June 7, 2019 at 15:31Ecosystem Approach to Business Technology
- Transfer
To take full advantage of the new business technologies, technical directors need to adapt their traditional IT approaches to the capabilities and challenges of emerging technology ecosystems. Here's how to do it.
The role of IT in the traditional sense is the foundation for the company. One of the main functions of the business was to protect the company's operations with firewalls and encryption in order to restrict access to technologies from outside. However, with the development of technology, a large number of opportunities and sources of competitive advantage appear outside the traditional business framework. These opportunities are combined in many new ecosystems.
Ecosystem Archetypes: Explosive Growth
Similar ecosystems often intersect. For example, a social payment application can be part of an ecosystem of mobile, social, informational, and banking services. The Internet of Things (IOT) is an ecosystem in which several applications interact with each other as a network.
By connecting to a similar ecosystem, companies can access the entire network. Among other things, they can find new customers, connect to new data sources and improve current business processes.
CTOs and IT organizations have a major role to play in taking advantage of these opportunities. But they will not be able to do this if they continue to conduct business “the old fashioned way”. In an ecosystem environment, an over-emphasis on “self-defense” will limit the company to take advantage of new opportunities. To adapt their complex business architecture to ecosystems, IT directors will have to figure out how to use external technologies and solve security problems at the same time, managing the rapid flow of technological innovations.
IDC predicts that by 2018, more than 50 percent of large enterprises and more than 80 percent of enterprises with advanced digital transformation strategies will create industry platforms or collaborate with existing ones. At the same time, according to Cisco, in 2020, more than 50 billion devices will be connected to the network.
These figures are pushing for a radical rethinking of what IT is and suggest that CTOs should manage them differently: not as a set of internal information technology (IT), but as a wide network of ecosystem technologies (ET). For the CTO, this shift also provides an excellent opportunity to build close cooperation with the CEO for business priorities and become the main strategic partner.
ET includes an expanded set of IT capabilities and functions (Appendix 2). The CTO still needs to manage multi-speed IT functions as well as ongoing bilateral programs. The next level - ET - represents a new set of opportunities, as well as an extension of existing ones.
CTOs can define and shape their technology ecosystems in three ways:
Open internal IT to the outside world
This approach is to build an IT architecture to connect internal systems and capabilities with external systems. One example of this approach in action is the Delta Air Lines mobile app, which interacts with Uber so that travelers can order a taxi right after landing. Kraft has made a purchase management tool from his recipe app that creates a list and easily passes it to Peapod's product delivery service. Think of it as an extension of the user journey — and the company’s customer relationship — through integration with other service providers.
Many companies already provide integration opportunities for upstream and downstream partners - technologies such as EDI (Electronic Data Interchange) have been around for several decades. However, these integration points often remain static. This is a two-way relationship with a small, pre-selected group of partners such as distributors and suppliers. Such integration points are rarely used, and often in an integrated mode.
In the future, integration with external ecosystems will force companies to interact with many partners, covering a wide range of functions, from customer search to social advertising and payment solutions. This will happen because the low cost of technology and the dynamic environment of startups have led to a significant increase in the speed of introducing new services. Therefore, IT must follow the Amazon principle, making system components available as services in order to integrate with the ecosystem. Interfaces must be open, dynamic, and functional in real time so that they can integrate partners, technologies, and applications as needed.
One obvious consequence of this process is the need to develop a lightweight technology architecture based on microservices and application programming interfaces (APIs) to allow third parties to easily connect to the new ecosystem. Technical directors need to think in terms of the platforms and their architectures that automotive OEMs use to upgrade in the future in the entire ecosystem. They may even need to provide users with an “app store” so that they can choose what they need. And, of course, the infrastructure must be reliable and safe.
An example of how this can be implemented can be found with telecommunications companies that expand their range of interconnected services, including e-commerce, music, insurance, healthcare, education, media and smart homes. All these services are combined into one ecosystem, offering the client several services through the technological highway of a telecommunication company. Salesforce's AppExchange is already embodying this model, creating a cloud-based environment in which developers can create and release their own applications.
