In my last article, I talked about how cloud computing requires IT organizations to restructure the application life cycle to leverage agile development, quality assurance, artifacts, and operations. Cloud computing has reset expectations with regard to how fast applications should be delivered, DevOps is key, and only by re-examining every part of how IT does its business can your organization move at the speed of cloud.
However, it's important to understand that accelerating technical competencies isn't enough. Even if your IT organization fully optimizes its internal processes to match the speed of cloud, there's still more to do. IT is now being asked to move beyond its traditional role of building internal applications and to enable the companies they support to compete in the new digital world. In short, you need to take advantage of application agility achieved through DevOps and leverage that to move toward redesigning the way you do business.
How apps are redesigning the business
The impetus for this redesign is highlighted in venture capitalist Marc Andreessen's now-famous opinion, "Why Software Is Eating the World," published by The Wall Street Journal four years ago. He noted then that economic sectors as diverse as entertainment, agriculture, and defense were being remade as their products and services became software-enabled.
To compete in the future, companies must integrate software capabilities into their offerings, and woe be it to companies that fail to make the software transition. It’s this business change that I address here: Failing to integrate agile IT with software-infused business offerings will, in the near future, consign companies to also-ran status.
Want proof? Look at the taxi industry post-Uber and -Lyft. An industry that survived two world wars and the Great Depression has been decimated by software-based transportation services. Taxi companies have declared bankruptcy. Financial firms that loaned money to purchase taxi medallions are facing liquidity crises. The entire sector is on life support.
The point is that companies need to rethink the way they engage with customers, how they deliver value, and the best way to meet customer needs. The choice is stark: Reinvent your business model, or go the way of Yellow Cab.
Here are some considerations when rethinking your business offering:
View the ability to create software-powered offerings as a core competency for the business
Mobile apps are often the place that companies start in rebuilding their offerings, which makes sense. After all, mobile device-carrying customers are in the vanguard of new customer expectations. However, many companies have made the mistake of treating their mobile apps as an outsourced activity, relying on an external consulting firm for implementation. This isn’t necessarily a bad way to start, but it should be seen for what it is—a short-term solution. Relying on an external party runs the risk that the company will never step up to internalizing the skills it needs for the future. Worse, external agencies lack real domain expertise, which means the applications they turn out are likely to fall short when it comes to functionality.
Companies such as Capital One have illuminated the path forward. The bank dramatically restructured its IT organization and brought in new skills. It recognized that banking will be very different in the future, and digital skills are critical to its survival. Unless your CEO realizes that IT is a core competency, and plans to make building digital capabilities a core competency, your company will struggle in the future.
UI/UX is necessary, but not sufficient
Many companies pursuing a digital strategy place much of their emphasis on the user interface (UI) and user experience (UX). By creating enticing interfaces, the thinking goes, customers will be delighted and choose to do business with them.
It’s true that a terrible UI will put customers off. However, unless the entire software stack supports and delivers useful functionality, a pretty UI is, as the saying goes, like lipstick on a pig.
The right way to go about this is to recognize that you will need digital skills across the organization. Fortunately, if you’re pursuing a deep DevOps approach to application life-cycle management, you’ll already be bringing in a lot of the back-end talent you’ll need to enable an engaging UI. Don’t overlook the need for new integration capabilities, which means you’ll also need skills in the area of APIs and legacy application functionality.
Form joint product and technical teams
Creating compelling user experiences and delivering them in an agile fashion means the old model of one group envisioning a business offering and another group building it just won’t work.
It's clear that this approach is too slow, but there’s also a more subtle drawback: It fails to unleash collaboration between product owners and technical implementers. Only when both groups work together can more creative solutions emerge. Furthermore, the rapid iteration made possible by closely working together allows for faster convergence on offerings that will delight customers.
Capital One is moving toward this approach, as evidenced by its digital website. It calls out a “fail fast” approach, a rethinking of office design, and close collaboration as hallmarks of the business' digital strategy. You could do worse than look to Capital One for inspiration. In fact, the financial services giant has stood up innovation labs to pursue its new offerings.
Rethink the customer value chain
In his book, The Innovator’s Solution, Clayton Christensen calls on company management to take a different perspective on their products and services. Instead of thinking about features or pricing, consider what he calls “the job to be done,” which is the problem the consumer is solving with the purchase of the good or service.
This approach is vividly illustrated by the legendary example proffered by Harvard Business School professor Theodore Levitt.
"People don’t want to buy a quarter-inch drill. They want a quarter-inch hole."
If you examine products from the consumer’s perspective, you can turn up surprising motivations. Christensen cites a fast-food chain that found that 40% of its shakes were purchased in the morning by consumers who bought no other product. When they were queried, the company found they bought the shakes to provide stimulation during boring commutes.
Rethinking the customer value chain to address the need that consumers are trying to fulfill is vital for the new world of software-enabled products, and getting it right is imperative. But it can be challenging.
For example, one hotel chain I frequent sent me an email proclaiming that its new mobile app would let me check in without waiting in line at the front desk. That's fantastic, I thought. I’m all for saving time. But when I arrived, I still needed to wait in line at the front desk to get my key! Clearly, the business hadn’t fully thought out the customer value chain to save time across the entire check-in process.
The emerging discipline to address value chain reengineering is design thinking. Like the term DevOps, design thinking is a concept, not a specific set of practices. But common to most design thinking approaches is viewing a product or service from the user perspective and seeking a better solution, rather than dictating a specific approach.
So, instead of defining the problem of check-in as waiting in line to hand over a credit card and identification, the hotel chain could have sought a solution for reducing total time, from when customers first step into the hotel lobby to when they enter their rooms. That approach would have identified key acquisition as an important step, and designed a way to streamline that activity as well.
Design thinking is something in which every company needs to engage. And unlike mobile, where it’s a mistake to rely on an outside agency, for design thinking it makes sense to engage an external party. That's because an agency can assist with the process, while leaving the implementation to the company itself.
Expect to see this emphasis on rethinking customer value chains and leveraging design thinking to reengineer company offerings become a high-profile topic over the next couple of years. The key task for IT will be to align and integrate new business offerings with IT agility to help the larger organization become a true software company.
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