It seems that there are a wide range of Board members (directors of companies, government enterprises and not-for-profit entities) who are unable to conceive / appreciate the nature of the disruption that is likely to / will inevitably occur in their market place – disruptions caused by innovative adoption of IT by others. This is not about knowing more about IT. It is about being able to picture and imagine a different operating model in their marketplace.
In a completely different context, my Church Council was discussing future directions. One Council member suggested that we pose the following question to members of our faith community – what are your hopes and dreams for how this faith community might make a difference in people’s lives in 10/15 years’ time. Another member who makes some of the most valuable contributions to the thinking of our Council responded to say she could not think that way. She could not conceive of what life might be like in 15 years time and then work back to the implications for now. Having said that, she was one of the first to “get” the fact that the world has changed and our community has not changed, but needs to respond to the changing world. She can work forward incrementally and deal with the necessary change in that fashion, but cannot use her imagination to jump forward 15 years. Some can, some can’t. It is not a reflection of an inappropriateness or unsuitability for governance. It is the different ways in which our minds work.
In a different space, exploring IT enabled innovation, I have become alert to one of the key issues facing Boards and Governments being that IT enabled innovation is disrupting businesses and marketplaces all over the world.
Yet there is an amazing inability of some people, even some for whom one might have the highest regard, to conceive of the nature of the disruption that will occur and the impact for their organisation. This is not about technology or technical knowledge. It is about the ability to imagine and conceive of completely different operating models being adopted by competitors which will radically change marketplace dynamics. It is an inability to observe patterns in other marketplaces and to conceive of the implications for the marketplaces in which they operate.We need to find ways to activate the collective imagination of Boards and Governments to better perceive changes which will inevitably occur in the markets in which they operate (whether commercial or non-commercial markets).
What better way than to model the markets in which we operate and regard them as the enterprise. In that way, we will identify capabilities needed by the market and the opportunities to position our enterprises to meet changing market operating models and their associated market demands.
Understanding the value of enterprise modeling is best achieved through practical examples.
Here is an approach to applying enterprise modeling and governance thinking to an important national challenge in Australia – the Murray Darling Basin, a significant river system upon which a significant segment of our nation is dependent for positive economic, social and environmental outcomes.
What is apparent to me and I assume to some but not to others is:
- The Murray Darling basin is a significant area of economic, social and environmental activity in the life of our nation. I don’t have the statistics at hand, but it does contribute a recognisable amount to our GDP and it does support a significant population. It is a significant environmental asset. These figures have been quoted and are readily available.
- There are other significant communities beyond the bounds of the basin that rely on the continued viable operation of this river system. Typically this is a reliance on water supplies.
- If the communities that exist within this geographical area and those outside the area continue to behave as they currently are (and have for the last x decades), it is evident that the river system will collapse and all the communities will suffer. Hence, change is mandatory – there is no choice.
- There are many communities who are unwilling to make the currently proposed changes. They claim that the proposed changes will impact on them economically and socially, and reject the changes on this basis. Yet, if no change occurs then all will suffer economically and socially. So, the choices are between no change (unacceptable), insufficient change (unacceptable), some change (necessary but not yet acceptable). It appears that there is insufficient recognition of the degree of change needed, especially when that change impacts local communities – yet the local communities will be impacted even more by no change or insufficient change.
- It is in this context, that we need new thinking models to enable appropriate decisions to be made, lest we make no decision and all suffer the consequences.
One thinking model which might help to approach the problem from a different angle, entails the following:
- The Murrary Darling Basin is a signficant national asset
- The MDB needs to be more appropriately “governed” – the current model of partnership between State Governments is clearly not working – it is evidence of failed governance.
- A new governance arrangement would benefit from taking a “portfolio management” approach to this valuable national asset. That is, to manage the asset in a way which generates the greatest value to the asset owners, operators and those that rely on this asset. Portfolio management simply applies the governance concept to the defined resources involved in the portfolio.
- A little known fact (as I understand it) is that our national Constitution which creates a Federation of states (and territories) is designed in such a way that it makes it very difficult to reduce or remove any states. (This comes from thinking and reviewing our three levels of government, and asking whether we could remove the second level – the answer is that it is virtually impossible to do). However, it is designed in a way that makes it relatively easy to add more states.
- What if Australia was to create the new Murray Darling State? This state would have a geographical boundary that aligns with the Basin perimeter ie the primary area that is the source for the river system, and the communities that are within this boundary. The new state would involve excising these areas from Qld, NSW, Vic and SA. I imagine that ACT would remain a separate territory.
- Under these new arrangements, the Murray Darling State would establish a Parliament and Government to attend to the long-term sustainability of the state, and all those within the state who are dependent socially, economically and environmentally on the viable operation of the state and one of its most valuable assets.
- The MDS would have full rights to manage its assets, and would establish appropriate contracts with other states for the provision of products and services. Normal state trading arrangements would be established and operate.
- States reliant on products and services from MDS would need to adjust their thinking and their behaviour as a result of becoming a customer of the MDS and negotiate in good faith, consistent with the Constitution. Disputes would be referred to the High Court.
- MDS would have representation in the national Parliament, consistent with its composition and place in the nation, based on the normal rules for representation – population based for House of Reps and standard numbers for Senate. Future decisions might well still require an Authority which brings the States and the Australian Government together to make appropriate joint decisions.
This, to me, offers a new thinking model (and even perhaps a new operational model if it were decided to be implemented). It allows the problem to be tackled in a more holistic fashion, using conventional decision making tools and instruments. It allows the nation to come at this problem in a different manner, without all parties coming from the position of “everybody else needs to change but I won’t because it will be the death of me”.
Even if not implemented, I believe the thinking model allows for a different approach to the problem – and I would hope a more successful one in making the necessary decisions.
I am interested in comments on either of:
- the merits of this as an alternate approach to a major national problem
- the merits of finding alternative thinking models to intractable problems facing our Boards
Enterprise modeling, as described in previous items, provides decision support to enterprise improvement investment decisions.
Given that some of these decisions are in the province of corporate governance, it becomes evident that enterprise modeling, if used effectively, can contribute to and enhance corporate governance activities.
Of course, enterprise modeling is not exclusively applicable to corporate governance. It supports a range of business improvement investment decisions, typically in the context of taking a portfolio management approach to a defined set of resources / assets to the benefit of overall improved organisational performance.
Hence, enterprise modeling is intrinsically related to and supports more effective approaches to the practices of governance, strategy and portfolio management.
Beyond the purpose of enterprise modeling, the question arises as to what value it offers and whether the value offered outweighs the cost of undertaking the modeling.
Value derived speaks to outcomes – how is enterprise modeling used; what are the outcomes sought in using it?
Based around the previous item which posits that the purpose is to enhance understanding of how an enterprise operates or could operate, the value and outcomes sought in achieving enhanced understanding could be:
- assessing the impact of changes to the enterprise
- evaluating the benefits of changing the enterprise
- being more readily able to estimate the cost of changing the enterprise
- identifying the outputs of any initiative aimed at improving enterprise performance
In effect, the products of enterprise modeling seek to better inform investment decisions associated with capability improvement for improved enterprise performance.
The assessment of the value and ROI of enterprise modeling are then related to the relative cost of making an investment decision, with or without the use of enterprise modeling and the likelihood or achievement of enhanced enterprise performance beyond that which would have been realised without the use of enterprise modeling.
This speaks to the fact that simple enterprises with simple improvement initiatives are unlikely to warrant or justify the use of enterprise modeling. The larger and more complex the enterprise, the more likely that enterprise modeling with deliver value and deliver it in a timely fashion.
More about how to do that later!