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Re-imagining Business Through Integration

14 Nov

(I’m cross-posting this from the Fujitsu RunMyProcess blog where I am now a regular contributor).

Just a commentary in response to a post I found by by Peter Evans-Greenwood on the potential for business re-engineering based on presence-based technologies such as Apple’s iBeacon. While I don’t want to talk about this subject specifically, Peter uses a couple of very clear examples in terms of retail purchasing that illustrate the power of re-imagining desirable outcomes from the consumer’s perspective – as opposed to a technology perspective – and the resulting need to pursue consumer-focused integration of business capabilities to give them what they need.

These themes resonated with me this morning as I gave a talk at the Eurocloud congress recently in which I berated people for not “thinking big” about the potential of cloud in combination with other technologies. At the moment there is so much discussion and argument about whose VM is better or the benefits (or not) of making VMs more ‘enterprisey’ that everyone seems to be missing the ‘moon shot’ opportunity of integrating, simplifying and putting technology platforms into the hands of everyone. This problem only becomes more acute as you broaden your view to all of the other silo arguments raging across other areas of technology evolution. From this perspective Peter’s examples of design-led, consumer-oriented thinking were very similar to the challenge I tried to lay down to congress attendees.

Effectively I believe that the IT challenge of our generation is to package diverse technologies into much higher level platforms that humanise technology and empower less technical people to solve real problems – i.e. to enable them to use modelling and simplified domain languages to scalably and reliably address the huge opportunities that technology can deliver to science, business and society. It’s a shock to many IT people but more often than not it’s actually other people who have the domain knowledge required to change the world – which is why they don’t have the time to learn the technology. From their perspective everything related to traditional IT is a form of tax, a significant driver of risk and delay and at worst an insurmountable barrier to their activities. These problems become more acute as you scale down the size of organisation under consideration – to the point at which the vast majority of smart people are locked out of the ability to bring their expertise to bear in new digital business models.

humanizing technology to realise new digital value chains

If we take Peter’s examples of placing the consumer – rather than technology – at the heart of our endeavours then it feels to me as if many seemingly “hot” IT trends fail on this basic test and are simply a reflection of technology-led thinking. Doing isolated things better because we can – e.g. like Peter’s NFC example – is really just a way of increasing the efficiency of something that brings no benefit to the customer and is therefore just pointless when you step back and reflect. In Peter’s example the ‘customer’ from the technology provider’s perspective may have been the cashiers, the people who support payment systems or even the CIO. When you shift to an outside-in perspective, however, the obvious question is why make payment at the cash desk more efficient when there is no need to queue to pay at all?

I know it’s a difficult discussion but in a similar sense businesses rather than IT staff are the true customers of IT and their intent is ultimately to deliver new and valuable outcomes as quickly as possible – they really couldn’t care less whether your infrastructure is virtualised, what middleware is or whether the pointless technical activity required to undertake these tasks is managed by operations staff or developers. While they still have to ‘queue’ unnecessarily to get their outcomes it makes no material difference to their poor experience or the lack of empowerment offered by technology platforms. By stepping back we can see that most of the activity in cloud at the moment is not focused on re-imagining how we integrate and simplify IT to support the rapid achievement of new and customer-led business models but rather on how we provide tools and approaches to increase the efficiency of the people who have traditionally implemented IT. Again, this might make worthless tasks more efficient but effectively it’s like the payment example mentioned by Peter – in the same way that using NFC misses the opportunity for a wholesale rethink of the customer’s payment experience, I feel that most cloud activity (and certainly noise) is focused on achieving efficiency increases within the vast swathes of traditional IT activity which could be wholly eliminated using a design-led, outcome-centric approach.

In this context I believe that the major responsibility of cloud platform providers is to provide a simplified way of creating business solutions that span all of the different technologies, business capabilities and channels that are meaningful to the creation of business models. Essentially we need to enable businesses to ‘compose’ internal and external capabilities into new value webs supporting innovative new business models – all at a higher level of abstraction. I call this concept of rapid business model creation, integration and adaptation composite business. Essentially there should be no need for anyone other than cloud platform providers to understand the complexity of the different underlying technologies necessary to create, deliver and monetise systems that digitally encode business IP for such composite business models.

Realising a business platform for the support of composite business models requires the consideration of two different dimensions of integration and simplification:

  1. Firstly composite business platforms need to provide a cohesive experience to their users by integrating and simplifying all of the technologies, processes and tools required to deliver value outcomes via multi-layer business composition; such platforms cannot simply be a loose and low level collection of technologies and middleware that require ongoing integration, configuration and management by technical users.
  2. Secondly the platform itself needs to provide high leverage tools that a range of stakeholders can use to quickly capture, deliver, monetise and distribute their business IP as composite business and technology services.  In this context a composite business platform needs to facilitate the simplified creation of solutions that integrate distributed and heterogeneous assets into new value webs – while hiding the technical complexity required to enable it.

In stepping back we need to realise the essentially pointless nature of technology implementation and management as an end in itself and focus on the ways in which we can make it disappear behind tools that simplify the realisation of valuable business outcomes. Such a re-imagining has never been more feasible – we now have a foundation of open networks, open protocols and open technologies that enable the creation of new and higher order platforms for value creation. From my perspective this is the responsibility of platform companies in the emerging business ecosystem and we only have to step back to see the opportunities.

Aspects of Integration

In this context ‘cloud integration’ transforms from being a technical issue to an enabler to the rapid linkage of business and technology assets into new, consumer-centric value webs that can span industry boundaries and deliver new personalised services.

Furthermore while I believe that this shift has the short term potential to improve services from companies and organisations operating within settled industry boundaries, the outstanding business opportunities of our age are to put high leverage cloud platforms into the hands of the maximum number of people to democratise technology and allow organisations to pursue wholesale specialisation and the aggressive re-drawing of existing industry and social boundaries around value. I believe that we truly are on the verge of not just a new information industrial revolution that impacts IT companies but rather a whole new business revolution that will leverage the shift to utility platforms to change the basis of on which businesses compete.  As the technology platform coheres,  enterprises will increasingly be able to specialise, integrate and then focus their joint efforts around value to the end consumer rather than on maximising the utilisation of their own capabilities in pursuit of scale and efficiency (something that represents a ‘punctuated equilibrium’ in evolutionary terms – as I’ll continue to explore in part II of my recent post on this subject). As value webs can be quickly created, evolved and realigned to ‘pull’ everything into the experience required by the consumer, the old model of ‘pushing’ industrially or functionally siloed products and services from large and tightly integrated companies becomes insupportable.

So I would encourage you to read Peter’s post – to see some simple and concrete examples of design thinking in action – and then think about the ‘moonshot’ opportunity of a wholesale re-imagining of technology. With all of the myriad technology advances that we are seeing it has never been easier to create a simplified and reliable platform for the modelling, execution and monetisation of new kinds of business.

Finally, also take the time to really reflect on all of these opportunities in the context of your role and the ways in which you can truly add value in this new environment. If you are working in an enterprise then think hard about whether you really need to control the technology in order to realise business value for your organisation (hint – uh, no). On the other hand if you’re working in an IT company then think about how to hide the technology and enable IT groups to focus purely on business IP capture, management and distribution.

