Bringing speed and adaptability to your global enterprise by ‘legofying’ your digital platform
In my previous article “Is your business getting Scrooged?” I used the classic Dickens story “A Christmas Carol”, as an analogy for reflecting on the past, present and the future of your (digital) business. In the article I have stressed the need for successful business model innovation in surviving the roaring twenties of the digital age.
Only focusing on new (digital) business models however will not be enough to survive this decade. A lot of companies are still working with the mindset, organizational structures, processes and systems stemming from the Industrial Age. Unfortunately, these structures, processes and systems have been optimized for efficiency gains in a more predictable business environment and are not very well suited to cope with the accelerating change we are experiencing today.
Hence you will need to adopt a different mindset and different structures, processes and systems in order to increase the speed and adaptability of your company, which is needed to respond in a timely manner to this never ending and accelerating change. In this article I will focus on how to improve the speed and adaptability of your digital platform and in my final article within this trilogy I will focus on the need for speed and adaptability within your organization.
Speed and adaptability of your digital platform. A key ingredient in surviving the coming decade.
Continuously and rigorously improving the speed and adaptability of your digital platform is a key ingredient in surviving the coming decade. It is needed to be able to respond to the never-ending and accelerating change we are experiencing nowadays. This change is coming from multiple angles as already touched upon in my previous article. In case we would perform a full PEST or PESTLE analysis, I could probably spend an entire article on which macro-environmental factors are causing this change to happen.
For the purpose of this article however, I would like to highlight only some of the most impactful factors determining the current rate of change and therefore the shift in business models that we are experiencing today. In essence these factors are indirectly and directly SETting the pace of today’s business model innovation and the current Corona Crisis is causing a flywheel effect accelerating today’s rate of change.
· Social: Already for a while we see a shift in the expectations that people have when engaging with companies and brands. This is not only the case in a B2C setting, but more and more also in a B2B setting. Millennials have entered the workforce and are working in key frontline positions. In these positions they are influencing the new norm for doing business between companies. Companies cannot get away anymore with serving their customers only via face2face or phone contact or letting customers place orders via fax or email. More and more customers expect companies to provide them with self-service capabilities by offering them digital tools like, for example, a B2B webstore, a Configure-Price-Quote (CPQ) solution or better service via chat functionalities with both actual service representatives as well as chatbots. According to Forrester, in 2018, 67% of B2B buyers said that they do not want to interact with a sales representative as their primary source of research. The good thing is that this will help to free up time from your sales and service people, so that they can focus on bringing real added value to your customers. Next to this we see the flywheel effect of Covid-19 where B2B salespeople are suddenly not able to visit their customers anymore and are massively making use of video conferencing via the likes of Zoom and Microsoft Teams. I have experienced first-hand the acceleration Covid-19 is causing, when it comes to providing digital services to customers. In May last year for example one of my clients decided to start building their CPQ capabilities to provide a better service to their customers. In the end people are social and creative animals and they need to have interactions with other people, so they will look for new ways to get this interaction going and the creativity flowing. A nice example is the sudden phenomenon of sea shanties (like the Wellerman) going viral online after using TikTok’s duet feature.
· Environmental: Global concerns around the environment and climate change are getting more and more important for businesses today. Large organizations cannot permit themselves anymore to neglect these concerns and need to focus on corporate social responsibility and sustainability. As a result, new business models are emerging like re-commerce and circular shopping. California based Trove for example is helping brands like Patagonia and Levi’s to give their high-quality products a second and, in some cases, even a third or a fourth chance. As already touched upon in my previous article, the younger generations are very concerned about the wellbeing of our beautiful planet. It is only logical that they will be more and more inclined to only interact with and buy from companies/brands that are not looking to make a quick profit, but are putting effort into making our world a better place for the generations yet to come. And it is not only the younger people that find this important as research from the Capgemini Research Institute suggests that ‘a significant majority of consumers (79%) are changing their purchase preference based on sustainability’. A positive aspect of the current Corona Crisis is the lasting impact this will probably have on business travel. Companies have started to realize that for a lot of meetings, they can work with the digital collaboration tools available today. It goes without saying that this will lead to a lower carbon footprint and will therefore have a positive impact on our environment.
