Strategic and economic drivers of governance
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Transcript of Strategic and economic drivers of governance
Contents
• The relationship to demand
• The economics
• Strategy
• Governance as driven by economics and strategy
• Managing the balance
• The East-West Challenge
• Exploring the connections to ULS
2 Copyright © BRL 2008
Nation % WW
Labor
%
A
%
G
%
S
25 yr %
delta S
China 21.0 50 15 35 191
India 17.0 60 17 23 28
U.S.A. 4.8 3 27 70 21
Indonesia 3.9 45 16 39 35
Brazil 3.0 23 24 53 20
Russia 2.5 12 23 65 38
Japan 2.4 5 25 70 40
Nigeria 2.2 70 10 20 30
Banglad. 2.2 63 11 26 30
Germany 1.4 3 33 64 44
Top Ten Nations by Labor Force Size (about 50% of world labor in just 10 nations)
A = Agriculture, G = Goods, S = Services >50% (S) services, >33% (S) services
2004
The largest labor force migration in human
history is underway, driven by urbanization,
global communications, low cost labor,
business growth and technology
innovation.
2004 United States
(A)
Agriculture: Value from
harvesting nature (G) Goods: Value from
making products
(S) Services: Value from enhancing the capabilities
of things (customizing, distributing,
etc.) and interactions between things
The World is becoming a service system (I.E. PLATFORM-CENTRIC BECOMES CAPABILITY-CENTRIC)
Source: IBM Research © 2005 IBM Corporation
3 Copyright © BRL 2008
Value Chain Organisation
• Need to consider – demand-side changes in the way value is
created for the customer – supply-side changes in the organisation of
the value chain itself
One position Our current ‘front-line’ line
addressing different customer requirements
Alternative organisation of the
Value Chain
5 Copyright © BRL 2008
Air Traffic Control position
The ATC Chain
Components
Boxes
Design, Build, Make
MSSR
RSC/CSI Integrator
3rd Parties
NATS
Install, train,
operate
Air Traffic Control Provider
Airline
Service, Support, Finance
Regulation
Considering the possible organisations of the Value Chain from
here will give a very different perspective on the ATC position
6 Copyright © BRL 2008
The Effects Ladder – organising the value chain
Rethinking how the customer
creates value
Rethinking how value is created for
the customer
Managing the relationship means competing on the
Effects Ladder
Effects
Ladder
7 Copyright © BRL 2008
Problems related by a shared value
proposition
Zoning of ladder by type of competitive
presence
level below which context-of-use can
be ignored, and there can be an
arms-length procurement relationship
Major drivers determining
nature of demand situation
The Effects Ladder1
This is the crucial ground to ‘take’
competitively
The demand situation
This boundary is moving
8 Copyright © BRL 2008
Indirect Battlefield
Engagement
Weapon systems upgrades
Non-Tactical training
(knowing what)
ISTAR – situational awareness
Maintenance
Logistical capability
Storage
doctrineInter-operability
cost-effectiveness
Manpower productivity
Synthetic environments
War gaming
Operational analysis
platforms Tactical training
(knowing how)
ROE x TEWA
Exo-system context able to ‘feed’ STA
capability + interface integration
Physical installation
integrationSoftware installation
integration
MMI/STA integration
C2 Structure
‘feed’ fusion
CM Mvre
DEC CCII
DEC ISTAR
CM IS
CM IS
Army
CM Mvre
DERA
?
Army
DLO
DERA/CDA
CM IS
CM Mvre
Army
?
To sort out these dotted line areas, it is necessary to get at DCDS (Systems), DGE, CM Mvre, CM IS, CM
ISTAR, DEC IBE & DFD.
The Effects Ladder2
9 Copyright © BRL 2008
Contents
• The relationship to demand
• The economics
• Strategy
• Governance as driven by economics and strategy
• Managing the balance
• The East-West Challenge
• Exploring the connections to ULS
10 Copyright © BRL 2008
Asymmetric Advantage
• The third kind of asymmetric advantage depends on relating to asymmetric forms of demand
• The traditional approach to competitive advantage (following Porter) is based on owning something i.e. on establishing property rights.
