What should be your firm's Target Maturity Level

Over the years various companies have come up with different maturity models. In my previous blogs some of these maturity models have been discussed in detail. However the question remains as to how to establish which maturity model suites you best. Identifying the IT strategy and future state based on the maturity model has proven to be a tough nut to crack.

In this blog, I will make an effort you utilize some of the well-known frameworks to help make this process a little simpler. Without going into the details of the maturity models since they have been discussed extensively in the previous blogs, lets break review these frameworks and the model to leverage them. As a refresher:

• Not all Organizations need to operate at Level V
• Some organizations can do well at Level III
• Longer the sales cycle, more complex the organization should be.

The three frameworks we would leverage for the purpose are:

·       BCG’s Business Environment

·       Porter’s Competitive Strategy

·       MIT Sloan’s Operating Model

In addition to these three qualifiers, I have added to quantitative measures as well:

·       Repeat Business

·       Sales Team

BCG’s Business Environment

Each of these environments needs or mandates a separate strategy. While classical environments lend themselves to strategies of position where advantage is achieved through scale. Adaptive environments require continuous experimentation because planning does not work under conditions of rapid change. In a visionary setting a firm wins by being first. In a shaping environment firms can collaboratively shape an industry to their advantage.

It should be noted over here that companies over there life cycles move across these four quadrants. E.g. Amazon started as a transformational and disruptive firm. Since it came out with a completely new business model the predictability was high but at the same time it had the capacity to change based on the flexibility to adapt with the changing market needs. As the company grew and e-Commerce matured the unpredictability reduced significantly. Amazon could now define its supply chain, its operations, predict sales and maintain and expand warehouses. So it gradually moved into the Visionary group.

As companies continue to grow, there malleability decreases just as it is hard to change direction of a huge ship, thus moving them in the Classical quadrant. At which point many of them decide to come put with new products, thus again increasing unpredictability thus moving them to Adaptive, e.g. being Zara.

In simple words one could say:

·       Classical : Be big

·       Adaptive : Be fast

·       Visionary : be first

·       Shaping : Be the orchestrator

MIT Sloan Operating Model

MIT Sloan breaks down the Enterprises across two dimensions:

·       Business Process Standardization

·       Data Integration

The business process standardization depends upon the consistency of business processes across the enterprise. There could be legal/compliance/institutional needs which would mandate different processes at different geographical locations. Legal requirements for financial firms are different in Europe and America, leading to changes in processes accordingly.

Data integration is governed by if the vendors and the customers of the business are shared across the enterprise or if the enterprise is more segmented? Based on these definitions a company can identify which quadrant they fall in.

Porter’s Competitive Strategy

Porter’s strategy defines and enterprise in terms of their Competitive Advantage and target Scope. Whether an enterprise is selling its product or services with lower cost being the advantage e.g. Walmart or is it Differentiation and Excellence of the product e.g., Apple.

Similarly are you targeting a specific segment of the population like Zara or across the population?

Based on these three frameworks one needs to put their company in one quadrant for each of the frameworks.

Moment of Truth

Following the exercise leads you the moment of truth. Having placed oneself in one of the quadrants for each of the frameworks, will help you identify which maturity level works best for you.

E.g. An investment bank like Nomura or Barclay’s

Competitive Strategy

It would fall in Differentiation focus. Since they are selling their product (securities) to a certain target market (high net worth institutions and funds) claiming they would provide you with better opportunities as per the changing environments (differentiation). Category II

Business Environments

They would fall in Adaptive category since while the unpredictability is relatively high. Stock markets are hard to predict. The size of these enterprises and the legal requirements makes the less malleable. Category I

Operating Model

While the processes would be different across the global because of institutional and legal requirements. The operations of these regional entities might not be limited to that region. Not only they would be interested in understanding each other’s transactions but also exploit some of the global opportunities. Thus falling under Coordination model. Category II

Now the two quantitative variables:

Repeat Business

For these companies the repeat business would be around 50% of the sales volume on the average so again putting them in category II.

Sales Team

They would have different sales teams based on the regional products. So a sales team in US would not be able to sell Tokyo SE products and vice versa. At the same time they would have different sales teams for different kinds of products e.g. equities, fixed income etc. Again putting them in Category II.

Based on this analysis we can easily reach the conclusion that both Nomura and Barclay’s fall under category II.

Which Maturity Model

Which leads to the final analysis as to what maturity model, now that we have identified they category level. To summarize:

·       Maturity Level I = Opportunistic

·       Maturity Level II = Productive

·       Maturity Level III = Optimized

·       Maturity Level IV = Competitive

·       Maturity Level V = Transformational

Based on which we would advise both the enterprises to work towards being  in maturity level III or IV, which would be their target maturity level.