The path of enterprise evolution

“The art of progress is to preserve order amid change and to preserve change amid order” - Andrew North Whitehead (1861-1947), mathematician, logician, philosopher and author

In my last column, “Working in collaborative ecosystems”, we looked at using IT to focus on the end customer. I also mentioned that automated business partnerships (ABPs) are an extension of enterprise evolution where enterprises leverage IT to extend value chain capabilities to confer single-minded focus on the end customer. In this column I would like to look at enterprise evolution, as a way of focusing on what enterprises need to do internally to achieve superior external performance such as the value chain effectiveness achieved through ABPs.

The premise for the need for enterprises to evolve emerges from the fact that change is inevitable. At the beginning of the 20th century, Singer was listed among the top 10 companies by market capitalisation, a position that the company no longer enjoys because the market for sewing machines radically changed when people bought clothes rather than made them at home. At the turn of this century, three oil companies were among the largest global corporations. Perhaps they will have to adapt later this century when the world runs dry of hydrocarbon fuels or perhaps when consumers switch to sustainable and renewable energy sources. However, companies that are designed for change continue to do well. Southwest Airlines last year had earnings of $241 million, its 30th consecutive year of profitability. The company achieved such performance through differentiation on cost in a devastating year for the airline industry post 9/11,

There is also a co-relation between company performance and effective use of IT. Wal-Mart, FedEx, Dell, and P&G use IT effectively and in a transformational manner to stay at the top of their respective industries. IT becomes useful because it enables recording of every customer interaction, ability to offer insights into customer and market behaviour, turn a business into a scientific laboratory for pre and post production and manufacturing purposes, and its potential to reinvent the economics of business itself.

I am not for a moment advocating that IT alone can bring about the necessary change in business effectiveness. Changing organisations need a strong business model like Southwest Airlines, well-defined business processes that are increasingly flexible, and an organisation structure that supports change, in addition to the right use of technology. These attributes form the base parameters of enterprise evolution, and they change with changing roles given for technologies within the enterprise, leading to increased enterprise maturity.

In my opinion, the path to enterprise evolution cannot be achieved overnight with one grand stroke of an expert’s magic wand. Enterprise evolution is punctuated by distinct stages of increased integration and collaboration using IT, which organisations have to adopt in a planned and sustained manner. This is evident not only from historical data on successful companies, but also from a careful analysis of evolution of technologies. For example, look at workgroups that eventually led to LANs, WANs, and global networks and ultimately became pervasive with the onset of the Internet. Along with the evolution of technology rose the integration of departments, enterprises, value chains, and so on. With these trends, we have seen business models, team structures and organisation structures changing. In the final analysis, we are witnessing organisations spilling over their boundaries, becoming more flexible, externally focused, and adapting to the dynamic external environment. This is the core outcome of leveraging IT rightly for business transformation.

Characteristic stages in the evolution can therefore be plotted as a function of increased flexibility and integration beginning with cross-functional integration leading to enterprise-wide integration from an internal perspective; and, the integration of value chains leading to creation of a collaborative ecosystem from an external perspective of an enterprise. There are thus four distinct steps on the path to enterprise evolution viz: cross-functional integration, enterprisewide integration and value chain integration leading ultimately to the collaborative ecosystem.

In the next column I will be discussing what these distinct steps are and what these mean to enterprises. I will be using examples from Boeing, Seagate, Dell and General Motors to illustrate what these distinct stages of enterprise evolution would mean to enterprises using IT for business transformation.

George Eby Mathew has been analysing global IT for about a decade. Currently he is a Principal Researcher with Software Engineering & Technology Labs at Infosys Technologies, where his research interest covers the business value of IT amongst other topics. George can be reached at george_mathew@infosys.com. The opinions expressed here may not reflect the views of Infosys.