• The new kinds of disruptive competitive strategy (viz Christenson et al*) are based on creating asymmetric advantage.
• Asymmetric advantage is based on knowing something that competitors don’t know that creates value for customers
• There are three kinds of asymmetric advantage:
1. uses-of-technology know-how, 2. customisation-of-business-process know-how, and 3. embedding-in-customer-context-of-use know-how.
* Christensen, C.M., Johnson, M.W. and Rigby, D.K. (2002) ‘Foundations for Growth: how
to identify and build disruptive new businesses’, MIT Sloan Management Review, Spring
11 Copyright © BRL 2008
The third asymmetry: Asymmetric Demand
• Symmetric Demand – Those aspects of a demand situation
• that can be abstracted and generalised across different contexts-of-use, and
• that are treated as symmetric with supply-side capabilities
• Asymmetric Demand – Those aspects of a demand situation
• that are particular to the context-of-use (i.e. cannot be abstracted and generalised), and
• that need orchestration and synchronization of supply-side capabilities in a way that is particular to satisfying the particular demand
• Value Deficit
– The gap between the symmetric and asymmetric aspects of a demand situation.
Strategy based on extracting maximum value from position
Strategy based on extracting maximum value from relationship
12 Copyright © BRL 2008
Competitive Advantage
• A particular form of competitive advantage flows from each form of asymmetric advantage:
1. Superior know-how about uses-of-technology generates economies of scale: • we can produce things more economically than our competitors
2. Superior know-how about customisation-of-business-processes generates economies of scope: • we can deliver our products and services to markets more economically than our
competitors
3. Superior know-how about embedding-in-customer-context-of-use generates economies of alignment: • we can orchestrate and synchronize products and services dynamically in ways that change
with the way your particular needs are changing.
• These forms of competitive advantage are not mutually exclusive
13 Copyright © BRL 2008
Technology 6-layer stratification
WHY:
What are the contexts-of-use
and customer situations that
are generating the demands
that you are targeting, and
how will you synchronize*
the composite capabilities
needed to satisfy them?
WHAT:
What are the critical
technologies*that you
have to be able to master
and/or source?
HOW:
What are the key
constituent performances
that you need to construct
output performances
WHO/M:
How are you going to have
to customize and orchestrate
outputs to generate the
composite capabilities you
need to support the customer
situations you are targeting?
1st asymmetry the technology is not the product
Economies of Scale
2nd asymmetry the business model is not the
value proposition
Economies of Scope
3rd asymmetry the demand is not the experience
Economies of Alignment
The Asymmetries build on each other
critical
technologies
Key constituent
performances
output performances
Customized
outputs
Composite
Capabilities
Customer
situations
Contexts-
of-use
Engineering
Type 0 Constructive
Type I Customization
Type II
Orchestration
Type III Synchronization
14 Copyright © BRL 2008
Contents
• The relationship to demand
• The economics
• Strategy
• Governance as driven by economics and strategy
• Managing the balance
• The East-West Challenge
• Exploring the connections to ULS
15 Copyright © BRL 2008
Opportunistic (marginal/ incremental)
Effects-based (focus where
Relational
advantage can be
sustained)
Niche-based (focus where
Positional
advantage can be
sustained)
Asymmetric Advantage from
Economies of Alignment
No Yes
Asymmetric
Advantage
from
Economies
of Scale or
of Scope Yes
No
Commoditization
centre-driven directed
composition or directed
collaboration
edge-driven
distributed
collaboration
The challenge for the enterprise
is to be able to extend the
competitive footprint of its
businesses so that they are able
to include effects-based forms of
competition
Digitalization The processes of digitalization
are shifting the economics
towards being able to address
asymmetries of demand
Relational Advantage has a half-life
because of Knowledge Diffusion
The impact of Digitalization
16 Copyright © BRL 2008
Business: 2-levels • Strategic Marketing
– Shaping the demand of the client
• Strategy – Defining the SBU positioning
to capture sustainable competitive advantage
• Tactics – The steps needed to
implement the strategy .
