processes and to initiate activities.
Digital transformation influences enterprises, business
models, processes, relationships and products to improve the
performance and scale of the enterprise. [16] According to
Matt et al. digital transformation involves the application of
digital technologies with the aim of a change of key business
operations, products, processes, organizational structures and
management concepts. The authors describe manifold benefits
like increased sales and productivity as well as innovations in
value creation and customer interaction. [7] Nandico
describes digital transformation as a change of an enterprise
with the aim to provide new or enhanced products, services or
both to the customer. A key enabler for this new offering or
enhancement is the application of information technology.
Thereby, enterprises try to create new business models,
customer experience or operating models. [8] Whereas Matt et
Fig. 1. Process of enterprise transformation.
al. see the impact of digital transformation rather broad,
542 David Goerzig and Thomas Bauernhansl / Procedia CIRP 67 (2018) 540 – 545

Nandico concentrates on service innovation.

In this paper, digital transformation is defined as a
fundamental change process in enterprises initiated by new
competitive advantages through the evolution of IT into an
essential part of the value creation. To unlock these new
potentials enterprises evolve their products into services and
start to operate together with their customers in co-creation
aiming at value maximization. Important enabler are context-
sensitive systems that help to adapt the services to the
individual and situational requirements of customers. In order Fig. 2. Elements of digital transformation.
to be capable of offering these digitized services enterprises
have to think in modular, cross-functional and distributed 3. Embedding Enterprise Architectures in the Digital
business processes that allow them the integration into Transformation
ecosystems. Result of the change is the ability to create
personalized customer value at costs of mass production. The initial point of digital transformation is a digital
Figure 2 summarizes the definition based on figure 1. business strategy. This is an organizational strategy that aims
Hereby, several requirements for planning and to create differential value by applying digital resources in
development tools arise. Since it aims for the realization of formulation and execution. It goes far beyond traditional IT
innovative forms of value creation, an approach should be strategy which considers IT as a tool for improvement of
able to integrate ecosystems and platforms. Secondly, in order business processes. It contains scope, scale and speed of
to create customer-oriented and context-based solutions, the digital business strategy as well as sources of business value
approach should allow the analysis and documentation of the creation and capture. [14] Since the digital transformation is a
close interaction with the customer and a quick adaption of complex process for implementation, more details are
the necessary processes to changing market contexts. Because required. That is why a business model is derived from the
a digital transformation is a fundamental change process an digital business strategy. In the past businesses operated in a
approach should help enterprises to create a clear relatively stable environment with limited operative
transformation strategy and to provide a clear vision of the possibilities. For business managers, it was possible to derive
future state to get the commitment of all stakeholders. processes directly from strategy. With increasing digitization
SMEs have special characteristics that influence the the situation becomes more complex. The application of IT-
process of digital transformation and thus lead to based processes not only expanded the possibilities of doing
requirements concerning the supporting tools. SMEs are very things, the things themselves also got more complex. [17]
limited in their resources. On the one hand, their employees That is why new methods, models and tools are needed which
mostly do not have the required skills. Furthermore, they are help to put the strategy into action. Matt et al. propose the
tied to day-to-day business and are therefore not available for development of a digital transformation strategy. It contains
the development of new solutions. On the other hand, SMEs essential decisions on technology, structure, financials and
have only limited financial resources. Thus they cannot afford value creation. [7] This approach helps to detail important
expensive external support. For digital transformation issues of digital business strategy but is still on an abstract
methods, this means that they should have very little demands level. With business models, there is an approach that helps
for IT-capabilities and be very time-efficient. Moreover, it enterprises to make strategy more explicit. [17] A business
should be possible to apply them with a minimum of external model describes how organizations create value. It contains
support. Because of the financial shortage, SMEs are activities and resources that create customer value and,
dependent on the success of the realized projects. Therefore, therefore, lead to revenues. [18] Business models are made for
the expected returns of every project must exceed their costs the elaboration of value generation, but they are not suitable
and risks. A method for digital transformation should offer a for planning the implementatio of processes and services. [17]
good cost-benefit ratio. Since in SMEs the important decision Thus, another approach is needed to design and implement
are made by the CEO, he should be involved in the decision- processes and synchronize IT activities. In information
making process. Another demand of SMEs is a clear systems research many authors claim the application of EA
description of how the results shall be realized. [6] for implementation of business transformation. [9] The
Enterprises in mechanical engineering are characterized by question is if they are also useful for digital transformation.
the development and system integration of long-lasting capital EA can be comprised as a complete description of an
goods which are sold in a business-to-business relationship. enterprise. It describes the essential business artifacts and
The enterprises have a strong focus on product and their relationship. Therefore, EA contains a set of principles,
technology innovation. [15] Currently, software services play methods and models that help enterprises to design and realize
a tangential role. They are mostly used to raise margins or to its organizational structure as well as the fitting business
offer additional value to the customer. Software development processes, information systems and infrastructure. [19, 20, 21]
and networking of machines are still a challenge for the The central aim of EA is creating transparency by
branch. Thus, tools for digital transformation in mechanical documenting the actual situation. Thus, it aims at giving an
engineering enterprises should be easy to use and understand enterprise the control over its complexity, processes and
in order to involve all relevant stakeholders. Additionally, information systems. Additional aims are data demand and
they need to draw a clear picture of the transformation process interface analysis. Secondly, by providing an overview of the
and the expected results. essentials of the enterprise, EA helps to control and conserve
its most stable parts. As a third task, EA supports enterprises
 David Goerzig and Thomas Bauernhansl / Procedia CIRP 67 (2018) 540 – 545 543

