Situation Normal Everything Must Change - from innovation to commoditisation in business and strategy

Situation Normal,Everything Must

Change

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LEF tracks the co-evolution of Business & IT

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Developing an Outside-In Operating Model

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The Future of Data & ERP

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01/29/13 01:57 2

2013 Research

STRATEGY

TacticalChoices

(BYOT)

OperationalDetails

(SLAs)Implementation

Details(Private vs Public)

Purchasing Decisions

(Oracle vs SAP)

How? What? When?

Why?

Vague

Bombard the hill!

But Why?

ABC Report 67% of successful generals bombard

hills

Is this the Why?

Bombarding Hills is on the Slope of Enlightenment?

Is this the Why?

Cut off supply lanes?Possible

where

Possible where

Possible where

Why?

Cut off supply lanes?

How, What, When

Why?

Why?

Vague

No Map?

How do you map business?

Company (Nut & Bolts)

Company (Machine)

Screw Cutting Lathe

Metal Ingots

Nuts & Bolts

Machine

Armory System

Standard Pipes

Company (Lathes)

Value Chain

Nokia

... but value chains change ...

Early Adopter

Laggards

... due to innovation ...

It's all random ...

Hang on ...

Evolve

Evolve

Certainty

Ubi

quity

Custom Built

Commodity

ServiceProduct

Utility

GenesisEvolution

Certainty

Ubi

quity

Co

nsu

me

r

Supplier

Competitio

n

Value Chain(describes organisation)

Evolution(describes change)

What if we combine?

Photo Storage

Data Centre

Power

Compute

Payment

Distributed Architecture

Web Site

Platform

Fotango

Customer

Servers

Development Tools

Banking systems

The Company

Image Manipulation

Customer Relationship

System (CRM)

Val

ue

Ch

ain

Val

ue

Ch

ain

Genesis Custom Built

Product (+ rental)

Commodity (+ utility)

Evolution

Online Photo Storage

Data CentrePower

Payment

Distributed Architecture

Web Site

Platform

FotangoCustomer

CRM

Online Image Manipulation

Compute

Map

Lesson 1

Needs vs Efficiency

Val

ue

Ch

ain

Genesis Custom Built

Product (+ rental)

Commodity (+ utility)

Evolution

Need

Differentiation

Val

ue

Ch

ain

Genesis Custom Built

Product (+ rental)

Commodity (+ utility)

Evolution

Efficiency

Hidden

Lesson 2

Competition ChangesEverything

Val

ue

Ch

ain

Genesis Custom Built

Product (+ rental)

Commodity (+ utility)

Evolution

Chaotic

Val

ue

Ch

ain

Genesis Custom Built

Product (+ rental)

Commodity (+ utility)

Evolution

Online Photo Storage

Distributed Architecture

Fotango

Online Image Manipulation

Rare

Poorly Understood

Differential

High unit value

Constantly changing

Undefined market

Competitive Advantage

Val

ue

Ch

ain

Genesis Custom Built

Product (+ rental)

Commodity (+ utility)

Evolution

Linear

Val

ue

Ch

ain

Genesis Custom Built

Product (+ rental)

Commodity (+ utility)

Evolution

PowerCompute

Web Site

CRM

Commonplace

Well Understood

Efficiency & Operations

Volume operations

Standardised

Defined market

Cost of doing business

Val

ue

Ch

ain

Genesis Custom Built

Product (+ rental)

Commodity (+ utility)

Evolution

Competition

Chaotic

Linear

Lesson 3

One size never fits all

Val

ue

Ch

ain

Genesis Custom Built

Product (+ rental)

Commodity (+ utility)

Evolution

SIX SIGMA

StrongWeak

AGILE

Strong Weak

Val

ue

Ch

ain

Genesis Custom Built

Product (+ rental)

Commodity (+ utility)

Evolution

SIX SIGMA

StrongWeak

Outsource

... tends to apply single technique ...

Val

ue

Ch

ain

Genesis Custom Built

Product (+ rental)

Commodity (+ utility)

Evolution

Change Control +++

... with a common consequence ...

