Strategies For Digital Business– PART II

Please check out PART I of this article if you have not yet read it here.

Data Driven

Lately the phrase ‘Data is the new oil or currency’ is in every business guru’s vocabulary. With the advent of data management technologies during last decade or so, that allowed easy ingestion and processing of Big Data, there is no secret that data is particularly important for every business in all sectors. For those who have managed to capitalize on this wave, data has become a new energy source fueling growth and major source of revenue.

Just like crude oil must be first refined before it can become useful in its purest form along with numerous other value-added side-products, raw data also must be first processed before it becomes useful in variety of ways. For example, efficiency in all aspects of business functions can be improved merely by sharing data across all business units based on user’s needs, traditional decision support can be enhanced by multiple orders of magnitude with business intelligence and advance analytics. Business and IT operations can be made efficient, and security can be tightened by leveraging advanced analytics, artificial intelligence, and machine learning algorithms. A whole new range of products and services can be built around data ecosystem by creating and monetizing data services.

Data streaming, processing, and management platforms have become commoditized and are easily accessible to all businesses. Capabilities such as data mining and data science that were once only afforded by large businesses are now available in public cloud for use to new start-ups, again leveling the playing field. Technology advancements under SMACIT are transforming the business models and operating models and making it possible for businesses to safely go on their digital modernization journey despite competitive pressures.

Businesses with data-driven business models base their core business operations around the availability and use of their data assets. To be truly a data driven business, it must adopt a data centric enterprise architecture and build their operating models ground up based on the data centric enterprise architecture. In other words, businesses define the conceptual enterprise data model first and then design and build the systems that support lifecycle and flow of the data entities, as opposed to how traditionally the IT ecosystems are built today, by cobbling up assorted set of diverse systems together to support end-to-end business processes which oftentimes creates duplicate and fragmented data models that are virtually impossible to extend and manage. Adopting the data centric architecture requires transformational changes to the core of business and its culture. This dependence on data architecture at the core affects all dimensions of business model and operating model.

Businesses that have not yet adopted data driven strategy are clearly lagging in the race and so they must gradually start factoring in aspect data centric architecture during their strategy formulation to keep pace with the competition. Some good examples of companies who at the core have embraced the data centric architecture are – Google, Netflix, and Uber. Recently McDonald is making great strides in adopting data centric model.

Business As a Platform

Most traditional businesses create value by producing products and services and sell them to their customers. Here the business is responsible not just for creation of products and services but also for attracting their customers. This is a traditional linear value chain and hence the businesses who follow it are referred to as the linear businesses. Traditional behemoths like General Motors, GE, Siemens, Standard Oil, and Toyota are some classic examples of these linear businesses.

Lately, with the explosion of SMACIT technologies, it has become possible for new businesses to take advantage of the advancements in the social platform technologies and build their business models around these platforms. These new businesses provide a virtual marketplace for the suppliers of products and services to be sold to many potential buyers and provide easy access to these products and services and attract the consumers on behalf of the suppliers. These are platform businesses. The concept is not new, it is at the very core of the modern stock exchanges. Recent good examples of pure platform businesses can be found in Uber, Airbnb, Alibaba, and of course the pioneer, Amazon.

Physical marketplaces have been around since the dawn of civilizations, what is new is the concept of a ‘virtual’ marketplace that has the potential to provide access to considerable number of customers around the globe with unlimited choice of products and services. Platform business model can be considered as a new spin on the old brokerage model where the platform businesses function as the ‘match makers’ for supplier and buyers.

The linear business is a single entity serving limited set of customers who are interested in their products and services; the platform businesses, on the other hand, can support many suppliers serving a much diverse customer base where there is plenty of opportunity to upsell and cross-sell variety of products.

The platform businesses clearly scale easily compared to their linear counterparts and they do so by taking advantage of the network effects. As more customers visit the virtual marketplace, they are more likely to continue to revisit the platform repeatedly and these customers can also by way of ‘word of mouth’ spread the news about the products/services on the platform within their social networks for free this clearly provides an edge for the new businesses.

Another way the platform businesses succeed is not having to burden themselves with lifecycle management responsibilities for the products and services they sell on the platform which are expensive and time-consuming activities. Another advantage is that most of the products and services that are sold on the platforms are digital in nature (e.g., pictures, text, audio, video content) and can be produced at scale much quickly with almost zero production costs.

This does not necessarily mean linear businesses are bad and platform businesses are good. In fact, platform businesses need linear businesses to exist in the first place. The reality is that every business model has its niche to succeed in the market, provided their business strategy, business models and operating models are implemented efficiently and effectively. There are many examples of successful linear businesses that have prudently applied one or more of the digital strategies described here.

The trend nowadays however is towards a hybrid strategy that effectively combines strengths of both the linear and platform business models. There are many good examples of new and established businesses that have adopted this hybrid model, most notable and obvious examples being Apple and Amazon. Both have their own products and services and run partially as linear businesses however, they also have extensively leveraged the platform business model to augment their business to create community of suppliers (App developers for App store in Apple, and Amazon platform that supports large supplier network, for example) to cater to a broader and global customer base.