Implement external technology
This approach aims to open up internal IT systems so that a business can incorporate external capabilities into the ecosystem to better serve its customers, support its employees, or create new products and capabilities often offered through SaaS and APIs. A simple example of this approach is the integration of a third-party point of sale (POS) application into the company's internal payment systems to simplify the in-store shopping process. Or integration of a third-party customer support service into the company’s website. Or even integration with Yammer (the corporate social platform) to increase employee productivity.
This approach clearly changes the process of how IT designs and manages their systems. Now it’s not about buying software packages and creating individual solutions on site or working with several system integrators to provide business solutions. Now we are talking about developing interaction with customers throughout its length and how external and already available services can be used in combination with internal solutions to form a complete, unique offer. Companies will need to complement their internal skills with an external specialization deeply integrated into the ongoing process of developing IT applications and infrastructure management. It is about creating a round-the-clock environment that will allow us to offer products to millions of customers around the world.
One leading international travel company, whose competitive advantage was undermined by the emergence of many start-ups in the tourism industry, decided that it needed to build its capacity to carry out the necessary transformations. An important component of her strategy was cooperation with vendors from the external ecosystem to provide support for various services, such as mobile services, search and payment systems, CRM. This approach allowed them to accelerate the transformation, increase market reach and attract talented professionals as technology develops and demand grows.
Upgrade IT to match innovation
We often hear about how fast the pace of development of new technologies has become. But it is worth remembering that many of the new tools can dramatically change the business model of the company, although at first glance this nuance can not be noticed. In order to prepare for these changes and take a more aggressive competitive position, companies must test new technologies and be ready to use them as soon as the value of these technologies is proved and they become available for scaling. This can be done in the form of “play with new technologies” (for example, with open source standards) in special “sandboxes” where you can test the connection between internal and external IT. In addition, IT leaders will need to actively build partnerships or alliances with vendors and service providers to truly understand and appreciate
In fact, many companies are already actively investing in new technologies. For example, a large number of financial companies have created internal corporate venture capital funds to invest in technologies such as blockchain and IOT. However, companies have shown less progress and success in integrating these technologies into their existing IT infrastructure, as well as in the subsequent dissemination of value propositions among their customers. Startups that offer innovative solutions often use “immature” technologies that are unable to scale; they often use external cloud services, which may be incompatible with the cloud infrastructure of the customer companies. Therefore, it is important for such companies to consider how to ensure the smooth integration of new tools both from the technical side and from the working culture, to take full advantage of the products offered by startups. If at this stage mistakes are made, the company will create another unworked “spaghetti” infrastructure.
Given the scale of innovation, keeping up with competitors will only be possible if the technical director employs analysts or architects whose job it is to evaluate and ensure the compatibility of external technologies. For example, DBS Innovation Group has established the position of vice president of financial technology, which is responsible for identifying, integrating, and managing potential ecosystem members. This person manages fintech projects at local and regional levels and reports to the head of the global partnership.
Regardless of which method or combination of ways of forming an ecosystem the general and technical directors choose, IT specialists come to the fore not only in the field of technology, but also in the innovation of business models.
Despite the fact that building an ecosystem is a complex task based on many interdependencies, we found that focusing on the following six elements will allow the technical and CEO to get the most out of:
Redefining the business strategy
The choice of a method or combination of methods for interacting with different ecosystems (or for creating your own ecosystem) depends on three things: the company's strategy, market environment and the general risk appetite of the enterprise. This, in turn, requires the technical director to work closely with the general director and leading specialists of the company in order to help formulate a business strategy by identifying new technologies and ecosystems that can dramatically change the situation on the market, determine where future sources of value, and develop the necessary strategic actions to succeed in intercepting them. The essence of this dialogue is continuous bilateral research, where technology and business strategy are inextricably linked.The economic foundations of digital strategy ”).
