“AI enabled platforms are shifting the role of enterprise technology from enabling strategy to transforming it”
why some leaders will make the leap and others won’t
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Meet the Authors
Jack Calhoun, Mark Withington, with help from Jennifer Ai
Accelare’s CEO, Jack Calhoun and Vice President, Mark Withington, supported by research from Jennifer Ai (a sophisticated language model), unveil a groundbreaking approach leaders must embrace in their struggle to capitalize on the AI fueled world of digital transformation.
In “Good to Next,” we challenge the conventional wisdom that the org-chart is the cornerstone of strategic planning. We argue this reliance is a profound misstep, as it forces a tool never intended for strategic planning to dictate how a company approaches its markets, customers, and the very resources it needs to succeed.
Furthermore, we argue that the annual budgeting process, driven by the org-chart’s departmental structure, fragments an organization’s strategy and customer journeys into siloed optimizations, inadvertently reinforcing the status quo instead of driving innovation.
“Good to Next” outlines four new business principles starting with reengineering the strategic planning process; and in doing so introduces the High Definition Operating Model which explicitly defines how the organization designs, prepares for, and delivers it value proposition to its customers.
Getting to “Next”
This books stands on the shoulders of giants in a literal sense. Business best sellers such as “Reengineering the Corporation” (Hammer & Champy), “The Innovator's Dilemma” (Christensen), “Good to Great” (Collins), “Blue Ocean Strategy” (Kim & Mauborgne), and Scrum: The Art of Doing Twice the Work in Half the Time (Sutherland) set the stage for the NEXT big idea in business strategy and management. Indeed, the title, “Good to Next” is intended to be a double entendre expressing our desire for it to not only become the next book in a series of business best sellers that CEOs and their staff will consider mandatory read, but also the approach in which organizations can reinvent themselves to address the needs of their NEXT business model and opportunity.
Over the last 35 years we have held positions as software engineers, strategy advisors and turnaround consultants, entrepreneurs, Sr. Executives and Board Members. Along the way we have been party to and responsible for many strategy processes and major business transformation programs. We have both been the executives responsible for strategy formulation and execution, and participants in dozens of client strategy processes across numerous industries and on most continents. We are also voracious readers and students of business management theory, and contributors to the best-selling books by Michael Hammer and James Champy – Reengineering the Corporation, X-Engineering, The Agenda and authors of HBR articles including The Next Revolution in Productivity.
At their core, organizations do two things:
- Processes – to Run their current operations and
- Projects – to define and execute a portfolio of changes intended to run and improve their current processes (by improving their efficiency and effectiveness), and another portfolio of changes intended to transform their processes to seize new opportunities and markets.
Organizations do processes and projects to improve and transform those processes. Processes and projects – that’s really it.
This book focuses on both how organizations run their AS-IS Processes more effectively and at the same time change in order to improve and transform their processes. An organizations fitness and ability to change is essential yet most organizations are not good at it – in fact the current strategy process fails to deliver 60+% of the time.
Imagine a process where 60+% of the products manufactured failed or an airline with a 60+% failure rate on its landing process, or a medical procedure with a 60+% failure rate. Those would certainly rank very high on the things those organizations need to fix. And yet, successful strategy formulation and subsequest execution – arguably one of the most important processes an organization needs to master in order to protect shareholder value and stay alive – remains elusive… And with the advent of new technologies like artificial intelligence, cloud computing, big data, etc. which have the ability to radically impact existing business models. – what we call digital disruption exposure – one would think this should be the highest priority for every CEO and Board member.
We have entered the era of Digital Disruption, a transformative shift that is rapidly reshaping industries, markets, and customer expectations. As Klaus Schwab, founder of the World Economic Forum, boldly articulated in his book “The Fourth Industrial Revolution,” we are in the midst of a technological transformation unlike anything humankind has experienced before. This revolution is driven by the relentless march of technologies like artificial intelligence (AI), platform-as-a-service (PaaS), Big Data, the Internet of Things (IoT), blockchain, and mobile computing.
These technologies aren’t just incremental improvements; they are fundamentally reimagining how businesses operate and create value. Consider, for example, how Artificial intelligence (AI) has the potential to create knowledge asymmetry (the imbalance of knowledge) between organizations that leverage AI and ones that don’t.
AI algorithms are trained on vast amounts of data, giving them access to insights and patterns that may not be readily available to humans. This data advantage can lead to AI systems making more informed decisions and predictions, creating a knowledge gap between those with access to AI and those without.
In today’s dynamic, technology infused business landscape, organizations must excel at two core, yet interconnected, tasks to remain viable:
- flawlessly running and improving their current business and operating models that deliver their current value proposition
- simultaneously envision and execute the projects necessary to transform themselves into their next.
Unfortunately, most strategic planning efforts fall short of this two-pronged approach, focusing instead on identifying extensions of the existing value proposition (through product and service portfolio expansion) and only marginally on the next big idea—their next value proposition, business, and operating model.
The Value Proposition, Business Model, and Operating Model Paradox
Understanding the interplay between an organization’s value proposition, business model, and operating model is crucial for achieving strategic success. The value proposition is the foundation for attracting and retaining customers. It articulates a unique set of benefits the organization promises to deliver to customers. The business model then outlines how the company creates, delivers, and captures value from this value proposition by defining the target customers, the channels used to reach them, the key activities required, and the resources needed to deliver it. And finally, the operating model brings the business model to life. It specifies the capabilities (processes, technology, and people) and the governance structures that work together to deliver the promised value proposition to customers in a sustainable and efficient manner.
