Successfully reported this slideshow.
We use your LinkedIn profile and activity data to personalize ads and to show you more relevant ads. You can change your ad preferences anytime.

Moving To The Edge 2007


Published on

A description of the Platform Enterprise

Published in: Technology
  • Be the first to comment

  • Be the first to like this

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>