How are we to think about the transition in the architecture of the enterprise needed to support a transition to East-West dominance?

1. Enterprise Architecture and
Governance
In which the enterprise is subject to the
law of requisite variety, forcing a
progressive capability for sustaining
differentiated integrations of behavior
.
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2. ASYMMETRIC ADVANTAGE
.
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3. Asymmetric Advantage
• The traditional approach to competitive advantage (following
Porter) is based on owning something i.e. on establishing
property rights.
• The new kinds of disruptive competitive strategy (viz Christenson
et al*) are based on creating asymmetric advantage.
• Asymmetric advantage is based on knowing something that
competitors don’t know that creates value for customers
• There are three kinds of asymmetric advantage:
1. Know-how concerning uses of technology,
2. Know-how concerning customisation of business processes, and
3. Know-how concerning embedding services in customers’ contexts-of-use.
• The third kind of asymmetric advantage depends on
relating to asymmetric forms of demand
* Christensen, C.M., Johnson, M.W. and Rigby, D.K. (2002) ‘Foundations for Growth: how
to identify and build disruptive new businesses’, MIT Sloan Management Review, Spring
.
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4. The third asymmetry: Asymmetric
Demand
Strategy based on extracting
• Symmetric Demand maximum value from position
– Those aspects of a customer situation
• that can be abstracted and generalised across different contexts-of-use, and
• that are treated as symmetric with supply-side capabilities
Strategy based on extracting
• Asymmetric Demand maximum value from relationship
– Those aspects of a customer situation
• that are particular to the customer’s contexts-of-use (i.e. cannot be abstracted and
generalised), and
• that need orchestration and synchronization of supply-side capabilities by (or on behalf of) the
customer in a way that is particular to satisfying the particular indirect demands on the
customer (i.e. from the customer’s customers)
• that therefore demand an understanding of the indirect customers’ contexts-of-use.
• Value Deficit
– The gap between the symmetric and asymmetric aspects of a customer situation.
.
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5. Competitive Advantage
• A particular form of competitive advantage flows from each
form of asymmetric advantage:
1. Superior know-how about uses-of-technology generating
economies of scale:
• we can produce things more economically than our competitors
2. Superior know-how about customisation-of-business-processes
generating economies of scope:
• we can deliver our products and services to markets more economically than our
competitors
3. Superior know-how about embedding-in-customers’-contexts-of-use
generating economies of alignment:
• we can orchestrate and synchronize products and services dynamically in ways that change
with the way the particular needs of your customers (our indirect customers) are changing.
• These forms of competitive advantage are not
mutually exclusive
.
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6. The 21st Century challenge
Technology now makes it possible to demand that products and solutions be
customized, personalized, unique and distinctive to ourselves within our context
(Bobbitt, 2002 ‘Shield of Achilles’)
The dominant source of threat shifts from competitors
(other nations) to customers (citizens and NGOs)
Asymmetric demand (threat)
– that demand which is specific to the customer’s particular circumstances
and contexts-of-use. This may include tacit or latent demand that the
customer is not yet able to articulate relating to their relationship to their
customers (our indirect customers).
Power to the edge*
– Enabling people who directly experience a customer’s demand at the edge
of the organization to be able to organise forms of orchestration and
synchronization appropriate to the particular nature of the demand.
– The assumption is that the organization faces many such forms of demand,
and that power-to-the-edge therefore involves distributed collaboration.
* Power to the Edge: Command and Control in the Information Age. Alberts & Hayes 2003
.
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7. DEFINING THE ENTERPRISE
.
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8. Defining the Enterprise
•The goal is to establish who are the key actors, and how they influence each other in
determining the performance of the whole:
The ‘why’:
The ‘how’: Will we produce the effect
Are we doing that we want to?
things right?
Black:
White:
What shapes how we must the contexts
the way from which the
do what we
things work demands
do
emerge
Red: The domain of practice
The way Blue:
things particular
what we do
work demands
W N
Internal External What shapes
the way
White:
how we must
Black:
the contexts
from which the
The ‘who for whom’:
do what we
things work demands
do
emerge
The ‘what’: Are we satisfying the
The way
things
work
Blue:
what we do
Red:
particular
demands
Are things working as presenting demand? Internal External
they should? S E
.
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9. Governance as driven by the need to
Black:
manage balance
the contexts
from which the
demands
emerge
White:
how we must
do what we do
Red:
particular
demands
Balance
Clear overall intent
Blue:
what we do
Direction
Developing effective ways of the whole
of satisfying the
particular demand
The particular nature of the demand
Problem-solving
Demand
Know-how
Developing the best
Source: East-West Dominance, Operational
supporting
Philip Boxer, 2006, Capabilities
http://www.asymmetricdesign.com/archives/32 infrastructures
.
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10. North-South vs East-West Dominance
• With North-South dominance, the E-W response is subordinated to the N-S control
axis
– Directors’ top-down strategies (N) for how business capabilities (S) are to be used
dictate the way demands are identified and responded to.
• With East-West dominance, the N-S axis is subordinated to the E-W demand axis
– The identification of demands (E) and the formulation of effective responses to them
(W) determine the way business capabilities are directed and deployed.
• The ‘Faustian pact’ delays having to develop E-W dominance
– It allows the organisation to remain N-S dominant by cutting enough slack for those
needing to operate E-W so that they can deal with the variations in demand they are
encountering by informally flexing the system within the overall N-S control framework.
