Perpetual evolution — the management approach required for digital transformation

Here is a brief excerpt from an article written by Oliver Bossert and Jürgen Laartz for the McKinsey Quarterly, published by McKinsey & Company. To read the complete article, check out other resources, learn more about the firm, obtain subscription information, and register to receive email alerts, please click here.

To learn more about the McKinsey Quarterly, please click here.

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Companies that commit to continually updating their enterprise architectures can deliver goods and services as fast as Internet-born competitors do.

Internet retailers can make crucial changes to their e-commerce websites within hours, while it takes brick-and-mortar retailers three months or more to do the same. Cloud-based enterprise software suppliers can update their products in days or weeks. By contrast, traditional enterprise software companies need months.

Why can’t established companies move as quickly as their Internet-born competitors? In part, because they are limited by their enterprise architecture, which is the underlying design and management of the technology platforms and capabilities that support a company’s business strategies.

The enterprise architecture in traditional companies typically reflects a bygone era, when it was not necessary for companies to shift their business strategies, release new products and services, and incorporate new business processes at hyperspeed. Consider that until this decade, mobile devices, the Internet of Things, and big data and analytics platforms weren’t crucial for competing in the marketplace. Companies did not have an acute need to continually infuse new IT-enabled business capabilities into their operations.

They do now.

To compete against digital-born companies, traditional companies need to adopt a much different approach to designing and managing enterprise architecture—a model we call “perpetual evolution,” because it emphasizes continual changes to and modular design of business capabilities as well as the technologies behind them. This approach encompasses a range of widely known enterprise architecture frameworks but links them together in a new way. It compels executives to take a comprehensive view of their digital capabilities and technologies but to manage them in a way that mitigates or removes interdependencies and emphasizes speed. Indeed, our work with companies exploring digital transformations suggests that a shift to the perpetual-evolution model can result in faster product-development cycles and greater operational efficiencies—outcomes that are in sync with customers’ expectations.

An enterprise architecture built for perpetual evolution differs from a traditional one in six important ways. When considering business processes and activities, IT and business leaders emphasize end-to-end customer journeys rather than discrete product- or service-oriented processes. They use multiple operating models rather than one. When considering the application landscape, IT leaders design and develop applications to be modular and work independently rather than being tightly coupled with other applications or systems. The enterprise architecture features a central integration platform that boasts lightweight connections rather than a heavyweight bus.1The IT organization deploys an application-development model in which developers and IT operations staffers work closely to test and launch new software features quickly (DevOps). And the general view of information and communications technology is as a commodity rather than a strategic factor (Exhibit 1).

Digital transformation requires a dierent model for managing enterprise architecture.

In this article, we compare the perpetual-evolution model with existing approaches to designing and managing enterprise architecture, and we explore what’s required to shift to this newer approach. The companies that do can unburden themselves of their legacy business processes and mind-sets. They can build the systems and capabilities required to thrive in this era of digitization, enhanced service delivery, and dramatically reduced software-release cycles.

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Here is a direct link to the complete article.

Oliver Bossert is a senior expert in McKinsey’s Frankfurt office, and Jürgen Laartz is a senior partner in McKinsey’s Berlin office.
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