economics

Invention (Innovation) Not Strategy Creates Renaissance – Moving from Darwinian Adaptive to Generative Transformation

Invention (Innovation), Not Strategy Creates Renaissance. Most Darwinian concepts does not engender to developing creativity, and so to innovation. Instead it is about strategy for developing dominant position, this is not a sustainable model as history has shown. Instead, Enterprise Architects should begin reinforcing energy into lost opportunities in innovation and explore to create newer territories.

In the recent times, we saw the fall of Michael Porter’s ideas around corporate Darwinism. His company during the past two decades influenced the CEO’s with trickle down ideas and C level were enamoured by it, as it helped them device system giving them enormous clout. Suddenly the landscape has changed, the market response has been very different, from what the CEO’s sought. This is because Darwinian theory does not sustain. Inorganic decisions are not working. From recent HP’s fiasco (Autonomy acquisition), it is much evident how corporates are massively faltering. Decade back, Carly Fiorina then HP’s CEO sought EA framework based on Darwinian adaptive principles as a way to achieve business enablement. It has not worked. It is now exactly a decade since she introduced. Theories developed on Darwinian dominance has been flawed and it is now much evident. Porter’s company recently declared bankruptcy. Those ideas are history.

What killed Michael Porter’s Monitor Group
http://www.forbes.com/sites/stevedenning/2012/11/20/what-killed-michael-porters-monitor-group-the-one-force-that-really-matters/

Check out interview with Carly’s Darwin EA framework to create adaptive capabilities.

http://www.hp.com/hpinfo/execteam/speeches/fiorina/forbes04.html

Based on flawed ideas, corporates employed resources targeting to achieve market dominating capabilities. Against this landscape, IT unfortunately has been delivering diminishing return. To overcome the value struggle that IT could offer, various schemes in the industry has been probed. Especially, TOGAF itself has been maturing to develop dialogue for IT from being across LOB service provider, cost to profit center, to more ambitious as business enabler. The argument of Nicholas Carr’s IT Does Not Matter when seemed almost true, ideas around creating EA driven strategic operating model emerged. Jeanne Ross book on EA as Strategy – Achieve Competitive Advantage

These ideas are getting outmoded. The essence of creating sustainable business model is to keep throttle on innovation. Challenges still remain to solve or probably discover newer opportunities by innovation that creates generative system, which intrinsically allows for emergence.

Check out Jeanne Ross discussion on EA – IT in context of business transformation

MIT’s Ross on How Enterprise Architecture and IT More Than Ever Lead to Business Transformation

In my mind, even Jeanne dwells on conventional wisdom. She is not discovering newer landscape. She discuses to improve the leverage to achieve strategy for transformation. The question is why/ which / what / where/ when strategy and how transformation and finally what outcome??

Dealing with thoughts like these, EA is not a domain of IT alone. EA is an integrative subject that brings together several disciplines to solve both macro systemic and micro functional concerns. EA can be used to reimagine and repurpose architectures including those realized by IT.

Another concern that EA must tackle in its value proposition is the value it can help achieve at system level. The GDP related to digitization has been in the increase. However, what is not evident is the “productive” impact of the digitized portion of the GDP. Meaning what activities in the digitized world are essential to mankind’s survival, are productive GDP. Innovations are required in increasing the potential of the productive GDP driven by IT. This argument is crucial.

In my view, EA can offer a great leverage to reimagine future, besides achieving leverage in the existing operating model. In pursuit of such mission, EA does not belong to “IT” alone. What we need is generative and not mere adaptive transformation efforts. It is in generative system, where integrative disciplines will work to allow for tacit knowledge creation. It is this tacit knowledge that will trigger emergence of newer opportunities, creating emergent architecture.

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Operating Model – Have Fed Agencies abandoned creating “Enterprise Transition Plan” ? ETP is challenging for the OCIO

Enterprise Transition Plan – Line Of Sight – Operating Model

Ref:- FEAC Institute, FEA Guidance, INGINE INC, Srinidhi Boray[/

Conceiving a coherent modernization plan and executing them has always been a challenge for OCIO. Enterprise Transition Plans generally documents the visions, goals, capabilities at the strategic level and then progresses to envisage “target conceptual architecture”, while planning for tactical efforts working through the mechanisms of architecture lifecycle needed to transition towards the target enterprise conceptual architecture. This results into creating the “roadmap”. The documents that holistically speaks to organizationals capability in reaching such a roadmap is the “Enterprise Transition Strategy”.

