CHAPTER 9
Developing Products for Competitive Advantage

What are smart products? Well, we are already familiar with smartphones, so we know that smart products can do things for us that we don’t even know we want to do yet. Smart products are intelligent, interconnected, and instrumented business solutions and products. They include communications networks, enterprise resource planning applications, online navigation systems, traffic and fleet logistics management systems, point-of-sale retail systems, and health care information management systems.

Here is how IBM explains the philosophy behind and general functions of smart products:

It is clear that smart products rely heavily on software to operate “smartly”; hardware is no longer the discriminator.

We might wonder how technology vendors continue to deploy innovative software products year after year. The intense competitive pressures in the marketplace demand that all industries innovate. Regardless of the industry you are in, it is almost certain that information technology and software development have become critically important for your organization to create innovative business processes, products, and services.

SYSTEMS THINKING

According to IBM, a holistic approach to product and IT system development is needed to be able to react to, and hopefully preempt, the market changes that have led to delivering value through smarter products. Keep in mind that it is no longer enough to incrementally add value to existing products to maintain a competitive edge in the marketplace. In this environment, we must look across the enterprise and outside the enterprise, across companies and business ecosystems, as we develop the creative solutions we need for survival. Your challenge as the business analyst is to refine process-, product-, and service-development efforts to deliver the smarter solutions that employees and customers demand—before your competitors do it.²

Since smart products often combine a physical product with additional services, they are a kind of product service system, which is a set of products and services capable of jointly fulfilling a customer’s needs.³ Realizing that profit can be made by bundling products with valuable services, companies reacting to the changes in market conditions have begun to augment their product suite with services.⁴

BEST PRACTICES FOR INNOVATIVE PRODUCT DEVELOPMENT

IBM proposes several practices that businesses can employ to build smarter products and drive innovative technologies:

These sound very much like business analysis best practices! We can see, then, how important it is for business analysts to master the disciplines needed to successfully deliver innovative solutions on highly complex IT projects. So let’s examine the nature of complex IT and software development projects.

WHAT MAKES INNOVATION PROJECTS COMPLEX?

Virtually all projects that involve significant new IT products and services are highly complex. There are many technical and managerial factors behind this complexity. IT organizations are structured so that hardware and the software components are provided by different technical teams, which can lead to bandwidth, performance, and compatibility issues. These teams are often unable to manage the dependencies and integration risks, resulting in (1) schedule and cost overruns to fix the issues; (2) defects, discovered by the customer in the field; and (3) erosion of the business benefits expected from the new solution.

In addition to these common problems, there is a great deal of pressure to build agility and ease of change into the next generation of IT systems. With complexity accelerating, far-reaching new managerial techniques, partnerships, and technologies are needed if our economic competitiveness is not to be compromised.

TECHNICAL COMPLEXITIES

There are several sources of technical complexity in IT product development.

MANAGERIAL COMPLEXITIES

Projects to design and build complex IT solutions are usually affected by several complexity dimensions related to management, including:

To remain competitive, organizations need flexible, adaptable business solutions that rely on embedded IT systems. There is a sweeping realization in the business world that our inflexible business processes and IT business applications form barriers to business agility at every turn. Successful 21^st century businesses need to streamline their processes and applications, making them more nimble, adaptable, and agile to keep pace with the changes in the competitive landscape and in customer preferences.

HARNESSING IT COMPLEXITY FOR COMPETITIVE ADVANTAGE

For the past twenty years, CIO Magazine has recognized the “CIO 100,” a list of chief information officers who run standout companies across multiple industries. In 2007, the winners were dubbed “The Transformers” for their contributions to their companies in terms of innovation and increased business value. According to the article on the winners, companies that strive to harness technology for competitive advantage need:

Organizations innovate in many different ways, ranging from product innovation to process innovation to customer-experience innovation. To design, build, and maintain innovative, adaptive products and business solutions that are dependent on highly complex IT applications, you must understand and account for the strategies of your business as they evolve, your customer inclinations as they transform, and the competitive environment as it changes. You also must be able to build and support nested systems within systems, complex business rules, and the intricate feedback loops that are characteristic of software-rich systems.

ADAPTIVE MANAGEMENT APPROACHES

Thought leaders in the IT industry suggest that radical new approaches are required to build complex adaptive products and business solutions. While building software-intensive systems is an engineering specialty all its own, we offer some up-and-coming management approaches to foster innovation and customer empowerment.

