Covid-19 has been giving all of us a taste of the VUCA world: Exponentially rising case numbers, new and partly contradictory messages and behavior rules on a daily basis, radically reduced predictability. “Running on sight” is the name of the game. At the time this article is published, it is still unclear where this journey will lead us. That is why as a result of the Corona crisis, the VUCA paradigm is experiencing entirely new relevancy and is increasingly moving into the focus of attention. This begs the question of which strategy is advisable in times of volatility and complexity. It is precisely with digital evolution that companies can overcome these uncertainties.
Digital evolution versus disruption
Innovations and new developments are of course important, but we should not forget that experience is also a valuable asset in technology. Harvard professor Clayton Christensen is known as the inventor of the theory of disruptive innovation. According to Christensen, digital disruption describes a process in which an established technology or service is displaced by an innovation. Established companies however may quickly fail with this concept of a fresh start, as it means going back to zero and as a result brings with it an increased need for capital. Digital evolution, on the other hand, takes an approach that is executed with considerably less risk, and with its dynamism is no doubt an important driver of changes in the VUCA world.
Origin and challenge of the VUCA world
With the collapse of the Soviet Union at the beginning of the 1990s, the acronym VUCA acquired its first meaning. Composed of the terms volatility, uncertainty, complexity and ambiguity, it very accurately described the state of the multilateral world that had emerged with the end of the Cold War (see [BeL14, MKK16]). A consideration of volatile and uncertain times of crisis (Fig. 1) further points to the highly explosive potential of future crises. Questions about the disruptive digitization, refugee crises, the worsening of the energy crisis, the rising climate catastrophe, as well as the consequences of BREXIT and the advancing deglobalization are of major concern to people in their living and working environments.
Figure 1: Long-term development of the global GDP and world trade
[Source of the numbers: OECD Economic Outlook No. 106 – Nov. 2019 (from 2019 prognoses)]
This inevitably leads to success factors that are elementary for mastering the VUCA world. This is another area where VUCA is often used as an acronym: vision, understanding, clarity, and agility. Applied to strategic corporate management, success requires a vision of the future that serves as a guiding principle and as motivation for activities within the company. In addition, interrelationships need to be understood, and so need to be the causes and rules responsible for the changes, as well as the consequences and risks associated with the changes. Clarity stands for transparent processes and guidelines as well as for clearly formulated goals, strategies and plans. And finally, agility is indispensable for successful companies in the VUCA world, as it connotes the ability to adapt quickly and efficiently to changes (cf. [RSN19]). But what exactly is agility and how can a company become agile?
Agility as a key factor of digitization
Agility is by no means a new topic, but has existed in various facets and guises for almost 70 years. However, digitization has given it greater significance and a high degree of topicality. Agility is, so to speak, the interplay of speed, flexibility and focus, and defines a company’s ability to continuously adapt to its complex, turbulent and uncertain environment by anticipating these changes as early as possible and aligning its business model and work processes accordingly.
An article by the GfO (Gesellschaft für Organisation e.V.) addresses an interesting observation linked to the transformation into an agile company: The increase in adaptability at the expense of stability is often accompanied by a loss of identity and a threat to the social integration of the organization. As a result, the authors recommend that agility and stability should not be viewed as separate phenomena, but rather as two mutually dependent voltage poles, with the organization’s performance being added as a third voltage pole in Fig. 2 (right side). The management of voltage poles is therefore an essential task of corporate management (see [GLL18]).
However, the principle of agility needs to be lived throughout the entire company. It is not enough to carry out agile projects selectively and to otherwise continue living out rigid corporate processes. Instead, the principle of agility needs to be firmly anchored in the enterprise architecture (see Fig. 2, left side). This enables agile companies to respond more quickly to upheavals in an increasingly complex world, and at the same time produce high-quality results. This is another reason why agile thinking and action will be an indispensable factor for success in the future.
