Understanding The Benefits & Risks Of The Interconnected Enterprise Model
17 May, 2021 by Alex Hawkes
The interconnected enterprise model is a natural response to the high frequency change that we are seeing across multiple industries.
Today’s enterprises are now find themselves interconnected with a vast pool of cloud and SaaS providers as well as other business partners, which allows organisations to adapt more rapidly to changing market conditions and opportunities.
But like any business model, this presents risks and challenges as well as its rewards…
Benefits of the Interconnected Enterprise Model:
The ecosystem model allows organisations to add – or drop – resource much more quickly, acquiring the skills, assets or tools required to innovate in the face of changing demand.
The reduced friction in partnership agreements can increase uncertainty for each partner or functional unit. But in the ideal ecosystem, no partner is reliant on a single customer. Even units inside organisations can diversify and begin to sell their services outside the walls of the organisation, increasing resilience.
- Reduced risk profile
Though the operational costs of this more agile approach can be higher (see risks), the capital investment in innovation, product development, production and routes to market can be much lower. There are fewer legacy investments to slow the organisation’s future transitions.
- Access to global talent and resources
In the ecosystem enterprise, the resources you need are never more than a few keystrokes away, whoever owns them and wherever they are in the world.
- Accelerated innovation
In the ecosystem economy, anyone can rapidly combine other people’s processes, technologies and assets into new products and services. Innovation can be accelerated dramatically.
RISKS OF THE INTERCONNECTED ENTERPRISE MODEL:
- Managing complexity
Complexity in an interconnected enterprise can scale rapidly, as new resources are added and dropped from the ecosystem. The situation is particularly challenging in the digital sphere as the many APIs that support core applications and infrastructure can be frequently updated.
- Operational overheads
The trading of owned assets for rented services naturally adds a margin to operational costs. This combined with the overhead for managing these services can put pressure on the organisation. The right tools, skills and governance are needed to keep operational overheads under control.
- Maintaining control
Operating an interconnected enterprise requires a more distributed approach to decision-making, something that can be a difficult cultural shift for leaders and organisations alike. Making this transition successfully often requires training, new processes, and a degree of courage. Large strategic decisions remain at the core of the organisation, adding a new challenge: maintaining a level of transparency through an increasingly complex ecosystem.