Moving To The Edge 2007


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A description of the Platform Enterprise

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  • Moving To The Edge 2007

    1. 1. Extracting Value from Technology John C. Henderson Nalin Kulatilaka Moving to the Edge: Leveraging Business Platforms
    2. 2. Exploiting Intelligence at the Edge <ul><li>BP – Field of the Future </li></ul><ul><li>Sears - Home Repair </li></ul><ul><li>GE - Remote Monitoring of Engines </li></ul><ul><li>US Army – Network Centric </li></ul><ul><li>Progressive – Pay as you go </li></ul><ul><li>… </li></ul>Is there an Emerging Business Model ?
    3. 3. Use Platform to Create Intelligence at the Edge Pervasive Connectivity Sensory Network Intelligence at the Edge
    4. 4. Moving to the edge: Three key challenges <ul><li>Leverage the network of customers, suppliers and third parties </li></ul><ul><li>Invest in capabilities not technologies </li></ul><ul><li>Earn and learn </li></ul>Time Earn learn
    5. 5. Earn and Learn: A Business Platform Strategy <ul><li>In the context of a Business Network, you must navigate the uncertainty of a dynamic, global market </li></ul><ul><ul><li>Create value by the ability to explore and exploit </li></ul></ul><ul><ul><li>Capture the value of good ideas </li></ul></ul><ul><ul><li>Operate at scale in a highly networked environment </li></ul></ul>
    6. 6. Cope with Uncertainty High Low Time Value Possible paths ? ?
    7. 7. Strategic Parity Depends on Competitive Conditions Time Value Strategic Parity ? ?
    8. 8. Navigate the Cone Time Value X X X X Learn and Adapt Reduce Downside Capture Upside
    9. 9. Drive Increasing Value Time Value X X X X Capture Upside
    10. 10. The Economics of a Business Platform <ul><li>A business platform is a set of capabilities that </li></ul><ul><ul><li>Has “options” value </li></ul></ul><ul><ul><li>Creates Network Effects </li></ul></ul><ul><ul><li>Has explicit Architectural Control Points </li></ul></ul>
    11. 11. Business Capabilities Platforms <ul><li>A business capability is </li></ul><ul><li>“ What not how” </li></ul><ul><ul><li>Value driven </li></ul></ul><ul><ul><li>Measurable </li></ul></ul><ul><ul><li>Action oriented </li></ul></ul><ul><li>Achieved by combining </li></ul><ul><ul><li>People </li></ul></ul><ul><ul><li>Process </li></ul></ul><ul><ul><li>Technology </li></ul></ul><ul><ul><li>Governance (Organization) </li></ul></ul>
    12. 12. Network Systems: A User’s View <ul><li>Value to users increase as more users use the system. </li></ul><ul><ul><li>Reduced costs of search, transactions, synchronization …. </li></ul></ul><ul><ul><li>Consumers derive an autarky value and a network value </li></ul></ul><ul><li>Direct (connected) network effects </li></ul><ul><ul><ul><li>Telephone, Fax, email </li></ul></ul></ul><ul><ul><ul><li>Excel, MS-Word, MP3 </li></ul></ul></ul><ul><li>Indirect (complementary) network effects </li></ul><ul><ul><ul><li>VCRs and content, cars and gas stations typewriters and skilled typists, Hardware and software, operating systems and applications, shared data and models </li></ul></ul></ul><ul><li>Some networks have both types of network effects </li></ul><ul><ul><li>Roads and vehicles, The Internet </li></ul></ul>
    13. 13. Network Systems: A Producer’s View <ul><li>Scale and scope economies </li></ul><ul><ul><li>High fixed costs (R&D) and low (near zero) variable costs create falling average costs (e.g., Information goods) </li></ul></ul><ul><li>Network externalities result when the benefits of network effects can not be captured by the producers. </li></ul><ul><li>Platform strategies strive to “internalize” these effected </li></ul>
    14. 14. Return on investment grows rapidly with scale <ul><li>Large up-front investment </li></ul><ul><li>Value grows rapidly with scale </li></ul>Size of Network Value of Network Cost of Building Network
