CTO Blog
I have had posts, emails and been questioned about differentiation so much recently, here are some thoughts on the challenge. Differentiation is clearly the lifeblood of successful completion in the market, so not surprisingly, everyone is focussed on the topic. The term ‘innovation’ usually comes up as part of such conversations. The dialogue also frequently alludes to the old Paretto ‘20/80’ principle, where 20% of what we do provides 80% of the results. The results being margin, revenues and market share.
Innovating to find a uniquely different idea is surprisingly easy. Most companies have available plenty of good people with ideas, plenty of challenges and the intrinsic capabilities to help them stand out from crowd, but creating differentiation comes from the execution. The ability to take ideas and transfer them into the real business-winning capabilities that feed through into financial results is really the difficult part. This raises another sub-question, which is the lack of expertise in building the solution around the use of new technology and with integrating existing IT to ensure that the final business ‘book to bill’ transactions are captured.
It’s not even a once-off challenge either. Whatever creates true market differentiation will rapidly be copied by competitors in some form or other. They might even innovate to add a new twist, but there is a need to see the innovation/differentiation as a continuous flow of new activities. As a result, every enterprise, and the industry as a whole, will struggle to find enough expertise to solve each new innovation differentiation as a unique solution, so we must find a reusable approach to preserve our sanity, otherwise we all simply will not be able to provide the enterprise with the solutions it needs to be competitive
My point is that it doesn’t have to be like this, instead of 20/80 think 2/18/80, whereby the 2 percent is the differentiating element; the 80 percent is the contextual operation of the enterprise supported by its existing IT systems; and the 18 percent is the business technology platform supporting and connecting the other two elements. The real challenge is to recognise this and use the new technologies with a ‘platform mentality’ in mind. This is not naturally the approach we think of in IT, as we are generally set up to handle ‘projects’ with a single focus and justification, complete with a mentality to stop ‘scope creep’. All of which is good practise, given the monolithic nature of the software application and need for dedicated resources.
The web and big ‘web centres’, which are now morphing into cloud computing, don’t work that way. Instead there has been a decoupling of the resources that allow the freedom to develop, operate, scale up/down and exit at will. As for the development of web-based apps: it’s a completely different game, with standardisation and simplicity in the tools reducing time & skill required. The reason is that the web is acting as a framework, or a platform, over and above the hardware of the servers and communications layers. This is not an argument that the web is an operating system or a link to Android, but it a pointer to how we should be thinking about internal development in the 18 percent.
Business technology is in most respects a child of – and development in the use of – the web and its web 2.0 and cloud-supporting characteristics. Therefore the argument about internal clouds is not one of hardware provisioning; it’s an argument about creating an environment internally that supports the way the two percent is deployed externally. So the 18 percent should not be focussing on supporting a one-off series of builds, but on the creation of a framework at the beginning, moving to a platform as the technology matures. Think of it as the new ERP, but if ERP is focussed on data and one version of the truth, what should the ‘business resources platform’ be based on. And for that matter how should it relate to and support ‘situational apps’?.
Looking forward to some good comments on this!
About the author
Capgemini Global Chief Technology Officer, Andy is a member of the Capgemini Group management board and advises on all aspects of technology-driven market changes, together with being a member of the Policy Board for the British Computer Society. Andy is the author of many white papers, and the co-author three books that have charted the current changes in technology and its use by business starting in 2006 with ‘Mashup Corporations’ detailing how enterprises could make use of Web 2.0 to develop new go to market propositions. This was followed in May 2008 by Mesh Collaboration focussing on the impact of Web 2.0 on the enterprise front office and its working techniques, then in 2010 “Enterprise Cloud Computing: A Strategy Guide for Business and Technology leaders” co-authored with well-known academic Peter Fingar and one of the leading authorities on business process, John Pyke. The book describes the wider business implications of Cloud Computing with the promise of on-demand business innovation. It looks at how businesses trade differently on the web using mash-ups but also the challenges in managing more frequent change through social tools, and what happens when cloud comes into play in fully fledged operations. Andy was voted one of the top 25 most influential CTOs in the world in 2009 by InfoWorld and is grateful to readers of Computing Weekly who voted the Capgemini CTOblog the best Blog for Business Managers and CIOs each year for the last three years.
I like the extra 2 percent bit, however there are two challenges that we must always admit they will be there; there is always going to be competition and there is always going to be competition that will copy the ideas.
To keep up with the speed of innovation, we need to learn from Manufacturing Industry how stock is turned into products and the concept of WIP. The ‘stock’ is synonymous to the ‘innovative idea’. The principle of Work in Progress is to make it as small as possible to reduce lead times. In other words, turn the raw material into stock as soon as possible. It makes production process more efficient which in turn affects the bottom line. We need to reduce ‘dead stock’ i.e. ideas which are just there doing nothing. Essentially put strategies to have a quick turnaround and hence be competitive.
Secondly, need for a change in the mindset of what innovation means. Innovation is not always creating something radically different to differentiate. Innovation also means to innovative new ways to improve what currently exists; a process, a deliverable or a product. A strategy needs to be in place that revisits key business functions and focuses on innovating new ways to perform better. That is what many business are missing.
good points – all somewhat counter cultural to the way we have built solutions to business requirements in the past. Good enough is enough under this line of thinking and we should guard against thinking we should spend time and money on building the best with the expectation it will be an enduring service.
Yes Andy, “platform” is the keyword here and as the name suggests, what we require is a flat (organizational) structure to build such a mentality within the Enterprise. Moving from a traditionally monolithic structure to a platform structure is a challenge more on the people side than on the technology.
Greater coordination among multiple groups with someone on top having a clear view of the big picture to identify the differentiation opportunity and the need for greater flexibility and agility in the manner such projects are implemented. Gets tougher with the size of the Enterprise…. Organizational modularity is perhaps what’s needed most….
Hi Renjish
Yes its an interesting point you raise – i am aware that IBM internally has found their technology of ‘collaboration’ etc has not been as easy to get into use as they thought because it requires managers to ‘give up control’ and they fear for the results.
Yet on the other side people in more knowledge driven roles seem very aware of the need to demonstrate their value and behave with increasing responsibility for their own actions, education, etc.
Of course in the early 90s Matrix working produced simalar problems in this case people didnt like having some many bosses, in practice most of us have learnt that it actually provides the freedom to manage our own work more effectively. Guess this time the lesson has to be learnt again but the other way round!
Your 2/18/80 formulation is very astute, but I think it’s important to stress that a core part of the 18 is an explicit, flexible and modifiable process for innovation. As you rightly say, we need embedded and repeatable methods that make innovation “part of what we do” rather an occasional happy cataclysm. I’m not sure that “platform” is the right label to use for the 18 layer though: the word carries a lot of IT freight. Maybe the term we’re creeping towards here is… BPM (Business Process Management)?
hi paul
i wish i knew what the right term is, tried framework as another option, and think that quite simply all these terms have prescriptive IT defintions in the stable world of IT and there fore dont fit to the dynamic Business Technology. Unformatunately i lack the imagination to come up with a new term.
hopefully we will see others posting suggestions!
best andy
hi paul
i wish i knew what the right term is, tried framework as another option, and think that quite simply all these terms have prescriptive IT defintions in the stable world of IT and there fore dont fit to the dynamic Business Technology. Unformatunately i lack the imagination to come up with a new term.
hopefully we will see others posting suggestions!
best andy