Mark McDonald

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Mark P. McDonald
GVP EXP
8 years at Gartner
24 years IT industry

Mark McDonald, Ph.D., is a former group vice president and head of research in Gartner Executive Programs. He is the co-author of The Social Organization with Anthony Bradley. Read Full Bio

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Is your company an enterprise? The answer matters

by Mark P. McDonald  |  June 15, 2009  |  6 Comments

People talk about the ‘enterprise’ all the time, particularly in IT.  There are enterprise solutions, enterprise architecture, enterprise portals, enterprise security, etc.  In this context the term enterprise is more often meant to mean all encompassing, across business units or geographies, the whole of our business operations.

Just because we say something is enterprise level that does not mean that it applies to the entire company.  When that happens you have to ask yourself the question – are we an enterprise?

Its an important question because if the company is not an enterprise, then enterprise solutions, architectures and the approaches either will not be effective, waste money and resources, or worse relegate IT to the role of glorified staff administrator.

You are an enterprise if the majority of these conditions apply:

  • The business strategy is based on the results of the different parts of the business working together.  If you have separate strategies for different parts of the business, then the company is more of a holding company, and it is less likely that you are an enterprise.
  • The people in the business think of themselves as belonging to a company that is bigger than their individual team or operating unit.  If people identify with their organizational unit more than they do the entire company, then it is less likely that you are an enterprise.
  • The business operates out of a common set of financial resources – meaning underperformance in one part of the business adversely effect the other parts of the business.  If the parts of the business are financially independent with separate P&L, capital expenditure and investment plans, than it is less likely that you are an enterprise.
  • The business serves different customers and success does not require the customer to buy products and services from different parts of the business.   If you separate customers, either by geographic lines or by product or business lines and you do not expect them to cross those lines then it is less likely that you are an enterprise.
  • The business uses a common set of information, metrics and measures to run the company.  You do not have to have all of the same rules, but there is a core of rules that apply equally across your operations.  If the different parts of the business play by different rules and are graded differently, then it is less likely that you are an enterprise.
  • The business shares common systems for similar functions.  If you have different systems for the same functions across parts of the business it is less likely that you are an enterprise.

So what does if mean if I am NOT an enterprise?

First, it does not mean that your company is in anyway at a fundamental disadvantage to those that see themselves as an enterprise.  There are examples of highly successful companies that are not enterprises – most energy companies are not enterprises under these rules, General Electric is not an enterprise, neither is the Virgin Group in Europe.

Companies that are not enterprises, however, will find it difficult to implement and get benefits out of enterprise based strategies, solutions and approaches because they do not operate as an enterprise.  This is often the case with enterprise processes such as IT Enterprise Architecture.  So if you are not an enterprise, take a critical view to those things that are billed as ‘enterprise solutions’ or that deliver ‘enterprise value.’

Enterprise type solutions may be applicable, however they will be more likely than not applied to individual parts of the business – business lines, geographies, and operations.  This is because many business units can be enterprises in their own right, without being part of an enterprise as a whole.

So what does if mean if I AM an enterprise?

Do not assume success because of your structure.  While there are many successful enterprises, there are just as many who are challenged to remain an enterprise.

Recognize your enterprise nature in terms of leading and governing the company.  IF you are an enterprise, then there should be enterprise level mechanisms with corresponding fewer mechanisms in the individual parts of the business.  This consolidated leadership; management and governance approach is possible, as you need to make decisions that benefit the entire enterprise.

Put the customer at the center of the company, because it is the one thing that you all share.  That sounds trite but its true.  Look to reduce barriers or impediments to internal operations that reduce customer service or make it harder for the customer to engage all parts of the company.  After all as an enterprise you economic model rests on the ability to engage and serve the customer across your entire operations.

Invest in enterprise level solutions to gain scale cost and service efficiencies.  You are an enterprise so look to take advantage of this.  Local customizations and uniqueness still matter – but you do not put those customizations and their complexity in core systems.  Studies of companies that have this level of digitized platform indicate that they enjoy 20% higher margins than their competitors.

Take advantage of your enterprise status by managing the entire company from the perspective of bringing more resources to bear on high potential and growth opportunities.  Competitors that are not enterprises will spin-up a separate business unit, often with out the scale to dominate an early forming market.  As an enterprise

Are you an enterprise?  Don’t assume that because you all share the same stock symbol, or get paid by the same company that you are.  Does being an enterprise matter?  Yes, particular to the extent that you are able to use enterprise solutions and approaches.

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Enterprise Definition
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People talk about the ‘enterprise' all the time, particularly in IT. There are enterprise solutions, enterprise architecture, enterprise portals, enterprise security, etc. In this context the term enterprise is more often meant to mean all encompassing, across business units or geographies, the whole of our business operations.

6 Comments »

Category: CIO Leadership Strategy     Tags: , , , ,

6 responses so far ↓

  • 1 Adrian Grigoriu   June 16, 2009 at 5:21 am

    The question is good.The answer is debatable. Is an Enterprise defined by the same strategy…? It depends on the point of view.

    In practical terms, the debate comes down to: to what extent an Enterprise Architecture, Strategy or IT development can be applied across geographies, business operations or to a Group of companies? It is about the scope of the development.
    The confusion started with Java Enterprise Edition (JavaEE), Enterprise Applications Integration (EAI) … then the Enterprise portal…

    Legally an Enterprise Group has an identity and a single governance. It is up to the management to define the Group Operating Model: unification… An operating model is the degree of integration and standardisation of various companies within a group. Some companies are part of the financial group but otherwise are left to their own devices. Loosely coupled, I would say, by design.

    In the absence of an Operating Model (most cases), from an IT perspective, it is up to an IT group to negotiate with their stakeholders and peers the scope of the Enterprise for the development. It depends upon the organisational remit of the IT department, culture, individuals…

    The scope of the Enterprise, in the proposed definition, is seen from an IT team point of view. As such, it may vary with every IT development. Nobody establishes the Enterpise boundary upfront based on the listed conditions.

    But legally and financially the Enterprise is still the Group.

  • 2 Mark McDonald   June 16, 2009 at 7:54 am

    Adrian while I agree with your comments and there are legal/ownership aspects of being an enterprise. The post was intended to highlight the conditions if the company operates as an enterprise — it actually works that way.

    The legal, strategic, or ownership structure aside, if a company does not operate and manage itself as an enterprise then techniques such as enterprise architecture do not have the same ability to create results as they do in a company that does manage and operate as an enterprise. That is the losely coupled organization you mention above.

    I created the post because of an observation that often IT organizations try to make a company an enterprise when its not. Hence the IT point of view.

    Most of these enterprise conditions are not IT specific *customers/markets/finance/strategic intent” so while the post is on a technology blog and technology is often trying to make an enterprise where there is not one, the point is a business point not just IT.

  • 3 Business News » Blog Archive » Is your company an enterprise? The answer matters   June 16, 2009 at 8:25 am

    [...] Read the rest of this great post here [...]

  • 4 Henry Lee   February 18, 2012 at 10:40 pm

    Thanks,very informative

  • 5 The Chief Digital Officer, you may not need one.   March 6, 2013 at 8:26 am

    [...] as a collection of individual operations, business units, channels or lines of business, then it is not an enterprise and will not make decisions or take actions that benefit the whole. Then you need to create an [...]

  • 6 Sara Lee   June 2, 2013 at 9:04 am

    Would a fast food restaurant considered an enterprise? I am a salary assitant manager, and I am to work mandatory hours of over rime without pay. According to the FSLA an enterprise company can work me as long as they want without over time pay. Reading the article I am still not sure if the fast food restaurant I work for would be considered an enterpise.