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Competing within ecosystems: Sustaining Ways of Creating Indirect Value

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The presentation discusses the nature of the complexity that makes this way of thinking about the relationships between suppliers and customers ‘non-classical’. Thus entanglement means moving from a one-sided to a multi-sided understanding of markets, which changes the unit of analysis from the supplier to the ecosystem with which the supplier is interacting. Analysing market behaviours in a way that is driven by a tempo of demand organised by customers’ value deficits means that there are many different local environments within which market behaviours are expected to be aligned.
A quantum metaphor is used to cast light on what makes this way of thinking ‘non-classical’. The varieties of simultaneous behaviours which the business platform must be able to support are a superposed set of states. Each customer’s local environment collapses a singular local state from this platform that need not be correlated with states experienced in other customers’ environments. This collapse takes place through the local coherence created by alignment processes organised by shared meaning established within the customer’s local environment.
Two implications are drawn from this way of thinking: first, how are agile platforms to be engineered if they are to support this level of variety in simultaneous complex behaviours; and second, how are the forms of agency to be developed within an organisation through which many forms of simultaneous local coherence may be created and sustained cost-effectively at its edges.

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Competing within ecosystems: Sustaining Ways of Creating Indirect Value

  1. 1. Competing within Ecosystems:sustaining ways of creating indirect value Philip Boxer BSc MBA PhD An invited talk given at The School of Systems & Enterprises Stevens Institute of Technology December 5th 2012
  2. 2. Background Experience: focusing on indirect value Project Direct Multi-sided Indirect Potential Customers platform Customers Indirect Value 40% saving on operational MoD surface MoD C4ISTAR Mission costs, 15% from reduced capability acquisition platform Commanders variationQuantifyingIndirect Swiss e- Federal Search engine Respondents to 80% saving, 50% from Government Chancellery platform citizens reduced variationValue Uninhabited Royal UAS Mission 40% saving, 30% from Aerial Systems Artillery platform Commanders reduced variation BT customer Area Customer Phone 70% of errors from failures to service management services platform user align properlyIdentifying Network Enabled MoD Collaborative Mission Unable to assess impact of Capability acquisition SoS Commanders mission thread variabilityRisks Architecture restricting AWACS NATO Mission systems Mission adaptation to new types of capability acquisition of systems commanders mission Wildland Federal Collaboration Fire Needed focus on variation in Fire Agencies support fighters forms of collaborationMitigating Supercomputing Research Research Needed focus on variation in XSEDERisks centers SoS collaborations forms of collaboration NHS Healthcare Clinician support Managing treatment through- Patients Orthotics Trusts platform life means $1 now = $4 savedCopyright © Philip Boxer 2012 December 5th 2012 2
  3. 3. Outline• Introduction This metaphor provides a way of understanding the nature of the ‘disconnect’• A closer look at the problem between individual behaviors and organized complexity• The quantum metaphor• Modeling risk and indirect value• Implications Boxer, P.J. (2012) Evaluating platform architectures within ecosystems: modeling the relation to indirect value within ecosystems. Lambert, ISBN: 978-3-659-25536-6Copyright © Philip Boxer 2012 December 5th 2012 3
  4. 4. Why this interest I am going to use healthcare as my Why it matters running example Major challenges Main themes INTRODUCTIONCopyright © Philip Boxer 2012 December 5th 2012 4
  5. 5. Why this interest? What kind of organizational challenge is presented by the tempo at which a clinic’s patients expect care pathways particular to their condition?Copyright © Philip Boxer 2012 December 5th 2012 5
  6. 6. Why does it matter?• Competitive organizations must achieve new levels of value for Patients always want their customers continuously if they are to survive in the long run. ‘more’. – As this pursuit of value moves them further and further away from products towards services, Their conditions are • value becomes increasingly specific to the customer’s context-of-use, and increasingly chronic and difficult to dependent on the organization’s capacity to learn from those contexts. diagnose. – The complexity involved in delivering this value must to some extent be organized, Their treatment demands increasingly • not just emergent from amongst the interactions within an ecosystem of complex collaborations multiple organizations and stakeholders. between specialists. – Organizing this complexity presents unprecedented challenges to the forms of conversation demanded between the actors within these ecosystems, Managing outcomes challenges existing • not only in defining relevant relationships between socio-technical ways of organizing care systems and their environments, but also in defining the supporting pathways system-of-system architecturesCopyright © Philip Boxer 2012 December 5th 2012 6
