Tag Archives: strategy
Recently, I got to speak to a CIO at a Global 500 Company about the challenges of running his IT organization. He said that one of his biggest challenges is getting business leaders to understand technology better. “I want my business leaders to be asking for digital services that support and build upon their product and service offerings”. I think that his perspective provides real insight to how businesses should be thinking about the so called Internet of Things (IoT), but let me get you there first.
What is the IoT?
According to Frank Burkitt of @Strategy, by 2029, an estimated 50 billion devices around the globe will be connected to the Internet. Perhaps a third will be computers, smartphones, tablets, and TVs. The remaining two-thirds will be “things”–sensors, actuators, and intelligent devices that monitor, control, analyze, and optimize our world. Frank goes on to say if your company wants to stake a claim in the IoT, you first need to develop a distinctive “way to play”—a clear value proposition that you can offer customers. This should be consistent with your enterprise’s overall capabilities system: the things you do best when you go to market.
While what Frank suggests make great sense, they do not in my opinion provide the strategic underpinning that business leaders need to link the IoT to their business strategy. Last week an article in Harvard Business Review by Michael Porter and James E. Heppelmann shared what business leaders need to do to apply the IoT to their businesses. According to Porter and Hepplemann, historical, enterprises have defined their businesses by the physical attributes of the products and services they produce. And while products have been mostly composed of mechanical and electrical parts, they are increasingly becoming complex systems that combine hardware, sensors, data storage, microprocessors, software, and data connectivity.
The IoT is really about creating a system of systems
Porter and Hepplemann share in their article how connectivity allows companies to evolve from making point solutions, to making more complex, higher-value “systems of systems”. According to Russell Ackoff, a system’s orientation views customer problems “as a whole and not on their parts taken separate” (Ackoff’s Best, Russell Ackoff, John Wiley and Sons, page 47). This change means that market winners will tend to view business opportunities from a larger versus a smaller perspective. It reminds me a lot of what Xerox did when it transformed itself from commoditized copiers to high priced software based document management where the printer represent an input device to a larger system. Porter and Hepplemann’s give the example of a company that sells tractors. Once a tractor is smart and connected, it becomes part of a highly interconnected agricultural management solution.
According to Porter and Hepplemann, the key element of “smart, connected products” is they take advantage of ubiquitous wireless connectivity to unleash an era where competition is increasingly about the size of the business problem solved. Porter and Hepplemann claim that as smart, connected products take hold, the idea of industries being defined by physical products or services alone will cease to have meaning. What sense does it make to talk about a “tractor industry” when tractors represent just a piece of an integrated system of products, services, software, and data designed to help farmers increase their crop yield?
Porter and Hepplemann claim, therefore, the phrase “Internet of Things” is not very helpful in understanding the phenomenon or even its implications. They say after all what makes smart, connected products fundamentally different is not the Internet, it is a redefinition of what is a product and the capabilities smart, connected products provide and the data they generate. Companies, therefore, need to look at how the IoT will transform the competition within their specific industries.
Like a business slogan, the IoT is about putting IT inside
IT leaders have a role to play in the IoT. They need to move IT from just assisting business management drive improvements to the company value chain to organizations that as well embed IT in what become system oriented products. How perceptive, therefore, was my CIO friend.
Porter and Hepplemann claim connectivity serves two purposes. First, it allows information to be exchanged between a product and its operating environment, its maker, its users, and other products and systems. Second, connectivity enables some functions of the product to exist outside the physical device. Porter and Hepplemann give the example of Schindler’s PORT Technology that reduces elevator wait times by as much as 50% by predicting elevator demand patterns, calculating the fastest time to destination, and assigning the appropriate elevator to move passengers quickly. Porter and Hepplemann see as well intelligence and connectivity enabling an entirely new set of product functions and capabilities, which can be grouped into four categories: monitor, control, optimize, and autonomy. To be clear, a systems product can potentially incorporate all four.
- Monitored products alert users to changes in circumstances or performance. They can provide a product’s operating characteristics and history. A company must choose the set customer value and define its competitive positioning. This has implications design, marketing, service, and warranty.
- Controlled products can receive remote commands or have algorithms that are built into the device or reside in the product’s cloud. For example, “if pressure gets too high, shut off the valve” or “when traffic in a parking garage reaches a certain level, turn the overhead lighting on or off”.
- Optimized products apply algorithms and analytics to in-use or historical data to improve output, utilization, and efficiency. Real-time monitoring data on product condition and product control capability enables firms to optimize service.
- Autonomous product like are able to learn about their environment, self-diagnose their own service needs, and adapt to users’ preferences.
