Chapter 2
Disruptive Innovation and Evolving Business Model

We walk into a store to buy some products, and the moment we like something we are tempted to scan the bar code with our handheld smartphones to compare the price at Amazon. We are motivated to place an order instantly if it is cheaper at the online store and to claim the incentive offer. Sometimes we go to the mall with family and while those folks are busy shopping for their stuff, we receive text alerts about discounts or instant offers by business merchants or service providers near us in the mall with the help of location-based services offered by Foursquare, Google, and others. We are experiencing these changes in the products and services offered, marketed, and served with the help of disruptive innovation and a changing business model.

Disruptive Innovation Creates Business Dilemma

In a rapidly changing technology and business environment, companies across industries such as information technology (IT), airlines, retailers, media, and banking are experiencing major disruptions by new and disruptive technologies and business models. The success of recent companies such as Dell, Facebook, Google, Best Buy, eBay, Salesforce.com, Virgin Blue, easyJet, Netflix, and ING Direct in capturing market share is a classic example of disruptive technologies and business models. The term disruptive innovation first gained popularity in 1997, coined by Harvard Business School professor Clayton Christensen in his book The Innovator's Dilemma. Christensen focused on how to embrace disruptive innovation to advantage and for survival. A sustaining innovation hardly results in the downfall of established companies, because it improves the performance of existing products along the dimensions that mainstream customers value. Disruptive innovations create new user excitement and acceptance along with the dumping of existing products and services. Apple's iPhone and iPad are clear examples of disruptive innovations that users accepted unequivocally.

Disruptive Innovation Introduces New Paradigm

Disruptive business models focus on creating, refining, reengineering, or optimizing a product/service, role/function/practice, category, market, sector, or industry. The most successful companies incorporate disruptive thinking into all of their business and management practices to gain distinctive competitive value propositions. Despite that, many established and often well-managed companies struggle with disruptive innovation. This is mostly because companies have been doing the same things with a regular source of sustained revenue and are not willing to cannibalize and change. We have seen many companies across every sector that have failed to embrace disruptive technologies or business models. They remained focused on making incremental gains through process improvements, were satisfied with their business models, and didn't recognize the threat of disruption until the last moment. Companies that haven't seen these innovative models as an opportunity have lost their edge and gone out of business.

To stay ahead in today's rapidly changing business environment, organizations need agile business processes that allow them to adapt quickly to evolving markets, customer needs, policies, regulations, and business models. The convergence of these emerging technologies and business practices—cloud, social, mobile, video, and big data–driven analytics, along with business process management (BPM)—is opening up interesting avenues for businesses.

Service-Oriented Architecture and Business Process Management Drive Systems of Engagement

Social and mobile business models have already contributed important new frameworks for collaboration and information sharing in the enterprise. While these technologies are still in a nascent state, BPM and service-oriented architecture (SOA) solutions are well established, providing a history of clear and complementary benefits. This is not surprising, given that BPM and SOA have arisen as the natural result of business and information technology (IT) users striving to work together more efficiently and effectively.

Learning from customers' past experiences, interactions, and social conversations provides valuable insight that can be used to improve products, enhance customer-facing processes, and ultimately improve the overall customer experience. As stated in Chapter 1, although the five “Perfect Storm” technologies (cloud, social, mobile, video, and big data) have developed separately, their convergence at this time has been recognized as the “Tornado” phenomenon described by Geoffrey Moore. This “chasm” decision making is driving enterprise information technology adoption strategies for IT that is creating business value in terms of agility. Since we are taking a “whole product” approach to digital business strategy for virtual enterprises, utilizing the digitization of customer-focused business practices, processes, and protocols will produce superior customer experience management solutions.

Clearly how this convergence is transforming customer value propositions throughout the business world is the theme of this book. So we want to illustrate how the converging actions of the Force 5 Tornado may be harnessed to enable competitive advantage by defining their synergistic interrelationships as shown in Figure 2.1 as the Force 5 Tornado Data Model. The common element of the Force 5 Tornado technologies of cloud, social, mobile, video, and big data–driven analytics is the value of information to anticipate the future. The interrelated five Forces of the Tornado are disrupting product-focused businesses as laggards and replacing them with more valuable customer-centric business ecosystems.

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Figure 2.1 Force 5 Tornado Data Model

As the technologies and business practices surrounding cloud, social, mobile, video, and big data–driven analytics as well as SOA and BPM mature, IT and business stakeholders are discovering new ways to work together and engage customers via dynamic business processes that address several important business imperatives.

Contemplating further, we find that fragmented data, disjointed systems, and multichannel interactions make it difficult to deliver a consistent customer experience. Such inconsistent experiences result in lower customer satisfaction and a loss of business in the longer term. There are multiple opportunities to up-sell and cross-sell products that impact the bottom line. If companies can't identify such opportunities, bring a product to market quickly, or offer the right product to the right customer at the right time, significant loss of revenue may occur. Furthermore, it is paramount for businesses to embrace regulations such as know your customer (KYC), export/import laws, payment card industry/data security standards (PCI/DSS), and taxation policies. They must also comply with the service-level agreements (SLAs) that they have committed to their customers. If they don't meet these requirements, they can face serious fines, penalties, and losses of business.

Business processes are at the heart of what makes or breaks a business, as well as what differentiates it from the competition. Business processes that deliver operational efficiency, business visibility, and agility give an enterprise an edge by enabling it to conduct business in a cost-effective, dynamic way. As organizations strive for greater efficiency and effectiveness, they create or adapt technology to fill their needs. Force 5 Tornado technologies of cloud, social, mobile, video, and big data–driven analytics are driving a fundamental business transformation with agility. Astute organizations are implementing these technologies to respond to today's multifaceted business challenges and to take advantage of new opportunities.