What Does it Mean to Think of Your Business as a Service?

10 Nov

Just read a really interesting post from Henry Chesbrough about what it means to think about your business as a service.  It touches on something that has always seemed obvious to me but which also seems to be not well understood.  It’s important as it’s both subtle but ultimately highly disruptive.

In order to set some context about how businesses typically think of services, Henry first points to an illustration of the value chain model and the place of ‘services’ within this illustration:

image

He points out that services are often thought of as a second-class citizen in this view of the world, merely being tacked onto the end of the process to assist customers in adopting the ‘real’ value – i.e. that which has been designed to be pushed at them through the tightly integrated value chain.

He then goes on to suggest that this isn’t the best view of what services should be in reality and that there is immense value in thinking about – and delivering the value of – a business as a service.

I have been arguing on my blog for a long time that the challenge facing most organisations is to reimagine themselves as a set of ‘business services’ (or business capabilities) that are organised around value rather than customer segments, functional disciplines or physical assets.  Such a move can make them more adaptable, help them to specialise by disaggregating non-core capabilities to partners and unleash innovation on a scale not possible in today’s internally focused and tightly coupled organisations.  Looking at different kinds of value can also help us to sustainably disaggregate and then re-aggregate the organisation based on cultural and economic differences (so based around relationship management business models, infrastructural business models, IP development business models or portfolio management business models).

90% of people I talk to still equate services with the value chain definition highlighted above, however, and miss the core point that a move to a ‘services based world’ isn’t that the small area of the traditional value chain called ‘services’ becomes the most economically attractive (i.e. consulting is better than product development and so we should concentrate more there) but rather that every participant in the traditional value chain has to realign themselves to take responsibility for ‘hiding’ the assets needed to deliver their outcome.  In doing this they simplify consumption for their customers and create an ability to work with far more value web participants outside the boundaries of a single organisation.  Equally importantly such a realignment sets the scene for them to participate in pull-oriented value webs rather than merely being a dumb participant in a pre-set and push-oriented value chain.  This does not mean that they are only specialising on the traditional ‘services’ part of the value chain and sourcing all the non-services parts from partners – rather it means that every organisation has to identify the correct business model for each component and then increase the scope of each to wrap up whatever physical, human or information assets are required to deliver that as a specialised service.  As an example manufacturers (an infrastructural business with heavy dependency on physical assets and hence far from the definition of services we started with) will still need manufacturing capability, but they will ‘expose’ the whole capability (i.e. people, processes and technologies) as a service to others (who follow different business models related to IP development or relationships).

Such a shift to greater specialisation around the delivered value whilst simultaneously extending the required scope of expertise required to deliver that value as a service is an important point; more often than not such realignments will cut across settled business boundaries and drive ‘mini-vertical-integration*’ within the context of a particular business type and outcome.

We could therefore consider a reorganisation of businesses for a service economy as a move away from the value chain model we started with to one in which:

  • ‘services’ become core offerings rather than merely a value add and represent both the external boundary and a definition of the specialised outcome delivered.  Internally the service will be implemented by a ‘mini internal value chain’ tightly optimised to deliver its differentiating IP through the appropriate combination of physical, information and human resources; and
  • a ‘value web’ coordinates services into broader networks by aggregating value via the coordination of outcomes from many specialised service providers.

Effectively you could say that the ‘value chain’ (i.e. explicit, known implementation) becomes internal to the service provider whilst the ‘value web’ (i.e. external coordination of outcomes) becomes the external expression of how value is aggregated.

Either way there is an important mind shift that needs to be made here – moving to a model in which you make your business available as a service has profound implications for what does or does not constitute a specialisation for your organisation and on how you organise.  You may find that many things you have traditionally done internally actually have no intrinsic value and can be ceded to specialised partners, whereas subsets of many of the things that have over-simplistically been considered ‘horizontal’ (and thus easily outsourced – so for example HR, Marketing or IT) come to represent significant value when you look to optimise against outcomes.  Only be re-orienting around value will we gain the insights necessary to understand the nature of the services we wish to offer, the optimum business model to adopt for each and the skills and assets required by the cross-functional teams who will deliver it.

P.S.  As an example – I briefly discussed how moves to specialise around value might affect IT departments last week.

*I should also state that when talking about ‘vertical integration’ in this context I mean within a particular business type (i.e. relationship management, infrastructure, IP development or portfolio management) rather than _across_ business types – such horrific ‘vertical integration’ across the whole value chain of different kinds of value (as beloved by traditional telecoms incumbents and, it seems, Apple) creates walled gardens that restrict consumer freedom, create asymmetrical power relationships and inhibit innovation.  As a result I believe that this is something to be strictly avoided if we want open and competitive markets (and increasingly enforced by regulation if necessary).

Private Clouds “Surge” for Wrong Reasons?

14 Jul

I read a post by David Linthicum today on an apparent surge in demand for Private Clouds.  This was in turn spurred by thoughts from Steve Rosenbush on increasing demand for Private Cloud infrastructures.

To me this whole debate is slightly tragic as I believe that most people are framing the wrong issues when considering the public vs private cloud debate (and frankly for me it is a ridiculous debate as in my mind ‘the cloud’ can only exist ‘out there, somewhere’ and thus be shared; to me a ‘private’ cloud can only be a logically separate area of a shared infrastructure and not an organisation specific infrastructure which merely shares some of the technologies and approaches – which, frankly, is business as usual and not a cloud.  For that reason when I talk about public clouds I also include such logically private clouds running on shared infrastructures).  As David points out there are a whole host of reasons that people push back against the use of cloud infrastructures, mostly to do with retaining control in one way or another.  In essence there are a list of IT issues that people raise as absolute blockers that require private infrastructure to solve – particularly control, service levels and security – whilst they ignore the business benefits of specialisation, flexibility and choice.  Often “solving” the IT issues and propagating a model of ownership and mediocrity in IT delivery when it’s not really necessary merely denies the business the opportunity to solve their issues and transformationally improve their operations (and surely optimising the business is more important than undermining it in order to optimise the IT, right?).  That’s why for me the discussion should be about the business opportunities presented by the cloud and not simply a childish public vs private debate at the – pretty worthless – technology level.

Let’s have a look at a couple of issues:

  1. The degree of truth in the control, service and security concerns most often cited about public cloud adoption and whether they represent serious blockers to progress;
  2. Whether public and private clouds are logically equivalent or completely different.

IT issues and the Major Fallacies

Control

Everyone wants to be in control.  I do.  I want to feel as if I’m moving towards my goals, doing a good job – on top of things.  In order to be able to be on top of things, however, there are certain things I need to take for granted.  I don’t grow my own food, I don’t run my own bank, I don’t make my own clothes.  In order for me to concentrate on my purpose in life and deliver the higher level services that I provide to my customers there are a whole bunch of things that I just need to be available to me at a cost that fits into my parameters.  And to avoid being overly facetious I’ll also extend this into the IT services that I use to do my job – I don’t build my own blogging software or create my own email application but rather consume all of these as services over the web from people like WordPress.com and Google. 

