1 year, 11 months ago

The Digital Future: Services Oriented Architecture and Mass Customization, Part 3A

Link: http://organizational-economics.blogspot.com/2017/12/the-digital-future-services-oriented_19.html

From Parts 1 and 2

Part 1 discussed the four ages of mankind.  The first was the Age of Speech; for the first time humans could “learn by listening” rather than “learn by doing”; that is, data could be accumulated, communicated, and stored by verbal communications.  It also transformed the hunting and gathering into an economic architecture of small somewhat settled communities over the course of 300,000 years.   Settlement produced first significant increase in economic activity, wealth per capita, and in the academics in the form of the shaman for tribal organization.
The second, the Age of Writing, produced a quantum leap in data and information that could be accumulated, communicated, and stored.  This was over a period of at least 6,500 years.  During this time, academic activity evolved from everyone working to survive to a diversity of jobs and trades and the economic stratification of political organizations.   Again, the total wealth of humanity took a leap of orders of magnitude as the economic architectures of city states, then countries, and then empires evolved.  The academics evolved from the shaman, to priests, clerics, researchers, mathematicians, and universities (e.g. the Museum at Alexandria ~ 370 BC and the University of Bologna, 1088) and libraries.

The third, the Age of Print, started with Gutenberg’s press in 1455, but blossomed with Luther’s radical admonition that everyone should “read” the bible about 1517.  Suddenly, the quantity of information and knowledge to a leap of several orders of magnitude as all types of ideas were accumulated, communicated, and stored.
Part 2 dealt with history of Services Oriented Architecture (SOA) as it developed hand in glove with computing architecture—a natural fit.

This part, Part 3 A, deals with how SOA works with mass customization of products, systems, and services.  Part 3 B, will show where the three economic architectures, infrastructure, mass production, and mass customization will be employed in the Digital Age.

Mass Customization Using Services Oriented Architecture

As I will attempt to demonstrate, Services Oriented Architecture (SOA), while beginning its life as an architecture for computer applications, is really a new economic system that will supplant Capitalism as the economic engine.  That is to say, the prescriptive economic architectures of socialism and communism do not have the ability to create value; just redistribute it so that everyone is in the same economic class…destitute.

Mass Production Architecture

I’m positing that in the Digital Age mass customization will replace mass production for products, systems, and services.  This does not mean that mass production will go the way of the dodo.  In fact there will be three architectures, infrastructure, mass production, and mass customization.

Many times, many people may want and are willing to pay for the same or nearly identical items.  As Adam Smith discussed, the reason the mass production produced so much wealth is that mass production is cost efficient, or as many economists point out, there are economies of scale.  Economies of scale result from turning the process of manufacturing a produce into discrete steps or activities.
Adam Smith discussed this concept in the first chapter of An Inquiry into the Nature and Causes of the Wealth of Nations.  He showed how the same number of individuals could make an order of magnitude more pins per day when each one performed only one step in the process and repeated that step of each pin.
According to Adam Smith, once the process for creating a product is divided into discrete steps, many individuals will “figure out” how to create tooling to improve their step of the process.  While Adam Smith did not document this step, he implied that the business owner, the one selling the product and employing the personnel, would then purchase the tooling.  Again, the productivity of each worker using the tooling increases. 

Since Adam Smith’s time, economists have been fascinated with these two concepts.  The first Adam Smith called the “Division of Labor”.  The second has no name so I call this effect “process multiplication”.  The reason is that tooling increases the effectiveness of labor the way a gun increases the effectiveness of a soldier—the military calls this effect “force multiplication”.

The more tooling that is used in the process, the more the tooling costs.  The more it costs, the more product is produce (hopefully) and more cost efficiently.  This cost efficiency means the product costs less to produce.

Because the production process has been tooling intensive, it has also become capital intensive—tooling costs money and a lot of expensive tooling costs a lot of money (capital—hence Capitalism).  Actually, there is no such thing as Capitalism; it’s really mass production architecture.  Since it is capital intensive, anyone who does not have the money to purchase the tools can’t produce the product as cost efficiently.  This leads to both the concepts of Economies of Scale, (i.e., the greater the quantity of product you make, the better the division of labor and process multiplication of more tooling), and the Barrier to Entry caused by the need to have the money to buy the tooling to produce the product cost competitively.

The reason for this brief recitation of a significant portion of the mass production architecture is that for the near and mid-terms there will be certain sectors of the economy where mass production will continue to make sense—it will continue to be the most cost efficient architecture for producing a certain class of products.

The Day before Mass Customization

In the early 1990s, I worked with the Strategic Supply Chain Management (SSCM) Project.  The goal of this team was to find ways to improve the cost efficiency of mass production systems.  This included the development and implementation of products.  The reason for the formation of this project was to counter the gains in market share by the Japanese and other foreigners.

The team came to several conclusions.  First, Just In Time (JIT) manufacturing was an imperative.  JIT means that the subcomponents of a product are manufactured as they are needed for the assembly of a product in response to a customer order—all of this in near real time.  JIT means that warehousing costs are completely eliminated.

I had already worked on two projects of this type.  The first in 1984 and 85 created a paperless product line for a major office furniture company (The design of this line won the Society of Manufacturing Engineers Lead Award in 1987).  In 1986 and 1987, I worked on a program for the US Navy, called Rapid Access to Manufactured Parts, (RAMP).  It too, was using JIT concepts.

The SSCM team came to two other conclusions.  First, that standardized contractual clauses should be agreed to by contractor and subcontractor before any contracts are bid on.  In other words, there should be a team, built by and around the contractor to “go after” proposed projects.

