I spend my days in the Innovation Office of a large professional services organization. Our team focuses on helping the firm generate and refine new ideas to improve our culture, operations, and the services we provide to clients.
All our efforts would be useless unless what we do is strategically aligned. One tool we use to ensure alignement is to map out the business ecosystem: we begin by modeling the structural elements (who are the stakeholders, what are the relationships between them, and what kind of interactions do they have), then we overlay the forces (technological, cultural, legislative, etc.) that are creating pressure for change on the stakeholders. By identifying the forces that are driving change in an ecosystem, you can more effectively scope your innovation activities and prioritize your ideas.
Having been through this exercise a number of times, we have found that, while the structural elements vary from domain to domain and many of the forces are unique, a handful of the forces are common to all ecosystems. Here’s what we’ve found to be the common drivers of change acting on every ecosystem, or the 5 vectors of business transformation:
1 » Infrastructure: From Servers to Services
Previously, a company would maintain a server rooms in secure locations to hold their applications and information. If you needed more computing power or storage capacity, you would purchase more servers or add more disk drives to expand your infrastructure. Today, there are countless benefits to buying cycles or storage on servers in the cloud.
For one, you can ramp capacity up and down with need. For instance, Amazon S3 allows you to match your capacity to need in real time. If you need more storage space, you just take more storage space. If you can clean house and pare down your data needs, you just remove data from the system. If you were maintaining your own servers, you’d be locked into the cost of keeping the maximum number of servers necessary. You are also locked in to the cost and resource needs to maintain those servers.
Another is how you utilize functionality. If you maintain your own server farm, you create or purchase the code necessary to execute each bit of business logic. In a services scenario, you can hit an API and feed it your data in order to get back the result you seek. There’s no need to hire developers to build and maintain that code. You can also let the service provider worry about updates to the code, all you need to know is what you need to input to get the right output.
One interesting development is the emergence of markets based on excess capacity, like SpotCloud. People maintaining large numbers of servers can put their excess capacity up for auction in the market and those who need more capacity can bid on that excess capacity. That has the effect of optimizing both capacity and pricing for cloud-based infrastructure.
There is a slow, but consistent, move away from centrally maintained servers with proprietary code to SaaS applications and integration.
2 » Products: From Artifacts to Experiences
The things you buy are getting less thing-y. It used to be that you would buy a scale and when you stepped on it, the display would read out your weight to you. Done.
Now, a scale can go far beyond that point-in-time interaction. Not only can it measure your weight, but also gather other biometric data, log it in a cloud-based database for you to track your weight, share the results with your medical professionals or, if you prefer, your entire Facebook friend list.
Even standard products are getting apps as add-ons, creating new functionality and new communities around the artifact. The Chevy Volt has a companion app that reports out data about your vehicle and allows you to remotely control many vehicle functions. Tivo Premiere owners can download an app that allows them to interact with their set top box in interesting ways including remote control and extra information about the programs currently being watched. We will see the number of artifact/app partnerships continue to grow in the future.
Your products have a story to tell and that story changes the mode of interaction with your products. I’ve reminded of Bruce Sterling‘s definition of Spimes, where a product’s knowledge of its history and usage cannot be distinguished from the product itself. Now, your car can share its telematics with you to optimize its usage, and a golf club has an embedded chip to help you develop your swing. Using a product helps you learn how to better use that product. It also helps the designers understand how to make improvements to the product and corresponding experience.
3 » Channels: From Customers to Communities
John Sviokla wrote an interesting post detailing the difference between the campaigns of Barack Obama and Hillary Clinton. He noted that the difference between giving to each campaign was that Hillary gave you a receipt for your contribution, while Barack gave you membership. Along with that membership came the ability to interact with other Obama supporters and a constant feed of info from the candidate.
Other organizations have taken a similar tack. Southwest enables its customer base to help each other consume Southwest’s services more effectively. Comcast’s success in leveraging Twitter as a support channel has been well-documented. And New York City allows its citizenry to report issues via social media and track the response transparently in real-time.
Engaging your constituents as a community rather than as a collection of individual interactions allows you to look across those interactions for common concerns or themes and address them appropriately.
In addition, the channel is now two-way. Listening to your consumers, supply chain partners, and competitors is just as (if not more) important that what you say. Engaging in dialog with a community requires openness and trust – two things that have historically been difficult for large organizations. Enabling and equipping your people to articulate your brand through open and honest dialog is the most effective way to open the door on community engagement.
4 » Organization: From Centralized to Distributed
These disruptive forces are having a profound impact on the way we structure our organizations, as well. Companies have gone from being structured around chains of command, to being focused on processes, to a matrix with overlap between roles and resources. I’ve written previously about the changes to corporate structure because I see a trend toward edge-enabled tribal organizations.
But, it’s important to note here that the corporations you’re working with are going through similar transformations. The lines between separate organizations are blurring just as the lines on the org chart within your organization are blurring. The distinction between home and office is blurring. It is just as likely that you will interact with a client from home after hours as it is during the day and through official channels. The nature of corporate relationships is blurring into personal relationships as well.
5 » Insight: From Hierarchy to Heterarchy
Finally, all the changes in how we do what we do has brought about changes in how we view, interpret, and report on our activities. Not only is data being generated in greater quantities than ever before, but new types of data are being generated all the time. The era of Big Data has been sparked by the ubiquitous availability of these masses of both quantitative and qualitative data. In addition, new streams of data are being created by mashing up data from different sources.
With growing frequency, new technology-enabled community interactions are generating unique data streams that can be interpreted in new ways. Target was famously able to predict that a teenage girl was pregnant before even her father knew. This was possible because Target was able to look across large amounts of purchasing data and make a correlation that wouldn’t be obvious looking at individual interactions.
Semantic analysis is making it possible to measure things like consumer sentiment and the “white space” in community conversations (what people are not saying is often as important as what they are saying). New algorithms on today’s vast amounts of data make it possible to perform predictive analytics with unprecedented accuracy. We are currently drinking from the fire hose and only chipping at the tip of the iceberg of what is possible as far as interpreting the information available to us.
Regardless of the focus of your organization, it’s guaranteed that you are being affected by these 5 transformational forces. Think about the kinds of changes they’re bringing to the ecosystem in which you operate and prioritize your innovation activities accordingly.