Jim Highsmith, a guru in the agile project management arena, tells us that today’s development teams must strive to adopt the objectives of reliable innovation:

BUILD SOLUTIONS THAT EMPOWER THE CUSTOMER

To design and build complex adaptive products and business systems that are responsive to changes in customer desires and the global marketplace, IT leaders are focusing their teams on new success criteria: innovation, adaptability, customer empowerment, and benefit generation. IT business solutions are seldom about cost savings anymore (we have done most of those projects already); they are about revenue generation and empowering customers to drive the system so that they get what they want, when and how they want it. Forward-thinking CIOs say that there are three important steps to building solutions that empower the customer:

To find out everything you can about your customers, conduct extensive research to gather information on their preferences, likes, and dislikes. It takes a creative team to then anticipate what customers’ desires will be in the future. Since it is virtually impossible to predict the future precisely, lots of experimentation and prototyping will be needed to bring into focus a solution that will be adaptable as customers’ desires change.

EXPLOIT THE ADVANTAGES OF EDGE-OF-CHAOS MANAGEMENT

When facilitating groups, the business analyst must encourage his or her team to operate on the edge of chaos by brainstorming, creating, studying, examining ideas, experimenting, prototyping, and evaluating the flexibility, adaptability, and interdependencies of solution options to select the most innovative, revenue-generating, customer-empowering solution. In some cases, expert designers will begin to design and develop more than one solution to determine which one is truly the most elegant and adaptable. Spending adequate time in this creative zone can lead to outcomes that are more innovative and creative then ever imagined.

INTRODUCE A LAST RESPONSIBLE MOMENT DECISION-MAKING PROCESS

So how do you know when to wind down experimentation and get down to building something? In Lean Software Development: An Agile Toolkit, Mary Poppendieck and Tom Poppendieck describe a technique for making better decisions.¹⁰ They advocate that teams dealing with ambiguity and constant change start development when only partial requirements are known, develop partial solutions in small components iteratively, and schedule feedback and learnings after each iteration so that the solution emerges. This approach obviously allows for solution design decisions to be made iteratively as more is learned, and it encourages the development team to delay commitment to a design concept until the last responsible moment. Design decisions are deferred until all viable options are explored as fully as possible. The goal is to increase solution adaptability and customer value.

This approach prevents teams from making decisions too early, when not much is known and more risk is involved. However, be mindful that if decisions are delayed beyond this point, they are likely to be made by default, which is highly undesirable. It is up to the complex project team, architects, and the business analyst to intuitively guide the timing of team decisions.

STRUCTURE THE EFFORT INTO MICROPROJECTS

The Standish Group predicts that microprojects will dominate the IT landscape in the 21^st century. Microprojects are the ultimate in minimization; they last no more than four months, involve no more than four people, and cost around $100K. The Standish Group’s CHAOS research indicates that microprojects are more successful than are customary large-scale IT projects.¹¹ The web has made it easier to standardize the technical development infrastructure, thus making microprojects plausible.

There are many positive aspects of microprojects: valuable solution components are delivered early and often, learnings occur with each deployment, benefits can be realized immediately, and problems are identified and fixed quickly. However, there are downsides, too: it takes considerable effort to manage resources across many small projects, configuration management may be made more difficult, and dependencies between projects are difficult to manage.

CREATE COMMUNITIES OF PRACTICE AND FOSTER DIVERSITY OF THOUGHT

To leverage the diverse expertise needed to build complex adaptive products and business systems, project leaders often establish an integrated solution design team comprising empowered experts who have clear roles, responsibilities, and authority, as well as a common understanding of the project vision. Diversity of core solution design team members is critical if a team is to come up with the best solution, one that can react to changes in the environment. These teams typically include a project manager, a business analyst, an IT technologist, and a business visionary and process expert.

On complex projects, communication is of utmost importance. Within any expert group, members hold a significant amount of unspoken knowledge in their heads. This sometimes vital information may be intuitive, experiential, and judgmental, and it is often context sensitive. In addition, it may be difficult to articulate and is almost never recorded. Establishing formal communities of practice to share this knowledge facilitates the emergence of collaborative solutions that are much more innovative than ones designed by a single architect.¹²

ENSURE YOUR IT ARCHITECT IS SEASONED

The vital role of the IT architect has been woefully underutilized in the IT world. As a result, there is a shortage of individuals who are skilled and seasoned IT architects—an expertise that is essential when building complex IT systems. But IT architects are becoming pivotal to complex IT projects because there are so many technology options (hardware, software, and communications) to choose from.

The job of the architect is not just about IT; it is about achieving the needed business benefits. The architect creates a vision of how the new solution will look when it is all put together—when business processes, policies, manual procedures, training, desktop tools, and personnel are in place to optimally use the new technology.

