Monthly Archives: June 2014

Management Consulting

TriStrategy’s 3T Framework on Innovation in Service Business*

Almost all businesses today are facing the forces of disruptive technologies. These forces can prove deadly for some long-time traditional businesses. Based on our observations and experiences, TriStrategist designed the “3T Innovation Framework” for a service business to innovate in the right way to stay current, stay ahead and prevent the threat of disruptive forces. The “3T” represents the three underlying concurrent themes for a service business to target on innovations: Talent-centric People Innovation, Time-focused Process Innovation and Transcendent Value Innovation.

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3T Innovation Framework for Services. Click to enlarge the image.
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3T Innovation Framework for Services. Click to enlarge the image.

TriStrategist thinks that compared with a product-focused company, it is harder for a service business to innovate or keep an innovative edge among competitions. Thus, a long-time service business can be even more vulnerable facing disruptive forces. There are several reasons to it:

1. A service business, even with sound management and constant innovative moves, tend to be on sustaining innovation mode** at best. It tends to stay on course for the continuity of the services and for the satisfaction of their customers. They are easily restrained from making quick or drastic changes by their customers. This renders them a lack of flexibility and versatility to deal with new, distinctively different disruptive forces on the market;

2. An established service business tends to have heavy upfront investments or fairly fixed profitability model. Dealing with a new emerging disruptive service model on the market could mean to uproot or change completely the existing model, which is often to too costly, by their traditional way of opportunity cost calculation, to make up a good financial case in decision making when there is still time to react;

3. In an existing service organization, the continuity of the service to serve their most valuable customers often imply some specialized skills and fixed procedures in the process. Routine work and mindset thus formed. People in these organizations are typically not equipped with the capabilities of quick mindset or skillset switching that are urgently needed to deal with the emerging disruptive forces. Even if the organization is keenly aware of the new forces and their threats, people in the organization, including decision makers tend to be reluctant to face them until it’s too late;

4. The disruptive force for a service tends to first attack in one or a few segments of the value chain, either by advanced technologies or innovative delivery mechanisms. Still it’s often hard for an existing service business to incorporate the new ideas quickly into their existing service model, either due to value market differentiation, technology incompatibility with the rest of the chain, or a lack of expertise in the new way. Thus, the existing business can easily lose the valuable time to combat the new wave, and more often than not, cost them the leading edge or potentially the entire business.

One good example is the movie rental business of Blockbuster vs. Netflix. Blockbuster, founded in 1985, had the heavy upfront brick-and-mortar investments in its numerous neighborhood stores and had dominant position in movie rental business for years. By targeting the same customers and essentially the same service business, Netflix, started in 2002, offered a new delivery mechanism with a lower monthly fee and the convenience of in-house delivery(also a time-saving value for some customers). Blockbuster saw Netflix’ new delivery model coming, but it was hard for them to abandon the existing store model and reset resources to immediately catch up. In fact Blockbuster’s store model had a higher profit margin (apart from the upfront investments) than the initial Netflix’ mail-in model. When they eventually tried to counter offer the mail-in service to their customers, it was already too late as Netflix’ new model has been adopted by the mainstream. Moreover, Netflix quickly started investing in streaming videos/movies which had a hugely enhanced time value in delivery, appealing more to the society thanks to the prevailing cable networks at that time. We all knew how the story ended: by 2010, Blockbuster filed its bankruptcy protection and never came out of it.

Another contemporary example can be seen in book publishing services. The traditional publishing houses have been using the same process for decades. They charged a percentage for editing, publishing and promoting the books for the authors and the entire process is slow. When self-publishing service first came into reality, traditional publishing houses couldn’t deal with it immediately: both due to the different value market (selective authors vs. every writer) and the incompatibility of the publishing process and fee structure. Still self-publishing service poses a serious disruptive force against the traditional publishing service. Today it has started moving up the value chain to attract even the established authors for both the time and fee savings. The battle is still intensely on.

