A New Way for Entrepreneurs to Think About IT

Entrepreneurs have historically taken one of two approaches to IT. Most think of IT as a “necessary evil.” For this group, IT is for back office support for their business ideas. They typically hire third parties to help them with IT and never make it part of their core business. A second set of entrepreneurs focus on information goods and think of IT as the product. These entrepreneurs typically have an engineering background, and schools that support this approach have strong engineering departments. Given their capabilities, these entrepreneurs take a “do-it-yourself” approach and develop software to support organizational needs.

But today there is a third approach, one that will become the dominant path for most entrepreneurs, especially those building information products. This third way thinks of IT as essential for interacting with all of a new venture’s stakeholders. Importantly, though, entrepreneurs with this perspective are happy to use existing IT building blocks to create those interfaces. Theirs is a “bricolage” approach to digital.

Bricolage, a French word by origin, means the construction of things from a set of available items. The bricoleur is a French term for the person who employs such construction methods—in short, a handyman or jack-of-all-trades. Entrepreneurs today who practice digital bricolage can construct amazing companies and organizations from existing pieces, many of which offer capabilities once available only to large businesses.

Over the last 15 years, Internet giants have built platforms or utilities on top of the Internet that make innovation easier and faster. For instance, Amazon has created a cloud services business that enables established firms and startups alike to rent IT infrastructures and processes from Amazon. Amazon Web Services (AWS) has built a robust infrastructure that can handle heavy demand and has the spare capacity to let others use it. Microsoft, IBM, and Google offer similar services. Companies can also rent their business applications (for accounting and finance, human resource management, marketing and sales, collaboration, project management, and so forth) on-demand from companies like Microsoft, Salesforce.com, Workday, Hubspot, Yammer, Dropbox, Basecamp and others.

Another way to pursue digital bricolage is to share data and applications across organizations. This has been made possible with the arrival of application program interfaces or APIs. APIs are a technology that allows firms to interact and share information with other firms at an unprecedented scale. If your website needs mapping capabilities, you can get them through APIs from Google or Mapquest. If you need weather data for your site or your business, you can turn to Accuweather, Weather Channel, or Weather Underground. Need travel information or services? You can get them through APIs from the likes of TripAdvisor, Expedia, or Amadeus.

Some providers of IT capabilities have even created APIs for the core of their offerings. For example, when IBM unleashed the cognitive technology Watson, it did not try to create all the applications if the technology itself. Instead, IBM opened the APIs to Watson (there are now about 35 of them, with more being created all the time) and allowed third parties to use them for cognitive service applications. These APIs were picked up by Memorial Sloan Kettering Cancer Center and other hospitals, for example, and developed into a highly useful oncology treatment application that doctors can use with patient encounters.

With APIs, data integration investments need not depend on relationships. For example, Expedia’s publicly described APIs (Expedia Affiliate Network) enable data integration across numerous partners that include almost all competing airline companies, thousands of hotels, resorts, rental car companies, and payment service providers. Expedia’s APIs need not have any limit on the number of partners signing up. In fact, Expedia benefits when more partners sign up, with little if any increase in costs and complexity. More partners eventually yield more visits to the Expedia site and more bookings.

The trick for entrepreneurs and digital innovators, then, is to use a bricolage strategy to obtain modern digital infrastructure and tools to transform existing businesses or conceive and build new ones.

These digital innovators use the modern-day infrastructure as Lego-like building blocks to build novel and interesting new products and services. Take a company like Airbnb. It has identified that there is variability in supply and demand for lodging services and created a platform for accommodation seekers and accommodation providers to find one another. Airbnb uses the smart phone and its location information to get customer information, uses existing payment platforms, and AWS for its infrastructure needs. The magic building blocks that Airbnb adds are tools for matching, spot pricing, and analyzing the data it collects on all participants in its ecosystem. By empowering renters and seekers with relevant data conveniently delivered through the smartphone, Airbnb is disrupting the entire travel industry. But it is not stopping there, partnering with third parties like American Express, Nest, Tesla and KLM Airlines to provide their customers with more value added services. Other fast-rising digital companies like Uber have employed similar approaches.

What does the availability of re-usable infrastructure do for digital innovators? It has several key benefits:

Speeds time-to-market. APIs and platforms reduces the time-to-market for products and services.

Provides a low-cost, real-time network to test ideas. Entrepreneurs with an idea can describe an idea and get people in their target market to vote on them using platforms like Facebook and Twitter. A/B testing allows for rapid comparison of alternative features and functions. Crowdfunding sites are another avenue to test product ideas. As a result of these mechanisms, entrepreneurs are faced with lower experimentation costs. And given the low cost for infrastructure, entrepreneurs of digital products or services can launch their companies very quickly and test to see if there is truly a market for an idea.

Provides access to experts or mentorship. Today, it is possible to get many of our questions answered using social media-enabled networks. The trick is to follow influential people and make connections with them. In addition, if you ask and respond to queries in LinkedIn and Quora forums, people take notice and reciprocate by answering your questions. In addition, entrepreneurs have blogs and resources that are tailored to them, like Onstartups.com.

Eases partner identification and access. In earlier times, companies had to get their legal department involved and sign contracts before experimenting with a partnership. Today it is possible for companies to build complex ecosystems by making their data and services available to third parties and tracking usage. If they find that there is high usage, they can then negotiate terms and agreements. This is often referred to as “ubiquity first and revenues later” strategy.

Bricolage of IT capabilities and related services means that digital entrepreneurship is easier than ever before. Entrepreneurs need only to be aware of existing external resources, and to make smart decisions about which ones to build themselves and which to obtain in the external market. They need a good business idea, but they can quickly test and refine it using available tools. This network of resources will only continue to expand, and will continue to transform the process of business formation and scale-up.

ABOUT AUTHORS
Bala Iyer (@BalaIyer) is a professor and chair of the Technology, Operations, and Information Management Division at Babson College in Wellesley, Massachusetts. 

Thomas H. Davenport (@tdav) is the president’s distinguished professor in management and information technology at Babson College, and cofounder of the International Institute for Analytics. He also contributes to the MIT Initiative on the Digital Economy as a fellow, and as a senior advisor to Deloitte Analytics. Author of over a dozen management books, his latest is Only Humans Need Apply: Winners and Losers in the Age of Smart Machines.

*This article was originally published by Harvard Business Review on June 28, 2016.