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Disruptive Innovation: Past, Present, Future
(how to use these theories to manage your IT)
February, 2016
Mark Madsen - @markmadsen - http://ThirdNature.net
© Third Nature
Innovation: The Cargo Cult of Management Consulting
© Third Nature Max Gurvitz
© Third Nature
The go-to innovation company is Google
You can’t get fired for doing what everyone else did (but
you can get fired for not getting the results they did)
© Third Nature
If you do what google did you could:
Make a data center out of shipping containers.
▪ That didn’t work out.
Build your own servers.
▪ Made out of “razor blades and hate”
▪ Start fires in the data center
Build your own environmental cooling data center
▪ Generating fog and rain inside the data center
As Dan Luu noted, at least copy current engineering
practices rather than things done in 1999.
By the way, are you using MapReduce?
© Third Nature
Saying there’s a
process you can
follow to be
innovative is like
saying there’s a
recipe that will
make you a chef.
© Third Nature
You keep using that word.
I do not think it means
what you think it means.
Innovation?
© Third Nature
Innovation is not “add new features”
© Third Nature
“Better experiences, not more features.”
Roland Rust
“When technology
delivers basic needs,
user experience
dominates”
Don Norman
© Third Nature
Value is not in the product, it’s in the practice
Innovation is not a characteristic of things
© Third Nature
Innovation is change. Change is often not appreciated.
© Third Nature
Paradox: Innovation becomes best practice
Innovation isn’t reproducible. Only the conditions that permit it are
© Third Nature
HOW DOES THE MARKET WORK AND WHAT
IS HAPPENING TO OUR TECHNOLOGIES?
© Third Nature
Commoditization of Computing Technology is the Driver
“There is no reason anyone
would want a computer in
their home.”
Ken Olson, CEO of DEC, 1977
“…by 2008 we will be producing
one billion transistors for every
man, woman and child on earth”
Semiconductor Industry Association, 2007
© Third Nature
How significant is the computing improvement?
1900 1910 1920 1930 1940 1950 1960 1970 1980 1990 2000
1010
10 9
10 8
107
106
105
104
103
102
101
10
10-1
01-2
10-3
10-4
10-5
10-6
Calculationspersecondper$1000
Data: Ray Kurzweil, 2001
10,000 X improvement
DW architecture and
methods start here in
the mid 80s
Term “BI” coined
Mechanical Relay Vacuum tube Transistor Integrated circuit
© Third Nature
Don’t worry about performance, just buy more hardware
10,000 X performance
improvement, soon 100K
© Third Nature
There are always limits
“If the automobile had followed
the same development as the
computer, a Rolls-Royce would
today cost $100, get a million
miles per gallon, and explode
once a year killing everyone
inside.”
Robert Cringely
Time
Anything
Reality
© Third Nature
RIP Moore’s Law. Data is growing faster than
compute. This forces an architectural shift.
© Third Nature
We’ve reached another generational technology shift
1900 1910 1920 1930 1940 1950 1960 1970 1980 1990 2000
1010
10 9
10 8
107
106
105
104
103
102
101
10
10-1
01-2
10-3
10-4
10-5
10-6
Calculationspersecondper$1000
Mechanical Relay Vacuum tube Transistor Integrated circuit
Data: Ray Kurzweil, 2001
Multicore and networked
parallelism is the next wave
© Third Nature
What’s different?
Parallelism
We’re not getting more CPU
power, but more CPUs.
There are too many CPUs
relative to other resources,
creating an imbalance in
hardware platforms.
Most software is designed
for a single worker, not
high degrees of parallelism
and won’t scale well.
© Third Nature
Reality: you must assume distributed architecture
Why by default? Because the upgrade between single
node and distributed is a major change to designs. It
carries new component linkages and complexities. A new
ecosystem.
The future holds cloud provisioning, software-defined
environments and a lot less single-server provisioning.
Slide 21Copyright Third Nature, Inc.
(a) Scaling up with a larger server (b) Scaling out with many small servers
(aka “++ungood)” (aka “the future”)
The future is already here, it just isn’t evenly distributed yet.
© Third Nature
An important cloud computing benefit
Scalability is free (if you have the right software)
If your task requires 10 units of work, you can decide
when you want the results:
10 servers, 1 unit of time
Cost is the same. Not true of the conventional IT model
Time
1 server, 10 units of time
X X
© Third Nature
We are in a transitional phase in IT architecture
Then State of Practice Now, forward
Architecture Timeshare Client/server Cloud
Data Core TXs All TXs, some
events, docs
All data
Rate of change Slow Rapid Continuous
Uses Few Many Everything
Latency Daily+++ < daily to
minutes
Immediate
Data platform Uniprocessor SMP, cluster Shared nothing
© Third Nature
Majority use of computing over time
1930s-1950s: Calculate
1960s-1980s: Automate
1990s-2010s: Informate
2010s+: Analyze and
Actuate
Computing technology has become a tool of observation
Risingorganizationalcomplexity
© Third Nature
Evolution of data
50s-60s: data as product
70s-80s: data as byproduct
90s-00s: data as asset
2010s +: data as substrate
The real data revolution is in
business structure and
processes and how they use
information.
© Third Nature
Not hype: another round of infrastructure change
Mainframe  c/s  cloud
Batch  online  event driven
Infrastructure takes a long time.
Value is driven by new capabilities
used to do new things, less by
doing old things better or cheaper
© Third Nature
Disruption Time
The Internet forced a new
architectural evolution.
IT has had a hard time
keeping up, and new
entrants in many markets
are taking advantage of the
new architecture to change
how IT work is done.
Any time you have a backlog
of resisted innovations, the
pressure will eventually
force wholesale change.
© Third Nature
UNDERSTANDING INNOVATION AND
COMMODITIZATION PROCESSES*
This is how things change.