Second, that a better customer requirements identification and management process is needed to effectively and cost efficiently manage a supply chain.  These are two items that are required for the digital age and mass customization.  While the first has gained a very small amount of traction, businesses in the US, at least, have paid no attention to the second.  Sometime in the near future it will become self-evident that this is a problem.

While the static and dynamic architecture of mass production, as described by Adam Smith, and incorporated into the US Constitution, has served the United States and the rest of the world well, it will be supplanted by the mass customization using Services Oriented Architecture in the Digital Age.

Mass customization is creating products, systems and services tailor-made to the customer’s requirements.  Actually, this was tried by the US automotive industry after WWII with limited success. In the 1950s and 60s the “option list” for automobiles was quite long.  For example, you could order a car only with power steering but not power brakes, with an AM or with an AM/FM radio.  Every option was individually priced.  So each customer could get a vehicle that met their exact requirements.

However, the Japanese took advantage of the inherent costs in terms of time to fulfill orders, defects caused by not meeting the customer requirements, etc., by reducing the costs of their vehicles and decreasing the delivery time through offering bundled packages of options, among other things.
Now, customers could only order a sun roof if they accepted a power seat on the driver’s side, even if they didn’t want because the seat was part of the bundle or package that include the sun roof.  In the future, this will not be the case.

Mass Customization

In the 1990s, I became a member of several international standards committees.  The first was the Agile Manufacturing Enterprise Forum, at Lehigh University.  Their definition of agile manufacturing was “an organization that has created the processes, tools, and training to enable it to respond quickly to customer needs and market changes while still controlling costs and quality.”  The team determined that this is accomplished by assembling a consortium of small organizations (businesses, consultants, and possibly academics).  This consortium would as a team on create products, systems, and services.

The next team that I joined, The Next Generation Manufacturing Project (NGM), elaborated on the consortium concept.  This project focused on how to create an agile manufacturing enterprise.  It concluded that there are two ways to create design/development/implementation/manufacturing consortiums.  These happen to be identical with the ways that programming languages were implemented in the 1960s and with the ways services are assembled in SOA.

The first method for assembling services into a program is called “Orchestration”.  Orchestration is gathering all of the needed software functional components together, then ordering and structuring them into the program that performs the task require by the customer.  In the older programming technology this would be called compiling a program; that is, converting all of the instructions into machine code before executing the program.

For mass customization, orchestration is assembling a team or consortium of small and entrepreneurial organizations, then creating the product, system, or service.  Because it’s mass customization and not mass production the team creates only one item.

Currently, one of the better examples of organizations that use the orchestration form of business architecture, are custom car shops.  In fact, there is one television channel where half its shows are of shops that create custom cars.  In these shows, a customer starts with something that was well used, badly abused, to complete junk.  The customer tells the custom car shop owner his or her requirements and the owner tells the customer the approximate cost.

When the vehicle, in whatever condition comes into the shop, the shop’s team disassembles it entirely.  They send all of the metal body components to a member of the consortium that functions as a “sand” blaster and epoxy coater, send the engine and other mechanical components to a shop that functions as the engine and mechanical parts rebuild center, send seats and other interior components to a shop that functions as the interior restoration and customization center, and tosses the parts that can’t be salvaged.

When the metal body comes back to the shop, generally, there is rust and damage, which didn’t show prior to the blasting that will need to be repaired.  Additionally, if the job is to “customize” as opposed to “restore” the vehicle a body shop function will need to change the bodies shape to enable the customization.    Frequently, this is the function of the shop.

If, for example, a fender is in too poor condition to be repaired, then the shop may go to a junkyard to find the part or may go to an organization that just manufactures metal components that are no longer available.  This is yet another function of the consortium.

When the body work is completed, the shop will send the vehicle’s body, sometimes it engine and mechanical components out to a paint shop; and if there are chrome parts, they may be sent to a shop specializing in chroming parts—two more functions of the consortium.  Frequently, for customized vehicles a new exhaust system needs to be constructed—yet one more function; and finally the vehicle is assembled in its restored or custom form.

Since these custom car shops (especially those with good to great reputations) have a fairly constant stream of customers, they can set up agreements (read contracts, with standard contractual clauses) as to who does what part of the work, the timeframes required, and the costs, prior to starting a job.  In effect, the consortium functions as a single unit, the way services assembled for execution function as a program.  So we could call this organizational architecture, the Orchestration Mass Customization Architecture.

The second method for assembling software services is called “Choreography”.   Choreography differs from orchestration in that the core organization—the one accountable to the customer for the product, system, or service—organizes the team on an as required basis.  At the start of the effort it does not have a consortium in place.  Instead, the core organization adds functional services as it deems necessary.

Most times, core organizations engaged in research and development or creative content activities use choreographic organizational architecture.  This would include research institutes, creation of exotic materials, the initial development of an entire new field of engineering, like ocean engineering or space engineering, and, most familiar to most people, the creation of entertainment content.

The motion picture and now the video content industry have long used choreographic organizational architecture.  To start, a “screenwriter” authors or adapts a story from a book to the “must meet” requirements for a video or movie; that is, that it fits within a time-frame, that much of the background of the story is told dialog and so on.

Once the screenwriter has a script, he or she will send it out to producers.  If a producer likes the script, that is, in general “make money”, he or she will assemble a team to produce the film or video.  This team is assembled as needed, not like the old studio system where a team has been preassembled. 

Actually, these days and going forward, more videos will be produced by “amateurs” using current and near future technology.  This is very likely going to undermine the entire “entertainment industry”.  This is the next step from the studio system, to customer centric entertainment.

The Three Economic Architectures of the Digital Age

In Part 3 B, I will describe how the three architectures that I have defined will work together in the Digital Age to provide unprecedented value to the largest number of people possible.