Smart, connected products expand opportunities for product differentiation
In a world where Geoffrey Moore sees differentiated products constantly being commoditized; smart, connected products dramatically expand opportunities for product differentiation and move the competition away from price alone. Knowing how customers actually use your products enhances a company’s ability to segment customers, customize products, set prices to better capture value, and extend value-added services. Smart, connected products, at the same time, create opportunities to broaden the value proposition beyond products per se, to include valuable data and enhanced service offerings. Broadening product definitions can raise barriers to entrants even higher. The powerful capabilities of smart, connected products not only reshape competition within an industry, but they can expand the very definition of the industry itself. For example, integrating smart, connected farm equipment—such as tractors, tillers, and planters—can enable better overall equipment performance.
Smart, connected products will not only reshape competition within an industry, but they can expand the very definition of the industry itself. Here Porter and Hepplemann are talking here about the competitive boundaries of an industry widen to encompass a set of related products that together meet a broader underlying need. The function of one product is optimized with other related products.
Porter and Hepplemann believe that smart, connected products allow as well companies to form new kinds of relationships with their customers. In many cases, this may require market participants to develop new marketing practices and skill sets. As companies accumulate and analyze product usage data, they will as well gain new insights into how products create value for customers, allowing better positioning of offerings and more effective communication of product value to customers. Using data analytics tools, firms will be able segment their markets in more-sophisticated ways, tailor product and service bundles that deliver greater value to each segment, and price those bundles to capture more of that value.
Some parting thoughts
So summarizing their position, Porter and Hepplemann believe the IoT is really about taking smart things and building solutions that solve bigger problems because one can architect the piece parts into a solution of solutions. This will impact marketplace dynamics and create competitive differentiators in a world of increasing product commodization. For me this is a roadmap forward especially for those at the later stages of product lifecycle curve.
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Author Twitter: @MylesSuer
The conversation at the Gartner Enterprise Architecture Summit was very interesting last week. They central them for years had been idea of closely linking enterprise architecture with the goals and strategy. This year, Gartner added another layer to that conversation. They are now actively promoting the idea of enterprise architects as strategists.
The reason why is simple. The next wave of change is coming and it will significantly disrupt everybody. Even worse, your new competitors may be coming from other industries.
Enterprise architects are in a position to take a leading role within the strategy process. This is because they are the people who best understand both business strategy and technology trends.
Some of the key ideas discussed included:
- The boundaries between physical and digital products will blur
- Every organization will need a technology strategy to survive
- Gartner predicts that by 2017: 60% of the Global 1,000 will execute on at least one revolutionary and currently unimaginable business transformation effort.
- The change is being driven by trends such as mobile, social, the connectedness of everything, cloud/hybrid, software-defined everything, smart machines, and 3D printing.
I agree with all of this. My view is that this means that it is time for enterprise architects to think very differently about architecture. Enterprise applications will come and go. They are rapidly being commoditized in any case. They need to think like strategists; in terms of market differentiation. And nothing will differentiate an organization more than their data. Example: Google autonomous cars. Google is jumping across industry boundaries to compete in a new market with data as their primary differentiator. There will be many others.
Years of thinking of architecture from an application-first or business process-first perspective have left us with silos of data and the classic ‘spaghetti diagram” of data architecture. This is slowing down business initiative delivery precisely at the time organizations need to accelerate and make data their strategic weapon. It is time to think data-first when it comes to enterprise architecture.
You will be seeing more from Informatica on this subject over the coming weeks and months.
Take a minute to comment on this article. Your thoughts on how we should go about changing to a data-first perspective, both pro and con are welcomed.
Also, remember that Informatica is running a contest to design the data architecture of the year 2020. Full details are here.
Imagine you have a crystal ball. With it, you can look into the future and see where your business will be next year, whether or not that key project will be a success or failure. You could take corrective actions today that would help ensure that success. Life would be great.
Unfortunately, we don’t have a crystal ball so we have to embark on projects not knowing with any degree of certainty whether they will succeed or fail. Fortunately, we can increase our chances of success by conducting some due diligence which helps uncover otherwise unforeseen twists in the road. All too often, however, the due diligence step is left out and projects more often than not fail. (more…)
So now you are interested in proposing Big Data projects, but are skeptical about getting business excited about yet another IT project? Somehow the business did not want to talk about data integration, data quality and master data management despite all the homework you did to propose a plan of action? Enter sentiment analysis. (more…)
Juan Carlos Soto shares his perspective on the Informatica Cloud’s three pronged growth strategy including: the Platform for Hybrid IT, Cloud Services for All and Informatica Inside.
Business modernization programs typically focus on process standardization to gain the benefits of efficient repeatable, measurable processes. Enterprise resource planning (ERP) technologies fulfill the process standardization requirements and have now become a central point for management of business processes. However, ERP systems do not prevent low quality data from entering the systems nor do they measure its impact on the efficiency of a business process. Most organizations today are using the same ERP systems (SAP or Oracle) that were configured by the same consultancies. Therefore, the uniqueness and the scope for competitive advantage of any organization are defined by the people and the data. (more…)