An amalgam of Everett Rogers, Yochai Benkler, Geoffrey Moore, Clayton
Christensen, Stephen Gould, Eric von Hippel and others.
aka I like S curves
*the very short version
© Third Nature
COMMODITIZATION
© Third Nature
Four phases of technology commoditization
Early adopters
show results
Market
growth
Innovation
Development
Maturation
Saturation
Time
Early mainstream
starts to pay attention
Mainstream buy-in
This axis could be considered market penetration, adoption, product maturity
Invention /
discovery
© Third Nature
Time
Characteristics of software as it evolves
Innovation
Unique
Custom built
High value
High cost
Differentiator
Not well understood
High rate of change
Few vendors
© Third Nature
Time
Oddity  known
Focus on integration not
building, customizable
products
High value
Lowered costs or
cost/speed/fit tradeoffs
Point of competition
Better understood
Slowed rate of change
Growing then shrinking
vendor count
Characteristics of software as it evolves
Maturation
© Third Nature
Time
Ubiquitous
Configurable product
High to low value*
Low cost
Barrier to entry
Purpose and limitations well
understood
Negligible rate of change
Few, large vendors
Characteristics of software as it evolves
Saturation
© Third Nature
Time
Compete on
differentiating
value
Vendor strategies (in general) vary by phase
Maturation
Compete on
product &
features
Compete on
process
SaturationInnovation
Market
growth
© Third Nature
Should you be a first mover or fast follower?
Time
Little product
substitution is
possible here.
Few competitive
bids or RFPs.
Maturation
Uncertain
tradeoffs here.
Competitive
bids for unlike
products. Early
it’s less “what
feature” and
more “how to
accomplish my
task”, later it’s
the opposite.
Predictable
cost and
feature
comparison
until practices
change. That
change can
take a long
time to occur.
SaturationInnovation
Market
growth
© Third Nature
Time
Few product
choices
The vendor landscape changes over time
Many, expanding
product choices
Many, contracting
product choices
Relatively few
product choices
Market
growth
A particularly
dangerous time
to pick vendors
© Third Nature
We see this pattern in evolutionary processes
Saturation,competition,env.constraints
Evolution in most complex
systems goes through periods
of rapid change followed by
periods of general stability,
referred to as “punctuated
equilibrium”
Invertebrates
Vertebrates
Bacteria
Insects
Innovation – Adaptive radiation – Selection – Convergence
3.5b Bacteria (Cell)
2.5b Sponge (Body)
0.7b Clams (Nerves)
0.5b Trilobites (Brains)
0.1b Mammals
Timing
© Third Nature
The same model can be applied to technology
Saturation,competition,env.constraints
Copyright Third Nature, Inc.
Innovation – Adaptive radiation – Selection – Convergence
© Third Nature
With a long view a pattern emerges
Evolution in most complex systems goes through periods
of rapid change followed by periods of general stability,
referred to as “punctuated equilibrium”
New technologies take the place of old, establishing new
ecosystems which are in turn disrupted by newer
technologies and ecosystems.
Chaotic Stable Chaotic Stable Chaotic
Time
© Third Nature
Activities, products and practices evolve over time
Source: Simon Wardley
© Third Nature
Technology doesn’t just fulfill a need. It generates
new needs and new problems. Business practices
and technology co-evolve.
© Third Nature
As practices evolve based on new capabilities…
A new level of
complexity
develops over
top of the
older, now
better
understood
processes,
leading to new
needs.
© Third Nature
Evolution and the Salaman-Story Paradox
Source: Simon Wardley
© Third Nature
Evolution and the Salaman-Story Paradox
”Survival requires efficient exploration of current
competencies and ‘coherence, coordination and
stability’; whereas innovation requires discovery
and development of new competencies and this
requires the loosening and replacement of these
erstwhile virtues”
Source: Simon Wardley
© Third Nature
As a technology moves from emerging to commodity the
nature of acquiring, using and managing it should change
Generate
options
Innovation
Novel practice
Maximize value
Maturation
Standardize /
minimize choice
Acquisition
Best practice
Minimize costs
SaturationInnovation
e.g. BI which went from many tools to a few vendors, now being
disrupted by new technologies and capabilities
Constrain
choices
Adaptation
Good practice
Optimize
© Third Nature
In terms of technology, we are in a tough position
because the ecosystem is in a disjoint state
Maturation SaturationInnovation
Big data and
analytics is here
BI / DW is here
© Third Nature
ADOPTION: ENOUGH ABOUT THE
ADOPTEES, WHAT ABOUT ADOPTERS?
The Enterprise IT Adoption Cycle
Wardley IT adoption reality
Adoption cycle graphic © 2012 Simon Wardley and CC BY-SA 3.0
****
© Third Nature
The Incredible Rate of Technology Change
Big data?
OMG!
© Third Nature
The Incredible Rate of Technology Change
We told you about
it in 2004…
© Third Nature
Time
Adoption
Rate
Some Innovation Adoption Theory
End of LifeNew innovation
Time
Adoption
Rate
End of LifeNew innovation
© Third Nature
Adopter Categories
Innovators Late
Majority
Early
Majority
Early
Adopters
Laggards
© Third Nature
Ability to adopt is governed by people & organizations
Innovators Late
Majority
Early
Majority
Early
Adopters
Late adopters
People here tend to view
a technology as a means
to capitalize on future
opportunities*
e.g. big new projects,
process change
People here tend to
view technology as a
means to resolve
present problems.
e.g. more focused
projects, process
improvement
Copyright Third Nature, Inc.
*adopter status is based on the person/org and a given technology, it’s not a blanket statement
© Third Nature
Slowing it down: innovation is gated by ability to adopt
No technology stands
entirely alone – these
dependencies slow
adoption, stretching
the maturation phase.
This ecosystem effect
is what creates
technology regimes
that can last decades.
Copyright Third Nature, Inc.
Younger companies
have a relative
advantage when it
comes to absorbing
new infrastructure.