In order to take advantage of the convergence of cloud, social, mobile, video, and big data–driven analytics to become more innovative, nimble, and adaptive to change, we must first understand how these technology-based solutions work independently of one another.

We will explore this convergence in more detail later in Chapter 2 with the focus on video as a fifth force of the perfect storm. Video has strong implications for transforming the way businesses relate to and engage their customers via technology. The fact that we include video reflects our convictions that it is another important technology enabler that recently has changed consumers’ behavior in many ways. Smart devices with built-in cameras that record good quality video offer consumers the power to capture events on film at the time of happening and report them to the world via social media. Real-time news streaming is relying on crowdsourcing for real-time news and videos from social feeds. These videos have not only challenged and transformed news agencies and media reporting, but also have helped in capturing consumers' feedback and support across all industries around the globe.

The recently emerging cloud-based technologies and cloud operating environment (discussed in detail in Chapter 3) based on a scalable elastic model have supported a new services deployment model that can be consumed globally from anywhere on any device. The cloud platform has enabled enterprise solutions to fit into Christensen's framework for disruptive innovation. This new technology platform for computing offers cheaper, simpler, and often wider alternatives compared to legacy models of enterprise computing.

These models have encouraged established corporations to respond by adopting the new business models alongside their established ones. According to Michael Porter and other strategy theorists, managing two different business models in the same industry at the same time is challenging because the two models and their underlying value chains can conflict with each other. For example, airlines selling tickets through the Internet to fight back against their low-cost competitors risk alienating their existing travel agents.

Social computing concerns the intersection of social behavior and computational systems. It encompasses various technologies and tools for social engagement, social media monitoring, and analytics. As consumers share experiences on social networking sites such as Twitter, Facebook, LinkedIn, and Google+, astute organizations are tapping into the dialogue to better understand their customers and prospects. Analyzing the data generated from social interactions can reveal insights into what customers want, need, and prefer, a body of knowledge commonly called customer sentiment. Social computing tools help organizations identify key trends and develop ideas for new products and services. Within the workplace, companies use similar social technologies for collaboration, brainstorming, and innovation. Wikis, chats, discussion threads, content ratings, gamification, and crowdsourcing are commonplace.

Mobile computing implies more than just doing familiar tasks from new devices and locations. Today's mobile applications infuse device-centric features such as GPS-driven geolocation services, contextual search results, gamification, and the ability to interact easily with social media sites for group validation. Smartphones and tablets support these new modes of interaction while integrating traditional work-related tasks, drawing on information from enterprise information systems. The mobile technology landscape is driven by consumer apps that utilize a variety of operating systems, tools, languages, and platforms. Innovative organizations are taking advantage of mobile computing advancements to help employees, partners, and customers connect and collaborate, regardless of location.

Big data is a major revolution of current times and will have a larger impact in advanced analytics in the coming years (discussed in detail in Chapter 8). Big data is becoming relevant in all business cases and will help in gaining competitive advantage. As the technology platform is maturing rapidly, organizations need to give strategic importance to big data sources to gain insights and to offer their products and services based on customer needs. Analytics and business intelligence based on new big data sources will help business decision makers with greater predictability.

Business process management (BPM) represents a strategy of managing and improving business performance by continuously optimizing business processes in a closed-loop cycle of modeling, execution, and measurement. Everything companies do to attain their business goals involves a process, structured or unstructured. BPM technology helps organizations to create, document, and modify business processes quickly and drive process changes in a nontechnical, business-friendly manner, along with technology for implementing, executing, and monitoring end-to-end processes. BPM systems often span numerous departments and IT systems in an organization. By merging technologies and functions into a seamlessly integrated environment, BPM gives technologists and business specialists a common language for achieving their shared and separate goals.

Service-oriented architecture (SOA) has become a popular method for linking disparate applications across many different business lines and functions, thereby centralizing and improving process efficiency. It facilitates the creation of loosely coupled, interoperable business services that are easily shared within and among enterprises. Companies utilize this architecture for its reuse and agility. When properly constructed and interfaced, SOA applications can last for decades in the form of virtualized enterprise applications. SOA interoperates with all parts of the IT architecture to integrate business applications, moving them onto a common service bus and a common work flow engine.

Having understood these key technologies concepts at a very high level, we need to analyze further how the convergence of these technologies and business models would help in driving business agility.

Effective collaboration is often fueled by information that is created and managed both within the business and through external sources. To complete an assigned task, knowledge workers must access and discover many pieces of information. For many organizational processes, this has increased the number of people who are involved in a completely unscripted and undefined chain of events. Without a defined process, the time required to complete an activity increases.

In addition to discovering information and people who can aid decision making, employees continually create new information using a variety of tools and resources, both within and outside the company. The use of these tools is typically not well coordinated in the context of what these people are working on. Even more troubling, many knowledge workers can't access them. The term social BPM is sometimes used to describe the use of social tools and techniques in business process improvement efforts. Social BPM helps eliminate barriers between decision makers and the people affected by their decisions. These tools facilitate communication that companies can leverage to improve business processes. Social BPM enables collaboration in the context of BPM and adds the richness of modern social communication tools.

In conjunction with SOA, social BPM increases business value by extracting information from enterprise systems and using it within social networks. Meanwhile, social technologies permit employees to utilize feedback from social networks to improve business processes.

