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Purposeful Enterprise -- some thoughts on shaping the enterprise of the future

Author: Sarang Shah, Principal Consultant

We are in the midst of an exciting stage in the evolution of the modern economy, where accelerating technological changes, highly networked world, demographic shifts and rapid urbanization are leading to a disruption that is not ordinary [1]. The effects of these disruptive changes are impacting the prime movers of our modern economy - the businesses' or corporations. In this blog post, I would like to share some of my thoughts and questions about the future of these prime movers.

Let us take a step back and talk about the corporation itself. What is a corporation? What is its relationship with the market? What determines its boundary, size and scope? Economists attempt to answer these questions using various approaches - I would like to specifically point out the idea of cost of market transactions or transaction costs as described in Ronald Coase's seminal work 'the nature of the firm'. Coase points out that 'people begin to organize their production in firms when the transaction cost of coordinating production through the market exchange, given imperfect information, is greater than within the firm' as illustrated in the diagram below.[2]

purposefulEA-Shah.png

Recent technological advances like mobile, cloud, social media, internet of things, augmented reality, block chain, and many more are causing disintermediation and dematerialization at an unprecedented speed and scale. These technologies directly lead to decrease in the transaction costs that we mentioned above and hence they influence the nature of the corporation also. We see these changes manifesting themselves in new digital business models, unbundling of corporations and redrawing of industry boundaries e.g. a mobile company provides payment services, an e-commerce retailer provides credit facilities, and so on.

Along with the technological changes, we are also seeing demographic and behavioral shifts in our economy. For instance, today's customer is more demanding in terms of value they get from the product or service than in the past, as they have easier access and the ability to consult and compare between various products/services in the market as a result of technological advances. In fact, even regulations are also promoting behaviors that allow customers more choice - e.g. sharing of payments data by the banks (Open Banking, PSD2) or mobile phone number portability across network carriers. The same demographic and behavioral shifts that affect the customers also influence the staff employed by the enterprise. We are beginning to see large parts of the workforce are now digital natives, who have access to information and are networked like never before. I believe these shifts impact the way the enterprise functions and is architected.

We are already seeing these shifts impacting the way enterprises function - enterprises that empathize with their customers and put them at the center more so then ever before; enterprises that understand that taking a long view on capital may be more beneficial for all the stakeholders; enterprises that are responsible towards the social and natural ecosystems they operate in and take a circular economy approach to the future; and enterprises that understand that in the future man and intelligent machines will work together collaboratively.

These changes lead us to ask some fundamental questions like: How will enterprises look like in the future? How will enterprises transform and adapt under volatile, uncertain, complex and ambiguous conditions? How should enterprise processes and policies be designed for digital natives and gig economy? How should enterprise ethics evolve as intelligent machines become integral to the enterprise? and many more.

I believe that taking a holistic and systemic perspective is required in shaping the purposeful enterprises of the future and we as enterprise architects have a unique opportunity to do the same. I and my colleagues at Infosys will be writing more about the same in the future blogs here.

 

I would like to thank A. Nick Malik & Steven Schilders for providing their suggestions for this post.

 

References:

[1] No Ordinary Disruption: The Four Global Forces Breaking All the Trends by Dobbs, R. and Manyika, J.

[2] The nature of the firm (http)

[3] The nexus of forces is creating the digital business, Dec 2014, Gartner (http)

[4] Unbundling the corporation, Mar 1999, Harvard Business Review (http)

[5] The self-tuning enterprise, June 2015, Harvard Business Review (http)

 

Note:

The terms 'business', 'company', 'corporation', 'enterprise' & 'firm' have been used interchangeably. The primary intent of this blog is for-profit enterprises, though some of the ideas described above are applicable to other types of enterprises also.

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