Reading the Enterprise Transition Strategy following should be evident:

Organization’s maturity and competence to perform and embrace the future capabilities

Organization’s present constraints in delivering the needed “capabilities”

The profile of the architecture cross sections (segments) needing modernization to develop the intended “portfolio of capabilities”

Investment Profile – planned to executive segment modernization

The governance structure and mechanism that engages the different functional capabilities, such as leadership – management, lines of businesses, enterprise architecture, capital planning and program management. This group together develops and vets – strategic plans, tactical plans and implementation plans governed by following  life cycles

  • Performance Management (Architect, Invest, Implement)
  • Architecture Segment (Notional, Planned, In-Progress, Completed)
  • Release Architecture (sadly mostly do not plan this – it is here interdependence of architectures or capabilities are realized and maintained)
  • Capital Planning (Preselect, Select, Control & Evaluate)
  • Investment (mixed, steady state, Development, Modernization & Enhancement -DME)

A “Sequence Plan” along with “Implementation Plan” is developed to reach the desired Target Architecture (temporal perspective)

Finally Operating Model – The most important component – it assimilates all the decisions chosen for creating an operating leverage, that creates degree or order of leverage to deal with inherent systemic complexities against the efforts of creating economy of scale in delivering the enterprise capabilities essential for delivering the enterprise mission.

More discussion in below link in creating Enterprise Transition Strategy

https://ingine.wordpress.com/2008/12/06/ea-framework-for-transition-planning/

Transformation Framework Capturing an Operating Model

https://ingine.wordpress.com/2012/08/03/transformative-enterprise-architecture-framework-connecting-strategy-tactical-operational-execution-implementation/

Mike Whitney: There is No Recession There is Demolition

Another Classic Example of Gaussian Distribution :

“During eight years of the Bush Administration, the 400 richest Americans, who now own more than the bottom 150 million Americans, increased their net worth by $700 billion. In 2005, the top one per cent claimed 22 per cent of the national income, while the top ten per cent took half of the total income, the largest share since 1928.

“Over 40 per cent of GNP comes from Fortune 500 companies. According to the World Institute for Development Economics Research, the 500 largest conglomerates in the U.S. “control over two-thirds of the business resources, employ two-thirds of the industrial workers, account for 60 per cent of the sales, and collect over 70 per cent of the profits.”

… In 1955, IRS records indicated the 400 richest people in the country were worth an average $12.6 million, adjusted for inflation. In 2006, the 400 richest increased their average to $263 million, representing an epochal shift of wealth upward in the U.S.” (“Wealth Inequality destroys US Ideals” Don Monkerud, consortiumnews.com)

via Mike Whitney: There is No Recession .

Game Theory : The essence of Enterprise Architecture is about establishing a “Dominant Strategy”

There is Darwinian in the below idea; however more congenial idea is Generative having more systemic congruent results

Same ideas can be repurposed in a better way.

The essence of Enterprise Architecture is about establishing a “Dominant Strategy”, that best achieves ‘economy of scale’. The economy of scale will apply to each of the architecture design decision selected. The set of design decisions that leads the architecture planning from strategy to tactical and from tactical to execution needs to converge to a dominant strategy engaging all the stake holders led by a cohesive mechanism of Governance.

Note: EA is about discussing the largest picture of the enterprise. Hence, any decision made must ensure that it lends sufficiently across the enterprise while increasing its “reuse”. This means ‘economy of scale’. All decisions, including the technical design decisions must yield a better ‘return on investment’ from optimized ‘performance vs cost’ perspective.

The main goal of the Governance, is to lead the dialogue that an enterprise riddled with complexities is engaged in,  towards a –“Dominant Strategy”. In many ways the array of events that Governance trigers, while working towards converging the decisions to a cohesive set of results, is similar to the behavioral probabilities  studied in Game Theory.

When a system is riddled with constraints, especially when  ‘money’ as  a resource is scarce, then it dominates the decisions needed to achieve the strategy. A system’s behavior  is governed by both micro and macro considerations. There is a threshold until which the system is probabilistically stable and is not affected by the micro behavior. After a certain threshold the micro behavior is unable to sustain the desired macro outcomes.

When Scarcity arises – Economics is Hot

Dominant Strategy

A strategy is dominant if, regardless of what any other players do, the strategy earns a player a larger payoff than any other. Hence, a strategy is dominant if it is always better than any other strategy, for any profile of other players’ actions. Depending on whether “better” is defined with weak or strict inequalities, the strategy is termed strictly dominant or weakly dominant. If one strategy is dominant, than all others are dominated. For example, in the prisoner’s dilemma, each player has a dominant strategy.

Introduction to Game Theory

Only Essential Matters – When IT Budget is shrinking

 

Architect will be forced to think economics first and then technology. Also, architecture will be about leveraging the existing infrastructure and then plan IT spending for only the essentials. ART in Architecture will still matter. The above curve looks like a bell curve. This is another example of extreme linearization resulting into gaussian distribution.

