Value Pathways Enabling Digital Transformation

10th August 2021

VALUE PATHWAYS ENABLING DIGITAL TRANSFORMATION

The world is changing at an ever-increasing pace with new intelligent products and services linked to greater individualized needs and expectations. New technologies are providing a foundation for this cultural change. But we haven’t fundamentally changed the way in which we architect the business landscape and still use methods and models that were introduced many years ago. So now is the time, I think, that we need to seriously look at how better to approach the design of the new business architecture to enable true digital transformation

We are moving from assets and capabilities on demand into collaborative, autonomous, real-time services/data/transactions which can link dynamically to future, loosely coupled, outcome-based, stochastic value pathways enabled through new distributed applications/data and digital platforms.

Three major trends are now happening that are being enabled with new/emerging technologies:

1.????Real-time: more and more everything is now connecting in near real-time. With 5G, internet-of-things, smart sensors, we can truly now look to architecture solutions providing intelligence at-the-edge

2.????Precision: we now have expectations that products and services should be tailored exactly to our needs. With improved understandings of our DNA make-up and behavioral patterns – this is becoming a reality

3.????Collaboration: no longer can one company do everything. The move into business-to-business connectivity is already behind us. The future is orchestrating across multiple service providers with a collective intent to improve outcomes

Introduction

So, what is the issue? Let’s look at how we have gotten to where we are today and why people are struggling with thinking pragmatically about digital transformation. Beginning, in this introduction, to look at where existing approaches are focused and why they are not as applicable today for digitization:

·??????Value Chain: Describes a set of activities that a firm performs, operating in a specific industry, to deliver a valuable product (i.e., a good and/or service) for the market (has been around since 1985 where the emphasis is clearly within a single organization only, and does not relate to nor address a combination of companies working together within a network to achieve collaborative outcomes)

·??????Workflow Process Mapping: Consists of an orchestrated and repeatable pattern of activity, enabled by the systematic organization of resources into processes that transforms materials, provide services, or process information. It can be depicted as a sequence of operations, the work of a person or group (traces back as early as 1921. Focuses on the business steps themselves and not the wider network or information technology considerations. Today’s world tends not to follow repeatable patterns nor rely on deliberate and rational behaviors)

·??????Value Stream Management: A set of tools for process improvement emerging out of the Lean Six Sigma movement. It’s about improving quality by identifying and removing the causes of defects and minimizing variability in business processes (not really suited for innovation or digital transformation as the focus is on improving a current state and not designing a new digital future state)

So, there appears a white space, a lack of an approach or method for understanding and performing digital transformation. Today’s approaches look mainly at in-company and in ways to improve quality and reduce costs/waste. Digital transformation needs to look at a wider ecosystem of collaboration with new innovative approaches for increased revenue and profitably.

Problem Definition

What is the business problem? Digital transformation can solve many problems in different areas and across various industries. Here are a few examples of where digital transformation solved some issues:

·??????Retail: This is an industry now moving more to on-line search, discovery with direct delivery to the consumer’s home. Companies need to improve delivery times and look at new ways to advertise to their consumers. The use of digital technology in stores, in online ordering and within social media and web presence has improved customer service, delivery times and ways to personalize the recommendations from understanding more the digital buyer behavior patterns.

·??????Technology Vendors: The need to move away from traditional software solutions and packaging into more cloud-based ‘Software-as-a-Service’ solutions. Digital transformation moves towards a more networking solution which is more fluid for both personal and enterprise use. Also, the ability to work with other technology and software companies and create lucrative partnerships providing more holistic solutions.

·??????Automotive: Early endeavors focused on transformation in siloed business units on a tactical basis. The move to wider digital transformation covers all sections of the operation, taking in every department and each team member. The result is to expand overall automation. Think of initiatives like the connected vehicle, which does everything from analyzing navigation services and real-time traffic reports to reading out news and choosing music (all controlled via a smartphone).

·??????Ecommerce: This industry was suffering with a lack of quality customer engagement and ways to build better relationships. With digital transformation you can better personalize the customer service, introduce new self-service tools, have interactive video tutorials all linked to mobile access. This leads to a deep customer engagement and return custom. Furthermore, this allows an organization to collect data that enables them to build yet more detailed customer profiles.

