#eavoices

Modernizing the modernization strategy

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I was amused this week to be contacted by Researchgate, a syndication platform that have somehow republished my paper Enterprise resource planning: Componentizing the enterprise application packages that was originally published in April 2000 by the ACM. [ref 1] It was entertaining reading something I authored over 15 years ago, but quite refreshing that much of the thinking makes sense today. The gist of the paper was to discuss how some of the package vendors had responded to the impending Y2K event by componentizing and service enabling their packages, many of which at that time were exemplars of the worst monolithic application architecture (sic). At that time I observed that the componentization was a key factor in the huge growth of the EAI (enterprise application integration) market, and provided a genuine alternative to the conventional “buy or build” choice by enabling “buy, build or reuse”.

And this is really where my thinking has evolved considerably. Fifteen years ago we were very focused on transactional systems with a much lower requirement for flexibility. Today, and indeed for the past decade, I advise a radically different approach which is much more strongly business focused.

All too often the big question that bubbles to the surface is “should we buy or build?” And not surprisingly the buy option is often seen as an easier option because current systems are viewed as problematic and the organization has little or no competence in large scale systems development. In fact, for many organizations that have outsourced IT, development is not seen as a core business capability. So the question of buy or build becomes focused on whether a suitable package exists at an affordable price, where suitable means “supports our processes and information needs as we understand them today”.  And package vendors are well equipped to demonstrate how they have readymade and low risk capabilities that have high levels of configurability.

These days I advise a focus on just two important questions:

1. What are the systems requirements of our future business?
Many enterprises recognize their business models are changing rapidly and that there are numerous triggers, including technology, regulation, demographics, climate change, economics and more, that only indicate much more volatility. Most enterprises operate established sector specific models that have many conceptual elements that are shared with competitors, with clear areas of differentiation. Geoffrey Moore [ref 2] gave us excellent vocabulary to describe the Core and Context areas of our business, in which Core business capabilities should be highly differentiating and Context capabilities are managed to be equivalent to the competition, but no better. So the primary question to attempt to answer is, how might the balance between Core and Context shift over the coming years? If the shift is likely to be towards the Context, where competitive equality is a high probability outcome, then a buy solution “may” be appropriate if there is a package that really fits with the business model. This could well be true of highly regulated industries, semi-state organizations etc. However all the signs are that in the general commercial market there is likely to be a frenzy of innovation of core capabilities. That a high level of unpredictability inherent in some of the major triggers would indicate the most appropriate strategy will prioritize maximum flexibility  and response to change. And that leads on to the second important question.  
2. What are the cultural requirements of the future business? 
Everyone will recognize the extraordinary innovation culture demonstrated by organizations such as Amazon, Google and the vast numbers of start-ups leveraging technology opportunities. And this cultural paradigm shift is not restricted to so called Internet companies. Many large, conventional businesses recognize the existential threat and have responded, integrating bricks and mortar operations and processes with Internet portals, apps, IoT and B2B architectures. Crucially evolving their products and services in which information is an integral component. And most of these innovating companies are exploring Agile development practices demonstrating the extraordinary innovation, productivity and quality that can be achieved by a convergence of business and IT skills and expertise. Some of these organizations have reinvented their business models because they have been brave enough to change from command and control to delegated responsibility development models. They are demonstrating tomorrow’s enterprise is an information enterprise where conventional demarcation lines between IT and business need to be challenged and reengineered. Do packaged solutions have a place in such a high innovation culture? Of course – for the obviously Context areas of the business such as general ledger and receivables they make sense. But for Core business capabilities, a packaged solution must look like the dead hand of a commodity.
You may ask, “but back in April 2000 you expected a flourishing integration market, based on buy, build and reuse, why is that not applicable today?” And my answer is, “That actually happened in the noughties. But today we have a different challenge. Burdening creative people with huge integration and semantic transformation complexity is not a great way to reinvent the future business, as the past will be an anchor holding you back. Integration will be necessary and essential, but your core business architecture should be optimized as much as possible”
In a recent blog post I said, “modernization is not about achieving a new plateau of capability and functionality. Rather it is about enabling continuous, short cycle time response to change”. It’s about creating an Agile Enterprise.
CODA: Geoffrey Moore’s concept of Core relates to the centrality and mission critical nature of a capability. This should not be confused with the CBDI-SAE concept of Core Business Service, which is the service layer managing the state of the business. 
References:
1. Componentizing the enterprise application packages , David Sprott. ACM April 2000 
Researchgate  (public domain)
ACM (subscription or pay as you go)
2. Geoffrey Moore, Dealing With Darwin

The New Economics of Manufacturing

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Popped over to Turin this week to give a presentation at a seminar on the Future of Manufacturing.

