Situation Normal Everything Must Change - from innovation to commoditisation in business and strategy

1. Situation Normal, Everything Must Change

2. LEF tracks the co-evolution of Business & IT Developing an Outside-In Operating Model Research-Based Services Visioning, strategy, advice, coaching, executive education, diagnostics, assessments, staff development, training workshops, presentations, The Future of Data & ERP Weapons of Mass events, study tours Discussion 2012 Research 2013 Research Previous Research Leading Edge Forum 01/29/13 01:57 2

3. STRATEGY

4. Tactical Purchasing Choices Decisions (BYOT) (Oracle vs SAP) Operational Details Implementation (SLAs) Details (Private vs Public)

5. Why? Vague How? What? When?

6. Bombard the hill! But Why?

7. ABC Report 67% of successful generals bombard hills Is this the Why?

8. Bombarding Hills is on the Slope of Enlightenment? Is this the Why?

9. Possible where Why? Cut off supply Possible lanes? where Possible where

10. Why? Cut off supply lanes? How, What, When

11. Why? Vague No Map?

12. How do you map business?

13. Value Chain Machine Company (Machine) Standard Pipes Company Nuts & Bolts (Nut & Bolts) Armory System Screw Cutting Lathe Metal Ingots Company (Lathes)

14. Nokia ... but value chains change ...

15. Laggards Early Adopter ... due to innovation ...

16. It's all random ... Hang on ...

17. Evolve

18. Evolve

19. Ubiquity Utility Commodity Product Service Custom Built Evolution Genesis Certainty

20. Ubiquity ion etit p C om Consumer Supplier Certainty

21. Value Chain Evolution (describes organisation) (describes change)

22. What if we combine?

23. Value Chain Customer Fotango Image Manipulation Payment Photo Storage Web Site Banking systems Customer Platform Relationship System Development Tools (CRM) Distributed Architecture Compute Data Centre The Company Servers Power

24. Customer Value Chain Fotango Online Image Map Payment Manipulation Online Photo Storage Web Site CRM Distributed Platform Architecture Data Centre Compute Power Genesis Custom Product Commodity Evolution Built (+ rental) (+ utility)

25. Lesson 1 Needs vs Efﬁciency

26. Value Chain Need Differentiation Genesis Custom Product Commodity Evolution Built (+ rental) (+ utility)

27. Value Chain Hidden Efﬁciency Genesis Custom Product Commodity Evolution Built (+ rental) (+ utility)

28. Lesson 2 Competition Changes Everything

29. Value Chain Chaotic Genesis Custom Product Commodity Evolution Built (+ rental) (+ utility)

30. Value Chain Fotango Rare Online Image ManipulationUnderstood Poorly Online Photo Storage Differential Competitive Advantage High unit value Distributed Constantly changing Architecture Undeﬁned market Genesis Custom Product Commodity Evolution Built (+ rental) (+ utility)

31. Value Chain Linear Genesis Custom Product Commodity Evolution Built (+ rental) (+ utility)

32. Value Chain Commonplace Well Understood Web Site & Operations Efﬁciency CRM Cost of doing business Volume operations Standardised Deﬁned market Compute Power Genesis Custom Product Commodity Evolution Built (+ rental) (+ utility)

33. Value Chain Linear Competition Chaotic Genesis Custom Product Commodity Evolution Built (+ rental) (+ utility)

34. Lesson 3 One size never ﬁts all

35. Value Chain AGILE Strong Weak SIX SIGMA Weak Strong Genesis Custom Product Commodity Evolution Built (+ rental) (+ utility)

36. Value Chain Outsource SIX SIGMA Weak Strong ... tends to apply single technique ... Genesis Custom Product Commodity Evolution Built (+ rental) (+ utility)

37. Value Chain Change Control +++ ... with a common consequence ... Genesis Custom Product Commodity Evolution Built (+ rental) (+ utility)

38. Value Chain ... only somethings are suitable Outsource Genesis Custom Product Commodity Evolution Built (+ rental) (+ utility)

39. Lesson 4 Efﬁciency enables Innovation

40. Value Chain Electricity Provision Siemens A/C Utility (Westinghouse) Genesis Custom Product Commodity Evolution Built (+ rental) (+ utility)

41. Value Chain Worth Agility e fac er Efﬁciency Int Competition Genesis Custom Product Commodity Evolution Built (+ rental) (+ utility)

42. Componentisation Herbert Simon

43. Creative Destruction Joseph Schumpeter

44. Lesson 5 Choice is an illusion

45. Value Chain Worth Agility e fac er Efﬁciency Int Competition Genesis Custom Product Commodity Evolution Built (+ rental) (+ utility)

46. “Red Queen” The need to constantly evolve in order to stand still relative to a surrounding ecosystem Prof.Van Valen

47. Lesson 6 We have inertia

48. Computing Infrastructure Past Compute (Product) Novel Architectural Emerging Good Practice Best Practice Practice Practice (Scale Up) (Scale Up) (Scale Up) (Scale Up) Evolution

