Five insights for Enterprise Architecture to save your digitization

Failed transformations reveal we’re still thinking inside the box

Last week saw the collapse of Thomas Cook, the world’s oldest travel business. Apart from disastrous acquisitions in the past, analysts point at the company missing out on digitization, relying on a large brick-and-mortar presence, while competitors successfully transitioned to efficient online travel platforms.

Thomas Cook’s ostracean strategy may have been very particular, but recent research suggests that still two-thirds of all digitization projects fail costly. Post-mortems reveal, among other reasons, vague definitions, rosy projections, limited funding and digital opportunities being overlooked. But most failures chased a reluctant vision leading to a low-risk strategy, limited in scope and fragmented in time.

It seems we’re digitizing the hard way. How many failures can business take before finance and change appetite run out? The answer is simple: until it gets it right. Since market competition dictates digitization, learning from botched attempts should get us there.

The main lesson is that old habits, wishful thinking and conventional wisdom wreck digital transitions. By nature and method, digitizations differ fundamentally from traditional transformations and can only succeed by rethinking taboos and accepting five clear prerequisites that define digitization as:

1. business-led, it’s digital-as-a-service

2. all-out, capturing the total enterprise ecosystem

3. hands-off: autonomous and short time horizons

4. pull-in: digital absorbs the as-is business, not vice-versa

5. lock-in expertise and change appetite

Digital enterprise strategies should put these prerequisites at heart, as a prelude to the architectural principles and requirements. In execution phase, their operationalization is continuously monitored, so deviations can be timely corrected.

1. Digitization is led by business

Let’s start by clearing up a common myth: there is no IT in digitization. The business drives and owns the digitization efforts, since it needs to keep up with competition, cut operational cost, improve margins, or better interact with their customers. Interestingly, digitization not only transforms business practice, but also reshapes the enterprise itself. New-found opportunities, offerings and markets demand rethinking the business, its strategy and its capabilities while keeping staff, customers and suppliers close.

Digitization is not kickstarted by upping the IT budget to revamp company processes by throwing in promising digital technologies (e.g. RPA, AI, ML). Obviously, IT will facilitate and support digitization, but they cannot lead it. Without business in the driver’s seat, understanding the connected threats and opportunities and overseeing its implementation, digitization is doomed to fail.

2. Digitization is all-out

Research shows that botched transformations underestimated the impact digitization has on the enterprise as a whole. A traditional change can be confined to (a combination of) elements like process, organization, location, data, application or technology (Poldat). But digitization hits the overall enterprise ecosystem. Unmanaged changes are felt much deeper in the organization, disrupting informal and ad-hoc relationships that make up business practice, culture, capabilities, reputation, supplier interactions and market response. An effective digital strategy must factor this in by taking a holistic approach and gauge the impact on the complete enterprise.

This all-out capture is performed company-wide (breadth) and top-down (depth). Conducting business interviews is a useful technique can provide a flying start. It can provide a rough sketch of staff’s preparedness, understanding and motivation. To feed subsequent business scenarios and capability gap analyses, recurring standard questions could be used like: “what will happen to the/your […] without digitization”, where […] could stand for [motivation], [actor], [system], [product], [service], [unit], [position], [interaction with others] and so on.

3. Hands-off approach

Another learning point is ensuring versatility. Unlike “normal” transformations with a set course to clearly defined objectives, digitization can branch out into many unpredictable benefits and fresh business opportunities that may require a strategic calibration of the portfolio/road-map in run-time. To be successful, a digital strategy and its timeline cannot be cast in iron and should have a short horizon.

Digitization pays off when executed in a hands-off mode, and able to absorb and adapt to unexpected real-time events and opportunities. Contrary to traditional watertight definitions, objectives, timelines and budgets, a hands-off strategy offers much more creativity, breadth, autonomy and risk appetite than traditional business sense would permit.

Such a unorthodox all-out and hands-off digitization is unlikely to entertain the board. Even a digitally aware leadership expects a traditional strategy underpinned by scope confinement, financial control and risk-aversion to avoid collisions with the business-as-usual.