By not taking personal responsibility for the design, manufacture and delivery of these items, however (i.e. by not maintaining ‘control’ of how they are delivered to me), I gain the more useful ability to be in control of which services I consume to give me the greatest chance of delivering the things that are important to me (mostly, lol).  In essence I would have little chance of sitting here writing about cloud computing if I also had to cater to all my basic needs (from both a personal as well as IT perspective).  I don’t want to dive off into economics but simplistically I’m taking advantage of the transformational improvements that come from division of labour and specialisation – by relying on products and services from other people who can produce them better and at lower cost I can concentrate on the things that add value for me.

Now let’s come back to the issue of private infrastructure.  Let’s be harsh.  Businesses simply need IT that performs some useful service.  In an ideal world they would simply pay a small amount for the applications they need, as they need them.  For 80% of IT there is absolutely no purpose in owning it – it provides no differentiation and is merely an infrastructural capability that is required to get on with value-adding work (like my blog software).  In a totally optimised world businesses wouldn’t even use software for many of their activities but rather consume business services offered by partners that make IT irrelevant. 

So far then we can argue that for 80% of IT we don’t actually need to own it (i.e. we don’t need to physically control how it is delivered) as long as we have access to it.  For this category we could easily consume software as a service from the “public” cloud and doing so gives us far greater choice, flexibility and agility.

In order to deliver some of the applications and services that a business requires to deliver its own specialised and differentiated capabilities, however, they still need to create some bespoke software.  To do this they need a development platform.  We can therefore argue that the lowest level of computing required by a business in future is a Platform as a Service (PaaS) capability; businesses never need to be aware of the underlying hardware as it has – quite literally – no value.  Even in terms of the required PaaS capability the business doesn’t have any interest in the way in which it supports software development as long as it enables them to deliver the required solutions quickly, cheaply and with the right quality.  As a result the internals of the PaaS (in terms of development tooling, middleware and process support) have no intrinsic value to a business beyond the quality of outcome delivered by the whole.  In this context we also do not care about control since as long as we get the outcomes we require (i.e. rapid, cost effective and reliable applications delivery and operation) we do not care about the internals of the platform (i.e. we don’t need to have any control over how it is internally designed, the technology choices to realise the design or how it is operated).  More broadly a business can leverage the economies of scale provided by PaaS providers – plus interoperability standards – to use multiple platforms for different purposes, increasing the ‘fitness’ of their overall IT landscape without the traditional penalties of heterogeneity (since traditionally they would be ‘bound’ to one platform by the inability of their internal IT department to cost-effectively support more than one technology).

Thinking more deeply about control in the context of this discussion we can see that for the majority of IT required by an organisation concentrating on access gives greater control than ownership due to increased choice, flexibility and agility (and the ability to leverage economies of scale through sharing).  In this sense the appropriate meaning of ‘control’ is that businesses have flexibility in choosing the IT services that best optimise their individual business capabilities and not that the IT department has ‘control’ of the way in which these services are built and delivered.  I don’t need to control how my clothes manufacturer puts my t-shirt together but I do want to control which t-shirts I wear.  Control in the new economy is empowerment of businesses to choose the most appropriate services and not of the IT department to play with technology and specify how they should be built.  Allowing IT departments to maintain control – and meddle in the way in which services are delivered – actually destroys value by creating a burden of ownership for absolutely zero value to the business.  As a result giving ‘control’ to the IT department results in the destruction of an equal and opposite amount of ‘control’ in the business and is something to be feared rather than embraced.

So the need to maintain control – in the way in which many IT groups are positioning it – is the first major and dangerous fallacy. 

Service levels

It is currently pretty difficult to get a guaranteed service level with cloud service providers.  On the other hand, most providers are consistently up in the 99th percentile and so the actual service levels are pretty good.  The lack of a piece of paper with this actual, experienced service level written down as a guarantee, however, is currently perceived as a major blocker to adoption.  Essentially IT departments use it as a way of demonstrating the superiority of their services (“look, our service level says 5 nines – guaranteed!”) whilst the level of stock they put in these service levels creates FUD in the minds of business owners who want to avoid major risks. 

So let’s lay this out.  People compare the current lack of service level guarantees from cloud service providers with the ability to agree ‘cast-iron’ service levels with internal IT departments.  Every project I’ve ever been involved in has had a set of service levels but very few ever get delivered in practice.  Sometimes they end up being twisted into worthless measures for simplicity of delivery – like whether a machine is running irrespective of whether the business service it supports is available – and sometimes they are just unachievable given the level of investment and resources available to internal IT departments (whose function, after all, is merely that of a barely-tolerated but traditionally necessary drain on the core purpose of the business). 

So to find out whether I’m right or not and whether service level guarantees have any meaning I will wait until every IT department in the world puts their actual achieved service levels up on the web like – for instance – Salesforce.  I’m keen to compare practice rather than promises.  Irrespective of guarantees my suspicion is that most organisations actual service levels are woeful in comparison to the actual service levels delivered by cloud providers but I’m willing to be convinced.   Despite the illusion of SLA guarantees and enforcement the majority of internal IT departments (and managed service providers who take over all of those legacy systems for that matter) get nowhere near the actual service levels of cloud providers irrespective of what internal documents might say.  It is a false comfort.  Businesses therefore need to wise up, consider real data and actual risks – in conjunction with the transformational business benefits that can be gained by offloading capabilities and specialising – rather than let such meaningless nonsense take them down the old path to ownership; in doing so they are potentially sacrificing a move to cloud services and therefore their best chance of transforming their relationship with their IT and optimising their business.  This is essentially the ‘promise’ of buying into updated private infrastructures (aka ‘private cloud’).

A lot of it comes down to specialisation again and the incentives for delivering high service levels.  Think about it – a cloud provider (literally) lives and dies by whether the services they offer are up; without them they make no money, their stock falls and customers move to other providers.  That’s some incentive to maintain excellence.  Internally – well, what you gonna do?  You own the systems and all of the people so are you really going to penalise yourself?  Realistically you just grit your teeth and live with the mediocrity even though it is driving rampant sub-optimisation of your business.  Traditionally there has been no other option and IT has been a long process of trying to have less bad capability than your competitors, to be able to stagger forward slightly faster or spend a few pence less.  Even outsourcing your IT doesn’t address this since whilst you have the fleeting pleasure of kicking someone else at the end of the day it’s still your IT and you’ve got nowhere to go from there.  Cloud services provide you with another option, however, one which takes advantage of the fact that other people are specialising on providing the services and that they will live and die by their quality.  Whilst we might not get service levels – at this point in their evolution at least – we do get transparency of historical performance and actual excellence; stepping back it is critical to realise that deeds are more important than words, particularly in the new reputation-driven economy. 

So the perceived need for service levels as a justification for private infrastructures is the second major and dangerous fallacy.  Businesses may well get better service levels from cloud providers than they would internally and any suggestion to the contrary will need to be backed up by thorough historical analysis of the actual service levels experienced for the equivalent capability.  Simply stating that you get a guarantee is no longer acceptable. 

