Tom Graves / Tetradian

As the economy shifts ever onward from manufacturing toward services, how do marketing and market-relationships need to change with this shift? And what enterprise-architectures do we need to support this?

[In part this is a follow-on from Dave Gray's excellent Dachis Group article 'Everything is a service': I strongly recommend to read that post first before continuing here.]

As Dave Gray indicates in his article ‘Everything is a service’, many people in and around business are seeing a ‘Great Reset’ – a fundamental shift in the nature of the economy, and with it a fundamental shift in the nature of a viable business: a change in focus from products to services.

In a product-oriented economy, an organisation’s market is built around transactions, exchanges of goods and services. Within this metaphor, services are quasi-products, another type of ‘thing’ to be ‘consumed’ by a passive marketplace of ‘consumers’. Financial services, for example, are packaged as ‘products’; so-called service-organisations sell ‘solutions’ to often-unspecified ‘problems’ that a ‘consumer’ is presumed to face.

Producers produce, consumers consume: the roles are explicit, and explicitly separate and distinct. The role of marketing there is to create a market ‘want’ – often entirely artificial – for whatever product the producers want to sell. The role of enterprise-architecture and the like is to support creation of the maximum volume of product for the minimum necessary effort and cost.

The overall view – perhaps still illustrated best by the implied left-to-right flow in the structure of the Business Model Canvas above – is a linear structure of processes. A supply-chain (‘Key Partners’) feeds into the business-processes of the organisation (‘Key Activities’), the results of which are then sold on to ‘consumers’ (‘Customer Segments’). The sequence ends at the ‘consumer’, or more specifically at the moment that the customer has paid for the ‘product’; and everything is centred around the organisation, as ‘the enterprise’.

This view of the market is also often possession-based, with very unequal power-relationships assumed between the organisation and everyone else: we talk about ‘capturing’ a market, ‘owning’ market-share, and so on. This often leads in turn to a very combative relationship across the market, both between organisations competing for ‘possession’ of market-share, and between an organisation and its customers, employees and broader communities – all of whom, perhaps unsurprisingly, may well object to being treated as possessed ‘objects’ or ‘subjects’ of the organisation.

In business terms, one of the key drivers behind the ‘big reset’ or ‘big shift’ that Dave Gray describes is that this model of the market is rapidly becoming less and less viable. Most markets are either at or approaching saturation-point; the hidden-costs are becoming more visible, and harder to externalise; and the supposed economies of scale of mass-production and mass-marketing deliver steadily lower returns, especially relative to smaller and more adaptable technologies and business-models. And in bald economic terms, there are practical limits as to how much ‘stuff’ we can continue to make and sell on a finite planet – limits which in many cases we’ve already overshot. Some real problems there… – and yet they’re inherent in that model of the business-market.

A service-oriented economy is radically different, in that the market is built primarily around relationships. As Dave Gray put it:

A service is at its core a relationship between server and served. Service is work performed in support of another. At every point of interaction, the measure of success is not a product but the satisfaction, delight or disappointment of the customer.

Within this metaphor, products are best understood as proto-services, typically as part of the means for self-delivery of some service. Everyone in the market is both ‘producer’ and ‘consumer’: the roles blur, and are inherently much more equal or peer-based in nature than in the product-oriented economy.

This view of the market is also based much more on mutual responsibilities: we talk about co-creation, about partnering in a shared enterprise. The power-relationships are much more equal, and necessarily focussed on building and maintaining mutual trust – rather than the combative contracts of the possession-model, which mostly reflect an absence of trust.

The overall model still has transactions and processes and supply-chains, but the perspective is different. As Verna Allee describes it, that linear ‘supply-chain’ is actually one view into a much more nuanced ‘value-network’; and a product- or service-transaction is merely one phase within a much larger market-cycle:

Importantly, the fundamental focus of relationships is inverted, from organisation-centric to customer-centric: as Chris Potts puts it, “customers don’t appear in our processes: we appear in their experiences”. The sales-focus also shifts from ‘push’ to ‘pull’, from manipulating or even forcing the ‘consumer’ into a single once-off ‘the sale’, to building a continuing long-term mutual relationship. All of this requires radically different approaches to sales and marketing, but it can be done – and increasingly, is much more profitable than the ‘push’ model.

[For example, compare your experience of the usual soulless time-driven 'customer-as-product' sales call-centre - such as that which interrupted me just now whilst writing this, and who cut me off in the middle of saying "Thank you, but no" - to an intentionally relationship-oriented call-centre such as that run by US retailer Zappos, which focusses much more on respect and mutual trust. Which approach would you prefer to deal with in your business day? The answer's fairly obvious: which is why the conventional call-centre model is becoming less and less viable, no matter how much pressure is put upon the long-suffering staff.

