Product Meta-Models

Imagine the future. Not the distant future, we’re talking about next week or maybe the week after rather than an eventual future where we all have flying cars. A new business competitor has emerged on the market, coming out of nowhere with a business model that makes it impossible for your company to compete. They have half the cost to serve of their competitors, half the time to revenue, they seem to be able to introduce a new product in a matter of days rather than weeks, and their products are incredibly customisable. They seem to have halved the business metrics that you want to go down, doubled the ones you want to go up, while as the same time supporting a product portfolio of impressive depth and complexity. And they claim to be able to do this with conventional technology. How did they do it? And how are you going to respond?

A version was published in Align Journal as Product Meta-Models:
Delivering business agility through a new perspective on technology
.

Link to complete article.

Innovation [2009-03-09]

Another week and another collection of interesting ideas from around the Internet.

As always, thoughts and/or comments are greatly appreciated.

This issue:

Beyond Rules Engines

I figured that I might as well take the time to clean up some of the articles that I’ve written in the past and drop them on the web site. The first cab off the rank is something I put together to point out some of the limitations when using rules engines to capture business logic, and technologies that might help us past these limitations.

Beyond Rules Engines

Agent technology represents a new generation of software that brings the power and sophistication of goal–directed reasoning and planning to business applications for the first time. The technology was developed during the early 80s in reaction to the perceived limitations of the rule–based systems (expert systems) that were in wide use at the time. Goal–directed technology builds on the rule–based technologies that preceded it, overcoming their limitations by integrating support for procedural reasoning; the step–by–step, trial–and–error approach that a person typically uses to solve a problem.

Goal–Directed technology enables the development of more flexible and robust applications; applications that are aligned with the business and that allow enterprise systems to adapt rapidly in the face of changing requirements.

Link to complete article.

Innovation [2009-02-23]

Another week and another collection of interesting ideas from around the Internet.

As always, thoughts and/or comments are greatly appreciated.

This issue:

Applications let us differentiate, not!

Being involved in enterprise IT, we tend to think that the applications we build, install and maintain will provide a competitive advantage to the companies we work for.

Take Walmart, for example. During the early 80s, Walmart invested heavily in creating a data warehouse to help it analyze its end-to-end supply chain. The data was used to statically optimize Walmart’s supply chain, creating the most efficient, lowest cost supply chain in the world at the time. Half the savings were passed on to Walmart’s customers, half whet directly to the bottom line, and the rest is history. The IT asset, the data warehouse, enabled Walmart to differentiate, while the investment and time required to develop the data warehouse created a barrier to competition. Unfortunately this approach doesn’t work anymore.

Fast forward to the recent past. The market for enterprise applications has grown tremendously since Walmart first brought that data warehouse online. Today, applications providing solutions to most business problems are available from a range of vendors, and at a fraction of the cost required for the first bespoke solutions that blazed the enterprise application trail. Walmart even replaced that original bespoke supply chain data warehouse, which had become something of an expensive albatross, with an off-the-rack solution. How is it possible for enterprise applications to provide a competitive advantage if we’re all buying from the same vendors?

One argument is that differentiation rests in how we use enterprise applications, rather than in the applications themselves. Think of the manufacturing industries (to use a popular analogy at the moment). If two companies have access to identical factories, then they can still make different, and differentiated, products. Now think of enterprise applications as business process factories. Instead of turning out products, we use these factories to turn out business processes. These digital process factories are very flexible. Even if we all start with the same basic functionality, if I’m smarter at configuring the factory, then I’ll get ahead over time and create a competitive advantage.

This analogy is so general that it’s hard to disagree with. Yes, enterprise applications are (mostly) commodities so any differentiation they might provide now rests in how you use them. However, this is not a simple question of configuration and customization. The problem is a bit more nuanced than that.

Many companies make the mistake that customizing (code changes etc) their unique business processes into an application will provide them with a competitive advantage. Unfortunately the economics of the enterprise software market mean that they are more likely to have created an albatross for their enterprise, than provided a competitive advantage.

Applications are typically parameterized bespoke solutions. (Many of the early enterprise applications were bespoke COBOL solutions where some of the static information—from company name through shop floor configuration—has been pushed into databases as configuration parameters. ) The more configuration parameters provided by the vendor, the more you can bend the application to a shape that suits you.

Each of these configuration parameters requires and investment of time and effort to develop and maintain. They complicate the solution, pushing up its maintenance cost. This leads vendors to try and minimize the number of configuration points they provide to a set of points that will meet most, but not all customers’ needs. In practical terms, it is not possible to configure an application to let you differentiate in a meaningful way. The configuration space is simply too small.