·??????Media & Entertainment: This industry is moving more to new streaming opportunities and consumer personalization that needed a new digital approach. The ability to link to or purchase new streaming technology to be part of the new offering is essential. Also, the ways to bring their characters to life and treat them as separate digital assets opens new markets and ways to directly engage with the customers.

·??????Manufacturing: The need to speed new development times, reduce cost of manufacturing, transportation, and storage. Digital technologies such as digital twins, 3D printing, and blockchain enabled supply chain provides a new industry outlook.

·??????Logistics: There is still a lot of manual work and paper-based procedures in logistics companies – still the need to use pen and paper and manual scanners to ensure the service runs smoothly. With digital transformation you have a way to manage a larger proportion of the collection and delivery processes.

·??????Construction: Many tools and equipment are needed across different projects and locations. It’s difficult to track the whereabouts and know what equipment needs maintenance with timely non usage of resources. With digitization you can collect machine performance data to predict the timeliest moment for preventative maintenance, drastically decreasing downtime. Also, with IoT sensors you can track and trace device locations and usage patterns.

·??????Healthcare: This sector faces challenges with stringent regulation, privacy concerns and steeply rising costs. With digital transformation new IT infrastructures supports new data management, interoperability, and clinical systems integration. Also, with clinical devices becoming more connected, this enables medical professionals to work faster and more efficiently – allowing more time with patients and reducing healthcare costs.

·??????Finance: Today many of the leading finance organizations are using pilots to experiment with digital transformation. The larger scalable opportunities are still being evaluated. Moving forward digitization will bring more touchless automation, federated analytics will glean new insights, reporting will be real-time, self-service will become the norm, traditional ERP systems will be replaced, and more data standardization will prevail.

·??????Regulators: More and more the regulators are wanting to gain earlier access on evidence to confirm compliance. The idea of visiting a company and performing audits some period post transactions is becoming very legacy. Digital can provide everything up to ‘compliance-as-a-service’ with near real-time visibility into activities plus with high degrees of automation we will move to a position where non-compliant transactions will not be allowed to be executed.

High Level Solution

So, what new methodology/approach can help organizations move more readily into digital transformation projects and that way of thinking?

Value pathways will effectively become the new version, or way of thinking, replacing the existing value chain, workflow, and value stream way of thinking. A value pathway will include all the required services and will cover the full end-to-end outcome needs. In effect the value pathway becomes a much more intelligent way of managing end-to-end scenarios that focus more on the outcomes and the best ways of achieving the outcome results (without being restricted to a pre-defined linear tightly coupled design). Think of the value pathway as a wave of activities over time where parts of the journey can have greater speed than others and where there is more awareness of time in general across the end-to-end flow.

These new value pathways are very stochastic in nature as each of the services performed are at a more granular (quanta) level and each are recognized as being events at precise time intervals. Each of these quanta services can be measured at high speed with the results dictating the future flow of the value pathway (think about a car being auto navigated, where the car can be constantly measured and adjusted to the optimum route at any given time based on all kinds of contextual attributes). Value pathways can become very personal, singular, and customized. The value pathway also has, as a foundational concept, the need for these services to be designed and delivered by any network entity in a loosely coupled manner. It also recognizes the need for cross company collaboration and trusted data sharing within new governing rules.

Solution Details

Let’s now look in more detail as to the key value pillars of value pathways. We shall dig deeper into each major aspect (principle) that value pathways deliver. Here I will cover 8 major attributes:

1.????Outcome Focused: The world is moving to outcome-based rewards and pricing models. Value pathways has as its foundation a thinking about what are the measurable outcomes for each pathway. Each outcome is at the value pathway level, representing a high-level driver metric, and each quanta service needs to recognize its contribution to the wider success at play. These are the focus points for measurability during the pathway journey and benefits realization. Upon successful outcome, the known and evidenced services involved can be additionally rewarded/compensated for their specific contributions.?