A lot of the other presentations focused on the technology (3D Printers, Cyber-Physical Systems, Internet of Things), so I wanted to look at the broader economic picture. I drew some inspiration from a recent interview with the French writer Jacques Attali, who predicted the crisis in the music industry.  

“For Attali, music is not simply a reflection of culture, but a harbinger of change, an anticipatory abstraction of the shape of things to come.” (from a review of Attali’s 1985 book Noise)

Attali now says manufacturing will be hit by an identical crisis – this time caused by 3D printing. Apparently some spare parts have already started to appear on pirate websites. Thus instead of paying the manufacturer for a spare part, you might be able to download and print it yourself. Given that many manufacturers sell their products at low margin, in order to make money from spare parts and maintenance, this could seriously disrupt the economics of manufacturing.

By the way, making money from the consumable part of the product is a very old idea – business schools usually attribute the idea to Gillette’s strategy of giving away the razors in order to sell the blades, although Randy Picker argues that the history of Gillette’s innovation was a bit more complicated than the usual story.

There are two possible responses to this challenge. Firstly a shift from the cost of the fabrication to the cost of the materials. The materials used by 3D printers are very expensive compared with normal material. And secondly, designing the whole product to frustrate the use of generic spare parts.

We can see both of these tactics in the world of 2D printers. Printers for home use are really cheap, but the replacement ink cartridges cost almost as much as the printer. Printer ink is the most expensive liquid most people ever buy – much more expensive than good champagne. Or for that matter, human blood. (Not that I’ve ever needed to buy any, thank goodness.)

Which brings us to the second tactic. Yes you can refill ink cartridges or use generic replacements. But the printer can be equipped with software to detect and frustrate this, degrading its performance and efficiency when it detects a third party or refilled cartridge. As we discovered in the Volkswagen “defeat device” scandal, the embedded software in any product may be designed to serve the commercial interests of the manufacturer rather than the consumer.

Manufacturing is shifting away from products (including spare parts) and towards services. Instead of trying to sell you overpriced tyres, the car manufacturer must make sure that only its accredited partners have the software to balance the wheels properly. In other words, not just architecting the product or even the process, but architecting the whole ecosystem.

And of course, music the harbinger. Famous popstars used to do free concerts in order to sell more albums. Now they might as well give away the albums in order to sell more concert tickets.

But we’ve been here before. Attali makes the point that when musicians in the 18th Century – like the composer Handel – started selling tickets for concerts, rather than seeking royal patronage, they were breaking new economic ground. They were signalling the end of feudalism and the beginning of a new order of capitalism.

Related Posts

Defeating the Device Paradigm (October 2015)
Weaving in Three Dimensions (November 2015)
Right to Repair (March 2017)

Other Sources

Alex Hudson, Is digital piracy possible on any object? (BBC Click, 9 December 2013)

Randy Picker, Gillette’s Strange History with the Razor and Blade Strategy (HBR Sept 2010)

Sam York, The pop star and the prophet (BBC News Magazine, 17 September 2015)

The New Economics of Manufacturing

by

Popped over to Turin this week to give a presentation at a seminar on the Future of Manufacturing.

A lot of the other presentations focused on the technology (3D Printers, Cyber-Physical Systems, Internet of Things), so I wanted to look at the broader economic picture. I drew some inspiration from a recent interview with the French writer Jacques Attali, who predicted the crisis in the music industry.  

“For Attali, music is not simply a reflection of culture, but a harbinger of change, an anticipatory abstraction of the shape of things to come.” (from a review of Attali’s 1985 book Noise)

Attali now says manufacturing will be hit by an identical crisis – this time caused by 3D printing. Apparently some spare parts have already started to appear on pirate websites. Thus instead of paying the manufacturer for a spare part, you might be able to download and print it yourself. Given that many manufacturers sell their products at low margin, in order to make money from spare parts and maintenance, this could seriously disrupt the economics of manufacturing.

By the way, making money from the consumable part of the product is a very old idea – business schools usually attribute the idea to Gillette’s strategy of giving away the razors in order to sell the blades, although Randy Picker argues that the history of Gillette’s innovation was a bit more complicated than the usual story.

