The Virtual Transformation

Article first published as The Virtual Transformation on Technorati

In August 1995, Microsoft launched Windows 95 in an attempt to capture their founder's audacious dream of having a computer running Windows on every desktop in the world. But in a world with an insatiable appetite for communication the vision statements have dramatically changed. Everyone is leaving their desktops behind and moving into the cloud and soon reaching for the stars. In an increasingly mobile world instant gratification is top order.

Bye bye PCs

Three global behemoths, Apple, Google and Microsoft are locked in a battle for supremacy, and there are the outliers, Amazon and RIM. One a bold maverick and the latter was once a visionary in the enterprise world, now fast disappearing into the background . While Microsoft still maintains a stranglehold on the PC marketshare Google and Apple have gone mobile and flipped the game on Microsoft. Over the last few years PC sales has diminished, as we speak there are more smart mobile devices (smart phones and tablets) sold than PCs. IBM sold their, once priced PC business to the Chinese firm Lenovo. HP is struggling to hive off it's PC business, in an attemptt to move into high value solutions and services. This is a testament to the fact that the era of the PC will soon be behind us. This is made possible through increasingly shrinking chipsets and cloud based services. While device footprint are increasingly portable, we are witnessing convergence, now no one carries an mp3 player, phone, and a camera, they just carry their smart phone instead.

Devices to services

In a fast evolving world and market place nobody has the time to marvel at product spec sheets, everybody is interested in the end service. In other words, what's in it for me? Hardware manufacturers no longer just publish technical specifications, instead feature apps and their services. So what sells now is Nokia's navigation services, Amazon Kindles's books online, iTunes music or YouTube's video channels and the device is merely a means to an end. This is increasingly driving the cost of the hardware down, as seen with the launch of the Kindle Fire. The device that runs the largest app store indirectly delivers the widest range of services. Apple sits pretty on top with 414,852 apps since its launch in 2007, while Google is fast catching up with 237,199 apps in the last 3 years.

Your avatar in a virtual world

Moving away from the physical world is a direct result of this transformative communication age. You no longer need to carry your wallet, just flash your phone to pay your check, Singapore is the third Asian country to adopt NFC for payments in a large scale after Japan and Korea. For many, shops are just viewing galleries, they try out new clothes and swipe the barcode to purchase it cheaper online. Track the delivery status, pay your bills, drop off a check, hail a cab, check-in to a flight everything from your phone. You can literally rule the world from the palm of your hands. Owe your friend money just bump your phones to transfer money. The line between the physical world and the virtual is fast blurring. No more cash or credit cards just a smart guy with a smart card in a smart phone.

Go east, get young and get rich

The new markets are rapidly moving east as the average age of the rest of the world is fast rising and the west is struggling to revive growth. China's median age is 35 and India's around 29, this means more than 25% of the world's population are under the age of 40. The youth in these regions are not going to stand in long queues to do business, they are going to do it online and will want it at a fraction of the cost. These are low cost economies where it's all about volume. India and China alone constitute over 1.6 billion mobile subscribers. Going mobile here reduces cost of services and increases reach to tap into a fast emerging middle class and remote corners where modern services remains remote. India just launched a 35$ tablet, this will expectedly, further kill PC sales in the region and will soon make India one of the largest internet markets. So while western economies are having to deal with an aging population the new markets are young and eager to absorb new technologies.

Competing with Free

Ever since Gillete offered shaving sticks for free while selling razors, we have inadvertently entered the age of free. We are seeing innovative pricing strategies and bundled services offering, banks provide free money transfer and make money off float, TV channels offer free online viewing as against paying cable charges. This is further made possible by the cost of setting up business on the internet coming down, dramatically reducing entry barriers. News channels have to compete with bloggers and the social media where people are experiencing instant news that is fast and free. So companies now have to build innovative strategies to monetize free.

Embrace the change

It is important to embrace this change and adapt to the new strategies. Business relying on online channels for new innovative services, is not another hype like the dotcom bubble, this is a paradigm shift. The shift is to value focused services, innovative pricing strategy with a constant downward pressure on costs, products and services that constantly evolve, supported by a strong technology vision and strategy. In short in the future there will be very few services that rely purely on a physical delivery channels. The industries most affected by this change are Entertainment, Media, Financial Services and Retail.

