The Organisation’s Governing Logic and Enterprise System
How deeper organisational principles shape the system through which capability is developed, strategy pursued and value created.
NB
You need a boundary, but “major” isn’t a satisfactory boundary.
I think your answer lies in the phrase “an organisation’s Enterprise System”. You need to establish that an Enterprise System is an enterprise-level analytical construct; not every local operational adjustment constitutes an adaptation of the Enterprise System.
That distinction should ultimately be developed on the Enterprise System page. Otherwise your HBS criticism can rebound against you: HBS has an undefined lower boundary; your definition could appear to have no lower boundary at all.
Contents
Introduction
The webpage A Definition Of Organisational Change provides a definition as:
“The adaptation of an organisation’s Enterprise System and, where necessary, its Governance Logic to support the achievement of its strategy and objectives.”
The definition highlights the Enterprise System and Governing Logic as key areas for organisational change. The Enterprise System includes Culture, Business Model, Value Chain, and Operating Model. Governing Logic refers to the underlying principles and assumptions guiding enterprise-level decisions.
Organisational change may involve adapting the Enterprise System while Governing Logic remains substantially intact or, where necessary, changing the Governing Logic itself. Understanding these constructs is essential to interpreting organisational change as defined on this website.
The Governing Logic
Organisations may change structures, processes, systems, and behaviours without altering the underlying principles and assumptions that guide key decisions. These may evolve over time and may not be consistent across the organisation. Examining Governing Logic allows for a deeper understanding of what is considered appropriate, desirable, or legitimate. The nine dimensions in Figure 1, examined in greater detail here, offer complementary perspectives for this analysis.
| Governing Logic Dimension | Description |
|---|---|
| Value Creation | The prevailing conception of what constitutes value, for whom value should be created, and how different forms of value and competing stakeholder interests should be prioritised. |
| Identity & Legitimacy | The collective conception of what kind of organisation this is, what it is entitled or expected to do, whose expectations matter, and what forms of action and organisation are regarded as appropriate and legitimate.Row 2, Content 1 |
| Control & Authority | The principles that determine where authority should reside, how decision rights should be distributed, how much autonomy should be permitted, and how organisational activity should be controlled. |
| Strategy | The prevailing view of how strategic direction should be determined, who should shape it, how deliberately it can be formulated, and how the organisation should respond to learning and changing circumstances. |
| Incentive & Reinforcement | The established beliefs about what behaviours, decisions and outcomes should be encouraged, rewarded or discouraged, and the mechanisms through which these expectations are reinforced. |
| Resource Allocation & Investment | The principles through which financial, human and other scarce resources are allocated, investment priorities determined, and competing demands resolved. |
| Risk & Accountability | The accepted view of what risks are appropriate, who may take them, where responsibility for decisions and outcomes resides, and how accountability should be exercised. |
| Information & Transparency | The conventions governing who should have access to information, how openly it should flow across organisational boundaries, what should be disclosed, and how information should inform decision-making. |
| Time Horizon & Cadence | The prevailing orientation towards the time horizons over which performance and value are considered, how quickly decisions and results are expected, and the rhythms through which the organisation plans, reviews and adapts. |
Figure 1: The Dimensions Of Governing Logic
The nine dimensions are not hierarchical or independent checklist items. Instead, they form a system of mutually reinforcing principles and assumptions, each influencing and being influenced by the others. Their significance varies by organisational context.
Some dimensions, such as Identity & Legitimacy and Value Creation, may be more foundational, shaping the organisation’s self-understanding, stakeholders, and values. However, there is no fixed hierarchy, as other dimensions can reinforce or challenge these core beliefs.
Ideally, Governing Logic would be consciously aligned with the organisation’s purpose and strategy. In practice, it often develops over time through decisions, practices, leadership behaviours, and responses to change, with some assumptions becoming deeply embedded and rarely questioned.
The Enterprise System
The Enterprise System does not replace established concepts such as organisational design, architecture, or operating models. Instead, it serves as an analytical lens that integrates four distinct perspectives to examine organisational capability and change. Considering these together helps identify how changes in one area may affect others, while maintaining clear analytical distinctions.
The perspectives are:
Culture
Culture includes the shared assumptions, norms, and behaviours shaped by and interacting with Governing Logic. It influences how people interpret situations and act within the organisation, affecting how formal arrangements function and whether they reinforce or undermine changes in the Enterprise System.
The Culture Canvas, as presented in Figure 2, summarises the main facets through which an organisation’s culture can be systematically examined and assessed.
Figure 2: Culture Canvas
Culture influences the Business Model, Value Chain, and Operating Model by shaping how each operates in practice. It affects perceptions of value and stakeholders, interactions across the Value Chain, and the functioning of structures and processes in the Operating Model. These elements can also reinforce or alter the organisation’s culture.
Culture and Governing Logic overlap, as both involve deeply embedded organisational assumptions. The distinction here is primarily analytical focus:
- Governing Logic concerns the principles and assumptions that shape enterprise-level choices about matters such as value creation, authority, strategy, resource allocation, risk and legitimacy.
- Culture concerns the socially established assumptions, norms and patterns of behaviour through which people interpret situations and act in organisational life.
The two are closely connected. Governing Logic shapes Culture, while established cultural patterns can reinforce or challenge Governing Logic. Organisational culture is discussed in more detail here
Business Model
The Business Model explains how the organisation creates, delivers, and captures value, tailored to its nature and purpose. The Business Model Canvas, as presented in Figure 3 and explained here, summarises the key elements needed to understand this process.
Figure 3: Business Model Canvas
The presented canvas is designed for private sector organisations and should be adapted for public and third sector contexts.
Value Chain
Michael Porter developed the Value Chain, which maps the connected activities that create and deliver value as described in the Business Model. It provides a cross-functional view, showing how activities combine to produce outcomes rather than focusing on individual processes or departments.
Figure 4 presents an adapted Value Chain, described in more detail here. The primary activities shown are generic and should be tailored to the specific organisation being assessed.
Figure 4: Value Chain
Operating Model
The Operating Model describes how the organisation organises and enables the activities identified in the Value Chain. The Operating Model Canvas in Figure 5 provides a structured view of the main organisational arrangements supporting these activities.
Figure 5: Operating Model Canvas
Some frameworks use Operating Model to include aspects of the Business Model and Value Chain. This website treats them separately, as each addresses different analytical questions: how value is created, through which activities, and how those activities are organised and enabled.
The Relationship Between The Governing Logic And The Enterprise System
Governing Logic is reflected in the Enterprise System. Assumptions about value creation shape the Business Model and Value Chain; assumptions about authority and accountability influence the Operating Model; and assumptions about behaviour, identity, and legitimacy are expressed and reinforced through Culture.
The relationship is reciprocal. The Enterprise System does not merely implement Governing Logic; experiences, behaviours, and outcomes within the system can reinforce or challenge existing assumptions. New practices may prompt reconsideration of previously unquestioned beliefs. Governing Logic and the Enterprise System are mutually influential but remain analytically distinct.
Summary
Governing Logic and the Enterprise System offer complementary perspectives on organisational capability. Governing Logic describes the deeper principles shaping enterprise-level choices, while the Enterprise System integrates Culture, Business Model, Value Chain, and Operating Model to examine capability. Together, they explain how an organisation pursues strategy and creates value through operational continuity.
The relationship between Governing Logic and the Enterprise System is reciprocal, not hierarchical. Governing Logic shapes the Enterprise System, while experiences and outcomes within the system can reinforce or alter Governing Logic. Neither is an organisational capability on its own; their interaction shapes the organisation’s capabilities. Figure 6 summarises these relationships.
