Advanced Practices Council Insights This issue highlights research presented to Advanced Practices Council (APC) members at the January meeting. The key theme emerging from the meeting is thinking and behaving differently to increase IT's value to the firm.
Don't Wait for Your Current Business Model to Expire
Are you interested in improving your firm's current business model to increase profits? Are you also interested in transforming your firm's current business model to be more profitable in the future even though it's successful today? According to Yves Pigneur, co-author of Business Model Generation, success begins with defining business model canvas elements for your firm (i.e., customer segments, value propositions, channels, customer relationship, revenue stream, key resources, key activities, key partners and cost structure) as well as external factors (i.e., key trends, market forces, macroeconomic forces and industry forces). The next step entails exploring what needs to change to increase profitability, how might your current business model expire in the future, what forces could disrupt your industry, what alternative futures you can envision, and how you might test alternatives now. Amazon and Apple are well-known examples of firms that leveraged new technologies to transform their business models to include new products and services while their current offerings flourished.
Is Complexity Limiting Your Profitability?
McDonald's COO blamed soft sales in 2013 on too many new menu items rolled out quickly. "We need to do fewer products with better execution," he explained. In 2003, LEGO sold off its stores and theme parks and reduced the variety of LEGO pieces when it was one quarter away from bankruptcy and came back from the brink. Just like cholesterol (there's good and bad), there's good and bad complexity. Michael Wade of IMD shared his findings on creating the right balance, explaining how to SPRING clean your organization through Standardization, Prioritization, Rationalization, Institutionalization, Navigation and Governance. He provided methods for measuring complexity (to prioritize) and examples of navigating through simple rules to guide action. For example, Miramax Films has four simple rules for all films: (1) based on a human condition; (2) main character appealing but flawed; (3) strong story line with beginning, middle, end; and (4) firm cap on production costs. All else is flexible. He asked APC members, "Is IT a source of complexity or simplification?"
Engaging Partners to Foster Agility and Innovation
Many firms are transforming strategic external partner relationships from contracted services that deliver as specified (what researcher Arun Rai calls system of records) to relationships of engagement (system of engagement) that promote collaboration, knowledge sharing, agile action, and innovation. Salesforce, whose revenue has grown exponentially in the last three years and is #1 on Forbes' list of innovative companies, engages with its broad ecosystem of implementation and developer partners through an open social innovation community with transparent knowledge flows about customers, social media conversations, and idea exchanges in a climate of trust. Coca-Cola considers its revamped relationships with partners, including customers, to be a key element of its vision to double profit by 2020. Its strategy is to build a socially connected system to sell moments of pleasure. Its chief customer officer assures that Coca-Cola staff across departments engage regularly with their counterparts in Wal-mart and other key retailers rather than delegating communication to one or two people in each organization. Staff meet with franchise owners of McDonald's several times a year to explore what they can do together to create value. Interactive tablet applications further regular communication on outcomes, predictions, and insights. Staff connect with customers at checkout lines who are interacting on Facebook, Instagram, and Twitter to offer real-time promotions.
Mitigating Mobile App Risks
Opportunities to increase customer engagement, innovation and revenue abound with mobile app development. Organizations across the world continue to develop apps, share APIs with outside developers, and reengineer business processes to leverage mobile apps. Mobile apps have also unleashed opportunities to disrupt industries. For example, Nike collects information through fitness monitoring devices on individuals' health that traditional health providers are prohibited from collecting and Happtique enables physicians to prescribe a mobile app to monitor patient lifestyle choices and intervene instead of prescribing pills. And Google's recent purchase of Nest foreshadows smart home innovations. However, as with most things in life, there is no free lunch. Kevin Desouza described a disturbing litany of risks, including volume; vulnerabilities in operating systems, networks, apps or other software; data breaches; BYOD; platforms; data storage especially from connections to the cloud; unstable business models; malicious threats; and emerging apperating systems such as Facebook and Dropbox. When APC members were sufficiently scared, he offered reassurance and guidance on mitigating risks in the form of ten guiding principles:
- Start with apps that engage customers, but do no harm; then develop apps that might generate revenue, but don't expect much.
- Develop iteratively and release in beta.
- Use cross-functional app development teams with technology, business, and legal expertise.
- Be clear on the value proposition.
- Co-design with customers rather than for customers.
- Educate users on safe app behavior and reward it.
- Limit sensitive data interactions.
- Understand local before going global.
- Stay on top of app innovation (e.g., apperating systems)
- Devise metrics to gauge significance of the app beyond usage statistics.
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