Another first-hand example: a couple days ago I was looking at cameras in the local branch of a medium-sized national chain of camera-stores. The absence of pressure was really noticeable; and the saleswoman's quiet passion for photography per se shone through. The change in energy of the place was very noticeable, compared to the last time I'd been there, a year or so ago: more like an Apple Store than a 'normal' sales-obsessed high-street retailer.

Talking with her, it became clear that the company had made that crucial shift from product-orientation to service-orientation. The key was that they'd come to understand they made most of their money not from selling cameras as such, but from the ongoing photo-print service. Camera-sales became viewed as a means to support that service: it needed to be profitable in its own right, but it wasn't the primary focus for profit. Hence it became much more important to match the camera to the client's actual needs - and that emphasis on matching real needs itself became a key foundation for mutual trust, and hence for long-term relationships that would be profitable to all parties.

Contrast that with the usual high-street high-pressure retailer, where the emphasis is more likely to be about offloading the highest-margin object that the 'consumer' could afford, then dropping the attention instantly so as to move on to the next 'punter' as quickly as possible. "I worked in a place like that for three months", she said, "and I felt like I aged ten years while I was there. Soul-destroying, for everyone. So I know why I'm working here! - because I want to be here."]

So what kind of enterprise-architecture do we need for a service-oriented enterprise? How does it differ from the conventional product-oriented architectures – particularly in its business-architecture and process-architecture? Probably the key requirement is an awareness of the implications of one simple statement:

A service exists to serve.

But what does it serve? And whom does it serve? Architecturally, those are not trivial questions…

In the highly unequal power-relationships in the conventional product-oriented model, the answers are very clear indeed: there is often a thin pretence of ‘customer-service’, but in reality the ‘consumer’ is deemed to exist solely to serve the organisation and its perceived ‘need’ to sell.

[And the organisation in turn is deemed to exist solely to serve the 'needs' of the stockholders, but that's another story...]

But in a service-oriented enterprise, there are two fundamentally-different types of service going on: and the architecture needs to support both of these.

One type – which we might describe as ‘horizontal’ – is the conventional ‘supply-chain’ structure: the service-producer serves the needs of the service-consumer. The issues here that the architecture needs to support are that:

• the relationships between producer and consumer are essentially peer-to-peer
• the roles of ‘producer’ and ‘consumer’ will often blur or even swap over, especially in the ‘co-creation’ relationships that are common in a service-oriented model
• the overall relationships are built via the self-reinforcing loop of the full ‘market-cycle’, as above

The other type of service is more ‘vertical’: within the context of those ‘horizontal’ supply-chain service-relationships, every player in the shared-enterprise serves the same overall vision and values. The market exists within the context of a broader shared-enterprise, defined by a distinct purpose or ‘vision’ and its associated values.

Remember Chris Potts’ point above, that “we appear in customers’ experiences”: there’s a crucial difference here between the organisation and those with whom it interacts. Architecturally speaking, the organisation chooses the vision and values to which it will align. When customers’ experiences – and, for that matter, suppliers’ experiences – happen also to align with that same vision and values, there is then a basis for a shared connection. Serving the same ends – the same vision and values – creates the basis for mutual trust, which then starts the market-cycle rolling.

So the service is delivered through the ‘horizontal’ connection; but the connection only exists because both parties share ‘vertical’ alignment to the same vision and values.

Note that the customers’ experiences – or even supplier’s experiences – may only align with the organisation’s chosen vision for a brief period: think of a restaurant at lunch-time, for example. But whilst that alignment exists, there is the basis for conversation and connection – and hence the first stage of the market-cycle already in progress.

[Back to the camera-shop. The focus throughout the conversation was photography, what kind of photography I might need to do, about cameras in general. Firstly, there was a conversation - which in some stores doesn't even happen at all; and the conversation didn't have an all-too-obvious undercurrent of 'how can we sell you a high-priced camera that you don't need?' - which I've had all too often in the high-pressure stores. Instead, I felt listened-to, respected, safe, served - all of which increases the likelihood that I'd go back there when I am ready to buy another camera. In other words, that first part of the market-cycle is already in progress; and I feel safe in the belief that the closing 'post-sale' part of the market-cycle would be there, too.

Yet note that I wouldn't go there to buy a sandwich, or clothes, or anything that wasn't about cameras - because that isn't part of their vision or purpose that they present. They're clear about what they do and what they don't do, and demonstrate their vision and values in practice: so I know when to go there, and when not to go there. Sounds obvious, perhaps: but some organisations are so sales-obsessed that they give the impression that they'll sell us anything, whether they have it or not, just to make up their sales-quota - and that's really confusing, for everyone.]

