We talk about the end of business as usual, mash-ups and how the ground rules in our respective industries are changing. But how do we use these technologies to change our own business? When it comes time to replace that core banking system or enterprise resource planning (ERP) solution and we cannot see any other option than creating another major project and application. These systems are big, and it will take big projects to replace them.
Our current approach to IT is the product of how we have engaged with IT in the past. Projects were large, which makes sense when applications needed to support a lot of business functionality. Delivering even a simple solution was a major challenge, and we quite rightly engaged IT as a major engineering task. The size of the problems we would tackle—the amount of functionality in a solution—was simply a product of the economics of software development. While that original valve and punch-card solution used to predict a U.S. election (correctly, despite what the critics thought) didn’t deliver a lot of business functionality by today’s standards, at the time anything smaller wouldn’t have produced a useful solution. IT is a lot more capable today but the same rules apply; significant slabs of functionality take a correspondingly significant effort to deliver.
And now we have reached the nub of the problem: we’re still thinking of IT as an engineering challenge when the rules of the game have changed around us. As Albert Einstein eloquently put it, we can’t solve problems by using the same kind of thinking we used when we created them! Approaching the development of a new core banking or sales and operations planning solution from the familiar engineering viewpoint will result in a similar engineering centric approach. We need to do some thing different.
The key to succeeding in the new world is to change our perspective, viewing old problems through new eyes. For example, Threadless brought a new view point to t-shirt manufacturing. Rather than pay a room full of designers to create designs, print the results and then push the product into a number of distribution channels, they took a different approach mashing together Paypal (online payments), Flickr (photos), online voting and outsourced production. Threadless created a forum where users could submit designs for users to view and vote on. If a user liked a design they can indicate whether or not they would buy it if it was made. Every few weeks Threadless selects the most popular designs and engages a contract manufacturer, sending the printed t-shirts directly to the users who indicated that they would buy them. With no investment in design, production or distribution, and a business model that has them only producing product that their clients want, Threadless was profitable in their first year an on a trajectory to quickly reach in excess of US$18 million per year.
While impressive, we might think that a mash-up approach will only work for the Web 2.0 crowd however Toyota used a similar approach to create their most popular car launch to date. Caught with a business model that excels at mass producing identical products and their clients desire for highly customised cars, Toyota mashed together their production line, Pimp My Ride, dealers and chop-shops to create the endlessly customized Scion. The production line plays to its strengths by producing only three (rather bland) models. The dealers then work with local chop-shops and clients to Pimp Their Rides, customizing each Scion to an individual’s needs. This might range some a simple paint job and wheels through to high-end stereo and anything else you can imagine. While initially only released in California, Scion was a huge success and Toyota capped production to prevent diluting the brand.
It’s not hard to extend this approach to other worlds. Take consumer mortgages for example. What started as bespoke tailoring—collecting deposits which are then provided to consumers in hand crafted loans—has rapidly become a mass customized product supported by the current generation of mortgage applications. We can take this a step further though, pulling ideas from flexible manufacturing and the military’s experience in situation awareness. Taking our knowledge of the moving parts of a mortgage, how they are related, and the business rules that surround them we can create a Threadless inspired mortgage solution, owning the core value generating business logic, connecting customers directly to the market while leveraging external services for non-core business functions. Rather than creating a mortgage application capable of supporting a limited number of possible mortgages, we can create a flexible mortgage factory capable of supporting a nearly infinite range of mortgages. Handing the solution directly to our customers creates the ultimate self-service mortgage application, allowing them to craft a mortgage to meet their specific needs.
The moral of this story is that we need to stop thinking of IT as an engineering and technology challenge and start thinking in terms of business mash-ups and enterprise bricolage, reorienting ourselves to pull ideas from the environment around them to create new solutions to old problems. Companies that can move to this new world will realize a step-change in their operational capabilities, redefining their business to become more agile, flexible and responsive while being able to focus their resources on differentiating in their chosen market. It will be hard to compete with them, as they will move and innovate so quickly that even maintaining a fast-follower strategy will be challenging. An easier solution is to ensure that you’re at the front of the pack.