Invest in the right technologies

When the entire world is gravitating towards mobiles and the cloud, it makes no sense to persist with desktop and other physical services. Companies that are aggressively investing on their internet platforms have to make sure it's tablet ready and backed by mobile services capabilities. This is a significant change to technology roadmaps. Volumes and frequency of hits will increase, driving up traffic, therefore will require the supporting infrastructure, both in terms of availability and capacity. Mobile services operate on different technologies, this will mandate robust services based (SOA) platforms capable of supporting multiple delivery channels or end points that include PCs, tablets and smart phones.

Rapid innovation with shorter product life cycles

A rapidly evolving product and services portfolio is much needed where entry cost with business going online have come down. Innovation in organizations cannot be confined to the R&D teams. Finally being able to convert new bright ideas into reality and doing it quick is the need of the hour. This is not possible unless business is supported with open innovation platforms, agile IT and business processes Product release cycles over the years have consistently reduced from years to months to weeks. Information sharing is simplified outside the enterprise and users are able to easily share rich content and communicate with ease. There is a significant step down when employees step into enterprises that are struggling to catch up. New apps are launched every day in the app stores and it is frustrating to work with a lumbering IT function that takes weeks to even provide a solution. IT and business need to transform themselves into light weight nimble teams that can provide quick turn around times and freely innovate.

Now or never

As the online consumer base grows, the physical paper based services will eventually disappear, further increasing the need for automation, dramatically shrinking turn around times and SLAs ,eventually transforming current business operating parameters. Organizations that struggle to adapt are more likely to fail in this new unforgiving world of business.

While there is a lot of debate on the future technology landscape, some of which is denial, some as a result of the new technologies being transitionary.In my mind the direction is clear, there have been some fundamental changes in the way business is done, the way technology impacts business and there is significant advantage in investing ahead of the curve.

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Operationalizing Enterprise Ecosystems

Article first published as Operationalizing Enterprise Ecosystems on Technorati (PCX5DZB6CX25).

In the times of F.W. Taylor, focus of enterprise process was on repeatability and predictability and less on adaptability and agility. A hundred years later automation is pushing the monotonous functions to computer systems, using tools like self service solutions and straight through processing. As enterprises mature the role of the desk clerk who will come into work and do the same job day in and day out will be marginalized. Every employee will be empowered with the power to think, plan and execute in the new innovative enterprise.

The biggest challenge in being the innovative enterprise is in transitioning from conventional organization and systems to one that enables mass scale innovation, building the ability to tap into many little idea bubbles and aggregating them into new product or services that impact change in the way business gets done. My belief is this can be a achieved by establishing the right frameworks and tools or an Enterprise Ecosystems.

While this is the future, it is important to understand where organizations stand today and the direction in which they are evolving and why we are in a much better place to make that transition today than ever before.

Enterprise evolution

Enterprise Strategy

Enterprise strategy is conventionally driven top down, where the board decides the strategic direction, the annual and quarterly targets. The rest of the employees are expected to pretty much expand on the vision and execute. While this model has served the interests of rich boards and some overpaid CEOs does it really do justice to the true growth potential of an enterprise?

Ownership Structure

There was a time when organizations were started and owned by a few wealthy investors pooling their resources to start a company. As scale increased companies were restricted by the availability of capital. That changed with the advent of organized institutional finance and public capital markets. Ownership could rest in the hands of hundreds of thousands of investors driving up the scale of enterprise to heights never imagined before.

Management Control

Conventional enterprises depended on a centralized command and control model where a small executive team that decided the fate of thousands of employees. Systems were designed to support a centralized chain of command and a pyramid style organization, with management and control that rested in the hands of few, restricting growth and innovation. As organizations spread across multiple geographies and became today’s mammoth, global enterprise, product lines and services had to be adapted to the culture, tastes and preferences of the local markets. Therefore control shifted to regional and countrywide command centers and thereby broadened the span of control and adaptability of the organization.

Innovation

Innovation in most organizations was driven by R&D teams which was capital intensive and was restricted to the brightest minds in the world. This drove the thought that all product development is capital and resource intensive hence had to be centrally managed. With the internet and open source revolution we learnt that products can be loosely managed and allowed to evolve naturally, through mass innovation. Linux being the first of many successful open source products to prove products can be developed with no R&D teams and no executive boards defining go to market strategies or goals. It was the form of free enterprise that proved one does not need the restrictive corporate structures to successfully develop products.

