The NOSE

A Ridiculously Simple View of Enterprise IT (Higher Education)

For those responsible for technology planning I thought I would provide a Ridiculously Simple View of Enterprise IT, particularly from a higher education lens. The diagram below is intended to provide the major functions of an enterprise IT organization in higher education. In future posts I will drill down in each area to illustrate key challenges for those involved with strategy and planning. I will also provide another diagram soon for what I call enterprise Business IT (eBIT). Most of us know that true technology planning is business planning. But how to represent that? Stay tuned.

Scaling Innovation: An Introduction to Prahalad & Krishnan's The New Age of Innovation.

Scale matters. But when and how? For a time the theory of capitalism rested on the belief that in a competitive process large-scale capitalism always beats out the smaller counterpart. Among the first to articulate this view was Marx: "The battle of competition is fought by the cheapening of commodities. The cheapness of commodities depends, ceteris paribus, on the productiveness of labour, and this again on the scale of production. Therefore, the large capitals beat the smaller." Although the intellectual antecedents of "giantism" can be found in Marx, the theory of capitalism in the West as represented by Schumpeter, Galbraith and others in the 1950s and 1960s, also proclaimed the invincibility of the large firm. The concentration and centralization of capital leads to economies of scale, which in turn leads to the highest levels of productivity growth. Schumpeter, for example, wrote in 1942 that "What we have got to accept is that (the large establishment or unit of control) has come to be the most powerful engine of progress."

The thesis of giantism has proven to be economically suspect and historically unsound. Indeed, the pendulum has swung so far the other way that today "innovation" has become synonymous with entrepreneurship and the latent ingenuity in small firms. According to today's conventional wisdom it's the entrepreneur and the small business owner that innovates. By contrast large firms are inherently bureaucratic and sclerotic. Clayton Christensen in The Innovator's Dilemma has made the further point (in Hegelian fashion) that the very logic that drives incumbent firms to success later generates the seed of self destruction. Is there no hope then for large firms?

Prahalad and Krishnan's The New Age of Innovation is not an apologia for large-scale capitalism. However, it is one of the few recent books on innovation that approaches the problem synoptically and comprehensively. It can be read by firms small or large as a primer on innovation strategy. Their starting point is the claim that "traditional sources of competitive advantage, such as access to capital, physical location, and raw materials or technology, will become table stakes. These factors are diminishing in their importance as sources of competitive advantage. Access to these factors is becoming easier."

Value creation and new competitive advantage derive from a set of factors which Prahalad and Krishnan portray pictorially as a house. The two pillars are labelled as "N=1" and "R=G". N=1 asserts that "value is based on unique, personalized co-created experiences of customers" while "R=G" means that successful firms will draw on, though not necessarily own, ideas, talents, and resources globally. In addition to these two pillars an innovation strategy integrates business processes, analytics, technology, and social architecture. The individual elements in Prahalad and Krishnan's model are not new but their synthesis is original. Large firms need not throw in the towel just yet.

Stay tuned for more on Prahalad and Krishnan.

History of the Computer Industry in One Slide

As the inimitable Yogi Berra once said: "It's tough to make predictions, especially about the future." I have been giving talks recently, including one at Harvard's Kennedy School eGovernment Executive Education Program, where I try to predict the future of IT and how firms and organizations will have to adapt radically or face extinction. A large scale industry shift is underway and its significance is likely to be far greater than people realize.

In looking at the future, it's always worthwhile to understand the past. In my talks about the future of IT, I lead with the following question:

"What paradigm shift in the computer industry brought us here?"

The audience usually provides answers such as: networking, the personal computer, TCP/IP, etc. These were all significant developments but don't get at the seismic shift that led to present state of affairs. Andy Grove in Only the Paranoid Survive not only posed the question but provided the answer.

"Going into the eighties, the old computer companies were strong, growing and vital...But by the end of the eighties, many large vertical computer ocmpanies were in the midst of layoffs and restructuring..."