  7. 7. Major challenges• Comparing Healthcare with Manufacturing suppliers* – ‘the expectations of customers’. The unknowable aspects of customers’ needs in ‘Value Deficit’ healthcare emerge as new forms of demand at a much faster tempo. drives demand. – ‘their knowledge of the (near-term) future’. The closer to the patient’s condition, the more unpredictable the demand. – ‘the variability in their work processes’. Variability is driven by the need to align processes to patients’ particular conditions. – ‘the traceability between performance and the result for the customer’. Run-time The effects of a particular treatment on patient outcome depends on the context. generation of – ‘duration of production process’. The availability of treatments has to be timely. outcomes and design-time – ‘the ability to buffer the production process against variability in levels of diagnosis are demand’. Treatment protocols have to be applied on a just-in-time basis. ‘entangled’ – ‘the costs of production’. The complexity of the alignment process is itself a major driver of outcome costs. – ‘the connection between cost of production and revenue from the customer’. There is no direct link between patient outcome and cost recovery. * Rouse, W. B., L. F. McGinnis, et al. (2009). Models of Complex Enterprise Networks.Copyright © Philip Boxer 2012 Second International Symposium on Engineering Systems, MIT Cambridge, Massachusetts. December 5th 2012 7
  8. 8. Main themes…• What approach to creating value does this imply? Managing the through-life cost of the – An approach that creates indirect value driven by the patient’s condition to the patient as individual customer’s value deficit. well as to the insurance company.• What forms of collaboration does this demand between the actors within these ecosystems? – Collaboration within an approach to governance that Governance aimed at scaling learning about alignment of care pathways as assumes run-time and design-time conversations are much as at scaling efficiencies. necessarily entangled.• How is the resultant complexity to be supported? System-of-systems platforms – System-of-system platforms agile enough to support a supporting multiple forms of variety of multi-sided demands. alignment by those collaboratingCopyright © Philip Boxer 2012 December 5th 2012 8
  9. 9. Multi-sided Demand Indirect Value Managing Multi-sidedness A CLOSER LOOK AT THE PROBLEMCopyright © Philip Boxer 2012 December 5th 2012 9
  10. 10. Multi-sided Demand: counting the value of indirect customers• Multi-sided demand supported by a platform is demand for which: direct provision of treatment of a – There is direct value in the platform’s direct ‘one-sided’ patient’s condition relationship with a participant the patient-in-their-life needing – The customer of a collaboration between ecosystem participants a collaboration between specialists responding to their is an indirect customer condition – With multi-sided demand, there is indirect value in the ‘multi- the way a hospital provides sided’ relationships the platform supports between collaborating support to collaboration ecosystem participants between its clinicians 2 4 Indirect value of a ‘multi- Ecosystem 1 sided’ relationship participants … n 3 Direct value of aEvans, D. S., Hagiu, A., & Schmalensee, R. ‘one-sided’(2006). Invisible Engines: How Software relationshipPlatforms Drive Innovation and TransformIndustries. Cambridge: MIT. Platform SupplierCopyright © Philip Boxer 2012 December 5th 2012 10
  11. 11. Indirect Value: the value is in supporting the collaborations Orthotics Clinics e-Government UAS iPhone Supplier Orthotics supplier IT Department Thales Apple Platform Orthotics clinic Research engine UAS iPhone+Cloud Clinicians, Orthotics Departmental & Royal Service Providers, App Direct Customers Agency users Artillery developers etc Manufacturers etc Between Force Collaboration Between clinicians’ Between Departments Between users and Elements and supported by Platform episodes of care and external Agencies their apps Mission Command The phone user Indirect Customer The patient managing The citizen with a Interdicting arranging to meet Situation their diabetic condition question fleeting targets a blind date Costs to the patient and Costs to the citizen Costs of aligning more Costs to the user of Indirect Value to be insurer of failing to and Government of expensive capabilities having to use less direct captured manage their condition responding mistakenly by other means methods of organizing Demand tempo for the Month-by-month Week-by-week Hour-by-hour Minute-by-minute SupplierCopyright © Philip Boxer 2012 December 5th 2012 11
