Leadership and Science of Convergence

Innovation, Agility, Sustainability by Converging Business and Technology

By Faisal Hoque, Founder, Chairman and CEO, BTM Corporation

The overarching challenge for a leader today is to prepare his or her organization to respond to surprises, to at times be the instigator of those surprises, and to do it all faster than traditional ways of making decisions allow. The period of rapid and chaotic change in which we find ourselves keeps the buzzword industry busy – be resilient, be innovative, be agile, be adaptive. Fine, you say, let’s do that. Now what?

Actually, these seemingly distinct concepts are interrelated and interdependent. As an analogy, think of the Internet. It was created to make our national defense communications resilient, i.e., able to bounce back from a shock. Yet it allows our organizations to be agile, i.e., able to act nimbly to seize opportunities. And it has been the enabler of endless innovation in business models, processes and global collaboration.

In the same way, a firm that is adaptive – agile and resilient – will be equipped to experience sustained innovation, meaning it is not solely the result of happenstance but rather continuous and evolutionary. The connection of these concepts should not be surprising. Innovation, after all, is doing something new. Agility and resilience imply the ability to do something new.

This ability must be established before opportunities or threats come knocking, because in a connected world time is risk. The success of an organization depends on its leaders’ ability to be future-oriented, take advantage of external opportunities and bounce back from unforeseen challenges. The value in capitalizing on global market trends by anticipating them and then rapidly responding innovatively is incalculable. In this new environment:

Disruptive innovation creates new markets
Evolutionary or sustained innovation creates great enterprises
Agility allows rapid response to unforeseen changes
Globalization enables extended enterprises reinforcing competitive edge
The convergence of business and technology enables agile, innovative, extended enterprises
Convergence relies upon repeatable, multi-disciplinary management capabilities

Organizational design has a direct impact on how the enterprise can react to and recover from forces beyond its control. Our recent book, Sustained Innovation (2007), was based on research, both primary and secondary, that illustrated the successes and lessons learned at leading organizations around the globe. These included Global 2000 corporations such as GE, Boeing and Xerox; government agencies such as the Defense Advanced Research Projects Agency, the U.S. Army and the Government Services Agency; and social enterprises such as Grameen Bank, SKS Microfinance and n-Logue. We looked into these organizations to gain a better understanding of how they create innovative business models – models that can adapt as opposed to suffering from unexpected shifts in the market. The results of that research were instructive: the successful organizations all moved towards convergence of business and technology with similar organizational designs and behaviors.

Consider the subtle yet significant shift in the role of technology in today’s business environment. Technology is now basic to all business activities, which is why we call it “business technology.” Companies spend as much on it as on all other capital investments combined. It has become integral to the business, but if it is not managed as such – if the management of business and technology are not “converged” – efforts to be adaptive and innovative will be undermined.

To create an environment where technology helps to shape -- rather than simply enable -- strategic choices, leading enterprises are already working to synchronize -- rather than simply align -- their business and technology decision-making. And in the best-managed modern enterprises, technology and business management will converge completely. Convergence occurs when business and technology activities are intertwined and the leadership teams operate almost interchangeably. Managing business and technology together, or as we call the discipline, “Business Technology Management (BTM),” takes a multi-disciplinary, structured approach that creates a “whole-brained” enterprise.

Our research since 1999, in conjunction with leading business professors and industry practitioners, suggsts that leaders who place a focus on converging the business and technology sides of their companies attain far more success than those who continue to treat them as silos. The essential conclusion of this research is that there is demonstrable economic value for enterprises in advancing business technology management maturity, and that the payoff is greatest for those enterprises that are approaching business/technology convergence.

Between 2002 and 2006, this research covering 50 industries shows that, working in the same environment as their direct competitors, enterprises with a more converged business technology management exhibited superior revenue growth and net margins relative to their industry groups:

12% average annual revenue growth vs. 4% for their industry groups
36% average annual earnings per share growth vs. 7% for their industry groups

Not only did these enterprises grow at a faster pace than did their peers, but they also exhibited consistently greater returns than those of their competitors:

6% higher EBITD margins than those delivered by their industry groups
4% average higher return on equity
8% average higher return on assets
14% higher return on investments

A full copy of this research report can be found at http://www.btminstitute.org/pdf/Business Technology Convergence Index_Final.pdf

In our previous books – The Alignment Effect (2003) and Winning the 3-Legged Race (2006) -- we identified a set of essential management capabilities for effective business technology convergence. These are grouped in four functional areas: Governance & Organization, Strategy & Planning, Investment Management, and Strategic Enterprise Architecture. A Business Technology Management Capability is a specific competency defined by four critical dimensions, i.e., each capability is ordered by repeatable processes, executed through appropriate organizational structures, and enabled by the right information and technology. A Management Maturity Model identifies areas most in need of improvement, secures a starting point for enterprise development, and specifies the journey and destinations for sustained innovation and change.

By developing these management capabilities, an organization creates an environment for strategic exploration and business agility. This occurs in the context of a clear understanding of business technology's potential to accelerate development of both effective strategic positioning and innovative business models.

The convergence of the business and technology sides of a business into an integrated, “whole-brained” enterprise provides the connections among innovation, resilience and agility. This organizational maturity supports innovative thinking through carefully designed processes, rewarding measured risk taking, and providing information architectures that serve as a knowledge base for building and testing opportunity scenarios. Convergence provides the enterprise with the platform to thrive on marketplace change rather than just reacting to keep pace.

Business Technology Management (BTM) is the multi-disciplinary management science, grounded in research and practice, which unifies business and technology decision-making from the board of directors to the project team. BTM’s structured approach allows enterprises to align, synchronize, and ultimately converge business and technology management, thus ensuring better execution, risk control, and profitability.

It is without a doubt that economic power today is derived from skills and innovation. Societies that do not invest in skills will weaken; it is that simple. One of the goals of BTM is to lead the industry in making business and technology one by developing innovative skills. And the BTM Academy is the leadership development center that will allow the next generation of executive to collaboratively develop these skills.