49. Novel Architectural Practice Emerging (Scale Out, Practice Good Practice Distributed Systems) (Scale Out) Future Best (Scale Out) Practice (Scale Out) Past Compute Compute (Product) (Utility) Best Practice (Scale Up) Evolution

50. Good Practice (Scale Out) Co-Evolution Compute Compute (Product) (Utility) Best Practice (Scale Up) Evolution

51. Good Practice (Scale Out) New Estate But we want the "DevOps" beneﬁts ... Compute Compute (Product) (Utility) Legacy Estate Best Practice (Scale Up) Evolution

52. Good Practice But we don't (Scale Out) want to re- New Estate architect ... "DevOps" Cost Compute Compute (Product) (Utility) Legacy Estate Best Practice (Scale Up) Evolution

53. Value Chain Worth Agility Efﬁciency Despite beneﬁts, Inertia cost creates ... Genesis Custom Product Commodity Evolution Built (+ rental) (+ utility)

54. Lesson 7 Inertia Kills

55. Value Chain Vendors have ... Past Success Inertia Genesis Custom Product Commodity Evolution Built (+ rental) (+ utility)

56. Million $2,000 3% and the new $1,500 world is changing slowly ... $1,000 $500 $0 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 Analyst Estimates for EC2 Revenue

57. Million $30,000 50% $22,500 Hang on, this can't be right ... $15,000 $7,500 3% $0 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 Analyst Estimates for EC2 Revenue

58. IT change is slower!

59. Value Chain Alas, we're lulled by past state of competition ... Peace Genesis Custom Product Commodity Evolution Built (+ rental) (+ utility)

60. Value Chain Punctuated Equilibrium Peace War Genesis Custom Product Commodity Evolution Built (+ rental) (+ utility)

61. Lesson 8 Cycles

62. Value Chain Wonder e fac er Peace Int War Genesis Custom Product Commodity Evolution Built (+ rental) (+ utility)

63. Peace War Wonder

64. The Mechanical Age

65. The Age of Electricity

66. Utility Ubiquity Product Cloud is standard evolutionary shift ... Certainty

67. Ubiquity ion etit p C om Consumer ... caused by competition Supplier Certainty

68. Value Chain Worth ... resulting in standard beneﬁts Agility e fac er Efﬁciency Int Competition Genesis Custom Product Commodity Evolution Built (+ rental) (+ utility)

69. Value Chain ... which we have inertia to Inertia Genesis Custom Product Commodity Evolution Built (+ rental) (+ utility)

70. Value Chain ... along with a change in competition Peace War Genesis Custom Product Commodity Evolution Built (+ rental) (+ utility)

71. “Red Queen” The need to constantly evolve in order to stand still relative to a surrounding ecosystem Prof.Van Valen ... that kills

72. Situation Normal, Everything Must Change ... bought the T- Shirt

73. New organisations form because ...

74. Good Practice (Scale Out) New Estate "DevOps" Co-Evolution Compute Compute (Product) (Utility) Legacy Estate Best Practice (Scale Up) Evolution

75. 60% View on Open Source Three forms of 50% organisation in the wild ... 40% 30% 20% 10% 0% Nothing Cost Rely Engaged Weapon Traditional Web 2.0 Next Generation

76. Type Traditional Next Generation Organisation Structure Departmental Service / Cell Culture Inertia Fluid / Gameable Corporate Focus Profit Disruption Strategy / Tactical Open source Cost Reduction Weapon Learning Analysts Ecosystem "Big" Data Used Driven By Resilience N+1 Design For Failure Failure Testing Disaster Recovery Chaos Engines Practice Capacity Scale Up Scale-out Technique Single Mixed Deployment Change Control Continuous Activity Infrastructure Enterprise Class Commodity

77. Value Chain More cell based Genesis Custom Product Commodity Evolution Built (+ rental) (+ utility)

78. Ubiquity Lower adoption barriers p en O Impact of Open ... Collaboration Certainty

79. Value Chain Worth Agility e fac er Efﬁciency Int Open Genesis Custom Product Commodity Evolution Built (+ rental) (+ utility)

80. 90% of large organizations use open source

81. 40% We have a formal process for Open Technology 30% Traditional 20% Web 2.0 10% 0% Strongly Strongly Disagree Neutral Agree Disagree Agree

82. Our company deploys an open technology 60% approach as a means of outmaneouvering competitors 40% Traditional Web 2.0 20% 0% Strongly Strongly Disagree Neutral Agree Disagree Agree

83. Value Chain IOS Genesis Custom Product Commodity Evolution Built (+ rental) (+ utility)

84. Value Chain IOS Genesis Custom Product Commodity Evolution Built (+ rental) (+ utility)

85. Value Chain Data Centre Open Genesis Custom Product Commodity Evolution Built (+ rental) (+ utility)

86. Type Traditional Next Generation Organisation Structure Departmental Service / Cell Culture Inertia Fluid / Gameable Corporate Focus Profit Disruption Strategy / Tactical Open source Cost Reduction Weapon Learning Analysts Ecosystem "Big" Data Used Driven By Resilience N+1 Design For Failure Failure Testing Disaster Recovery Chaos Engines Practice Capacity Scale Up Scale-out Technique Single Mixed Deployment Change Control Continuous Activity Infrastructure Enterprise Class Commodity

