Pardon, which sector? – Xtech and Why I’m Fed Up with Tech part 3

Capability Components

I’ve written previously about the issues with xtech that arise from applying -tech to the end of a sector such as healthtech, fintech, etc. And I introduced (and revoked) the idea of a -value suffix. Earlier this week, a conversation earlier made me think more about this and I want to explore the concepts of Business Capability and Capability Components further.

The entrepreneur mentioned that he was in the finance sector. On questioning further, the offer was a financial app for any sector. There’s a big difference and we can explore that difference in a matrix between capabilities and sectors.

Sector Capability Matrix
Figure 1: Sector Capability Matrix

At first glance, that looks like a contender for the world’s least useful matrix. On second glance, I’d also probably agree with my first impression. Not only does every cell in the matrix have a tick in it (so there’s no differentiation), it doesn’t include a full list of Business Capabilities. Instead, there’s sufficient to explore the concept for our purposes.

Let’s take it a bit further and use it to explore an issue I see with companies, mostly those in a supply position. If you’re selling software into healthcare, then are you a tech company or a healthcare company? It helps to phrase the position in terms of the capability you provide or improve in your target sector. So in that case, you’d be providing technology into healthcare. As we can see from the possibly-useless matrix above, we’d expect all sectors to require all business capabilities.

But I find more companies are confused if they’re providing software into finance. Suddenly they’re in the financial sector. True, the selling into the financial sector, by providing services into it, but they’re still a tech company.

This becomes more obvious when the software company that originally sold to Finance sector then also repackages the product to sell into Healthcare.

This is a simplistic view of the concepts of horizontal-integration or vertical-distribution; you can provide:

  • more services into your industry vertical, e.g. provide tech and financial management into healthcare or
  • the same capability into many sectors, e.g. provide financial management into healthcare and education or expand in both directions with
  • a mix of capabilities across sectors

Another Perspective

However, it’s more complicated than that. Each of the capabilities listed in the only-slightly-useful Sector Capability Matrix features at Level 1 or Level 2 (depending on where you start counting from the top). From a standard business architecture practice, each of the capabilities can be decomposed further, for instance, within sales management, we’d expect to see sales analytics, sales commissions, sales execution (the actual doing the selling), sales performance management, etc. Different organisations have a different angle on how they decompose the lower level capabilities. The main concept to take away is that we can take a conceptual capability and split it into more granular capabilities.

Instead, we are going to decompose them in a different manner. Most of the capabilities can be viewed as mini-businesses in their own right, so we’d expect to see a microcosm of capabilities within them.

Business Components
Figure 2: Business Components

Whereas the traditional business architecture view is based on functional decomposition (in that the capabilities are decomposing into more specialist capabilities), we’re going to decompose into enabling components.

For each of those capabilities that support an organisation, there are several components that are required to turn those capabilities into reality. In the same way that the organisation requires capabilities to function, the capabilities themselves require the components to be able to deliver. These components are capabilities at the next level down, to some extent mirroring the capabilities of the organisation as whole. For instance, most capabilities require people who can do the job, people who can manage, technology, etc. Hence the concept of capabilities as mini-businesses in their own right and that’s what we see in Figure 2 above. Each capability is supported by components. Note that Figure 2 does not include all capabilities or components, just enough to give an indication of what we’re discussing here.

Capability Components
Figure 3: Capability Components

This becomes significant when we consider the role of the components in a B2B context. This article started with a founder’s confusion over the sector, we then took a route through exploring capabilities. Now I want us to focus on the components.

It’s that middle column, with the red border, that we should consider when creating a new business. For B2B, we provide Capability Components to a client business.

If your client is a car dealership, they’re in the automotive sector.

The car dealership will have many Capabilities, e.g. Sales Management, HR Management, Organisational Development, etc.

If you are a company selling sales training, then your selling into two capabilities. You’re improving their Sales Management capability, but providing services into their Organisational Development capability. And that’s why it’s confusing. We have to remember, not only the sector that the client is in, but the interplay of the Capability Components we offer with the client’s Capabilities.

