Meeting disruption head-on with response, change and innovation management

The event had all the makings of a modern financial crisis. It began with a period of unrestrained lending—of creditors and borrowers ignoring systemic risks as they sought property and corresponding social status. Then came the bust, and the immense strain on banks that had fueled all the excess. Finally, the government stepped in with a bailout—which saved the system from collapse, yet not before fortunes were ruined.

This may sound like the United States 2007/2008, but it isn’t: the crisis here dates to ancient Rome, to the reign of Emperor Tiberius in 33 AD, when enforcement of a law meant to rein in usury instead led to a credit crunch that impacted nearly all of Rome’s elite. Financial crises, indeed, have been a near constant throughout history, whether fueled by a bubble in the market for tulips (The Netherlands, 1636), excessive speculation in stocks (the UK in 1825 or the US in 1929), or over-exuberance for new technologies (the Dot-com crash of 2001)

As a business leader, it’s wise to keep this in mind: the most recent crisis, financial or otherwise, wasn’t the first, and most certainly won’t be the last. Disruptions impacting business, after all, are everywhere: in new laws and regulations, geopolitical tensions, shifts in macroeconomic policy, and unforeseen pandemics that can bring the world to a halt almost overnight. The cause of a disruption need not even be a “bad” one: companies, and entire industries, also face the disruptive force of innovation, which is critical to keeping markets vibrant, and ultimately fueling growth. What’s important, then, is not predicting the exact nature of the next disruption, but in being
aware of the forces that could shape it—and being ready to react when it hits.

It all starts with your IT

How can you ensure your enterprise is best prepared to meet the next crisis head-on—with the agility to stay competitive? It begins with your IT—and the ability of your IT organization and your IT landscape to withstand rapid change and drive new ways of doing business. To put your organization in a state of being as ready as possible, your IT must deliver on three critical activities:

• Crisis management, for the immediate response
  
• Change management, to build continuous resilience
• Innovation management, to embrace innovative products, services, and
  business practices—and become an agent of disruption itself

How can you best position your IT to achieve success in these three areas—and to view disruption as an opportunity, rather than a threat? The following paper shows you why the secret lies in enterprise architecture management and strategic portfolio management (EAM/SPM), an approach that organizations across a wide variety of industries are embracing to align IT with the wider business vision and better prepare for the disruptive forces of the future. Learn how EAM/SPM equips you with the means to act fast when a crisis hits—and understand which portfolio management and enterprise architecture capabilities are essential.

First, though, what does disruption mean today? And why is being prepared to embrace change more important now than ever?

Not unlike Rome in 33 AD, the global economy of 2023 is in the throes of great uncertainty. In Tiberius’ day, the trigger of financial crisis was the sudden enforcement of a pre-existing law that caused creditors to demand loan repayment sooner than borrowers had expected. Today, the seeds of disruption are many. Not only has the Covid-19 pandemic accelerated a pre-existing drive toward digitalization; its lingering impact has combined with several other forces that are reshaping the global business environment. Business leaders today must grapple with rapidly changing policies, laws, and consumer expectations designed to build the low-carbon world of the future. They face demographic shifts that point to a future of decelerating growth in much of the industrialized world. They’re also confronted with a global economic order that’s fracturing—as countries adopt increasingly protectionist policies designed to nurture domestic industries and limit reliance on geopolitical rivals.

What does all this mean for the individual enterprise?

Research by PwC, a strategic consultancy, suggests these trends are driving a corporate “race to reinvent.” More than ever, it argues in a 2023 report, executives are reimagining their firms’ role in the world by “looking beyond the current portfolio of businesses and products to determine what value an organization will create, and for whom.” Surveys bear this out: in a 2021 poll of 250 global executives, PwC found that more than four out of five expect their companies to change in terms of how they operate or what they do to create value for their clients. More recently, in January 2023, it found that nearly four in ten global CEOs believe their organization will no longer be economically viable in ten years if it continues on its present course.

Avoiding knee-jerk reactions

Before we probe deeper into the best ways to prepare for such a transformation, and the central role of IT in the process, it’s useful to consider some typical flawed approaches. The first mistake enterprises make when handling disruptive trends and events happens even before calamity rears its ugly head—it is failing to build a foundation for resilience. Even though crises can be impossible to predict, firms should have some baseline preparedness—such as a business continuity plan that spells out its ability to maintain essential functions during the event and its aftermath. Absent this, too often, when disruption hits, companies react in a knee-jerk fashion. They don’t have the calmness and time to analyze the roots of the crisis and the opportunities it presents for building new strategic and innovative capabilities.