There are two possible responses to this challenge. Firstly a shift from the cost of the fabrication to the cost of the materials. The materials used by 3D printers are very expensive compared with normal material. And secondly, designing the whole product to frustrate the use of generic spare parts.

We can see both of these tactics in the world of 2D printers. Printers for home use are really cheap, but the replacement ink cartridges cost almost as much as the printer. Printer ink is the most expensive liquid most people ever buy – much more expensive than good champagne. Or for that matter, human blood. (Not that I’ve ever needed to buy any, thank goodness.)

Which brings us to the second tactic. Yes you can refill ink cartridges or use generic replacements. But the printer can be equipped with software to detect and frustrate this, degrading its performance and efficiency when it detects a third party or refilled cartridge. As we discovered in the Volkswagen “defeat device” scandal, the embedded software in any product may be designed to serve the commercial interests of the manufacturer rather than the consumer.

Manufacturing is shifting away from products (including spare parts) and towards services. Instead of trying to sell you overpriced tyres, the car manufacturer must make sure that only its accredited partners have the software to balance the wheels properly. In other words, not just architecting the product or even the process, but architecting the whole ecosystem.

And of course, music the harbinger. Famous popstars used to do free concerts in order to sell more albums. Now they might as well give away the albums in order to sell more concert tickets.

But we’ve been here before. Attali makes the point that when musicians in the 18th Century – like the composer Handel – started selling tickets for concerts, rather than seeking royal patronage, they were breaking new economic ground. They were signalling the end of feudalism and the beginning of a new order of capitalism.

Related Posts

Defeating the Device Paradigm (October 2015)

Other Sources

Alex Hudson, Is digital piracy possible on any object? (BBC Click, 9 December 2013)

Randy Picker, Gillette’s Strange History with the Razor and Blade Strategy (HBR Sept 2010)

Sam York, The pop star and the prophet (BBC News Magazine, 17 September 2015)

Upgrading the EA Role

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Why the EA role is changingLate last year I wrote a post on the Cutter Blog, entitled EA to Reflect On and Upgrade Its Role, as part of the Cutter predictions series. A recent comment asked said that “EA is mainly perceived as IT discipline and so far largely failed to establish Business Capability Evolution…

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Selective Perception

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In psychology selective perceptive is the tendency not to notice and more quickly forget stimuli that causes emotional discomfort and contradicts our prior beliefs. We know that this tendency is very real and can be quantified since the mid 60’s however we tend only to use and notice it in relationship with branding and advertising. … Continue reading Selective Perception →

Engineer, Get Over Yourself

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Ian Bogost’s “Programmers: Stop Calling Yourselves Engineers” in the Atlantic, claims “The title “engineer” is cheapened by the tech industry.” He goes on to state: When it comes to skyscrapers and bridges and power plants and elevators and the like, engineering has been, and will continue to be, managed partly by professional standards, and partly […]

Data Science On Non-Locality, Hidden Problems and Lack of Information

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Discourse with Dr. Barry Robson, about some thing quite bizarre in solving an unknown problem against uncertainty. Srinidhi Boray (SB) – Hey Barry Question !!! “Graphing should pave way for creating the tacit knowledge by context for a chosen hypothesis; and infinite varieties of the hypothesis is technically possible in an ecosystem” Dr. Barry Robson (BR) – Your question […]

The Customer Card

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It’s never been as important to reach outside of the business as it is in the digital world of today. From an architects perspective it is vital to be able to connect the dots between what is servicing and who is being served. This little card is designed to help you go fast by staying small and […]

IBM And Teradata — A Tale Of Two Vendors’ Struggle With Disruption

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I said that 2015 would be a tough year for enterprise data and analytics vendors in my spring report, “Brief: Turning Big Data Into Business Insights, 2015.” I thought two things would happen. First, open source would drag on vendors’ revenues as demand for big expensive products declined. Second, the cloud would create revenue headaches. Turns out, I was right. Teradata’s midyear earnings were down 8%, and IBM reported that Q2 revenue was down 12% from a year ago. As further proof, consider the rash of data management vendors running for private equity (e.g. Dell/EMC, Informatica, and TIBCO). It’s been tough times indeed, even though most vendors are keeping their messaging positive to reassure buyers and investors.

Over the past two weeks, I attended Teradata Partners in Anaheim and IBM Insight in Las Vegas — giving me a firsthand look at how two giants of the data and analytics industry are handling disruption. What I saw was a tale of two vendors that couldn’t be any more different:

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