The time has come where companies need to decide what they want to be, driving unique sales propositions, by customizing they Marketing, PR, and Technology or outsource with the focus on providing commodity (or at risk of being) products! A hackthon in a corporation who is almost fully outsourced is a mere marketing trick, to look good in the media, but it doesn’t provide a unique ability to drive unique digital products at speed. A hackthon in a corporation who is almost fully outsourced is a mere marketing trick, to look good in the media, but it doesn’t provide a unique ability to drive unique digital products at speed. 

When consider business strategies and models, there is a new question now: What is the approach to digitization and technology?  

The answer will lead to a different operational framework of the company. Select the cage you want to live in! 

Once the fundamental approach has been selected and invested in, it is very costly and time consuming to drive an opposing strategy. I have seen small and big companies being driven into bankruptcy in the US, Thailand, or Singapore in their attempts to significantly alter the model. 

How competitive do we want to be? 

How unique do we want to be? 

How much investment is it worth to us? 

How much effort and restructuring are we ready to do? 

What is commodity for me?

Business Models and the ability for corporates to evolve, are dependent by the technology approach they choose.

Many traditional companies and startups are stumbling through their technology choices, often in reaction to perceived short term needs, causing issues downstream when market pressures are changing. A Board of Directors needs to choose their technology approach, based upon their business model of the company. Changing quadrants as outlined above will take time, possibly many years and has far reaching impact on skills, people, processes, and cost. 

Do I want the same digital platforms as others or one others could equally well buy versus a unique technical capability? The answer will allow you to decide the level of differentiation, but also carry dependencies. Acquiring a certain set of tools and services will make you dependent on a delivery model limiting flexibility, cost, and time to market for your organization. 

There are further dependencies on hiring and managing talent, revising your decisions, office space, managing and sourcing talents, etc. Typically organization generate a framework for all corporate technology services and breaks down this large questions into segments, to decide in which specific domain the question should be answered how! 

In-house 

Google and Facebook have developed their own servers, perfectly integrating into the operating system, administrative and application layers-‘Data centre health’ with little people involvement. They also adopt and sharing open source and free software, where it is in to the benefit of their own business model – Operating System and Data store technologies benefits of having a bigger community to evolve standard functions creates better quality commodity functions. This approach requires developing internally deep skills and ongoing investment to develop an architecture, a multi-year road map, and understanding the delivery methods. It less the time of size of teams, but the depth one can attract. 

Low customization and low vendor quadrant 

Are they using technology at all? Is it a bank? Start thinking about your technology adoption! Think about a motorsai driver in a Soi, who might never have thought about a smart phone. Now he can a.) afford it and b.) can use the app to maximize to assign jobs all over the city to him = profits. Technology is key for everyone. 

Outsourced 

Fully outsourced data centers and applications, such as HR, finance, collaboration, Email, ERP or other business apps (e.g., credit card, OSS, BSS). With in the framework vendors could customized the setup of existing products and services. Clearly, a large portion of the responsibility of operating in budget, time, and quality would relate to the service and product providers the company selected. However, you inherit the properties of each provider you choose. Cost, time to market, and ability to customize is within the framework you decide. AWS can add multiple features to their cloud platform every week.

The vendor scene is also changing.

Innovation happens in open source and communities, vendors are driven towards services and consultants often build capabilities around products. Buy-ecosystems increasingly prices towards commodity, but open source platforms are used for high end skills and vertical products. Both customers and vendors are having the same challenges in sourcing for the skills. Often this model uses commodity services skills. High end and in-depth skills are difficult to integrate in such a model. Managing and delivery products based upon outsourcing or 3rd parodist and services, can be as challenging as in-house deliveries of the such features. These are just different models. In traditional corporates many technology professionals are used to the buy model. In the startup world many technologists are focusing on the custom build model. 

I have seen corporates and startups with poor platforms requiring complete rework. Equally I have seen large corporates in the buy model, paying high price and getting low end skills from product and service vendors, in expanding even simple initiatives into annual turn around times. Cloud vendors are breaking out of this paradigm, as they are providing commodity platforms – being the same for everyone – and are increasing quality. Here is a good game for buyer’s need to address commodity products. 

Opinions are my own! 

aw@axelwinter.com – www.axelwinter.com

For a discussion with a friend, who is CIO&COO at a Thai company, I have drafted a few pages showing one approach to a technology driven change agenda, around an enterprise architecture team.