Security

It’s worth stating from the beginning that there is nothing inherently less secure about cloud infrastructures.  Let’s just get that out there to begin with.  Also in getting infrastructure as a service out of the way – given that we’re taking the position in this post that PaaS is the first level of actual value to a business – we can  say that it’s just infrastructure; your data and applications will be no more or less secure than your own procedures make it but the data centre is likely to be at least as secure as your own and probably much more so due to the level of capability required by a true service provider.

So starting from ground zero with things that actually deliver something (i.e. PaaS and SaaS) a cloud provider can build a service that uses any of the technologies that you use in your organisation to secure your applications and data only they’ll have more usecases and hence will consider more threats than you will.  And that’s just the start.  From that point the cloud provider will also have to consider how they manage different tenants to ensure that their data remains secure and they will also have to protect customers’ data from their own (i.e. the cloud service providers) employees.  This is a level of security that is rarely considered by internal IT departments and results in more – and more deeply considered – data separation and encryption than would be possible within a single company. 

Looking at the cloud service from the outside we can see that providers will be more obvious targets for security attacks than individual enterprises but counter-intuitively this will make them more secure.  They will need to be secured against a broader range of attacks, they will learn more rapidly and the capabilities they learn through this process could never be created within an internal IT organisation.  Frankly, however, the need to make security of IT a core competency is one of the things that will push us towards consolidation of computing platforms into large providers – it is a complex subject that will be more safely handled by specialised platforms rather than each cloud service provider or enterprise individually. 

All of these changes are part of the more general shift to new models of computing; to date the paradigm for security has largely been that we hide our applications and data from each other within firewalled islands.  Increasing collaboration across organisations and the cost, flexibility and scale benefits of sharing mean that we need to find a way of making our services available outside our organisational boundaries, however.  Again in doing this we need to consider who is best placed to ensure the secure operation of applications that are supporting multiple clients – is it specialised cloud providers who have created a security model specifically to cope with secure open access and multi-tenancy for many customer organisations, or is it a group of keen “amateurs” with the limited experience that comes from the small number of usecases they have discovered within the bounds of a single organisation?  Furthermore as more and more companies migrate onto cloud services – and such services become ever more secure – so the isolated islands will become prime targets for security attacks, since the likelihood that they can maintain top levels of security cut off from the rest of the industry – and with far less investment in security than can be made by specialised platform providers – becomes ever less.  Slowly isolationism becomes a threat rather than a protection.  We really are stronger together.

A final key issue that falls under the ‘security’ tag is that of data location (basically the perceived requirement to keep data in the country of the customers operating business).  Often this starts out as the major, major barrier to adoption but slowly you often discover that people are willing to trade off where their data are stored when the costs of implementing such location policies can be huge for little value.  Again, in an increasingly global world businesses need to think more openly about the implications of storing data outside their country – for instance a UK company (perhaps even government) may have no practical issues in storing most data within the EU.  Again, however, in many cases businesses apply old rules or ways of thinking rather than challenging themselves in order to gain the benefits involved.  This is often tied into political processes – particularly between the business and IT – and leads to organisations not sufficiently examining the real legal issues and possible solutions in a truly open way.  This can often become an excuse to build a private infrastructure, fulfilling the IT departments desire to maintain control over the assets but in doing so loading unnecessary costs and inflexibility on the business itself – ironically as a direct result of the businesses unwillingness to challenge its own thinking. 

Does this mean that I believe that people should immediately begin throwing applications into the cloud without due care and attention?  Of course not.  Any potential provider of applications or platforms will need to demonstrate appropriate certifications and undergo some kind of due diligence.  Where data resides is a real issue that needs to be considered but increasingly this is regional rather than country specific.   Overall, however, the reality is that credible providers will likely have better, more up to date and broader security measures than those in place within a single organisation. 

So finally – at least for me – weak cloud security is the third major and dangerous and fallacy.

Comparing Public and Private

Private and Public are Not Equivalent

The real discussion here needs to be less about public vs private clouds – as if they are equivalent but just delivered differently – and more about how businesses can leverage the seismic change in model occurring in IT delivery and economics.  Concentrating on the small minded issues of whether technology should be deployed internally or externally as a result of often inconsequential concerns – as we have discussed – belittles the business opportunities presented by a shift to the cloud by dragging the discussion out of the business realm and back into the sphere of techno-babble.

The reality is that public and private clouds and services are not remotely equivalent; private clouds (i.e. internal infrastructure) are a vote to retain the current expensive, inflexible and one-size-fits-all model of IT that forces a business to sub-optimise a large proportion of its capabilities to make their IT costs even slightly tolerable.  It is a vote to restrict choice, reduce flexibility, suffer uncompetitive service levels and to continue to be distracted – and poorly served – by activities that have absolutely no differentiating value to the business. 

Public clouds and services on the other hand are about letting go of non-differentiating services and embracing specialisation in order to focus limited attention and money on the key mission of the business.  The key point in this whole debate is therefore specialisation; organisations need to treat IT as an enabler and not an asset, they need to  concentrate on delivering their services and not on how their clothes get made. 

Summary

If there is currently a ‘surge’ in interest in private clouds it is deeply confusing (and disturbing) to me given that the basis for focusing attention on private infrastructures appears to be deeply flawed thinking around control, service and security.  As we have discussed not only are cloud services the best opportunity that businesses have ever had to improve these factors to their own gain but a misplaced desire to retain the IT models of today also undermines the huge business optimisations available through specialisation and condemns businesses to limited choice, high costs and poor service levels.  The very concerns that are expressed as reasons not to move to cloud models – due to a concentration on FUD around a small number of technical issues – are actually the things that businesses have most to gain from should they be bold and start a managed transition to new models.  Cloud models will give them control over their IT by allowing them to choose from different providers to optimise different areas of their business without sacrificing scale and management benefits; service levels of cloud providers – whilst not currently guaranteed – are often better than they’ve ever experienced and entrusting security to focused third parties is probably smarter than leaving it as one of many diverse concerns for stretched IT departments. 

Fundamentally, though, there is no equivalence between the concept of public (including logically private but shared) and truly private clouds; public services enable specialisation, focus and all of the benefits we’ve outlined whereas private clouds are just a vote to continue with the old way.  Yes virtualisation might reduce some costs, yes consolidation might help but at the end of the day the choice is not the simple hosting decision it’s often made out to be but one of business strategy and outlook.  It boils down to a choice between being specialised, outward looking, networked and able to accelerate capability building by taking advantage of other people’s scale and expertise or rejecting these transformational benefits and living within the scale and capability constraints of your existing business – even as other companies transform and build new and powerful value networks without you.

iPad not harbinger of PC doom according to Steve Jobs

9 Jun

After having put some time into thinking about people’s discomfort with the iPad a couple of weeks ago I was interested in this brief article in AppleInsider where Steve Jobs admits that the notion of a post-PC era is ‘uncomfortable’ for many people – a subject that I touched on in my post.  Jobs’ comments appear to support my own impressions that this is really just a maturation of the industry, a democratisation of access to computing for the masses and that it won’t undermine traditional computing for those with the necessary skills.  This should be a relief to people who worry that such devices will replace computers and thereby destroy the ability of individuals to be technically “generative”.   I also basically agree with his summary of tablets as a new form factor that replaces the need for a PC for many people, that PCs will continue to exist and that more choice is good (and although I still don’t agree with the Apple business model – and feel that it will suffer as other people replicate their innovations in more open ecosystems – only one of us is obscenely rich :-)).

