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Tuesday, July 31, 2007

Minimizing Enterprise Entropy - Using the OOF

Enterprise Entropy

Many large enterprises are struggling to come to grips with Global Innovation Complexity (GIX), which requires fundamental shift in the organization structure. Although many enterprises have opened their structures, however, the thinking of the people/leaders continues to be hierarchical rather than networked. The new world needs a rapid shift to networked thinking in the organizations. The problem is - a solution that may look optimal in a specific time period may loose its efficiency and in fact validity in a world where technology has advanced into hitherto uncharted waters. It is impossible to re-architect the enterprise with every technological advance. Enterprises advance by adopting new technologies in piecemeal fashion. Business processes are changed and Information and knowledge bases changed in a form and use that is typically unpredictable. It is this continuous piecemeal improvement to get quick solutions and may be business value that creates the enterprise entropy – a measure of disorder in the enterprise. The enterprise becomes extremely connected spaghetti of business processes, people, IT applications, computer networks, multiple customer channels and multiple supplier connections.

A dynamic, thriving, living enterprise of today is a remarkable system of wonderful complexities. The complexities evolve over a period of many years, many initiatives, multiple technologies, and multitude of people, multiple mistakes and learning. The initiatives result in processes that have tacit knowledge embedded in people, departments and specific organization structures. The processes have legacy IT applications as a source of processed data, information, knowledge and decision enabling actions. There are many new technologies that have been appended or enmeshed in this structure through careful adoption and adaptation. The result have been in creating further complexities as the enterprises have IT applications of multiple age profiles working together in business processes to create an enterprise.

When one juxtaposition this thriving, complex and dynamic enterprise in a globalizing world the complexities increase exponentially. In the globalizing world, the economics of the business demands that skills, capabilities and even knowledge should be leveraged from across the geographies provided these geographies are connected through robust data and information networks. In such a scenario it becomes exceedingly difficult for CXO’s to not to explore the options of global optimization strategies. This is more so, as the benefits that can be generated through leveraging of the global village if done right can create order of magnitude differences in bottom line performances. Thus we have the widespread trends of outsourcing and further off shoring – to follow the sun so that one designs a 24x7 enterprise. If one looks at the questions of what to outsource/offshore it becomes clear, that one need to understand the inherent complexity of the enterprise architecture.

The enterprises will face three important problems in tackling these questions –Complexity - Fundamentally we deal with complexity by partitioning the process into manageable functions, creating boundaries and interdependencies. The size of these functions (number and complexity of work steps) is determined by our ability to control/manage the work steps. There is a tendency to take responsibility for only the work we can control. Because of this, for the people doing the work, functions becomes the purpose of the work. Bureaucracy and ritualized work soon follow. Functions become optimized at the expense of the overall organizational purpose. Soon the individual functions become desensitized to the overall organizational purpose, become resistive to change, compete for resources, and blame problems on other functions they are most dependent on. The organization becomes unable to adapt quickly to changing markets, organizational learning stagnates and organizations start decaying.

Constant Change - The second factor is that the world we live in is constantly changing. Future is approaching us faster than history is leaving us. Any organization that is not constantly adapting to this change is progressing towards elimination. In other words there is no perfect organization, no optimal work flow, no optimal measures, and no ideal vision. What is needed is holistic purpose driven adaptation to an ever changing environment. Organizations, processes, measures, and visions only have value as structures that help us adapt. People adapt more quickly than structures. Only the learners will inherit the future. Hence incorporating the change lenses in the enterprise at all levels is the only way to embrace future.

Fuzzy Common Operating Picture – Because of the focus on the function the specific person, role, department, has a fuzzy visibility of the end to end process. The partitioning of roles within the enterprise puts people in conflict. That conflict can be seen most clearly at the boundaries of their roles, ritualized work practices with localized sense of purpose. How do we share responsibility for achieving the enterprise (shared) purpose?

The OOF (Offshore-Outsourcing Framework)

There have been simplified versions of years of wisdom in defining and designing an enterprise using different models. We describe three such meta-models of the enterprise, each with increasing complexity of parameters and interactions of these parameters.

People, Processes, and Technology (PPT) How does an enterprise connect these three building blocks for creating lasting business value for the customers is a major requirement for creating differentiation? Building this architecture requires a comprehensive understanding of what people skills and knowledge, and how these skills, roles and capabilities are stitched in business processes that flow into each other and out of the enterprise into customers or suppliers. How technologies can be leveraged and exploited to achieve connectivity of people and processes to achieve fundamental business objectives is another dimension. This involves major strategic decisions and operational actions, and a continuous re-evaluation as the technologies change rapidly.

Strategy Processes Organization Technology (SPOT) – This framework requires that besides the PPT the strategy of the organization in the marketplace is an essential component of the enterprise design. How an enterprise create the strategy and generate options and execute these options in the dynamic world make a difference to the success and failure. Further, it is not only the people, but how they are organized – the structure of the enterprise, the departments, the roles etc, that play a much important role in maximizing the capabilities of the people.

Value Net – Co-Optetion Framework – This framework looks at the Value net of the enterprise from the market perspective. The Value net includes the customers, suppliers, competitors and complementors as defined by Nalebuff and Brandenburger in their book Co-opetition. This framework gives an externalized perspective to the architecture of the enterprise whereas the first two frameworks are more of internal perspectives. Using these three frameworks, one can decipher with sufficient level of details, the structures, processes, people, and the market scenarios in which the enterprise is placed at a particular moment in its history. Technological connections between, people, processes, customers, suppliers, etc, are really the key to the enterprise architecture. These technological connections in the form of enterprise architecture stitch together people, processes, applications, data/information stores, knowledge repositories; design capabilities etc and provide services/products to the customers. Enterprises that glue these pieces through multiple technological solutions and adapt these solutions in the changing market scenarios by crafting solutions using current technologies are able to create better value with more profits.

We offer the Offshore-Outsourcing Framework (OOF) to take care of enterprise entropy.
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