· Technological: The impact of cloud on digital technology has off course been enormous in the last decade. The number of available digital technology solutions has exponentially grown since 2011 and this growth is not expected to slow down looking at current developments around Artificial Intelligence & Machine Learning, Augmented & Virtual Reality and the introduction of 5G. I was very inspired last year by the story of one of my friends who went to Suriname to perform a life-saving operation on a 2-month old baby. In the future it might even become possible for him to perform these operations from a distance as doctors in China are already using 5G to perform remote surgery. Off course Last year Covid-19 has proven to be an accelerator for adopting digital technologies like the ones needed for working from home. In my own experience it has also helped my clients to fast-track decisions to improve their digital platforms to better serve their end-customers throughout all the stages of the customer journey. For example, we have helped one of our clients in Belgium to build a click & collect capability for all of their stores at record speed in order to be ready for the second wave of Corona.
In short, these three factors are reinforcing each other. Covid-19 is adding a flywheel effect on top of this, leading to an accelerating change in the global marketplace. However, as I will explain in the coming section, global enterprises are typically not very well suited to address and respond to this accelerating change.
Traditional global enterprises are too slow to respond to this change
Much of the management theory that is still dominant in global enterprises today is stemming from the time of Frederick Winslow Taylor. The ideas written down in his book Principles of Scientific Management were leading to huge efficiency gains by, for example, successfully implementing an assembly line at the Ford Motor Company. In the past century a lot of focus and effort has been directed toward efficiency gains in ever-growing global enterprises. These practices were quite useful in an environment where change was relatively easy to predict. This has led to the traditional organizational structures that are still dominant in most of the large global enterprises today with, in many cases, different divisions and business units organized in functional silos.
These dominant organizational and communication structures also have influenced the IT systems these companies were implementing to support the business processes and employees within the different functions of the organization. In today’s popular management literature, this effect has come to be known as Conway’s Law and reads as follows: ‘Organizations which design systems…are constrained to produce designs which are copies of the communication structures of these organizations… The larger an organization is, the less flexibility it has and the more pronounced the phenomenon. (Melvin Conway, 1968)’.
As these enterprises are organized in functional silos it will in effect build systems that are focused on these functional silos. These systems are typically not focused on collaboration, handovers and integration with other silos within the organization. In my area of expertise this, for example, leads to an enterprise that can work on a digital commerce system without integrating it to their marketing, service and sales systems and processes. This off course leads to a highly fragmented customer journey. Customers will not have the feeling they are interacting with a company that has a full understanding of what they need in the different stages of their customer journey. In many cases you can get a fair view on how an enterprise is being organized by analyzing the different channels (e.g. brand websites, webstores, social media channels) that they use in their interactions with their customers.
Next to that, global enterprises are typically organized in divisions, business units and regions. Business units have their own go-to-market strategies, brands and target segments which need to be adapted to the local cultures of the countries they are operating in. This will lead to even more siloed systems for these different business units and or brands. Please notice Conway’s Law being at work here as well. Local businesses in the emerging countries are also not very fond of partnering with central digital teams and their partners, because of the premium price that they are paying for their services versus what they would be paying when they engage with a local partner. I have personally witnessed the risk of this, when performing a global website scan at one of my clients. We found quite some websites that were not so well managed and maintained. This was leading to an increased risk of getting hacked with possible negative consequences like theft of customer data, loosing trust of customers, fines from authorities and damage to the brand.
Large global enterprises are also subject to mergers and acquisitions on a regular basis. Acquisitions will come with their own cultures, processes and systems as well. These will subsequently need to be integrated into the larger entity, causing the enterprise to be even less responsive to change.
