A version of this article originally appeared in Digital CXO.
Founders and CEOs need visibility into business operations, metrics and resource allocation. Today's innovators have the ability to start life as digital-first businesses which can help them leapfrog years of technical transformation, application refactoring and cloud migration that burden incumbents.
This digital-first advantage can potentially be diluted without the right strategic focus on the best course for enterprise architecture. This isn't an arcane, large enterprise concept, but one important to the agility and data-driven decision-making of all succesful ScaleUps.
Consequently, CxOs — who may be, for example, Founders, CEOs, CIOs, CFOs, CTOs — at successful digital-first ScaleUps are increasingly being responsible for (and held accountable by the Board and their investors) for business goals and efficient growth achieved through technology.
Choosing the right mix of technologies is important — but it is only half the story. Digital- and innovation-first ScaleUps are increasingly realizing that having the right mix of skills and leadership is crucial in selecting and capitalizing on enterprise-architecture investments. A prerequisite is harmonizing how system architecture supports the customer. In this way, the choice of architecture disrupts the value chain in such a way to make the customer experience more seamless and inviting than it was before – essential for Product-Led Growth (PLG) companies and underestimated in Sales-Led Growth ScaleUps.
Orchestrating enterprise architecture is the ability to drive innovation and growth through selective investment in systems with critical business capabilities. These systems must then be integrated to produce meaningful data, business metrics and insights. The result is often a differentiated customer experience (for internal customer stakeholders, and paying external customers).
Customer value is created by architecting the entire enterprise holistically and continuously, rather than in silos and episodically. ScaleUps can use enterprise architecture to create new ways for customers to discover, learn about and eventually buy new products or services, then receive ongoing value.
The diagram below illustrates the expected architecture results by company size:
Building Blocks for Functional Innovation
Until companies reach $100 million, the role of enterprise architecture is spread across many leaders, but should be something within the remit of the CEO, Founder or other senior leader. Startups with annual revenues under $100 million struggle to decide when to hire a CIO or enterprise tech leader, without realizing the value that enterprise architecture drives in helping companies improve both customer and employee experiences, optimizing the application portfolio and maintaining technical standards. Below is a typical self-assessment any company can perform to determine the level of systems maturity:
Innovation at a Digital-first Company
Enterprise architects sometimes limit the scope of EA tools to cataloging the lifecycles and constraints of existing IT systems, applications and technologies, according to Gartner. “They miss the opportunity for EA tools to capture the business architecture, which support business strategy discussions and underpin wider change plans of the organization,” analysts Akshay Jhawar, Gilbert van der Heiden and Nolan Hart write.
The FEAC Institute — which educates and certifies enterprise architects and business analysts — lists reasons why enterprise architecture efforts fail. Insight Partners’ experience working with more than 60 portfolio companies leads us to agree on each of them:
- Misalignment between technical architecture and business problems or outcomes, resulting in disjointed customer experience.
- Focus on the future state with either no understanding of the current state, or only a partial understanding due to missing stakeholders.
- Replacing systems without decomposing the current capabilities, many of which may be custom and customer-facing.
- Roadmaps and capabilities prioritized without reference to business process or customer journey.
- Lack of traceability during project execution beyond initial, high-level requirements.
To understand and map the enterprise holistically, we recommend developing a high-level diagram in simple business terms, as seen in the example above. Time spent crafting the diagram will both expose areas of concern and help communicate them convincingly.
Of course, there is no way of knowing on Planning Day One precisely what the end state will look like after Production Day One.
“Do not try to model everything and for every eventuality,” advised Laura Mauersberger, a marketing campaign lead at LeanIX, in a blog post, and one of Insight's portfolio investments. "You cannot anticipate all the disruptive events that will influence your business…By simplifying your [enterprise architecture] models and focusing on your capabilities, you remain flexible enough to react to unexpected events and trends. If the project is executed well, all the pieces will fit and there will be no leftover pieces.”
The less time and effort your organization spends on in-house development, the less risk you run of having to amortize vaporware over the course of years. That is a lesson Workato (also an Insight investment) constantly teaches its clientele when focusing on enterprise integrations.
“With the Workato community, we can save time by using recipes that others have created, taking advantage of built-in connectors,” says Erez Simai, business applications team lead at monday.com (an Insight investment focused on work operating systems). “Our first use case with Workato will be transforming our quote-to-cash process by connecting Salesforce with Priority [our ERP]. We have an entire roadmap for using Workato across all parts of the business, from sales and finance to HR and marketing, and we can’t wait to get started.”
Many ScaleUps already have applications and legacy technology that connect well with each other. But can they snap together tightly with newer building blocks that are becoming industry standards? If not, some organizations might struggle to respond to market changes and adapt to customer demands.
To transform their businesses, digital-first companies (with CxO leaders) are able to find new ways to stay on top of this constantly changing complexity. Keeping up to date also lowers the risks of technological obsolescence, vendor lock-in or skills shortages.
Top of the Digital-Innovation Ladder
In his book Unlocking the Customer Value Chain, Professor Thales Teixeira of Harvard Business School describes a framework for business model innovation by unbundling value, disintermediation and decoupling.
In this way, a customer value chain is a business process, and a workflow that customers follow, resulting in new value being generated. To build a high growth business, the EA function should drive end-to-end business processes and understanding network effects. According to a Deloitte study, the proportion of public companies with tech executives on their boards almost doubled over the past decade to 32% — one in three public companies now has a tech exec on the board – becuase of the customer value and business insights derived from integrated tech platforms.
Here's the important take away for Founders and CEOs: the innovation-first ScaleUp should never consider shipping product to customers, without the ability to dynamically change enterprise architecture that delivers a better customer experience, direct business metrics, and insights. Whoever wears the CxO hat in your high-growth ScaleUp should be thinking beyond projects and individual systems, in order to focus on business outcomes.