    15. 15. Business Platforms: Building on Existing Theory <ul><li>Design Theory: Product Platform Architectures </li></ul><ul><ul><li>Enhance Innovation/Manage Complexity </li></ul></ul><ul><ul><ul><li>Define interfaces (standards) </li></ul></ul></ul><ul><ul><ul><li>Encapsulate functionality/specialize </li></ul></ul></ul><ul><ul><li>Enhance Productivity </li></ul></ul><ul><ul><ul><li>Core functionality (reuse) </li></ul></ul></ul><ul><ul><ul><li>Independent/parallel work (ecosystem) </li></ul></ul></ul><ul><li>Organization Theory: Capabilities </li></ul><ul><ul><li>Dynamic Capability (Teece) </li></ul></ul><ul><ul><ul><li>Function competency vs reconfigurability (Pavlou/El Sawy) </li></ul></ul></ul><ul><ul><li>Shared knowledge and learning organizations </li></ul></ul>
    16. 16. The Edge Organization <ul><li>Where is the edge of the organization ? </li></ul><ul><ul><li>Where is the edge of a school bus company? </li></ul></ul><ul><ul><li>What would the business model look like if the bus was the true edge and what would it take to make it so? </li></ul></ul><ul><ul><li>How would it alter the ability to </li></ul></ul><ul><ul><ul><li>Manage scale </li></ul></ul></ul><ul><ul><ul><li>Grow </li></ul></ul></ul><ul><ul><ul><li>Differentiate </li></ul></ul></ul>Proposition: A Business Platform Enables a shift to an Edge Organization
    17. 17. Moving to the Edge: Five Principles of a Business platforms <ul><li>Leverage our understanding of design </li></ul><ul><ul><li>Products </li></ul></ul><ul><ul><li>Organizations </li></ul></ul><ul><li>Focus on the Economics of Platforms </li></ul>
    18. 18. Five principles of a Business Capability Platform <ul><li>Integrity of Core Operations </li></ul><ul><ul><li>Define the core – focus </li></ul></ul><ul><ul><li>Evolve the core </li></ul></ul><ul><ul><li>Defend the core – ACP </li></ul></ul><ul><li>Observability </li></ul><ul><ul><li>Connectivity </li></ul></ul><ul><ul><li>Information quality </li></ul></ul><ul><ul><ul><li>Technical </li></ul></ul></ul><ul><ul><ul><li>Analytical </li></ul></ul></ul><ul><ul><ul><li>Social </li></ul></ul></ul><ul><li>Working at the Edge </li></ul><ul><ul><li>Leveraging distributed Cognition </li></ul></ul><ul><ul><ul><li>Knowledge sharing </li></ul></ul></ul><ul><ul><ul><li>Shared awareness </li></ul></ul></ul><ul><ul><li>Leveraging distributed work </li></ul></ul><ul><ul><ul><li>Coordination </li></ul></ul></ul><ul><ul><ul><li>Synchronization </li></ul></ul></ul>
    19. 19. Five Principles of a Business Capability Platform <ul><li>4. Contractual flexibility </li></ul><ul><ul><li>Responsibility </li></ul></ul><ul><ul><li>Accountability </li></ul></ul><ul><ul><li>Incentives </li></ul></ul><ul><li>5. Coherence </li></ul><ul><ul><li>Share values </li></ul></ul><ul><ul><li>Shared intent </li></ul></ul><ul><ul><li>Strategic experimentation </li></ul></ul>
    20. 20. Leverage the Network : The Edge Organizations <ul><li>An organization form that </li></ul><ul><ul><li>Leverages the network through co evolution in both execution and innovation </li></ul></ul><ul><ul><li>Effectively exploits peer to peer, self-synchronization relationships while sustaining and adapting a shared strategic intent </li></ul></ul><ul><ul><li>Can create and capture the economic value of platforms </li></ul></ul>
    21. 21. Leadership Challanges <ul><li>Earn and Learn </li></ul><ul><ul><li>Evolve capabilities over time </li></ul></ul><ul><ul><ul><li>Connect </li></ul></ul></ul><ul><ul><ul><li>Shared awareness </li></ul></ul></ul><ul><ul><ul><li>Scale </li></ul></ul></ul><ul><ul><ul><li>Grow </li></ul></ul></ul><ul><ul><ul><li>Differentiate </li></ul></ul></ul><ul><li>Leverage peer to peer </li></ul><ul><li>Drive strategic learning </li></ul><ul><li>Create the new performance measurement system </li></ul>