2 years, 1 month ago

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

Link: http://organizational-economics.blogspot.com/2018/01/the-digital-future-services-oriented.html

From Previous Parts

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.

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

The Classes Architectures of the Future

Now let’s look at the three archetypal architectures.

Infrastructure Architecture (Monolithic Architecture)

The first archetypal architecture is Infrastructure Architecture, which might also be called “well regulated monopoly architecture”, “utility architecture”, “government architecture”, “Medieval architecture”, “Socialist architecture”, “Communist Architecture”, “Dictatorial architecture”, or “Barbarian architecture”.  In software it’s termed “Monolithic Architecture”.  Yes, that’s a lot of names for the same economic architecture.

I prefer to call this model “Infrastructure Architecture”.  It is an architecture where the function is governed as a single unit. 

The infrastructure/government architecture is by far the oldest of the architectures.  It’s beginnings are built into the DNA of all living things—it could be called the “wolf pack” model.  Humans used from the time they formed bands (and probably before speech) until 1455 with the start of the Age of Print.

Its foundation is risk reduction through a secure existence.  However, this risk reduction also always includes a highly structured, inflexible, with a great deal of not always uniform (can be differentially, See Animal Farm) regulations.  This reduces data, information, and knowledge creation to zero.

In the Digital Age it has a role akin to the business/finance concept of “the cost of doing business”.  A portion of the infrastructure can be identified as “a function that all people with a territorial organization use equally, that enables and supports the creation of value and wealth within the territory, and for which there is no possible way to create a competing function”.

There are really three sub-categories of Infrastructure Architecture, physical, security, and standards and policies.

10,000 years ago or more, the physical infrastructure consisted of building and maintaining the trails to fields surrounding a village and building and maintaining the walls around it.  Now the physical infrastructure has become highly complex.

Clearly, roads, bridges, tunnels, airports, ports, electrical systems, voice and data cable systems (i.e., telephone land lines and data lines) are examples of the physical infrastructure.  There is no indication in the US Constitution that the physical infrastructure should be included within the purview of government.  And there are examples of nongovernmental physical infrastructure architectures.

In the US railroads are examples of well regulated monopolies, while in Europe they are government owned and operated.  In the US railroads are privately owned, operated, and maintained.  And they have a good many governing rules, tariffs, and regulations about how these and even how much the railroads can charge for transporting products. 

Until the mid-1960s the US telecommunications infrastructure was also a “well run monopoly”.  Then the US courts broke it up.

Since the mid-1980s the US cable networks became examples ofnot so well regulated monopolies.  In the mid-1980s a whole series of very small cable companies contracted with local governments for monopoly rights to build out the local cable infrastructure.  They claimed, maybe correctly, that this is the only way they could afford to string the cable.

However, once they built out the physical network, they started bundling content that the customer might or might not want into packages.  So that if customers wanted all of the sports channels, they would pay for the home shopping networks and Spanish language channels as well.  Additionally, if they wanted all of the sports channels, then they pay for several premium packages.  Because they are a monopoly, they have been able to get away with this and for continually upping the package prices.

So far, there has been minimal governmental intervention and no competition.  However, this is changing and will continue to change, as I will discuss in part 5 of this series. 

Next there is the security infrastructure—everyone needs security to produce value and wealth.  It would include military for external security and police for internal security.  Security is the seminal reason for having a government to start with—much to the chagrin of anarchists.   Without external security—every man (and woman) for himself (or herself), it becomes who can wield the biggest club and impregnate the most women that will survive and perhaps prosper.

With the possible apocryphal exception of the prostitution, the oldest two professions were the farmer, who grew the food and the soldier who ensured the farmer kept enough food to survive; there being barbarians who figured out that it was easier to take food than to grow food.

For internal security there were judges who settled disputes and constables who enforced the judges’ decisions, if it came to that.  In fact, in the Jewish Bible, in the section of the history of the Israelites, there is a book entitled, Judges, that in a small way discussed how the judges operated in a period starting from  between 1400 BC to 1200 BC.

