Are you ready to become a digital technology leader?

In “Designed for Digital," which will be released next week, the authors suggest that winning at digital requires more than a mastery of social, mobile, analytics, cloud and IoT. It requires the willingness to experiment and to create new digital value propositions.

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Establishing a digital platform

While the operational backbone—delivers operational excellence—in particular reliability and transparency, the digital platform delivers new sources of top-line revenue. Companies do this by applying SMACIT to create and deliver digital offerings. Fundamentally, these offerings are about enhancing the customer value propositions. A digital platform, for this reason, has as its goal to delight customers by enabling experimentation, rapid innovation and continuous feature enhancements for business offerings.

Digital companies build, buy, configure and reconfigure business, data and technology components to generate and enhance digital offerings. And importantly, they do so rapidly. According to the authors, moving from monolithic code to components represents a critical change for enterprises. Components enable speed and agility because, like Lego blocks, they allow people to quickly assemble solutions from parts that already exist.

designed for digital Jeanne W. Ross, Cynthia Beath and Martin Mocker

To put this all together, the authors suggest organizations use a digital platform to keep track of all the components they create, through the creation of a catalog.

To be clear, the digital platform needs a catalog but the platform itself is the repository of architected API-enabled components. The aim of the digital platform is to provide easy access to the data, business and technology components needed to create digital offerings. A digital platform, therefore, is a repository of business, data and infrastructure components used to rapidly configure digital offerings.

The components, for those that are not technologists represent “slices of code that perform specific tasks.” With them, developers can configure offerings by calling upon existing components. To make components reusable, developers API-enable these components—this enables components to exchange data with other components. For this reason, in a well-designed digital platform, each component provides an API that allows pre-defined, plug and play connections between otherwise independent components.

At the heart of the digital platform is a repository of data components. These components store, manipulate, analyze and display data. According to Sharon Pitt, CIO of the University of Delaware, “I'm not sure how much it's about the data as the people who input that data and use it. Focus on accuracy, consistency, integrity and accountability is needed. And I would add that data governance is a key part releasing data via an API layer. Users, patrons and consumers need to know what the data is before calling it and perhaps misusing it."

Ken LeBlanc, former CIO of Iron Mountain, further suggests that “the first step should be focused on refining and optimizing legacy business processes and reaching agreement on what differentiated capabilities make the company relevant.”

The next component of the digital platform is infrastructure components. This provides technical services components to adapt the services embedded in the cloud platform to specific needs of the company offerings and customers. This includes authentication, access control and connectivity for smart devices. These bridge between business components and cloud services.

Finally, the repository of business components provides functionality required for multiple digital components. This include dashboards, rules for alerting customers and employees, onboarding processes for establishing new relationships and bots that provide support to customers.

In sum, the digital platform is a repository of cloud services that provide hosting and performance management of applications. With this, a digital offering is software that includes code unique to that offering. Here unique features for a customer segment as well as API calls to reusable components needed from repositories. Clearly, as digital offerings grow, a company will maintain a catalog of digital offerings. The digital platform can and should continuously evolve.

What's different?

The essence of designing a digital platform is deconstructing the company’s existing and imagined digital offerings into data, business and infrastructure components. The digital platform, for this reason, should house repositories of API enabled data, infrastructure and business components so the company can quickly configure and commercialize digital products and services. Put simply, the digital platform exists to enhance digital offerings with new digital technologies.

The authors are clear that legacy businesses for the most part are still in the early stages of building their digital platforms. According to MIT CISR’s research, 74% of legacy businesses have begun the process. But designing and building a digital platform requires leaders to recognize and invest in their longer-term needs before those needs are apparent.

At this point, the authors take a moment to recognize the difference between the starting points for legacy businesses and startups. Legacy businesses typically focus on their operational backbone to ensure reliability and efficiency of core business processes. Digital startups have focused on the digital platform first.

An example is provided here of customer onboarding and employee onboarding. They should combine reusable business components in a digital platform or end to end processes in an operational backbone. In designing a digital platform, organizations must define data, business and infrastructure components and design them for reuse. They must rethink what they want to offer customers in terms of components. According to Zack Hicks, CEO of Toyota Connected Enterprise, “our job isn’t to tell them what to do. Our job is to remove the obstacles that are in the way. The PMs can hire and do as much as they want if they are profitable. This of course requires a rethink of governance.”