A further angle is that if you have sufficient capability components, you can provide the whole Capability to your client business, e.g. fully outsourced HR services.

Conclusion

We need to be careful about how we define our sector. Depending on the context, your audience will interpret the sector differently. A lot of that will also depend on what you meaning you intend to convey when you say your company is in a given sector.

The key item to remember is that the client operates in a Sector and that we offer Capability Components that interact (e.g. support, improve, provide) with the client’s Capabilities.

Automation of White Collar Jobs and Process Debt

Background

Plan
Plan

Business Insider published an article on how automation may remove the need for people in white-collar roles.

While the context of the article seems relevant, I found the choice of example to be very odd. Specifically Deliveroo’s creation of 25 redundancies in their ordering process. In fact, I think it more likely that process debt had been accrued and then paid off as part of an improvement programme.

Initial Thoughts

I found it odd because to me that sounds like the original ordering process was horrendously inefficient. Automation was one tool that was used, but I doubt that it was the only tool. Better process design, streamlining and more intelligent analysis of the how the process worked were probably a bigger part of the result than the automation itself. The automation was just one of the enablers.

Rationale

The reason that I think it’s this way is because of debt, not financial debt, but design debt. In the same way that technical debt exists, so can design debt, architectural debt. I don’t want to coin another phrase since debt works adequately once we recognise that not all debts are purely financial.

The point is that a company can make decisions to react quickly rather than spending time and effort to improve their processes, their technology and, indeed, their finances. Those decisions can move them to a place where they are able to react quicker (by using existing processes, tech, etc rather than having to build updates or change platform completely), but where they also know that time is limited. There are reasons why some companies have put the time and effort into improvement and reasons why other companies choose the quicker solution . In choosing the quicker solution, the company is building up a debt. And like all debts, it has to be repaid. The hope and idea is that the company is profitable enough from its short-term decisions that it can easily afford the debt when it’s called in.

All founders make these decisions. As a relatively young company, it’s likely that Deliveroo made those decisions and at times leaned towards building a presence and market share in lieu of efficiency. Like a garden or like a code-repository, all organisations need maintaining otherwise they become stale, complete with weeds of inefficiency.

When was the last time you actively improved your processes?

 

 

Enterprise Architecture in Startups: Is it relevant?

Ludo Board for depicting strategy
Ludo Board

Practitioners of Customer Development, Lean Startup and Enterprise Architecture can all learn from each other. But they shouldn’t enforce their views on each other as there are some incompatibilities. Let’s see how enterprise architecture in startups can exist.

Background

The Startup culture and methods have largely been defined by Steve Blank who wrote The Startup Owners Handbook and later, by Eric Ries who wrote Lean Startup. Both of these consider how newly-created companies can grow quickly and in the right direction for their founders and customers. Many authors and speakers followed, but for this article, we’ll mainly focus on these two.

Enterprise Architecture (EA) functions can be found in many large, mature organisations that have a need to get a grip on their ICT* landscape. Continue reading “Enterprise Architecture in Startups: Is it relevant?”

Rodents Don’t Scuba Dive – Innovation In The Real World

Diving in Black and White
Diving in Black and White

I’ve always liked the concept about innovation being the introduction of something that’s already done in one industry sector into another sector where it’s not (yet) done.

Incomplete Definition

Unfortunately, it doesn’t stand-up as a complete definition of innovation. For instance, it falls short by not recognising innovation from within. By that, I’m not referring to new types of products (e.g. the internal combustion engine) since those would be better classed as inventions. Many new products are existing concepts with new features, so would be better described as improvements. But taking a product and using it for a different purpose, e.g. using an internal combustion engine to power a unicycle could be an innovation.

What I like about the simple concept is that it immediately makes people think about what they Continue reading “Rodents Don’t Scuba Dive – Innovation In The Real World”