What happened? In a famous diagram, Grove described the transformation of the computer industry from a set of vertically integrated silos, dominated by companies such as IBM, DEC, Sperry Univac and Wang, to a horizontal stack which made possible modular recombination of cheap components. That was the fundamental transformation in the computer industry that demolished the old computer companies, a number of them permanently. A similar transformation is underway in the computer industry and it will be equally seismic in its consequences. Stay tuned.

Acknowledgment: I came across the diagram in "Designs and Design Architecture: The Missing Link between 'Knowledge' and the 'Economy'" by Carliss W. Baldwin and Kim Clark

Jack Welch on Strategy

One of the best chapters in Jack Welch's new book Winning is on strategy. Let's see what he says:

"It's not that I don't understand their [the experts'] theories about competitive advantage, core competencies, virtual commerce, supply chain economics, disruptive innovation, and so on, it's just that the way these experts tend to talk about strategy -- as if it is some kind of high-brain scientific methodology -- feels really off to me."

"In real life, strategy is actually very straightforward. You pick a general direction (Welch calls this the "big aha")  and implement like hell."

Welch boils down strategy into 3 + 5. The "3" refers to  3 steps where the key is to come up with a "big aha". The "5" refers to five slides that answer a set of questions that cycle back to the "big aha".

The Three Steps:

1. First, come up with a "big aha" for your business -- a smart, realistic, relatively fast way to gain sustainable competitive advantage.
2. Second, put the right people in the right jobs to drive the "big aha" forward.
3. Third, relentlessly seek out the best practices to achieve your "big aha", whether inside or out, adapt them, and continually improve them.

The Title of the Five Slides (I won't give the bullet points, buy the book!!)

1. What the Play Field Looks Like Now. (scoping out the competition)
2. What the Competition Has Been Up To (where is the competition going? are there new entrants?)
3. What You've Been Up To (scoping out yourself)
4. What's Around the Corner (where are the threats?)
5. What's Your Winning Move?
   

Three Generic Competitive Strategies

It's time to do a series of postings on strategy as a way to motivate myself to understand it. Michael Porter's (even if he is from Harvard Business School :) ) Competitive Strategy: Techniques for Analyzing Industries and Competitors  (originally published in 1980) still stands as the classic work in the field. Unlike most management books, it's free of jargon and clearly written.

Porter notes that ultimately there are three approaches (i.e. strategies) for outperforming other competitors in the industry.

1. overall cost leadership
2. differentiation
3. focus

Overall Cost Leadership. A couple of years ago I visited Dell Computer for an Executive Briefing. One theme came across loud and clear in everyhing they do. They are relentless in cost cutting. What penny pinchers I thought! But Dell has written and re-written the book on seizing overall cost leadership. First, they started with desktops, then laptops, then servers, then printers, and the list goes on and on. As Porter notes, "a cost leadership strategy can sometimes revolutionize an industry". Dell has and continues to do so in the way it manages its supply chain.

Differentiation. Differentiating a product or service means creating a product or service which is perceived industrywide as being unique. How about that iPod? Apple's iPod is not unique as a digital entertainment device. But its style and design are. This results in brand loyalty and lower sensitivity to price. I'm willing to pay extra for my iPod!

Focus. The third generic competitive strategy is focus. It can take many forms but the basic objective is to focus on a particular market segment or buyer group. Adobe (not now but in its original reincarnation) focused relentlessly on the "prosumer" (blend of professional and consumer) market by turning out high end products for graphic designers, artists, and publishers. Adobe hit a nice sweet spot by serving not only professionals but a wider market of those who want goods of a better quality than consumer items but can't afford professional items (hence the term prosumer). (note: Adobe is in the midst of reinventing its strategy to target the enterprise.)

Now here's Porter's most important point. "The three generic strategies are alternatives [emphasis mine], viable approaches to dealing with the competitive forces. The converse of the previous discussion is that the firm failing to develop its strategy in at least one of the three directions -- a firm that is "stuck in the middle" -- is in an extremely poor strategic situation."