Figure 2: Leadership in agile companies
[Source: PROMATIS]
The secret of agile companies
The illustration of the enterprise architecture in Fig. 2 is based on the proposals made by BITKOM (see [BIT11]). Thus, the requirement for corporate IT is to reflect the complexity of economic activity and to take into account the ongoing changes and challenges of the market. Enterprise Architecture Management (EAM) provides the concept and the tools for this. With its holistic approach, a division into architecture levels, the associated implementation methods and governance foundations, EAM offers a strategic shaping of the entire business process IT landscape in terms of business requirements, and lays the groundwork for local improvements and optimizations. Starting from the business model as top level, on which the business context, goals, strategies and performance metrics are described, the business architecture follows and provides the strategic capabilities to implement the business model. The information system architecture combined with the technical architecture provide the business capabilities for implementing corporate strategies, and it is precisely here where an immediate potential for digitization lies. However, this raises questions about the direct fields of action as well as the strategic fields of digitization.
Strategic digitization fields
Before a company embarks on the digital world, some clarity about the areas of digitization is needed to ensure orientation and a correct prioritization of resources. Anything else will lead to misunderstandings, to dispersal and, eventually, to rampant discussions without any results. An efficient framework for discussing and organizing the digitization fields is the digitization matrix according to [Stö20]. This matrix consists of two coordinates: On the abscissa we find the current and the new business model. Digitization solutions can strengthen the existing business model or initiate a completely new one. The ordinate shows the market focus and the productivity focus. This means that every digitization measure has to lead to progress in one direction or another. Consequently, this digitization matrix forms the basis for developing and deciding on the necessary focal points for the future. Following the dimensions of the digitization matrix, four digital standard strategies which contain the fields of digitization can now be depicted. The first strategy is professionalization through digitization. Within the existing business model, the primary focus is on productivity, i.e. workflows, functions, lead times and management processes. The second strategy is referred to as perfection through digitization. Again, the focus is on productivity, however, this time, within the scope of a new business model. Standard strategy three deals with market development through digitization. Within the scope of the existing business model, new markets, customers, products or services are pushed. The fourth strategy is described as innovation through digitization. It is characterized by market solutions based on a completely new business model. These are the radically new approaches that often lead to changes in companies and industries, and are referred to as substitution or disruption.
Agility in digitization projects
But how do we define the route for digitization programs that consist of several optimally coordinated projects? Many companies want to transform in an agile way – but not in the final analysis. Here, an opportunistic approach is frequently encountered, which manifests itself in behavior that is not goal-oriented. For example, attempts are made to copy or imitate market leaders or competitors – the „twinkling stars“. Similar stumbling blocks include exclusively randomized knowledge acquisition or unstructured, poorly targeted experimentation with digital technologies. In this context, selective perception, or „digital cherry-picking,“ describes the hiding of evidence or deception through incomplete evidence. Taking the best of different concepts in each case while ignoring a significant proportion of related cases or data that might contradict this position will turn out to be a pitfall. The „moving target problem“, too, should ring the alarm bells of any project manager, since it will not produce the desired success strategy either. Change for the sake of change only – neither with any consistency nor clear strategy – is consequently superfluous. Instead, the challenge is to maintain agility within given resource, cost and time budgets. So when people speak of digital evolution, they often focus on technological evolution, on the provision of new technologies. This requires, first of all, the development of a digital vision. There is a targeted build-up of knowledge in the use of digital innovations. Ideally, models and prototypes are used to identify and prioritize evolutionary waves. Systematically and on the basis of comprehensive business models that present the processes within the company in an optimized way, transparency and openness need to be emphasized. Here, business process specialists refer to an evolutionary process that passes through different stages, so-called waves. Innovation is the driver, followed by implementation, but it is the permanent monitoring and the resulting process improvements that are crucial for long-term digitization. To successfully implement the digital evolution program, the topic of governance is another essential building block for dealing with the complexities of digitization. The goal is to ensure sustainable value creation that is both effective and efficient. In addition, a planning approach should be adopted for a successful digital evolution. We are talking about solution-driven requirements discovery in agile implementation projects. This solution-oriented determination of requirements is also reflected in the comprehensive IQPM™ process model (cf. [IQPM20]), which defines a procedure for goal-oriented project work. IQPM stands for Integrated Quality Process Model, so its name already emphasizes the importance of quality in the development process and process results. IQPM defines project activities, result objects, roles as well as causal and temporal dependencies; furthermore, requirements for the methods and tools to be used in the project. Elementary components are specifications for project and quality management as well as for controlling the organizational change process. Proven best practice templates ensure that IQPM meets the requirements of a business process reengineering as well as an agile digitization project.