© Third Nature
Time
Cumulative
Adoption
Market Adoption
Hard work
Tipping point
© Third Nature
Product
Maturity
Some Ideas Aren’t That Good
End of LifeTimeNew innovation
Some ideas aren’t that
good, like object
databases in the 1990s
© Third Nature
These Curves Can Explain a Lot
Time
Product
Maturity
Analyst revenue
predictions
Executive interest“Gartner Gap”
© Third Nature
The “experts” often have a foreshortened view
“Open source is not worth paying attention to.”
A Gartner analyst talking about the database and analytics market, January, 2006.
Where the analysts are on the
adoption curve
© Third Nature
Crossing the Chasm (1991)
© Third Nature
Geoffrey Moore’s Ideas
Built on Rogers’ ideas, extended them to tech
marketing and product management. The original
focus was on the development of technology (gray).
Just say no
Stick with the proven
Stick with the herd
Stay ahead of
the herd
Just try it
© Third Nature
Core BI / DW technology is mainstream-stable
The data management market has many segments,
some new, some mature, some being rejuvenated.
Platforms (this
should scare
everyone)
Databases*
Reporting
&
ETL and DI
Analytics
© Third Nature
Product evolution in software markets
PC
1 2 3
4 5 6
Image: Geoffrey Moore, Dealing With Darwin”
© Third Nature
INNOVATION
© Third Nature
Innovation and Commoditization
This section isn’t really a summary
© Third Nature
Image: Harvard Business Review, “Skate to Where the Money Will Be”
Theory of Disruptive Innovation
i.e. you don’t pay attention and do
what you always did and the other guy
eats your market from below
© Third Nature
Disproving Christensen
a) 9% of the cases fit the model
b) Disruptive innovation <> success; banks disruptively innovated
debt products and we know how that turned out
c) The model fails to predict failure too:
In 2007, Christensen told Business Week that “the prediction of
the theory would be that Apple won’t succeed with the
iPhone,” adding, “History speaks pretty loudly on that.” In its
first five years, the iPhone generated a hundred and fifty
billion dollars of revenue. In the preface to the 2011 edition of
“The Innovator’s Dilemma,” Christensen reports that, since the
book’s publication, in 1997, “the theory of disruption
continues to yield predictions that are quite accurate.”
d) Oh
© Third Nature
Types of innovation
Incremental or “sustaining”
▪ Incremental is based on existing concepts, framing;
smaller changes within the same general framework
Disruptive
▪ Based on new concepts, science, principles; requires
new knowledge, skills; over time has significant
consequences to market
Architectural – the third path
▪ Changes how the parts are related. It devalues
advantage of experience, knowledge, usefulness of
prior knowledge, but doesn’t affect the existing
knowledge. (Christensen missed this one)
© Third Nature
Adoption and decline – everything gets old
For most businesses, nearly 80% of IT budget is dedicated
to basic infrastructure
…and more than 60% of IT labor cost goes to keep things
running, i.e. basic operations and support.
Strategic
Commodity
© Third Nature
It Wasn’t Always This Way
As technologies mature and spread to competitors, they
cease to be differentiators. Unfortunately, this is what
packaged software vendors do to your “best practice.”
CommodityCommodity
The old advantages becomes the new focus of cost reduction.
For example, your data warehouse.
Strategic Strategic
© Third Nature
Adoption and decline
Rarely does anyone talk about the core problem:
preexisting conditions
You have something new. How does it affect the old?
▪ Replaces it?
▪ Adds something new?
▪ Overlaps it, forcing you to make hard decisions about what
parts to keep, change, throw away?
The heart of this problem is the process of architecture:
integrating changes to systems over time. The integration
is not purely technical, it’s practices of use, operation,
deployment.
© Third Nature
Most data tech is a commodity, a cost of doing business
© Third Nature
Adopting new things: there’s a problem with your budget
© Third Nature
How IT strategies evolved with commoditization
Time
Equipment
Expensive: outsource to reduce equipment cost
Labor
Affordable: insource for control, innovation
Dirt cheap: outsource to reduce labor cost
76
© Third Nature
The cost flip in the business intelligence world
Cost factors traded positions 1990 - 2010
Equipment
Software
77
Cost
Labor
For small to mid-sized organizations it’s very affordable
© Third Nature
TCO and BI
What can you control?
▪ Labor effort is almost
identical across BI
products.
▪ Hardware use by BI tools
is similar across
products.
▪ You can negotiate the
software costs.
3 Year BI TCO Cost Categories
Source: Third Nature Open Source cost study
© Third Nature
BI Market: Cost is normally driven out by
commodities, not increased
79
© Third Nature
This is an old problem
BI tools are better, but the model being applied in
most organizations is not different from the past.
Slide 81November 2010 Mark Madsen
If BI is a commodity, why does it cost so much?
Processes Applications Data Integration Storage EDM / BRM Delivery Consumers
Purchasing
Distribution
Manufacturing
Sales &
Service
ERP Data warehouse
ODS
Stream db / cache
Content store
Identify
Analyze
Debt<10% of Income Debt=0%
Good
Credit
Risks
Bad
Credit
Risks
Good
Credit
Risks
Yes
YesYes
NO
NONO
Income>$40K
Predict
Batch ETL
EII
SCM
SFA
CRM ESB
EDR
Monitor
Explore
Data mart
Low-lat ETL
BPM/Workflow
BRE
CEP
Prescribe
Data services
Transaction services
Manual feedback
Automated feedback
© Third Nature
Lessons to take from this
1. Business intelligence is still expensive for many
organizations, with the largest proportion of cost
being labor.
2. Business intelligences is not a technology problem,
or the failure rate and costs wouldn’t be so high.
3. BI tools being a commodity does not make BI a
commodity.
4. Architecture has an outsized impact on your ability
to adopt and adapt.
5. What you remove is as important as what you add.
82
© Third Nature
WHAT CAN YOU DO KNOWING
HOW THE MARKET EVOLVES?
