Monthly Archives: September 2011

In Services Today, Success Often Depends on the Harnessing of Ecosystem Relations

“Research reveals 12 steps for executives who want to follow a business model innovation approach to service provision.”  A new study with very informative findings is available from Ivanaka Vismjic and Andy Neely.  I have published the executive summary below.  and the following is a link to their paper in PDF form: “From Processes to Promise:  How complex service providers use business model innovation to deliver sustainable growth” (9/2011)   Ivanka Visnjic, Business Models Research Lead, Cambridge Service Alliance and Assistant Professor, ESADE Business School, Andy Neely, Director, Cambridge Service Alliance.

Executive Summary (as published by Visnjic and Neely)

The ‘pure’ service sector represents three quarters of the developed
world’s economy. Forty per cent of manufacturing firms sell services
as well as products. In some cases ‘traditional’ manufacturing firms
generate over fifty per cent of their revenues from services. It is clear
that service offers companies significant opportunities to create and
capture economic value. Underlying this shift to service is a change
in the nature of service. Increasingly firms are focusing on how they
can deliver services that help their customers deliver value to their
stakeholders. In essence service providers are shifting from being
‘doers’ to becoming ‘problem solvers’, capable of orchestrating the
delivery of complex services.
 
Our research explores the challenges and opportunities associated
with this shift. Through interviews with 24 managers from 12
different companies we show how complex service providers are
innovating their business models to obtain sustainable profits and
growth.
 
A key finding of our research is that these service business model
innovations do not occur in isolation. Instead one has to take
account of the ecosystem – the business environment in which
the service provider operates. This ecosystem consists of all those
organisations that are able – directly or indirectly – to influence
the service provider’s ability to create and appropriate value. Our
research suggests that the impact of ecosystems is growing.
We also find that business model innovation involves service
providers extending their ‘value proposition’. They move from
offering relatively simple services, such as IT support or equipment
maintenance, towards more comprehensive service offerings,
such as ‘cloud’ computing capacity or guaranteeing equipment
availability. In doing so, complex service providers position
themselves as solution-providers, offering to be held accountable
for the delivery of service outcomes.
 
Service providers have three options to extend their accountability.
First they can extend the scope of services they provide. Second
they can increase the timeframe over which these services are
provided. Third, they can change the nature of the contract, by
guaranteeing outcomes and performance levels. Each of these
innovations offers new opportunities to create value, by more
closely aligning with the customer’s business model.
Importantly the service provider also has to decide how to
structure the service delivery system. Service providers may remain
accountable for the ultimate service delivery, but they do not need
to undertake all of the elements involved in service delivery. They
have the freedom to decide how the service will be delivered. This
freedom means they can innovate the service delivery system.
Often they use technology – smarter services – to enhance service
delivery.
 
Rarely do single service providers have all of the capabilities
required to deliver services. This is particularly the case as value
propositions become more complex and service delivery systems
become more technologically dependent. By partnering, service
providers can fill their own competence gaps, but by partnering the
service provider is also exposed to more risk.
Separating what the provider is accountable for from how this
promise is delivered increases the accountability spread. As a
consequence the service provider is exposed to risks that originate
from: (i) the value proposition, (ii) the value delivery system – either
of the provider or the broader ecosystem, or (iii) beyond the
ecosystem.
 
Our research reveals how complex service providers are innovating
their business models in the pursuit of increased growth and
profitability. It also enables us to identify the organisational
capabilities that organisations need in order to successfully innovate
their business models. These capabilities relate to the three aspects
of service business model innovation – the value proposition, value
delivery and accountability spread.
 
So, for example, the service provider should have a thorough
understanding of the way its customers do business, and create
and capture value, in order to define effective value propositions.
The service provider must be able to clearly define and articulate
the value proposition and its benefits to customers and build
confidence in the viability of their value proposition.
 
To deliver value effectively the service provider must have the
organisational capabilities required to manage and orchestrate the
ecosystem. It must make the right decisions about who to involve in
value delivery, be able to assess and choose the best partners, and
build and maintain productive relationships with them. The service
provider must also be able to work effectively with the customer to
co-create value.
 
Service providers also require capabilities to deal with the
accountability spread produced by service business model
innovation. Some of these capabilities concern risk identification.
Other capabilities relate to being able to measure and manage
the risks arising from changing the value proposition and delivery
systems, and containing and sharing this risk together with other
members of the ecosystem. Being able to articulate and price the
risk is important; it involves identifying appropriate mechanisms,
commercial and legal constructs, for example, with which to
operate effectively across the network and capture value.
 
