Digital Transformation and Enterprise Architecture
Digital Transformation is highly interconnected. It starts with strategy and permeates to every process and employee. Unless we understand the interconnected nature of products, services, technologies, and environment benefits will fall short.
Good enterprise architecture brings the relevant connections to the front. Framing the problems we are solving for decision makers.
The Seven Levers of Digital Transformation provides enterprise architects with a reference model of identifying interconnection relevant to value.
Business have embraced investments in the digital landscape to reinvent themselves, stay relevant, and get ahead of their competitors.
The approach is piecemeal. Technology specialists promote their specialization - mobile, analytics, bots, AI, IoT. The inability to re-articulate corporate strategy or its implication accurately has resulted in this myopia.
Projects do not build on each other to deliver on the corporate strategy and goals. Without connecting other parts of the organization, return on technology dollar always fall short of projected value.
Enterprises do not follow a cohesive strategy have fragmented their potential. What’s worse, there was no disciplined way to diagnose. A 2016 PwC study highlights the state of affairs:
- 45% of the digital projects faced scope issues
- 25% of the projects require outside help for skills, despite internal teams getting trained
- 57% outsourced their digital projects.
Digital Transformation is highly interconnected. It starts with the leadership and strategy and permeates to every leaf level process and employee. Unless the interconnected nature across products, services, technologies, and environment are understood, benefits will fall short of projections and expectations. This document is about creating an awareness about this interconnection. An awareness that would cause creating value for the enterprise and its customers; it is about framing the problems we are solving for before decision making.
Architected Approach to Digital Transformation
High functioning Enterprise Architecture Teams deliver on their purpose and answer the hard problem. Nothing else. Even if they can.
Digital Transformation will have questions of Strategy, Portfolio and Projects. Digital Transformation will have plenty of solution delivery.
An Architected approach comes down to:
- answering the question at hand
- providing the minimum constraints to ensure decisions do not fail a test that is not apparent to the decision-maker.
Strategy & portfolio questions are longer-term planning and budgeting. Every organization has multiple paths forward and different constraints. Successful organizations perform prioritization and trade-off.
Project and solution delivery need alignment support. Enterprise architecture exists to guide choice when the success criteria is outside the decision maker's field of view.
We use Seven Levers of Digital Transformation to drive strategy, portfolio and project questions.
The Seven Levers of Digital Transformation
Except for “ecosystem and business model”, all the levers to applicable to all enterprises. With the saturated marketplace, it is worth a pause or re-look at your own ecosystem and business model.
All these levers should be engaged synergistically to amplify the returns. As we review each lever, it will broaden the understanding of the digital transformation landscape, help you assess where gaps exist within the enterprise, and successfully address them.
Lever 1 - Business Process Transformation
Every enterprise has at least three kinds of processes: product / service development, cross organizational collaboration, and external engagement (with suppliers, distributors, and customers). Until a few years ago, at least the first two were stable enough to cause any concern. Rate of change of the external engagement processes were also partly controllable. Engagement with customer was the only area with a lot of variability. Social, mobile and internet technologies have further thrown a wrench into the stability of customer engagement processes.
“Explore” and “Reflect” phases are always outside the enterprise boundary. Depending on the industry segment, “First Use” and “Repeat Use” may be opaque to the enterprise. It has become an imperative for businesses to be ‘in the know’ about every customer touchpoint in a saturated marketplace. These stages are important to craft the three kinds of business processes.
Even with digitization of processes, instrumentation and measurements to understand the behavior of people interacting with the system were rarely in focus. Now, with ease of instrumentation, we have new possibilities. Instrumenting business processes within and outside the enterprise lend insight into human behavior. Instrumenting applications and technology tools lend the insight into machine behavior. Both of them generate large volume of breadcrumb data in a brief span of time that is too complex for humans to interpret and respond in time.
Lever 2 - Customer Engagement and Experience
Experience is also the gap between the customer’s expectation and the reality. It influences the engagement. In like vein, engagement when positively affecting the customer, leads to a desired experience. They can feed off of each other and amplify both harmoniously, creating customer and business outcomes. With the customer obsession buzz engulfing us, it may serve us well to examine what makes this attention new.
Service mindset over Product Mindset
For providing delightful experiences, and increasing engagement, it is best to focus on the customer’s outcome and the touchpoint they wish to engage in. Adopting a service mindset instead of being fixated on company’s own products being in the delivery system is the way to go. It is wise to be mindful that retention of the apps beyond 90 days of first use is declining heavily. In September 2016, Recode reported that “half of U.S. smartphone users download zero apps per month in the past year.” That’s also not a new trend, as we have been seeing similar numbers since 2014.
Another emerging concept advocated by Clayton Christensen is “jobs to be done”. Focusing on the core need as the unit of analysis over the customer is this new thinking. We root it in the idea that customer’s hire a product or a service for a job (core need) that has to be met.
Dashboards in cars displaying miles left to drive before a refill is a shift from metric to outcome by adopting this approach. It is about enabling decision making. Other examples from IDEO and their work with shopping carts, OXO, and pillpack highlight the same approach.
Connecting Experience and Process
How do the experiences of your customers, employees, suppliers and partners impact the business processes? Using the above-the-line (experience) and below-the-line (process and technology) mapping.
The process here is a simple complement to the typical Journey Map. We can break this process map into decisions made by the front-line personnel and corporate/back-office personnel. Decisions made by the corporate personnel will impact the frontline and customer.
Lever 3 - Product or Service Digitization
Simply put, products and services exist to enable customer outcomes. Digitization is a method of employing electronic technology to create a product or a service or to understand the behaviors of the user.