© Third Nature
Questions to ask
Why innovate?
▪ Usual answer: profit
▪ Proper answer: solve a problem
Innovation for what?
▪ A product or service you are selling to customers
▪ Internal products and services, how you run your
business or department
© Third Nature
Reinforcing relationships resist change, despite
radical technology and practice shifts
Note how only one third is tech
Architectural
Regime
MethodologyTechnology
Organization
Organization
defines where the
work is done and
the roles.
Technology
defines what
work can be done
in a given area. Methodology
defines how
work is done
and what that
work is.
Slide 85
© Third Nature
Designing for data: monolithic vendor technology-
based classifications of the ecosystem won’t help
These types of eye
charts provide a
categorization of
what’s available,
not what you
need. They ignore
the contexts of use
that are most
important.
86
© Third Nature
It’s tough making it decisions in a turbulent market
Maturation SaturationInnovation
If you’re here you probably
don’t want to be making
long term technology or
vendor commitments.
© Third Nature
Today: repeating the experience of the 80s & 90s
This is the turbulent
phase of the market
as it goes through
rapid development,
then product and
service changes.
Copyright Third Nature, Inc.
The Internet combined with commodity computing is forcing a new
architectural evolution, already well underway.
Maturation SaturationInnovation
© Third Nature
Time
Rule of thumb: when a product is in phase…
Maturation SaturationInnovation
Market
growth
Build Integrate Buy
© Third Nature
Methods change too, one size doesn’t fit all
Maturation SaturationInnovation
Agile &
exploratory
methods
6 Sigma &
efficiency
methods
© Third Nature
How procurement
decisions are made
Deliberation
▪ Actions are consciously
chosen. Don’t attribute to
malice what you can attribute
to stupidity, and don’t
attribute to stupidity what
you can attribute to laziness.
Rationality
▪ People make logical
decisions. Sure they do.
Order
▪ System are understandable
and the results of actions
predictable.
© Third Nature
90% of
EVERYTHING
is crap
“Sturgeon’s Revelation”
© Third Nature
“Choose Boring Technology”
You only get so many chances
to make big changes at a
company. Don’t waste them.
You can spend X time focusing
on the goal and worry less
about the known tech, or you
can spend X time learning the
new tech and less time
focusing on the goal.
The important thing is not the
choice of tech, it’s knowing
when the time is right to make
a new tech choice.
© Third Nature
Beware unintended
consequencesUnintended consequences
© Third Nature
In other words…
Software is like puppies.
Getting a puppy is easy, raising one is hard.
“The short term benefits of using a new [type of]
database exceed the long term cost of operating it.”
Dan Mckinley
© Third Nature
Where does innovation come from?
“It has long been assumed that product
innovations are typically developed by product
manufacturers. …it now appears that this basic
assumption is often wrong.”
Eric von Hippel
© Third Nature
How to find “innovative” solutions
N.W.A. Answer: steal them from somewhere else.
© Third Nature
Being innovative and culture
Myth of process – there is no
“process for innovation”, only
principles and exceptions
e.g. “It’s best to work in small
teams, keep them crowded and
foster serendipitious
connections.” – Eric Schmidt
It depends on creative problem
solving, and solving problems
people care about.
Removing deviance removes
change, so you have to be careful
about best practices.
© Third Nature
No silver bullet
It’s culture-dependent, and creative and messy
and idiosyncratic and slow and hard, no process,
just survival bias and heuristics and principles.
© Third Nature
“The future, according to some scientists, will be exactly like
the past, only far more expensive.” ~ John Sladek
© Third Nature
Further Reading
Further Reading:
Manager’s Theories About Innovation, Salaman & Storey, 2002
Democratizing Innovation, Eric von Hippel,
http://web.mit.edu/evhippel/www/books/DI/DemocInn.pdf
Sources of Innovation, Eric von Hippel, http://web.mit.edu/evhippel/www/sources.htm
The Wealth of Networks, Yocahi Benkler
An introduction to value chain mapping, http://blog.gardeviance.org/2015/02/an-
introduction-to-wardley-value-chain.html
The diffusion of infrastructure dependent technologies: A simple model http://www.dime-
eu.org/files/active/0/vanderVoorenAlkemade.pdf
Architectural innovation: the reconfiguration of existing product technologies and the failure
of established firms http://dimetic.dime-eu.org/dimetic_files/HendersonClarkASQ1990.pdf
What the Gospel of Innovation Gets Wrong
http://www.newyorker.com/magazine/2014/06/23/the-disruption-machine
How Useful Is the Theory of Disruptive Innovation? http://sloanreview.mit.edu/article/how-
useful-is-the-theory-of-disruptive-innovation/
Slide 101
© Third Nature
Image Attributions
Thanks to the people who supplied the images used in this presentation:
indonesian angry mask phone - Erik De Castro Reuters.jpg
egg_face1.jpg - http://www.flickr.com/photos/sally_monster/3228248457
chicken_head2.jpg - http://www.flickr.com/photos/coycholla/4901760905
snail1.jpg - http://flickr.com/photos/7147684@N03/1037533775/
wheat_field.jpg - http://www.flickr.com/photos/ecstaticist/1120119742/
© Third Nature
About Third Nature
Third Nature is a consulting and advisory firm focused on new and
emerging technology and practices in information architecture, analytics,
business intelligence and data management. If your question is related to
data, analytics, information strategy and technology infrastructure then
you‘re at the right place.
Our goal is to help organizations solve problems using data. We offer
education, consulting and research services to support business and IT
organizations as well as technology vendors.
We specialize in information strategy and architecture, so we look at
emerging technologies and markets, evaluating how technologies are
applied to solve problems.