Some companies resort to customizing the application—changing its code—to get their “IP” in. While this might give you a solution reflecting how your business runs today, every customization takes you further from a packaged solution (low cost, easy to maintain, relatively straight forward to upgrade …) and closer to a bespoke solution (high cost, expensive to maintain, difficult or impossible to upgrade). I’ve worked with a number of companies where an application is so heavily customized that it is impossible to deploy vendor patches and/or upgrades. The application that was supposed to help them differentiate had become an expensive burden.

Any advantage to be wrung from enterprise IT now comes from the gaps between applications, not from the applications themselves. Take supply chain for example. Most large businesses have deployed planning and supply chain management solutions, and have been on either the LEAN or Six Sigma journey. Configuring your planning solution slightly differently to your competitors is not going to provide much of an edge, as we’re all using the same algorithms, data models and planning drivers to operate our planning process.

Most of the potential for differentiation now lies with the messier parts of the process, such as exception management (the people who deal with stock-outs and lost or delayed shipments). If I can bring together a work environment that makes my exception managers more productive than yours—responding more rapidly and accurately to exceptions—then I’ve created a competitive advantage as my supply chain is now more agile than yours. If I can capture what it is that my exception managers do, their non-linear and creative problem solving process, automate it, and use this to create time and space for my exception managers to continuously improve how supply chain disruptions are handled, then I’ve created a sustainable competitive advantage. (This is why Enterprise 2.0 is so exciting, since a lot of this IP in this space is tacit information or collaboration.)

Simply configuring an application with today’s best practice—how your company currently does stuff—doesn’t cut it. You need to understand the synergies between your business and the technologies available, and find ways to exploit these synergies. The trick is to understand the 5% that really makes your company different, and then reconfiguring both the business and technology to amplify this advantage while commoditizing the other 95%. Rolls-Royce (appears to be) a great example of getting this right. Starting life as an manufacturer of aircraft engines, Rolls Royce has leveraged its deep understanding of how aircraft engines work (from design through operation and maintenance), reifying this knowledge in a business and IT estate that can provide clients with a service to keep their aircraft moving.

Innovation [2009-02-09]

Another week and another collection of interesting ideas from around the Internet.

As always, thoughts and/or comments are greatly appreciated.

This issue:

  • Birdmen and the Casual Fallacy [Malstrom’s Articles]
    It’s always wise to have a clear understanding of the market you are really in. Wang was a good example of this, repositioning from mini computers to office automation with some success. Nintendo might have taken this method to an entirely new level, using an innovative blue water strategy and a superior understanding of the dynamics of their chosen market to put their competitors in a potentially impossible position.
  • Kelly’s 14 Rules [Lockheed Martin]
    Lockheed Martin’s Skunk Works is a good example of supporting a disruptive, innovative organisation within a larger, and much more conventional, business. Here are the fourteen rules the Skunk Works lives by.
  • At G.M., innovation often suffers for profits [New York Times]
    G.M. has no shortage of innovative ideas to persue. Why then, does G.M. have such a hard time getting innovative products out the door?
  • Forget how the Crow Flies [Spirit in Business]
    John Kay one one of the first to put forward the idea of Obliquity as a business strategy. Obliquity is not a new idea; the concept that sometimes the best route to success is an indirect one. Apple is a great example of this, with their proclaimed desire to simply make products that they, themselves, would love, often resulting in category defining products. Obliquity is an idea worth reminding ourselves of.

Innovation [2009-01-27]

Another week and another collection of interesting ideas from around the Internet.

As always, thoughts and/or comments are greatly appreciated.

This issue:

There’s more to sustainability than simply using less

I wouldn’t be too surprised if the Australian government passes legislation requiring all residents to shower with a friend in an effort to save water. We’re in a bit of a bind; the longest drought in living memory combined with global warming and climate change means that there is just not enough water to go around.

Energy, water and our population are all interrelated
Energy, water and our population are all interrelated

It’s not just a lack of water causing problems though. Manufacturing more energy (electricity) requires huge amounts of water (for steam), while manufacturing more water requires huge amounts of energy (for desalination). Factor in a growing and increasingly urban population and you quickly realize that washing your car every few weeks and buying energy appliances just won’t cut it.