Let's look at some examples of how the convergence of BPM, SOA, and social technologies can improve internal efficiency for employees and create better experiences for customers.

With the advent of social networks and mobile technology, companies need to focus not only on process efficiency but also on customer engagement. Customers demand to interact with companies via new types of social and mobile channels. They want to place their orders using mobile phones and tweet about their issues. Companies need to gear up to meet these expectations according to the customers' demands. Most companies are organized into departments such as marketing, sales, and service. They might maintain prospect data in a salesforce automation system, order information in an enterprise resource planning (ERP) system, and customer issues in a customer relationship management (CRM) system. In order to best serve the customers, organizations must pull information scattered across systems, include information from social networks, and create a unified customer view. No matter what channel customers use and no matter what departments they contact, they get a consistent response from the company. BPM helps deliver these experiences and design customer experiences that integrate the underlining channels, systems, and applications to make sure that accurate, consistent information is delivered to the right people at the right time across any channel of interaction.

In addition to orchestrating systems and channels for consistency, BPM also enhances decision making. By using data from both current and historical transactions, sales and service professionals can determine customer preferences, customer value, and churn propensity. When infused into the process and presented in the right context, this insight can enable knowledge workers to make timely suggestions, such as presenting a targeted offer, giving a discount, or offering a troubleshooting tip based on experiences with similar customers. BPM in conjunction with complex event processing (CEP) capabilities can “listen” for event patterns and identify customer issues as they arise (credit card stolen, baggage lost, or change of address). Powered with this insight, systems can trigger alerts or invoke corrective processes immediately. Such abilities let customer service reps take action before routine issues snowball into disasters.

In order to succeed in the most competitive business environment, an IT organization needs to understand the business requirements for new information and how it can affect measurable business outcomes and help drive innovation. The increasing volume, variety, and velocity means data will need different infrastructures for accessing, storing, managing, analyzing, governing, presenting, and collaborating on, and sharing information.

CIO-CMO Alignment via Business Process Management and Balanced Scorecard

The need for developing a system of engagement (SOE) using cloud SOA products, including platform as a service (PaaS) middleware for BPM services, is a fundamental core of the Ecosystem Hub architecture. This will also support adaptive strategic planning processes, described in Chapter 1, as well as adaptive real-time operational planning processes with big data analytics (BDA) collaboration services. See Figure 2.2 for an illustration of the key elements of BDA services delivered by the Ecosystem Hub architecture.

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Figure 2.2 Adaptive Strategic Planning and Operational Planning Processes with BDA

As previously stated, Ecosystem Hubs provide the environment that facilitates digital business web services for applications such as inventory visibility, BPM, and performance metrics displayed in real-time dashboards. Application software developed using an SOA and deployed as web services has provided the technology base for the concept of the next-generation Internet—Web 2.0.

Systems of engagement (SOEs) are emerging as a new paradigm for both consumer and business applications. Users are tempted to access multiple channels such as mobile, social, locations, and maps in the context of their transactional applications to make effective decisions. These sources render various data types (mostly unstructured or semi-structured) that need to be captured, processed, and analyzed in real or near real time to provide information that users are seeking from their systems.

In a 2011 white paper, management and IT leader Geoffrey Moore introduced the term systems of engagement to describe systems that focus on “empowering the middle of the enterprise to communicate and collaborate across business boundaries, global time zones, and language and culture barriers, using next-generation IT applications and infrastructure adapted from the consumer space” (Castiglioni and Crudele 2013).

Adaptive Strategic Planning Framework

Enterprises need a framework that facilitates adaptive strategic planning for value chain management. A suite of BDA applications provides the functionality needed to implement c-commerce business models. A continuous c-commerce strategic planning process approach, which adapts to the real-time execution of the business plans, is essential to value chain management success.

The four key BDA framework elements deployed in a service-oriented architecture as a network of Ecosystem Hub platforms are defined as follows:

  1. Execute via balanced scorecard.
  2. Measure via business activity monitoring.
  3. Analyze via knowledge management.
  4. Model via dynamic simulation.

Execute via Balanced Scorecard

The execute function allows an enterprise to continuously translate c-commerce strategy into action within day-to-day business activities and by constantly adapting strategy with real-time feedback based on the actual operational performance of each value chain. Adaptive ability can be expressed in terms of three types of actions resulting from the management decision-making process: predictive, proactive, and reactive. Predictive controls involve anticipating a problem and deploying a solution in time to avoid the adversity. Proactive responses are associated with smooth recovery from a problem before it escalates. Reactive capabilities are limited by supply chain uncertainties to just-in-case deployments of inventory safety stock, as well as excessive resource allocation for production and distribution capacity in order to maintain contractual service-level agreements.

Measure via Business Activity Monitoring

The most important feature of the adaptive strategic planning process is the ability to provide feedback by means of real-time performance measurement. As the enterprise executes its c-commerce strategy for each value chain, the world around it changes and that strategy must adapt accordingly. As a strategic management practice, adaptive strategic planning must be a learning process. The BDA should facilitate a dialogue throughout the value chain so that performance can be interpreted, knowledge can be transferred, and improvements can be made. Real-time measurement is crucial because the longer the BPM latency, the more management is limited to reactive rather than proactive decision making. Leading enterprises are using IT solutions for SCM to speed relevant performance information to the appropriate managers and to display these key performance indicators (KPIs) in a desktop dashboard as exception reporting to focus decision-making attention. Critical success factors involve not only the determination of the correct KPIs, but also the refresh frequency for each KPI on each manager's dashboard.

