How to use technology to compete with startups like Alibaba?


Alibaba is a Technology Driven Business challanging traditional corporates in ASEAN/rest of world and competing with it requires a change of approach. This means Thai and ASEAN Corporations must deploy similar data driven and technology methods to compete.

Recently I wrote an article on ASEAN economic integration and the best approach to develop a target operating model, addressing the changed situation.

Related to this is the significant uptake in technology driven business models — in startups, but also traditional corporations. Technology becomes a so much more important game changer, driven by start ups and super global players. Technology innovation changes industries and business models (On-line money moves away from banks to Mobile Operators — having banks loose customers, etc.).

“Just to show how real this is: Last week I met the CEO of a new Thai start up providing instant and low cost international money transfers across Asia Pacific — they will compete and undercut Western Union and traditional banks.”

This is a battle at many fronts for executives and businesses. Now this is not only about traditional business management and regional integration, but also incorporating technologists into the business strategy and product development. The IT Order taker — if indeed it has ever been like that — becomes one of the main actors.

Many businesses struggle with the role of technology. A couple of years ago, I was arguing with friends from business departments over dinner, that banking is a technology business — some agreed, but some got downright angry. Some still haven’t changed their mind and today the 3rd largest bank by market capitalisation would be Alibaba — a b2b market place with banking license.

Based on the new competitors, the focus must be on two items:

  1. Rapidly expanding corporations with evolving business model
  2. Technology Startups driving new products and services in traditional industries

This means managers in companies, need to be focused on multiple issues:

  1. Get basic Technology right
  2. Business Operations and Enablement functions are optimised
  3. Iterative optimisations
  4. Drive for speed

Meaning the engine is efficient and competitive. Productivity is created in an ongoing circle, driving bottom line growth (lowering cost). This enables the corporations to focus on the most important item:

5. Focus on new product and services iteratively, to evolve the business model.

Expanding market share and hence driving top line growth.

Both will lead to an ongoing increase in net income, very competitive positioning, and ability to remain in this spot. Think Apple versus Nokia or Google versus Microsoft.

In this context, it is absolutely key that the technology team in a corporation also starts to revisit its own business model. In the past the role of the IT Team was to:

  1. Discuss requirements with Business owners and enabling functions (HR, finance, etc.)
  2. Develop a plan to roll these out with either a new or existing platform
  3. Budget and prepare teams
  4. Debate solutions internally
  5. Debate solutions with Vendors — often depends on preferences
  6. Engage vendors for additions in the data center and network
  7. Change/Reconfigure existing Software or launch new system selection.

Any initiative had a 6–12 Month minimum run time or even 2–3 years. This is not speed!

To compete with the new bread of players, Technology Teams must be able to launch new capabilities every single day and not get mired down in legacy discussions.

Once in a while there is an urgent requirement and IT must react quickly. Example in Singapore: GrabTaxi meets ComfortDelGrow — track Comfort’s paranoia in their mobile phone app changes (becomes ever closer to GrabTaxi). Example in Thailand: TrueMoney (Money transfers of over 1 BN USD outside the banking system; they also offer Mobile Payments linking banks in the background).

In such cases money doesn’t play a big role and all eyes are on the project, which is being implemented with the same steps, but accelerated. A quick win with less capability is being driven rapidly in a few weeks or months — but actually given the cost and style, this further aggravates the market position.

Now let’s look how the technology industry is changing. Over the last few years a number of technologies and methods, have generated solid trends. Trends lend themselves to startups around products and services.

The first key question is to place the bet on what to develop in-house and what to out-source? There are professionals who are focusing on one versus the other with different arguments, but both can deliver value at speed. In either way, one needs specialists to drive the solutions.

Without surprise the themse are:

  1. Cloud Service — Application Stacks and Infrastructure Stacks in standardised fashion are being offered 70–80% less expensive, within hours or days. Traditional vendors struggle to do the same and evade into the consulting space, offering value add BPO services.
  2. Mobile first — Staff and consumers are using mobile applications first. The key is the changes in business dynamics to real time and context sensitive interaction and business intelligence.
  3. Data driven — Process based jobs and work is being depreciated versus decisions being data driven, presented by smart application and analytical processes.
  4. Community Innovation — A lot of innovation doesn’t come from traditional vendors or big corporates anymore, but is driven by communities, which are very often organised around open source projects (Hadoop, Java…) or groups of startups and governments (open data…).
  5. Service Providers and Consulting — The way to consume and acquire advisory and implementation services is adapting to the new approach, which in this area is counterintuitive and often means providing commoditization.

These 5 trends are being evolved into many sub trends, combinations, and industry specific needs into new and evolving models — mobile operators finding out that they are having access to more customers and sales stations then banks -they are offering new and innovative products at rapid space.

In other words, buying “cloud” from a vendor, doesn’t do anything to the “engine”. Neither does the hiring of a data scientist from a consultant, who knows the industry, but doesn’t know the value specific data sets might represent.

It is equally clear, that for states to prosper governments are required to put in the infrastructure or regulate the infrastructure being developed in faster cycles, but equally are required to be investing into public private partnerships, ensuring the nation has access to innovation (by attracting it) and enables corporations to have access to all 5. Singapore is one of the countries, doing very well in this context. The country — albeit easier in a city state — invests strategically in infrastructure and a startup framework. Thailand created a framework with the Board of Investement and SIPA, to help technology companies setup in Thailand with favorable legal frameworks — more to be done, but it did produce a growing technology force.

Technology teams now, need to understand the shift in Enterprise Technology, Delivery, and business dynamics.