The traditional financial businesses with the help of new FinTech and Insure-Tech entrants are also taking advantage of the hybrid platform as a business model. It is evident from these examples that businesses who formulate their strategies based on hybrid model have a vast competitive advantage over their linear counterparts and can create potential opportunities quickly to grow at scale.

Innovation

Innovation, as a concept refers to the strategic approach organizations undertake to conceptualize brand new products and services, or to revise new ways of creating the existing products and services more efficiently.

Innovation can take many forms – innovation in new product and service ideas, innovation in the process designs, innovation in technology adoption, or even innovation in the business model itself. Tesla and Apple may be the classic examples of companies who have been thriving due to their ‘innovation as a strategy’ approach. Apple effectively embraced innovation at many key points in its lifetime. In the ’90s, for example, the company was on the verge of bankruptcy, but managed to stave it off by partnering with Microsoft, a company long seen as its rival. This move effectively shaped Apple’s entire corporate philosophy and led to the introduction of the iMac, which was an overall turning point for the company. This was only the beginning for Apple, the partnership with Microsoft kick-started an era of innovative risk-taking, which led to the invention of tech products like iPod, iPhone, MacBook, Apple Watch, iPad, and more—alongside the invention of iTunes, which effectively reshaped the music industry.

Strategy and innovation are closely tied together, and it is difficult to draw a line separating the two. That said, what really matters the most is that the process for developing strategy must include the process of uncovering and meeting customer opportunities through innovation.

As a part of the planning stages of strategic planning cycle, business must adopt a systematic approach to formally sponsor activities to identify gaps in their products and services offerings and as a result, also identify the gaps in the technical capabilities to support them. On a continual basis business must sponsor initiatives to improve the delivery processes and activities that must be undertaken to explicitly investigate and assess, by way of ‘proof of concepts’, the innovative remedies (technological or otherwise) to address the identified gaps to design appropriate solutions to improve their products and services offerings.

Without a well formulated innovation strategy the innovation improvement efforts, although well- intentioned, at best can become ad hoc and disorganized set of activities.

Business’s ability for innovation can only be realized by instating a formal innovation capability where a coherent set of interdependent processes and group of tech-savvy people dictate how the business as a part of strategy formulation identifies the ‘right’ problem to solve with the right innovative design and solution and synthesizes ideas into new concepts, products, and services and prioritize which projects should get funded. A business without an innovation strategy cannot make right choices thus creating conflicts among the lines of businesses based on their perceived urgencies.

Innovation must not be seen as IT overhead. All successful companies that have understood the value of SMACIT technologies and are willing to experiment with it, not for amusement but as a necessity, have incorporated innovation as one of the core pillars of their strategy formulation.

Location Independence

Except for the large well established multi-national businesses, most traditional businesses operate from a few locations where they manufacture their products and operate their services with limited physical distribution channels. However, that situation is changing fast with the technologies that promote digital transformations such as the SMACIT technologies. These technology advancements have enabled businesses to operate anywhere reasonably easily and inexpensively, provided there is market potential and there are no geopolitical impediments to launch the operations in the given geographic area. This has levelled the field for all businesses big and small; new start-ups are able to compete with established businesses anywhere in the globe.

The opposite of the above is the notion that customer is everywhere. Again, SMACIT technology advancements have enabled possibility for customers to reach out to the businesses securely using various online channels allowing them to browse for the products and services all the way to purchase online from the comforts of their homes irrespective of their geographic proximity to the business.

Pandemic has created unique challenges for businesses to come up quickly with the new and creative ways to stay remotely connected with their customers. Businesses had to find ways to provide continued operations by allowing their non-essential workers to work remotely from home or from secure locations. This has drastically affected their operating models as to how they must provide variety of services remotely by leveraging SMACIT technologies.

This trend will continue as it appears that the ‘new normal’ is here to stay. Businesses will have to factor in location independence in the formulation of their strategy, business model, and operating models.

Fail Fast, Recover Fast

SMACIT technologies again has allowed businesses to try out their ideas quickly and convert them into new products and services and evaluate them in the market to assess the customer reactions to quickly determine successes and failures. It is now possible with resilient architectures and low-code/no-code composable application platforms to release solutions quickly to the market and withdraw them quickly if the product and service do not appear to resonate with the customers without any noticeable damage to the business’s brand and reputation thus again leveling the field between the newcomers and established businesses.

Hyper automation through use of technology has enabled the businesses to be nimbler and cost effective. It has enabled businesses to provide customer service with low cost and be able to quickly introduce new products and services to the market.

This is an irreversible trend and businesses will be forced to adopt the ‘fail fast recover fast’ strategy and build it into the core of their business models and operating models.

All leading technology giants follow this approach, to name a few – Google, Facebook, Spotify, Tesla, and Amazon. No wonder it is not easy for one to search for the support contact details for these giants on their websites, The fact is that right from the beginning they have engineered self healing and self managed services and products so that their customers seldom ask for help or online support for operational issues.

Author: Sunil Rananavare, IT Strategy Planning and Architecture (CIO Advisory)

Follow me on LinkedIn to stay informed.

The views in the article are author’s own and not necessarily of his employer.?