Take the electrify industry for example. Today’s electricity utilities follow a model that is relatively unchanged since Samuel Insull’s day. Electrons are manufactured in large power stations before they are trucked down wires to where they are consumed by consumer and industrial devices. Demand dictates supply. Electrons are shared equally among devices and if we don’t have enough to meet demand, then everyone gets less than they need. The result is brownouts: motors fuse, traffic lights dim and people crash. Life generally stops.

Electricity production since Samuel Insulls day
Electricity production since Samuel Insull's day

Micro-generation and CHP (combined heat and power) will alleviate the problem somewhat, but if we want an electricity supply for a sustainable future then we need to completely rethink how electricity is managed. We need to move from a demand-driven system, to a supply-driven system. Rather than racing to manufacture enough electricity to fulfill demand, the focus would be on effectively using the energy available to us.

The technology required to reinvent electricity distribution is already emerging into the commercial world. The global rollout of smart metering is providing us with the basic infrastructure for a new, smarter energy distribution system. The challenge is to move beyond conventional centrally run demand management programmes, and adopt more distributed approaches. Technology is already emerging into the commercial arena demonstrating the first tentative steps on this journey.

Imagine if we could import the retail electricity spot price into the home or factory via smart metering. We have national energy markets, so why not create an energy market inside our houses? Local generation (solar, wind, CHP) would have a price set based on required required return on investment, while energy is imported (if required) based on the spot price. The decision if and when to consume electricity is then devolved to the appliances (fridge, air conditioner etc) by letting them bid for the energy they need.

An internal energy market
An internal energy market

The intelligence to support this complex behavior might be buried inside the appliance itself, or mediated via a smart plug. A hot water heater would trade of electricity price, usage profile and current water temperature to optimize its operation. Air conditioners might let the internal temperature rise a couple of degrees if its exceptionally hit out side. A dish washer might wait until a quiet period late at night—long after you’ve gone to bed—before running it’s cycle. Lights would always turn on (of course), but would also turn off again if they cannot detect anyone in the room.

Given an understanding of our usage patterns a market can be used to turn of appliances we don’t need, harvest power then it is cheap (by using waste solar power to pump water up hill), or even sell our excess. Technology enables us to understand our usage patterns and align them with the internal and national energy market to most effectively use the energy available to us.

The new complexity this approach creates could be packaged into solutions. Energy retailers could offer energy plans, analogous to mobile phone plans. Each plan would be tailored to suit different habits and needs. Plans might include value-added solutions, such as installing solar or wind power on premises, integrated into the home market.

In the same way that Threadless and Rolls Royce mined the synergies between business and technology to reinvent their respective industries, some companies might use a supply driven network to transform their business models. Rather than selling electricity (generating more profit by selling more) they might reconfigure themselves into power management companies who help you manage your consumption (generating more profit by selling less). This could range from configuring, monitoring and managing you home appliances to match their performance to your needs, through to installing solar panels on your own roof—at their own cost—so that that they can offer solar power on your internal energy market.

What are the challenges and opportunities created when we move to a supply driven model? What happens when we have supply driven homes? Supply driven committees? Supply driven regions? Or when entire networks become supply driven?

What are the challenges and opportunities created when we move to a supply driven model?
What are the challenges and opportunities created when we move to a supply driven model?

Smart metering and smart plugs are showing us the way. We already have a demand signal, though somewhat delayed, and we can retro-fit appliances with smart plugs to support demand management. The next step is to make this infrastructure a little smarter; upgrading the sensor network to support more distributed command and control, and embedding decision making in the home and, ultimately, the appliances themselves. This enables us to push decision making to the edge of the network where it can scale more effectively, provides us with a generation of much more efficient applications, and sets us up for the future.

Innovation [2009-01-12]

Another week and another collection of interesting ideas from around the Internet.

As always, thoughts and/or comments are greatly appreciated.

This issue:

Innovation [2008-12-15]

Another week and another collection of interesting ideas from around the Internet.

As always, thoughts and/or comments are greatly appreciated.

This issue:

  • What Apple learned from Kodak [BusinessWeek]
    Sometimes repeating what was done in the past is the best path to innovation.
  • Miyamoto unplugged [Edge Online]
    Back before the Wii was released no one took them seriously, but Nintendo’s focus on simply making fun games has paid off and they see no need to change strategy now.
  • The role of business in society [John Kay]
    Sometimes the best approach to success is to approach it indirectly. Apple focused on making products they themselves would love to use, while Nintendo wants to make fun games everyone can enjoy. Obliquity might be the best approach to innovation: try and be the best you can, rather than trying to be the most innovative.
  • In which innovation leads to injury [Wondermark]
    Not all ideas work out the way we expect.