87. Choose one ... + Innovation + Customer + Efﬁciency

88. Supplier Ecosystem

89. Innovate

90. Value Chain Innovate Hadoop EC2 Genesis Custom Product Commodity Evolution Built (+ rental) (+ utility)

91. Value Chain Commoditise EMR EC2 Genesis Custom Product Commodity Evolution Built (+ rental) (+ utility)

92. Value Chain Innovate EMR EC2 Genesis Custom Product Commodity Evolution Built (+ rental) (+ utility)

93. Value Chain Innovate Leverage Commoditise Genesis Custom Product Commodity Evolution Built (+ rental) (+ utility)

94. Choose All ... + Innovation + Customer + Efﬁciency

95. Value Chain Electronic Health Care Record Systems Efﬁciency Genesis Custom Product Commodity Evolution Built (+ rental) (+ utility)

96. Value Chain Electronic Health Care Record Systems Past Success Genesis Custom Product Commodity Evolution Built (+ rental) (+ utility)

97. Value Chain ce rf a te In Electronic Health Care Record Systems Open Genesis Custom Product Commodity Evolution Built (+ rental) (+ utility)

98. Commoditise Recruitment Efﬁciency ... more powerful than most realise Open Ecosystems Protecting Value Chain Barrier to Entry Standards

99. Strategic Play Uses Open to Compete

100. Web 2.0 Traditional Strategic Play Uses Open to Compete

101. Players Doing well ... Strategic Play Uses Open to Compete

102. Type Traditional Next Generation Organisation Structure Departmental Service / Cell ... More Culture Inertia Fluid / Gameable like Corporate Focus Profit Disruption Strategy / Tactical Open source Cost Reduction Weapon Learning Analysts Ecosystem "Big" Data Used Driven By Resilience N+1 Design For Failure Failure Testing Disaster Recovery Chaos Engines Practice Capacity Scale Up Scale-out Technique Single Mixed Deployment Change Control Continuous Activity Infrastructure Enterprise Class Commodity

103. Customer Value Chain Fotango .... Manipulate Online Image Payment Manipulation Open Source, Online Photo Open Data, Storage APIs Web Site CRM Distributed Platform Architecture Data Centre Compute Power Genesis Custom Product Commodity Evolution Built (+ rental) (+ utility)

104. .... Tend to Use IT as a weapon

105. Thinkers Doing OK ... Strategic Play Uses Open to Compete

106. Strategic Play Believers Whoops ... Uses Open to Compete

107. Strategic Play Chancers Oh dear ... Uses Open to Compete

108. Type Traditional Next Generation Organisation Structure Departmental Service / Cell Look Like ... Culture Inertia Fluid / Gameable Corporate Focus Profit Disruption Strategy / Tactical Open source Cost Reduction Weapon Learning Analysts Ecosystem "Big" Data Used Driven By Resilience N+1 Design For Failure Failure Testing Disaster Recovery Chaos Engines Practice Capacity Scale Up Scale-out Technique Single Mixed Deployment Change Control Continuous Activity Infrastructure Enterprise Class Commodity

109. Lots of big documents ... IT STRATEGY

110. Not so big on ... Why? Vague

111. Adapt Doing well ... Strategic Play Die Oh dear ... Uses Open to Compete

112. What to do?

113. Need

114. Value Chain Value Chain

115. Ubiquity Utility Commodity Product Service Custom Built Evolution Genesis Certainty

116. Value Chain Step 1. Map Genesis Custom Product Commodity Evolution Built (+ rental) (+ utility)

117. Value Chain Step 2. Find Inefﬁciencies Hidden Efﬁciency Genesis Custom Product Commodity Evolution Built (+ rental) (+ utility)

118. Value Chain Step 3. Break existing model Genesis Custom Product Commodity Evolution Built (+ rental) (+ utility)

119. Value Chain Step 4. Treat as units Genesis Custom Product Commodity Evolution Built (+ rental) (+ utility)

120. Value Chain Step 5. Apply right methods AGILE Strong Weak SIX SIGMA Weak Strong Genesis Custom Product Commodity Evolution Built (+ rental) (+ utility)

121. Value Chain Agile, In-House Genesis Custom Product Commodity Evolution Built (+ rental) (+ utility)

122. Value Chain Leverage, Buy Products, Open Source Genesis Custom Product Commodity Evolution Built (+ rental) (+ utility)

123. Value Chain Utility, Outsource Genesis Custom Product Commodity Evolution Built (+ rental) (+ utility)

124. Step 6. Find shared components

125. Value Chain Step 7. Worth Manipulate the environment (Strategy) Agility e fac er Efﬁciency Int Open Genesis Custom Product Commodity Evolution Built (+ rental) (+ utility)

126. lef.csc.com @lefep @swardley

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Situation Normal Everything Must Change - from innovation to commoditisation in business and strategy