  12. 12. Managing Multi-sidedness• Capturing indirect value at demand tempo – The supplier has to consider their relationship to indirect The clinic has to understand the variety of clinical forms of demand, and the organizational processes by collaborations needed in which their own products and services can be aligned with responding to the variety of those of others to support multi-sided demands. conditions they are meeting• Defining the economics at the level of the ecosystem It becomes critical to analyze – The value lies in reducing the costs that fall ultimately on the cost to the patient of their the indirect customer of aligning suppliers’ products and condition over its life, and what are its drivers services to multi-sided demands.• Developing the platform architecture capable of capturing indirect value The agility of the platform is – The architecture has to be ‘agile’ in the sense that it can defined by the variety of care support a sufficient variety of forms of multi-sided demand. pathways that it can supportCopyright © Philip Boxer 2012 December 5th 2012 12
  13. 13. Each collaboration defines a Quantum State ‘Classical’ versus ‘Quantum State’ Organization Platforms supporting multi-sidedness THE QUANTUM METAPHORCopyright © Philip Boxer 2012 December 5th 2012 13
  14. 14. The Quantum Metaphor: each collaboration defines a quantum state• It is the actors participating in a particular collaboration who will define the way they want their collaboration to be supported by the platform.• The form of the collaboration will be determined by the conversations through which the actors understand the multi-sided demand.• The actors in a collaboration can be spread across multiple organizations within an ecosystem. The clinic has to be able to manage many different things at the same time Simultaneous A Collaboration between Actors care pathways Supporting Platform Support Superposition of Quantum States Source: Fig 2-1 on the Management Challenge: Systems Engineering Guide for Systems of Systems, OSD, Version 1.0 August 2008.Copyright © Philip Boxer 2012 December 5th 2012 14
  15. 15. ‘Classical’ organization:design-time conversations separated from run-time conversations ‘We treat necrosis’ Markets Hierarchical Governance Opportunity to Planned Establishing a one- capture value behaviors sided relationship (constrained by to Demand architecture) (the value defined a priori) Operations Management Accountability Hierarchies (defining quality attributes) Run-time Design-timeCopyright © Philip Boxer 2012 December 5th 2012 15
  16. 16. ‘Quantum State’ organization:design-time conversations entangled with run-time conversations Each collaboration has to be able to collapse out a ‘We enable our patients to different Quantum State manage their diabetes’ It is all going on at run-time for Demand-in-its-context Simultaneous each demand (describes the variety of indirect care pathways demands) Cohesion of the Modularity of response to multi- Support behaviors (constrained by sided Demands technical (the experience of the architecture) value provided) Operations Management (the multi-sidedness Accountability (organizes the which the supporting Hierarchies alignment processes) platforms are capable of (defining quality supporting at a given attributes) tempo)Copyright © Philip Boxer 2012 December 5th 2012 16
  17. 17. Platforms supporting multi-sidedness: the platform has to be able to support superposition Simultaneous care pathways Demand-in-its- context Cohesion of the Support Modularity of response to multi- behaviors functional value coupling propositions sided Demands accountability Operations Management Accountability Hierarchies The platform has to ‘Our clinic has to support our clinicians learning about support the superposition effective care pathways’ of these Quantum StatesCopyright © Philip Boxer 2012 December 5th 2012 17
  18. 18. Triple Articulation Conceptual Modeling Structure Analysis and Monte Carlo simulation MODELING RISK AND INDIRECT VALUECopyright © Philip Boxer 2012 December 5th 2012 18
  19. 19. Triple Articulation: the articulation of constraintsWhat are the available treatments What variety of care pathways can and how do they interact? How can pathways be aligned be aligned to patients’ conditions? Constraints on to the contexts-of-use? Demand-sidefunctional granularity Constraints on & coupling Functional Paths generating cohesion Coupling paths value propositions aligned behaviors How do these supply-side What will the constraints over-determine cohesion costs* be? behaviors? Hierarchical paths of accountability * Cohesion cost = Constraints on costs of use of particular components + costs of alignment to situation. non-functional characteristics Who is accountable for cost/quality trade- Copyright © Philip Boxer 2012 offs and securing funding? December 5th 2012 19
  20. 20. Conceptual Modeling: modeling the relationships between three types of modelPhysical structure & behavior Synchronization across The processes by which The Organization of Accountability Hierarchies clinicians keep care Demand Dynamic configuration Socio-technical of physical structure pathways aligned Synchronization Problem Domain Physical The way Digital Synchronization/ Data Fusion Structure treatments Demand Physical are executed Situation Functional Paths generating Event for and by Coupling paths value propositions Customer the clinic Situation Physical Process aligned Demand Outcome from complex The socio- behaviours Driver chains of events technical The organizations systems and processes doingSystem structure & behavior generating The value the aligning Dynamic configuration the implicit in of system structure constituent indirect Hierarchical paths of System products and customers’ structure accountability services demands Accountability Hierarchy Digital Trace The way Unit of The different kinds of information Accountability The institutional Digital circumstance in which Process is organized context in which the patients present with for the clinic clinic operates their conditions Copyright © Philip Boxer 2012 December 5th 2012 20
