In my preceding article, I discussed five primary dimensions of The Multi-Dimensional Organization (MDO). In my July, 2011, article, “Rethinking Business in a Changing,” I outlined new fundamentals that affect the way executives should think about their enterprise in this changing world. In the present article, I will discuss how an MDO perspective more effectively addresses these fundamentals.
The five dimensions of the MDO:
· Product capability services are the capabilities that are involved in the delivery of a product or service.
· Lines of business are responsible for management of products or services from concept through customer support.
· Primary support services provide capabilities that are not specific to the particular business or industry, but instead support business activities throughout the enterprise.
· Coalitions are collaborations that cross organizational boundaries and may engage participants from other parts of the enterprise or outside the organization.
· Enterprise leadership includes the executives and their supporting staff activities.
The new fundamentals:
· Value creation
· Sharable capabilities
· Enterprise optimization
· Risk abatement
· Regulatory compliance.
The impact of MDO on each of the fundamentals is discussed in the following sections.
The enterprise exists to produce value for customers and other stakeholders. It’s no longer simply about profit. Values include company reputation, product aesthetics and prestige, timeliness of delivery, quality of service after the sale and various product features. And there are values that affect relationships with investors, suppliers and employees.
Lines of business (LOB) should focus on values delivered in their products and services along with the capabilities they need to contribute those values. Product capability organizations should focus on providing value to the lines of business they support with optimal utilization of resources.
Support services should consider values for other stakeholders such as finance for investors, human resources for employees and procurement for suppliers.
Enterprise leaders must consider the values developed and acquired by the enterprise as a whole, considering relationships with customers, suppliers, other business partners, industry coalitions, and stockholders. They must (1) provide an enterprise perspective on the creation of value to avoid sub-optimization, (2) evaluate the value contributions of LOBs and capability units in their respective roles and (3) determine the best way to invest limited resources to improve value delivery.
In addition, enterprise leaders should understand the value of insights and market influence realized through participation in industry coalitions involving customers, competitors and others to gain insights and to influence the market.
The separation of product capability services from lines of business minimizes capability bias toward a particular line of business and enables more objective analysis and implementation of capability requirements, performance, and interfaces.
Capabilities may be consolidated, or affiliated under a broader capability management to achieve economies of scale in technology or workload balancing. Some capabilities may be outsourced to take advantage of greater economies of scale and enable the enterprise to focus on the core business. Potential product implications of capability modifications can be evaluated in appropriate contexts, with an understanding of the impact on the enterprise as a whole, resulting in more objective investment and transformation priorities. Consolidated capabilities improve agility by enabling existing capabilities to be engaged in new lines of business and by expediting changes that might otherwise require multiple, varied implementations.
Primary support services (e.g., finance and procurement) typically are implemented as shared capability services although they may operate through antiquated interfaces. In some cases there are opportunities for consolidation or outsourcing to realize additional economies of scale. Recognition of these as a separate organizational dimension provides a better focus on their contributions and implementation of relevant policies and regulations.
A collaboration is any association of people and organizations work together to achieve a shared purpose. Collaborations already exist as a recursive element in the traditional, management hierarchy. What is important is recognition that the operation of the enterprise occurs in a complex, collaborative network where many collaborations are cross-organizational coalitions that bring together people from different traditional organizations. Many of these coalitions may not be formally identified, fostered and supported by enterprise management.
For example, coalitions between representatives of LOBs, IT services and capability units are essential for developing and improving each capability to best meet the needs of its multiple users. Coalitions are also essential for developing and implementing changes, such as product technology upgrades, affecting multiple capabilities. These coalitions must be supported and the products of their efforts must become part of the enterprise business planning and transformation activities.
An MDO model legitimizes the roles of coalitions. It highlights the need to know how people contribute to various coalitions and how they are contributing value to the enterprise. Formal recognition of the purpose, roles, responsibilities and participants in each coalition is the first step in providing leadership and managing the funding and motivation of such efforts.
Enterprise optimization requires participation from all levels of an organization. The different dimensions of an MDO bring different perspectives and empower individual organizations to optimize operations while broader optimizations are achieved through coalitions at the middle-management and enterprise levels.