In today’s technology service sector, the battles are even more fierce and scary. TriStrategist will continue to study some of these cases in the subsequent blogs.

“All things are ready, if our mind be so.” – William Shakespeare, in Henry V.

Therefore an effective innovation framework in place is essential for any service business to stay innovative throughout the organization, to smartly decide on resource and investment allocations, and to keep market leadership by preemptively dealing with any potential disruptive force in the current age of explosive innovations, if not becoming a creator. TriStrategy’s 3T Innovation Framework is designed to help on these purposes.

* Note: This blog is a continuation on the subject of Innovation and Services Business, first posted on May 17, 2014. TriStrategist will continue to refine the 3T Innovation Framework from our management consulting work and observations.

** Note: For the definitions of sustaining vs. disruptive innovations and the value network theory on disruptive innovations, please check out Harvard Business School Clayton M. Christensen’ publications and other related discussions.

Trend of Technology

Machine Learning and AI, Where Science and Technology Merge

Could some super intelligent machine being exist in our future? The answer is likely yes.

Science-fiction movies since birth have tried to lead our imaginations and predict how the future world and technologies would look like. We all have in our minds some images of the intelligent supercomputers from the movies, Deep Thought in Hitchhilder's Guide to Gallaxy
for example, the Deep Thought in 2005 movie The Hitchhiker’s Guide to the Galaxy (see pic) or the intelligent master control system in 2008 movie Eagle Eye, known as the government’s intelligent gathering supercomputer ARIIA or ARIA(see pic below).

The ARIA in Eagle Eye In many of these movies, a common theme had been that when such an intelligent “machine being” became overly powerful or misguided by evils, human heroes had the obligation to destroy it before it could destroy mankind. Although there is a distinct possibility that such a super intelligent machine being could exist in our real future, increasing evidences from today suggest that its picture be totally different. It will not be a centralized physical super machine or system as in the movies, but rather more likely it will take an invisible form living in the future clouds – in the complex webs of networked systems that could exist everywhere, on earth, in orbits or even on remote stars. The plot in the movie series The Matrix (1999 and 2003) seemed closer to this scenario. It would become a lot harder to be destroyed though if indeed evil thoughts took control. Let’s wish the age of ultra-capable RoboCops or human surrogates (as in 2009 movie Surrogates) that could draw intelligence and power through such invisible all-around machine forces won’t come into reality too soon before we find out the answer to this age-old question yet: Could one day machine-learnt intelligence indeed surpass human intelligence?

Machine Learning (ML) is a branch of Artificial Intelligence (AI). It’s the study of using machines’ computing and large data processing power, analyzing past and present data through programming and algorithms, to offer predictive capabilities without the inputs of human intuitions. The next stage will lead to more advanced AI that allows the simulations of the cognitive powers of the human brain by the machines. In fact these desires and concepts, as shown in generations of sci-fi movies, have existed for a very long time and nothing is new. Many commercial companies, including Google, Microsoft, Amazon, IBM, etc., have been playing with these concepts in their data-mining related product and service offerings such as search, cross-selling, online gaming, etc. People and countries also have been building better and faster supercomputers for decades to shrink the computing time. However only with the recent compounding growth of the compute power by clouds or clusters, these ideas, and many more enhanced possibilities in advanced AI, are becoming closer and closer to reality, and exciting again.

Machine Learning and AI are great examples of those fields in which when science and technology merge together, unlimited potentials emerge. Even with increasingly scalable and seemingly unlimited compute power, machines can only learn as intelligently as the algorithms that direct them. That’s the field of Data Science, the multi-disciplinary science of extracting insights and knowledge from data. Math and statistics are only part of what Data Science needs. Versatile skills in many areas are needed to truly make intelligent sense out of the amount of data in our hands today and the gigantic yet-to-come in order to predict the future or build human capabilities in machines.