© Third Nature
About the Presenter
Mark Madsen is president of Third
Nature, a technology research and
consulting firm focused on business
intelligence, analytics and
performance management. Mark is
an award-winning author, architect
and former CTO whose work has
been featured in numerous industry
publications. During his career Mark
received awards from the American
Productivity & Quality Center, TDWI,
Computerworld and the Smithsonian
Institute. He is an international
speaker, contributing editor at
Intelligent Enterprise, and manages
the open source channel at the
Business Intelligence Network. For
more information or to contact Mark,
visit http://ThirdNature.net.

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Disruptive Innovation: how do you use these theories to manage your IT?

  • 1. Disruptive Innovation: Past, Present, Future (how to use these theories to manage your IT) February, 2016 Mark Madsen - @markmadsen - http://ThirdNature.net
  • 2. © Third Nature Innovation: The Cargo Cult of Management Consulting
  • 3. © Third Nature Max Gurvitz
  • 4. © Third Nature The go-to innovation company is Google You can’t get fired for doing what everyone else did (but you can get fired for not getting the results they did)
  • 5. © Third Nature If you do what google did you could: Make a data center out of shipping containers. ▪ That didn’t work out. Build your own servers. ▪ Made out of “razor blades and hate” ▪ Start fires in the data center Build your own environmental cooling data center ▪ Generating fog and rain inside the data center As Dan Luu noted, at least copy current engineering practices rather than things done in 1999. By the way, are you using MapReduce?
  • 6. © Third Nature Saying there’s a process you can follow to be innovative is like saying there’s a recipe that will make you a chef.
  • 7. © Third Nature You keep using that word. I do not think it means what you think it means. Innovation?
  • 8. © Third Nature Innovation is not “add new features”
  • 9. © Third Nature “Better experiences, not more features.” Roland Rust “When technology delivers basic needs, user experience dominates” Don Norman
  • 10. © Third Nature Value is not in the product, it’s in the practice Innovation is not a characteristic of things
  • 11. © Third Nature Innovation is change. Change is often not appreciated.
  • 12. © Third Nature Paradox: Innovation becomes best practice Innovation isn’t reproducible. Only the conditions that permit it are
  • 13. © Third Nature HOW DOES THE MARKET WORK AND WHAT IS HAPPENING TO OUR TECHNOLOGIES?
  • 14. © Third Nature Commoditization of Computing Technology is the Driver “There is no reason anyone would want a computer in their home.” Ken Olson, CEO of DEC, 1977 “…by 2008 we will be producing one billion transistors for every man, woman and child on earth” Semiconductor Industry Association, 2007
  • 15. © Third Nature How significant is the computing improvement? 1900 1910 1920 1930 1940 1950 1960 1970 1980 1990 2000 1010 10 9 10 8 107 106 105 104 103 102 101 10 10-1 01-2 10-3 10-4 10-5 10-6 Calculationspersecondper$1000 Data: Ray Kurzweil, 2001 10,000 X improvement DW architecture and methods start here in the mid 80s Term “BI” coined Mechanical Relay Vacuum tube Transistor Integrated circuit
  • 16. © Third Nature Don’t worry about performance, just buy more hardware 10,000 X performance improvement, soon 100K
  • 17. © Third Nature There are always limits “If the automobile had followed the same development as the computer, a Rolls-Royce would today cost $100, get a million miles per gallon, and explode once a year killing everyone inside.” Robert Cringely Time Anything Reality
  • 18. © Third Nature RIP Moore’s Law. Data is growing faster than compute. This forces an architectural shift.
  • 19. © Third Nature We’ve reached another generational technology shift 1900 1910 1920 1930 1940 1950 1960 1970 1980 1990 2000 1010 10 9 10 8 107 106 105 104 103 102 101 10 10-1 01-2 10-3 10-4 10-5 10-6 Calculationspersecondper$1000 Mechanical Relay Vacuum tube Transistor Integrated circuit Data: Ray Kurzweil, 2001 Multicore and networked parallelism is the next wave
  • 20. © Third Nature What’s different? Parallelism We’re not getting more CPU power, but more CPUs. There are too many CPUs relative to other resources, creating an imbalance in hardware platforms. Most software is designed for a single worker, not high degrees of parallelism and won’t scale well.
  • 21. © Third Nature Reality: you must assume distributed architecture Why by default? Because the upgrade between single node and distributed is a major change to designs. It carries new component linkages and complexities. A new ecosystem. The future holds cloud provisioning, software-defined environments and a lot less single-server provisioning. Slide 21Copyright Third Nature, Inc. (a) Scaling up with a larger server (b) Scaling out with many small servers (aka “++ungood)” (aka “the future”) The future is already here, it just isn’t evenly distributed yet.
  • 22. © Third Nature An important cloud computing benefit Scalability is free (if you have the right software) If your task requires 10 units of work, you can decide when you want the results: 10 servers, 1 unit of time Cost is the same. Not true of the conventional IT model Time 1 server, 10 units of time X X
  • 23. © Third Nature We are in a transitional phase in IT architecture Then State of Practice Now, forward Architecture Timeshare Client/server Cloud Data Core TXs All TXs, some events, docs All data Rate of change Slow Rapid Continuous Uses Few Many Everything Latency Daily+++ < daily to minutes Immediate Data platform Uniprocessor SMP, cluster Shared nothing
  • 24. © Third Nature Majority use of computing over time 1930s-1950s: Calculate 1960s-1980s: Automate 1990s-2010s: Informate 2010s+: Analyze and Actuate Computing technology has become a tool of observation Risingorganizationalcomplexity
  • 25. © Third Nature Evolution of data 50s-60s: data as product 70s-80s: data as byproduct 90s-00s: data as asset 2010s +: data as substrate The real data revolution is in business structure and processes and how they use information.
  • 26. © Third Nature Not hype: another round of infrastructure change Mainframe  c/s  cloud Batch  online  event driven Infrastructure takes a long time. Value is driven by new capabilities used to do new things, less by doing old things better or cheaper
  • 27. © Third Nature Disruption Time The Internet forced a new architectural evolution. IT has had a hard time keeping up, and new entrants in many markets are taking advantage of the new architecture to change how IT work is done. Any time you have a backlog of resisted innovations, the pressure will eventually force wholesale change.
