Digital Era Business Structures: Crafting Organizations Like LEGO Blocks in Modern Times
In today's rapidly changing world, businesses are shifting towards a new model known as composable business. This approach, which has been pioneered by tech giants like Amazon, Netflix, and Salesforce, promises a competitive advantage in an era of constant disruption.
At the heart of composable business is modularity. Every capability, process, and service is designed as a self-contained unit, much like the shift from monolithic software architecture to microservices. This modularity allows businesses to combine and reconfigure services as needed, delivering superior service at lower cost than traditional bureaucracies, as demonstrated by Estonia's digital government.
AI plays a crucial role in this new landscape, supercharging composable business models by discovering optimal component combinations, predicting reconfiguration needs, and orchestrating complex systems in real-time. Machine learning optimizes component selection by analyzing performance data across thousands of configurations.
The winners in the composable economy think and act like conductors, not factory managers. They prioritize integration expertise, orchestration capabilities, and ecosystem relationships over functional depth and operational efficiency. This shift in organisational design is significant, similar to the transition from the assembly line.
Composability extends beyond tech industries, with manufacturers, retailers, and banks adopting modular business design. Manufacturing is embracing composable production, with modular production cells reconfiguring based on demand for mass customization. Financial services are leading composable adoption, transforming from monolithic institutions to orchestrators of financial capabilities. Healthcare is discovering composable care, with providers orchestrating specialized capabilities as needed for patient needs.
Starting small with pilot projects is key when implementing composable business strategies. Choose a non-critical business function and decompose it into modular services. Start building composable capabilities by standardizing processes, data formats, and interfaces, documenting everything as a service, investing in integration infrastructure, and fostering a culture of collaboration and sharing.
However, this new approach also presents challenges. Governance becomes complex as capabilities span organisational boundaries. Vendor lock-in can take new forms due to proprietary interfaces and data formats. Quality control requires new approaches in composable systems due to their dynamic nature. Interoperability enables modules to work together seamlessly, requiring standardized data formats, compatible processes, and aligned incentives.
The COVID-19 pandemic has accelerated composable adoption, with companies that could rapidly reconfigure surviving and thriving, while those locked in rigid structures struggled or failed. The companies that discovered composability during the crisis are making it permanent, having experienced the power of rapid reconfiguration and refusing to return to rigid structures.
Speed-to-market improves by orders of magnitude, with new products launching in weeks instead of years, and innovation costs plummet, enabling more experimentation. Diversification happens naturally in composable businesses due to modular capabilities. Composable businesses are able to adapt quickly to changing markets, reducing existential risk and enabling aggressive innovation.
In conclusion, composable business represents a significant shift towards flexible and adaptive organisations. By treating services as modular components, investing in platforms rather than point solutions, and prioritising orchestration, businesses can thrive in an era of constant disruption. Prepare for constant change, build change management into your DNA, and embrace the power of composability.
