Innovation and Business Platforms


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Presented at Managing the Strategic Value of Innovation programme by Imperial College Business School

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Innovation and Business Platforms

  1. 1. Managing the Strategic Value of InnovationUsing PlatformsJeremy CaineIBM Executive Architect25 June 2012Using Platforms | © IBM Corporation 2012 1
  2. 2. AgendaInnovation through PlatformsCurrent TrendsDiscovery TechniquesExampleExerciseUsing Platforms | © IBM Corporation 2012 2
  3. 3. Innovation through PlatformsUsing Platforms | © IBM Corporation 2012 3
  4. 4. Why Does Innovation Matter? Generates high-value, higher-paying jobs Fuels wealth creation and profitability Creates new industries and markets Spurs productivity and economic growth Raises standard of living Goes beyond inventionUsing Platforms | © IBM Corporation 2012 4
  5. 5. Do you have an Innovation ‘Ambition’? A novel creation that produces value Invest along a broad spectrum of risk and reward Transformation requires you to do things differently Key management dimensions of a Total Innovation System: Talent; Integration; Funding, Pipeline, Metrics Source: Harvard Business Review, May 2012 (R1205C)Using Platforms | © IBM Corporation 2012 5
  6. 6. Switch to multi-sided Consolidation of platform business model platform business model 2001 2003 2008© Apple Using Platforms | © IBM Corporation 2012 Inc© 6
  7. 7. What can you expect from Innovation activities? INVESTMENT RETURNS Focus of innovation activity 10% translated into returns Companies targeting the 20% “Golden Ratio” typically outperform peers with P/ECORE 70% premium of 10-20% Different ambitions, different allocations 70% Transformational initiatives areADJACENT 20% the engines of blockbuster growthTRANSFORM 10% Source: Harvard Business Review, May 2012 (R1205C) Using Platforms | © IBM Corporation 2012 7
  8. 8. Technology is changing business Technology Area Emerging Technologies Implication Automation Cloud computing, BPM Optimised infrastructures Access to Public sources, real-time feeds, Informed customers, network Information event systems effects, richer databases Real-time video analysis, Potential exploitation of Digitisation semantic tagging unstructured data Increasing affordability, online Total transaction history Storage backup availability Stream Processing Increasingly sophisticated, real- Analysis Event Processing time analysis Rich local ecosystem (suppliers, Instrumentation Smart Planet partners, customers.) Web 2.0, Mobile, Social / Digital natives viewing using Collaboration Real-time Media services as part of ecosystemUsing Platforms | © IBM Corporation 2012 8
  9. 9. Required shifts to keep current and competitive Make and sell Sell and make Product-centricity Customer-centricity Output Performances Transaction Relationship Value delivery Value co-creation Competition Co-supply Value chain Value network Miraglia and Davies 2009 Client relationships and ecosystems matter What does your ecosystem look like?Using Platforms | © IBM Corporation 2012 9
  10. 10. Digital Platforms for Transformational Growth Disruptive Disruptive Business Business Business Business Business Business Platform Platform Platform Platform Products & Services Capability Integrated Product- Capabilities enhancement Service systems Costs, profits Technology Value creation and enablement market control Strategies Processing efficiency Multi-sided business Revenue streams Increase straight- models through processing Open connectedness Per-click business to partners and models suppliersUsing Platforms | © IBM Corporation 2012 10
  11. 11. Innovate through a Platform evolution strategy Open Standards UTILITY INDUSTRYLevel of Standardisation PLATFORM PLATFORM External Connectivity INTERNAL VALUE NET PLATFORM PLATFORM None Business Supply Chain Cross Unit Industry Value derived from Platform Using Platforms | © IBM Corporation 2012 11
  12. 12. Current TrendsUsing Platforms | © IBM Corporation 2012 12
  13. 13. Mobile, Social and Real-time Business is a cultural change, not a fad 70% of Gen Y will be “mobile first” by 2015 Gen Y will be 45% of the workforce in 2020 Shifting demographics, global lifestyles, shared life events complicate segmentations Products, services and pricing must address the complexity Fine grained segmentation driven by event and location factorsPercentage of Consumers with Accounts on Social SitesSource: IBM Institute for Business Value Analysis, CRM 2011; sample size N=1056 Using Platforms | © IBM Corporation 2012 13
  14. 14. The Consumer Web is influential to Platform StrategyOpinion on information, products andservices is the new influencer Linked networks allow data capture that can be scary powerfulKey platform protocols such as OAuthand RESTful services should not beoverlookedUsing Platforms | © IBM Corporation 2012 14
  15. 15. Connecting to and collating data is an innovation opportunityTransactionsHistory Your data What’s happening? Their data OpinionPersonal details on them sharedNet worth Self-promotion Information sharing insight World events Outside data Real-time influencing Capitalise React Data is the new landfillUsing Platforms | © IBM Corporation 2012 15
  16. 16. Platform “Gamification” might seem pointless…Collecting badges is onepointless by-product ofusing a platform …but think of providing goals as a means for driving real transactions Using Platforms | © IBM Corporation 2012 16
  17. 17. Look at what Foursquare has been building up to © Foursquare LabsUsing Platforms | © IBM Corporation 2012 17
  18. 18. Discovery TechniquesUsing Platforms | © IBM Corporation 2012 18
  19. 19. How do you find Business Platforms? How is value being What value could How could our unique captured by the be “platformed”? capabilities drive value organisation today? capture in the future? Industry, Market and Capabilities Social trends Candidate Platforms Value levers Vision Business Process and Control points Unique Organisation capabilities Industry Standards (Component) models Financial models Partner Ecosystem Technology models Emerging Technology technologiesUsing Platforms | © IBM Corporation 2012 19