to transfer strategy to daily processes. The fourth aim for EA customers into the development processes of the fast-
is that it can be understood by all involved stakeholders. A changing service systems become highly important. EA, in
fifth aim is that EA supports holistic optimization and contrast, follows the traditional waterfall approach of
identification of simplification. [19, 20] developing detailed and completed architectures and
Besides this very general characterization of EA and its implement them afterwards. In this view, information systems
tasks, there are many different definitions and EA frameworks are quite stable. During this process, there is no space for
with different scopes and focuses. Important distinguishing quick adaptions and iterative development. The focus on
features are the supported enterprise layers. There are five detailed planning leads to a conflict with newer agile
possible layers. In the strategic layer, an EA defines for approaches. [8] These approaches base upon an incremental
example products, interaction with suppliers and customers. development and a high involvement of customers. This leads
In the organizational layer, the architect elaborates business to less effort, increased velocity and an excellent customer
processes, information flows and roles. The integration layer satisfaction. [23] Additionally to the changes in the
considers applications, services and interfaces. Whereas the development approach also the system boundaries of EA are
software layer defines data structures and software realigned. With digital transformation, there is a fundamental
components, the IT infrastructure layer works out hardware change in business processes and organizational structures.
and network components as well as software platforms. Most This entails a strong business orientation and creates a
EA approaches focus on organizational, integration and demand for deep integration of digital strategies and business
software layer. First well-known approaches were the models. Currently, there is a rather neglected integration and a
Zachman framework and ARIS. Today, TOGAF is the most concentration on the integration of applications and
common framework. [20] infrastructure. Through the use of standardized platforms,
these challenges recede into background. At the same time,
4. Criticism on Enterprise Architectures as an Instrument the borders between market actors get fuzzy or in some
for Digital Transformation aspects even disappear. Digitized products gather customer
data and adapt to the context. To cope with this situation IT
At first sight, EA could be a great support for digital frameworks need to think in a service-oriented way and
transformation in SMEs of mechanical engineering. But unlock the potentials of ecosystems and platforms. Only in
currently, this approach is not very common in business this way it is possible to create individual, customer-oriented
transformation. In the literature, the development of the solutions. Up to now, EA frameworks are not capable of this.
application of EA for business transformation is discussed [8, 22] EA is used to plan and maintain the current state of
only in a few publications. Especially in SMEs it is unknown stable internal information systems. There are only limited
and not used. Although there are enterprises which already ways for doing things. In the future, there will be a large
align strategy and processes, they do not use EA. [6, 22] demand for the agile development of target states. Moreover,
There are several possible reasons for this situation. the transformation process itself becomes more important,
An important aim of EA is to bring people of different especially when it comes to the development of smart
fields together and to create solutions that are understood by products, processes and services. This all creates new tasks
all of them. Though this is a very important concern in major for EA in the life cycles of applications. [20, 22] Table 1
changes, in practice there is a wide gap between business compares the features of EA with the most important
transformation and EA. Because of their origin in different challenges of digital transformation.
disciplines, each approach uses different languages, In summary, EA is a very strong approach for
description techniques and tools. Business transformation has development, maintenance and documentation of information
a stronger focus on processes. Although EA has the word systems. It offers a wide variety of tools and models and has
enterprise in its name it is strongly rooted in IT. Strategy and proven its effectiveness in many projects. But while topics
processes are only considered marginally and with an IT- like digital transformation are hyped, EA becomes less
focus. Thus, the application of EA is mostly limited to IT important. The main objection is that EA is too complex and
departments. Publications argue that EA is thus to abstract. deeply rooted in IT. That is why this approach is not
That is why there is often a lack of management support. [19, understood by business and also not by SMEs of mechanical
22] engineering. But especially major change processes need a
In SMEs EA frameworks are not understood. TOGAF, for clear that is understood by all. Another point of criticism is
example, creates a complete view of an enterprise. But the that EA offers an extensive and inflexible way of planning.
approach is also very difficult to implement. It needs an But currently, agile methods change the way software is
extensive training and certification for use. EA frameworks planned and developed. Through the digital transformation,
are extensive and complex and difficult to handle. Although new hurdles like a stronger customer integration and
this challenge is widely known there are only a few ecosystems arise. Needed are approaches that look closer at
approaches in literature to cope with this. Even the official customer needs and offer an iterative development. Therefore,
TOGAF documentation points out that a reduction of the lightweight planning tools with a strong business focus, which
framework is recommended. But there is no information given can be understood by each stakeholder, have to be developed.
which parts should be eliminated for the application in SMEs.
Despite this situation, the application of EA in SMEs is barely
noticed in research. [6, 20]
Besides these hurdles in business transformation, new
challenges arise with digital transformation. Due to
digitization, a short time-to-market and the inclusion of
544 David Goerzig and Thomas Bauernhansl / Procedia CIRP 67 (2018) 540 – 545