The prevalent organizational and communication structures within digital & IT organizations in large enterprises tend to also lead to (again in line with Conway’s Law) so-called monolithic, tightly coupled systems which are quite hard to manage and change.
For example, the people that are building a commerce system are organized in specialized functions, working on the different components of a digital commerce system. This is creating a lot of dependencies between the different teams in implementing, testing and releasing the product to their customers. This will lead to bottlenecks, either in the pace of one of the teams building their components or in the integration of the different components into one product.
As you can imagine, all of this will lead to a lot of duplicated efforts and is still resulting in systems that are both hard to manage and not very responsive to change.
On the other hand, we all know a very large global enterprise proving that it is possible to build a large enterprise responsive to change. Until this day Amazon is still very effective in bringing new innovations to live. It has also proven to be capable of effectively integrating an acquisition like Whole Foods, creating real business synergies in the process. I understand people countering that Amazon was born in another day and age and has been growing, during its early years, as a pure-play online retailer. Nonetheless Amazon has deliberately evolved its platform to be open and adaptable, as can be illustrated with the memo better known as the Bezos API Mandate. Amazon has practically invented building API-first, microservices based, cloud native applications and, in fact, the current AWS platform is a result of the practices employed by Amazon in building their digital commerce platform.
Traditional global enterprises will need to learn from the likes of Amazon to become more responsive to change. More and more enterprises have started to embrace the practices that help them become lean enterprises. I will discuss this in more detail in my next article. Next to this the cloud is bringing technology advances, that make it possible to strike the right balance between central governance and local freedom and to increase the speed and adaptability of their global digital platforms. Let’s dive a little bit deeper into this topic.
‘Legofying’ your digital platform to ensure speed and adaptability
To be able to quicker respond to this accelerating change, large global enterprises will need to (gradually) move to a digital platform that is optimized for speed and adaptability. In order to do this enterprises will need to put the right building blocks in place that can be independently changed or replaced with other small building blocks, so that the platform can be adapted quickly in case the situation asks for this. In effect these building blocks help to ‘legofy’ the global digital platform.
1. Design Systems
Design systems will help to easier build the different user interfaces (heads) to interact with end-customers both online (e.g. web, mobile, social, marketplaces) as well as offline (e.g. PoS). It is about creating an ecosystem of guidelines, reusable code, design assets and tools that help your organization to deliver consistent brand experiences across all your different channels used to interact with your customers. More details on design systems can be found here.
2. Modular and Flexible Architecture
Small building blocks that can be changed by independent teams without dependencies on other building blocks in the platform. In practice this can be done by using SaaS components or microservices that cover a (part of a) business domain. These components and microservices are API-first and API-only. Because these are API-first it also means that they are headless and different frontends can use these applications to serve a specific need of your end-customers. Next to that these applications are Cloud Native which makes them horizontally scalable. The industry is using different names for this kind of architecture like a composable architecture, composable commerce or a MACH (microservices-based, API-first, cloud native & headless) platform.
3. DevOps Practices and Tools
Accelerating quality software delivery by adopting practices and tools that help improve delivery lead time, deployment frequency, time to restore service, and lower the change fail rate. A lot of interesting insights around this topic have been shared in the book Accelerate and in the annual State of DevOps Report.
4. Enterprise API Integration
As already mentioned, large enterprises typically have a lot of different businesses, employing a lot of different brands in a lot of different countries. This means that they also will have multiple backend systems where the master data (e.g. product, customer, price, stock availability) is residing that is needed to interact with the end customer. It is not realistic to assume that it is possible to get this data into one single source of truth (e.g. think again about the acquisitions being done by large enterprises). Therefore, it is best to manage this data coming from multiple Systems of Record in a federative manner and adopting an API strategy for enterprise integration toward multiple legacy backend systems.