Analyze via Knowledge Management

Key enabling technology trends in knowledge discovery and business intelligence are making management decision-making breakthroughs possible. Data-mining techniques permit extracting and transforming data from multiple sources. Data mining can be classified as either descriptive or predictive, where descriptive mining tasks characterize the general properties of the data whereas predictive mining tasks perform inferences on the source data. These knowledge discovery techniques can be used to explore trends and relationships across a value chain. Knowledge management enabled by a BDA with these tools and databases can support analytic approaches used to test and evaluate value chain design and operational policy hypotheses, explain the higher-level trends associated with the dynamics of supply and demand as part of the value chain management system, or generate new insights that update and refine the c-commerce strategy.

Model via Dynamic Simulation

The use of dynamic simulation of value chain business models will dramatically increase the effective execution of c-commerce strategies. Simulation allows the balanced scorecard cause-and-effect linkages of the strategy to be described mathematically and used for testing scenarios. This capability will help companies evaluate what-if scenarios. It will allow the entire management team to participate in interactive sessions for the real-time development of strategy. Dynamic simulation software will have the same impact on strategic planning that spreadsheet software has had on financial planning.

The BDA for adaptive strategic planning can be applied to a range of business process modeling applications and work with live operational data to dynamically model processes. Although such functionality provides a tool that allows users distributed across a virtual enterprise to collaborate in examining the potential opportunities or threats to planned business operations, it is important to note that virtual enterprise integration (VEI) is a precursor for success. The result of such collaboration is a clear understanding of the options, the risks, and the impacts across each value chain. Such predictive analyses can be shared across the value chain for joint decision making on the optimal alternatives that facilitate collaborative planning and forecasting activities.

BDA technology is emerging to enable the design and management of complex value chains for strategic, as well as tactical and eventually operational decision making. For example, Intel uses a BDA at the strategic level to design a value chain based on validated SCM models that ensure that the right product is placed in the right location in the right amount at the right time based on service-level agreement performance objectives (SCOR, 2002). Then the tool can be used tactically to determine if these inventory management decisions are still valid based on the demand dynamics of the marketplace or on daily replenishment priorities, such as adaptive supply chain execution decisions in terms of which distribution center should fulfill an order.

The result is a new type of management tool that helps enterprises to quickly identify the impact of changing market conditions on value chain performance and to access the best course of action to minimize risk and maximize revenue based on specified KPIs. It also provides rapid what-if analysis to make decisions quickly, and then can facilitate effective communication of that predicted performance information throughout the virtual enterprise using a service-level agreement framework.

Deploying Big Data Analytics: Adaptive Strategic Planning

An incremental implementation roadmap for BDA leverages the practical application of various enabling technologies for an adaptive strategic planning framework discussed in the previous section. The fundamental concept is to generate and/or evaluate a strategic plan that adapts to the tactical and operational-level performance changes based on the feedback from KPIs.

Such a roadmap for developing an adaptive strategic planning infrastructure is navigated in accordance with the following six tasks:

  1. Develop c-commerce business models by value chain. Craft a set of integrated intranet, extranet, and Internet value chain scenarios that represent value chain optimization opportunities using the leverage of the business ecosystem models as a benchmark.
  2. Focus on the Ecosystem Hub SOA to evaluate enterprise information portal (EIP) product functionality for providing content management, enterprise application integration, and semantic interoperability services to support a BDA. Such a supply chain integration framework includes a value chain model repository featuring analysis and reporting tools with data mining capabilities to evaluate Ecosystem Hub functionality for providing knowledge management capabilities.
  3. Identify specific value chain operating scenarios and supply chain management issues within key enterprise initiatives, and model the core processes using the dynamic simulation tools. The value chain models are populated with balanced scorecard KPIs. These models are then used to identify supply chain bottlenecks and analyze areas for process improvement, evaluate the business case associated with c-commerce initiatives, and design optimal value chains for specific target customer or market initiatives.
  4. Focus on developing and testing the feedback mechanisms for balanced scorecard KPIs reporting of real-time business activity monitoring visibility data and event-based notifications captured from operational transactions that are facilitated by Ecosystem Hubs. This is a key element of the adaptive decision-making process that links supply chain performance management and business operations budgeting with enterprise-level c-commerce strategy.
  5. Deployment of this initial adaptive strategic planning BDA completes the initial effort. The BDA facilitates changes to the alternative supply chain systems design and experimentation with potential outcomes as a result of these scenario changes, thereby evolving the strategic plan. The BDA provides a knowledge base for investment portfolio management of the c-commerce initiative information needed for the strategic and business planning effort, as well as facilitating the development of business cases supporting these initiatives.
  6. For the adaptive strategic planning decision-making process reengineering to be fully realized, the successful BDA pilot system implementation must be extended and rehosted on an enterprise-class server. This provides the scalable Ecosystem Hub platform needed to support a fully operational competency center for real-time value chain management as part of a multiphase iterative implementation effort to realize incremental benefits. The strategic balanced scorecard KPIs are then deployed using a distributed network of Ecosystem Hubs, thereby instrumenting each of the various c-commerce value chain scenarios with the appropriate dashboards. Each dashboard reflects actual KPIs as the performance metrics associated with the individual decision maker's point of view for the virtual enterprise operations in an actionable way.

The combination of a BDA for strategic planning with an operational value chain management system competency center provides the feedback system to optimize value chain investment, as well as assure virtual enterprise agility. Thus, the benefits of VEI are achieved by implementing an orchestrated choreography of collaborative value chain scenarios executed in accordance with the appropriate intranet, extranet, and Internet business case analysis.

