APAC failing to build successful digital business models

Approximately 61% of organizations have failed to build robust and successful business models, primarily due to unsound practices of enterprise architecture (EA) teams, according to a report from Forrester.

An enterprise architecture team is responsible for designing and implementing IT solutions with the aim of improving efficiency in business operations.

While the rate of failure looks marginally better when compared to global, North American and European regions—whose failure rates stand at 63%, 66% and 63% respectively—it is nothing to rejoice at.

A digital model details the whole route an enterprise takes to digital transformation, including operational changes in an organization, by integrating with emerging technologies to drive more efficient business processes and outcomes.

One reason for the greater success rate in APAC is the relatively high percentage of young companies adopting emerging technologies from startups.

“Because of these new-age companies, APAC has less legacy drag when compared to other mature markets such as North America. If you look at the numbers with this information at the backdrop, APAC's success rates should have been higher,” said Sam Higgins, principal analyst at Forrester and co-author of the report.

Forrester benchmarks a successful digital model based on efficiencies driven by IT infrastructure implementation and so-called customer obsession, all of which can be broken down to submetrics such as growth rate of revenue, profitability, customer retention rates and employee engagement.

The report, which surveyed 924 software decision makers from the APAC region, as well as 1,431 North American and 1,235 European software decision makers, points out that the reason behind high failure rates can be found in the approach that an enterprise architecture team takes.

Enterprise architecture is key to success

“To regain momentum, enterprise architecture practices must shift their value proposition from cost-centric technology architecture analysis to insights-driven adaptive architectures that address business outcomes, including the delivery of customer value,” Higgins said.

Enterprise architecture teams often don't evaluate the needs of application users or the experience they will go through.

Almost 22% of respondents in the APAC region have said that lack of alignment between IT and business outcomes is one of the biggest challenges an organization faces when executing its software strategy, despite having fewer budget constraints compared to more developed regions such as North America and Europe.

In comparison, about 18% and 16% of respondents across North America and Europe, respectively, cited lack of alignment as one of the challenges.

“While North America and Europe may have marginally better IT and business outcome alignment, they suffer from security issues and budgetary constraints—both of which are much higher than that of APAC,” Higgins explained.

Only 22% of APAC decision makers cited security as an issue compared to 31% in North America and 26% in Europe. In terms of budget, 29% of European decision makers cited it as a constraint, followed by North America at 27% and APAC at 21%.

Diversity of needs affect failure rates

Some of the other factors that heavily influence failure rates in APAC and other regions include diversity of business needs across divisions, inflexibility of existing applications, availability of partners for help and unavailability of relevant skills.

Forrester believes that enterprise architecture teams across APAC can drive more value and increase their chances of success by linking business capability modelling (BCM) with customer journey mapping and by using value stream management (VSM) to drive effective change. VSM calls for companies to adopt strategies to streamline and optimize the flow of value associated with business initiatives. This includes setting business goals and establishing investment plans to support delivery of value to customers.

Using these techniques, stakeholders including enterprise architecture teams talk to each other to figure out desired business capabilities, continuously take feedback from customers (or employees) on technology requirements, and then deliver a solution that can be updated.

In order to achieve this, Higgins believes that leaders of development teams should integrate VSM with strategic portfolio management to optimize business alignment, improve delivery observability, and automate a closed feedback loop to the portfolio.

“In terms of VSM tools, the preferred way to start is usually by integration with existing continuous integration/continuous delivery tool chains via API connectivity. Your data architecture should also include the common data models of VSM tools to yield a holistic view,” Higgins said.

Some of the other approaches include prioritizing cloud platforms to change technical architecture in a way to support business innovation, and embracing cloud-native to accelerate cloud modernization.

According to Higgins, as technology elements in traditional architecture shift to a range of services in the cloud across the tech stack, it's not enough for enterprise architecture teams in APAC to revisit their technology architecture to identify areas to improve with cloud platforms.

“They must also comprehensively assess the data management impact of cloud adoption on platform and data architectures in areas such as database as a service, cloud data warehouse, and AI/machine learning in the public cloud,” the report said.

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