Enterprise Architecture is evolving to become a business and technology strategy and transformation office for corporates. The precise role depends on the organisational context. Architects – much like consultants – need to align with the way the organisation works and change it, to ensure desired outcome. Remember the key focus must be the result in achieving metrics and results in delivery, not the academic beauty of a model. As such Change Agents metrics should be aligned with the desired results the organisation has to achieve. Productivity and revenue improvements, agility, quality, etc. These encompass all other measurements.

Dimensions

The dimensions of change journeys are around the business itself: Strategy itself, but also the priorities of the strategic imperatives and (new) it’s properties. The strategy might be a geographic expansion, the priority is the consumer business, and the property is the level of agility product implementation and speed. Technology would need to consider evolving targets and not be in a sequential delivery model, but focus on more rapid and more quality, rather than overly focusing on commodity products and vendors. Commodity shouldn’t be a concern, but the delivery of the unique capabilities. This requires depth and experience, which can be bought only with difficulity. This while adopting innovation and consistently driving productivity, as part of life. This interlinks with the operating model itself. Technology influences processes, setting of metrics, and organisational needs, as well as a move to data centricity. Process centric organisations staff often let go of the goals the organisation has and rather focus on following processes. People enablement comes on the back of data and analytical results. This requires cultural changes, as much as skill development, and a strong change management function. I am a big fan of developing people and make them better, stronger, faster, creating a cheaper, better, and more agile organisation.

Logical Enterprise Framework

The core of the architecture work is to drive a sensible framework, in alignment with the business and other enabling functions. This becomes the road map and a communication vehicle. What we are trying to develop – Services for startups/corporates/consumers/employees? What products and frameworks do we require – Corporate, Retail, Cash? What do we need to manage — Monitoring, Operational risk? Finally, what is the business infrastructure required – ERP, Process and Data Management, etc.

Principles

Guiding principles are an essential way to drive strategy and the transformation journey it self.Key principles are to generate a new delivery engine for technical and business artefacts, at key level of detail.

Build

The upgrade of the corporate ‘engine’ end to end is a difficult business has many dependencies, but this is the task at hand. Building a new corporate engine takes a couple of months and is the platform of which we can iterate in weeks or months new capabilities. A new capability could be a new HR function, contact centre, knowledge management, data centre, etc. It is important, however, not to stop the engine whilst it’s running. The larger and more immovable the organisation (feels like my back pain), the longer it takes to get it going. When it is humming though, intelligent management to keep it going is required. This often includes the redo of a delivery methodology (“SDLC System Delivery Life Cycle”). Examples are time to delivery, but also problems in the testing phase. These are pointing to lack of quality of delivery and a gap in-depth design. New methodologies for delivery such as “DevOps” will help to drive better design and strategy (alignment) and quality (better resources, adoption of open source, improved and reusable APIs).

Team

Typically, the team who is getting it going and start with renovating the ‘hotel’, will at some point want to move on to the next house (2-3 years) and that is actually a good thing. There are people at corporates who love to be there for the long run and there are others, who are thrilled by change and will feed of the next change. Both are required to drive fundamental change. It is also my experience, that the team responsible for large programs (and who are good at it), often cross political boundaries and that can make  moving advisable – often consultants are at the core of these journeys, which can make such aspects easier. The skill requirements are diverse, but each of the key people must be exceptional strong. To me this means, that they are close and hands on to the content and not only “power point experienced.” In my view, it is more helpful to have a small team of 5-10 skilled resources or are managing all key initiatives within the transformational portfolio. The key resources need to enough of source code, pay structures, credit card dynamics, etc. to drive success. They link board level thinking to the execution tier. Not having this, will fail this journey. Often these projects are being made too big with too many senior managers. The project teams doesn’t see the ground anymore (What is the ground? Heaven is nicer!) and you know this program will cost hundreds of millions, but definitely not deliver benefits. Most successful initiatives are small budgets with ingenious teams versus big budget productions where a few million don’t matter. Many small directly benefiting projects are key, but are difficult to orchestrate and manage. This is the experience to build. I recall at the transformational journey at General Electric – reporting directly to the global CIO – I called the global leaders at really inconvenient times around the globe, worked out configurations, processes, and APIs with vendors, negotiatied, because every day is precious and the delivery date and content is scared.

There are many aspects in a transformational journey and images try to give lead to most topics, but books can be filled around this. So just take it as its meant: A teaser!

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.