More broadly my gut feel is that as the interfaces and capabilities of tablets increase in sophistication so we will be able to encourage more ‘vertical’ and ‘individual’ creativity and “generativity” in the population as a whole.  These people won’t be using the same tools as those we’ve had to learn to create through PC use but then they also won’t need that lower level, general-purpose control over raw computing that many people have had to learn merely to pursue higher level interests.  There will still be plenty of IT work – in fact more than ever – implementing applications and services to help these newly liberated consumers ignore the underlying computer and be creative within their own domains.

Evolution and IT

3 Jun

This is a subject that has been on my mind a lot lately as I recently read an astounding book by Eric D. Beinhocker called “The Origins of Wealth”.  It was astounding to me for the way in which Beinhocker imperiously swept across traditional economic theories based on equilibrium systems, critiqued the inherent weaknesses of such theories when faced with real world scenarios and then hypothesised the use of the evolutionary algorithm as a basis for a fundamental shift to what he called ‘complexity economics’.  I’m going to return to discuss some of the points from this book – and the way in which they resonated with my own thoughts around business design, economic patterns and technology change – but for today I just wanted to comment on a post by Steve Jones where he raises the issue of evolution in the context of IT systems.

Steve’s question was whether we should “reject evolution and instead take up arms with the Intelligent design mob”.  His thoughts have been influenced by the writing of Richard Dawkins, in particular the oft-times contrast between the apparent elegance of the external appearance of an animal (including its fitness for its environment) with the messy internals that give it life.  Steve suggests that he sees parallels in the IT world and brings this around to issues with the way in which a shift to service-based models often creates unfounded expectations on internal agility:

“The point is that actually we shouldn’t sell SOA from the perspective of evolution of the INSIDE at all we should sell it as an intelligent design approach based on the outside of the service. Its interfaces and its contracts. By claiming internal elements as benefits we are actually undermining the whole benefits that SOA can actually deliver.”

In the rest of the post and into the comments Steve then extends this argument to call for intelligent design (of externals) in place of evolution:

“The point I’m making is that Evolution is a bad way to design a system the whole point of evolution is that of selection, selection of an individual against others. In IT we have just one individual (our IT estate) and so selection doesn’t apply.”

My own feeling is that there isn’t a direct 1:1 relationship in thinking about evolution and the difficulties of changing the internals of a service in the way that Steve suggests.  I believe that evolution is a fractal algorithm whose principles apply equally to the design of business capabilities, service contracts and code.  To think about this more specifically I’d like to consider a number of his points after first considering evolution and how we frame it more broadly from a market and enterprise context.

What is evolution?

Evolution is an algorithm that allows us to explore large design spaces without knowing everything in advance.  It allows us to try out random designs, apply some selection criteria and then amplify those characteristics of a design that are judged as ‘fit’ by the environment (i.e. the selection criteria).  In the natural world evolution throws up organisms that have many component traits and success is judged – often brutally – by how well these traits enable an animal to survive in the environment in which it exists.  Within an individual species there will be a particular subset of traits that define that species (so traits that govern size, speed or vision for instance).  Individuals within a species who have the most desirable instances of these traits will be better equipped to survive, the mating of these individuals will merge their desirable traits and over time the preponderance of the most effective traits will therefore increase in the population overall.  As a result evolution creates a number of designs and uses a selection algorithm to more rapidly arrive at designs that are ‘good enough’ to thrive within the context of the environment in which they exist.  It is a much more rapid method of exploring large design spaces than trying to think about every possible design, work out the best combination of traits and then create the ‘perfect’ design from scratch (i.e. “intelligently” design something without a full understanding of the complexities of the selection criteria and hence what will be successful).

Enterprises and evolution

In Beinhockers book he uses a ‘business’ as the unit of selection that operates within the evolutionary context of the market.  Those businesses with successful traits are chosen by consumers and thus excel.  These traits – whether they be talent strategies, process strategies or technology strategies – are then copied by other businesses, replicating and amplifying successful traits within the economic system. 

I believe that this is the best approximation that we can use in the – rather unsystematic – businesses that exist today but that we can use systematic business architecture to do better.  I have often written about my belief in the need for companies to become more adaptable by identifying and then reforming around the discrete business capabilities they require to realise value.  Such capabilities would form a portfolio of discrete components with defined outcomes which could then be combined and recombined as necessary to realise systematic value streams. 

Such a shift to business capabilities will allow an enterprise to adapt its organisation through the optimisation and recombination of components; whilst at this stage of maturity Beinhocker’s hypothesis of the ‘business’ as the element of selection remains sound (since capabilities are still internal and not individually selectable as desirable traits) we can at least begin to talk about capabilities and the way in which we combine them as the primary traits that need to be ‘amplified’ to increase the fitness of the design of our business. 

Inside Out 

Whilst realigning internal capabilities is a worthwhile exercise in its own right, evolutionary systems also tend to exhibit long periods of relative stability punctuated by rapid change as something happens to alter the selection criteria for ‘fitness’.  The Web and related techniques for decomposition – such as service-orientation – have made it possible to consume external services as easily as internal services.  Business capabilities can thus be made available by specialised providers from anywhere in the world in such a way that they can be easily integrated with internal capabilities to form collaborative value webs.  We can therefore view the current convergence of business architecture, technology and a mass shift to service models as a point of ‘punctuated equilibrium’. 

In this environment continuing to execute capabilities that are non-differentiating will cease to be an attractive option as working with specialised providers will deliver both better outcomes and more opportunities for innovation.  From an evolutionary perspective our algorithm will continue to select those organisations that are most fit (as judged by the market) and those organisations will be those with the strongest combination of traits (i.e. capabilities).  Specialised, external capabilities can be considered to be more attractive ‘traits’ due to their sharp focus, shorter feedback loops and market outlook; they will thus be amplified as more organisations close down their own internal capabilities and integrate them instead, a kind of organisational mutation caused by the combination of the best capabilities available to increase overall fitness.    Enterprises working with limited, expensive and non-differentiating internal capabilities will risk extinction.

Once this shift reaches a tipping point we discover that business capabilities become the unit of market selection since they are now visible as businesses in their own right.  Whilst this could be considered pedantry – as a ‘business’ is still the unit of selection even though what we consider a business has become smaller – there is an important shift that happens at this point.  Essentially as business capabilities become units of selection in their own right the ‘traits’ for selection and amplification of their services become a combination of their own internal people, process and technology capabilities plus the quality of the external capabilities they integrate.  Equally importantly they have to act as businesses – rather than internal, supporting organisations – and support the needs of many customers – and hence support mass customisation.  This will mean that they will have many more consumers than internal support functions would ever have had and the needs of these consumers could be both very different and impossible to guess in advance; there will be new opportunities to rapidly improve their services based on insight from different industries, orthogonal areas and new collaborations.  An ability to respond to these new opportunities by changing their own capabilities or finding new partners to work with will be a significant factor in whether these capabilities thrive and are thus judged as ‘fit’ by the selection criteria of the market.  An ability to evolve externally to provide the ‘right’ services will thus be a core competency required in the new world. 