Military ‘Strategy’ ≠ Business ‘Strategy’: Military Strategy is Effects-based
Military: 3-levels • Strategy
– Shaping the will of the adversary
• Operations – Defining operational
capabilities to support the strategy .
• Tactic – The steps needed to deliver
the operational capability in this instance
Effects-basing requires new ways of competing that involve taking the ‘shaping’ power to the edge of the organization, and making the
organisation’s infrastructures structurally agile.
Uncertainty
• About what needs are out there.
• About how to organize things .
• About what will be the effect.
A 2-level approach to strategy relegates strategic marketing to being
subordinate to operational strategy
17 Copyright © BRL 2008
The more dynamic the demands, the higher the Strategy Ceiling needs to be lifted
(the level above which it is none of your business…)
WHY Strategic Why is this needed?
WHO/M Operational Who is going to deliver value to whom?
HOW Tactical How should we organize it?
WHAT What do we need to do?
18 Copyright © BRL 2008
Implications
• With a 2-level approach to strategy, “strategy” is about defining the organization within which things will get implemented.
– This is ‘operational strategy’ (Porter, 1996*), and is about the long term/general in relation to the short term/particular – prone to arm-waving!
• With a 3-level approach to strategy, “strategy” becomes very specific to the situation giving rise to the demand and how effects can be generated upon it
– This is about ‘shaping the demand’, and involves considering the variety of forms of value proposition that it must be possible to generate to create those effects (Hagel, Brown & Davison, 2008**).
• Distributed collaboration is needed to sustaining 3-level strategies in complex and dynamic demand environments
– 3-level strategies become necessary in (e.g.) counter-insurgency environments: environments where the varieties of demand are too great and too dynamic to rely on 2-level strategies.
* “What is strategy?” by Michael Porter. Harvard Business Review Nov-Dec 1996. pp 61-78. ** “Shaping Strategy in a World of Constant Disruption” Hagel, Brown and Davison, HBR October 2008
19 Copyright © BRL 2008
Contents
• The relationship to demand
• The economics
• Strategy
• Governance as driven by economics and strategy
• Managing the balance
• The East-West Challenge
• Exploring the connections to ULS
20 Copyright © BRL 2008
•The goal is to establish who are the key actors, and how they influence each other in determining the performance of the whole:
The domain of practice
White:
how we must
do what we do
Blue:
what we do
Red:
particular
demands
Black:
the contexts
from which the
demands
emerge
The ‘who for whom’:
Are we satisfying the
presenting demand?
The ‘why’:
Will we produce the effect
that we want to?
The ‘what’:
Are things working as
they should?
The ‘how’:
Are we doing
things right?
Defining the Enterprise as a sovereign entity
21
What shapes
the way
things work
The way
things
work
Internal External
N
S
W
E
Copyright © BRL 2008
Governance as driven by the need to manage balance
Direction
of the whole
Operational
Capabilities
Developing the best
supporting
infrastructures
Demand
The particular nature of the demand
Problem-solving
Know-how
Developing effective ways
of satisfying the
particular demand
Balance
Clear overall intent
Source: East-West Dominance, Philip Boxer, 2006, http://www.asymmetricdesign.com/archives/32
Black:
the contexts
from which the
demands
emerge
Red:
particular
demands
Blue:
what we do
White:
how we must
do what we do
22 Copyright © BRL 2008
North-South vs East-West Dominance
• With North-South dominance, the E-W response is subordinated to the N-S control axis – Directors’ top-down strategies (N) for how business capabilities (S) are to be
used dictate the way demands are identified and responded to.
• With East-West dominance, the N-S axis is subordinated to the E-W demand axis – The identification of demands (E) and the formulation of effective responses to
them (W) determine the way business capabilities are directed and deployed.
• The ‘Faustian pact’ delays having to develop E-W dominance – It allows the organisation to remain N-S dominant by cutting enough slack for
those needing to operate E-W so that they can deal with the variations in demand they are encountering by informally flexing the system within the overall N-S control framework.
