In a previous post (Black Swans and Supermen), we discussed the role of so-called Horizon Scanning in dealing effectively with digital (and other) business disruption. This post explores in more detail just what this activity might involve, the role played by the Business Architecture function, and some ideas about the frameworks and methods that can be employed to perform horizon scanning effectively.
According to the Chief Scientific Advisers Committee (CSAC) at the UK Ministry of Defence, ‘Horizon Scanning’ is defined as:
The Systematic examination of potential threats, opportunities and likely developments, including but not restricted to those at the margins of current thinking and planning. Horizon Scanning may explore novel and unexpected issues as well as persistent problems or trends
Less formally, Horizon Scanning can be seen as ‘being aware enough of the broader landscape in which the enterprise operates to be able to recognise relevant disruptive factors’. Enterprise Business Architects (EBAs) should consider that this is an essential and formal part of their role. Unfortunately, in very many cases, this is a long way from reality.
The Disruption Management Chain
Dealing with disruption in an effective and proactive way involves a number of steps, several of which fall under the responsibility of the EBA. In summary, this chain can be represented as the need to answer a set of fundamental question about the nature and significance of business disruption:
- Horizon Scanning: Active observation of the context in which the enterprise operates;
- Disruptor Identification: Recognition of emergent factors which have a potential disruptive affect on the business;
- Impact Analysis: Determination of the significance and likelihood of each relevant disruptor;
- Solution Design: Development of a future architecture which accounts for and mitigates the impact of disruptors
- Business Transformation: Execution of a transformative program of work to implement and embed a solution capability in the organisation
Questions the EBA should be able to answer
We can reconsider this chain as a set of questions that a competent enterprise business architect should be able to source answers to:
- What external influencers have the potential to disrupt us in the future?
- How will these directly force us to change our business model?
- What effect will they have on the business models of other parties in our ecosystem?
- What indirect impacts will this have on our own business model?
- What does our future business model look like, with these impacts mitigated?
- Does the enterprise have an aggressive or defensive strategy for these disruptors? (i.e. is dealing with the disruptor seen as opportunity exploitation or threat mitigation?) This can, of course, differ by category of disruptor for a single enterprise.
Firstly, an EBA in a mature practice should be considered the custodian of the enterprise business model. As mentioned elsewhere (see Black Swans and Supermen) this business model comprises a set of distinct but interrelated analyses detailing the state of the business (at a fairly high level).
A tried and tested combination of analyses would be:
The Business Model Canvas (BMC) detailing the operations of the business, the resources to sustain operation, the products of that operation and the customers to whom these products provide value. It also details the costs accrued by and the revenues gained from these operations. In essence it tells us WHAT is required to run the business, and WHAT is produced.
The Value Proposition Canvas (VPC) giving us more detail about the operational reasons for the enterprise to do what it does (i.e. to produce specific value for specific customers). It details WHY the enterprise operates as it does, and FOR WHOM.
The Business Motivation Model (BMM) fleshing out the strategic reasons or the enterprise to exist (vision, goals, objectives, etc.). It details WHY the enterprise is in this business at all.
In addition to these formal analyses, a competent EBA should have a understanding of the competitive position of the enterprise in its vertical (positioning according to Porter’s Five Forces, for example), and its financial health.
Secondly, the EBA should have an accurate (although by necessity much less detailed) model for the full landscape (or ecosystem) in which the enterprise operates. This implies having equivalent business models for other parties who have a significant relationship with the enterprise:
- As parties in the enterprise supply chain (suppliers and customers)
- As other significant stakeholders, either enabling (mechanisms) or constraining (controls) the operation of the business
Thirdly, there should be a solid knowledge framework in place to enable the EBA (and others) to capture, analyse, communicate and control the various models and collateral that are needed to manage disruption.
A Framework for Horizon Scanning
The EBA should be able to answer the basic questions about disruptors and their impact on the enterprise, but there will be a need to address more complex issues in a consistent and robust manner, such as:
- What potential disruptors does the enterprise (in the form of the SMT, direction-setters, major senior stakeholders) consider relevant to the future health of the business?
- What other disruptors exist, in addition to this, which might cause unforeseen effects?
- How, in general, might these disruptors affect the vertical in which the enterprise operates?
- How might it affect the competitive position of the enterprise?
- How might it affect the financial position of the enterprise?
- Will it affect the controlling parties (e.g. regulators) or facilitating parties (e.g. partners, key resources)?
- What knock-on impacts will there be on the enterprise as a result? (e.g. suppliers raising prices, more time and money spent on regulatory compliance, competitors lowering prices due to exploitation of new technologies, etc.)
It is possible, of course, that the EBA can recognise disruptors through conscientious reading of the business and technical press, blogs, etc. It is also possible that they can analyse and pass on strategies for dealing with ‘black swan’ events through being golf partners with the CEO.
However, with the sheer scope and diversity of these ‘unknown unknowns’, and the seriousness of mishandling them to the business, a more rigorous approach is called for.
Experience suggests that an horizon scanning framework should be set up to ensure effective and (where possible) efficient handling of emergent disruptors. This framework should comprise:
- A Disruptor Taxonomy: an authoritative, agreed and well-understood catalogue of current and potential disruptors;
- Impact Analysis Templates: generic analyses of the effects of these disruptors on all relevant parties in the ecosystem;
- Risk Analysis: assessments of the likelihood and urgency of each category of disruptor.
- An Operating Model: defining the roles, responsibilities and processes for dealing with disruptors at an enterprise level.
These four, together with the ecosystem business models, will enable the EBA to answer basic questions:
- What disruptors are we interested in (and should we be, even if not)?
- Are they already disrupting our ecosystem?
- If they occur, what will the effects be of these disruptors on our business (either directly or indirectly)?
- How seriously should we be taking this?
- How likely are they to occur, and how soon?
More significantly, the existence of this framework will underpin the authoritative, well-understood, and widely communicated position of the enterprise vis-à-vis each disruptor type.
Framework Component 1: The Disruptor Taxonomy
The EBA function should be custodian of an agreed classification (taxonomy) of current and potential disruptors relevant to the business and its ecosystem. At its simplest, this should include:
- a classification scheme (see illustrative example, below);
- a description of each type of disruptor;
- its current state significance;
- potential for future escalation;
- responsibilities for ongoing tracking.
Framework Component 2: Impact Analysis Templates
This should include:
- A structured taxonomy of the categories of impact any disruptor might have on the ecosystem business model (illustrative example below);
- Cross-analysis of how each type of specific disruptor might affect each of these impact categories.
Framework Component 3: Disruptor Risk Analysis
These cross analyses should be assessed according to the so-called Eisenhower Principle, basically determining which impacts are both serious and likely to happen (and hence which disruptors are worthy of more serious consideration).
Framework Component 4: The Operating Model
Last, but not least, a mature EBA practice should have a solid operating model to determine
- how this work is conducted;
- how the analyses are performed, communicated and kept evergreen;
- what escalation processes are in place for high-risk disruptors.