Three Characteristics of Successful Composable Enterprises
The impact of this hyper-competitive market is felt wider than web-based product and service providers. It is felt throughout the value chain and even into long-standing businesses who face a dynamic trading environment where increasing pressures on cost, price and regulatory oversight continue to complicate traditional business models.
Consequently, both startups and established businesses are adapting and adopting new approaches to their organisational structures. They are putting each individual link in the operating model chain under greater scrutiny, looking for better ways of delivering customer value and questioning established ways of working.
This approach is called the Component Operating Model (COM) and can be thought of like viewing an organisation as a series of Lego bricks, each with their own individual components and connections into the wider business. It requires a willingness to view each functional team and operating process in a modular way with the objective of assessing the ability of each to adapt dynamically and strategically.
Naturally this has a profound impact on traditional or existing structures and challenges the very nature of the corporation.
The Composable Enterprise
Businesses which adopt this approach will put a significant stress on traditional IT infrastructure and service delivery. Until now, successful ICT departments were able to offer robust, stable and secure service across corporate silos, some of which had little if any connection to other service divisions. As with so many other casualties of the digital economy* this rigidity, once a strength, is now a strategic weakness. Operating models are changing and ICT departments are not immune.
In response, businesses are turning to the COM to guide the next generation of change, leading to the rise of the Composable Enterprise, a company capable of delivering top-to-bottom flexibility and agility towards innovation and service delivery.
Of course there’s no one right way to implement this model. However, a few characteristics of successful transitions are emerging, including:
- Redefined Operating Model. Crucial to the success of any COM effort is a focus on creating an operating model which takes a sufficiently atomic view of business operations. Key elements, such as the least dependency, minimal function, predictable SLAs, shared knowledge must be identified and interrogated.
- Appropriate Skills & Capabilities. Transformation is only possible through people and the success is predicated on having the right people, with the right skills and the right attitude, the latter being particularly important as part of a larger change initiative.
- Clear Critical Path. Finally, the ultimate goal is to define the organisation’s critical path; that is, the minimal functions and resources required to deliver customer value. From this the management team can identify areas which require scale and create individual KPIs and success metrics on an atomic level.
For many businesses it is a radical step and this kind of change must be driven from the top. However, emerging web services driven by the API economy – like Amazon and Dropbox – are offering new ICT alternatives that can help smooth the transition.
And considering every new company started today will view the COM as its starting point, the writing is on the wall for all businesses, established or otherwise.
* “Services with Everything: The ICT-Enabled Digital Transformation of Services”; Zysman, et al, BRIE Working Paper 187a (April 2010)