Once again there is an imperative need for the IT organization to work with key business leaders to develop an iterative information management strategy to support effective decision making. Bottom line: The value of CIO-CMO alignment goes way beyond surviving. It promotes a dominant digital business leading a strong virtual enterprise in a thriving business ecosystem.

Business Agility Readiness Transformation

The disruptive technologies such as delivery platforms (cloud, social, mobile), communication and collaboration channels (web, mobile, social), and big data (structured and unstructured) are influencing major business transformations almost at the same time. As written by Geoffrey Moore, systems of records such as enterprise resource planning (ERP), supply chain management (SCM), customer relationship management (CRM), and human capital management (HCM) have delivered great transactional and operational efficiencies to business. These systems need to undergo major transformation and be complemented with systems of engagement, and finally need to be supported with multidimensional scoring (MDS) to create business agility.

Business Agility Circle of Influence

The biggest technology influences of the next half decade include cloud computing, social media (or more specifically social business), next-generation mobility, big data, and predictive analytics. These will not only help the current businesses to survive and thrive but also help build digital businesses with greater agility. Systems of records (SORs) of the past helped business with transactional data, providing facts, numbers, charts, and reports to run business operations successfully. Systems of engagement (SOEs) with the evolution of social media influence relationships and trust in the context of records.

Now in the current business environment, multidimensional scoring is the big idea to explore, evaluate, and deploy to measure business agility in a much more tangible way.

What Is Multidimensional Scoring (MDS)?

Grading, rating, scoring, and return on investment (ROI) have been talked about in many business contexts. We have discussed use of the balanced scorecard to evaluate the success of business parameters. Lead scoring has been extensively used in the context of customer relationship management, but Lauren Littlefield explains three-dimensional scoring as the next big thing in measuring success in business quantitatively. This concept is illustrated in Figure 2.3.

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Figure 2.3 The Concept of 3-D Scoring

Systems of records (SORs) render facts and figures about businesses while systems of engagement (SOEs) drive relationships, and, in turn, relationships drive revenue. Three-dimensional scoring ultimately turns engaged relationships into revenue-driving streams that can be measured.

We tend to measure the effectiveness of everything in our lives, and that holds true for businesses as well. Business entities such as products, services, customers, suppliers, employees, and their profiles, life cycles, and engagement must be measured for agility that provides sustainable competitive advantage.

Customers are the most valuable assets of any business, and they are directly responsible for the success of business; therefore it is extremely important to profile them (company, contacts, etc.) and score them individually as to their likes and dislikes, behavioral patterns, buying decisions, recommendations, connections, favorites, and so on. The profile score enables direct communication and engagement strategies, helping achieve a higher conversion rate of closure.

Scoring and profiling all business entities such as customers, employees, partners, and suppliers will directly provide metrics to measure the time and resources that need to be deployed based on the score.

Measuring Relationship in Systems of Engagement

We have assessed the significance of relationship in business. We know that business entity relationship plays an important role in business process optimization and effectiveness. But new behavioral and social inputs in the process add the third dimension in the 3-D metrics that will play a highly significant role in the next generation of business agility.

Recall the discussion in Chapter 1 of the role of trust in the culture of a digital business as the key to virtual enterprise relationship management as a core competency for business ecosystem success. Therefore, we add trust expressed in terms of “listening to own conscience” as the fourth dimension in the multidimensional scoring (MDS), as shown is Figure 2.4 that would further enhance innovation in driving business agility.

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Figure 2.4 Trust Cycle Drives MDS

Listening to Own Conscience: Fourth Dimension in Driving Agility

Listening to our own inner conscience offers the voice that will add the fourth dimension in the multidimensional metrics to provide business agility.

In his book Self Power (Ebury Publishing, 2012), Deepak Chopra, MD, highlights the power within every individual and the spiritual awakening coming from divine power to create something new or to solve the greatest challenges. He describes the three levels of emotions in awareness:

  1. Contracted
  2. Expanded
  3. Pure

This concept is both logical and spiritual, and has higher levels of consciousness relationship to self-power. He further describes how consciousness is linked to the spiritual solution that must be scored and graded in the multidimensional metrics.

Stephen R. Covey in his book The 8th Habit: From Effectiveness to Greatness (Free Press, 2004) also emphasizes the necessity to find your own inner voice and express your voice with vision, discipline, and passion, and as coming from divine power and conscience. He then advocates inspiring others to find their voices to inculcate leadership.

In the book Behind the Cloud (John Wiley & Sons, 2009), Marc Benioff, founder and CEO of Salesforce.com, outlines his initial awakening to leverage the disruptive innovation offered by the Internet. He made several trips to Hawaii over several months in quest of his inner voice and conscience. Benioff decided it was time to think more deeply about the technological landscape—and his own career—so he took a sabbatical that started with a trip to India, where he met a diverse variety of people, including a spiritual leader and humanitarian, Mata Amritanandamayi. Despite all the technological resources available to him, he listened to his inner conscience and executed what he found there with passion to create Salesforce.com as one of the most innovative business corporations of recent times.

In accepting Hall of Fame induction by the San Francisco Bay Area Council, Larry Ellison, founder and CEO of Oracle, chose to praise Steve Jobs for his creative genius in our generation. He characterized Jobs as a philosopher, an artist, and an inventor who always listened to his inner voice and conscience and applied what he found there with tireless diligence and meticulous precision until his last breath to put the most sophisticated Apple devices in our hands and to converge major technologies. According to Ellison, Jobs was our Edison and our Picasso who was singularly focused on turning ideas into things that worked.