Strive to recruit a certified IT architect experienced in specifying, designing, implementing, testing, releasing, and driving maintenance of either semi-custom or custom software. Embed the solution architect in the project team from the very beginning, when the team is defining the solution concept and lots of experimentation is expected.

FORGE NEW PARTNERSHIPS

When multiple development teams, consisting of both internal and external members dispersed geographically, are involved in a project, the teams must put an end to viewing themselves as individual entities and commit to establishing strong partnerships. Their focus should be on understanding what is needed (instead of on negotiating the best contract), clearly defining roles and responsibilities, and intensely collaborating every step of the way.

A stunning example of 21^st century partnerships is the outsourcing agreement between BAE Systems, the combination of British Aerospace (BAE) and Marconi Electronic Systems (MES), and Computer Sciences Corporation (CSC), one of the longest-running alliances of its kind. According to CSC, “The two companies have successfully grappled with the biggest challenges in any outsourcing agreement: building mutual trust over the long haul and creating an effective deal management structure. And they have kept a focus on the business even while doing some highly complex IT implementations.” The collaboration allowed the companies to cut IT costs by 30 percent in the first 18 months.¹³

Building a trusting relationship comes from working closely together, slowly earning each other’s trust and confidence. CSC asserts that “establishing shared expectations and a requirements management process involving all stakeholders will break the cycle of misunderstanding and unfulfilled expectations.”¹⁴

SET UP SYSTEM INTEGRATION TEAMS

System integration is all about managing dependencies. Dependencies and interrelationships bring about complexity. When there are multiple development teams, integration is the major complexity. Integration involves combining system entities, proving the system works as specified, and confirming that the right system has been built and that the customers or users are satisfied.¹⁵ Because software development is riddled with complexity, establish joint integration, verification, and validation (IV&V) teams to bring together the software and hardware components, subsystems, elements, and segments to “build up” the integrated IT system.

Techniques for the integration team to consider that are intended to limit integration complexities include planning the integration of various workflows as an “upstream” activity, planning interfaces early to anticipate integration obstacles, reusing modules whenever possible, and using simulation and layer-based testing to establish a strong platform concept that limits dependencies.¹⁶

STRIKE THE RIGHT BALANCE BETWEEN DISCIPLINE AND AGILITY

In most discussions about what project cycle to use, we tend to weigh agile versus plan-based approaches as if they are mutually exclusive. The best approach to managing a project is to use a blend of adaptive project management approaches and conventional plan-based disciplines. The trick is for the complex project team to determine when each approach is appropriate.

According to two experts, Barry Boehm of the University of Southern California and Richard Turner of George Washington University:

So how do Boehm and Turner suggest determining the right balance between agility and discipline? They propose conducting a risk-based analysis of your project using a simple framework based on five key project dimensions affecting method selection:

Once the analysis is complete, it may be apparent that either the agile approach or the disciplined method is needed. More likely, a mixture of the two will strike the right balance, and the team will have to adjust its methods to address identified risks in each project dimension.

COMPLEXITY MANAGEMENT DESIGN TECHNIQUES

Because the business analyst works with the design team to identify the most feasible solution, it is imperative that she be familiar with complexity-reducing design techniques. Indeed, the requirements should be structured to mirror the overall solution design. Innovative design approaches for systems that are driven by the customer and adapt to environmental changes are emerging; we discuss some of these next.

LIMIT DEPENDENCIES BETWEEN SOLUTION COMPONENTS

When a technical solution is complex, it is prudent to divide the development into a core system (the operative part of the system), and special components (elements that are separate from the core and add functionality. This approach is often referred to as a wheel and spoke design. Further divide the core system into extension levels, building the foundation platform first and then extending system capabilities incrementally. While the core system is developed and implemented, different technical teams work on specialized functional components.

The secret to the success of this design approach is to build the specialized components with only a one-way dependency with the core system; therefore, specialized components are independent of each other and can be created in any order or even in parallel. This approach also limits the cost of changes, since components can easily be changed without impacting other specialized functional components of the system.¹⁹

MAKE USE OF CONTEMPORARY SOLUTION DESIGN TOOLS

When there is a high degree of uncertainty (e.g., requirements, technology, or even the business model are rapidly changing) and a need for interoperability across a complex network of suppliers and customers, the use of architecture tools is virtually essential.