Val

ue

Ch

ain

Genesis Custom Built

Product (+ rental)

Commodity (+ utility)

Evolution

Outsource

... only somethings are

suitable

Lesson 4

Efficiency enables Innovation

Val

ue

Ch

ain

Genesis Custom Built

Product (+ rental)

Commodity (+ utility)

Evolution

Electricity Provision

A/C Utility (Westinghouse)

Siemens

Val

ue

Ch

ain

Genesis Custom Built

Product (+ rental)

Commodity (+ utility)

Evolution

Inte

rfac

e

Worth

AgilityEfficiency

Competition

ComponentisationHerbert Simon

Creative DestructionJoseph Schumpeter

Lesson 5

Choice is an illusion

Val

ue

Ch

ain

Genesis Custom Built

Product (+ rental)

Commodity (+ utility)

Evolution

Inte

rfac

e

Worth

AgilityEfficiency

Competition

“Red Queen”

The need to constantly evolve in order to stand still

relative to a surrounding ecosystem

Prof. Van Valen

Lesson 6

We have inertia

Evolution

Computing Infrastructure

Compute(Product)

Novel Architectural Practice (Scale Up)

Emerging Practice (Scale Up)

Best Practice (Scale Up)

Past

Good Practice (Scale Up)

Evolution

Good Practice (Scale Out)

Novel Architectural Practice (Scale Out, Distributed Systems)

Emerging Practice (Scale Out)

Compute(Utility)

Future Best Practice (Scale Out)

Best Practice (Scale Up)

Past Compute(Product)

Evolution

Good Practice (Scale Out)

Compute(Utility)

Best Practice (Scale Up)

Compute(Product)

Co-Evolution

Evolution

Good Practice (Scale Out)

LegacyEstate

Compute(Utility)

Best Practice (Scale Up)

Compute(Product)

New Estate "DevOps"But we want the

benefits ...

Evolution

Good Practice (Scale Out)

LegacyEstate

Compute(Utility)

Best Practice (Scale Up)

Compute(Product)

New Estate "DevOps"

Cost

But we don't want to re-architect ...

Val

ue

Ch

ain

Genesis Custom Built

Product (+ rental)

Commodity (+ utility)

Evolution

Inertia

Efficiency

Agility

Worth

Despite benefits, cost creates ...

Lesson 7

Inertia Kills

Val

ue

Ch

ain

Genesis Custom Built

Product (+ rental)

Commodity (+ utility)

Evolution

Inertia

Past Success

Vendors have ...

$0

$500

$1,000

$1,500

$2,000

2007 2008 2009 2010 2011 2012 2013 2014 2015 2016

Analyst Estimates for EC2 Revenue

Million3%

and the new world is changing

slowly ...

$0

$7,500

$15,000

$22,500

$30,000

2007 2008 2009 2010 2011 2012 2013 2014 2015 2016

Analyst Estimates for EC2 Revenue

Million

3%

50%

Hang on, this can't be right ...

IT change is slower!

Val

ue

Ch

ain

Genesis Custom Built

Product (+ rental)

Commodity (+ utility)

Evolution

Peace

Alas, we're lulled by past state of competition ...

Val

ue

Ch

ain

Genesis Custom Built

Product (+ rental)

Commodity (+ utility)

Evolution

WarPeace

Punctuated Equilibrium

Lesson 8

Cycles

Val

ue

Ch

ain

Genesis Custom Built

Product (+ rental)

Commodity (+ utility)

Evolution

Inte

rfac

e

Peace War

Wonder

Peace

War

Wonder

The Mechanical Age

The Age of Electricity

Certainty

Ubi

quity

Product

Cloud is standard evolutionary shift ...

Utility

Certainty

Ubi

quity

Co

nsu

me

r

Supplier

Competitio

n

... caused by competition

Val

ue

Ch

ain

Genesis Custom Built

Product (+ rental)

Commodity (+ utility)

Evolution

Inte

rfac

e

Worth

AgilityEfficiency

Competition

... resulting in standard benefits

Val

ue

Ch

ain

Genesis Custom Built

Product (+ rental)

Commodity (+ utility)

Evolution

Inertia

... which we have inertia to

Val

ue

Ch

ain

Genesis Custom Built

Product (+ rental)

Commodity (+ utility)

Evolution

Peace War

... along with a change in

competition

“Red Queen”

The need to constantly evolve in order to stand still

relative to a surrounding ecosystem

Prof. Van Valen ... that kills

Situation Normal,Everything Must

Change... bought the T-

Shirt

New organisations form because ...