Business Teams need to understand the Technology is core of the business model and the liberalisation of markets (ASEAN Economic Community AEC, but also the TPP and others) will further accelerate the roll-out of competitors with access to such disrupting technologies and agile practices.

There is a level of commodity business infrastructure, which has to be cheap, available, and working. The amount of work of getting this operating at efficiency is monumental — some companies are outsourcing IT, resulting in slower execution, with the same quality issues. No one can make the old IT model compete with the new model — considering feasibility and quality.

The real issues for IT Departments are that they are stuck on stuff which isn’t directly adding value (incremental functionality delivered, cost reduction exercises, searching for skills) and aren’t able to dedicate enough time to new products and services. How do you then compete with a company which has all the key resources towards new stuff and uses Cloud/Mobile/Data/Innovation in the most beneficial way?

I had a workout with one of the top US CIOs. They are using Cloud for ERP, collaboration, infrastructure, monitoring, analytics, and integration technology. This is his “business infrastructure,” which only has a few (single digit) people managing this. His top guys are sitting with the business folks developing new strategies teaming with their business partners — which drives business efficiencies. The nearest competitor still gets stuck with the old world.

GE’s global Chief Technology Officer (my old boss), Larry Biagini, just told the New York Times, how most of GE employees everywhere on the planet will use products and services originating “outside of the GE network”. Meaning most of the base applications will be supplied via external parties, hosted externally, having zero customisation, and just need to be turned on.

This doesn’t mean, the IT team isn’t required anymore. It also doesn’t mean IT gets easier. The opposite is true. GE implemented a platform with Pivotal together, to collect GE’s airline engine data and makes it accessible for customers via a Hadoop Big Cloud platform. Understanding that customers like Thai Airways or Lufthansa, wouldn’t want a “portal” or a pre formatted file, but just access to hadoop, allowing clients to mine this data upon their own requirements — changing requirements. Today, next month, or in 2 years.

There is often a misunderstanding, that there are very specific items which count as commodity or innovation (e.g., Operating Systems, Java Skills, Hardware, BI skills, Business Analysts, etc.). This is not true. Google and Facebook are even building servers, which are integrated into their very specific application and service fabric — who would have ever recommended that? The key question is, how does the business model align and what is required to differentiate.

The cool stuff is difficult though. You can’t easily give it to 3rd parties — they can be involved, but they can’t drive it. The difficult “business model changing things” are often connected to “sweat and tears” — meaning some deep dive skills are required. People who deep dive develop technology and functional design — 3rd parties can give additional input and help that journey, but if they own it, how unique can the answer be?

Consultants may drive a digitisation, but again, if you translate processes into systems without considering these, you would still have massive inefficiencies and manifest them. The trick is to build the engine to evolve processes and “data driven’ness” before digitising and the ability to keep changing.

So how would IT create such an engine, to deliver wonders?

These aren’t “my” preferences, but just a list based on experience:

It takes skill at the centre. The crucial skills to generate a strong engine are usually neither the top management or board members (they should understand and have done it before though) and neither are day one developers, but the heroes in the middle, who love their job and are experts. Global SOA-like journey at GE Capital = 3 top guys owned it and had tremendous success.

Setting up a simple technology model. Complexity is the enemy of the good, but that doesn’t mean power point is all you need (albeit it would be simple). Simplified technology models are difficult to build, because they need clear rules and in-depth understood technologies. Vendors are seldom able to create these — also in part, because the buyer is trained to buy “100 for 1 Million” versus 2 resources for the same amount. The latter takes a lot of trust.

Evolve the technology model slowly, but use the pieces the framework offers very fast — be able to drive every day a new feature.

Develop community within the team and related open source initiatives, even if you don’t use open source, it has great learnings.

Build a team of motivated professionals. The senior guy shield the centre, the centre build the technology model and enable the bigger team to be there and enjoy living technology. They will do incredible things for you – day and night. However, these skilled resources will leave, if you don’t let them try out the latest library or tool, if you can’t throw a pizza once in a while, if you nag them with processes meant for untrained resources.

Don’t create layers of process and people around knowledge, but setup small units of knowledgable technical and functional experts — both users and customers — to drive design and discussion further.

A key question I often asks, is the time it takes to create a sub product (e.g., a new credit card) and if the answer often is 3, 6, 9, or 12 Months. Clearly is too slow and doesn’t work. It should be 2–3 days. So you need to generate a framework, which defines speed and flexibility.

This is also something users need to do! Product and Operations teams, can equally develop decision matrices, essentially configurability, areas for increased customisation, etc.

Apple decided the iOS phone app can’t be tempered with — unlike google in Android — and this has the draw back of little voice innovation, but it has the benefit that no developer can easily stop your phone function of working. Is this technical or functional? It is a strategic decision a joint team made. It can be changed, but that will have impact.

Generate small competing teams and align tech standards to it. Amazon started with simple rules: It allowed discrete application teams to work on their own, but interfaces across applications required a central team to approve it. The outcome was a powerful service driven architecture, abstracting architecture layers. Amazon could exchange the shopping cart app, without other apps being impacted.

These leads to the best shopping cart app and interfaces. Without coordination, without overhead, and without millions of interfaces.

While workflows are important, centralise data versus process. Data is ubiquitous. Applications, customers, and users make decision based upon data and then execute. Workflows are predictable and need time to adapt, they might slow down empowerment.

Focus on functionality and technology advancement. Getting these two out of sync means developing legacy. Investment gaps start small and go into the millions quickly.

Don’t design and implement process, people, and technology and feel achievement. It is a starting point. Be open to change it. Iterate towards success and measurement.

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