Infrastructure development The
new bi-directional technology integration is dynamic; It happens in real time with thousands of business partners or end users. Such a process requires companies to create a next-generation integration architecture that can support these processes, and introduce open standards that can be easily adopted by external parties. The company’s existing master data management catalog also needs to be expanded to include third-party data and allow for potential integration with external master data providers. For systems to work, there must be a clear data architecture and control scheme to ensure that they are cleaned, streamlined, and standardized.
Rethinking the process and structure of customer management
When customers turn to technical support, in the ecosystem it will be difficult to determine exactly where the points of failure are: in the company's systems, third-party services, cloud storage, network, or in some combination of the above? Such a multi-level reality will require the company to fundamentally rethink its infrastructure support processes.
The creation of such SLAs (Service Level Agreements) that clearly define escalation and resolution protocols and which all parties agree with will be crucial. The creation of standard identifiers, or “triplets,” and their integration into partner services and technologies used in the ecosystem will be an important step for the rapid detection and resolution of emerging technical problems.
However, the establishment of such standards and agreements is not an excuse to transfer customers from one partner to a second, third, etc. A customer service company needs to solve problems behind the scenes without complicating the navigation of partner ecosystems for consumers.
Defining cybersecurity parameters, legal framework and partnership
As a result of the expansion of infrastructure, internal cyber security policies and processes will need to include third-party partners and suppliers. A new set of security standards should be defined and agreed upon that clearly articulates how integration will take place and what types of data can be exchanged in which directions.
Working with a wide range of third parties raises other legal issues: intellectual property, responsibility, confidentiality, profit sharing and resolving difficulties can seriously limit the potential benefits of participating in an expanded ecosystem. Licensing problems have already arisen in the interaction between companies providing cloud services and companies working with local hardware and software products due to different and competing business models. In particular, data ownership and customer management will be critical given that companies need to have access to both of these areas.
This will require significant negotiation skills, as well as efforts to develop and implement a wide range of standards to avoid constantly building agreements from scratch with the advent of each new partner or supplier. The application market approach, which clearly indicates standards, provides tools, and agreements are made before you begin, can be a useful model.
Interacting with a vendor network also requires changes in certification skills and performance management. Companies will need to clearly define the standards and procedures that suppliers must work with, and set out guidelines that determine how the supplier will be included in the delivery life cycle. Home Depot is developing standards in conjunction with its product manufacturers to ensure compatibility with the Wink smart home system. Companies that interact with suppliers most effectively see vendor relations as a partnership with a high degree of transparency. To do this, we need to restructure the internal procurement and supplier management processes so that they are more like M&A,
Open to the outside world
Technical directors are usually focused on protecting systems and ensuring their efficient operation. But the new digital world requires more active interaction with the outside world in order to understand competitive threats and sources of value. Technical directors should develop a much more flexible IT infrastructure and consider creating new ways to constructively integrate external systems. But spending a long time creating too complex "bulletproof" systems is counterproductive; testing an application or a new platform should take several days or weeks.
Investing in new opportunities.
As companies increasingly use technology from external ecosystems, they require full-stack architects and converged infrastructure engineers who can provide expertise in third-party software, be fluent in several best-in-class technologies, and share experience integrating multiple technologies. The ability of a “translator” will also be critical to bridge the gap between business goals and the technological requirements of the ecosystem. Any new feature in enterprise architecture must work closely with the business to understand how external services can be integrated with products to expand the customer’s value proposition.
With the development of cloud computing and a software infrastructure, the necessary resources (such as networks, servers, storage systems, applications and services) can now be provided faster, and can also be managed and used with minimal effort. This requires DevOps (integration of development and operation) and cloud engineers who have experience navigating the rapidly changing ecosystem of cloud computing and software, as well as data experts, automation engineers and corporate architects. In addition, companies will need to find several senior developers who can set development standards in the app store.
Companies often outsource many of these features. But due to the increased importance of design and automation skills, many rethink this approach as information technology moves from an auxiliary element to an acting one.