4. Pull, don’t push

However, managerial conservatism is mostly kept alive by the cliche that digitization, like a traditional change, is pushed into the existing business, where it may interfere with operations. To avoid this, digitization should move in the reverse direction: it is the existing business that is pulled into the digital enterprise.

To enable this reverse transition, an independent “digital factory” needs to be set up as a separate entity alongside the existing enterprise, eliminating interference with current operations. Successful strategies entrust this “factory” with full autonomy in execution, resourcing and culture. In return, it iteratively evolves into the target digital enterprise that will gradually absorb the existing business. While in transition, the overall organization will inevitably live in two worlds, “as-is” and “digital”. However, as they are organized separately, there is a clear line simplifying transitions.

This dual approach implies accepting that digitization is not a start-to-finish objective to be delivered, but an unending business function, serving the larger company with a specific practice and expertise like HR, IT or Sales. The digital factory provides in fact a “Digital-as-a-Service”, that iteratively offers new ways to conduct business.

5. Lock-in expertise and change appetite

From an organizational vantage point, the infusion of adequate expertise and willingness to absorb cultural change are crucial to digital success.

Importantly, the new digital knowledge management needs to be owned by the enterprise and its staff, not by external parties. However, blending own staff and hired consultants to infuse expertise through a controlled knowledge transfer program can kick-start a digital proficiency. Another (and faster) strategy is the acquisition of more advanced businesses including their digital capabilities. This “human digitization” comes in three flavors.

Leadership: It is key for leadership to be well aware of strengths and threats of a digital business to take informed strategic decisions on key topics like security, compliance and cloud presence. The greenfield digital factory allows the evaluation of and commitment to foundational standards enabling security-by-design, conformity-as-a-service and cloud nativity.

Stakeholders: On a more detailed level, business stakeholders and process owners need to thoroughly understand how emerging technologies (e.g. cloud nativity, API architectures, AI, ML and RPA) affect and benefit their business goals. In a digital enterprise, data ownership lies exclusively with business management. This implies their deep understanding and reliable execution of data strategy and governance.

IT professionals: As IT will sign off on the digital enterprise from a technology viewpoint, it needs to attain the technical expertise level needed to spar with business and suppliers. Strategy execution will define a framework defining how and when to integrate IT (development, delivery and service) with operations (e.g. DevOps). Based on this, a solid digital training portfolio and knowledge transfer program will timely ensure the required technical expertise levels.

In cultural context, new digital capabilities will affect all staff in many ways, defining many new roles and responsibilities demanding fresh skills. The digital strategy guides this culture change, with its impact and focus areas defined by a detailed capability gap analysis. Crucially, the staff’s preparedness to absorb new processes, roles, responsibilities and skills needs permanent health monitoring and evaluation. Typical risk mitigation upholding the change appetite center on ensuring digital awareness, adequate training, clear communication and firm stakeholder management.

Put standard EA in charge

Surprisingly, standard enterprise architecture comes fully equipped to cater for all above described digitization prerequisites. All five easily translate to architecture principles defining the architectural requirements.

The greenfield digital factory grants the enterprise architect (EA) an excellent opportunity to craft a native framework, providing a blank slate for the digital business, information and technology architectures and for core architectural requirements and constraints (related to e.g. security, compliance, cost, make-or-buy).

With the business driving them, use cases, business scenarios, and gap analyses digitization will shape a fresh business architecture, not held back by legacy data, systems or technology. Also, the dual approach provides a natural distinction between the baseline (as-is) and target (digital) architectures. This will also facilitate the prioritization and update of the road-map, change portfolio and transition architectures.

These are just few of many reasons to empower EA. Putting it in charge of digitization will provide a clean and robust architecture, able to simplify complexity reduction and adherence to conformity. In turn, the EA approach not only benefits an adequate and cost-efficient architecture but will also provide the flexible yet resilient framework an erratic digital business needs.