  • 28. © Third Nature UNDERSTANDING INNOVATION AND COMMODITIZATION PROCESSES* This is how things change. An amalgam of Everett Rogers, Yochai Benkler, Geoffrey Moore, Clayton Christensen, Stephen Gould, Eric von Hippel and others. aka I like S curves *the very short version
  • 30. © Third Nature Four phases of technology commoditization Early adopters show results Market growth Innovation Development Maturation Saturation Time Early mainstream starts to pay attention Mainstream buy-in This axis could be considered market penetration, adoption, product maturity Invention / discovery
  • 31. © Third Nature Time Characteristics of software as it evolves Innovation Unique Custom built High value High cost Differentiator Not well understood High rate of change Few vendors
  • 32. © Third Nature Time Oddity  known Focus on integration not building, customizable products High value Lowered costs or cost/speed/fit tradeoffs Point of competition Better understood Slowed rate of change Growing then shrinking vendor count Characteristics of software as it evolves Maturation
  • 33. © Third Nature Time Ubiquitous Configurable product High to low value* Low cost Barrier to entry Purpose and limitations well understood Negligible rate of change Few, large vendors Characteristics of software as it evolves Saturation
  • 34. © Third Nature Time Compete on differentiating value Vendor strategies (in general) vary by phase Maturation Compete on product & features Compete on process SaturationInnovation Market growth
  • 35. © Third Nature Should you be a first mover or fast follower? Time Little product substitution is possible here. Few competitive bids or RFPs. Maturation Uncertain tradeoffs here. Competitive bids for unlike products. Early it’s less “what feature” and more “how to accomplish my task”, later it’s the opposite. Predictable cost and feature comparison until practices change. That change can take a long time to occur. SaturationInnovation Market growth
  • 36. © Third Nature Time Few product choices The vendor landscape changes over time Many, expanding product choices Many, contracting product choices Relatively few product choices Market growth A particularly dangerous time to pick vendors
  • 37. © Third Nature We see this pattern in evolutionary processes Saturation,competition,env.constraints Evolution in most complex systems goes through periods of rapid change followed by periods of general stability, referred to as “punctuated equilibrium” Invertebrates Vertebrates Bacteria Insects Innovation – Adaptive radiation – Selection – Convergence 3.5b Bacteria (Cell) 2.5b Sponge (Body) 0.7b Clams (Nerves) 0.5b Trilobites (Brains) 0.1b Mammals Timing
  • 38. © Third Nature The same model can be applied to technology Saturation,competition,env.constraints Copyright Third Nature, Inc. Innovation – Adaptive radiation – Selection – Convergence
  • 39. © Third Nature With a long view a pattern emerges Evolution in most complex systems goes through periods of rapid change followed by periods of general stability, referred to as “punctuated equilibrium” New technologies take the place of old, establishing new ecosystems which are in turn disrupted by newer technologies and ecosystems. Chaotic Stable Chaotic Stable Chaotic Time
  • 40. © Third Nature Activities, products and practices evolve over time Source: Simon Wardley
  • 41. © Third Nature Technology doesn’t just fulfill a need. It generates new needs and new problems. Business practices and technology co-evolve.
  • 42. © Third Nature As practices evolve based on new capabilities… A new level of complexity develops over top of the older, now better understood processes, leading to new needs.
  • 43. © Third Nature Evolution and the Salaman-Story Paradox Source: Simon Wardley
  • 44. © Third Nature Evolution and the Salaman-Story Paradox ”Survival requires efficient exploration of current competencies and ‘coherence, coordination and stability’; whereas innovation requires discovery and development of new competencies and this requires the loosening and replacement of these erstwhile virtues” Source: Simon Wardley
  • 45. © Third Nature As a technology moves from emerging to commodity the nature of acquiring, using and managing it should change Generate options Innovation Novel practice Maximize value Maturation Standardize / minimize choice Acquisition Best practice Minimize costs SaturationInnovation e.g. BI which went from many tools to a few vendors, now being disrupted by new technologies and capabilities Constrain choices Adaptation Good practice Optimize
  • 46. © Third Nature In terms of technology, we are in a tough position because the ecosystem is in a disjoint state Maturation SaturationInnovation Big data and analytics is here BI / DW is here
  • 47. © Third Nature ADOPTION: ENOUGH ABOUT THE ADOPTEES, WHAT ABOUT ADOPTERS?
  • 48. The Enterprise IT Adoption Cycle Wardley IT adoption reality Adoption cycle graphic © 2012 Simon Wardley and CC BY-SA 3.0 ****
  • 49. © Third Nature The Incredible Rate of Technology Change Big data? OMG!
  • 50. © Third Nature The Incredible Rate of Technology Change We told you about it in 2004…
  • 51. © Third Nature Time Adoption Rate Some Innovation Adoption Theory End of LifeNew innovation Time Adoption Rate End of LifeNew innovation
  • 52. © Third Nature Adopter Categories Innovators Late Majority Early Majority Early Adopters Laggards
  • 53. © Third Nature Ability to adopt is governed by people & organizations Innovators Late Majority Early Majority Early Adopters Late adopters People here tend to view a technology as a means to capitalize on future opportunities* e.g. big new projects, process change People here tend to view technology as a means to resolve present problems. e.g. more focused projects, process improvement Copyright Third Nature, Inc. *adopter status is based on the person/org and a given technology, it’s not a blanket statement
  • 54. © Third Nature Slowing it down: innovation is gated by ability to adopt No technology stands entirely alone – these dependencies slow adoption, stretching the maturation phase. This ecosystem effect is what creates technology regimes that can last decades. Copyright Third Nature, Inc. Younger companies have a relative advantage when it comes to absorbing new infrastructure.