Architecture tools capture, organize, and link complex information about the organization and the supporting technology; they help guide decision-making and monitor design decision implementation and success. In addition, architecture tools institutionalize standards that facilitate communication, a common language, common references, and common work products and data. When designing complex systems, a number of architectural views may be created to capture information about the operations, the business systems, and the supporting hardware and software technologies. The tool documents interrelationships between the views. This allows for a keener understanding of the dependencies within the solution that must be identified, made visible, understood, and managed.

DESIGN FOR PEOPLE, BUILD FOR CHANGE

John Rymer and Connie Moore of Forrester Research, Inc., an independent technology and market research company, present the case that our current IT systems are sadly inadequate when it comes to keeping up with the pace of change: “Most business applications are too inflexible to keep pace with the businesses they support. Today’s applications force people to figure out how to map isolated pools of information and functions to their tasks and processes, and they force IT pros to spend too much budget to keep up with evolving markets, policies, regulations, and business models.”²⁰ Their proposed solution is quite futuristic: IT innovators should make it their “primary goal” to invent the next generation of “enterprise software that adapts to the business and its work and evolves with it.” Rymer and Moore call such software Dynamic Business Applications.

Adaptable software can be said to be designed for people and built for change. Designing for people is all about customer empowerment, collaboration, and easy access to information. Building for change is concerned with making organizations and their business solutions flexible, agile, and adaptive. These tools will undoubtedly change people’s jobs, how we build and change business processes, and how we design and build software-rich products and business solutions.²¹

Peter Sterpe, a senior analyst at Forrester, surmises that the changes in how people work together will be formidable, and his predictions sound much like agile and extreme project methods:

Some people’s jobs will have to change. To conceive and build applications that are context-aware and process-aware, IT will need resources that are also context-aware and process-aware. Likely changes include:

COMPLEXITY MANAGEMENT TECHNOLOGIES

Advanced solution design and development technologies are rapidly emerging in the IT world. These do not use the traditional feature-based approach to building 21^st century solutions. Business analysts need to become intimately familiar with these technologies and adapt their requirements approach to the new principles.

SERVICE-ORIENTED ARCHITECTURE

One development method that is designed to reduce system dependencies and interrelationships is service-oriented architecture (SOA). SOA is a breakthrough software design technique that calls for the development of smaller services, or groups of software components that perform business processes. The services are then hooked together with other services to perform larger tasks. The services are loosely coupled, have an independent interface to the core system, and are reusable. An SOA project is a type of microproject.

Web services, one of the important strategies for increasing business while reducing transaction costs, are an example of SOA. This development approach represents a transformation in how businesses and IT collaboratively develop business solutions. It is an effort to drive down to total cost of ownership of IT systems, thus freeing scarce resources to develop even more innovative IT applications and infrastructures.²³

Using SOA and microprojects forever changes the business analyst’s work. At the tactical project level, the business analyst builds requirements as services. (Keep in mind that once the development team is “on a roll,” there is a risk that it will continue its work long after the basic business need is met. At the more strategic enterprise level, the business analyst’s job is to continually perform enterprise analysis, managing the business case so that the development team stops building services when the ROI and business objectives have been met, or redirecting the development team if the business need has changed.

BUSINESS PROCESS MANAGEMENT

Business process management (BPM) is a vital business analysis specialization. The practice is supported by vendor tool suites that are designed to standardize methods that align organizational processes with the needs of the customers. BPM strives to promote business effectiveness by optimizing business processes while focusing on flexibility and innovation—just the ingredients we need when building complex innovative products, services, and business solutions.

A difficult decision needs to be made about ownership of cross-functional business processes: someone in the organization needs to be responsible for enterprise business processes, those that cross functional boundaries. Many argue that the effort must be driven from the top, by a senior officer of the company. Often, the CIO is the most appropriate person to get the effort going. Forrester suggests organizations form teams, aligned with each line of business and channel, that are responsible for governing processes. These governance teams comprise representatives from all areas that support customers (e.g., marketing, sales, servicing, cross-selling, and retention). The goal is to build customer-centric processes and technology.²⁴

WEB 2.0 DEVELOPMENT

There is no single definition that is widely accepted for the term Web 2.0; however, we can describe it a set of design patterns and business models that have come into widespread use in the 21^st century, using the web as a platform.

Web 2.0 is more about customer participation than about simply publishing information. The emergence of Web 2.0 (no one person actually designed the web as we know it today) is a spectacular example of a complex adaptive system. Dynamic websites replaced static web pages a decade ago; today, it is the links in current web applications that increases the adaptive nature of the web. Blogging, which drives new value chains, is an example of a Web 2.0 technology. The power of the web in its current form is that it harnesses collective intelligence and houses it on relatively small sites.