• East-West dominance presumes asymmetric demand and means taking power to the edge of the organisation.
Black:
the contexts
from which the
demands
emerge
Red:
particular
demands
Blue:
what we do
White:
how we must
do what we do
23 Copyright © BRL 2008
Contents
• The relationship to demand
• The economics
• Strategy
• Governance as driven by economics and strategy
• Managing the balance
• The East-West Challenge
• Exploring the connections to ULS
24 Copyright © BRL 2008
Functionality available
Customer’s Timing & Logistics
The relations to the context-of-use
Crossing over this line
means having a
relationship to the
context-of-use…..
‘problem
solver’
‘product
developer’
‘service
provider’
‘cost
minimiser’
Where does the
Enterprise
need to
compete in this
space?
25 Copyright © BRL 2008
Knowledge Diffusion from supplier to competitors and customers
Functionality offered
Customer’s Timing & Logistics
The relation to
the context - of - use
‘problem
solver’
‘product
developer’
‘service
provider’
‘cost
minimiser’
26 Copyright © BRL 2008
‘role’
Do what you are told
‘achievement’
Use informal mechanisms to
compensate for limitations in
how your role is defined in
order that you are able to
achieve the objective set
Crossing over this line
means being driven by
the nature of the
situation….. ‘power’
Use informal mechanisms to overcome the
limitations of hierarchy through
personally authorised situational
definitions of how solutions should be
delivered, but still constrained by the silos
The forms of authorization
Responsibility-for
Accountability-to
‘support’
The supporting infrastructures are designed
to have the agility needed to support a
relational response to asymmetric demand
27 Copyright © BRL 2008
‘role’
‘achievement’
‘power’
Managing the use of scarce resources: de-confliction vs synchronisation
Responsibility-for
Accountability-to
‘support’
De-confliction dominant
Synchronization dominant
Requires power
at the edge
Requires power
at the centre
Informal/ad hoc
synchronization of the use of
resources in the response to
demand within the context of
Business Units
De-confliction of the use of
resources in response to
demand within Business
Unit Clusters
Synchronization of the use of
resources in the response to demand
through formalised edge processes
Faustian deal leaves silos of
control intact…
Faustian deal preserves
authority of hierarchy…
28 Copyright © BRL 2008
‘role’
‘achievement’
‘power’
Changing the forms of authorization
Responsibility-for
Accountability-to
‘support’
This move is not possible
organizationally
What is needed is this kind of move
29 Copyright © BRL 2008
Managing the balance
Responsibility-for
Accountability-to
The forms of
authorisation
Functionality offered
Customer’s Timing & Logistics
The relations to
the context-of-use
‘role’
‘achievement’
‘power’
‘support’
The relation will collapse to the
level at which there is a sustaining
form of authorisation…
… or more will be invested than
can be justified by the relation to
demand
The position
on the LHS
has to match
the position
on the RHS
‘problem
solver’
‘product
developer’
‘service
provider’
‘cost
minimiser’
30 Copyright © BRL 2008
The dynamics are different on either side
Responsibility - for
Accountability - to
Responsibility - for
Accountability - to
The forms of
authority
Functionality
Timing & Logistics
The relations to
the context - of - use
‘problem
solver’
‘product
developer’
‘solution
provider’
‘cost
minimiser’ ‘ role’
‘ achievement’
‘ power’
‘ support’ ‘ role’
‘ achievement’
‘ power’
‘ support’
31 Copyright © BRL 2008
The relation to the context-of-use - diagnostic
Where are you, and
where do you need to
be competitively?
32 Copyright © BRL 2008
Forms of Authorization - diagnostic
Where are you, and
where do you need to
be competitively?
33 Copyright © BRL 2008
Contents
• The relationship to demand
• The economics
• Strategy
• Governance as driven by economics and strategy
• Managing the balance
• The East-West Challenge
• Exploring the connections to ULS
34 Copyright © BRL 2008
The 21st Century challenge
Asymmetric demand (threat)
– that demand which is specific to the customer’s particular circumstances and context-of-use. This may include tacit or latent demand that the customer is not yet able to articulate.
