EA Radio - Episode 2 - Value of EA

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If you look at the statistics of Mergers and acquisitions you will see that the number of acquisitions and value of the acquisitions happening, doubles every five years. There were $300 billion worth of acquisitions in 1988 in 1997 it grew to $900 billion. There were $3431 billion worth of mergers and acquisitions worldwide in 2010 which grew to $6144 billion in 2015.

 

If you look at the product lifecycle of any product, whether it is a mobile phone, a vacuum cleaner, an air conditioner or an automobile. The cycle time that it takes to go from research and development to manufacturing and marketing has drastically come down. There are major investments being made to leverage technology in almost all business domains whether it is finance, banking, healthcare, pharmaceuticals, telecommunication or what have you. The first type writer was envisaged in 1575. The first typewriter that went into mass production, was designed by Christopher Scholes and manufactured and marketed by Remington on March 1, 1873. So it took them 300 years to go from design to manufacturing. The iPhone was first envisaged in 2004. It went into commercial production in 2007. From design to production in 3 years flat.

 

The business models are becoming more and more dynamic and the business landscape is constantly in a state of flux. It is mutating and changing every moment. Products are getting launched, alliances are happening, new countries are opening up business avenues and new ways of improving turnover and profitability are being discovered every day.

 

In such times, it is not possible for an organization to stay stagnant and continue to do business like they did before. What worked until now, will no longer work in the future. Organizations will have to become more malleable constantly adapting to the dynamic markets, changing customer needs and find ways to make themselves profitable.

 

The customer today is very savvy. The customer today needs more for less. The competitor today is very savvy. The competitor is constantly looking to find newer ways to provide the customer more for less.

 

So that businesses can provide more for less, for a few generations now, businesses have been focusing on operational efficiencies trying to make the business processes more efficient by eliminating waste and duplication and reducing costs. The industry has seen division of labor through "enquiry into the nature and causes of wealth of nations" by Adam Smith. It has seen automation and engineering to eliminate the human element in turn reducing human errors. It has seen the advent of computer technology to digitize processes, in turn reducing the cycle time to save costs.

 

Major breakthroughs have been made and the more we think about reducing operational costs now the more difficult it becomes. Just like when you start training for a 100% sprint. All the major gains in speed are made during the initial parts of the training. Once you have risen to your level of competence, making gains becomes exceptionally difficult.

 

And that's what happened to the Moore's law. Moore's law suggests that the no. of transistors in a dense integrated circuit doubles exactly every two years. This would mean the processor speeds would double every two years. And this cycle would continue indefinitely. Well guess what… we broke the Moore's law already. It was becoming more and more difficult to add transistors to an integrated circuit. So now we have more no. of integrated circuits. We came up with multi-core systems, thereby going much faster than double every two years.

 

And that's the kind of design thinking that's required in the industry today. While marginal gains are very important and every penny saved is a penny earned, we need to think big disruptive changes that would shake the entire business model at its core. And this is where I differentiate innovation from operational efficiencies. Disruption from marginal gains. And this will be repeated many times in the book. Know that when I talk about operational efficiencies, I am referring to continuous improvement activities that constantly provide housekeeping to the business landscape. And Innovation are large and disruptive ideas.

 

There's no argument about the fact that innovation is required in every organization and it must be done. So let's go ahead and do it, shall we? Easier said than done. "Innovation" has become a buzzword in the industry today. Everyone wants to do it. Everyone talks about it. Everyone perceives it as a silver bullet that will kill all the werewolves challenging their business. Then why are there so few companies who are being able to harness this successfully?

 

Well, that's because the challenge is change. Change is and has always been the most difficult thing for man. We hate it, we fear it, we abhor it and we absolutely do everything in our power to avoid it. Well, innovation means large and drastic changes. To have organizational agility is to have the capability to adapt to change. To be able to envision the impact of the change on the existing landscape. To be able to take corrective action to minimize negative impact to the existing landscape. To have the capability to harness the positive impact to the existing landscape.

 

Lots of difficult and large philosophical statements. That's what this books is all about. From within a team called Enterprise Architecture, I intend to show you how to keep an eye on the entire enterprise landscape and I intend to talk about what happens after you get an idea. I intend to show you how to create a culture where innovation is valued and there is continues generation of new and disruptive ideas, constantly providing the competitive advantage that an organization needs.