Digital Enterprise #5: How to become a New Form of Enterprise

Written for FutureEnterprise collaboratively by by NTUA (Iosif Alvertis) and EPFL (Gianluigi Viscusi).
In the related blog post of the “Digital Enterprise” series, the term “new forms of enterprises” has been adopted to reflect the latest evolutionary phase of a Digital Enterprise, and they can be simply viewed as the 2nd generation of digital enterprises. This hypothetical organization has accomplished to render every digital process and infrastructure of the organisation, internal and external, aligned and managed under common strategic, business and operational goals; thus every offering, and its basic operations can be exposed under a common interface (i.e. a digital marketplace) that is deeply integrated into the organisation and provides a strong, common, secure authorization layer, integrated with an intelligent management system for business rules that express the underlying business strategy.

At the end, new forms of enterprises are “Digital Enterprises of the Future, driven by constant business model transformation and innovation, acting as multi-sided platforms built on – as well as emerging from – digital innovations at the global, as well as local level, to produce shared value for their whole ecosystem”

It is more than clear that building or transforming a company into such a new form of enterprise is a constant effort, which may include different, multi-disciplinary aspects. In particular, such an organization should (a) grow its existing business, while it (b) experiments with new business models, it (c) tests new markets and it (d) integrates new technologies into its operations in order to increase the rate of innovation it generates and keep being competitive.
Making the hypothesis that an organization and its environment is static, the Digital Business Innovation framework proposed by FutureEnterprise may be used to digitize all the different operations of it and generate a fully digital enterprise. But based on the given definition, this organization should look for constant transformation, and decide for the next market to move towards. How should practically an organization work on becoming a “New Form of Enterprise”?
Business Model Innovation Transforming Digital Enterprises
In this Section we provide a mapping of a set of BMIs identified in Deliverable D1.2.1 on the value chain primary activities (product and market related activities) and support activities (related to infrastructure, technology, procurement, and human resource management). The mapping shown in Figure 1 has been adapted from Viscusi (2015),  proposing a sequence of adoption of the different business models by a generic enterprise willing to approach digital business innovation. The colour refers to the main design element implied by the considered business model innovation, that are adapted from Amit & Zott (2010) as follows:

  • green for “structure”, which refers to how the activities are linked,
  • blue for “governance”, which refers to who performs the activities, and
  • red for “content”, which refers to what activities have to be performed

Green BMIs are more oriented towards execution, while the red ones focus more on differentiation as competition target. It is worth noting that governance elements (blue BMIs) represent a key element for moving from execution to differentiation or vice versa.

Figure 1: Business Model Innovations Impact on value chain primary and secondary activities

As an example, considering the support activities in Figure 1, the adoption of BMIs such as, e.g., BMI#2 – Physical to Virtual and BMI#17 – Competency Centre, allows an integrate organizational change oriented towards execution of all of the support activities, namely firm infrastructure, human resource management, technology development, and procurement. As to the primary activities, these execution oriented have their complements represented by BMI#7 – Supply Chain Integration (covering logistics and operations), BMI#2 – Physical to Virtual and BMI#3 – Produce on Demand that are also a key basis for further adoption of differentiation oriented BMIs (such as, e.g., multi-sided platforms).
How we can get there?
Our initial analysis regarding the research state of play and market perception for digital enterprises has shown that we are not in the position to have a fully functional ecosystem of digital organizations. Various related articles imply that we are not yet there. In brief, in FutureEnterprise we believe that the digital leaders of the future should adopt the following approaches:

  • The leadership and the organization should develop a culture of experimentation, where new ideas, new approaches and new solutions will be tested, to explore how digital and business model innovations may transform current status quo.
  • The organizations that lead modern innovations look to have more flexible corporate structures, where less hierarchy, more agile processes and bottom-up approaches drive innovations, in operations that may create strategic advantage (e.g. in design and coding, not in assembly lines).
  • The organizations should aim for the technological excellence, by hiring people with proven digital skills and mindset; the competition in such workforce is high, thus motivations, vision and wages need to be formed accordingly. Even high level managers should have good understanding of the digital economy, and should integrate even artificial intelligence (AI) in the management operations.
  • The management team, even the lower levels of hierarchy, should be aware of all the available business model innovations: business, design and technology should be integrated in modern solutions. In that direction, the BMIs as documented and suggested in FutureEnterprise, may become a Handbook for Business Strategists that want to lead the digital era.

Even if an organization has all the assets, in many cases it may be difficult to change its mindset and challenge existing business. In that direction, the management may need to embrace existing frameworks that facilitate corporate changes, like the management of change or the FutureEnterprise DBI framework.
Is it futile to chase the digital enterprise dream?
Many people may consider that becoming digital should not be a self-fulfillment goal, as it drives an organization outside its main goals: creating value and being sustainable. Sure, an organization should test and grow its business model before thinking of scaling and dominating a global market, where being digital makes more sense.
But being digital in advance, or at least working to be digital, may unveil multiple opportunities that the leadership couldn’t even imagine. For example, Amazon invested early on on digital infrastructures, even if it risked its existence by closing continuously negative fiscal years; on the other hand, its investment on scalable server infrastructures allowed them to build a profitable business on Cloud Computing, while its digitally efficient operations allowed them to create another business by leasing external e-shops into their main website, and offering their services to them.
Another point that we want to raise is that being digital is a continuous effort, and not a status; as long as technologies change (all the time) and new digital innovations emerge, a new form of enterprise is “doomed” to work on its transformation into something new, to chase the evolution that will keep it into a strong player. Actually, this is the meaning of doing business, and this may indicate a decrease on the lifecycle of modern business organizations. But at the end, a new form of enterprise is a set of traits, a mindset of competences that continuously works on new, digitally-enabled solutions; thus, it is an instance of a continuous process, not a status.

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Figure 2: Innovation Paths towards new forms of enterprises

This article is part of the blog series named “Digital Enterprise”, including the following articles:

Further readings

  • Viscusi,G.(2015)”Digital business innovation: roadmaps and attitudes from a FutureEnterprise perspective” ,in Génie Logiciel, vol. 115, p. 36-41.
  • Alvertis, I., Kokkinakos, P., Koussouris, S., Lampathaki,  F., Psarras,  J., Viscusi,  G. and Tucci,  C. (2015) “Challenges Laying Ahead for Future Digital Enterprises: A Research Perspective,” in Advanced Information Systems Engineering Workshops SE  – 20, vol. 215, A. Persson and J. Stirna, Eds. Springer International Publishing, 2015, pp. 195–206.
  • Zott, C., & Amit, R. (2010). Business model design: an activity system perspective. Long Range Planning, 43(2-3), 216–226.doi:10.1016/j.lrp.2009.07.004