MIT CISR Special Report

Part of the Harvey Nash Group Digital Leadership report

Building the responsive enterprise

Stephanie L. Woerner

Research Scientist,
MIT Sloan School of Management’s Center for Information Systems Research

Peter Weill

Chairman and Senior Research Scientist,
MIT Sloan School of Management’s Center for Information Systems Research

Covid-19 has reinforced the need for all enterprises to increase their business responsiveness. And who knows what new disruption or opportunity is just around the corner?

Using the data from the Harvey Nash Group research we wanted to learn what the most effective firms in terms of business responsiveness do differently from the rest.

In our statistical analyses we identified three factors that support business responsiveness:

- Commitment to becoming a digitally savvy company
- Innovation via modular agility
- Technologies that scale and support learning

Digitally savvy

Enterprises and their leaders that commit to becoming digitally savvy are not just using new technologies and creating new products and services but are also ready to scrutinise every part of the enterprise to see how technology can free up resources, create predictability, increase productivity, better engage customers, test new business models and develop digital partnerships.

These enterprises and leaders look at the business model risk of not investing in technology as well as the direct benefits and costs of investments.

Committing to the potential of technology is about removing work barriers as well as enabling new ways of working, empowering a workforce to work collaboratively to solve complex problems.

Developing and retaining key talent increases a company’s responsiveness and agility, as these are the people that know the organisation’s systems, processes and data best and can leverage them in decision-making.

Finally, managing the decision rights around technology – for example, who decides the digital spend, how spend is prioritised, who enforces standards and reuse – is an important part of committing to and realising the potential of technology. Interestingly, enterprises that manage more of the IT/digital budget through IT are typically better at these factors and better at business responsiveness.

Modular agility

Innovating via modular agility is to take your ‘crown jewels’ – what makes your enterprise great – and turn them into reliable, low-cost, standardised and reusable digital services. These services can then be combined and recombined, like Lego blocks, to optimise operations or to design and create new digital offerings.

Take, for example, a bank that has a different onboarding process for every product. First, the bank must decide on the one best way to do the onboarding process and then standardise across the products – often a political activity rather than an operational or technical process.

The biggest challenge for many firms is taking that standardised process and turning it into a service that is usable in all products and is also managed as an enterprise asset. Developing the modules and then reusing throughout the enterprise are key to building responsiveness while controlling costs.

Technologies for scale and learning

Three technologies were linked to business responsiveness in our analysis, and all of them are platform-based and enable rapid learning throughout the enterprise, increasing responsiveness, especially to customers.

A digitised platform is an integrated set of digitised business processes and the technologies, services modules, compliance checks and data to achieve a specific purpose (like taking an order); it takes people out of the process, allowing an enterprise to redeploy the workforce toward higher-value activities. The first technology, machine learning and AI, helps an enterprise identify patterns in large sets of data and provides new insights for decision-making.

For example, Ping An, a Chinese financial services company, uses AI on its customer and operations data to improve performance in areas such as customer service, marketing and risk management, driving down the time to serve customers.

The second technology, IoT, is a network of devices, sensors and software that connect to each other and share data between each other. IoT moves the decision-making away from the centre of the enterprise and closer to the sensors and devices, allowing control of the devices to be more synchronised with the data being collected.

Schneider Electric has built an energy and automation digital solution based on IoT to help companies, landlords and property owners focus on sustainability and energy efficiency.

The third technology is on-demand platforms that allow delivery of products and services to customers when and where they want them. The platforms go beyond delivery by varying the choices being offered by taking into account customer preferences and can, in some instances, adapt the products and services themselves.

On-demand video and audio streaming services are instances of on-demand platforms – we predict more products and services will eventually be offered on these sorts of platforms in all sorts of industries.

Figure 1 compares enterprises scoring in the bottom quartile versus the top quartile of business responsiveness. Top quartile firms on business responsiveness were statistically significantly better at all three factors: digitally savvy, modular agility and technologies for scale and learning.

Evaluate your enterprise on these three factors and assess if you are doing all you can to increase business responsiveness.

The reward will be an increased ability to respond to an increasingly unpredictable business operating environment – both the opportunities and the threats.
Figure 1

Source: Harvey Nash Group 2021 Survey (N=1997). Factors were identified using regressions with Business Responsiveness as the dependent variable, with factors significant at the p<.08 level. Size of company is not significant for predicting business responsiveness nor is percentage of revenue spent on IT.