These three elements are inextricably linked: a compelling value proposition is essential for attracting customers, but it can only be sustained if the business model is sound and the operating model is capable of delivering the value effectively. Conversely, a well-designed operating model can be rendered ineffective if it doesn’t align with the business model or if the value proposition doesn’t resonate with customers.
Completing the Strategy Toolbox
The business landscape is a dynamic entity, constantly shifting under the pressures of technological advancements and evolving customer expectations. To navigate this turbulent terrain, organizations need a full set of tools or conceptual models that guide them towards sustainable success. Conceptual models serve as a blueprint for understanding complex systems, processes, or products. They simplify reality by representing the most salient features and relationships in a way that is easy to grasp. In the realm of design, conceptual models are invaluable tools that streamline the design process, enhance communication, and ultimately lead to better outcomes.
The Value Proposition and Business Model are simply conceptual models that help executives better define why customers buy from them and how value is created and captured, however, as we saw in the prior chapter, these models currently rely too heavily upon the org-chart as a means of connecting concepts to reality. This is the job of the operating model.
The operating model is the bridge between strategy and execution, and it’s essential to consider it an integral part of the strategy design process. While the value proposition defines what the organization offers and the business model outlines how it will generate revenue, the operating model delves into the “how” of delivering that value. It details the structures, processes, capabilities, and technologies needed to turn strategic aspirations into tangible outcomes.
In today’s rapidly evolving technological landscape, the operating model’s significance is heightened. Technology is no longer merely a supporting function; it’s often at the heart of the value proposition itself. Therefore, understanding and incorporating the technological components into the operating model is crucial for realizing the organization’s strategic vision.
Delegating the operationalization of strategy solely to department heads can lead to siloed decision-making and a disconnect between strategic intent and operational reality. By involving executives in the exploration and understanding of the technology architecture, organizations can ensure that the chosen technologies align with the strategic goals and can be effectively integrated into the operating model. This collaborative approach fosters a shared understanding of the strategic vision and facilitates a more seamless transition from planning to execution.
Integrating the operating model into the strategy design process also allows for a more proactive and adaptable approach to change. By anticipating potential challenges and identifying areas for improvement early on, organizations can make informed decisions about resource allocation, process optimization, and technology adoption, ensuring that the operating model remains aligned with the evolving business landscape.
The Evolution of Enterprise Software – from picking packages to committing to platforms
My first exposure to Enterprise Software was back in the 1980’s when I started my first job out of college working for Arthur Andersen’s consulting Division refining their Systems Development Lifecycle (SDLC) called Method 1 and supporting their MRP system called MAC PAC.
Method 1 was considered the gold standard for a structured “waterfall” SDLC and was one of the core services of Andersen Consulting and its 68,000 consultants which broke off from Arthur Andersen in 1989 and then in 2001 rebranded as Accenture. At this time MAC PAC was a financial and manufacturing resource planning package. The product was a combination of a General Ledger, Purchasing, Accounts Payable, Accounts Receivable and Manufacturing resource planning system. We had automated many of the GAAP procedures for accounting and started to create the workflows and controls needed to manage complex manufacturing processes including the bill of materials, supply ordering and workflows to manage the parts, labor and expenses across the rudimentary manufacturing processes. Because of the quality movement and the discipline needed to manage complex manufacturing processes, those parts of the business drove the automation of many of the processes from paper-based ledgers to automated control processes. MAC PAC was “packaged software”, the clients could license a copy of the software and run it on their infrastructure. This was the dominant model of software distribution until the internet and outsourcing made it possible for organizations to share distributed resources and not build their own on-premise data centers. Commonly called the move to the cloud. Cloud computing became popular in the early 2000s.
There were two dominant models – the Public Cloud: Services are delivered over the public internet and shared across multiple organizations. Examples include AWS, Microsoft Azure, and Google Cloud Platform.
The last time you bought health insurance, financial services, a driver’s license, internet/mobile phone services, or for that matter any service (often referred to as an intangible good), did you feel like your customer journey was well designed and mapped out? Or did you feel like a Customer Experience (Cx) pioneer “boldly going where no customer had gone before”?
Customer Experience, the compilation of emotions a prospect, new customer, or existing customer experience at each touchpoint with an organization (whether direct or indirect) that influence the their perception and decision-making process. The experience begins from the moment they first become aware of their need to the point of transaction all the way to the point of reflection (e.g., provide feedback and recommendation), often referred to as the Customer Journey.
For many organizations, particularly service organizations, cstomer experience has become the differentiating feature and yet for most of those organization, the customer experience is vaguely defined relying upon the heroics of frontline personnel to patch-up any inconsistencies in quality – yes, customer experience should be the measure of quality for an organization with the same level of precision or tolorance of tangible goods.
Unfortunately, most organizations unwittingly parse the end-to-end Customer Journey across the org-chart fragmenting the journey across artificial barriers. We call these artificial because from the perspective of the organization’s current and future customers the org-chart is totally invisible. They experience the output of an end-to-end process or customer journeys – from the point they’re compelled to action all the way through providing feedback and all the touchpoint in between.
These end-to-end processes/journeys traverse functional departments, and therefore, fragmenting the strategy and the customer journey into the org-chart is nonsensical. In fact, there is no mention of the customer nor process at all within the org-chart which is why so many customer complain of incomplete journeys riddled with poor departmental handoffs.
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