These references to inventions and innovations support the notion that people should listen to their own inner consciences, surrounding them with all other dimensions of information. It is paramount to allocate a grading pattern to this fourth dimension.

The automobile industry is not an exception to this disruptive innovation in technologies. U.S. automakers lost their competitive edge in the face of Japanese automakers' innovative cost and fuel efficiency. Recently, Tata Motors announced its Nano, which will retail for 1 lakh, or about $2,500, in the Indian market. It is a fully functional, four-door vehicle that aims to replace motorbikes. Small Brazilian company Obvio is set to release its first hybrid car, the 828, at a price of $14,000, less than half the cost of a Toyota Prius. By radically redesigning the traditional automotive production and distribution processes, Tata is positioned to grow sales of cars across the developing world and perhaps ultimately in low-end segments of the developed world. This is an example of disruptive innovation where competitors will have to create entirely new processes to produce a similar product, and it will not be easy to make a profit at this price by stripping down a conventional car. Tata Motors is targeting not only scooter and motorcycle buyers who pay around $1,250 today but also customers who need cars for commuting in busy traffic. Tata Motors introduced new automobile design and production processes to create a new market for the Nano. The company is also planning an innovative distribution model of shipping semifinished parts to rural entrepreneurs who can assemble and service these cars and customize them to suit customer needs. This innovative and disruptive model of distribution and being able to make to order on demand would help facilitate greater customization in the auto industry.

These emerging technologies such as social and collaborative power of software (discussed in Chapters 4 and 5) have also started disrupting the conventional business model by encouraging the carrying out of business from anywhere, not necessarily needing to have physical infrastructure. It is much easier to start business operations remotely, assemble the team globally, and build the global virtual team with the help of collaborative technologies.

We have witnessed the failure of electronic retailer Circuit City, which was focused on low prices, while competitor Best Buy rapidly moved to greater value for customers, not just a focus on price. Circuit City, the consumer electronics giant, went bust and closed down its large number of retail stores due to the lack of innovation in its business model while Best Buy offered value-added services and an innovative approach to business that helped it to survive, thrive, and prosper.

Besides many other factors, Circuit City was slow to adopt the latest technology and remained in Web 1.0 with its website not being easy to navigate. In contrast, Best Buy kept enhancing the customer experience with the latest technology on the Oracle Web Experience platform and with online strategies that had the customer at the center of the company's efforts. Similarly, leading bookseller Barnes & Noble, video rental store Blockbuster, and Circuit City were all faced with a dilemma and unable to recognize the leading technology innovation of Internet-based delivery that gave rise to Amazon, Netflix, and Best Buy. It's the same thing that has been happening to the newspaper and publishing industries: New and more efficient business models have emerged, making previous models increasingly obsolete.

Netflix's rental-by-mail model and Redbox's $1 DVD kiosks are the clear winners over Blockbuster's business model, but the online video distribution models that Netflix, Hulu, YouTube, and others have pioneered are also disrupting the DVD market.

Video: New Disruptive Technology for Digital Content

The amount of video has rapidly increased in recent years. Creating video content and dissemination has been easier than ever before using smart devices with powerful cameras. Recently, YouTube reported more than 4.5 billion hours watched per month. Netflix reported 1.5 billion hours of video consumption. People post their videos on YouTube, look for some entertainment, and send videos to friends on social media.

The share of total video plays by mobile and tablet platforms continues to take away playing time from other devices, as reported by Ooyala as part of its Global Video Index for the fourth quarter of 2013. Ooyala, the software as a service (SaaS) video management and analytics company, releases the aggregated numbers developed from its client base that serves 200 million viewers globally. The mobile plus tablet share of video plays reached almost 18 percent—an increase of more than 10 percentage points over the 7 percent reported a year earlier. The report predicts that mobile video “could make up to half of all online video consumption by 2016” (Seave 2014, March 31).

Long-form content dominates all device viewing. Long-form content is considered content that runs 10 minutes or longer, and even longer-form content is 30 minutes or longer (Seave 2014, April 1):

  • Watching content for longer than 10 minutes is at 61 percent for desktop video viewing, 60 percent for tablets, 75 percent for mobile devices, and 81 percent for connected TVs.
  • Watching content for longer than 30 minutes is at 34 percent for desktop video viewing, 36 percent for tablets, 53 percent for mobile devices, and 63 percent for connected TVs.

We live in an increasingly digital age. More than a third of the world's population uses the Internet today; by 2017, nearly half will. In developed economies, these numbers are far higher: In the United States, for example, the share of the population using the Internet will increase from 83 percent today to 87 percent by 2017 (Webster and Perry 2013).

Reaching the connected audience effectively requires the ability to create highly engaging experiences, and digital video has quickly become a critical component of these experiences. About half of worldwide Internet users watch video online today; by 2017, almost two-thirds of worldwide Internet users will be watching video online (i.e., some 2.2 billion people). In the United States, 76 percent of Internet users watch video over the Internet today; by 2017, 85 percent of Internet users will watch video over the Internet.

Let's explore some of the use cases for digital video. Broadly, there are two camps that publish digital video, and their goals are somewhat different.

Digital Video in Marketing

Marketers are using digital video to tell their brand story, increase sales, and turn customers into fans. They use digital video to help sell or deliver products and services, and their digital video publishing costs typically become line items in the marketing budget. They measure ROI from video in terms of increased conversions and revenue, reduced customer churn, and increased customer loyalty and advocacy.