What has this got to do with services?

The basic points I’m making here are that evolution acts at the scale of markets and is a process that we participate in rather than a way of designing.  We design our offers using the best knowledge that we have available but the market will decide whether the ‘traits’ we exhibit fit the selection criteria of the environment.  Business capabilities can become the ‘traits’ that make particular market offers (or businesses) fit for selection or not by having a huge influence over the overall cost, quality and desirability of a particular offer.  From a technology perspective such capabilities will in reality need to offer their services as services in order for them to be easily integrated into the overall value webs of their customers and partners; in many cases there may be a 1:1 mapping between the business capability and the service interface used to consume it.  In that sense services are just as much a driver of fitness in the overall ecosystem and their interface and purpose will inevitably need to change as the overall ecosystem evolves.  Hence it is not simply a question of ‘fixing’ interfaces and ‘evolving’ internals; the reality is that the whole market is an evolutionary system and businesses – plus the services they offer for consumption –will need to continually evolve in order to remain fit against changing selection criteria.

Intelligent design or evolution

The core question raised by Steve is whether ‘evolution’ has any place in our notion of service design.  In particular:

“The point I’m making is that Evolution is a bad way to design a system the whole point of evolution is that of selection, selection of an individual against others. In IT we have just one individual (our IT estate) and so selection doesn’t apply.”

Is evolution a ‘bad’ designer?

I do not believe that evolution is either a good or a bad designer but it is a very successful one.  Evolution is an algorithm that takes external selection criteria, applies them and amplifies those traits that are most successful in meeting the criteria.  It is brilliant at evaluating near-infinite design spaces (such as living organisms or markets) and continually refining designs to make them fit for the environmental selection criteria in play.

If I read Steve’s post correctly, however, he actually isn’t objecting to the notion of evolution per se – since at the macro level it is a market process in which we are all involved and not a conscious way of designing our services – but rather to a lack of design being labelled an ‘evolutionary’ approach. 

What is ‘evolutionary’ design?

In the majority of cases when people talk about ‘evolution’ in the context of systems they really mean that they want to implement as quickly and cheaply as possible and then ‘evolve’ the system.  Often vendors encourage this behaviour by promising that new technologies are so rapid as to make changes easy and inexpensive.  Such approaches often eschew any attempt at formal design, choosing instead to implement in isolation and then retro-integrate with anything else on a case by case basis.  I have often seen Steve talk about the evils of generating WSDL from code and I imagine that this is the sort of behaviour that he is classifying as ‘evolutionary’ changes to internals.

Is this a good or a bad approach?  From an evolutionary perspective we can say that we do not care.  Given that we are talking about evolution in its true sense the algorithm would merely continue to churn through its evaluation of services, amplifying successful traits.  It is just that such behaviour might have some unrecognised issues: firstly evolution would have to work for longer to bring a service to a point at which it is ‘fit’, secondly the combination of all of these unfit services means that there is a multiplier effect to evolving the ecosystem of services to a point at which it is fit overall and thirdly whilst all of this goes on at a micro level the fitness of the enterprise against the selection criteria of the market might be poor due to the unfitness of some of its major ‘traits’.

Intelligence in design

Whilst a lack of design might extend the evolutionary process to a point at which it is unlikely that a business could ever become fit before it became extinct, an assumption that we can design service interfaces that are fixed also ignores the reality of operating in a complex evolutionary system (like a business). 

Creating a ‘perfect’ service from scratch is a very difficult thing to do as even within the bounds of a single organisation we cannot know all of the potential uses that might come to pass.  We can however use the best available data to create an approximation of the business capabilities and resulting services required in order to try and speed up the evolutionary process by reducing the design space it has to search.  Hence the notion that we use an evolutionary process of service design (a bit like I discussed here) is an important one; often people will not know what good looks like until they see something.  Whilst I therefore accept that we can start with an approximation of the capabilities (and services) we believe we will need we have to accept that these will evolve as we gain experience and exposure to new use cases.  

From this perspective I don’t agree with the literal statement that Steve has made; it is not about intelligent design vs evolution but rather about intelligence of design to support the evolutionary process.  As I stated previously markets are fundamentally evolutionary systems and therefore our businesses – and the business capabilities and services that represent their traits – are assessed by the evolutionary algorithm for fitness against market selection criteria.  We are not dumb observers in this process, however, and must fight to create offers that are attractive to the market along with supporting organisations that enable us to do it at the right price and service levels.  We can apply our intelligence to this process to increase our chances of success but a key element will be to understand that our enterprises will increasingly become a value web of individual capabilities, that it is the combination of our capabilities that is judged and that we must therefore design our organisations to evolve by adopting successful traits to improve our overall fitness.  As a result we should not expect the evolutionary process to do our work for us – by choosing not to apply any intelligence in design – but we should also not assume that evolution has no place in design given that meeting its demands is becoming the primary requirement of business architecture.

Macro evolution in the economy

Stepping back and taking an external perspective leads us to realise that it is also untrue to say that we only have one individual (in terms of a single IT estate) and that there is nothing to select against; in reality even today we are competing for selection against businesses with other IT estates and thus our ‘traits’ (in the form of our IT) are already a major factor in deciding our fitness (and thus our ability to be ‘selected’ by the evolutionary algorithm of the market).  If we factor in the emerging discontinuities we see as part of the ‘punctuated equilibrium’ process it only makes things worse; the specific IT we have within specific business capabilities will have a large impact on the fitness of these capabilities to survive.  In that context continually evolving our business capabilities (and with them the IT and software services that enable them) is the only way to ensure future success.

More importantly as we look at the wider picture of the position of our business capabilities within the market as a whole so our unknowns become more acute and the more that we can only rely on selection and amplification (i.e. evolution) to guide us in shaping them.  Looking beyond the boundaries of our single organisation we have to consider the fact that all of our services will exist in a market ecosystem many of whose needs and usage we are even less equipped to know in advance.  There will often be new and novel ways in which we can change our services to meet the emerging needs of customers and partners and in this way the overall ecosystem itself will evolve.  As a result selection is the only way in which design can occur in an ecosystem as complex as a market where there are many participants whose needs are diverse.  Nobody can ‘intelligently design’ a whole market from top to bottom.  Furthermore the market – as an evolutionary system – will be subject to a process of ‘punctuated equilibrium’ meaning that sudden changes in the criteria used to judge fitness can occur.  From an IT perspective the shift towards service models such as cloud computing could be considered to be one such change, since it changes the economics of IT from one based on differentiation based on ownership to one based on universal access.  Such changes could be considered ‘revolutionary’ as the carefully crafted and scaled business models created during a period of relative stability cease to be appropriate and new capabilities have to be developed or integrated to be successful.  This is one area where I disagreed with Steve’s comment about the relationship between revolution and evolution:

“The point of revolutionary change is that it may require a drop back to the beginning and starting again. This isn’t possible in an evolutionary model.”