Evolution

LegacyEstate

Good Practice (Scale Out)

Compute(Utility)

Best Practice (Scale Up)

Compute(Product)

Co-EvolutionNew Estate "DevOps"

0%

10%

20%

30%

40%

50%

60%

Nothing Cost Rely Engaged Weapon

Traditional Web 2.0 Next Generation

View on Open SourceThree forms of organisation in

the wild ...

Open source

Resilience

Failure Testing

Infrastructure

Learning

"Big" Data

Culture

Structure

Corporate Focus

Type

Stra

tegy

/ Ta

ctic

alO

rgan

isat

ion

Act

ivity

Departmental

Inertia

Profit

Cost Reduction

N+1

Disaster Recovery

Analysts

Used

Enterprise Class

Service / Cell

Fluid / Gameable

Disruption

Weapon

Design For Failure

Chaos Engines

Ecosystem

Driven By

Commodity

Traditional Next Generation

Capacity

Deployment

Scale Up

Change Control

Scale-out

Continuous

Technique Single Mixed

Prac

tice

Val

ue

Ch

ain

Genesis Custom Built

Product (+ rental)

Commodity (+ utility)

Evolution

More cell based

Certainty

Ubi

quity

Low

er a

dopt

ion

barr

iers

Collaboration

Open

Impact of Open ...

Val

ue

Ch

ain

Genesis Custom Built

Product (+ rental)

Commodity (+ utility)

Evolution

Inte

rfac

e

Worth

AgilityEfficiency

Open

90% of large organizations use

open source

0%

10%

20%

30%

40%

Strongly Disagree Disagree Neutral Agree Strongly

Agree

Web 2.0

We have a formal process for Open Technology

Traditional

0%

20%

40%

60%

Web 2.0Traditional

Strongly Disagree Disagree Neutral Agree Strongly

Agree

Our company deploys an open technology approach as a means of outmaneouvering

competitors

Val

ue

Ch

ain

Genesis Custom Built

Product (+ rental)

Commodity (+ utility)

Evolution

IOS

Val

ue

Ch

ain

Genesis Custom Built

Product (+ rental)

Commodity (+ utility)

Evolution

IOS

Val

ue

Ch

ain

Genesis Custom Built

Product (+ rental)

Commodity (+ utility)

Evolution

Data Centre

Open

Open source

Resilience

Failure Testing

Infrastructure

Learning

"Big" Data

Culture

Structure

Corporate Focus

Type

Stra

tegy

/ Ta

ctic

alO

rgan

isat

ion

Act

ivity

Departmental

Inertia

Profit

Cost Reduction

N+1

Disaster Recovery

Analysts

Used

Enterprise Class

Service / Cell

Fluid / Gameable

Disruption

Weapon

Design For Failure

Chaos Engines

Ecosystem

Driven By

Commodity

Traditional Next Generation

Capacity

Deployment

Scale Up

Change Control

Scale-out

Continuous

Technique Single Mixed

Prac

tice

Choose one ...

+ Innovation

+ Customer

+ Efficiency

Ecosystem

Supplier

Innovate

Val

ue

Ch

ain

Genesis Custom Built

Product (+ rental)

Commodity (+ utility)

Evolution

Innovate

EC2

Hadoop

Val

ue

Ch

ain

Genesis Custom Built

Product (+ rental)

Commodity (+ utility)

Evolution

EC2

EMRCommoditise

Val

ue

Ch

ain

Genesis Custom Built

Product (+ rental)

Commodity (+ utility)

Evolution

EC2

EMR

Innovate

Val

ue

Ch

ain

Genesis Custom Built

Product (+ rental)

Commodity (+ utility)

Evolution

Innovate

Commoditise

Leverage

Choose All ...

+ Innovation

+ Customer

+ Efficiency

Val

ue

Ch

ain

Genesis Custom Built

Product (+ rental)

Commodity (+ utility)

Evolution

Electronic Health Care Record Systems

Efficiency

Val

ue

Ch

ain

Genesis Custom Built

Product (+ rental)

Commodity (+ utility)

Evolution

Electronic Health Care Record Systems

Past Success

Val

ue

Ch

ain

Genesis Custom Built

Product (+ rental)

Commodity (+ utility)

Evolution

Electronic Health Care Record Systems

Inte

rfac

e

Open

Open

Efficiency

Commoditise Recruitment

Protecting Value Chain

Standards

Ecosystems

Barrier to Entry

... more powerful than most realise

Str

ate

gic

Pla

y

Uses Open to Compete

Str

ate

gic

Pla

y

Uses Open to Compete

Web 2.0

Traditional

Str

ate

gic

Pla

y

Uses Open to Compete

Players

Doing well ...