Digitization serves multiple needs, depending on the context and purpose of the enterprise. It could be about improving the throughput of a production line, enabling preventive maintenance or improving the productivity of the end user. Focusing on customer engagement and experiences, and combining with the concepts of process management results in creation of the digital feedback mechanisms, customer empowerment options, and a digital twin. This can be achieved by pursuing Digitization to enable predictive intelligence and Digitization to create customer value. Digitization to extend a product or service to provide value in the digital channels, the customers choose to engage. The channel of engagement should not be an arbitrary choice whether to create a website or a social page. It needs to be an intentional capability that benefits our customer in the touchpoint of their choice. Productivity, predictive intelligence and outcome (value) are so interconnected that the customer may not see these are three different components of product and service digitization.
Lever 4 - IT and Delivery Transformation
In this document, we started with advocating the business processes, which are the backbone of the business, followed by customer focus—the purpose of the business and digitization of products and services—the contemporary call for businesses. If you concede that these essential are significant lifelines for any enterprise to thrive, then a multiplier for IT investments is a given. This also causes IT to deliver at the rate of market change. Hence, its delivery pipeline can no longer follow traditional methods. IT has to embrace the principles of automated BPM and lean practices; support decision making and deliver products; transition from differentiator to backbone of the enterprise.
Thanks for the need to govern and contain the spend on information technology or operational technology, cloud providers have changed their billing models. IT teams have evaluated their algorithms in terms of ROI, retention and delight. This way of thinking introduces a healthy tension between well thought out foundational architecture and time-to-market. These are the priorities to be navigated by the leadership, factoring brand affinity, profitability and shareholder value, and customer expectations on a case to case basis.
If your team knows the value of exceptional customer experience, cost of execution of logic, delivering productivity gains to its own (IT), business and customers. Congratulations! You are among the IT transformation leaders. The laggards—25% of the enterprises have no cloud or mobile strategy, followed by the next 30% with some transformation effort without fully baked outcome definitions.
Lever 5 - Organizational Culture
All changes we spoke about till now have a direct impact on the organization culture, team structuring and the time-to-market approach (delivery and execution mindset). In simple terms, be prepared to test most of your decisions, because the context and timeframe has changed. Question whether the knowledge is preserved within the walls of the enterprise. Are you deciding to support “as-is” operations and to enable the transformed state; do you want an incremental change or side-by-side operational model for change?
We have seen different symptoms of lack of cohesive direction for culture development. Fact based decision making and balancing it with judgement is hard. Transformation follows three distinct steps—time-to-market, scaling operations or sustaining capabilities. Each of step requires a different mindset.
In this period of transition, what is important is promoting a culture of continuous learning, experimentation, and making adjustments to the products and services toward long-term success. Process owners and managers who inject well-intended controls invariably cause frustrations to the customers. To their credit, absence of data could have led them to believe in the success of employing such controls.
We should train process decision makers to take advantage of the level of transparency enabled by instrumentation and telemetry. On the positive side, a well-structured transition from innovation to scaling to sustaining capabilities result in sticky customers. Blue-green deployment model used in IT delivery is optimized for concurrent experimentation and scaling. We can use same method and technique for organization design. It is one way to avoid leadership rotations.
Lever 6 - Strategy
Article by Gerald Kane and co., in the July 2015 MIT Sloan Review issue, summarized best “Strategy, Not Technology, drives Digital Transformation”. Several enterprises across segments, like John Deere, McCormik & Company, and Disney have created a clear vision for the use of digital technologies. Best strategies have made hard choices about investments in functions that produce value for the customer and margins for the enterprise. They have focused on the long-game and the human centricity.
An enterprise strategy should factor and support all the other levers. Strategy provides clarity whether to pursue product or service digitization. Strategy is not limited to bringing a vision to fruition through execution excellence. It can be game changing by questioning the current business model and effecting a disruption. It is only possible with bold leadership that starts with a beginners’ mind and lead with first principles.
A virtuous strategy enables culture (internal) and fosters the enterprises ecosystem (external). It requires the organizational leaders to step back from day-to-day operations to see internal and external patterns. Objective strategy waits for data – qualitative and quantitative. It simplifies decision making at the leaf level, making the rank and file focus on customer outcomes, corporate and social responsibility.
Lever 7 - Ecosystem and Business Model
In a connected world, with dynamic economic situation, the needs and problems should be reevaluated often. Customer’s focus on personal productivity and economic growth is driving enterprises to understand the frustrators and regressors. It is easy to buy into the notion that the new entrants are outstandingly innovative in solving a problem and extraordinarily creative about generating demand. In most cases, they have just removed the layer(s) of friction for enduring customer adoption. The incumbents just have to leverage the insights about their customer and be willing to reframe how the frustrators and regressors are addressed. They can just preempt disruption or be proactive from being disrupted. This is the foundational tenet of the “jobs-to-be-done” approach.
Pursuing any levers independent of the other or without equitable improvement in the other will not enable achievement of customer stickiness, improved margins or gains in productivity. Business processes not only provide operational backbone, the footprint it leaves enable artificial intelligence engines and guide autonomous bots. Understanding customer experience and behavior insights augment strategic the decisions about horizontal or vertical integration. Transforming technology delivery drives time-to-market, agility and margins. Transforming organizational culture ensures nimble operations and seamless governance.
As a decision maker, it is your responsibility to control the portfolio; guide the value realization with strong foundations and governance. You have made conscious choices to configure your value chain to sustain or lead in your industry segment – don’t let mundane operational issues let you lose sight of those configurations. Digitization is another tool to maximize the benefits of such configurations.
Govern the transformation for value, not activities performed. To support the governance:
- gain as much empirical insights as needed;
- develop your roadmap top-down and change course often based on bottom-up learnings;
- exercise all seven levers.
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