The marketing use case isn't just about brands, of course. Enterprises use video to communicate with shareholders, educate buyers, train sales teams and channel partners, and improve customer support. Schools, faith-based organizations, and other nonprofits use video to teach, build community, and inspire support. In federal, state, and local governments, elected officials use video to communicate with their constituents.

All of these organizations and individuals need to be able to analyze consumption and correlate video analytics with website analytics, shopping cart data, and other consumer information to target relevant content and optimize their marketing mix.

Digital Video in Media and Entertainment

For media and entertainment (M&E) companies, by contrast, digital video is the product; they need the ability to monetize it—whether through advertising, subscription, pay per view, or a mix of the three—and costs related to digital video publishing and delivery represent the cost of goods sold (COGS). M&E companies typically measure their ROI from video in terms of increased viewer engagement with the content itself (video starts and minutes consumed) and the increased advertising and paid content revenues that result.

Companies from every segment of the media and entertainment industry publish digital video today. Traditional newspaper publishers are equipping journalists with digital video cameras, bringing storytelling to a whole new level. Mainstream television broadcasters are putting recent shows online for catch-up viewing and making current episodes available via multichannel video programming distributor (MVPD) authentication together with added-value backstory content. Sports networks are streaming games and providing highlights to new audiences around the globe. Cable and satellite providers are extending the reach of their proprietary networks to over-the-top (OTT) devices via TV Everywhere (TVE) initiatives. Major studios are putting content online to expand their fan bases, and new programmers are being born on the Internet. All of these organizations need to be able to monetize their content—either by authenticating users or by injecting advertisements (or both); they must also analyze consumption and optimize placement, as well as optimize the experience through search and recommendations.

Overlapping Use Cases

The distinction between these two groups is not quite as cut-and-dried as it might appear, however. Companies that sell online training courses share many of the same concerns as media and entertainment companies regarding content protection and monetization, and athletic departments in large universities are often major broadcasters. Conversely, news organizations that make most of their digital video content freely available over the web are monetizing their websites more than the video itself. And media and entertainment companies are marketers, too: They need to promote their content—whether it's a new film, a TV series, or a championship sporting event—and what better way to do that than by using clips? So, despite some differences in the way different video publishers may think about their use of digital video and the particular features they need, it turns out that they share common requirements. This is why we've continued to see digital video solutions target and serve both market segments.

Another use case is Mobile Video Collaboration. It is the poster child for the Force 5 Tornado technology convergence model driven by three megatrends (Levitas, Berlinsky, Ellison et al. 2012):

  • The consumerization of IT driven by the use of consumer-oriented devices and applications crossing over into the small and medium-sized businesses (SMB) and enterprise markets
  • The increased adoption and usage of videoconferencing across the consumer, SMB, and enterprise markets
  • Technology advances in the underlying foundation of mobile video driven by rapidly growing network broadband capacity and compounded by the growth of video-capable mobile devices such as smartphones and tablets

Blue Jeans Network and FuzeBox are two leading vendors in this market space. Both of these companies are disrupting the voice teleconferencing industry by leveraging the BYOD trend with support for all popular consumer devices as well as commercial video and data conferencing systems based on international networking standards. The following are key considerations with regard to widespread adoption of mobile video collaboration (Levitas, Berlinsky, Ellison et al. 2012):

  • Interoperability. Creating a secure, seamless handoff to multiple networks and enabling integration with solutions in the areas of instant messaging/presence, telephony, web conferencing, mobile, and social media is key to tying remote video collaboration into the enterprise. Among the most important considerations is the ability to launch video collaboration sessions easily and intuitively from within familiar interfaces and normal work flows, enabling seamless dial plan integration to connect end points and devices from different vendors and consolidating multiple dial-in codes into one.
  • Scalability. The growing number of desktop and mobile video users will present increasing scalability challenges for enterprise networks. The requirement for easy setup and management is critical in order to manage and secure a fast-growing volume of end points. Statistically, when more users are registered with the server, more calls are placed. If the number of calls per second exceeds the maximum supported by the server's architecture, the server slows down and starts rejecting or dropping calls.
  • Security. When organizations are considering a bring your own device (BYOD) corporate policy, security is usually the first consideration for IT managers. Usage of embedded media encryption available for videoconferencing, such as H.235 security using 128-bit AES encryption, is among the technological advances that will provide a secure environment for the support of remote video collaboration tools.
  • Ease of use. An easy-to-use video collaboration environment is perhaps the most important feature and affects the user and IT manager in different ways. The user wants ease of use, but simplicity on the surface depends on a number of hidden capabilities at work in the background, including effective firewall traversal, a centralized directory, straightforward authentication, and seamless encryption. The IT manager needs to control access and security and ensure enterprise-class management and redundancy.

There are numerous websites offering video content streaming services exploiting the capabilities of the cloud challenging conventional TV media. A few examples that follow illustrate the significance of video that has come by storm combined with convergence of cloud, social, mobile, and big data to enable business agility.

Current TV is a website that acts also as a TV channel, but is unlike other TV sites that post their content from TV on their video sites. Current TV does the reverse: It plays the content from its website on TV. People post their videos or podcasts on the site, and these are voted on by the community; the highest-ranking ones get shown on the television channel.

TED is extraordinary at streaming video—its whole concept is to spread ideas by enlisting some of the most brilliant minds in the world to create talks about many topics.

Following a style very similar to TED, Big Think takes an interview approach to its video instead of a prepared talk. It is based on prepared questions and answers that provoke some interesting facts about issues.