  • 55. © Third Nature Time Cumulative Adoption Market Adoption Hard work Tipping point
  • 56. © Third Nature Product Maturity Some Ideas Aren’t That Good End of LifeTimeNew innovation Some ideas aren’t that good, like object databases in the 1990s
  • 57. © Third Nature These Curves Can Explain a Lot Time Product Maturity Analyst revenue predictions Executive interest“Gartner Gap”
  • 58. © Third Nature The “experts” often have a foreshortened view “Open source is not worth paying attention to.” A Gartner analyst talking about the database and analytics market, January, 2006. Where the analysts are on the adoption curve
  • 59. © Third Nature Crossing the Chasm (1991)
  • 60. © Third Nature Geoffrey Moore’s Ideas Built on Rogers’ ideas, extended them to tech marketing and product management. The original focus was on the development of technology (gray). Just say no Stick with the proven Stick with the herd Stay ahead of the herd Just try it
  • 61. © Third Nature Core BI / DW technology is mainstream-stable The data management market has many segments, some new, some mature, some being rejuvenated. Platforms (this should scare everyone) Databases* Reporting & ETL and DI Analytics
  • 62. © Third Nature Product evolution in software markets PC 1 2 3 4 5 6 Image: Geoffrey Moore, Dealing With Darwin”
  • 64. © Third Nature Innovation and Commoditization This section isn’t really a summary
  • 65. © Third Nature Image: Harvard Business Review, “Skate to Where the Money Will Be” Theory of Disruptive Innovation i.e. you don’t pay attention and do what you always did and the other guy eats your market from below
  • 66. © Third Nature Disproving Christensen a) 9% of the cases fit the model b) Disruptive innovation <> success; banks disruptively innovated debt products and we know how that turned out c) The model fails to predict failure too: In 2007, Christensen told Business Week that “the prediction of the theory would be that Apple won’t succeed with the iPhone,” adding, “History speaks pretty loudly on that.” In its first five years, the iPhone generated a hundred and fifty billion dollars of revenue. In the preface to the 2011 edition of “The Innovator’s Dilemma,” Christensen reports that, since the book’s publication, in 1997, “the theory of disruption continues to yield predictions that are quite accurate.” d) Oh
  • 67. © Third Nature Types of innovation Incremental or “sustaining” ▪ Incremental is based on existing concepts, framing; smaller changes within the same general framework Disruptive ▪ Based on new concepts, science, principles; requires new knowledge, skills; over time has significant consequences to market Architectural – the third path ▪ Changes how the parts are related. It devalues advantage of experience, knowledge, usefulness of prior knowledge, but doesn’t affect the existing knowledge. (Christensen missed this one)
  • 68. © Third Nature Adoption and decline – everything gets old For most businesses, nearly 80% of IT budget is dedicated to basic infrastructure …and more than 60% of IT labor cost goes to keep things running, i.e. basic operations and support. Strategic Commodity
  • 69. © Third Nature It Wasn’t Always This Way As technologies mature and spread to competitors, they cease to be differentiators. Unfortunately, this is what packaged software vendors do to your “best practice.” CommodityCommodity The old advantages becomes the new focus of cost reduction. For example, your data warehouse. Strategic Strategic
  • 70. © Third Nature Adoption and decline Rarely does anyone talk about the core problem: preexisting conditions You have something new. How does it affect the old? ▪ Replaces it? ▪ Adds something new? ▪ Overlaps it, forcing you to make hard decisions about what parts to keep, change, throw away? The heart of this problem is the process of architecture: integrating changes to systems over time. The integration is not purely technical, it’s practices of use, operation, deployment.
  • 71. © Third Nature Most data tech is a commodity, a cost of doing business
  • 72. © Third Nature Adopting new things: there’s a problem with your budget
  • 73. © Third Nature How IT strategies evolved with commoditization Time Equipment Expensive: outsource to reduce equipment cost Labor Affordable: insource for control, innovation Dirt cheap: outsource to reduce labor cost 76
  • 74. © Third Nature The cost flip in the business intelligence world Cost factors traded positions 1990 - 2010 Equipment Software 77 Cost Labor For small to mid-sized organizations it’s very affordable
  • 75. © Third Nature TCO and BI What can you control? ▪ Labor effort is almost identical across BI products. ▪ Hardware use by BI tools is similar across products. ▪ You can negotiate the software costs. 3 Year BI TCO Cost Categories Source: Third Nature Open Source cost study
  • 76. © Third Nature BI Market: Cost is normally driven out by commodities, not increased 79
  • 77. © Third Nature This is an old problem BI tools are better, but the model being applied in most organizations is not different from the past.
  • 78. Slide 81November 2010 Mark Madsen If BI is a commodity, why does it cost so much? Processes Applications Data Integration Storage EDM / BRM Delivery Consumers Purchasing Distribution Manufacturing Sales & Service ERP Data warehouse ODS Stream db / cache Content store Identify Analyze Debt<10% of Income Debt=0% Good Credit Risks Bad Credit Risks Good Credit Risks Yes YesYes NO NONO Income>$40K Predict Batch ETL EII SCM SFA CRM ESB EDR Monitor Explore Data mart Low-lat ETL BPM/Workflow BRE CEP Prescribe Data services Transaction services Manual feedback Automated feedback
  • 79. © Third Nature Lessons to take from this 1. Business intelligence is still expensive for many organizations, with the largest proportion of cost being labor. 2. Business intelligences is not a technology problem, or the failure rate and costs wouldn’t be so high. 3. BI tools being a commodity does not make BI a commodity. 4. Architecture has an outsized impact on your ability to adopt and adapt. 5. What you remove is as important as what you add. 82
  • 80. © Third Nature WHAT CAN YOU DO KNOWING HOW THE MARKET EVOLVES?