Some common flawed responses include:

• Indiscriminately reducing costs throughout the whole organization—without thought to business opportunity or strategy
• Introducing services or products designed to lure new customers, without fully considering their impact on existing ones
• Doubling down on branding or advertising, instead of investing in transforming the enterprise to be more resilient
• Focusing on the immediate situation at the expense of the broader picture—and how the response fits in with the company’s wider mission and purpose

Disruption and innovation  

Another flawed approach comes from the response to disruptive innovation, in which upstart companies challenge incumbents with new products or novel ways of doing business. Established firms often consider disruptive innovation as an attack that must be met with defensive measures, and they’re not without reason: disruptive technologies and business models have toppled many industry leaders and will continue to do so in the future.

Nonetheless, incumbents with enough built-in resilience, who recognize the need for transformation, can harness disruption as an avenue for new market discovery, and ultimately growth. Evidence suggests they frequently do. Despite all the disruption caused by the rise of the internet, for example, only 12 of the world’s Global 500 Companies in 2020 were firms that had not existed before 1995. According to Julian Birkinshaw, a professor of strategy and entrepreneurship at London Business School, this is a powerful sign that established enterprises are better at responding to disruptive innovation than they’re often given credit for. As Birkinshaw writes in Harvard Business Review: “Organizations that approach competitive threats soberly and systematically will make smarter choices about how not only to survive but also thrive.”

Innovation, studies show, is a critical element of this successful response. As the consultancy BCG noted in 2020, the firms included in its list of the 50 most innovative companies in 2007, all of which made significant investments in innovation following the ensuing financial crisis, greatly outperformed the market as the economy recovered. How exactly did they go about this? As BCG points out, “doubling down” on innovation in response to disruption requires developing a clear innovation strategy, supporting it with sufficient investment, and “ensuring that your innovation system is nimble enough to spot and seize the best opportunities quickly and decisively.”

All of this begins by taking a hard look at your IT portfolio.

Keeping nimble and approaching threats in a “sober and systematic manner,” aren’t difficult concepts to grasp: whether in business, or outside of it, we all make better decisions when we’re equipped with information that enables us to visualize the impact of change, and of our response to it. What, though, does this mean for your enterprise, in practice? In order to weather the immediate crisis, build continuous resilience, and seize on opportunities for transformation, you need to make sure you have an accurate, complete, and real time view of your IT landscape. You need a way to assess your IT’s performance, in terms of functionality, cost, and product delivery, and create roadmaps for change. You need the ability to mitigate IT risks—by boosting cyber security, gaining quick access to data in demand by regulators, and better understanding your mission critical applications and their interdependencies. This will help you ensure that changes made to one system don’t inadvertently create problems for another.

The EAM/SPM advantage

Much of the remainder of this paper will be devoted to helping you grasp the nuts and bolts of why an EAM/SPM approach is best suited to accomplishing these tasks—and in enabling your organization to prioritize the change that’s most impactful. For comparison’s sake, though, it’s useful to briefly introduce a few alternative approaches and their drawbacks.

One common practice is attempting to manage the IT portfolio through spreadsheets, CMDBs, or modeling solutions.

• Spreadsheets are an attractive option because they don’t require new tools: most enterprises already have Excel at their fingertips. For portfolio management, though, they have many drawbacks, most notably a lack of KPI-based analytics needed to assess the value of your portfolio elements. They also don’t help you understand which business capabilities you need to strengthen in response to a crisis.
• CMDBs do a better job creating a central repository of data. But they’re unable to match planned portfolio changes to business strategy. They also lack the big picture context to show the potentially damaging
  impact of a technology failure on other areas of IT and business.
• Modeling tools are useful for visualizing the systems that make up your existing IT landscape. But the information used to build them becomes quickly outdated. They also don’t offer the full picture from business strategy to IT execution in a single system, which undermines users’ ability to make well informed decisions on change for innovation.

Enterprises that decide to pursue an EAM/SPM-specific tool still have a choice between solutions geared toward each discipline and those that integrate the two into a single product. Enterprise architecture management is designed to give you a single source of truth: enterprise architecture capabilities help you to simplify your IT landscape, understand the implications of IT change, and anticipate system disruptions before they do damage to your business. Strategic portfolio management helps you connect the dots between IT change and your strategic goals—a process accomplished through portfolios that link all elements of your IT architecture to a clear functional purpose.

Although both types of tools provide some value as stand-alone products, a solution that incorporates both is strongly recommended. EAM, after all, is most impactful when it’s used as a foundation for discovering the effects of SPM-driven change. Stakeholders managing project portfolios, moreover, benefit greatly from an understanding of how other enterprise forces are changing the IT landscape. In order to identify a project’s interdependencies, and prevent potential issues with deployment, they need a full accounting of the as-is and to-be environments that only EAM can offer.

