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. 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 1 Copyright © BRL 2006
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Enterprise Architecture and Governance

Nov 01, 2014

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How are we to think about the transition in the architecture of the enterprise needed to support a transition to East-West dominance?
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Page 1: Enterprise Architecture and Governance

.

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

1 Copyright © BRL 2006

Page 2: Enterprise Architecture and Governance

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ASYMMETRIC ADVANTAGE

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Asymmetric Advantage

• The third kind of asymmetric advantage depends on relating to asymmetric forms of demand

• 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.

* 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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The third asymmetry: Asymmetric Demand

• Symmetric Demand – 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

• Asymmetric Demand – 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.

Strategy based on extracting maximum value from position

Strategy based on extracting maximum value from relationship

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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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The 21st Century challenge

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).

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’)

* Power to the Edge: Command and Control in the Information Age. Alberts & Hayes 2003

The dominant source of threat shifts from competitors (other nations) to customers (citizens and NGOs)

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.

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DEFINING THE ENTERPRISE

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•The goal is to establish who are the key actors, and how they influence each other in determining the performance of the whole:

The domain of practice

White:

how we must

do what we

do

Blue:

what we do

Internal External

Red:

particular

demands

Black:

the contexts

from which the

demands

emerge

The way

things

work

What shapes

the way

things work

The ‘who for whom’:

Are we satisfying the

presenting demand?

The ‘why’:

Will we produce the effect

that we want to?

The ‘what’:

Are things working as

they should?

The ‘how’:

Are we doing

things right?

Defining the Enterprise

N

S E

W

White:

how we must

do what we

do

Blue:

what we do

Internal External

Red:

particular

demands

Black:

the contexts

from which the

demands

emerge

The way

things

work

What shapes

the way

things work

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Governance as driven by the need to manage balance

Direction

of the whole

Operational

Capabilities

Developing the best

supporting

infrastructures

Demand

The particular nature of the demand

Problem-solving

Know-how

Developing effective ways

of satisfying the

particular demand

Balance

Clear overall intent

Source: East-West Dominance, Philip Boxer, 2006, http://www.asymmetricdesign.com/archives/32

Black:

the contexts

from which the

demands

emerge

Red:

particular

demands

Blue:

what we do

White:

how we must

do what we do

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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 asymmetric demand and means taking power to the edge of the organisation.

Black:

the contexts

from which the

demands

emerge

Red:

particular

demands

Blue:

what we do

White:

how we must

do what we do

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N-S dominant

N averages E demand defining the S

resources needing to be applied to the market as defined using the W know-

how model.

E-W dominant

N delegates accountability to E to

define the W know-how needed, defining the S

resources needed

Faustian

E-W definition overlaid on N-S

model informally working in the

reverse direction to the N-S model

within its constraints

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Direction

of the whole

Operational

Capabilities Developing the best

capabilities

Customer-centred

response

Organising the service

around the customer

Problem-solving

Know-how

Learning new ways of

providing services Regulation

Clear overall purpose

balance

Governance secures sustainable balance

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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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THE LAW OF REQUISITE VARIETY

The progressive development of the ability of the enterprise to integrate differentiated behaviors

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Integrating differentiated behaviors

what who/m

why how

what

who/m

why

how

op

erat

ion

al

fun

ctio

nal

po

siti

on

al

rela

tio

nal

inside outside

realization

identity

domain of relevance

‘above the strategy ceiling’ – unquestioned assumptions implicit in the way the enterprise does business, but ‘none of the business’ of the people working there

‘above’ the strategy ceiling

Defining Agency

Law of requisite variety

Progressive development of ability of enterprise to integrate differentiated behaviors

Definition of agency

Type of ‘culture’ (way-of-doing-things)

Copyright © BRL 2006 14

Integration of differentiated behavior

Differentiation of behavior

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Evolving Enterprise Architectural Patterns

task system boundary

managing director/boundary manager

operational managing director/ boundary manager

boundary

task system

functions: purchasing, production, sales, HR

functional

SBU managing directors/ boundary managers

functional ‘professions’: purchasing, production, sales, HR

task systems

‘push’ relation to the line

CEO

positional

SBU managing directors/ boundary managers

functional ‘professions’: purchasing, production, sales, HR

task systems

‘push’ relation to the line

CEO if directive

relational

VBU relationship managers

op

era

tio

na

lp

osi

tio

nal

rela

tio

nal

‘pull’ relation to the line

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CEOs if collaborative

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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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4 DIFFERENT FORMS OF GOVERNANCE

Different forms of ‘fit’ need different forms of governance

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South: Developing the best

supporting capabilities

(methods + skills + tools)

North: Direction of Strategic

Business Units (SBUs)

Directed Governance1: (functional culture)

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West:

business

process

know-how

in support

of the line

Cost to the ‘line’

Directed Governance2: (positional culture)

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Group 1

Group 2

… Group

n

Sites and Locations

Joint Venture

Acknowledged Governance: (positional cultures)

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Business-to-Business

support relationship

East : Virtual

Business Units

(VBUs) organised

around the

customer’s

demand

Balance: Demand-

side Regulation

Distributed Governance: (relational culture)

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Balance: demand-

side regulation

Group 1

Group 2

… Group

n

Sites and Locations

Self-Regulation

Collaborative Governance: (relational culture)

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Summarizing the different forms of governance

Acknowledged (positional culture)

Collaborative (relational culture)

Directed (operational,

functional or positional cultures)

Distributed (relational culture)

Single Enterprise

Multiple Enterprises

Product- or Solution-centric

(centre-driven)

Customer experience-

centric (edge-driven)

Balance: demand-

side regulation

Group 1

Group 2

…Group

n

Sites and Locations

Self-Regulation

Business-to-Business

support relationship

East : Virtual

Business Units

(VBUs) organised

around the

customer’s

demand

Balance: Demand-

side Regulation

Group 1

Group 2

…Group

n

Sites and Locations

Joint Venture

West:

business

process

know-how

in support

of the line

Cost to the ‘line’

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Relational Culture

• In both cases – The focus is on being edge-driven – Performativity depends on the strategy at the

edge – There is demand-side regulation of

performance

• In the single enterprise/distributed approach, this depends on the CEO’s (and stakeholders’) understanding the need to take up asymmetric forms of leadership.

• In the multi-enterprise collaborative approach, asymmetric leadership has to be emergent, and therefore critically dependent on the presence of demand-side regulation to ensure competition based on creating shared value*.

Copyright © BRL 2006 24

Balance: demand-

side regulation

Group 1

Group 2

…Group

n

Sites and Locations

Self-Regulation

Business-to-Business

support relationship

East : Virtual

Business Units

(VBUs) organised

around the

customer’s

demand

Balance: Demand-

side Regulation

Collaborative

Distributed

* 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