Then there is the standards and policies infrastructure.  These standards and policies define the way citizens and others within a territorial organization interact with one another.  Among the first things written in the Age of Writing were governmental laws, codes, regulations, and rules; witness The Code of Hammurabi.  Standards and policies define the “rules of engagement” for economic and social activities within the territorial/political organization.  In fact, I would submit this is what government is all about.

In the Age of Writing, this “political” role expanded to include a legislative function.  Initially, this was in some form of a dictator, usually called a King.  The King served in two political functions, legislative and enforcement.  Since, every dictatorial power has had these two functions.

The delegates to the US Constitutional convention understood this.  Consequently, they separated the functions of government into three branches, legislative, executive (executing the rules and regulations), and the judicial.  How this is supposed to work was included in the US Constitution, both in the preamble and within sections of the document.

The infrastructure architecture may also include other functions.  For example, education, that is, formal learning by listening came into its own during the Age of Print.  The reason is that printing allowed for the mass production of books.  Once Martin Luther insisted that all people read and interpret the Bible on their own, rather than accepting the “authority of the clergy”, there was a need to teach reading on a mass production basis; which consequently led mass education. 

In countries where there was and is mass education, the people create value, and therefore wealth, much more easily and create much more.  So most people believe that is the only way anyone can learn during the Age of Print and still do.  This “ain’t necessarily so” in the Digital Age as I will discuss later.

Another one of the “other” functions is Basic Research as opposed to applied research for development.  This may well be and will continue to be part of the infrastructure supporting the knowledge-base and therefore the economic-base of a country, that is, part of the infrastructure of a country in the Digital Age.

Commodity Products Architecture (Mass Production Architecture)

The second architecture is Commodity Products Architecture, which is the Mass Production Architecture as described by Adam Smith and discussed above. Beyond infrastructure, there will be products, systems, and services that don’t really lend themselves to mass customization. 

For example, screws, nuts, and bolts.  While there are a great variety of these, they are built to “must meet” standards, standard lengths, materials, sizes, thread size, and so on.  Since these are manufactured to standards, they lend themselves to the mass production process architecture.  They will always have economies of scale, thus barriers to entry.

A second example is agricultural products.  Despite what the “natural foolish foodies” think, all food eaten by humans today is GMO, even the organic.  For 10 of thousands of years, the process of human selection of crops to grow for their food has led to all plants being hybridized. And for thousands of years they have been hybridized to increase the grain’s flavor and the quantity produced per plant.

This last, when coupled with the industrialization of the farm, so as to feed ever greater numbers of people better food, has led to food being turned into a commodity with the same economies of scale and barriers to entry as any other mass production industry.

A third example is really raw materials.  This includes all of the ores, all of the petroleum products, sand and gravel, and lumber.  These will continue to have the Mass Production Architecture of the Age of Print.

Mass Customization Architecture (Services Oriented Architecture)

The third architecture is Mass Customization Architecturethat will replace much of the current Mass Production Architecture in the Digital Age.  Most consumer products, systems, and services will use Mass Customization.  And so too will be any significant or high cost development activities.

There has always been Customization Architecture especially in the construction of large products, housing, ships, and so on, and expensive items, like jewelry, gowns, or armor.  And in most cases these still are.  However, the Mass Customization Architecture of the Digital Age will reduce the cost and time of production, while increasing the quality (My definition, which is a clarification of Phil Crosby’s definition of Quality is “Conformance to the Customer’s requirements).

The reason for consumer products is that Mass Customization enables and supports the implementation of products, systems, and services that meet a given customer’s specific requirements, rather than the satificing (i.e., sort of meeting their requirements) model of mass production.

Already, a person can upload pictures of themselves, choose the material, pay for the clothing and shortly custom fit shirts and dresses appear via UPS.  The next step will allow them to choose the style, neck line and so on, by viewing the virtual garment on their own image.  When they have found the perfect (meaning it meets all their requirements) they can order it.  As this method for buying clothes catches on mass customization will massively disrupt the clothing industry.