In a moment, we’ll dive into some specific capabilities that enterprises seeking more resilience should look for in an EAM/SPM platform. First, though, what follows is a slightly deeper look into the ways that an EAM/SPM approach can leave you better prepared for disruptive events—by helping you respond to the immediate crisis, build a foundation to better manage change, and embrace disruption as a  catalyst for innovation.

Crisis Management: The immediate response

An EAM/SPM discipline not only helps your enterprise prepare for the next  crisis: it also equips you with the means to act decisively in the days and weeks after it hits. EAM/SPM enables you to:

• Identify critical business functions. When facing disruption, you need to know which business capabilities demand your full attention, and which ones can be moved into hibernation. EAM/SPM helps you identify the capabilities critical to business continuity, understand the impact on their associated processes and systems, and prioritize the activities that are essential to weathering the crisis.
• Make fast decisions on change. Crises often demand rapid change—and IT leaders may be unsure whether they have the best data at hand to base decisions on. A well-run EAM/SPM practice gives you the confidence that the data on your IT landscape is complete, consistent, and current and that all stakeholders are synched into the decision-making process. The result? Better coordinated, more informed decisions in the heat of the moment—with a greater understanding of the change that will result.
• Inform elastic budgets. Disruption can have a substantial impact on your bottom line, and stakeholders often struggle to identify where to reduce, or increase, budgets in response. EAM/SPM helps you figure out which investments are still relevant and gives you deeper insight into the cost implications of expanding, or cutting back, use of a given application. This also gives you the power to negotiate more favorable contracts with your vendors and better align costs to fit in with your new financial picture.
• Bolster service availability. Often, crises lead to an unforeseen spike in demand for IT services—as occurred when workers shifted to home offices during Covid-19. EAM/SPM allows you to conduct a business capability assessment to identify which applications are used outside the company premises, understand needed service capacity, and accelerate transition of workloads to the cloud for better scalability and performance. This keeps your systems secure and bolsters worker productivity—no matter where they’re located.
• Protect against cyber-attacks. The costs of a cyber-attack can be crippling—from the exposure of sensitive data, to millions spent on recovery efforts. EAM/SPM leaves you better prepared by giving you a straight line of sight from business capabilities to processes, applications, technologies, and devices. This allows you to better understand the impacts of corrupted systems, IT failure, or system outage. It can also help you strengthen management of threats through automation and accelerate protection mechanisms like two-factor authentication and SSO.

Change management: Build a foundation for resilience

Once the fog of the immediate crisis has cleared, your enterprise will likely face some existential questions. How can you stay competitive in a market heated up by disruption? How do you address customer preferences and priorities that have changed during the crisis? How can you boost resilience by adopting new technologies, and accelerating your digital strategy? EAM/SPM can guide you to the right answers—whether they entail developing new services and products, pursuing acquisitions, mergers, or divestitures, or developing the shape and substance of a wider transformation program. EAM/SPM enables you to:

• Understand what needs to change and why. Change management begins by identifying the business activities in urgent need of improvement—and understanding why they’re critical for enterprise success. EAM/SPM makes this simple by breaking down your business strategy into executable goals and visualizing their impact on current and future business capabilities. It allows you to analyze the operating model as the central pivoting point from business to IT—and align the entire enterprise behind a common plan of action.
• Know what your needed change entails. Once you’ve identified your ideal change initiatives, you need to ensure your IT can deliver. EAM/SPM allows you to analyze planned changes for cost, architectural risk, and the general health status of the IT landscape. It helps you check change needs against set IT standards and understand the impact of changes to your architecture early on, so that you avoid surprises half-way through an implementation. The result is improved predictability and reliability of your IT plan.
• Have planning processes in place. Success in managing change also demands a well-timed implementation—with stakeholders across the enterprise in sync. EAM/SPM helps you coordinate the many roadmaps as demands for IT changes are submitted, and more efficiently allocate resources and budgets across the organization. It provides decision-makers with essential information on the strategic value of IT investment alternatives, which ensures optimal delivery of products and features, and better aligns IT delivery to overall enterprise strategy.

Innovation management: Design your enterprise’s future

As we’ve already discussed, enterprises that achieve the most long-term success are typically the ones that get innovation right again and again—especially when the going is tough. EAM/SPM can play an important role in this process—by helping organizations leverage new technologies and apply design-thinking techniques, such as designing a desired customer experience, or developing a new way of doing things. In particular, it can:

• Capture innovations. Even in the era of digitalization, the innovation process begins as it always has: in the minds of your best people. EAM/SPM can aid the process through fostering collaboration—by capturing trends from portals, the UI, or other solutions; enabling voting, likes, discussion threads and surveys; using AI to identify idea clusters; and linking all of it to your IT architecture. The result is a systematized form of ideation, that collects input from all stakeholders as efficiently as possible.
• Prioritize ideas with the most promise. Successful innovation requires placing your preliminary ideas in context—by identifying their impact on business strategies and capabilities, assessing their IT impact, and weighing input from necessary stakeholders. EAM/SPM gives you a visual representation of your innovation pipeline that captures the interdependencies between your ideas, in-flight projects, and existing assets and aligns them to your strategic objectives.
• Track your execution. Translating trends and innovations into an executable strategy demands successful monitoring—to track IT projects and their deliverables with precision. A good EAM/SPM practice has established models to monitor execution, as well as dashboards to expose idea roadmaps and KPIs to relevant users. These enable stakeholders to view the status of their ideas—and help ensure alignment between business strategy and IT execution.  