  20. 20. Five patterns for creating new sources of client value Augment1 Products Instrument products to create new data and extend notion of client value Codify Expand use of differentiated capabilities2 Services through ecosystems or business platforms to create additional value Interconnect Use information to create new value3 Industries chains that reduce waste and bridge gaps between organizations Trade4 Information Translate data into information that is of value to adjacent industries Digitise5 Assets Transform analogue into digital assetsUsing Platforms | © IBM Corporation 2012 20
  21. 21. Think about the systems architecture commercially Open Platform Platform Open Applicati Applicati Access Access What data on on o API accessible should be W hat d rs free and com petito Commercial Gateway ? why? pay for ou t do y monetise W ha ? charge API eed Data Provision APIs n ck o to be r d n solid a e siv API respon Data Organisation API proprietary Data Consolidation There’s going to be lots of it Crowd Sensor Data Core Data Source DataUsing Platforms | © IBM Corporation 2012 21
  22. 22. In Summary Invest appropriately in your Innovation Ambition Define an ecosystem that could fuel transformational growth Understand the external industry and technology influences Envision what data you need to drive your “secret sauce” Develop a platform strategy and architecture Get there first !Using Platforms | © IBM Corporation 2012 22
  23. 23. ExampleUsing Platforms | © IBM Corporation 2012 23
  24. 24. PayPal created an $18Bn business through a standard, secure payment service • 1999- Founded- Max Levchin, Peter Thiel • 2000 Launches an e-mail payment system • 2002 Acquired by e-bay- Initially a competitor to e-bay’s Bill Point. • 2004 $1.4 billion revenues • 2005 Secure Payments enabled with acquisition of VeriSign • 2008 Tipping point. TPV off ebay. 60 million active accounts worldwide • 2010 Paypal X Launched. 87 million active Accounts • 3 Stage Strategy- US e-bay, International, Merchant Services • It uses the access to Bank accounts that Banks intended to use between each other Disruptive technology analysis | © IBM Corporation 2012 24
  25. 25. The “Invisible Platform” in Retail Payments – PayPal X2009 Paypal starts to open up it’s platform and code to a select group of developers.2010 it further opened up its code to developers. 15,000 developers accessing platform.Now anyone with rudimentary programming skills has access to the kind of technology andpayment-industry experience that powers PayPal itself2011- 50,000 developers from 129 countries which produced 1000 new apps since last year.Over $15M of payments were being processed on new services through PayPalCompared to the $2+ trillion annual credit card and $1+ trillion debit card spend this is a drop inthe ocean.PayPal X Developer Challenge with $160,000 USD in prizesExamples include: Off Internet use (Mobile/ Point of Sale)
  26. 26. DIGITAL PLATFORM EXERCISE Example Paypal vision To be the payment provider of choice for all consumer transactions (Internet, Vision mobile and possibly more) Opportunity To be the payments mechanism inside app based services; drive up the transaction volumes; disintermediation of the banks Banks, application developers, companies who would be banks, mobile Partners companies Data Standard Secure open web standards for integration; two-factor authentication Service Standard Low cost of entry to payments capabilities; Verisign backed security Vanilla payments transactions; electronic alternative to traditional paperUnique Capabilities methods; Using Platforms | © IBM Corporation 2012 26
  27. 27. DIGITAL PLATFORM EXERCISE ExerciseUsing Platforms | © IBM Corporation 2012 27
  28. 28. DIGITAL PLATFORM EXERCISE Define the platform vision To become the global platform provider for … Vision … leveraging unique capabilities xxx. Reduce costs (eco friendly), Provide business agility Opportunity Create Revenue: Advertising revenue. Faster conversion revenue. Telco – Network access, Application Software vendors, New Hardware xxx, Partners Business Partners – EU, US, Asia, Advertisers, Manufacturers. Data Standard Data model, Product definition, Feedback/experiences Service Standard Access services, Advertisement, Product Information, Product Selection Unique taxonomy, Process, Business Engine, Delivery Platform, FeedbackUnique Capabilities analyser. Using Platforms | © IBM Corporation 2012 28
  29. 29. DIGITAL PLATFORM EXERCISEDigital Platform Exercise1. What frustrates you, what would 2. What sort of platform ecosystemconstitute progress? could help?3. What could success look like, what 4. Who would need to be involved?would be the benefit / payback? 29
  30. 30. DIGITAL PLATFORM EXERCISE Define the platform vision Vision Opportunity Partners Data Standard Service StandardUnique Capabilities Using Platforms | © IBM Corporation 2012 30
  31. 31. Jeremy Caine IBM Executive Architect and Client Technical Advisor Caine is an IBM Executive Architect and Client Technical Advisor to UK and IrelandRetail Banking Sector. He provides technology leadership and architectural guidance to clients.Jeremy has previously worked for eighteen years on services engagements in IBM’s majorfinancial services clients. In Chief Architect roles, Jeremy has designed and delivered a numberof complex system integration solutions in business transformation programmes.Jeremy is leading initiatives for Digital Platform adoption as part of IBM Industry Innovationgrowth. He is an advocate of new technologies, standards and trends in platform architectures.Jeremy is a Member of UK Affiliate to the IBM Academy of Technology. He is a UK CharteredEngineer with a B.Sc. in Physics and Astrophysics, and M.Sc. in Information Technology. Copyright Imperial College Business School ©