Architecturally, the vision and values are the core of a service-oriented architecture: everything in the organisation needs to be understood as serving that vision.

Hence, for example, the value of a service-viability checklist that explicitly includes tracing of support for each of the values as they touch on every aspect of the enterprise.

Hence also the importance of ensuring that that same vision is carried across any partner- or outsourcing-relationships – especially where key customer-facing connections are handled by outsourced others such as an external customer-service centre.

And hence also the importance of keeping the focus on those shared-relationships overall, such as with Chris Potts’ aphorism above. As enterprise-architect Pat Ferdinandi put it, in a comment on an earlier post here:

That’s a brilliant line by Chris. It’s the corporation’s adjustment between customer service and customer loyalty. Customer service is viewed as a “fix” of problems. Customer loyalty is earned by the customer’s experience with the corporation but not necessarily from the corporation. The experience can be from word of mouse of a trusted friend. The experience can be from reviews by “specialists” in the area.

There’s a lot more on these themes scattered around on this site, and in the various books. For example, take a look at the post ‘Where marketing meets enterprise-architecture‘, or any of the articles here on Enterprise Canvas; and the books ‘The Service-Oriented Enterprise: enterprise-architecture and viable services‘, and ’Mapping the Enterprise: modelling the enterprise as services with the Enterprise Canvas‘. The chapter ‘Step 1: Know your business’ in the book ‘Doing Enterprise Architecture: process and practice in the real enterprise‘ also describes the practical processes needed to set up the initial architecture-models for a service-oriented enterprise. It’s all there: all we have to do is do it.

It’s simple, and straightforward: yet it’s often not easy at all. And the reason why it often isn’t easy is because it does require a real shift in perspective, a paradigm-shift – and no-one should underestimate just how hard those shifts are in real-world practice. Yet also don’t doubt that, as Dave Gray says, it is the way that the business-world is moving: so as enterprise-architects we do have to support our enterprises in that change, in whatever ways we can.

Enough for now, anyway: comments, anyone?

Rethinking the enterprise from a customer-centric perspective was another theme that came up in that conversation with Robert Phipps last week, in this case with a bit of virtual help from Chris Potts.

The ‘conventional’ way of viewing an enterprise is that of the stock-market – and, apparently, US commercial law – which seems to regard the enterprise is as nothing more than a means of ‘making money’ from other people:

• “Our vision is to maximise our profit and maximise the returns to our shareholders”

Which is all well and good from the shareholders’ perspective, perhaps. Yet in a sense it gives prospective customers a really good reason to not engage with that organisation, because in essence the company has declared that the only thing they’re really interested in is taking as much money as possible from the customer – regardless of whether doing so is of any benefit to the customer at all… And it also doesn’t make any sense in a non-commercial or government context, where ‘value’ and ‘profit’ usually cannot be described in simple monetary terms anyway.

The other ‘conventional’ way of viewing enterprise vision and purpose is kind of ‘self-centric’, where the organisation regards itself as the totality of ‘the enterprise’:

• “Our vision is to be the leading provider of pig-nuts in the West Midlands district”

In principle, that’s all well and good too, in its own terms. Yet it still doesn’t provide customers with much of a reason to talk with the company, because the latter are, it seems, too busy talking about themselves to notice anyone else.

So what does work? What does create a connection across the broader-enterprise, such as to give the organisation and its customers and suppliers and other stakeholders some solid reasons to converse with each other? What – if anything – is the difference between ‘organisation’ and ‘enterprise’? And what is an enterprise, anyway?

This is where all that work about vision comes into the story. As I understand it, the enterprise-vision needs to be something that engages everyone in that shared-enterprise – not just the organisation. It needs to say what is of interest to everyone in that enterprise; what is being done to or with or about that ‘item of interest’; and why this is important to each of the players. To me, good examples of a valid enterprise-scope vision include that of the TED conferences – “ideas worth spreading” – and the IT-standards body The Open Group – “boundaryless information flow”, coupled with its tag-line of ‘making standards work’.

Once we get the vision right, a lot of things become a lot simpler for the organisation, and for everyone else, in their relationships with each other, within the market and beyond. For quite a long while now, I’ve been using a frame that looks like this:

The vision provides a link and reference-point for everyone in this space – including the non-clients and, especially, the anti-clients, who will hold the organisation accountable to that vision and its implicit values. If we want to understand enterprise-scope architectures – as opposed to organisation-centric or, worse, IT-centric architectures – then we’re going to need a frame like this to give us our bearings. Osterwalder’s Business Model Canvas is another good example of this kind of broader-scope frame (though with somewhat narrower scope); likewise the SCOR supply-chain model.