The integration of IT companies with third-party capabilities opens up new ways of obtaining significant sources of value. But until information technologies turn into ecosystem technologies, the vast majority of new opportunities will remain out of reach.
The role of IT in the traditional sense is the foundation for the company. One of the main functions of the business was to protect the company's operations with firewalls and encryption in order to restrict access to technologies from outside. However, with the development of technology, a large number of opportunities and sources of competitive advantage appear outside the traditional business framework. These opportunities are combined in many new ecosystems.
Ecosystem Archetypes: Explosive Growth
Similar ecosystems often intersect. For example, a social payment application can be part of an ecosystem of mobile, social, informational, and banking services. The Internet of Things (IOT) is an ecosystem in which several applications interact with each other as a network.
By connecting to a similar ecosystem, companies can access the entire network. Among other things, they can find new customers, connect to new data sources and improve current business processes.
CTOs and IT organizations have a major role to play in taking advantage of these opportunities. But they will not be able to do this if they continue to conduct business “the old fashioned way”. In an ecosystem environment, an over-emphasis on “self-defense” will limit the company to take advantage of new opportunities. To adapt their complex business architecture to ecosystems, IT directors will have to figure out how to use external technologies and solve security problems at the same time, managing the rapid flow of technological innovations.
IDC predicts that by 2018, more than 50 percent of large enterprises and more than 80 percent of enterprises with advanced digital transformation strategies will create industry platforms or collaborate with existing ones. At the same time, according to Cisco, in 2020, more than 50 billion devices will be connected to the network.
These figures are pushing for a radical rethinking of what IT is and suggest that CTOs should manage them differently: not as a set of internal information technology (IT), but as a wide network of ecosystem technologies (ET). For the CTO, this shift also provides an excellent opportunity to build close cooperation with the CEO for business priorities and become the main strategic partner.
What is ecosystem technology
ET includes an expanded set of IT capabilities and functions (Appendix 2). The CTO still needs to manage multi-speed IT functions as well as ongoing bilateral programs. The next level - ET - represents a new set of opportunities, as well as an extension of existing ones.
CTOs can define and shape their technology ecosystems in three ways:
Open internal IT to the outside world
This approach is to build an IT architecture to connect internal systems and capabilities with external systems. One example of this approach in action is the Delta Air Lines mobile app, which interacts with Uber so that travelers can order a taxi right after landing. Kraft has made a purchase management tool from his recipe app that creates a list and easily passes it to Peapod's product delivery service. Think of it as an extension of the user journey — and the company’s customer relationship — through integration with other service providers.
Many companies already provide integration opportunities for upstream and downstream partners - technologies such as EDI (Electronic Data Interchange) have been around for several decades. However, these integration points often remain static. This is a two-way relationship with a small, pre-selected group of partners such as distributors and suppliers. Such integration points are rarely used, and often in an integrated mode.
In the future, integration with external ecosystems will force companies to interact with many partners, covering a wide range of functions, from customer search to social advertising and payment solutions. This will happen because the low cost of technology and the dynamic environment of startups have led to a significant increase in the speed of introducing new services. Therefore, IT must follow the Amazon principle, making system components available as services in order to integrate with the ecosystem. Interfaces must be open, dynamic, and functional in real time so that they can integrate partners, technologies, and applications as needed.
One obvious consequence of this process is the need to develop a lightweight technology architecture based on microservices and application programming interfaces (APIs) to allow third parties to easily connect to the new ecosystem. Technical directors need to think in terms of the platforms and their architectures that automotive OEMs use to upgrade in the future in the entire ecosystem. They may even need to provide users with an “app store” so that they can choose what they need. And, of course, the infrastructure must be reliable and safe.
An example of how this can be implemented can be found with telecommunications companies that expand their range of interconnected services, including e-commerce, music, insurance, healthcare, education, media and smart homes. All these services are combined into one ecosystem, offering the client several services through the technological highway of a telecommunication company. Salesforce's AppExchange is already embodying this model, creating a cloud-based environment in which developers can create and release their own applications.
