What is Composable Business?
7 Mar 2022 • Strategy & Business Design
Business adaptability requirements are putting organisations under pressure. Even without the dramatic changes in the business environment in recent years, the need to adapt has accelerated. This is the second part of Adaptable Business blog series on ways to build agility. In this article, we talk about what is Composable Business.
What is Composable Business?
Composable Business is a concept where a business is divided into modular and interchangeable building blocks that can be quickly replaced as market needs change. Composable business is about rapid adaptability and business resilience. Gartner divides the assembled business into three parts:
- Composable thinking relies on the idea that everything is modular. In other words, business and services are designed on a component basis and can be quickly adapted to changes in the business environment.
- Composable architecture refers to a modelling approach in which the digital architecture is built on a strong API-centric mindset and business functions are encapsulated in interchangeable components. Composability is not about replacing the current architecture, but about how to make it more business flexible.
- Composable technologies refers to modern products, systems, components, microservices or other software-based elements that are implemented in an API-oriented and interconnectable way.
How adaptative is your business?
A digitally mature organisation may think that composability is not relevant because the innovation capability and business concept are up to date. With years of investment in digital core systems, the sense of a modular and resilient digital heart can be strong.
In reality, only a fraction of organisations have designed their business and built their digital infrastructure in a way that can be adapted at maximum speed to meet virtually any need in the market environment. The composable thinking relies heavily on the idea of rapid adaptation and Gartner predicts that by 2023:
“Organizations that have adopted a composable approach will outpace the competition by 80% in the speed of new feature implementation.”
Composability is even challenging well-prepared and digitally mature organisations. Building competitive advantage digitally is moving from euros to speed. Embracing an aggregation mindset allows you to produce your own digital heart at up to a tenth of the investment that you have been used to for decades.
For those building a new business, the idea of composability can be a jackpot. With the right combination of business and technical understanding, you can build a base from which to start chasing hard after those ahead of you. The news is even better for SMEs, for whom the pursuit of a competitive advantage digitally may have been too costly.
Composable Business is one of the trends that will revolutionise the digitalisation in the coming years.
Composable Digital Heart
The Digital Heart is the organisation’s most important set of systems, tailored precisely to its needs. A Composable Digital Heart is a set of systems designed and implemented according to the ideology of the composable business. In practice, this often means that the former has more of the company’s own custom code and the latter, as its name suggests, is assembled from a variety of interconnected and modern API-based solutions or components.
The composability approach in building a digital heart is a concrete demonstration of the benefits. Market access is much faster and changing one piece of the puzzle does not require a major refactoring of the digital core system. One can spot a trend in raising the digital maturity of an organisation:
- Digital maturity level three is reached with a solution based on a monolithic ERP product, typically coupled with e.g. e-commerce software.
- Digital maturity level four or five is reached by producing a tailored digital core, typically a highly customised solution with high development costs and production time.
- Alternatively digital maturity level four or five can be reached by composing several components, products or solutions and connecting them together in a customised way.
Composable approach is a modern option to implement a more quickly adaptable digital heart.
What does the move to composable require?
Digital core solutions tend to be organisation-specific, so there is no single answer. However, a number of factors can be identified in the move towards composability:
- The ability to see change as an opportunity. The whole approach relies heavily on the ability to see, for example, customer pressure as a positive and driving factor in development. Indeed, clustering business is high on the wish list of a customer-centric organisation.
- No need to completely renew existing infrastructure. There is probably no need to completely replace your existing core system infrastructure. The whole composable approach is based on integration of different components, and the flexibility to change them comes from the ability to change them flexibly.
- The Composable Business Architect. The composable business architect can assess the state of the current digital infrastructure and mirror it against the ideology of assembling and future roadmap. The expert will create a pathway that takes the current technology path towards composability, step by step.
- Composable technologies. There is no established, uniform standard for the technology to be composable yet, but in practice, more and more products and services that fit the model are coming onto the market.
Package Business Capabilities (PBCs)
A Packaged Business Capability (PBC) is the building unit of a packaged business. Think Lego bricks. Each PBC implements a business-relevant function and together they create a digital solution. A simplified example is the e-commerce.
Traditionally e-commerce has been synonymous with online commerce. In other words, the company has acquired either traditional monolithic ecommerce software (such as Magento) or a more recent cloud product such as Shopify. In the idea of an composable business – or in this context, more precisely, an Composable Commerce – digitalisation is created from PBCs (which could be shopping cart and credit card payment functionality, for example).
Both the shopping cart and credit card payment components are implemented through interfaces or by using off-the-shelf cloud-based solutions such as Snipcart or Stripe that fit the architecture of the business being assembled. Composable thinking therefore encourages organisation to take an ecosystem approach.
Microservices are small, independent services that work together. PBCs can be seen as a combination of microservices that form independent business units. A single PBC could in principle provide a complete application implementation to end customers, but in practice it is usually a set of business capabilities (PBCs).
Building blocks of a Composable Business
Composable Business is primarily a mental concept and secondarily a technology. This change of order actually reflects the whole evolution of digitalisation in the 21st century. At the beginning of the millennium, innovations were made technology-first, now the business (7customer) tends to be driver. The composable thinking includes a strong capacity for advanced innovation and business insight.
Everything that is essential to digital business has been (essentially) possible for decades, but technology-driven development has sometimes eroded the business benefits. This relationship is finally reversing: business is driving the innovations. However, the need for technology insight has not diminished. The need to learn new things faster and faster and to be able to grasp ever broader issues as the boundaries between business and technology become blurred.
This megatrend shift will enable business design and service design to be developed directly into practice. Programming is not going away, it is just changing its skin. Composable solutions are being implemented according to the MACH architecture. MACH stands for Microservices, API-first, Cloud-native and Headless. In reality, the idea extends beyond MACH to components and products that are compatible with the business architecture being integrated through APIs.
What kind of organisations benefit of Composable Business?
As mentioned earlier, this is a model that prioritises changing and evolving business needs. It is therefore safe to recommend composability for organisations at all levels of the digital maturity model. Start-ups should focus on understanding the principles of composability and favouring technologies that fit the model, even if no competitive advantage is sought. This is because scalability allows for a smooth growth of digital maturity and full exploitation of the selected technologies.
It is clear that increased adaptability and resilience will be particularly useful for companies for whom building a business advantage is important. Larger companies have had access to this for decades, but it is now becoming more affordable for smaller ones as well. On the other hand, larger companies have struggled with seemingly endless ERP deployments and too slow adaptability; scalability is of interest to this segment too.
In practice, composable business is suitable for almost any organisation.
Composable is a way of thinking and acting that democratises the building a high digital maturity level. What was previously been accessible only to wealthier organisations is becoming commonplace for smaller SMEs.
It is therefore a very similar evolutionary path to that of, say, e-commerce. Initially, only the most invested had access to them, whereas today any organisation can open a Shopify store with a swipe of a credit card. Composable thinking is transforming technology-driven development into a more business-driven one, and for this reason alone, many are keen to embrace the idea.
Of course, composable paradigm is just one model for making business agile and in the next part of this blog series, I’ll look at other ways to modernise your digital capabilities.
Check out the whole “Adaptable Business” blog series:
- Part 1: Adaptable business
- Part 2: What is Composable Business? (this blog post)
- Part 3: What is a Composable Commerce?
- Part 4: What is Low-code and No-code?
- Part 5: What is Culture of Experimentation?