  21. 21. Eliciting relational knowledge: these models emerge from actors within the ecosystem AWACSIt is a process that carefully re-constructs a picture of the ‘elephant’ by combining the different blind persons’ partial experiences Copyright © Philip Boxer 2012 December 5th 2012 21
  22. 22. Structure Analysis: identifying structural gaps creating risks to dynamic alignmentEcosystem alignment to Distinguishing the Defining alignment Indirect Demands different kinds of path processes across strata Functional Value Coupling Propositions Accountability Hierarchies Analysis of Modularity within strata Identifying Structural Gaps within the different strata AWACS Mitigation Strategies Source: Anderson, Boxer & Browsword (2006) An Examination of a Structural Modeling Risk Probe Technique, Special Report, Software Engineering Institute, Carnegie Mellon University, CMU/SEI-2006-SR-017.Copyright © Philip Boxer 2012 December 5th 2012 22
  23. 23. Monte Carlo Simulation: The impact of variation in Indirect Demand on Cohesion Costs Ecosystem alignment to Defining alignment Costing Cohesion of Value Indirect Demands processes across strata Propositions traceventindividual_in_afghan-pakistan_border c_sitnindividual_in_afghan-pakistan_border unitorderborder_reaper_strike_cell traceventborder_male_on_station channelborder_reaper_strike_cell traceventborder_hale_on_station unitorderborder_caoc_atc_sync traceventborder_male_outputs traceventborder_sf_on_station unitorderafghan_border_strike traceventborder_male_strike unitorderborder_male_bm unitorderborder_hale_bm channelborder_male_bm channelborder_hale_bm unitorderborder_isr_cell traceventafghan_report unitorderborder_sf_cell channelborder_isr_cell channelborder_sf_cell 5-6col1 x 5 orchnafghan_border_strike 1 1 1 1 1 1 1 1 1 1 1 outcomeborder_hale_on_station 1 1 1 1 1 1 outcomeborder_male_on_station 1 1 1 1 1 1 outcomeborder_male_strike 1 1 1 1 1 1 outcomeborder_sf_on_station 1 1 1 1 khowborder_sf 1 1 1 1 1 1 khowborder_male_strike 1 1 1 1 1 1 1 khowborder_hale_global_hawk 1 1 1 designborder_hale_global_hawk 1 1 designborder_male_operator 1 1 1 1 1 1 1 capyborder_hale_global_hawk 1 1 capyborder_male_reaper 1 1 1 1 1 capyborder_sf 1 1 1 1 1 systemborder_hale_global_hawk 1 1 systemborder_male_reaper 1 1 1 1 1 1 systemborder_sf 1 1 processborder_hale_global_hawk 1 1 processborder_male_reaper 1 1 1 1 1 processborder_sf 1 1 1 1 1 dprocessborder_hale_global_hawk 1 dprocessborder_male_reaper 1 1 1 1Monte Carlo Simulation of impact of Variations in Real Option Valuation of impact of UAS Indirect Demand on cohesion cost range investment on cohesion cost range Large Scale 0.45 Increased Scenario 1 Small Scale enduring Medium Scale enduring 0.4 0.35 AgilityDefence Expenditure Alternative Scenario 2 Small Scale enduring 0.3 0.25 = Small Scale one-off Medium Scale enduring 0.2 0.15 Reduced Scenario 3 Small Scale limited 0.1 0.05 Cohesion Small Scale one-off 0 Costs 0 5 0 5 0 5 0 5 0 5 0 5 50 25 00 75 50 25 0 75 15 22 30 37 45 52 60 67 75 82 90 97 10 11 12 12 13 14 Scaled Cost1 Scaled Cost2 Scaled Difference Boxer, P.J. (2009) What Price Agility? Managing Through-Life Purchaser-Provider Relationships on the Basis of the Ability to Price Agility, Special Report, Software Engineering Institute, Carnegie Mellon University, CMU/SEI-2009-SR-031. Copyright © Philip Boxer 2012 December 5th 2012 23
  24. 24. Managing entangled conversations Supporting superposition IMPLICATIONSCopyright © Philip Boxer 2012 December 5th 2012 24
  25. 25. Implications: doing more with the same resources• Responding to multi-sided demands at demand tempo means dynamically aligning many value propositions to many different local environments. This means – Managing entangled conversations • Dynamic alignment entangles design-time and run-time conversations, changing the supplier’s unit of analysis from one-sided markets to the The Quantum Metaphor multi-sided contexts with which the supplier is interacting. helps us to understand • There has to be conversation with each local environment through which the challenge these local coherence can align pathways. environments present to • Each conversation must collapse out a singular local pathway that need not Leadership be correlated with pathways demanded in other local environments. – Supporting superposition Shifting the focus to • Platforms have to be engineered that are agile enough to support dynamic alignment to the variety of local environments encountered. managing cohesion cost • This variety of simultaneous pathways supported at demand tempo are a across the variety of superposed set of states. indirect demands led to • Engineering such platforms involves identifying risks to agility and 30-50% reductions in quantifying the value of increases in agility. operating costsCopyright © Philip Boxer 2012 December 5th 2012 25
  26. 26. Contact details: Philip J. Boxer BSc MBA PhD +1 908 458 6588 Philip.Boxer@brl.com http://www.linkedin.com/in/philboxer THANK YOUCopyright © Philip Boxer 2012 December 5th 2012 26

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