If as in Fig 1.1, 80% of your organization was execution focused, 20% was ensuring goals set by the top 0.1-0.5% were met; the organization is wasting at least 80-90% of its intellectual potential. As the opportunities to innovate and generate value drops in the lower levels of the pyramid. This leads to typical idea bubble evaporation, where employees are forced to suppress ideas, either because they are so low down in the hierarchy to be heard or their job description doesn’t enable them to step out of bounds. Over time the lost bubbles cost organizations in terms of lost opportunities and employees who leave with their ideas to start off on their own or even worse hand it over to competition. The challenge can be addressed by creating the right Enterprise Ecosystems, a system that captures, develops and convert ideas into real world solutions.

A one hit wonder or sustained innovation

In the book The Element the author mentions an interesting anecdote where George Harrison one day got together with Bob Dylan and group of like minded musicians in a jamming session. What was a casual get together of music's greats resulted in Handle with Care which turned out to be Harrison’s greatest song in the post Beatles era. Is innovation truly a random event? Do we all have a Dylan or a Harrison in us? The answer in my mind varies based on what you set out to do. Do you want to be a one hit wonder or whether you want to create a system that consistently delivers? In an ideal world George Harrison and Bob Dylan should have got together and started one of the greatest rock bands after their album Traveling Wilburys but that never happened. That’s because what got them together did not keep them together. Traveling Wilburys was like an affair or a fling and had all the flair and charms of one. Innovation in the enterprise is not a fling; it’s about creating a sustainable and a constantly innovating enterprise.

The time is ripe for an innovation culture

Corporations ownership structures are decentralized, control is spread across the levels of the organization in flatter organization structures. The open source programs of the world have established that innovation is not restricted to exclusive product development teams and can be broad based. This proves the power of plenty. Yet it is necessary to have the mechanism to piece together a framework that can identify the right ideas and convert them into viable solutions in an enterprise.

Enterprise ecosystems

An ecosystem is alive, dynamic, constantly evolving, nourishes growth and is supported by a strong community. Enterprise ecosystems create the internal mechanism for their employees to create new ideas and for like minded people to collaborate and build on it to the point where it can become a solution that justifies further investments. The idea can be a product, service, or even a new process. The ecosystem acts as a system that enables the identification, evolution and formalization of an idea into an offering. Further it is a culmination of tools that simplify collaboration, processes and systems that incubate ideas across the enterprise.

Enterprise Ecosystems and the innovation lifecycle

Idea Generation

Idea generation can be a random lightbulb moment or as a result of more deliberate thought which may arise due to gaps in services or product offering. Typically when ideas emerge people don't think of penning it down or even sharing it and building on it. It is necessary to create the necessary tools to capture ideas, promote a knowledge sharing culture and define the reward mechanism to effectively promote idea sharing. This is to ensure every light bulb moment is captured and given the opportunity to grow into a future offering and does not turn into another lost bubble. The idea generation systems offered might include:

An innovation portal that facilitate idea capture via idea blogs, discussions and posts

An Innovation Council that monitors these programs and identifies those ideas that demonstrate value for further investments

Feedback loop

The web and the social media tools generate a lot of chatter. Several organizations have invested heavily in internal social media tools, but often fail to also build the feedback channel. A channel that can sift through the chatter and pick up relevant information and piece it together to form meaningful intelligence. Therefore when the enterprise sets up a mass innovation systems, there must also be the mechanism to identify the right ideas. The Innovation Council supported by the necessary tools will play a pivotal role in whetting these thought bubbles and identifying the diamond in the rough.

Idea project development

An idea to be converted into a final solution will have to be designed, developed and tested. It further requires feasibility studies, market research and commercial evaluation to be converted into an offering. So as ideas bubble up via the feedback channel a project group is setup to further build on it and test it. The important element here is time and resources. Just as in the open source world, not everybody quits their day job, here also the idea is developed using a team of volunteers who truly believe in their idea. The team will have to be supported with the necessary management and collaboration tools to manage their project. It must be developed under the umbrella of an Innovation Council, to ensure that the focus is maintained and the necessary expertise is available. The initial beta tests can be conducted within the organization's volunteer groups. The end outcome will be a solution design, feasibility study, a beta tested product or service and a business case.