Open source

Resilience

Failure Testing

Infrastructure

Learning

"Big" Data

Culture

Structure

Corporate Focus

Type

Stra

tegy

/ Ta

ctic

alO

rgan

isat

ion

Act

ivity

Departmental

Inertia

Profit

Cost Reduction

N+1

Disaster Recovery

Analysts

Used

Enterprise Class

Service / Cell

Fluid / Gameable

Disruption

Weapon

Design For Failure

Chaos Engines

Ecosystem

Driven By

Commodity

Traditional Next Generation

Capacity

Deployment

Scale Up

Change Control

Scale-out

Continuous

Technique Single Mixed

Prac

tice

... More like

Val

ue

Ch

ain

Genesis Custom Built

Product (+ rental)

Commodity (+ utility)

Evolution

Open Source, Open Data, APIs

Online Photo Storage

Data CentrePower

Compute

Payment

Distributed Architecture

Web Site

Platform

FotangoCustomer

CRM

Online Image Manipulation

.... Manipulate

Use IT as a weapon

.... Tend to

Str

ate

gic

Pla

y

Uses Open to Compete

Thinkers

Doing OK ...

Str

ate

gic

Pla

y

Uses Open to Compete

Believers

Whoops ...

Str

ate

gic

Pla

y

Uses Open to Compete

Chancers

Oh dear ...

Open source

Resilience

Failure Testing

Infrastructure

Learning

"Big" Data

Culture

Structure

Corporate Focus

Type

Stra

tegy

/ Ta

ctic

alO

rgan

isat

ion

Act

ivity

Departmental

Inertia

Profit

Cost Reduction

N+1

Disaster Recovery

Analysts

Used

Enterprise Class

Service / Cell

Fluid / Gameable

Disruption

Weapon

Design For Failure

Chaos Engines

Ecosystem

Driven By

Commodity

Traditional Next Generation

Capacity

Deployment

Scale Up

Change Control

Scale-out

Continuous

Technique Single Mixed

Prac

tice

Look Like ...

IT STRATEGY

Lots of big documents ...

Why?

Vague

Not so big on ...

Str

ate

gic

Pla

y

Uses Open to Compete

Die

Adapt

Oh dear ...

Doing well ...

What to do?

Need

Val

ue

Ch

ain

Value Chain

Certainty

Ubi

quity

Custom Built

Commodity

ServiceProduct

Utility

GenesisEvolution

Val

ue

Ch

ain

Genesis Custom Built

Product (+ rental)

Commodity (+ utility)

Evolution

Step 1. Map

Val

ue

Ch

ain

Genesis Custom Built

Product (+ rental)

Commodity (+ utility)

Evolution

Efficiency

Hidden

Step 2. Find Inefficiencies

Val

ue

Ch

ain

Genesis Custom Built

Product (+ rental)

Commodity (+ utility)

Evolution

Step 3. Break existing model

Val

ue

Ch

ain

Genesis Custom Built

Product (+ rental)

Commodity (+ utility)

Evolution

Step 4. Treat as units

Val

ue

Ch

ain

Genesis Custom Built

Product (+ rental)

Commodity (+ utility)

Evolution

SIX SIGMA

StrongWeak

AGILE

Strong Weak

Step 5. Apply right methods

Val

ue

Ch

ain

Genesis Custom Built

Product (+ rental)

Commodity (+ utility)

Evolution

Agile, In-House

Val

ue

Ch

ain

Genesis Custom Built

Product (+ rental)

Commodity (+ utility)

Evolution

Leverage, Buy Products,Open Source

Val

ue

Ch

ain

Genesis Custom Built

Product (+ rental)

Commodity (+ utility)

Evolution

Utility, Outsource

Step 6. Find shared components

Val

ue

Ch

ain

Genesis Custom Built

Product (+ rental)

Commodity (+ utility)

Evolution

Inte

rfac

e

Worth

AgilityEfficiency

Open

Step 7. Manipulate the environment

(Strategy)

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