GPM First
Chapter 2 of Business Architecture (978-1-4094-3859-5) by Jonathan Whelan and Graham Meaden

Recognizing Today’s Business Dynamics

Continuous Change

Waves of change are hitting organizations with increasing frequency and ferocity. Technological and competitive pressure is forcing organizations to achieve greater efficiencies while meeting ever-declining price points. As customers expect more for less, organizations have to deliver better service and greater value for money year on year.

To survive, organizations must provide customers with great customer offerings and at the same time maintain their ability to change or reinvent themselves, and do so with agility. Increased competition fuelled by an expanding and maturing global marketplace and the penetration of technology into the home has led to rising customer expectations. To do better than just survive, organizations must offer something unique; in the industrial age a key differentiator was price, but in the information (or, arguably, knowledge) age there are many dimensions, including, but certainly not limited to, customer experience, personalized customer service, responsiveness, agility and innovation. These are the dynamics that today’s organizations face.

But change has always been present, and it has always been a necessity for organizations to master change if they want to excel. Many organizations respond by reorganizing themselves, and others by reinventing themselves. Take, for example, 3M, a company that started out as a niche mining concern and evolved into a multi-billion-dollar solution provider to customers in over 200 countries with over 55,000 product solutions,1 [5] and Nokia, which started off as a manufacturer of paper, then went into rubber and electricity generation, then telecommunications .2 [6]

The most successful companies adapt to embrace and exploit change; others (but not all) survive.

Increasing Competition and Globalization

The response to constant change is not a simple case of modernizing or refreshing an existing product or service line. The Internet as a distribution channel has removed geographical borders and allowed even the smallest companies to compete with the largest. The Internet has shrunk the world and provided access to a global community to ramp up competition. Web 2.03 [7] is with us, and Web 3.04 [8] takes advantage of semantics to create ‘intelligent products and services’.

Addressing these dynamics is leading organizations to restructure and reorganize themselves in a more integrated fashion, not just to the existing business model, but to a reinvented one. At the same time organizations are extending out to third parties and offshore locations, creating an ecosystem of collaborating entities. The pressure to squeeze out inefficiencies of more conventional, siloed organizations is irrepressible. Whether the silos exist as individual legal entities under the umbrella of a holding company or as disparate local and international divisions within a single entity, organizations are focusing on developing capabilities that drive strategic differentiation. Furthermore, they are exporting capabilities from the core to the external reaches of the ecosystem where they are commoditized and/or most efficiently served.

Organizations are eliminating, rationalizing, standardizing and reusing common labour, products, services, processes and technology. And they have to do so against a backdrop of increasing regulation – one of the costs of doing business – and corporate and social responsibility.

In some cases, changing the existing organization is too difficult. We saw this with the Internet boom at the start of the twenty-first century. Bricks-and-mortar organizations were just too slow. To compete with new market entrants, start-ups were incubated and grown alongside their bricks-and-mortar parents, and either subsequently integrated or left to operate alone under a differentiated branding. This model is still likely to be necessary going forward. However, the option for organizations to disassemble and reassemble is, in most cases, not feasible because no one really understands how their organization works and which of its activities are decisive in making profit and loss. Rarely can any individual understand all the complexities of today’s conglomerates.

The Influence of Technology

Change may be constant, but the pace is not: technology is a major accelerant. So dramatic is technology’s influence that it has the power to redefine the business landscape, to shape the structures and behaviour of organizations, to ultimately determine the success of organizations. With such an influence, organizations cannot ignore technology; they must embrace it. As organizations develop technology, exploit technology, sell technology, they must ensure that they refresh and rejuvenate their business models to ensure they are not wrong-footed or even marginalized by competitors. Their business architecture must change in tandem.

New technological advances are creating opportunities for start-up organizations to challenge the fundamental business models of industry sector leaders, sometimes leaving them stranded and struggling to survive and compete. Examples include:

  • Amazon versus book stores

  • iTunes versus music stores

  • Google versus traditional advertising

  • iPads versus laptops versus desktops

  • smartphones versus mobile phones

  • Netflix versus Blockbuster

If those examples don’t convince, today there are organizations that can attract more revenue from the advertising on their website than they can from the products and services they channel through the website.

We can be sure that there is more to come; the twenty-first century has been declared the ‘century of intellectual property’. If everyone owns a 3D printer in twenty years’ time, then distribution of ‘print designs’ will become the new media content. In the future, will iTunes be selling designs for printing a coffee table, a TV, a violin? Prototype printers are already printing prototype human organs. Advances in body scanning will enable replacement organs to be grown to custom-fit the customer.