Implement external technology
This approach aims to open up internal IT systems so that a business can incorporate external capabilities into the ecosystem to better serve its customers, support its employees, or create new products and capabilities often offered through SaaS and APIs. A simple example of this approach is the integration of a third-party point of sale (POS) application into the company's internal payment systems to simplify the in-store shopping process. Or integration of a third-party customer support service into the company’s website. Or even integration with Yammer (the corporate social platform) to increase employee productivity.
This approach clearly changes the process of how IT designs and manages their systems. Now it’s not about buying software packages and creating individual solutions on site or working with several system integrators to provide business solutions. Now we are talking about developing interaction with customers throughout its length and how external and already available services can be used in combination with internal solutions to form a complete, unique offer. Companies will need to complement their internal skills with an external specialization deeply integrated into the ongoing process of developing IT applications and infrastructure management. It is about creating a round-the-clock environment that will allow us to offer products to millions of customers around the world.
One leading international travel company, whose competitive advantage was undermined by the emergence of many start-ups in the tourism industry, decided that it needed to build its capacity to carry out the necessary transformations. An important component of her strategy was cooperation with vendors from the external ecosystem to provide support for various services, such as mobile services, search and payment systems, CRM. This approach allowed them to accelerate the transformation, increase market reach and attract talented professionals as technology develops and demand grows.
Upgrade IT to match innovation
We often hear about how fast the pace of development of new technologies has become. But it is worth remembering that many of the new tools can dramatically change the business model of the company, although at first glance this nuance can not be noticed. In order to prepare for these changes and take a more aggressive competitive position, companies must test new technologies and be ready to use them as soon as the value of these technologies is proved and they become available for scaling. This can be done in the form of “play with new technologies” (for example, with open source standards) in special “sandboxes” where you can test the connection between internal and external IT. In addition, IT leaders will need to actively build partnerships or alliances with vendors and service providers to truly understand and appreciate
In fact, many companies are already actively investing in new technologies. For example, a large number of financial companies have created internal corporate venture capital funds to invest in technologies such as blockchain and IOT. However, companies have shown less progress and success in integrating these technologies into their existing IT infrastructure, as well as in the subsequent dissemination of value propositions among their customers. Startups that offer innovative solutions often use “immature” technologies that are unable to scale; they often use external cloud services, which may be incompatible with the cloud infrastructure of the customer companies. Therefore, it is important for such companies to consider how to ensure the smooth integration of new tools both from the technical side and from the working culture, to take full advantage of the products offered by startups. If at this stage mistakes are made, the company will create another unworked “spaghetti” infrastructure.
Given the scale of innovation, keeping up with competitors will only be possible if the technical director employs analysts or architects whose job it is to evaluate and ensure the compatibility of external technologies. For example, DBS Innovation Group has established the position of vice president of financial technology, which is responsible for identifying, integrating, and managing potential ecosystem members. This person manages fintech projects at local and regional levels and reports to the head of the global partnership.
Regardless of which method or combination of ways of forming an ecosystem the general and technical directors choose, IT specialists come to the fore not only in the field of technology, but also in the innovation of business models.
Getting started with the ecosystem
Despite the fact that building an ecosystem is a complex task based on many interdependencies, we found that focusing on the following six elements will allow the technical and CEO to get the most out of:
Redefining the business strategy
The choice of a method or combination of methods for interacting with different ecosystems (or for creating your own ecosystem) depends on three things: the company's strategy, market environment and the general risk appetite of the enterprise. This, in turn, requires the technical director to work closely with the general director and leading specialists of the company in order to help formulate a business strategy by identifying new technologies and ecosystems that can dramatically change the situation on the market, determine where future sources of value, and develop the necessary strategic actions to succeed in intercepting them. The essence of this dialogue is continuous bilateral research, where technology and business strategy are inextricably linked.The economic foundations of digital strategy ”).