Likewise, building houses has almost always been about custom creation.  However, in the 1950s  builders , like Levitt, who built Levittown  NY, worked to find ways to replicate the mass production architecture of Henry Ford’s Model T. 

These builders attempt to use the Mass Production Architecture become more cost efficient in constructing houses.  They constructed a great many identical houses, even looking at ways to reduce the cost of wiring by nickels—I know I live in a  Levitt-built house—while barely meeting the building codes of the time.  They then sold the houses at enough less to attract a great many first time buyers.  Since, builders have been building subdivisions all over using a semi-mass production architecture.

However, in the Digital Age construction will be on a mass customization path.  Today, most houses in subdivisions are built on 3 to 5 different models with the customer being allowed to add many options.

Requirements and Mass Customization

The discussion above, proves that identification and management of requirements is imperative for successful Mass Customization Architecture; that is, “You can’t customize a product, system, or service to the customer’s requirements if you don’t know what those requirements are.”  However, right now nearly all suppliers are poor at helping the customer identify their requirements.  This leads to poor quality with many defects and an unhappy customer.  (aside: This is the reason I developed the prototype of a requirements identification and management tool, called CARRMA that I discussed in several other posts.)

Economies of Scale versus Economies of Knowledge

In the Digital Age with Mass Customization, economies of knowledge will supplant economies of scale in the creation and production of products, systems, and services. 

An example of this is carbon fiber for use in aircraft.  I was peripherally involved with the integration of two major US defense contractors.  At the time, one firm, with their finance engineering buried in Mass Production Architecture, built an internal carbon fiber laboratory for RD&T and prototyping of carbon fiber products.  The other built a laboratory for testing and prototyping products, but contracted with startups for the research and development of both for the carbon fiber and the resin formulations.

In comparing the output from the two efforts, the prototypes from the internal lab was of inferior quality and higher cost when compared with the one that brought several knowledge-based organization together.

Another example comes from steel production, one of the best known examples of Mass Production.  When Andrew Carnegie applied Henry Bessemer’s steel making process into his vertically integrated ironworks he created a cost efficient process for making steel.  Still today, steel plants are among the largest industrial facilities.

 Between 1955 and 1966 a company called Nucor Inc. created a knowledge-base steel company that went about creating mass customized steel products in small batches.  The chemistry of steel had evolved into at least dozens of steel specification, requiring very exacting combinations of materials at very specific temperatures.  Each specified steel had very specific characteristics and uses.  Large integrated steel works were not designed to create the small batches required.  Nucor used its knowledge and innovated methods and processes for creating these small batches.  It has ended up being one of the world’s largest steel producers.

This example demonstrates that the economies of knowledge and Mass Customization can and will out produce economies of scale even for products that seem to require economies of scale and mass production.  

Total automation of Product Manufacturing

Obviously, industry, especially in the industrialized world, is heading for totally automated production facilities. Again, let’s look at the steel plants.  The few that are left in the US now have fewer than 100 people employed, where in the late 1800s and early 1900s there were thousands.  The reason is automation.  Operationally, there are a few people sitting in an air-conditioned control room, but still many performing maintenance.   In the future there will be fewer maintenance personnel because the optional systems and equipment will become more and more self-healing.

Complex architectures

During the period of the paradigm  shift from Mass Production to Mass Customization Architecture for the creation and manufacture of products, systems, and services (and after) there will be an interaction among all three architectures.  The infrastructure (monolithic)  architecture will provide the physical and security infrastructure for all the organizations within the borders of a political unit, the commodity (mass production) architecture will provide those products that can only be produced cost efficiently at a large scale, while Mass Customization (Services Oriented) Architecture will provide and produce all products to meet the requirements of the individual customer/end user.

Looking Forward

In Part 4 I will some of the effects of the Digital Age and Mass Customization (SOA) Architecture on the individual.  In  Part 5 I will provide a number of examples of how Mass Customization, based on SOA, will effect a number of industries.