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In a recent presentation to their founders on adapting to the current market environment, the team at Sequoia quoted Charles Darwin: “It is not the strongest of the species that survive, nor the most intelligent, but the one most responsive to change.” The folks at Sequoia called this “survival of the quickest,” going so far as to name “speed” one of “the greatest business strategies.”
While many tend to agree with this advice, the mentality to “go faster” specifically in terms of accomplishing business tasks is not always particularly helpful. Many venture-funded companies today find themselves in a race against the clock. Investors ultimately want to see a return, which generally means IPO or acquisition. Between IPO volume being down 46% year over year, the IPO market not expecting to pick up any time soon and M&A activity being down 20% and slowing, leaders need to figure out how to keep the lights on before the money runs out.
Addressing complexity, inefficiency, indecision
In such a climate, the real question becomes: What exactly do business leaders need to do faster?
The answer is deceptively simple: Companies as a whole need to change faster.
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For venture-funded companies and companies in highly competitive and volatile markets, changing quickly is a core business capability, and if your company is adaptable and has the ability to change as a whole, more efficiency will be seen. To support this, leaders must architect their businesses around rapid change. Frankly, this is the only way to make speed a business strategy.
Architecting the business for speed, and thus accelerating any transformation, involves addressing three major obstacles: complexity, inefficiency and indecision. Complexity is dealt with by focusing on simplifying the customer and employee experience. Inefficiency issues are rectified by optimizing the technology you use. Indecision is overcome by providing actionable insight to the people who need it. Here’s how.
Simplifying the customer experience
Over the last decade, startups and scale-ups have focused on growth, particularly in a time of “capital superabundance.” We’ve now entered an era, however, when the tech financial market is essentially frozen. As a result, one change that companies need to navigate is a shift towards profitability.
Reducing costs is one lever for improving profitability. Acquiring and retaining more customers is another. Creating a business architecture focused on customers means rethinking how businesses invest in technology. More specifically, this means shifting the traditional IT focus. Whereas one common approach sees IT investing primarily in infrastructure and existing product capabilities, an approach focused on accelerating change invests far more heavily in developing new capabilities.
When customers’ needs change, as they are changing right now, companies need to respond quickly. This cannot be done if you have to reorganize the business to meet new demands. It can be done, though, if the business has created processes that continuously aggregate customer insights, and quickly turns those insights into new customer-centric capabilities.
Supporting this capability requires a simplification of internal operations, especially when it comes to optimizing the value of the stream from customer insight to development.
Optimizing technology usage
Ensuring that customer value drives technology architecture and investment is one way to optimize technology usage. Another way is to ensure that an organization is getting the most out of the investments it has already made. Inefficiency in any aspect of technology usage represents a drag on businesses’ ability to change quickly.
According to Forrester’s “The State of EA 2022” study, 67% of enterprise architecture (EA) leaders have significantly increased their focus on technology strategy. While enterprise architects (EAs) play a central role in identifying opportunities for this type of technology optimization, they have an even greater role to play when it comes to optimizing the entire IT landscape. A “business capability” perspective makes this possible.
When EAs focus on business capabilities and transformation, the discussion changes from “my favorite technology is x” to “we need to fill these specific business capability gaps.” Focusing on business capabilities creates a common language uniting business and IT leaders and allows you to think differently about how you support those capabilities.
Making better decisions faster
Efficiency doesn’t improve on its own. The business needs to decide to improve it. Making those decisions, however, is not always easy. As mentioned, relying on business capabilities to evaluate technology needs is one way to simplify the decision process. The other is visibility.
Business leaders can’t make decisions if they can’t see the problem. In terms of business architecture, EAs help guide leaders in the decisions they make by showing them business capability maps, data-rich process diagrams and dashboards highlighting the connection between architectural issues and business value.
When it comes to reducing costs, it’s critical that leaders understand where money is being spent and whether it’s being spent wisely. An overview of the entire application portfolio shows you where money is being spent. Connecting applications to business capabilities shows where they drive business value. Identifying opportunities to consolidate (as in the “common services” model), replace, improve performance (by moving to the cloud, for example) or retire shows where you can get more for your money.
Visibility is a must for business transformation
Still, there are some areas where obscurity reigns. For example, it’s estimated that over 30% of SaaS spend is wasted. At a time when companies need to control costs and optimize tech spend, managing this waste becomes a high priority. Attacking this problem demands visibility, first into how much SaaS you currently pay for, and second into whether anyone actually uses it.
Visibility on the first front calls for clever ways to uncover spend, such as mining expense systems to find SaaS payments that don’t go through IT. This helps drive SaaS discovery.
Visibility on the second front means closely monitoring usage. This helps with license management in two important ways.
First, it can uncover disconnects between the number of licenses the organization possesses and the number actually used. Second, it can indicate whether the organization needs licenses at all. For example, if you are paying for full Zoom licenses, but most Zoom calls are less than 30 minutes (which you can get for free), there’s an opportunity for license rightsizing that can translate into real savings. (Of course, monitoring licenses can also help you rein in automatic renewals on SaaS no one uses.)
Business transformation: Is your company built for speed?
In a rapidly changing environment, adaptation demands speed. With worldwide IT spending projected to total $4.4 trillion in 2022, an increase of 4% from 2021, if your organization isn’t already built for speed, that’s a problem. For this reason, leaders need to view speed as a critical business capability, and build it into the organization as soon as possible.
To that end, following these principles can work to your advantage. First, focus on your customer, as this will force you to be adaptive and responsive. Second, emphasize optimization. This will ensure efficient use of your technology. Finally, continuously generate actionable insights. As a result, when it’s time to make decisions quickly, it’s possible.
While we can’t predict in advance what changes will come and what we will need to do to respond, it’s imperative to focus on architecting an organization capable of changing as the need arises, truly accelerating business transformation.
André Christ is the co-founder and CEO of LeanIX.