Each line of business has a responsibility for optimization of the delivery of their products or services. Each product capability provider has a responsibility to optimize the performance of their services, particularly the timeliness, cost and quality of their contributions to the internal customers they serve. Coalitions are essential to resolve cross-organizational problems and reconcile dependencies between organizations where there may be competing objectives.
Enterprise leaders must achieve overall enterprise optimization considering different lines of business and business values. Much of this may be accomplished through coalitions organized by corporate staffs for development of optimal strategies and business design, and for implementation of business transformations. The contributions and cost of participants from outside the executive staff should be formalized and funded.
Enterprise optimization also may depend on synergy between different products or services or delivery of different products or services to the same customer. For example, the use of the same windshield washer pump in multiple vehicle lines reduces design costs and part inventories, and customers who purchase a printer eventually will purchase many ink cartridges for that printer. Individual lines of business must be motivated to realize these synergies. Enterprise leaders must provide the mechanism by which this synergy is recognized and each line of business experiences reciprocity in some form for their contribution.
Risk abatement must address potential single points of failure, vulnerabilities to attack, natural disasters and disruptive changes in technology and market conditions. Redundancy must be balanced against efficiency and agility.
One of the major challenges of risk abatement is identification of risks. The 5 dimensions of an MDO provide a framework for this analysis. Each of the capability service units can identify risks to the quality, cost and timeliness of their operations. This is input to an impact analysis of the internal organizations they support. Each line of business can identify the impact of disruptions of the suppliers and capabilities they use and the potential consequences to their lines of business.
Similarly, support services, such as financial and information services, should identify risks such as investment risks and information security risks.
Coalitions should be part of the risk analysis. Members of the coalitions should identify potential risks associated with disruptions of collaborative relationships or the interests they represent, both internal to the enterprise and with external stakeholders.
Corporate leadership and the executive staff, through coalitions, must drive risk identification and bring together the details of distributed risk analyses to identify common causes of risk and summarize potential consequences. They must also analyze risks associated with the role of the enterprise in the ecosystem of customers, business partners, political entities and other stakeholders. Managing these relationships is essential to sustained success of the business. They must determine their level of risk tolerance and make appropriate investments in abatement measures considering costs and impact on different lines of business.
Innovation is a critical aspect of competition in a rapidly changing world. Executives cannot be the primary source of innovation, but must leverage the talents of employees and other stakeholders. An MDO clarifies roles and responsibilities so that people throughout the organization can contribute innovation to the aspects of the business they know best.
Coalitions can bring together diverse expertise and points of view to think outside the box. The scope of many solutions will be contained within organization units that can take initiative to identify and implement them. Broader-scope effects or innovation from outside the affected organization must be recognized and escalated to the attention of leaders who can act on them for planning and investment activities where they can be given appropriate priority. Contributions of individuals must be recognized and rewarded to sustain motivation.
Most businesses are now global either in their operations or in the delivery of their products or services. This means an enterprise must comply with regulations of multiple political entities. As with risk abatement, an MDO provides a framework for identification of regulated activities and implementation of compliance mechanisms.
A corporate staff activity must track regulation changes around the world. Relevant regulatory requirements must be identified, interpreted in the context of the business, and brought to the attention the organization units that may be affected.
Capability units must consider the regulations affecting their resources, materials and methods. Lines of business must consider the regulations affecting their products and services—the design, the material content, and the risks to users where their products or services are delivered. Support services such as financial services, human resource management and information services must consider regulations such as financial accountability, employment practices and information security.
The implications of these regulation assessments should be reported to corporate leaders and their staff to determine the specific implications to the enterprise. Some regulations may be subject to further interpretation, some may affect where operations are performed, and others may affect the choice of markets. An MDO provides a framework for determining where and how compliance should be achieved. Corporate leaders should periodically review the relevant regulations, and assess the mechanisms and accountability for compliance.
While the new fundamentals are not entirely new concerns, attention to them has become increasingly important to the survival of today’s enterprise. Most of the workforce is now knowledge workers who each have expertise and insights into their segment of the business. While enterprise leaders have a critical role in reconciling and motivating different perspectives, they must utilize the abilities of people more directly engaged in the operation of the enterprise in order to be both efficient and agile. An MDO provides a structure in which the fundamentals can be addressed by appropriate members the enterprise, and their expertise and insights can be fully utilized to address the challenges and opportunities.