Although still in the basic stage, IBM’s $1 billion investment announced early this year in Watson, a cognitive ML technology on cloud, and the coming July release of Microsoft Azure ML, are seen as the start of the large-scale commercial propagation of Machine Learning, both as part of the cloud offerings on their individual cloud platform. Once these facilitating tools and services become available to the masses, the power of science and technology coupling will become even more evident.

At least in our current age, there is no doubt that humans are definitely still in control of the machines.

Trend of Technology

The Future of Enterprise IT

Today it is generally recognized throughout the IT industry that a well-connected, inter-operated, flexible multi-cloud ecosystem will be the near-future and future picture of Enterprise IT. This may be an over-simplified way to put it.

Many of the IT departments nowadays are busy fitting their existing IT into the cloud world or vice versa, and occupying themselves with cost evaluation, infrastructure alignment, vendor identification, skill acquisition, automation design, etc. Beyond the infrastructure, most of the existing mission-critical enterprise IT applications are far from being optimized for cloud computing either. Therefore many commercial opportunities exist today in both cloud and Big Data space to help companies’ IT departments get into the buzz. The complexities and efforts involved can hardly be overestimated, yet the direction can be even fuzzier.

Let’s first ask what would be the future picture of the Consumer IT space? With the coming of the Internet of Things (IoT) and many futurist movies, it is not hard to imagine that plug-and-play, simplicity, connectivity and speed, anywhere and anytime, will be in the future of Consumer space. Privacy and security concerns will more or less be delegated to the enterprise service providers and network providers in the ecosystem.

But for Enterprise IT, the future picture is likely going to be more complex. One thing is certain: the future of the enterprise IT departments will need handle a lot of more than the current demands to support enterprise operations. The increasing business and market trends to offer intelligence services by collecting, consuming, processing more and more market and consumer data, of their own or from others, connecting and transferring between more and more systems, will be in the future scope for enterprises. With cloud compute, storage, network technologies far from maturity today, existing enterprise applications mostly out-of-date in the cloud world, standards and regulations are still in the making, the fast-changing and foggy future demands from consumers and IoT to Enterprise IT are just adding more fuels to the fire. It’s too early to assume that incremental changes and upgrades here and there, which have been the norm for large enterprise IT departments for decades, can sufficiently and effectively transform current IT systems and applications safely into the future when the new setting is needed.

However, if an enterprise still has the confidence to move into the future of the next decade or further, have they thought about starting right now to directly invest on a new and flexible IT picture of the future by designing entirely new multi-cloud, Big-Data-capable infrastructure and application architectures from the scratch instead of focusing on tweaking the existing? This approach can be started today with much agility and speed than on incremental changes to make the existing fit. Although many technology details are not completely ready today, the ecosystem, the connectivity and plumbing concepts are already here and many innovations have already started. All the needed technologies and affordable choices will only become more readily available in the days (not years) to come. The justification of the different approaches will involve the time and cost evaluation, but that depends how an enterprise view the market, the future and the existing and new business challenges and opportunities. This will like become an interesting case study in the business schools on “marginal cost” vs. “total cost”. It could be quite counter-intuitive for the decision-makers. What could be viewed as an easier or more obvious choice today by selecting smaller “marginal cost on investment” based on the existing, could end up becoming a much more expensive “total cost on opportunity” of the near future.

If Enterprise IT departments believe that the future picture of Enterprise IT will be an innovative picture quite different than that of today, then a different mindset may be needed.

On Leadership and Management

On Corporate Culture

People tend to use many descriptive terms on corporate cultures. For example, “casual” vs. “serious”, “competitive” vs. “friendly”, “fast moving” vs. “slow”, “fun” vs. “rigid”, “quick decision” vs. “consensus”, etc. There are also many details to describe the behaviors of the people inside: “casual-dressed” vs. “suits & ties”, etc. So, what is exactly a corporate culture?

