To successfully segue into an elastic enterprisei, companies must resolve the following questions and translate flexible IT service delivery into competitive advantage.
What is the best way to structure our enterprise for success in the 21st century?
Elastic enterprises employ a new generation of strategic, structural and operational processes to meet marketplace demands, negotiate economic conditions and rapidly respond to opportunities. Five dynamics form the core for the new elasticity and underpin the operating model of the elastic enterprise (see Figure 1).
While all five dynamics work together to drive elasticity, here we especially focus on the complementary role of the business platforms, business ecosystems and the underlying elastic digital architecture.
The Business Platform
A business platform is an adaptive business structure that expresses the company's aims and interests, and supports its operations. When an elastic enterprise sees new opportunities, it uses its business platform(s) to take action.
The Business Ecosystem
A business ecosystem is an elastic business partnership structure consisting of a cornerstone company and all the business partners. The business ecosystem can scale up and down with very low friction because of synergies with the business platform.
Is our current operating model adaptable or fixed? What could we do with more enterprise elasticity?
Elasticity offers five key capabilities, each of which enables an enterprise to transform every business performance dimension: scale, cost, friction, speed (cycle time), responsiveness, customer experience, strategic optionality and innovation.lll
New-scale economics: With the elastic enterprise, scale economics change radically. Eliminating the capital investment and minimizing operating costs for the business platform significantly reduce the costs of adding new features, business partners or new products and services.
Mass differentiation: Business ecosystem partners can invent and offer specialized "plug-compatible" features supported within a business platform. Similarly, the cornerstone company can add new services on-demand, or hone new versions of existing ones through real-time data analytics.
Active strategy: Data analytics and extensive collaboration throughout the business ecosystem enable continuous strategic response to global markets and competitive threats, keeping decision making tied intimately to customers and the marketplace.
Strategic options portfolio: Systematic capture, measurement and evaluation of future strategic business options generated through business ecosystems, experience with business platforms, real-time customer product usage data, R&D, customer ecosystem social data and other inputs.
Radical adjacency: Going beyond core competencies and M&A to enter industries by leveraging business platforms and business ecosystem partnerships. Once in the new industry or market, the business platform and active strategy elements amplify and accelerate the learning process, sometimes allowing them to learn much faster than industry incumbents.
Does our current IT architecture future-proof our enterprise? Does our technology give us enough elasticity to compete?
A key component for any enterprise is an elastic digital architecture (EDA). The underpinnings of an EDA can be understood through social, mobile, analytics and cloud technologies, or the SMAC StackTM. By enabling real-time collaboration, anytime anywhere interaction, predictive insights and reduced Cap-Ex, SMAC creates new levels of operational efficiency and effectiveness, access to business platform components and unlocks additional value through a more extensive and adaptive business-IT architecture.
Progressing Toward an Elastic Digital Architecture
From our experience, creating an elastic digital architecture requires the following (see Figure 2):
An IT infrastructure that is dynamic and adaptive.
A business-oriented services catalog that offers a wide range of services to the enterprise.
A strong and mature IT service management support structure.
Differentiated access, zones of collaboration, data and decision rights, and user privileges.
Process and procedures to address security and privacy concerns.
What must IT do to ensure the future of our company?
The new structures that give the elastic enterprise its elasticity fundamentally transform the role of IT.
A New Role and Optics for IT
Here's what our experience in the field and our ongoing discussions with IT leaders tell us:
IT emerges as a key player with business ecosystem partners, customer communities and product and service development.
IT and the business become one. The flexibility and fluidity provided by an EDA means that execution moves to multidisciplinary teams, each of which are galvanized around a customer or market-focused activity.
IT becomes vigorously customer-centric. With increased instrumentation, data analytics, mobility, social networking and customer communities, the IT team receives valuable customer insights many times before anyone else in the company.
IT optics shift outside the enterprise, and IT effectiveness is measured by success in the marketplace.
IT becomes strategic and latency dwindles, when IT is intimately involved in the process.
In the first part of this two-part series, we discussed the rise of the digital world, the SMAC stack and the need for elasticity to sustain in the 21st century marketplace. We also argued for the IT intensity gravitating to the customer, competition and collaboration; the IT mindset changing as the IT optics change and IT skills evolve accordingly.
With the stage set for increased elasticity, part two of this series will offer pointers to execute an IT transformation and extract optimum value from an elastic architecture.
Read part II of the two-part series on creating elastic architectures. For further details and some real-life examples, please read our whitepaper Creating Elastic Digital Architectures (PDF). Also visit Cognizant's IT infrastructure services practice for more insights.
i Elastic enterprise is a term coined by authors Nick Vitaleri and Haydn Shaughnessy that defines a new generation of competitive strategies and operating principles that enable timely and effective responses to economic and market conditions.
ii Source: Nicholas Vitalari and Haydn Shaughnessy, The Elastic Enterprise, Telemachus Press, 2012. Copyright© 2012, used by permission. Elastic Enterprise is a registered trademark of Elasticity Labs