Posts Tagged ‘Business Design’
Late Night Thoughts on Stepping Into Cutter’s Agile Practice Director Role
http://www.flickr.com/photos/holia/3204431590/
I have just stepped into the role of Director, Cutter’s Agile Product and Project Management Practice. It has been a long time since I felt so honored. Little had I expected that a friendly 2008 email from Brian Robertson suggesting I write an article for Cutter, and a later invite from Jim Highsmith to join the practice would lead to my heading it now.
My preliminary thoughts about evolving the practice are summarized in the Cutter press release. I view Agility as much more than a ‘mere’ software method. I envision the combination of Agile, Cloud, Mobile and Social as transformative in nature. Specifically:
It is not ‘just’ about doing one thing or another a little faster. Rather, it is about enabling new business designs that utilize the ultra-fast pace and flexibility of multiple links in the company’s value chain. [Excerpt from the Cutter press release].
An example of the transformation I foresee is given in my 2011 prediction:
The paramount need to deliver faster/earlier is, for all practical purposes, dictated by today’s markets becoming hyper-segmented. For example, my (or your) Twitter network today is an evolving market segment. My Twitter network in March 2011 could easily be a different segment than the segment it is today. The only way to penetrate such fluid market segments effectively is by following the classic Agile mantra “Release early and often.”
Viewed from such perspective, Agility is more than a strategic initiative. It actually becomes a philosophy of life in the best sense of the word:
The real challenge, however, lies in how to go about solving problems when you don’t understand them well enough to get to a viable solution … when you don’t have a clear enough understanding of the problem to create clear solutions, you have to iterate. [Interview with Russ Daniels]
I will be the first one to admit that I don’t fully understand various facets of what it will take to make the Agile practice most meaningful to current Cutter clients and highly enticing to future prospects. Just as Russ suggests above, I plan to iterate.
And this, in the final analysis, is all that matters in an Agile practice.
The Supply Side of the Consumerization of Enterprise Software
Source: http://www.flickr.com/photos/bertboerland/2944895894/
In my recent post about the consumerization of enterprise software I discussed two factors that are likely to accelerate the pace toward such consumerization:
- Any department/business unit that can get a service in entirety from an outside source is likely to do so without worrying about enterprise software and/or data center considerations. This is already happening in Marketing. As other functions start doing so, more and more links in the value chain of enterprise software will be “consumerized.” In other words, these services will be carried out without the involvement of the IT department.
- Once the switch-over costs from legacy code to state-of-the-art code are less than the steady state costs (to maintain and update legacy code), the “consumerization” of enterprise software is going to happen with ferocious urgency.
In this post I would like to add a third factor – the buying pattern. My contention is that the buying pattern for micro-apps will spread to enterprise application. Potential demand for buying in this way is huge. Supply for buying enterprise software as micros-apps is not quite there yet, but it would take only one smart vendor to start transforming the traditional pattern how enterprise software is chunked, offered and sold.
Think about your recent experience downloading an application to your smart mobile phone. You did not go through a six-month evaluation period; you did not do a comprehensive competitive analysis; you did not check how well the seller does customer support in Sumatra. You simply paid something like $7.99 and downloaded the application. You are more than happy if it fulfills your needs in a reasonable manner. If it does not, you simply buy another application with the functionality you desire. Maybe you are a little more cautious now and ask a friend or send an inquiry to your Twitter followers before you pick the new application. Whatever you might choose to do, the fundamental facts are: A) you can afford to lose $7.99; and, B) your time is more precious than the sunk cost of the application. You simply move on.
This buying pattern is not something that you are going to forget when you step into your office in the morning. It makes perfect sense to you and it would be good for your company. You would rather concentrate on your business than on the tricky language of clause number 734 in the contract that your department’s attorney prepared for licensing yet another piece of enterprise software.
The ‘$7.99 experience’ you and zillion other folks like you had over the past week or the past month makes enterprise software vendors extremely vulnerable. The “high-touch; high-margin; high-commitment” [1] business design is not sustainable once the purchase model changes. The expensive machinery of professional services, system engineering and customer support is not affordable at the face of competition that constructs modular chunks of enterprise software and sells them at a price the customer can afford to write off (if they do not perform to satisfaction). Maybe the ceiling in the enterprise to ‘forget about this application and move on’ is no higher than $1,000 (instead of ‘no higher than $7.99’ for the private citizen), but a smart vendor can still make a lot of money on selling at one thousand dollars a pop to the enterprise.
The growing gap between “this lovely application on my iPhone” and the “headache of licensing traditional enterprise software” is an immense incentive for up-and-coming software vendors to use the ‘$7.99 experience’ as the heart of a new business design. This new business design can be simply summarized as “low-touch; low-margin; low commitment” [2]. And, yes, it is very disruptive to the incumbents…
My hunch is that the IT Service Management (ITSM) industry will be the first to crumble. The premise of “service delivery” sounds a little hollow in a cloud computing world characterized by “everything as a service” [3]. Would a buyer be really willing to pay for “service for the service” from a vendor who does not actually provide the underlying service?! It sounds like paying a Fidelity or a Vanguard investment manager to manage a portfolio of their own mutual funds for you…
All it takes for this shift to start – in ITSM or in another part of enterprise software – is one successful vendor.
Footnotes:
[1] I am indebted to Annie Shum for this phrase.
[2] Ibid.
[3] I am indebted to Russ Daniels for this phrase.