Blip.tv has mimicked what network television channels offer but uses independent producers. It currently has about 48,000 independently produced web shows and approximately 22 million viewers. It shares the revenue from ads with the producers, which allows them to make some income from their shows and keep producing them; in exchange, Blip.tv gets a constant supply of episodes for the video site.

Hulu carries content from many TV channels at very high streaming quality. It does not have international streaming rights for its content outside the United States and caters to the American audience only.

Vimeo shows a very holistic and welcoming approach to video sharing. Vimeo attracts more professional filmmakers than other sharing sites, and their videos are of higher quality. The community projects and groups also make it easy to find videos of a particular topic or subject matter. There are almost three million members and over 17,000 videos uploaded daily, so the community has a wide choice of videos.

Ustream also allows people to create their own broadcasting channels and their own live shows. It carries live broadcasting from many mainstream media sites. It doesn't allow people to join in with their video chats, but it does have live text chat.

Ooyala, in contrast, has a unique value proposition that is focused on harnessing the power of big data to deliver a broadcast TV quality online video experience globally across many devices. As an SaaS video management and analytics company, Ooyala solutions span enterprises for marketing, publishers for advertising, media and entertainment companies, as well as broadcasters for over-the-top TV services like Netflix. Ooyala uses big data and real-time video analytics to provide insights to the intended audience, and to connect them with meaningful experiences that are both personalized for the viewers and profitable for the digital publishers. Ooyala maximizes engagement by delivering content based on viewer behaviors for both live and on-demand media. It also helps in streamlining work flows with powerful tools featuring fast transcoding, efficient content management, and robust player customization. Ooyala has all the products and services needed to implement the video capabilities in a system of engagement for a digital business.

The host of Internet-based TV sites based on a cloud computing platform, along with the convergence of social, mobile, and big data, creates the disruptive innovation that brings changes to society. We are familiar with crowdsourcing of breaking news that comes first in the form of video that people have captured at the point of occurrence and uploaded from their smart devices.

Big data and advanced analytics based on metadata information from video footage and predictive analytics based on voice-transcribed text processing provide greater insights into behavioral patterns and predictability. Surveillance cameras across public buildings, airports, security gates, and traffic lights stream video footage that provides great data mining capabilities for predictable behavioral patterns to mitigate or minimize security threats.

In order to sustain business ecosystem leadership, digital businesses need to develop and execute a customer experience management strategy enabled by the relevant social business technology that will drive a customer-centric value chain as a virtual enterprise. The Ecosystem Hub architecture will continue to be described throughout chapters in the book as well as in the Epilogue with use case scenarios from the travel, tourism, and hospitality industry. Such familiar keystone scenarios utilize a virtual enterprise integration methodology that builds on a virtual Visitor Information Center (vVIC) platform as an example of Ecosystem Hubs developed using an iterative incremental implementation roadmap.

The key for building next-generation digital businesses is integrating the business ecosystem with customer engagement solutions. Remember this approach utilizes two fundamental elements of enterprise information systems engineering:

  • Ecosystem Hub architecture that employs the Force 5 Tornado technologies using collaborative commerce principles.
  • Ecosystem Hub implementation roadmap that is an extensible, robust, scalable model for digital business transformation in accordance with business agility readiness gap analysis concepts.

These elements provide the foundation of our strategic framework to build systems of engagement for creating business agility.

Travel Industry Disruption by Force 5 Tornado

The travel industry has a history of IT innovation disruption and now digital video is disrupting the marketing of destinations in the tourism industry:

  1. img First, the global distribution system changes airlines reservations…
  2. img Then, disruption via Internet disintermediation of travel agent in 1990s…
  3. img Now, DMAI Futures Study cites destination marketing organization disruption via “Googling”…

The travel, tourism and hospitality use case describes a destination marketing industry scenario that illustrates how the Ecosystem Hub Implementation Roadmap can be employed for evaluating business agility readiness. The example used is for the Sonoma County Tourism (SCT) Ecosystem as depicted in the example shown in Figure 2.5 for the “to-be” SOE deployed for the next Sneakaway campaign.

img

Figure 2.5 Business Agility Readiness Assessment

The Epilogue contains the keystone scenario assessment of business agility readiness for the SCT Sneakaway campaign. Recall that this use case features an overview of the development of the Ecosystem Hub via the cloud-based Simpleview Social CRM Partner Extranet to further describe the SCT Ecosystem. As such, key issues surrounding cloud, social, mobile, video, and big data analytic applications are discussed.

Remember that this case study will continue to evolve in order to provide an illustrative real-time story of how the Force 5 Tornado technologies can create the business agility needed to gain and sustain your competitive advantage. It may be accessed via the Creating Business Agility blog. Stay tuned for more…!!!

References

  1. Castiglioni, F., & M. Crudele 2013, October 22. “Design an SoE Ecosystem to Support Rich user experiences.” IBM Corporation.
  2. Levitas, D., I. Berlinsky, S. Ellison et al. March 2012. “Mobile Video Collaboration: The New Business Reality.” International Data Corporation.
  3. Supply-Chain Operations Reference-Model: SCOR Users Seminar. 2002, November 13. “From Modeling and Simulation to Real Time Decision Support.” Pittsburgh: Supply-Chain Council.
  4. Seave, A. 2014, March 31. “Mobile and Tablet Video Continues Exponential Growth, Reports Ooyala in Quarterly Index.” Forbes.
  5. Seave, A. 2014, April 1. “Mobile Video Viewers Spend Majority of Time Watching Long-Form Content.” Forbes.
  6. Webster, M., and R. Perry (October 2013). “The Business Value of Ooyala's Digital Video Solution.” International Data Corporation.
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