• East-West dominance presumes Black:
the contexts
from which the
N-S
dominant Faustian
E-W
dominant
asymmetric demand and means
demands
emerge
taking power to the edge of the White:
how we must
do what we do
Red:
particular
demands
organisation.
Blue:
what we do
N averages E demand E-W definition N delegates
defining the S overlaid on N-S accountability to E to
resources needing to model informally define the W know-how
be applied to the working in the needed, defining the S
market as defined reverse direction resources needed
using the W know- to the N-S model
how model. within its
constraints
.
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11. Governance secures sustainable balance
Clear overall purpose
Direction
of the whole
Learning new ways of Organising the service
providing services around the customer
Regulation
Problem-solving
Customer-centred
Know-how balance
response
Operational
Developing the best
Capabilities capabilities
.
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12. Sustaining East-West Dominance
• Sustaining East-West dominance requires:
– Leadership that can sustain power-at-the-edge
• A leadership model that can sustain the dynamic alignment
of infrastructures to demand
– An East-West approach to demand
• Collaborative relationships with customers within their
contexts-of-use developing strategy-at-the-edge.
– Infrastructures with agility
• Capabilities delivered within a framework of stratification
and granularity able to support distributed collaboration.
– Horizontal accountability
• The ability to hold accountable those with authority at the
edge
.
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13. The progressive development of the ability of the enterprise to integrate
differentiated behaviors
THE LAW OF REQUISITE VARIETY
.
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14. Integrating differentiated behaviors
Law of requisite variety domain of relevance
Integration of how why
identity
differentiated
realization
behavior
what who/m
‘above’ the strategy ceiling
inside outside
Differentiation of behavior why
Definition
who/m Defining Agency
of agency how
what
relational
operational
positional
functional
Progressive development of
Type of ‘culture’
ability of enterprise to integrate (way-of-doing-
differentiated behaviors things)
‘above the strategy ceiling’ – unquestioned assumptions implicit in the way the
enterprise does business, but ‘none of the business’ of the people working there
.
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15. Evolving Enterprise Architectural
Patterns functional
operational
managing director/
boundary manager
managing director/boundary manager
functions: purchasing,
boundary task system
production, sales, HR
operational
boundary
task system
CEOs if
positional collaborative relational
SBU managing
CEO CEO if directive
directors/ boundary SBU managing
managers directors/ boundary VBU
managers relationship
managers
functional
‘professions’: functional
positional
purchasing, ‘professions’:
production, purchasing,
sales, HR production,
sales, HR
‘push’ relation to
the line ‘push’ relation to
the line
relational
task systems ‘pull’ relation
task systems to the line
.
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16. On being edge-driven
• Only the relational form of organization can be
edge-driven without relying on faustian forms
of organization.
.
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17. Different forms of ‘fit’ need different forms of governance
4 DIFFERENT FORMS OF
GOVERNANCE
.
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18. Directed Governance1:
(functional culture) North: Direction of Strategic
Business Units (SBUs)
South: Developing the best
supporting capabilities
.
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19. Directed Governance2:
(positional culture)
West:
business
process
know-how
in support
of the line
Cost to the ‘line’
.
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20. Acknowledged Governance:
(positional cultures)
Joint
Venture
Group Group Group
…
1 2 n
Sites and Locations
.
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21. Business-to-Business
Distributed Governance: support relationship
(relational culture) Balance: Demand-
side Regulation
East : Virtual
Business Units
(VBUs) organised
around the
customer’s
demand
.
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22. Collaborative Governance: Balance: demand-
side regulation
(relational culture) Self-Regulation
Group Group Group
…
1 2 n
Sites and Locations
.
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23. Summarizing the different forms of
Group
1
governance
Group
2
Joint
Venture
…
Group
n
Balance: demand-
side regulation
Self-Regulation
Group Group Group
…
1 2 n
Sites and Locations
Sites and Locations
Multiple Acknowledged Collaborative
Enterprises (positional culture) (relational culture)
Directed
Single (operational, Distributed
Enterprise functional or positional
cultures)
(relational culture)
Business-to-Business
support relationship
Balance: Demand-
side Regulation
West:
business
process
know-how
Product- or Customer
in support
of the line
Solution- experience-
centric centric East : Virtual
Business Units
(VBUs) organised
around the
customer’s
Cost to the ‘line’
(centre-driven) (edge-driven) demand
.
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24. Relational Culture
• In both cases
Collaborative
– The focus is on being edge-driven Balance: demand-
– Performativity depends on the strategy at the
side regulation
Self-Regulation
edge Group
1
Group
2
…
Group
n
– There is demand-side regulation of
performance
• In the single enterprise/distributed approach, Sites and Locations
this depends on the CEO’s (and stakeholders’)
understanding the need to take up asymmetric Distributed
forms of leadership. Business-to-Business
support relationship
• In the multi-enterprise collaborative approach,
Balance: Demand-
side Regulation
asymmetric leadership has to be emergent,
and therefore critically dependent on the East : Virtual
presence of demand-side regulation to ensure Business Units
(VBUs) organised
around the
customer’s
competition based on creating shared value*.
demand
* Porter, M.E. & Kramer, M.R. Creating Shared Value: How to reinvent capitalism – and
unleash a wave of innovation and growth. Harvard Business Review, Jan-Feb 2011
.
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