Does a deal have architecture?
The simple answer is: Yes. If a deal is to be viewed holistically with a view to assessment or organically with a view to development then it must have architecture. More importantly, if a deal is to be assessed then some form of structure must be found.
Stop focusing on the system
Therefore, focus on the revenue model NOT the architecture. The architecture is absolutely vital but the fact that you’re going to deliver a fantastic, value-adding system is a given. It’s the reason you were invited to tender. Stop patting yourself on the back for being so good at your core business and now focus on how you’re going to make money out of it. Critically, how you are going to sell transformation to the client? Why should they buy into a target-architecture plan and why is it going to take so long to transform their business?
The first dimension of a deal, therefore, is “throughput”: the ability for the deal to be able to process business and create revenue. More importantly, it is possible to have a fantastic system and not make money (just ask Fujitsu ref their NHS UK deal).
The key to answering these questions is in assessing the 12 key variables of system viability. Here at Precision we adapted them from Jamshid Gharajedaghi’s system dimensions and variables in his seminal work “Systems Thinking” (Butterworth-Heinemann, 2006).
1. Capacity. Can the system cope with the expected demand and use? This is purely structural question: are the “pipes” big enough? More importantly, is the architecture able to expand and contract cost effectively to accommodate demand? Do the ‘joins’ and ‘bends’ suffer from fragility? Are the components ubiquitous enough? Scalable business models seem great but the architecture to empower them is more complex.
2. Performance. Will the system outputs always be of the highest quality? Many longer term outsourcing contracts are 5+5 years so this addresses whether the system will function as designed, well into the future.
3. Access & Demand. Are your assumptions of access to markets and customer demand correct? As the deal progresses will the business be able to expand and take advantage of peripheral value chains? Will it be able to turn cost centres into profit centres once they are mature? Can the business protect its intellectual property as it becomes more valuable?
4. Throughput Capability. Does your organisation have the know-how to keep developing the capability at the optimal rate? Does your business have the information management skills to be able to develop the knowledge to retain a very high capability? Take BP, for example, they outsource most things but their information productivity remains very high. They are still able to access the knowledge needed to develop their core capabilities. Many companies, however, outsource but cannot take advantage of the better employee-to-revenue ratio.
In summ, a deal is far more than the technical architecture, products or physical structures on which it is built. Focusing on these 4 key elements of a revenue model well into the future will give the business a realistic view of a deal’s viability.