To me, this is the typical view for enterprise-architecture: we create an architecture for an organisation, but about the the shared-enterprise(s) in which that organisation operates.

Yet in a sense this is still organisation-centric: it’s about the whole enterprise, but from the perspective of the organisation.

At that point, when talking about this with Robert Phipps, , Chris Potts‘ phrase came to mind: “customers do not appear in our processes: we appear in their experiences”. In that sense, how do people experience our vision, our organisation’s proposed way of viewing the shared-enterprise? What is that shared-enterprise, as an experience? And where does that experience fit, in relation to all the other experience-fragments that make up a total human experience? As in so many other contexts, Chris’ more customer-oriented view turns the whole frame upside-down.

It’s here that enterprise-architecture meets up with marketing – and vice versa, of course. Each enterprise-vision represents a story; in a sense, the enterprise is that story. Yet a marketplace consists of many stories or narratives, all of them not so much ‘competing’ as in ‘co-opetition‘ with each other – because without that underlying cooperation, the market itself would probably not exist. The market, in effect, is a narrative of narratives, a story made up of multiple stories.

The usual tactics for ‘positioning’ within a market include the conventional version of a ‘value-proposition’ – cheaper, faster, more economical, makes you look good and so on – or via brands – which act as a kind of precursor to and record of reputation, a proxy for the promise of experience. But the end result tends to be a bit like a raucous competition of ‘shouters’ at a street-market: “they are lovely now, come and buy, come and buy, fresh as the day they were laid, only two quid the punnet, come and buy”. That kind of competition may seem to look good and even sound good to each of the market-stall players – and seemingly a great place to grandstand the ego, too – but it actually doesn’t help people navigate their way through the market to meet their actual needs. In other words, their experience of the market – with various of the market-stalls appearing (and disappearing) within each distinct, unique and very personal experience. More often, that kind of grandstanding gets in the way of the customer-experience – but that fact is hard to see for each of the players themselves, because they’re too busy grandstanding to notice that it actually doesn’t work very well for anyone – especially over the longer term.

Yet if we re-frame the market not as a misplaced shouting-match, but as a place of story, we can see how a vision-based enterprise-architecture also re-frames the customer-experience. Each market-stall or, on a larger scale, each company or organisation, has its own distinct vision about where it sees itself within the market. It doesn’t need to shout: all it needs to do is expose and expound the respective vision. In turn, the vision provides clarity about how each player sees its respective role within that market – its role in the overall co-opetition – and also the values to which it expects to be held accountable. The classic ‘value-proposition’ and brands and so on become adjuncts or expressions of the vision and its implied values. The end-result is much more clarity about who is doing what, and how, and why; prospective customers gain a better understanding of what they can and should expect as part of their overall experience, when their personal narrative of experience touches the business-processes of that player.

This way, the company gets customers who want to be customers – in other words, ‘pull’ rather than ‘push’ – and who are much more clear about what they expect to get. They’re engaged in the story – and hence likely to be willing to tolerate minor lapses, as long as the story itself is demonstrably upheld. Equally important, the company also dissuades the engagement of prospective customers who are not a good fit to their business-processes – hence significantly reduced risks in terms of customers disgruntled with the experience, and all the concomitant problems that would arise from that, including customer-service costs, damage to reputation and so on.

That’s the overall idea, anyway.

This is just a first testing-the-waters with this idea – there’s a lot more that needs to be done to flesh it out, to build a full cross-link with classic marketing, and so on. There’s also a lot that could perhaps be done to cross-map with Verna Allee‘s Value Networks and suchlike. But I think this slightly re-purposed version of Chris’ insight could be immensely valuable to us here: customers do not appear within a market; instead, those markets – and our organisations with them – appear in customers’ experiences.

Comments or suggestions, anyone?

Every enterprise has a story, of course – many of them, in fact. Yet there’s also a deeper story that defines the enterprise itself, what the enterprise is. It’s not just that the enterprise has a story: the enterprise is a story.

What’s special about the enterprise-story is that every participant in the enterprise chooses to engage with that story. In a sometimes very literal sense, they each see themselves within the story. So how could and should that story be told, by whom, in what forms, via what means or media? And since it’s a story that’s also shared by every participant in the enterprise, there are some real questions about ownership here: if the enterprise is a story, who really owns the enterprise?

Just what that means in practice for the enterprise, and the risks and opportunities that it implies, seems a theme that’s worth exploring – not just for enterprise-architects, but for almost everyone else as well. So whatever your interest, although this is going to be another long post, you may find it more relevant than some of my other recent articles. Click on the ‘Read more…’ link to keep going, anyway.

Read more…