2.????Plug-n-Play Quanta Services: These are the steps, the activities, the processes within the value pathway. What services will be global common versus local unique? Which companies will own which services? How can you promote and monetize data as a service? Companies ‘do things’ but, yet, we have not looked at ways to model these in terms of discrete value add services that can be deployed internally and/or externally within other ecosystem pathways. We are moving away from a world of tightly coupled pre-defined vertical business processes into a future of more horizontal network environments of loosely linked collaborative services. Need to explore new ways of describing services, service discovery, service execution and in understanding and monitoring their individual SLA’s. ????

3.????Intelligence: The high usage of artificial intelligence and machine learning for decision making and automation. This includes intelligent event management during the pathway journey. Algorithms will become the ‘air traffic control’ for the value pathways directing traffic in near real time noting any external influences that can affect the original journey as planned – and adjust accordingly.

4.????Regulatory Control: The ability to have improved regulatory control across all the pathway services. To move to a world more of ‘compliance-as-a-service’ and to share the relevant information with regulators in a near real-time way. The value pathway will also connect in real-time to the latest regulatory controls and rules to ensure that the steps within and across the pathway are all executing under the necessary legal policy frameworks.

5.????Governance: With increasing involvement of multiple companies across the value pathway we need to look at a new governance structure to ensure all are aligned in their contributions and how they collaborate. What are the new ‘collective intent’ collaborative business model opportunities? Think more ‘industry-as-a-service’ rather than SaaS. Orchestration will include a new more real-time operational management system that will show a more minute-by-minute (graphic equalizer) type dashboard view of the companies and their services and performance.

6.????Trusted Data Sharing: The need for certain data items to be shared across contributing companies within the scope of the value pathway. New digital technologies are now available that allow trusted data sharing in a distributed fashion. Not all data needs to be shared – the right amount of data to exactly the right stakeholders that need the information. Note, the companies involved in the data sharing can be different and in addition to those companies involved in supplying the quanta services.

7.????Customer Centricity: Customers are moving away from being generalists and being mass clients into being individual advocates with specific tailored precision needs. The value pathway and quanta services need to recognize this increasing maturing of the customer population and in their touchpoints within the pathway and architect/design accordingly. ?

8.????Knowledge Chain: This covers the ability to learn from each instance/execution of any value pathway. The outcome information, plus the details on how was arrived at, should be fed into the intelligence algorithms as learning/training data.?

?Business Benefits

The benefits at an industry level will be greater visibility and clarity into the common services that underpin most industries and the opportunity for a smaller group of companies to offer and provide these at a lower commodity price point. Also, the value pathways will be designed at the value outcome benefit first and then look to define what services are needed and who can provide those. It’s a new top-down value outcome-based way of thinking and not a bottom-up single company trying to perform all steps.

For each company, the benefits can be thought of as:

·??????Allows a more strategic view of your company’s services and DNA positioning. To think of the organization now in terms of the value services it offers (both internally and externally). You can review these services in terms of what services are delivering competitive advantage (and should be at a premium price), which are mission critical and quality driven, and those which are more commodity where you may decide to better use an alternative 3rd party provider.?

·??????The ability to better monetize the data assets you have by converting these into more valuable discoverable data services

·??????A fresh way to look at your existing business architecture landscape. The ability to now break down any large costly tightly linked complex processes into separate ‘plug-n-play’ best of breed services

·??????The ability to link your business skills and capabilities into more well-defined discoverable services that can be maximized in terms of their usage and return on investment. To have more a strategic inventory of services and alignment with current assets and capabilities

·??????Better visibility on the finance picture and for financial planning in terms of the impact associated with business scenarios such as transformation, cost optimization, sourcing, technology changes, regulatory and other operational changes.

·??????To help enterprise transformations to take place – like digital transformation. By understanding the key value pathways and how these are moving into more collaborative services environments and helping you think how you should position and describe your value in terms of discoverable value add services.

Summary

?Value pathway thinking is a new white space for modeling your business for digital transformation, existing approaches are not that applicable, and a new method is required. A new information-based business ecosystem, from traditional fixed business partnerships to loosely coupled outcome driven service-based agreements. A new end-to-end intelligent business orchestration driving value outcomes managing and navigating the day-to-day services in near real-time

Should you need any further information on how to get started and how I can help then please contact/message me.

Thank you for taking time to read this and I hope was useful

Mal Postings

[email protected]