Former MIT Sloan Professor Edgar Schein, a known scholar on corporate culture, pointed out that the surface terms may not truly describe a company’s culture. He thinks that culture is a way of working together towards common goals that have been followed so frequently and so successfully that people don’t even think about trying to do things another way. If a culture has formed, people will autonomously do what they need to do to be successful.

From his explanation, a corporate culture is the common group approach, in explicit description or without, to do things inside the company and reach agreements. Other scholars summarize it as the combination of process and priorities inside an organization. Prof. Schein did warn us that it’s too easy to over-simply on what is truly a corporate culture. It comes in multiple levels and is influenced by multiple dimensions and factors with the age of the organization and its leaders, missions, strategies and goals, organizational structure and process, time and space, external forces, etc.

The question is at the interpretation of a “success” in a corporation. TriStrategist thinks a corporate culture is more than the “How” & “What” elements of the process and priorities; it has a lot to do with group-enforced human attitudes and behaviors under human psychology. These attitudes and behaviors, which over time form a “group preference” of doing things, for a large part, came directly from those of the company founders or top leaders. “Corporate Values” are not a culture statement. As the Corporate Mission Statement, they are for marketing a company’s ideal image to the outside, but the true culture inside speaks more about the personalities of the top leaders and people who subconsciously try to be “alike” to their leaders in order to be accepted or “successful” in a corporation. Because of the narrow definition of individual success in a corporate environment, the performance review and compensation system, reflecting how leaders and management value their people and contributions, also impact the culture twist. Underlying “directness” vs. “passive-aggressiveness”, “sharing” vs. “backstabbing” can all be the gradual results of it. People may even subdue their true personality in order to fit into a corporate culture at the workplace. A fun-loving person can easily keep a low key and put on a straight serious face for the 8 hours a day for the sake of making a living for the moment. Besides, there are plenty of stories on companies who failed on scandals because of the behaviors of their leaders and their questionable culture, although they had those shinning righteous corporate values posted on the wall.

The formation of a corporate culture is similar to that of a family culture. Even if the head of the household or parents may not explicitly try to “define” the culture of their family from the beginning, the children will inevitably inherit the day-to-day attitudes and behaviors from their parents inside a family. For example, “a caring, loving family” is where parents respect and care each other and their children. Parents’ honesty, hardworking, kindness to friends and neighbors, attitudes towards money, their rewards and punishment standards (especially) all help define a family culture and directly impact how their kids will behave. Same with a corporation. A competitive leader will generally lead a competitive company. A courteous leader who leads by persuasions may result in a company more “friendly” towards each other and to their customers. A overly consensus culture can seldom lead to great decision-making in a competitive market, but if that is the culture, people inside will accept it as a norm for a long time. A cunning, corner-cutting business culture may pursue aggressively on short-term gains, and that’s a culture too.

Neither a successful company ensures a winning culture, nor does a past winning culture guarantee a company’s future success. The snapshot “success” of a business usually comes with both the vision of the leaders and the luck, not necessarily the superior skills or aptitudes of the top leaders themselves. For example, a product or service may jump to an instant success because of the lack of the competitions in a particular market. No business model can last forever. Both the corporation and its culture evolve over time, but the culture, carrying the burden of a long history and the momentum of a large mass, tends to evolve much slower than the market conditions or business decisions.

A culture can be both a catalyst for many great new things or a barrier to change. The initial success of a great business tend to foster a culture which has embedded elements from their leaders and people that lead it to its success, either with their unique decision-making process, enhanced human psychology (innovative pioneering spirit, courage, passion, drive, etc.), or striking personalities (Steve Jobs as an example, who worshiped brilliance, simplicity, perfection, etc.). In the long run though, as the market and business evolves, its existing culture can directly impact if the business can adapt quickly or if it will last. A culture usually changes somewhat with the leadership change or gets blurry if neglected. Process and priorities can be changed anytime by logics, but a lasting successful business usually fosters a deeply rooted culture which includes those lasting human elements that can endure the test of the time. It is hard, but a long-lasting business needs a true “signature”.