Extreme Linearization results into Extreme Disparities

Extreme linearization leads into extreme exponential distribution resulting into extreme disparities. Top 20% in US earn 50%  income and own 85% wealth. The rest of the 80% earn the rest of 50% and own only 15% of wealth. The question is what or who is EA serving. The 20% or the 80% of the population or is it the income or to the wealth. Or, all put together.

In the context of TARP and the percentages of tax paid by different demographics – who is paying whom? Those who shored up losses by the marginalizing the working class receiving the bail-out?  In other words, to the losses white collar contributed, how much is the blue collar paying in bailout.

Recent Article

Concentration of wealth in hands of rich greatest on record

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BY DANIEL TENCER

Published: August 15, 2009
Updated 1 day ago

The wealthiest 10 percent of Americans now have a larger share of total income than they ever have in records going back nearly a century — an even larger amount than during the Roaring Twenties, the last time the US saw such similar disparities in wealth.

In recent years, the fact that differences between rich and poor are the greatest they’ve been since the Great Depression has become a popular talking point among liberal-leaning economists.

But an updated study (PDF) from University of California-Berkeley economist Emanuel Saez shows that, in 2007, the wealth disparity grew to its highest number on record, based on US tax data going back to 1917.

According to Saez’s study, which Nobel prize-winning economist Paul Krugman drew attention to at his New York Times blog, the top 10 percent of earners in America now receive nearly 50 percent of all the income earned in the United States, a higher percentage than they did during the 1920s.

“After decades of stability in the post-war period, the top decile share has increased dramatically over the last twenty-five years and has now regained its pre-war level,” Saez writes. “Indeed, the top decile share in 2007 is equal to 49.7 percent, a level higher than any other year since [records began in] 1917 and even surpasses 1928, the peak of stock market bubble in the ‘roaring’ 1920s.”

By comparison, during most of the 1970s the top 10 percent earned around 33 percent of all the income earned in the United States.

The contrast is even starker for the super-rich. The top 0.01 percent of earners in the US are now taking home six percent of all the income, higher than the 1920s peak of five percent, and a whopping six-fold increase since the start of the Reagan administration, when the top 0.01 percent earned one percent of all the income.

There is no consensus among economists on whether large disparities in income lead to economic disruption, but it is hard to ignore the correlation between rising income inequality and the onset of economic crisis. The last time the US saw similar differences in income was in 1928 and 1929, just before the start of the Great Depression.

Saez also broke the numbers down by administration, and found that while the wealthiest few saw their incomes rise as quickly during the Bush years as they did during the Clinton years, the same was not true for the rest of the population.

Saez suggests that the economic growth seen on paper during the Bush years was little more than an illusion for the vast majority of Americans, who saw their income grow much more slowly in the 2002-2007 period than they did during the Clinton years.

During both expansions, the incomes of the top 1 percent grew extremely quickly at an annual rate over 10.3 and 10.1 percent respectively. However, while the bottom 99 percent of incomes grew at a solid pace of 2.7 percent per year from 1993–2000, these incomes grew only 1.3 percent per year from 2002–2007. As a result, in the economic expansion of 2002-2007, the top 1 percent captured two thirds of income growth.
Those results may help explain the disconnect between the economic experiences of the public and the solid macroeconomic growth posted by the US economy since 2002. Those results may also help explain why the dramatic growth in top incomes during the Clinton administration did not generate much public outcry while there has been an extraordinary level of attention to top incomes in the press and in the public debate over the last two years.
Saez, who this spring won the prestigious John Bates Clark Medal for economists under 40, links this disparity to the Bush tax cuts, noting that “top income tax rates went up in 1993 during the Clinton administration (and hence a larger share of the gains made by top incomes was redistributed) while top income tax rates went down in 2001 during the Bush administration.”

TWO MORE RECESSIONS?

The economic crisis that has taken hold over the past year isn’t over, and the world could in fact see two more recessions before the crisis is finally over, says the chief economist of Germany’s influential Deutsche Bank.

Norbert Walter told CNBC that investors are worried about the health of the US dollar, and many countries are facing difficult financial problems because of overspending by governments on bailouts and stimulus. Those things combined could push the world economy downwards not once but two more times in the near future, he said.

“I believe that the rescue packages brought on have been so costly for so many governments that the exit from this fiscal policy will be very painful, very painful indeed,” he said. “Some of us are already talking about a W-shaped recovery. I’d probably talk about a triple-U-shaped recovery because there are so many stumbling blocks here to get out of this.”

“The world is in trouble,” Walter told CNBC.