The permeation of digital technologies throughout modern society has been ongoing for a while now. Today, however, the technology wave has not only continued to accelerate, but has also changed in its very nature. Technology trends such as the Internet of Things (IoT), cloud/virtualization, big data and data analytics, social media and Enterprise 2.0, advanced machine learning, 3D printing, and technological networks are radically transforming almost every industry. This transformation is evidenced by the fact that digital technologies are no longer just supporting how companies do business — digital is becoming the way to do business.
For business strategy, digitization creates a strategic paradox. One implication is that change has become the key characteristic of the new era. Research shows that the speed of change in an industry is directly correlated to the degree of digitization. The notion of sustained competitive advantage is diminishing in importance, if not becoming completely obsolete. Instead, strategists talk about transient advantages.[1] Businesses that understand the change become skilled at exploiting this concept, putting themselves in their customers’ place, and considering the outcome they are trying to achieve. They accept that competitive advantages are fleeting and disruption is crucial to being able to survive. This change is relentless and leaves little room for putting things on hold in order to restructure and rebuild. As soon as one transformation is accomplished, the company must be able to respond to the next challenge. Many transformations may even be ongoing in parallel work streams.
The other implication of digitization is that change is more difficult than ever. For many years, strategy has been about building and fortifying positions that are hard for competitors to imitate. Digital technologies have been adopted with this objective in mind. To transform, firms need to account for organizational change across the different business and technological layers of the organization in a synchronous way. This is hard, and often each transformational sprint creates some minor misalignment between the business and technology layers. Over time, these misalignments cumulatively add to organizational complexities, and as a result it becomes cumbersome, or even impossible, to exploit digital opportunities.
It’s widely accepted that companies such as the camera producer Kodak, the mobile phone company Nokia, and the typewriter manufacturer Smith Corona were disrupted because they didn’t spot the digital trends in their respective industries. The reality is, however, different in one important aspect. Kodak was itself the inventor of the digital camera. In 1996, Nokia released the first smartphone, more than a decade before Apple released the iPhone. Smith Corona was a frontrunner in word-processing typewriters with its PWP 1400 model. So the issue that brought these companies down was not that they were unable to see the technological trends. The issue was that they could not reinvent themselves to deal with the industry dynamics that followed the swell of digitization.
Enterprise Architecture as a Transformation Capability
Leaders peering over the edge of the horizon of their own and adjacent industries might wonder, “What are companies that have achieved digital success doing differently?” We believe that at the heart of the ability to manage an ongoing and multilayered organizational transformation rests a sophisticated enterprise architecture (EA) capability with a specific charter to act as a transformation engine connecting strategic intent and execution excellence. However, because of the relative youth of EA, there are many different views on what EA is and what impact/value it offers to modern businesses. Some talk about EA as a structural characteristic of how the different components of an IT infrastructure are assembled. Others talk about EA as a method or approach for understanding how the different business and technology layers of a firm fit together.
Our research has taught us that to capture what EA brings to the table in the era of digitization, EA needs to be understood as a capability for orchestrating an ongoing organizational transformation across the different layers of the enterprise. At the end of the day, it doesn’t matter what particular breed of EA framework a company uses. Neither is the state of the EA at the beginning of a series of digital transformations of decisive importance. As a starting point, it helps if the EA is in good condition, but what really matters is the long-term trajectory. Each effort should be improving the overall architecture in a significant way, rather than just introducing incremental changes or efficiencies. If used in the latter way, the EA becomes a marginalized and nonstrategic asset. Each minor transformation should not bring the organization one step closer to a major organizational restructure.
Our research points to two qualities of EA capability that are especially critical. The first is that the EA capability must have direct and intentional engagement quality. In our work, we have often seen EA kept at arm’s length from the transformation work. EA contributes to the transformation by providing various artifacts that map the as-is situation, but it does not assume responsibilities or accountability for any tasks in the transformation. The EA function should be able to not only deliver input as a supplier to other organizational units, but should also actively engage in the collaborative solving of challenges with other units.
The second quality an EA should have is to span across all architectural layers, from IT infrastructure and applications to operations and strategy. This might sound obvious, but because of the heritage from an era when digital technologies were only supporting business practices, most companies just use EA to orchestrate change across IT infrastructure and application layers. With the fusion of business and technology in the era of digital business, this separation is no longer effective when orchestrating organizational transformations.
Note
[1] Transient advantage is a business strategy that accepts that competitive advantages are often short-lived and focuses on innovation strategies that continually build new advantages. Instead of building one advantage and defending it, a transient strategy focuses on the velocity of competitive advantage. See: McGrath, Rita Gunther. “Transient Advantage.” Harvard Business Review, June 2013.
[For more from the authors on this topic, see “Achieving Digital Business Transformation through Strategic Acquisitions: The Role of Enterprise Architecture.”]
