Notes from the Field: The Rate of Change

I stated in my last article that an adaptive enterprise—or, as this customer likes to call it now, an extended enterprise—is built, not bought. It is a transformational process, and every enterprise arrives at the task of transforming itself with a different history and different goals, priorities, and needs.

My current customer’s process of transformation began with a thorough understanding of what its enterprise looks like today. I asked it the typical questions:

  1. What is its critical business priorities and strategies?
  2. Does it govern IT as a critical corporate asset?
  3. What are the strengths and weaknesses of the existing enterprise architecture? Does it facilitate IT governance?
  4. What are the strengths and weaknesses of its people, processes, and technologies?
  5. Where in the organization is it more or less agile today—and where does it want to be as a result of transformation?
  6. Where is its IT budget currently spent? What percentage goes to maintaining the existing applications and infrastructure and what percentage to innovation?
  7. How does the business view IT and why? Is IT viewed as a strategic business partner?

These questions and their subsequent answers have helped me and my team develop an important baseline understanding of the state of the enterprise: what we call CMO. Agility is a key topic of discussion with this customer and one that comes up with every meeting. The assessment that we have done considers three distinct dimensions of agility:

  1. The dimension of time considers the speed at with the organization can promote, enable, and react to change. How quickly can it make the necessary changes that are triggered by its business decisions? How well can the organization’s components keep pace with the rate of change in their respective industries?
  2. The dimension of range considers how the customer implements change across its businesses, whether across processes, organizations, or technologies. Does it have to limit initial implementation of those changes to a certain geography—and then roll it out across the enterprise? Can the customer do it worldwide from the start? The big question I posed was “How effectively can you roll out your product in all the different formats and modalities that the global marketplace requires?”
  3. The dimension of ease considers the levels of effort and cost required to introduce or support change. How effectively is it taking advantage of the enablers for change that are arising in the marketplace?

There’s that word again: “change”. I have spoken at length on this topic and in previous posts, but the one thing I haven’t really touched upon is the rate of change. This has been and continues to be a part of many conversations with my customer. I have taken a more macro-level business approach with it with the discussion about the rate of change and how it will often be dictated by how rapidly its industry’s value-exchange mechanisms can evolve over networked environments. In some of its business unit environments, the nature of how value is exchanged or how business is transacted will change very little. For instance, the sale of goods and services that require a high degree of customization will likely continue to be concluded on a case-by-case basis between a limited set of well-known business partners. While the network might facilitate the exchange of information between each of the parties involved, those kinds of bilateral transactions will remain unique and relatively complex in how they are negotiated and completed. In other business unit cases, collaborative markets will become the dominant means of conveying value.

Other environmental factors will have an equally significant influence on the future of successful business models. Not least will be the issues noted above, including the uncertainty of demand, the degree of asset specialization, and the costs related to complete transactions. Changes in any one of these factors can influence how successful incumbent business models will be in a rapidly changing network environment.

One way that we have worked together is by determining which existing business models across the customer’s global footprint will most likely be affected by changes to environmental factors. By assessing the degree of sensitivity of the current organization of economic activity for its industry and in business units around the world where asset specificity and transaction costs are relatively high, the chances are good that hierarchies will remain the preferred business model. However, we found that where goods and services are subject to high rates of demand uncertainty and consistently lower transaction costs, networks and collaborative value webs will emerge as the dominant business model. We are currently ensuring that those business units that aren’t properly positioned against key environmental factors are moving to address the dimensions of agility: time, range, and ease.

If this customer wants to attain a higher level of adaptiveness, how does it go about it? Technology and creativity in its application, as well as the behavior of people, together provide the answer. We have touched upon the “people” topic many times in the past in our meetings. The culture and mindset of the people in this global organization must be open to new ideas, reacting quickly upon changing circumstances and creating new opportunities so the people themselves have to adapt to react to events.

Becoming this new adaptive, extended enterprise will help this customer address core business needs: to maximize return, mitigate risk, improve performance, and increase agility. By working together to create an environment in which they can really synchronize business and IT, the people in this company can create an enterprise that can adapt to change, create new opportunities, and capitalize upon rapidly changing market conditions—all of which puts them in a singularly powerful position to deliver value, compete, and win in a rapidly changing world.