Success factors in agile digitization projects
Building on the strategic approach described above, however, the following success factors derived from practical experience are required:
Agile procedure model
- Clearly structured and defined process model
- Method expertise (cf. Scrum Master)
- Effective team training
The result is a benefit that lies primarily in high team performance and quality of results, agility and predictability, as well as team satisfaction through method security.
Experienced project management
- Experience in agile digitization projects
- Strong communication and problem-solving skills
- Leadership paired with innovative spirit
As a result, agility paired with adherence to deadlines and budgets, the foundation for effective change processes, and synergistic interaction between project team and client can be achieved.
Motivated team
- Agile competence and curiosity
- Ability for interdisciplinary teamwork
- Infrastructure for distributed, asynchronous work
This also results in both high team performance and high quality of results, a team spirit that ensures optimized results, as well as an optimal use of all skills within the team.
Innovation
- Readiness and capability for digital innovation
- Complementarity of business, process and technology excellence
- Effective change management
The key to innovation is therefore clear, and is expressed in the sustainability of digital innovation, the optimal use of innovation potential, and the speed and cost-effectiveness of implementation.
Agile business platform – stepping stone into digitization
In addition to defining the optimal strategy in any given case, the ability to then implement the strategy reliably is crucial. Because one thing is absolutely certain: a strategy is only as good as its implementation! But what should an optimal platform that allows for the execution of agile digitization projects look like? For this purpose. Oracle offers a complete suite of software-as-a-service (SaaS) and platform-as-a-service (PaaS) solutions, which can be combined. Fig. 3 shows an idealized business platform with Oracle Public Cloud Services, supplemented by the Horus Public Cloud (cf. [SVO11, VSD17]), which maps the process modeling area.
Figure 3: Idealized business platform with Oracle products
[Source: Oracle/PROMATIS]
Further drivers for agility
If we take a look at further potentials in Oracle digitization solutions, we can observe trends that are driven by an intensified use of modern digital technologies:
Autonomous computing
This solution approach provides the ability of a computer to manage itself automatically using adaptive technologies. Thanks to the intelligent automation of routine tasks, business and IT experts are given more freedom for tasks that cannot be automated, with a simultaneously improved quality of results. Moreover, the prevention of errors as well as continuous process improvements ultimately lead to an increased level of security and better performance.
Machine learning
Thanks to the increasing use of machine learning methods, a much higher degree of automation is achieved by shifting entire bundles of tasks in the planning process over into the software. Usage extends from all cloud applications to the infrastructure. Thanks to a wide variety of algorithms that are capable of learning independently from data and generating knowledge from it, as well as implementing intelligent processes and making decisions, new types of services are established across the entire value chain.
Oracle Fusion Analytics Warehouse
Oracle Fusion Analytics Warehouse provides pre-built data models and analytics for Oracle Cloud Applications based on Autonomous Data Warehouse and Oracle Analytics. This enables the automatic generation of an analytics warehouse with data from Oracle Fusion Cloud Applications (available for ERP and Human Capital Management; planned for Customer Experience, Supply Chain Management and NetSuite) that is up-to-date at all times. Companies benefit from pre-built best practice KPIs, reports and dashboards, as well as data integration from any desired external data source.