  • 81. © Third Nature Questions to ask Why innovate? ▪ Usual answer: profit ▪ Proper answer: solve a problem Innovation for what? ▪ A product or service you are selling to customers ▪ Internal products and services, how you run your business or department
  • 82. © Third Nature Reinforcing relationships resist change, despite radical technology and practice shifts Note how only one third is tech Architectural Regime MethodologyTechnology Organization Organization defines where the work is done and the roles. Technology defines what work can be done in a given area. Methodology defines how work is done and what that work is. Slide 85
  • 83. © Third Nature Designing for data: monolithic vendor technology- based classifications of the ecosystem won’t help These types of eye charts provide a categorization of what’s available, not what you need. They ignore the contexts of use that are most important. 86
  • 84. © Third Nature It’s tough making it decisions in a turbulent market Maturation SaturationInnovation If you’re here you probably don’t want to be making long term technology or vendor commitments.
  • 85. © Third Nature Today: repeating the experience of the 80s & 90s This is the turbulent phase of the market as it goes through rapid development, then product and service changes. Copyright Third Nature, Inc. The Internet combined with commodity computing is forcing a new architectural evolution, already well underway. Maturation SaturationInnovation
  • 86. © Third Nature Time Rule of thumb: when a product is in phase… Maturation SaturationInnovation Market growth Build Integrate Buy
  • 87. © Third Nature Methods change too, one size doesn’t fit all Maturation SaturationInnovation Agile & exploratory methods 6 Sigma & efficiency methods
  • 88. © Third Nature How procurement decisions are made Deliberation ▪ Actions are consciously chosen. Don’t attribute to malice what you can attribute to stupidity, and don’t attribute to stupidity what you can attribute to laziness. Rationality ▪ People make logical decisions. Sure they do. Order ▪ System are understandable and the results of actions predictable.
  • 89. © Third Nature 90% of EVERYTHING is crap “Sturgeon’s Revelation”
  • 90. © Third Nature “Choose Boring Technology” You only get so many chances to make big changes at a company. Don’t waste them. You can spend X time focusing on the goal and worry less about the known tech, or you can spend X time learning the new tech and less time focusing on the goal. The important thing is not the choice of tech, it’s knowing when the time is right to make a new tech choice.
  • 91. © Third Nature Beware unintended consequencesUnintended consequences
  • 92. © Third Nature In other words… Software is like puppies. Getting a puppy is easy, raising one is hard. “The short term benefits of using a new [type of] database exceed the long term cost of operating it.” Dan Mckinley
  • 93. © Third Nature Where does innovation come from? “It has long been assumed that product innovations are typically developed by product manufacturers. …it now appears that this basic assumption is often wrong.” Eric von Hippel
  • 94. © Third Nature How to find “innovative” solutions N.W.A. Answer: steal them from somewhere else.
  • 95. © Third Nature Being innovative and culture Myth of process – there is no “process for innovation”, only principles and exceptions e.g. “It’s best to work in small teams, keep them crowded and foster serendipitious connections.” – Eric Schmidt It depends on creative problem solving, and solving problems people care about. Removing deviance removes change, so you have to be careful about best practices.
  • 96. © Third Nature No silver bullet It’s culture-dependent, and creative and messy and idiosyncratic and slow and hard, no process, just survival bias and heuristics and principles.
  • 97. © Third Nature “The future, according to some scientists, will be exactly like the past, only far more expensive.” ~ John Sladek
  • 98. © Third Nature Further Reading Further Reading: Manager’s Theories About Innovation, Salaman & Storey, 2002 Democratizing Innovation, Eric von Hippel, http://web.mit.edu/evhippel/www/books/DI/DemocInn.pdf Sources of Innovation, Eric von Hippel, http://web.mit.edu/evhippel/www/sources.htm The Wealth of Networks, Yocahi Benkler An introduction to value chain mapping, http://blog.gardeviance.org/2015/02/an- introduction-to-wardley-value-chain.html The diffusion of infrastructure dependent technologies: A simple model http://www.dime- eu.org/files/active/0/vanderVoorenAlkemade.pdf Architectural innovation: the reconfiguration of existing product technologies and the failure of established firms http://dimetic.dime-eu.org/dimetic_files/HendersonClarkASQ1990.pdf What the Gospel of Innovation Gets Wrong http://www.newyorker.com/magazine/2014/06/23/the-disruption-machine How Useful Is the Theory of Disruptive Innovation? http://sloanreview.mit.edu/article/how- useful-is-the-theory-of-disruptive-innovation/ Slide 101
  • 99. © Third Nature Image Attributions Thanks to the people who supplied the images used in this presentation: indonesian angry mask phone - Erik De Castro Reuters.jpg egg_face1.jpg - http://www.flickr.com/photos/sally_monster/3228248457 chicken_head2.jpg - http://www.flickr.com/photos/coycholla/4901760905 snail1.jpg - http://flickr.com/photos/7147684@N03/1037533775/ wheat_field.jpg - http://www.flickr.com/photos/ecstaticist/1120119742/
  • 100. © Third Nature About Third Nature Third Nature is a consulting and advisory firm focused on new and emerging technology and practices in information architecture, analytics, business intelligence and data management. If your question is related to data, analytics, information strategy and technology infrastructure then you‘re at the right place. Our goal is to help organizations solve problems using data. We offer education, consulting and research services to support business and IT organizations as well as technology vendors. We specialize in information strategy and architecture, so we look at emerging technologies and markets, evaluating how technologies are applied to solve problems.
  • 101. © Third Nature About the Presenter Mark Madsen is president of Third Nature, a technology research and consulting firm focused on business intelligence, analytics and performance management. Mark is an award-winning author, architect and former CTO whose work has been featured in numerous industry publications. During his career Mark received awards from the American Productivity & Quality Center, TDWI, Computerworld and the Smithsonian Institute. He is an international speaker, contributing editor at Intelligent Enterprise, and manages the open source channel at the Business Intelligence Network. For more information or to contact Mark, visit http://ThirdNature.net.