Essentially revolutionary change often happens in evolutionary systems – evolution is always exploring the design space and changes in the environment can lead to previously uninteresting traits becoming key selection criteria.  In this case ‘revolutionary change’ is a side-effect of the way in which evolution starts to amplify different traits due to the changes in selection criteria.  In the natural world such changes can lead to catastrophic outcomes for whole species whose specialisations are too far removed from the new selection criteria and this can also happen to businesses (it will be interesting to see how many IT companies survive the shift to new models, for instance).  Evolution also allows the development of new ‘traits’ that make us sustainable, however, and therefore can support us in surviving ‘revolutionary’ changes if we have sufficient desirable ‘traits’ to prevent total collapse.  The trick is to understand how you can evolve at the macro level to incorporate the changes that have occurred in the selection criteria of your market and to realign your capabilities as appropriate.  Often the safest way to do this is to have different services on offer that try different combinations of traits, hence keeping sensors within the environment to warn you of impending changes. 

Summary

As a result there is no question that both evolution and intelligence in design have a place in the creation of sustainable architectures (whether macro business architectures or micro service architectures).  We have to be precise in the ways in which we use this language, however; it is not sufficient to label a lack of design as ‘evolution’ (which I believe was Steve’s core point).  Evolution is a larger, exogenous force that shapes systems by highlighting and amplifying desirable traits and not something that we can rely on to reliably fix our design issues without an infinite amount of time and change capability.  We therefore need to apply intelligence to the process of design – even when there is great uncertainty – to try and narrow down the design space to minimise the amount we have to rely on evolution to arrive at a viable ‘system’; even once we get to this point, however, we need to be aware of the fact that evolution is an ongoing process of selection and amplification and design our business architectures with the flexibility necessary to recognise this fact.

More broadly I believe that we can also look at the application of ‘intelligence’ and ‘evolution’ as a matter of scale;  we can design individual services with a fair degree of intelligence, we can design our business capabilities with some fair approximations and then rely on evolution to improve them but we can only rely on evolution to shape the market itself and thus the selection criteria that define our participation.  For this reason strategies that stress adaptability (i.e. an ability to evolve in response to changing selection criteria) have to take precedence over strategies that stress certainty and efficiency.

Relationships vs Transactions

27 Mar
Background

Got a comment from one of my colleagues – a chap called Martin Abbot – by email a couple of days ago with respect to my last post about institutional innovation.  Whilst I’ve been planning to find some time to write a follow up that links these ideas through to SOA and SaaS I thought it might be worth just posting the question and my email response.  It’s not a ‘proper’ blog post – and so is a bit messy – but the questions and my rushed answer are probably worth sharing.

The Question

Is the idea of moving away from transactional relationships to ones that are mutually beneficial not a little at odds with SaaS and SOA generally? Both of these seem to support the commoditization of resources and are therefore inherently transactional in nature.”

The Answer

Well I guess that there are a few things:

Lots of stuff tends towards commoditisation and so in many ways the argument Martin makes is understandable.  Even based purely on the use of ‘commodity’ services, however, I guess you could make the following arguments:

  • Commodity doesn’t necessarily mean wholly standardised.  In the future we’re going to need to support mass customisation of services to support our customers businesses.  In a SaaS/SOA environment this basically requires us to have many customisation points built into the software that support both multi-tenancy and customisation.  The key here is to build the software for customisation in a few key dimensions from the ground up rather than rely on your ability to bastardise it later.  To be able to understand the 20% key dimensions that need to be customisable, however, you need a pretty deep understanding of your consumers (I realise that this point is only tenuously related but I need to establish it first…)
  • The second point is that even if you are only delivering commodity services there is always the opportunity to a) understand your customers needs better and b) deliver services that are more appropriate to them through your improved contextual understanding.  This requires collaborating partners to share information much more freely in order to get the best service.  When you combine this with the ability to mass-customise services you can see that both the provider and consumer get best advantage when they each fully understand the capabilities and aspirations of the other.  This depth of relationship requires a degree of trust that goes above and beyond a traditional zero-sum approach, however.
  • From a provider perspective you also need to work closely with your partners to understand the effectiveness (or not of your services) in order to be able to shorten your feedback loop and accelerate the improvement of your capabilities.  Again this is a win-win scenario potentially as both parties get greater value.

All of this is fine from the perspective of thinking of two parties as ‘customer’ and ‘provider’ when the main goal is the consumption of services on a transactional basis.  i.e. there are still some low level advantages to both parties of creating a closer relationship.

Beyond this however is the real value.  If you build trust across organisations that offer some part of the value chain then the more important question becomes how you can leverage your capabilities together in order to improve existing offerings or – perhaps more importantly – create new services or offerings to existing or new markets.  The key here is that each service provider may have a fairly conventional view of what services they offer and who they serve but when each comes together to look at how they collaborate to deliver  value and how each others services could be used to approach their customers then a new perspective opens up.  Once this perspective is opened they can then begin to consider how each would need to optimise their services in order to create these new markets and this in turn can help them to consider how these ideas impact (and potentially improve) their ‘traditional’ offerings.  When you broaden this from two parties into everyone who performs any value adding activity within and across value webs you can see that the opportunities for collaboration and new value creation rise exponentially.

This is also applicable when you think of ‘customers’ in the traditional sense rather than groups of suppliers working together;  customers and their providers exist in a value-web and therefore by forging strong relationships and inviting suppliers to help improve the end product the overall value for everyone is greatly enhanced.  This is also a two-way dialogue since providers can use Web 2.0 techniques to bring their consumers into the service creation process and thereby become co-creators of the products and services that the company offers – an ideal way to balance push and pull models.

Even if we think about products and services that tend towards commoditisation – and many things do – we can see that the reality is that such commoditisation is inevitable and accelerating; sharing information with trusted partners – whilst it may hasten the commoditisation of certain services – more than offsets this by opening up far grander opportunities to utilise these services in new ways.  Furthermore if your services are subject to commoditisation then they are also subject to economies of scale and leveraging partners to find new ways of using these commoditised services to build new markets is a much smarter move than withdrawing into yourself and becoming obsessed with efficiency and cost reduction. 

To paraphrase Bill Joy, there are far more smart people outside your organisation than in it and maximising your ability to innovate by mutually leveraging this smartness is increasingly going to be a necessary capability.  As I stated in my original post, I agree that there are many things to be worked out in order to move people into this new way of working but I believe that those who make the transition will create and reap significantly greater value than those who do not.

Conclusion

My anticipated next post was to actually look at how service delivery platforms and SOA could help to accelerate the types of relationships that I discussed.  I’m still aiming to write that post but decided that there was value in exposing this information in the interim as a) it is related and adds to the discussion and b) given my excessive commitments at the moment it was easier than actually finding the time to write the post I need to at this point in time 😉

Stability, Relationships and Institutional Innovation as Pillars of Success

5 Feb

Just read a few pieces from John Hagel – one of my favourite writers – whilst catching up on my blog backlog.  Essentially two posts caught my attention, one describing some areas of concentration for the coming year and another exploring the concept of institutional innovation.  Both of these posts resonated strongly with me and I felt that elements of both were strongly – even inextricably – linked together.

The two main points from the first post that caught my attention were around the value of stability in a changing world and on the decreasing value of transactional behaviour.  These ideas were reinforced by the second post about institutional innovation as I believe that such transformational innovation requires us to recognise the need for stability whilst simultaneously downplaying transactional behaviour in favour of mutually beneficial relationships.