From business process to smart solutions
Returning to our idealized business platform, it may come as no surprise that a great deal of potential can be found in smart solutions, as they are the ideal basis for successfully navigating the path of digital transformation. They unify the IT infrastructure and enable the entire organization with all its departments to operate faster, more flexibly and more intelligently. But what are the detailed characteristics of smart solutions? In addition to autonomous computing, Big Data, Internet of Things (IoT) and Artificial Intelligence (AI) are used. Figure 4 illustrates the consequent implementation of this concept: Intelligent data merges with relevant business applications from all areas of the company. It is only the reasonable selection and configuration of such smart applications that represents a well-founded support of business processes and, in the context of agility, deserves to be called smart solutions.
Figure 4: Digital evolution through applying smart solutions
[Source: PROMATIS]
Conclusion and outlook
Serious changes are hallmarks and drivers for the VUCA world. As mentioned at the beginning, by the time this article is published, we still do not know where the Covid-19 journey will take us. This makes the current corona crisis a prime example of an uncertain and profound change, one that hardly anyone believed to occur with such intensity. Stagnating in a deadlock now would be a big mistake. Particularly in times of massive upheaval, it is essential to take action within narrow timeframes so the worst ramifications can be averted and, if possible, a time of crisis can be turned into a time of opportunity. The presentations in this paper reveal that there are indeed perspectives, practicable concepts and powerful planning instruments for meeting these challenges effectively. Agility is and will continue to be the order of the day, because it is particularly agile companies that react faster to upheavals and digital change in increasingly complex worlds.
Author: Dr. Frank Schoenthaler, Marion Rosemann
Image: © pixabay.com
References
[BeL14] N. Bennett, G.J. Lemoine (2014): What VUCA really Means for You. In Harvard Business Review, Jan.-Feb. 2014
[BIT11] BITKOM (Hrsg.) (2011): Enterprise Architecture Management – neue Disziplin für die ganzheitliche Unternehmensentwicklung. BITKOM, Berlin. https://www.bitkom.org/Bitkom/Publikationen/Leitfaden-EAM-Enterprise-Architecture-Management.html
[GLL18] H. Gergs, A. Lakeit, B. Linke (2018): Agilität braucht Stabilität: Was Unternehmen von Kampfflugzeugen, James Bon und Moses lernen können. In zfo 05/2018, Schäffer-Poeschel Verlag, 314-319
[IQPM20] IQPM™ – Projekt-Vorgehensmodell der PROMATIS Gruppe, Ettlingen
[RSN19] D.K. Rigby, J. Sutherland, A. Noble (2019): Das agile Unternehmen. In Harvard Business Manager, Jan. 2019, 33-42
[Stö20] R. Stöger (2020): Die strategischen Digitalisierungsfelder. Klarheit über die Schwerpunkte der Digitalisierung gewinnen. In zfo 05/2020, Schäffer-Poeschel Verlag, 109
[SVO11] F. Schönthaler, G. Vossen, A. Oberweis, T. Karle (2011): Geschäftsprozesse für Business Communities: Modellierungssprachen, Methoden, Werkzeuge. Oldenbourg Wissenschaftsverlag, München
[VSD17] G. Vossen, F. Schönthaler, S. Dillon (2017): The Web at Graduation and Beyond: Business Impacts and Developments. Springer International Publishing, Cham, CH
[Stö20] R. Stöger (2020): Die strategischen Digitalisierungsfelder. Klarheit über die Schwerpunkte der Digitalisierung gewinnen. In zfo 05/2020, Schäffer-Poeschel Verlag, 109
[SVO11] F. Schönthaler, G. Vossen, A. Oberweis, T. Karle (2011): Geschäftsprozesse für Business Communities: Modellierungssprachen, Methoden, Werkzeuge. Oldenbourg Wissenschaftsverlag, München
[VSD17] G. Vossen, F. Schönthaler, S. Dillon (2017): The Web at Graduation and Beyond: Business Impacts and Developments. Springer International Publishing, Cham, CH.