The Whole and the Parts

A modern-day motorcar has over ten thousand parts on average, and a Boeing 747 has six million.5 [9] Each of these has some form of architecture in place. A motorcar has a transmission system, fuel supply system, electrical system, exhaust system, steering system, engine, suspension system, braking system, cooling system, chassis, and so on; an aircraft has a fuselage, cockpit, wings, tail fins, engines, fuel systems, cargo storage, passenger compartments, flight systems, and so on.

Construction of motorcars and aircraft is complex, but their design and manufacturing has been constantly refined over the last hundred years or so. In other words, their architecture is well understood. This architecture is relatively static in nature: once these machines have been designed and manufactured, they are largely expected to operate to the same functional and quality specifications throughout their working life.

The complexity of these manufactured items compared with a living ecosystem is relatively simple: they are tangible, broadly predictable and measurable, and hence manageable. Of course, we do not underestimate the design and engineering feats required to create something like the Boeing 747 – it is without doubt one of the most recognizable icons of the twentieth century. But developing an architecture for something that is constantly changing in purpose, operation and nature, that contains as many dynamic agents as it does static agents, represents another level of challenge, and one that every large organization faces each day.

Complexity and richness of capability6 [10] is increasing. Organizations are using layering, componentization, encapsulation, standardized interfaces and standards to hide and manage complexity. One of the reasons that Apple7 [11] products are popular is that their underlying technical complexity is hidden from the user by simple, intuitive interfaces. In other words, organizations introduce ‘layers’ to shield customers from the complexity of their operations and, also so that they can be more flexible or agile. Some organizations achieve this with varying degrees of success, as we have all discovered through using Internet sites and customer call centres.

Managing complexity in this way drives up the number of parts in a ‘solution’. Organizing the parts structurally and determining how they behave and interact requires an architecture to ensure that the collective set of parts operates optimally. Also, smarter or multi-purpose, multi-feature parts are more complex than uni-purpose parts. For ‘parts’ read ‘components’; for ‘components’ read ‘resources’; for ‘resources’ read ‘people’. The multi-faceted nature of these parts means that to suit circumstance, they:

  • can be configured in different ways;

  • can be fit together in different ways;

  • can operate in different ways.

With a solution like an aircraft, with thousands of different kinds of parts, without an architecture composed of superstructures, structures, assemblies, sub-assemblies and parts, conception would be difficult and construction and maintenance would be harder. Furthermore, the aircraft has to be designed to cope with the challenges it will face in the skies.

It is not sufficient to optimize each of the parts individually: having each part optimized for its own aims doesn’t necessarily mean an optimized whole. A car with a super-powerful engine able to achieve 300 km/h is not much use unless the brakes are up-rated accordingly.

Staying with the car analogy briefly, when asked the question ‘What controls the speed of a car?’, the answer from the majority of respondents is the gas (or accelerator) pedal. However, other answers are equally valid depending on your perspective: for example, the brakes, the weather conditions, the environment in which the car is being driven (for example, in the vicinity of a school, an urban area), the condition of the car itself and the condition (ability, experience, mental state and so on) of the driver. Like driving a car, organizations need to consider all aspects of the environment in which they operate.

So we see the trends and the actions. But what are the consequences of such change, and what does the new world look like? We are already seeing traditional organizations evolving into organizations constructed from an operating platform of common processes, technologies, information and services that can be orchestrated to deliver differentiated (and in many cases mass-customized) customer propositions through multiple channels. Such organizations are no longer composed of rigid functional structures with well-defined boundaries and interaction channels. Today’s global organizations are complex ecosystems that cannot be represented by simple hierarchical charts; they reveal fractal-like complexity when you examine their detail. Business architecture provides the holistic perspective to understand this complexity.

We talk about whole, parts and structures of an organization in this book, and although we make comparisons to complex machines, organizations are not mechanistic, but largely social. Organizations are full of people, so organizations must be designed to maximize the human potential as well as the technology.

In many ways society provides useful parallels to understand the problem facing business owners, managers and architects. Deciding to swing towards or away from employing stronger architecture and more command and control methods across an organization with less freedom for the individual parts is akin to political swings in society: swings between greater or less private sector and public sector contribution to society; swings between powers of the state and powers of the individual. The real challenge for organizations is to get this balance right.

The world is moving so fast these days that the man who says it can’t be done is generally interrupted by someone doing it .

Elbert Hubbard

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