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Anatomy of Agile Enterprise

Janne J. Korhonen

Paradigm Shift in IT: Implications of Service-Dominant Logic

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The traditional metaphor of business is shipping: producers package content and move it through a channel, addressed for delivery down a distribution system. Not only is the metaphor applied to the movement of physical goods, but also to marketing, where marketing messages are delivered to consumers through broadcasting media. Customers are seen as the recipients of goods that can be acted on in terms of segmentation, promotion and distribution. Due to increasing division of labor, specialization of organizations and insulating distribution channels, the exchange with customers is often indirect and monetized.

However, in the wake of increasing complexity and competitiveness of today's business environment, the focus is shifting from the producer to the consumer. Over the last few decades, resources have increasingly been viewed not only as static "stuff" (operand resources) but also as intangible, dynamic functions (operant resources; e.g. human knowledge, skills, core competencies, organizational processes) that act on operand resources (and other operant resources). As operant resources produce effects, they escape the finitude of natural resources.

In their seminal article "Evolving to a New Dominant Logic for Marketing" (2004) and its follow-on work, Stephen L. Vargo and Robert F. Lusch maintain that service provision rather than goods is fundamental to economic change. This change in perspective -- shifting the primacy of resources from operand to operant -- has fundamental implications for how the organization is perceived.

The production-centric view on organization postulates a system that is goal-seeking in nature (to use Ackoff's classical terminology). It is abstracted as relatively self-contained, closed system, whose goal is to minimize the costs and maximize the profit. Given the technically rational basic assumptions, organizational learning is limited to incremental improvement within the established structures. To maximize production control and efficiency, the goods are standardized and produced away from the market.

In the service-centric view, in contrast, the organization is perceived as a purposeful system that exhibits will: it can change its goals and select both ends and means to pursue them. The organization is conceptualized as an open system that interacts with its environment. Other entities, such as potential customers, are also recognized as purposeful systems. Learning is not limited to doing things better, but it is also, and foremost, about doing better things. To maximize market responsiveness and effectiveness, co-productive relationships and open innovation are cultivated.

The new dominant logic can also be seen in information technology that mirrors the increasingly competitive business environment. The broad paradigm shift from closed, hierarchical and static systems to open, networked and dynamic systems denotes a move from centralized, siloed, proprietary and monolithic enterprise information systems to peer-to-peer, service-oriented, standards-based and modular inter-enterprise composite applications.

Different aspects of this paradigm shift in IT are summarized in Table 1. Nuff said?

Table 1. The paradigm shift in information technology.

Production-Centric ITService-Centric IT
DriverCost containment, stabilityValue creation, agility
Business modelProactive or reactive push modelInteractive pull model
Business-IT relationshipBusiness-IT alignmentBusiness-IT convergence
Led byIT departmentLine of Business Managers
Governance focusCompliance and controlEnterprise Architecture
Organizational scopeEnterpriseInter-enterprise
Business processesComplex and hardwiredModular and reconfigurable
Information systemsMonolithicService-oriented
Technology opennessProprietaryStandards-based
SpatialityFirmly on the ground (computer room in the basement)In the Cloud
Topicality of informationYesterday, last week, last monthReal-time
Focus onMachine-oriented transactionsPeople-oriented interactions
Communication styleSynchronous, remote procedure callsAsynchronous, document-oriented

Janne J. Korhonen provides insights into how information technology can be applied strategically to catalyze organizational change and responsiveness. Drawing from both theory and practice, he discusses agile enterprise and its governance.

Janne J. Korhonen

Janne J. Korhonen is an independent business and IT consultant,specializing in enterprise architecture, business process management,service-oriented architecture and pertinent governance models. He has over ten years of experience as an architect and consultant in a variety of extensive and mission-critical IT projects. With strong theoretical underpinnings, his consulting encompasses systemic co-development of business, organization and information technology.

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