Table 1. Features of enterprise architectures compared to the new challenges The first step of the macro cycle is to derive the business
of digital transformation. model from the digital business strategy. As described earlier,
Enterprise architecture Digital transformation the business model contains information like value
Driver IT-focus Business-focus proposition, customer segments or revenue streams. The
second step is to elaborate an ideal architecture. The aim of
Target groups IT-architects, Management, this step is to detail the business model in a very rough way.
IT-experts specialized staff, The ideal architecture contains descriptions of the main
IT-architects, … processes, main IT services and information that is needed for
realization. An important feature is that there are no
Subject Stable information Fast changing restrictions. The target of the ideal architecture is to give the
systems service systems architect room for new ideas without considering legacy
systems or strategic restrictions. Afterwards, the real
Development Waterfall approach Agile approaches
architecture is derived from the ideal architecture. In this step,
approach
the transformation strategy and the current architecture are
Focused Organizational layer, Strategic layer considered. Since the fundamental change during a digital
vertical integration layer, business model layer transformation should be realized incrementally, there are
hierarchy software layer, organizational layer always legacy systems and interfaces that have to be taken
levels infrastructure layer integration layer into account. Nevertheless, the architect should not continue
to use legacy systems at any price. The architecture backlog
Value stream Information systems for Ecosystems and context- follows similar ideas as the product backlog in the scrum
stable value chains and sensitive value creation approach. Based on the differences between current and real
customer needs architecture, user stories are defined in the architecture
backlog. These user stories are capsuled service systems with
Life cycle Development, Agile development, defined interfaces. A defined set of user stories can run
phases maintenance, usage, maintenance through the micro cycle independently from other user stories.
documentation documentation They describe the users, the desired functionality and the
benefit. There are no details about used software or hardware.
The aim of this is to create free space for the development
5. Approach for Digital Transformation in Small and team. Within the backlog, user stories are prioritized.
Medium-sized Enterprises Moreover, it is defined which user stories are built by the
enterprise and which are provided by partners within the
The previous analysis shows that EA offers a high ecosystem. Services that are part of the core competence or
potential for the implementation of digital transformation. But are not available on the market are developed single-
concurrently there are also weaknesses in existing approaches. handedly.
Especially an involvement of business could not be achieved. After running through the macro cycle the micro cycle can
Moreover, there are new challenges for EA. With the be started for the first time. This cycle begins with choosing
development of the last years, an agile development of the prioritized user stories from the backlog. The amount
business gets more importance. Additionally, the ecosystems depends on the speed of change an enterprise aims for. Next
and smart products become part of the architecture. In this step is the built or the service selection phase. During the built
paper, we present the first steps for a new EA approach for phase, the developers implement the user stories in a sprint.
digital transformation in SMEs. As previously analyzed, an But in most cases the selection of services off the shelf is the
approach for realization of digital transformation has to be better choice. Especially when a service is not part of the core
much more agile and therefore nearer to the customer. That is competence and is already available on the used platform, an
why agile development methods are the basis of the internal development should be avoided. After
developed approach. implementation or purchase, each user story is tested. Testing
As shown in figure 3, the approach is divided into a macro can be realized either together with a test customer or in a
and a micro cycle. The macro cycle defines the architecture of testbed as provided by different organizations (e.g. research
the entire SME. In the micro cycle single functions are institutes, universities …). In Germany, the I4KMU project
implemented and tested. Besides the incrementally developed offers SMEs help when it comes to testing of I4.0-relevant
macro and micro cycle there are two quite stable fields which technologies. They are supported to find a fitting test
help to conserve the digital strategy of an enterprise. The environment. [24] Next step is the review. There are three
digital business strategy is the initial point of the approach. It possible decisions. The first possibility is that the user story is
contains basic decisions concerning speed, scale and scope of marked as done. Then the teams start with the next user story.
the digital technology application in the enterprise. As The second possibility is that adaptions are required and the
described by Matt et al. it is essential to derive a micro cycle has to start again. The third possibility is that
transformation strategy out of the digital business strategy. there are findings that have an impact on the whole
Here, technological and organizational principles for the architecture. Then the macro cycle starts again. With the first
implementation are defined. In contrast to Matt et al., in this pass of the macro cycle, the architecture is still very rough.
approach value creation and financial aspects are not With every pass, there are more details. The macro cycle
considered as stable enough and are, therefore, defined in the should always give enough space for decisions in the micro
business model. cycle.
 David Goerzig and Thomas Bauernhansl / Procedia CIRP 67 (2018) 540 – 545 545

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