Finally, for executives who want to pursue this approach to business
model innovation, we suggest some initial measures. Steps should
be taken to establish and analyse the value proposition, value
delivery system, and resulting accountability spread. Efforts made
to understand and map the ecosystem. These and other critical
activities should be embedded into the roles of key individuals with
the accountability to drive profitability. Leaders should prepare for
transformation and change.

 

Data for Dummies? More Than Technology Needed to Make “Big” (or “Any”) Data Work

A recent article, “Rank-and-file data analysis skills the key to Big Data success?” makes some important, timely observations about unlocking the information in data.  Today this is an especially relevant topic. This is true not only because we are faced with the problem of how to make our businesses and other organizations more productive, agile, and innovative, but also because the amount of potentially usable data (due to the continuing digital revolution) is growing at a very high rate (that will also continue to accelerate):

Data streams are growing at a rate of 60% a year, and data use is reaching 35.2 zettabytes globally. This year, a billion terabytes of data will flow around the world, according to IDC. Given the need for tools that collect, cleanse and store all this stuff, that increase puts CIOs into prime position to become the keepers of business data. As it turns out, however, building better data analysis skills across the employee base is what’s going to make the Big Data engine churn, experts insist.

Some remarkable survey results shed some light on the current situation:

How ill-equipped for data analysis are we? The CEB surveyed 5,000 employees at 22 global companies and found a “serious data-analysis insight deficit,” Shah said. Of those surveyed, 43% were deemed unquestioning empiricists — they trusted data and statistics over judgment, and valued the consensus. Another 19% were visceral decision makers — they seldom trusted data analysis and made decisions unilaterally.

What companies need is employees who are informed skeptics, Shah explained. Such employees (38% of those surveyed) apply judgment to data analysis, listen to others and are comfortable with dissent.

Read more and draw your own conclusions from the data at  “Rank-and-file data analysis skills the key to Big Data success?” 

 

Rumored–Apple’s First New Product After Steve Job’s Departure as CEO

Rumors have it that Apple is about to introduce its first new product since the departure of Steve Jobs.  Called the “iRide,” it represents, according to shadowy sources, “Apple’s first foray into the area of green transportation technology.”  Entirely human powered, the iRide appears designed for the ecologically-aware. health-conscious and economically-constrained market segments or possibly for emerging international markets. It boasts Apple’s hallmark elegance, style, and lines, and it contains all the technology and functionality of the Apple iPhone and iPad repackaged in a rideable form.  TechCrunch said “this will bring a whole new dimension to mobile technology.”  AutoTrend Magazine said “it’s not really a car, but it’s cool and will turn heads–if not break necks–it’s one hip ride.”  Some Wall Street analysts, however, were reported to be wondering out-loud about this new direction and said they would wait to see if there is demand.  The photo is rumored to represent a prototype of the iRide being tested this summer in the tundra of northern Finland. The original rumors only came to light apparently after Americans, claiming to be Apple employees, reported to Finnish authorities the  theft of a vehicle they had parked outside a bar in the town of Sodankylä (pop. 5).   Post was authored by Andrew Karpie for the fun of imaginative satire and is not in any way an assertion of fact;  all statements about actual businesses are purely fictitious.

LinkedIn Group, Platforms Business Models and Strategies, Comes of Age….

 I am very pleased to announce that the LinkedIn group, Platform Business Models and Strategies (http://www.linkedin.com/groups), has reached a new stage of maturity. The group itself was conceived to be a platform for a community of (a) business practioners (managers, entrepreneurs, investors, consultants) and (b) academic scholars (researchers, theorists) to share information and ideas and develop useful knowledge on this important business subject.   

I started this group earlier this year and have been consistently seeding and nurturing it.  The group recently reached a membership of 100 interested professionals and specialists.  Among these initial members are a number of reputable academics/researchers focused on this subject, including (among others): Michael Cusumano (one of the “fathers” of business platform studies) http://web.mit.edu/cusumano/www/, Annabelle Gawer (perhaps the foremost expert on the subject today) http://www3.imperial.ac.uk/people/a.gawer, Jim Spohrer (one of the founders of the new Service Science, related to the subject) http://en.wikipedia.org/wiki/Jim_Spohrer, Chris Voss http://www.london.edu/facultyandresearch/faculty/search.do?uid=cvoss , and Kevin Boudreau http://www.kevinboudreau.com/.

I am now turning my attention to developing the “business practioners” side of the community. In that context, I am reaching out to extend an invitation to participate in this group to your business colleagues (managers, entrepreneurs, consultants) who may have an interest in taking part in this discussion. If you have not yet joined, please do. The following link, which may be sent to your colleagues, explains the group and presents a “JOIN” button: http://www.linkedin.com/groups?about=&gid=3830083.