Wednesday, June 14, 2006

A great post by Steve DeAngelis at ERMB, "Globalization and Resilient Enterprises", neatly explains the cutting edge trend for large organizations that wish to survive and dominate their market or environment. Some excerpts:

"What Palmisano calls "the globally integrated enterprise," is what I have been calling the "Resilient Enterprise." Whether you call it a globallly integrated or a resilient enterprise, isn't as important as the fact that what we are describing is a momentous shift in the global business paradigm -- it's not just a name change. Palmisano continues:

Let me describe this new creature. In a multinational model, companies built local production capacity within key markets, while performing other tasks on a global basis. They did this in response to the rise of protectionism and nationalism that began with the first world war and carried on late into the twentieth century. As an example, American multinationals such as General Motors, Ford and IBM built plants and established local workforce policies in Europe and Asia, but kept research and development and product design principally in the "home country". The globally integrated enterprise, in contrast, fashions its strategy, management and operations to integrate production - and deliver value to clients - worldwide. That has been made possible by shared technologies and shared business standards, built on top of a global information technology and communications infrastructure. Because new technology and business models are allowing companies to treat their functions and operations as component pieces, companies can pull those pieces apart and put them back together in new combinations, based on judgments about which operations the company wants to excel at and which are best suited to its partners.

The key to this paradigm is the ability to "pull apart" business processes and "put them back together" as needs dictate. Of course, this kind of talk excites me because Enterra Solutions is in the business of enabling globally integrated corporations and turning them into Resilient Enterprises. Tom Barnett and I spend a great deal of our time addressing multinational corporations about this subject. We talk about the need for the next generation Enterprise Architecture, which pulls apart business processes and turns them into automated rules sets that can be recombined as required in the corporate DNA. Because it utilizes a service-oriented architecture and a standards-based business process layer, the next generation Enterprise Architecture enables integration across departments and, as Palmisano notes, across the globe. "

Pulling apart segments of an organization and reassembling them to fit the conditions of a new and different scenario is a description of modularity, a critical principle for "managing complexity" (This capacity, incidentally, also increases organizational resilience by increasing the internal link density of the entity). Ideally, with modularity you want to have an organization where the parts, while able to function independently if need be, achieve net gains in effeciency and parameters of capabilities by integrating into a synergistic network.

If your organization must make decisions in a chaotic, "noisy" environment then modularity offers a significant advantage. Unsurprisingly, with war being the ultimate in disorderly environments, the U.S. Army has begun to experiment with a " modular" structure though the costs and the execution are proving controversial. The next evolutionary step in organizational modularity will be when the modules of an organization are able to self-organize in terms of reacting to an event without requiring central direction to " pull them apart". In other words,
" smart modularity".

The very acceleration in decision making tempo created by Gobalization's drive toward a 24/7 world hypereconomy, a dilemna that DeAngelis described as "The problem is that the landscape is changing so fast we haven't figured out how deal with it.", is going to force large organizations -corporations, states, armies, social movements - to go modular or go the way of the dinosaur.

The next evolutionary step in organizational modularity will be when the modules of an organization are able to self-organize in terms of reacting to an event without requiring central direction to " pull them apart". In other words, " smart modularity".

Watching this evolve will be interesting, especially under Constitutional limits.

DeAngelis talks about "ruleset automation," which really are putting in hard limits to stop such smart modularity in the context of regulation. A classic example is the civilian control of the military.

I also looked at this article, but from the perspective of dashboards.
There's a difference between the globalization that consisted of local production to fulfill the requirements of local governments and moving production for the domestic market overseas.

Distributing a company's facilities with the modular approach described is only more stable than the monolithic scheme if the political, financial, economic, and social systems within the countries are as stable of those of the original host country or if redundancy is built into the system. If there's redundancy in the current approach I certainly don't see it. Quite the opposite.
Redundancy is rarely a bad idea.

To an extent, modules should be able to do at least *some* of the tasks of a more specialized modules in a pinch but that will get into how autonmous you design each module to be and the flow of the organization's personnel between modules ( thus moving skill-sets from module to module).

"Watching this evolve will be interesting, especially under Constitutional limits"

Very close watching :o)
Building in some redundancy is a key to establishing resiliency. Yossi Sheffi, who has written "The Resilient Enterprise: Overcoming Vulnerability for Competitive Advantage," explains in the excerpt I have reproduced below:

"By creating redundancy...firms have a built-in hedge against a severe disruption (system perturbation). However, while redundancy can be helpful it is fraught with risk. Redundancy is expensive and often leads to sloppy business practices. Redundancy can be attained via number of means:
-Inventory--carrying excess inventory in the supply chain.
-Production--maintaining redundant production or servicing lines to eliminate stoppage
-Capacity--enables quicker restarts after a crisis
-IT Systems--highest yield form of redundancy, since the cost of doing so very rarely outweighs the cost of lost information

Depending on the type of entity being managed, a sound mix of the above types of redundancy would be appropriate in establishing a resilient entity.

Very cool Shawn - a book for the list. Timely info ! Much obliged !
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