I’ll explore this a little further.

The importance of internal stability

I’ve discussed many times how I believe that in order to be successful in a rapidly changing world we need to look at the structural properties of our organisations before considering how they work.  In this context understanding the capabilities that we need to be successful – along with the metrics that they need to support – is a key lever to greater organisational adaptability.  This is so since these abstractions allow us to concentrate on what we need to achieve whilst burying the detail of how we achieve it to prevent ourselves from being overwhelmed and therefore powerless to act decisively.  Equally importantly, however, a concentration on structural components and their relationships allows us to escape from tightly coupled process-oriented thinking and move to an organisational style that is more loosely coupled and output-driven. 

In this discussion, however, the key characteristic of interest in a structural view is that of stability – essentially a structural, capability based view of an organisation is far more stable than a dynamic, process-oriented one.  This is because the things that we do broadly remain static over time whilst the way in which we do them can be impacted hugely by influences such as technology advances, economic pressures or the talent pool we have at our disposal.

As increasingly rapid change impacts our organisations and forces us to rethink how we do things, the value of understanding explicitly what we do cannot be overstated.  Chaos ensues when people have no fixed reference points around which to manage change; a stable view of intent, however, allows us to have the benefit of both worlds – a stable understanding of things that need to be achieved and therefore a clear field of operations in which to implement change in a decisive and systematic fashion. 

The importance of external stability

Taking this thinking to the next level, increasing pressures on organisations will increasingly force them to look at the set of capabilities that they have and decide which ones represent their core areas of expertise (it is worth stating here that this is another, related reason to take a systematic view of the capabilities an organisation needs but that is assumed in this post).  This choice will increasingly be driven by economic forces and so – to use another of John’s broad ideas – organisations will need to decide whether they major on customer relationships, infrastructure or innovation.  Making this decision will be a further expression of stability at the macro level, however, since our organisation will now be signaling to its wider ecosystem that it has capabilities of a particular nature that can be leveraged and also that it will be looking for partners to provide other elements of the value chain on its behalf.  At the top level well positioned service providers can therefore become points of stability in the changing landscape of an industry, enhancing both their own positions but also providing reference points to new entrants trying to excel in a different section of the value chain. 

The futility of transactional behaviour

One of the key issues that emerges as we begin to seek complementary services from partners is the nature of the relationships we wish to build.  Current transactional based thinking would tend to treat partners as ‘suppliers’ held at arms length and squeezed for the minimum costs sustainable.  This approach ignores the far greater benefits to be accessed by building and leveraging these relationships to achieve profitable and sustainable growth on both sides and represent a zero sum game in place of efforts to mutually grow the available opportunities.  Many kinds of emerging relationships – whether those lauded by social networking advocates mentioned by John or those enabled by increasing B2B information exchanges – are merely transactional in nature and not relationships in the true sense of the word.  If we are to maximise our opportunities and accelerate the improvement of our chosen capabilities then we must build deeper relationships in place of impersonal transactions in order to leverage complementary expertise and expand our influence and opportunities into new markets.

The increasing importance of deepening relationships

Increasingly we are seeing a shift away from consumer-supplier relationships where one side owns the power towards a situation in which different organisations are composing value for customers out of their complementary capabilities.  In this context relationships are of far greater value than the lowest possible cost because we now need to leverage our combined talents to improve all of our services and by extension the overall result as experienced by the end customer.  We are therefore going to be looking to leverage our different perspectives and expertise in order to look at the overall value being created and to realign our individual services to improve the output of our joint activities

Two points in particular stood out for me in John’s post in the context of relationships:

  • Deep relationships become increasingly valuable in times of widespread change;
  • in fact, deep relationships are essential to capture the full value of weak ties.

Again one of the broader questions around the need for stability is what and who we can count on to help us make sense of the changes that are happening around us.  In this context the deeper our relationships with our partners the more we can both consider them a point of stability and support as we deal with change but also the broader range of perspectives and insight we have in making sense of change and in deciding how to react most effectively. 

In the second case it is worth highlighting the fact that deep relationships do not automatically infer tight integration.  In building relationships with partners who will offer their complementary capabilities to us we need to ensure that we deliver the loosest possible coupling between our respective services.  Counter-intuitively perhaps this is not because we wish to return to a view of our partner as a supplier to be easily swapped out but rather that we wish to give them the maximum scope for innovation in the services that they deliver to us.  In this context – again counter-intuitively perhaps – we require much deeper relationships and trust to be in place before we will consent to the loose coupling required to maximise innovation – the natural tendency when we unbundle capability to another is to want to understand and control the way in which things are done on our behalf.  This is limiting behaviour since we fail to take advantage of the complementary expertise of the specialised partner and instead continue to project our inadequacies onto their delivery and constrain their ability to deliver the best possible service on our behalf.  Breaking this habit requires deep and trusting relationships, however, since the more interdependent we become the more we each depend upon the other for mutual success and therefore the more we tend to want to feel in control.

Leveraging stability and deep relationships to realise institutional innovation

These ideas around the importance of stability and the inadequacy of transaction thinking lead onto a consideration of John’s other post around institutional innovation.  Developing a stable view of your organisation, zeroing in on your key capabilities and then concentrating on changing the nature of your relationships with partners can open the door to the benefits of institutional innovation:

Stability:  We know what we do and what our partners do and so can successfully build relationships around these points of stability.  We have a context for innovation across organisational boundaries.

Modularity:  A shift to a stable view also drives a more modular approach.  We can therefore minimise coupling and maximise innovation opportunities.  We therefore have a context for distributed and deconflicted innovation implementation.

Relationships:  Developing deep, positive sum game relationships enables us to jointly seek mutual advantage with our partners through leveraging our diversity.  We therefore have a context for longer term capability development and organisational growth.

Essentially as we and our partners become more dependent on each other to realise value so we also become dependent on each other to realise such value in the most effective way possible.  In this context innovation is no longer something that happens within the bounds of your organisation but rather is most potent at the intersection of your capabilities with those of your partners. 

As John points out such innovation transcends current practices around ‘open innovation’ and moves from point attempts to leverage occasional 3rd party expertise to inform our own innovation towards sustained and systematic examination of innnovation opportunities across our partner ecosystem.  This broader approach requires us to continually leverage the diverse experience, expertise and perspective of our wider ecosystem to look for mutual advantage, a subtle but important difference.  Essentially such innovation recognises the increasingly symbiotic nature of partnership and the huge opportunities to create breakthrough innovation through diversity  Such innovation may come in the form of improvements to individual capabilities as a result of partner feedback, in improvements in the functioning of the overall value web or in insights regarding new joint offering or market opportunities. 

Summary

This is an emerging area that requires us to rethink the way in which we deal with partners, the way in which we locate our people and the tools and technology that we can use to support distributed co-creation and innovation.  It may be that some of the tools are already here – I’ve written about using Web 2.0 techniques to leverage talent, for example – but our understanding of the practices and processes that will enable us to really exploit these opportunities is still limited.  Given the rich seam of benefit to be mined through broader, more collaborative innovation, however we all have a duty to promote and develop these ideas as quickly as possible.