Consumerization of Enterprise Software
Source: http://www.flickr.com/photos/ross/3055802287/
Figure 1: Consumerization of IT
The devastation in traditional Publishing needs precious little mentioning. Just think about a brand like BusinessWeek selling for a meager cash offer in the $2 million to $5 million range, McGraw Hill getting into interactive text books through Inkling or Flipboard delivering “… your personalized social magazine” to your iPad. This devastation might not have gotten the attention that the plight of the ‘big three’ automobile manufacturers got, but in its own way it is as shocking as a visit to the abandoned properties in Detroit is.
As most of my clients do enterprise software, many of my discussions with them is about the consumerization of IT. From a day-to-day perspective this consumerization is primarily about six aspects:
- Use of less expensive/consumer-focused components as infrastructure
- ‘Pay as you go’ pricing (through Cloud pricing mechanisms/policies)
- Use of web application interfaces to monitor IT infrastructure
- Use of mobile and consumer based devices for accessing IT alerts and interfacing with systems
- Use of the fast growing number of mobile applications to enhance productivity
- Application of enterprise social networks and social software in the data center
From a strategic perspective, IT consumerization IMHO is all about the transformation toward “everything as a service” [1]. The virtuous cycle driven by Cloud, Mobile and Social manifests itself at three levels:
- It obviously affects the IT folks with whom I discuss the subject. Immense changes are already taking place in many IT departments.
- It affects their company. For example, the company might need to change the business design in order to optimize its supply chain.
- It affects the clients of their company. Their definition of value changes these days faster than the time it takes the CIO I speak with to say “value.”
© Copyright 2010 Israel Gat
Figure 2: The Virtuous Cycle of Cloud, Mobile and Social
Sometimes I get a push-back from my clients on this topic. The push-back is usually rooted in the immense complexity (and fragility) of the enterprise software systems that had been built over the past ten, twenty or thirty years. The folks who push back on me point out that consumerization of IT will not scale big time until enterprise software gets “consumerized” or at least modernized.
I agree with this good counter-point but only up to a point. I believe two factors are likely to accelerate the pace toward “consumerization” of enterprise software:
- Any department/business unit that can get a service in entirety from an outside source is likely to do so without worrying about enterprise software and/or data center considerations. This is already happening in Marketing. As other functions start doing so, more and more links in the value chain of enterprise software will be “consumerized.” In other words, these services will be carried out without the involvement of the IT department.
- Once the switch-over costs from legacy code to state-of-the-art code are less than the steady state costs (to maintain and update legacy code), the “consumerization” of enterprise software is going to happen with ferocious urgency.
If you are in enterprise software you need to start modernizing your applications today. The reason is the imperative need to mitigate risk prior to reaching the end-point, almost irrespective of how far down the road the end-point might be. See Llewellyn Falco‘s excellent video clip Rewriting Vs Refactoring for a crisp articulation of the risk involved in rewriting and why starting to refactor now is the best way to mitigate the risk.
Footnotes:
[1] The phrase “Everything as a Service” has been coined by Russ Daniels.
“What is Our Recipe for Success?!”
A pattern started to emerge for me as I was listening to various participants in the Rally Agile Success Tour in Santa Clara. Agile champions these days often operate in the context of aging business designs. Opportunities the Agile champions highlight to utilize Agile for higher productivity, better quality and faster time-to market are often lost amidst a vicious cycle: sooner or later aging business design are accompanied by value outflow; the severity of the value outflow problem consumes most/all executive cycles; consequently, the message about the various ways in which Agile could help turn things around are not heard. It is a sad irony: at the time Agile is needed more than ever, openness and receptivity toward improving operations and attaining competitive advantage through new (software) methods tend to decline.
Here is a simple question you could ask executives in your company if/when your Agile message does not seem to get heard:
What is our recipe for success?!
The point in posing this question is straightforward: start a dialog aimed at identifying the linkage(s) between the benefits of Agile and the strategy or grand strategy a company is implementing. No matter what business your company is in, chances are software plays a big part in whatever it does. Any business process in your company depends on software. Services your company offers require software in one way or another. Quite a few products your company brings to market are likely to contain embedded software. Compliance requirements your company needs to adhere to inevitably depend on software. These days we all witness pervasive software in the true sense of the term.
The possibility exists that the question “What is our recipe for success?!” might be be misinterpreted as flippant. If you are worried about such misinterpretation, ask your Agile consultant to bring up this question. It is an absolutely appropriate, indeed necessary, question for him/her to pose in the course of designing an effective Agile roll-out. The roll-out itself might (or might not) be focused on R&D. However, the plan for so doing must factor in business circumstances and imperatives. The recipe for success question is part of “deciphering” the business context to enable R&D to be truly aligned with the business.
Marauder Strategy for Agile Companies
Colleague Annie Shum sent me the URL to a recent post by Clayton Christensen in The Huffington Post. In this post Christensen characterizes “disruption” in the following manner:
Disruption is the causal mechanism behind the “creative destruction” that [economist Joseph] Schumpeter saw so pervasively at work in capitalist economies. [Links added by IG]
Christensen’s post is largely about the automobile industry. It, however, ties nicely to an email exchange Jeff Sutherland and I had about Agile as a disruption inside the company vis-a-vis its intentional use as a disruptive methodology in the market. To quote Jeff:
We are starting to see organizations like yours that can use Scrum to disrupt a market. There is a tremendous amount of low hanging fruit out there. Dysfunctional companies that can’t deliver. I’ve been recommending a “Marauder” strategy to the venture group. Find a company who has a large amount of resources. Set them loose like pirates on the ocean and they seek out slow ships and take them out.
Carlota Perez, who has been often cited in this blog (click here, here and here), is a disciple of Schumpeter. I really like the way the “dots” are connected: Schumpeter –> Perez –> Christensen –> Schumpeter. Their theories of disruption and constructive destruction express themselves nicely in the business design proposed by Jeff.
The Agile Executive 