Building an accountability framework

The authors suggest that command and control management approaches have helped companies implement optimized enterprise processes. However, they do not build time-responsive digital business offerings. The development of a digital platform requires distributed responsibilities for digital offerings and components that balance autonomy and alignment. It requires, like Gary Hamel has suggested, empowered teams that establish metrics, define processes, assess outcomes and adjust their own activities to meet goals that contribute to larger, company-wide goals.

The authors suggest that digital offerings depend less on standardized process and more on rapid processes. For digital offerings to be created in a market-responsive fashion, leaders need to count on people to reimagine what is possible. What is needed is the distribution of responsibilities for digital offerings and components that balance autonomy and alignment. This also requires:

  • Moving from project managers to component owners
  • Moving to mission from structure
  • Metrics not directives
  • Experiments not major launches
  • Continuous release not scheduled release
  • Fully resourced teams, not matrixed management
  • Collaboration not hierarchy
  • Trust, not control

For these organizations, their software components become living assets. They require a dynamic environment. This makes empowerment and accountability critical. It demands agile software methodologies. What is demanded is an accountability framework that balances autonomy and alignment. This allows for evolving accountabilities as customers evolve and change. According to Suresh Kumar, former CIO of Bank of New York Mellon, a component owner is like a mini CEO. They have total responsibility for the success of their product.

Building an external development platform

For many businesses, a winning strategy involves becoming an ecosystems driver. These organizations “find ways to partner with providers of complementary products and services and then integrate those offerings…into a seamless experience." (“What’s Your Digital Business Model,” Peter Weill and Stephanie Woerner, pg. 158)

In this approach, companies find value by extending their digital platform to support an ecosystem of partners. The value of this business strategy is that ecosystems exhibit a virtuous cycle. To facilitate this, the authors suggest there needs to be an external development platform that is a repository of digital components open to external partners. This allows partners to use the company’s internally developed components in the partner offerings. Examples of external development platform include Apple’s Developer Platform and App Store.

To work effectively, the external development platform should provide a catalog and description of each component. APIs should enable a component to complete a task that it was programmed to do. With this, the aim is to enable partners to quickly write new code on top of their existing software components.

For this reason, the components should be modular, plug and play rather than a heap of traditional monolithic code. The authors give the example of DBS Bank which has provided 200 API enabled digital components including credit card management, loan eligibility, etc. SoCash has developed, on top of these API enabled components, an app that allows its customers to withdraw cash from a merchant cash register.

The roadmap for digital transformation

The authors suggest that organizations that figure how to assemble the digital building blocks—shared insights, the operational backbone, a digital platform, an accountability framework and an external development platform—will win in their respective markets. It is important to recognize that the building blocks will change people, process and technology.

The authors are clear that simultaneous development allows companies to take advantage of interdependencies between building blocks. There is no single roadmap that will be optimal for all companies. Instead, successful companies will focus upon capability building initiatives that enable them to make steady progress without the risk of overwhelming organizational change.

It seems clear that it is not possible to quickly instill digital culture and develop digital capabilities in a company that was not born digital. Instead, established companies must accumulate digital capabilities over time. Part of this can involve unlearning old habits and learning new ones. This is like the notion of rooting out orthodoxies suggested by Gary Hamel although much of this was perceived by Teece as radical competency destroying innovation. The capabilities that matter these days are digital.

Successful companies focus initially on developing one or two of the building blocks depending on industry and market competition. Three companies are provided as templates and examples of possible journeys—Schneider Electric, Royal Phillips and DBS Bank.

Overall, the authors recommend that your roadmap do the following:

  1. Fix the operational backbone
  2. Don’t put off your digital platform for long
  3. Synchronize your customer insights and digital platform development
  4. Start assigning accountabilities
  5. Don’t rush the external development platform
  6. Keep learning and building

Designing your company for digital

Digital technology changes the competitive landscape. Its capabilities require companies to rethink their customer value propositions. To win, companies need to reimagine what is possible needed by customers and then redesign your organization so to remain relevant. The authors suggest that now is the time is now to get inspired, that it's time to put your building blocks in place.

This can start via road mapping the journey. With this, you should establish ownership for each building block. And then you need to communicate your vision and journey and commit to it for the long haul. The question, are you ready to become a digital economy leader?

Copyright © 2019 IDG Communications, Inc.

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