Applying the strangler pattern to gradually improve your platform for speed and adaptability
I can almost hear the reader think that it is easy to talk about how this would work in a greenfield scenario, and that it is much harder in a large global enterprise where you already have one or multiple digital (commerce) platform(s) in place. These platforms have typically been implemented using monolithic enterprise software. Over time these platforms need to be upgraded to the latest version of the enterprise software and have gotten quite hard and expensive to change and improve. In these cases, it might seem a good idea to start a big bang replatforming project and move to the latest and greatest in technology. However, this is a quite risky undertaking as you will need to do a lot of development before you can test the new system being on par with the old one. These kind of replatforming projects run a high risk of schedule and cost slippage and, on top of that, of rebuilding features that do not bring any value to end-customers in the first place.
In practice it is a better idea to gradually move away from a monolithic platform architecture toward a highly modular and flexible architecture following a, so-called, strangler pattern.
Features that have been built in the monolithic platform will be gradually replaced. Either by relatively standard MACH services from specialized SaaS vendors or by bespoke microservices that are needed to differentiate the specific enterprise from its competition.
In the end the resulting architecture will look more like depicted in the figure above. As Conway’s law is at play, the organization and operating model will need to change accordingly in order to stay effective. I will elaborate more on this topic in my next article.
Striking the right balance between central governance and local freedom
But how will enterprises be able to strike the right balance between central governance across all the business units, brands and countries making use of the global platform and, at the same time, offering their local businesses enough freedom to serve their customers in the best possible way?
We were asking ourselves the same question in helping one of our clients, a global Paints & Coatings manufacturer, building a truly global digital platform. Collaboratively we have come up with a MACH architecture starting with two specific commerce use cases for two of their business units using Commercetools as the MACH commerce engine in combination with the Azure platform, GraphQL and Angular.
This architecture allows the different squads working on the platform to individually design and deploy new APIs when needed. When the platform matures, existing (micro) services can be easily replaced with 3rd party services. The microservices will be deployed by using serverless infrastructure so that it can be scaled, versioned, secured and deployed at the API level.
For this purpose, we are also utilizing Lab Digital’s MACH composer that will help to manage the configuration of environments (Infrastructure-as-code) across our client’s different business units, regions and brands.
This gives us the opportunity to adopt three different approaches in parallel to build a global digital platform that strikes the right balance between central governance and local freedom.
By following these 3 approaches in parallel we are able to iteratively work towards a global unified commerce platform that can serve all of our client’s customers during all the stages of the customer journey. In the end it is envisioned that the platform will be used for all business units, brands and markets without sacrificing the flexibility of local businesses in serving their local customers as they see best fit. In other words, the global enterprise will benefit from global standardization at the same time as offering freedom to the local businesses to service their customers during all the stages of the customer journey in the best possible way.
Make sure that your organization is able to drive and build out this platform
Now you can have a modern and flexible platform but (like owning a car) if you cannot drive this platform, your organization will not be able to adapt continuously and effectively to the ever-changing market conditions. In parallel to building this platform you will therefore also need to continuously evolve your operating model. An operating model that will allow you to stay innovative, effectively develop and operate your digital platform and continue to bring value to your customers.
I will elaborate more on this in my next article in this three-part series and will try to explain more about the characteristics of this operating model.
Conclusion
Bringing speed and adaptability to your global enterprise is key in surviving the coming decade as we are currently experiencing an unprecedented and accelerating rate of change in the global marketplace, customer expectations and digital technology. Traditional enterprises are often not well equipped to respond to this change and will therefore need to transform themselves to keep delivering value to their customers. One of the key elements in this digital transformation is a highly flexible and modular digital platform optimized for both global standardization as well as local freedom. As enterprises do not have the luxury of starting out fresh and typically have a lot of legacy systems in place, the platform will need to be iteratively built and continuously improved. Although it is still quite complex, the current state of technology will make it increasingly easier to strike a right balance between global standardization and local freedom.
I hope this article has given you some inspiration on how you can start bringing more speed and adaptability to your enterprise by gradually modernizing your digital platform(s). In case you would like to learn more on this topic, please feel free to connect.