Infrastructure development The
new bi-directional technology integration is dynamic; It happens in real time with thousands of business partners or end users. Such a process requires companies to create a next-generation integration architecture that can support these processes, and introduce open standards that can be easily adopted by external parties. The company’s existing master data management catalog also needs to be expanded to include third-party data and allow for potential integration with external master data providers. For systems to work, there must be a clear data architecture and control scheme to ensure that they are cleaned, streamlined, and standardized.
Rethinking the process and structure of customer management
When customers turn to technical support, in the ecosystem it will be difficult to determine exactly where the points of failure are: in the company's systems, third-party services, cloud storage, network, or in some combination of the above? Such a multi-level reality will require the company to fundamentally rethink its infrastructure support processes.
The creation of such SLAs (Service Level Agreements) that clearly define escalation and resolution protocols and which all parties agree with will be crucial. The creation of standard identifiers, or “triplets,” and their integration into partner services and technologies used in the ecosystem will be an important step for the rapid detection and resolution of emerging technical problems.
However, the establishment of such standards and agreements is not an excuse to transfer customers from one partner to a second, third, etc. A customer service company needs to solve problems behind the scenes without complicating the navigation of partner ecosystems for consumers.
Defining cybersecurity parameters, legal framework and partnership
As a result of the expansion of infrastructure, internal cyber security policies and processes will need to include third-party partners and suppliers. A new set of security standards should be defined and agreed upon that clearly articulates how integration will take place and what types of data can be exchanged in which directions.
Working with a wide range of third parties raises other legal issues: intellectual property, responsibility, confidentiality, profit sharing and resolving difficulties can seriously limit the potential benefits of participating in an expanded ecosystem. Licensing problems have already arisen in the interaction between companies providing cloud services and companies working with local hardware and software products due to different and competing business models. In particular, data ownership and customer management will be critical given that companies need to have access to both of these areas.
This will require significant negotiation skills, as well as efforts to develop and implement a wide range of standards to avoid constantly building agreements from scratch with the advent of each new partner or supplier. The application market approach, which clearly indicates standards, provides tools, and agreements are made before you begin, can be a useful model.
Interacting with a vendor network also requires changes in certification skills and performance management. Companies will need to clearly define the standards and procedures that suppliers must work with, and set out guidelines that determine how the supplier will be included in the delivery life cycle. Home Depot is developing standards in conjunction with its product manufacturers to ensure compatibility with the Wink smart home system. Companies that interact with suppliers most effectively see vendor relations as a partnership with a high degree of transparency. To do this, we need to restructure the internal procurement and supplier management processes so that they are more like M&A,
Open to the outside world
Technical directors are usually focused on protecting systems and ensuring their efficient operation. But the new digital world requires more active interaction with the outside world in order to understand competitive threats and sources of value. Technical directors should develop a much more flexible IT infrastructure and consider creating new ways to constructively integrate external systems. But spending a long time creating too complex "bulletproof" systems is counterproductive; testing an application or a new platform should take several days or weeks.
Investing in new opportunities.
As companies increasingly use technology from external ecosystems, they require full-stack architects and converged infrastructure engineers who can provide expertise in third-party software, be fluent in several best-in-class technologies, and share experience integrating multiple technologies. The ability of a “translator” will also be critical to bridge the gap between business goals and the technological requirements of the ecosystem. Any new feature in enterprise architecture must work closely with the business to understand how external services can be integrated with products to expand the customer’s value proposition.
With the development of cloud computing and a software infrastructure, the necessary resources (such as networks, servers, storage systems, applications and services) can now be provided faster, and can also be managed and used with minimal effort. This requires DevOps (integration of development and operation) and cloud engineers who have experience navigating the rapidly changing ecosystem of cloud computing and software, as well as data experts, automation engineers and corporate architects. In addition, companies will need to find several senior developers who can set development standards in the app store.
Companies often outsource many of these features. But due to the increased importance of design and automation skills, many rethink this approach as information technology moves from an auxiliary element to an acting one.
The integration of IT companies with third-party capabilities opens up new ways of obtaining significant sources of value. But until information technologies turn into ecosystem technologies, the vast majority of new opportunities will remain out of reach.