By now, the power, and versatility of an EAM/SPM approach should be clear—especially in today’s disruptive era. But what, exactly, should you seek out in a specific platform? At Software AG, we’ve identified seven core capabilities that will help you manage IT change most effectively—in the midst of a crisis and long after it. These will allow you to adopt multiple IT transformation and operating model optimization programs in parallel—and plan and execute them without conflicts, though an agile, adaptive approach.

The capabilities are as follows:

• Business strategy development. This capability pulls together information from various sources to build an iterated business strategy. The point is to generate a clear line of sight between the organization’s high-level vision and its implementation. In the context of disruption, this helps you understand which business areas need greatest protection, how they’re impacted by necessary changes, and where your enterprise would benefit most from innovation.
• Operating model development. This captures your existing operating model and its associated IT—while providing a road map for changes to your business capabilities, processes, and the wider organization. It’s critical to aligning the business and IT response to a crisis, designing change to the operating model and IT for future resiliencies, and understanding how this will all be impacted by innovation.
• Agile transformation. A rapidly changing and/or disruptive business environment requires agile delivery of IT services and products—with transparency, analytics, and feedback from stakeholders at all levels of the organization. Agile development and delivery methods can aid your response to a crisis by helping you decide which projects should be stopped and which ones should be accelerated. In the longer term, it can help you operationalize your business decisions, and more quickly realize innovations.
• IT portfolio management. This function helps you organize, and optimize, your IT to set the pace for change. It helps you better understand the up- and downstream consequences of a disruption, assess the impact of change on all objects in your IT and business portfolios, and ensure an appropriate tradeoff between progress in innovation and the technical debt that can accumulate though a scale-up of IT projects.
• Enterprise architecture governance. This enterprise architecture capability provides the underlying tools to ensure EAM/SPM projects are properly implemented—and that progress is monitored in a continuous fashion. It allows policies, standards, and data gathering to form the basis for informed decisions, both in response to a crisis and in ongoing change and innovation efforts.
• IT finance management. This function helps organizations optimize their IT with an eye toward cutting costs and ensuring new investments add value to business. It ensures stakeholders are aware of the financial implications of IT change and gives them confidence to make difficult decisions such as canceling licenses, reducing maintenance, or postponing new programs.
• IT risk management. This provides deep insights into the management of risks—by identifying the IT systems, technology components, and investments that are most vulnerable to threats, assessing the potential implications, and providing insights into measures for mitigation. It also supports the processes needed for compliance management—though monitoring systems subject to external requirements, determining responsibilities for evaluation, and generating data for documentation.

The world, we all know, has come a long way since Tiberius’ Rome—and for that matter, since the global financial crisis that began in 2007.  What hasn’t changed, though, is that the next disruption is always lurking in the future—and that the best time to get prepared for it is now.

As they navigate today’s disruptive forces—from climate change, to war in Ukraine, to the lingering effects of the Covid-19 pandemic—enterprises are increasingly aware that being ready to adapt begins by taking a hard look at their IT. As business success is increasingly defined by the speed of innovation, it’s your IT that will make your enterprise stand out, and double down when disruption hits to emerge stronger than ever.

Within this context, more and more businesses are beginning to see utility in an EAM/SPM solution. According to Gartner: “By 2024, 80% of digital businesses will integrate SPM and execution technologies, and adopt new frameworks and standards to achieve valued business outcomes.” Many of them are turning to Alfabet, the EAM/SPM platform from Software AG, which consistently ranks among the industry’s best. In its 2022 Magic Quadrant^TM for Strategic Portfolio Management, Gartner named Software AG as a Leader with the highest placement for “Ability to Execute.” Is your enterprise ready to join them? To ensure your IT becomes a driver of business success—and positions you to meet the next crisis head on, with confidence? At Software AG, planning and managing IT transformation is what we do best—and we’d love to guide you through the process. Get in touch to learn more about the many ways we can help your IT thrive—and why Alfabet could be the tool you’re looking for.

 

^{1 - Great expectations: Global executives respond to business disruption, PwC}

^{2 - Winning today’s race while running tomorrow’s, PwC}

^{3 - Economic conditions outlook during turbulent times, December 2022, McKinsey}