Create new offeringOnce the offering is adequately flushed out, feasibility study is complete and business case is established the Innovation Council will carry out the first level evaluation of the idea. Evaluation would examine the quality of product or service design, it's feasibility, impact to existing product or service lines, value proposition, market preparedness, targeted consumers, alignment to organization strategy, competitive positioning, investment requirement and commercial viability. On passing the litmus test the Innovation Council will represent the idea to the executive teams that will make the final decision on the new offering. Once the executive teams approve the service or product offering, the idea is passed on to the new product or service transition function. From here on it becomes part of the organization's process for a new product rollout, spearheaded by the innovation team.

Organization considerations for success

Establishing the Innovation Council

The Innovation Council will have to be represented by the various functions of the organization. It must be a group of experts with sufficient industry exposure and understanding of the organization's various functions. The council must be able to invest sufficient time and effort in identifying the ideas for further funding, whetting the various offerings presented, providing the necessary expertise and governance to the innovation program. This is a critical function and group that must have an open innovation mindset, this is pivotal to the success of the entire innovation program.

Reward Mechanism

When it comes to the open source communities, the driver is to build open products outside the mould of the corporate world. The ideals here is for a cause that is sometimes and not always non-profit. But this may not work in an enterprise context, so the organization must structure a reward mechanism, which has to be adequate to motivate active participation. The rewards could range from a one time pay off to royalty sharing with the employees and leadership roles in the new product or service lines.

Innovation cultureWhile a sizable reward is motivation for an innovator but the organization must have an innovation culture.

Not suited to a centralized command and control organization setup, requires a democratic leadership structure that empowers their employees

Employees hired must have a creative bend of mind and the aptitude to innovate

Organizations that largely hire low cost and low skilled resources who lack the skills to design and develop products or services may not deliver sufficient value for such setups

Must be supported by the internal groups for knowledge sharing, closed organizations where there isn't an active community for sharing and exchanging ideas will struggle to innovate

External programs, training and entrepreneurship programs to grow the innovation culture will nurture the talent pool and egg them on to innovate

Products that have very long gestation, that requires several years of specialized research may not be candidates for mass innovation

In a world where information dissemination is faster and simpler than ever before and rate of change is rapid, where fortunes are made and lost in quarterly cycles, innovation is critical to thrive. The role of employees is no longer to turn up in factory lines and execute mindlessly but to create value and innovate. The challenge is to turn the tables on the 80:20 rule of the old and increasingly provide employees the opportunity to move up the value chain. Enable them to assume leadership roles unhindered by stringent organization hierarchies and a central command imposed. While doing so it's essential to empower employees with the tools and support systems that nurture ideas and enable them to evolve into product or service offering. In order to create the new innovative enterprise, it requires sustained innovation, yet the freedom to mushroom from any corner. The overarching framework that enables the enterprise to evolve organically and unobstructed is the Enterprise Ecosystem.

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The old world and the new

One might wonder, if people had the same routine for the last 60 years, what has changed? People have been reading the news, the weather report, going to coffee shops and meetings since the last 100 years, so why are we so plugged in? Because depending on how you look at it everything has changed or nothing. My father visited the Grand Canyon and took a helicopter ride across the canyon in 15 mins, I hiked it over 2 days. My father still tells me he did what I did over 2 days in 15 mins and I still maintain he has not seen the canyon.

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Living in the cloud (Blog series)

Us humans have walked the planet earth for over 200,000 years. In this time we have seen a stone age, bronze age, the industrial revolution and now we are entering a new age which is just as pivotal, what could be called the age of the cloud. Yet when you live through each day so much seems to have changed yet nothing.

I wake up in the morning brush my teeth, grab some coffee, check the weather, catch the morning news, read the paper, go for a quick run, shower and check my calendar, drive down to meet a client, check in to the nearest coffee shop and grab a quick breakfast just in time to make it to my appointment. Probably fits the description of any urbanite in the last 60 years. So then what’s changed?

Let’s quickly rewind the morning scene and play it back a little differently now. Wake up in the morning brush my teeth, grab some coffee, log into Wunderground check the hourly forecast, switch to my news reader catch my personalized news, turn on my trail tracking software go for a run, compare the speeds of my last 5 runs, check my phone calendar, jump into my car turn on the GPS, spot a coffee shop on the way to the client office, grab a quick breakfast , whoops I’m late, so just dial into a video conference and continue to enjoy my breakfast.

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