Modern business environment is complex and highly dynamic. Digital disruption changes fundamentally the ways companies create value – both in terms of external customer experience and internal operations. The speed of change is fast and accelerating. The situation calls for strategic agility.
It is justified to claim that agility has become more important than strategy itself. Why is this? Shifting the focus to agility is a good way to acknowledge the fundamental unpredictability of the business environment – be it about customer needs or competitor moves. Homework around vision and strategy continues to be vital but in the final analysis it is agility that determines success.
Strategic agility consists of two key abilities:
- Ability to capture new business opportunities and to react to emerging risks
- Ability to renew business in terms of operating and business models
Agile company creates and captures new value thru in‑depth understanding of market needs combined with solution creation that beats the competition. To achieve this, the company needs to be innovative and quick.
However, digital disruption demands more than that. Long-term success calls for changes in operating model and sometimes in business model too. That is, transformation to a completely new configuration.
In its core, the concept of digital disruption is simple: Technology has become the dominating source for productivity. Digital capabilities are now the foundation for customer value, customer experience and operational efficiency. These capabilities position the company in relation to productivity frontier. This position is industry specific and determines company’s competitiveness. And it would be bad mistake to think that digital capabilities are about technical point-solutions available off-the-shelf from an IT house. Instead, they call for holistic and systematic approach and good leadership skills.
In this situation – characterised by technological and organisational complexity – strategic agility can only be achieved thru modular and distributed capabilities. Capability modules consist of technology, processes and people. Agility cannot be achieved with centralisation but thru distribution. And agility builds on modular rather than monolithic capabilities.
The age of distributed modular capabilities has begun. Implications are profound.
There are many elements enabling distributed modularity but the critical nucleous consists of the trio of architecture, technology platform and operating model. Together they form the foundation for succesful digital transformation.
Architecture is used to plan, describe and communicate digital capabilites. Architectural choices are in key role in determining how the goal of distributed modularity based agility is to be achieved. Architecture is multifaceted ranging from enterprise architecture to microservices.
Cloud computing as the dominating technology platform and ecosystem is key enabler for distributed modular capabilities. For example, distributed enterprise applications would not be feasible without versatile cloud computing service models. Beyond that, cloud technology is also critically important enabler for innovation, differentiation and fast solution creation. However, as a significant architectural and technological turning point, edge computing has new emerged as complementary element alongside the cloud.
Distributed modularity brings additional complexity and there is no way to avoid it. However, increased complexity needs to be managed. Well designed and carefully implemented operating model – consisting of organisational structure, business processess and governance – is the tool for the job.
Need for holistic and systematic approach becomes clear thru recognising the dependency between elements within architecture, cloud computing and operating model. Those elements must be be designed and deployed together in coordinated and syncronised manner.
Overall, the ten rules for digital business renewal build on these core themes:
- Agility thru federated modular capabilities
- Architecting digital capabilities
- Cloud as modularity and differentiation enabler
- Operating Model to manage increased complexity
- Integrating modules into coherent whole
- Data and software as critical success factors
- Leveraging legacy IT
- Utilising the ecosystem
- Going All-in with AI
- Managing digital transformation
To be continued.