The Strategic Foundation


In my last post, I explored the evolution of business in the industrial age. This Fourth Iteration of Business establishes resilience on a foundation of automation and intelligence. Resilience may be more important than the productivity gains that are sure to be realized as we progress towards Business 4.0, providing the capacity to recover quickly as the pace of shifts accelerates. This visual represents a strategic foundation for Business 4.0.

The Strategic Foundation

ADAPTIVE CORE: the path to resilience is slowed by the core of our organizations. In most cases, our legacy environments are standing in the way of resilience. Realizing an adaptive core depends both on technology and leadership (as we will see when describing the capability link). More detail is available in this post mentioned above.

SOFTWARE EXCELLENCE: aside from the technology foundation required to enable the core, future success relies on software excellence. As digital ripples across all aspects of value creation and capture, software cements its place as a cornerstone of future success. Lack of software talent – already in high demand – is a potential impediment to progress.

THE EDGE: increasingly, we view interactions at the edge of our organizations through an ecosystem lens. Value creation and capture in the broadest sense is becoming a collaborative affair that increasingly involves multiple stakeholders within a value ecosystem. Managing in this world is more complex, requiring collaborative competence and the agility to rapidly exploit opportunities for value creation and capture. The shift to Ecosystem Thinking is a critical step towards edge effectiveness. 

DIGITAL SPINE: Much like the human spine is our backbone, the heart of the strategic foundation is a digital spine. It is the basis upon which everything else is built. Adaptability and edge effectiveness rely upon a digital backbone that supports the linkage of organizational capability to the needs of the edge. The digital spine creates the frame for which the innovation accelerators that follow are built upon.

CAPABILITY LINK: a digital spine enables Capability Linkage. A tension exists between the core and the market facing edge of our business. The characteristic set is very different across these parts of our organizations. In a recent book titled Dual Transformation, the authors (Scott D. Anthony, Clark G. Gilbert, and Mark W. Johnson) focus on the challenging task of transforming the core while simultaneously creating a growth engine. Here is what they had to say about the capability link: It allows a company to strike a balance wherein it leverages just enough capabilities to gain an advantage versus other competitors, but not so many capabilities that by definition, its ability to do something new is constrained.

AUTOMATED: the possible economic impact of Automation lies somewhere between $14 and $30 trillion. Automation is critical to the productivity gains required to overcome economic stagnation. As described in a post on Tipping Points, automation is also required to address the potential supply constraints of the 2020s. While there are potential societal challenges driven by automation – there are many possible gains as described in this video by Bill Gates.

INNOVATIVE: the pace of shifts is accelerating and driving high levels of uncertainty. This environment puts a premium on organizational adaptability and alters our view of innovation. Rehearsing the future becomes a core competence, as we prepare for a range of possibilities. Future innovation portfolios therefore provide us with options that are leveraged to address the shifts. An effective portfolio requires an investment in seeing the future at a level that allows us to determine potential paths. Without it, speed of response is undermined. 

COLLABORATIVE: the future is about relationships and how we manage them. The complexity of multi-stakeholder ecosystems makes seamless engagement critical, and places greater emphasis on platform business models. Additionally, the pace of shifts will necessitate the ability to rapidly swap relationships in and out, making the effective use of plug-and-play relationships a core competence.

AGILE: agility is required in a world where emergent need is difficult to sense – and even more difficult to convert to emergent value (Respond). Ecosystem services are core capabilities that are consumable in the markets we interact in, representing the key to agility. A description of ecosystem services is available in this post mentioned above.

INTELLIGENT: the Role of Analytics has evolved in the last decade. The explosion of data coupled with the critical need for decision speed, personalization, insight and foresight, forces an analytic maturity progression for most organizations. Environmental complexity exacerbates the issue, increasing decision-making burden. As sense-and-respond paradigms replace our command and control management orientation, an enabled edge is the only path forward. This places greater importance on algorithms and artificial intelligence.

SENSE AND RESPOND: As the speed of business accelerates and the amount of data flowing through ecosystems expands, the need to sense stimuli and enable a real time response intensifies. This emerging management paradigm is broadly applied across a wide spectrum including: innovation, opportunity, risk, operations, future scenarios, and stakeholder experience.

PLATFORMS: Platforms are enabling mechanisms. They enable scale, collaboration, and near zero marginal cost. Business 4.0 is increasingly forming around them; the dominant growth engine of the future. The network orchestration business model enabled by platforms is the fastest and cheapest path to growth. Network orchestrators outperform companies with other business models in several key areas. These advantages include higher valuations relative to their revenue, faster growth, and larger profit margins. This occurs because the value creation performed by the ecosystem reduces the company’s marginal cost.

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