Technology now makes it possible to demand that products and solutions be customized, personalized, unique and distinctive to ourselves within our context (Bobbitt, 2002 ‘Shield of Achilles’)
* Power to the Edge: Command and Control in the Information Age. Alberts & Hayes 2003
The dominant source of threat shifts from competitors (other nations) to
customers (citizens and NGOs)
Power to the edge*
– Enabling people who directly experience a customer’s demand at the edge of the organization to be able to organise forms of orchestration and synchronization appropriate to the particular nature of the demand.
– The assumption is that the organization faces many such forms of demand, and that power-to-the-edge therefore involves distributed collaboration.
35 Copyright © BRL 2008
Sustaining East-West Dominance
Sustaining East-West dominance requires: – Leadership that can sustain power-at-the-edge
• A leadership model that can sustain the dynamic alignment of infrastructures to demand
– An East-West approach to demand • Collaborative relationships with customers within their
contexts-of-use developing strategy-at-the-edge.
– Infrastructures with agility • Capabilities delivered within a framework of stratification
and granularity able to support distributed collaboration.
– Horizontal transparency • The ability to hold accountable those with authority at the
edge
36 Copyright © BRL 2008
Contents
• The relationship to demand
• The economics
• Strategy
• Governance as driven by economics and strategy
• Managing the balance
• The East-West Challenge
• Exploring the connections to the ULS arena
37 Copyright © BRL 2008
Case Examples of the use of Projective Analysis Methods
1. Defining market failure and the need for changed purchaser-provider boundaries At Raytheon UK we examined the market failure that resulted in a change in the customer’s acquisition approach from being product-based to being capability-based, and identified the new forms of value proposition needed to rectify that failure.
2. Governance challenges supporting distributed collaboration At the Purchasing and Supplies Agency of the UK NHS we identified the challenges involved in creating accountability to care purchasers for providing through-life care to orthotic patients’ conditions, and established the collaboration platform needed to support the horizontal transparency required by distributed collaboration.
3. Operational effectiveness and its required variety of geometries-of-use At the MoD we analyzed the organization of campaign plans and the variety of patterns of organizational and technical orchestration needed to support them, and identified the gap between these patterns and the current approaches to capability audit.
4. Socio-technical interoperability risks and their mitigation At NATO we identified the risks posed by their current approach to orchestrating and aligning the constituent elements of their upgraded AWACS capability to sustaining its operational effectiveness over the next 10+ years.
5. Cohesion-based costing and the economics of alignment At Thales we examined the economics of alternative approaches taken by its MoD customer to orchestrating and aligning UAV capabilities across the DOTMLPF spectrum to create cohesive military responses.
6. Balancing centre-driven and edge-driven processes of distributed collaboration At JFSP we diagnosed the gaps between agencies’ center-driven approach to virtual organization and their ability to support the variety of approaches to collaboration used at the edge to mitigate wildland fire risks.
7. Situationally-driven data fusion and multi-sided market architectures At the Seattle Research Station of the US Forestry Service we established the scientific and data fusion characteristics particular to predicting smoke diffusion and defined the stratification of the BlueSky platform that enabled it to be embedded in a variety of user environments.
38 Copyright © BRL 2008
How projective analysis extends and complements existing forms of analysis
Current State of the Practice
Functional Architecture Description
Data Architecture Description
Accountability Hierarchy
Description
Social Synchronization/
Data Fusion Description
Description of Heterogeneity of
Demand Organization
Stand-alone Systems Architecture () - - -
Stand-alone Software Architecture () - - -
SoS Architecture (‘Complex’ as currently used)
() () - -
In the following case situations, projective analysis extended SEI’s Analytical Practice
BlueSky Framework Architecture () -
CREATE Framework Architecture - Phase II
NATO AWACS SoS Architecture
TUAV ULS Socio-Technical Ecosystem
Projective Analysis Views
Structure-function
Trace Hierarchy Synchronization Demand
39 Copyright © BRL 2008