SOCIAL NETWORKING

Social networking is an phenomenon that has effectively taken over the web, enabling connectivity and interaction between people all over the world. Networking sites like Facebook and MySpace are “virtual communities” that provide valuable consumer data to those interested in reaching groups of people with certain interests. The potential of social networking “teams” to bring about innovation for businesses is largely untapped and unknown, but businesses in industries as diverse as insurance, financial services, and electronics are exploring the potential.

UNIFIED COMMUNICATIONS

Unified communications (UC) is a software platform that brings multiple communications technologies together into a single solution. Elizabeth Herrell of Forrester Research writes:

UC is an emerging technology designed to improve collaboration, speed up decision-making, reduce customer response time, and increase enterprise agility—all of which are elements of managing complexity in the 21^st century.

PUTTING IT ALL TOGETHER: WHAT DOES THIS MEAN TO THE BUSINESS ANALYST?

A system-thinking, much more business- and customer-focused approach to product and IT system development is needed if companies are to be able to react to, and hopefully preempt, the market changes that have led to delivering value through smarter products. We must look across the enterprise and outside the enterprise, across companies and business ecosystems, as we determine and develop the creative solutions our businesses need for economic survival. The business analyst’s challenge: to become a key player in your organization’s efforts to transform process, product, and service development practices for delivering the smarter solutions that your employees and customer demand—before your competitors do it first.

The road ahead is daunting. The task at hand is complex. That is why we presented for your consideration several relatively forward-looking managerial, design, and development techniques to build innovative business solutions, products, and services. Many of these technologies are rather immature right now, but they are emerging in the IT industry in response to our need for radical new methods and tools that meet the challenges we are facing. A summary of these suggestions:

NOTES

1. IBM Corporation, “Four Key Strategies for Enabling Innovation in the Age of Smart,” 2010: 2.

2. IBM Corporation, “Turning Product Development into Competitive Advantage,” 2009: 16.

3. Cees Van Halen, Carlo Vezzoli, and Robert Wimmer, Methodology for Product Service System Innovation (Assen, NL: Uitgeverij Van Gorcum, 2005): 21.

4. Ken Bates, Hilary Bates, and Robert Johnston, “Linking Service to Profit: The Business Case for Service Excellence,” International Journal of Service Industry Management 14, no. 2 (2003): 173–183. Rogelio Oliva and Robert Kallenberg, “Managing the Transition from Products to Services,” International Journal of Service Industry Management 14, no. 2 (2003): 160–72.

5. IBM Corporation (2009), 2.

6. The Royal Academy of Engineering, “The Challenges of Complex IT Projects,” April 2004: 8. Online at http://www.raeng.org.uk/news/publications/list/reports/Complex_IT_Projects.pdf (accessed January 2011).

7. Elana Varon, “2007 CIO 100 Winners: How IT Can Harness the Power of Innovation,” CIO (August 6, 2007). Online at http://www.cio.com/article/127400 (accessed June 2011).

8. Jim Highsmith, Agile Project Management: Creating Innovative Products (Boston: Addison-Wesley, 2004): 6.

9. Katherine Walsh, “IT Innovations That Generate Revenue and Get You More Customers,” CIO (August 6, 2007). Online at http://www.cio.com/article/print/127651 (accessed January 2011).

10. Mary Poppendieck and Tom Poppendieck, Lean Software Development: An Agile Toolkit (Boston: Addison-Wesley, 2003): 2–42.

11. James H. Johnson, “Micro Projects Cause Constant Change,” Extreme CHAOS 2001 (West Yarmouth, MA: The Standish Group International, 2001): 132–135.

12. Linda J. Vandergriff, “Complex Venture Acquisition,” 2006: 9–14. Online at http://cs.calstatela.edu/wiki/images/1/1e/Vandergriff.pdf (accessed May 2011).

13. Louise Baverstock, “An Enduring Partnership,” CSC World (July–September 2006): 6–9. Online at http://assets1.csc.com/cscworld/downloads/cscworld_july_sep_2006.pdf (accessed May 2011).

14. Computer Sciences Corporation, “Managing a Transatlantic Relationship: Chris Coupland: Director, IT and e-Business, BAE Systems,” CSC World (July—September 2006): 10–13. Online at http://assets1.csc.com/cscworld/downloads/cscworld_july_sep_2006.pdf (accessed April 2011).

15. Hal Mooz, Kevin Forsberg, and Howard Cotterman, Communicating Project Management: The Integrated Vocabulary of Project Management and Systems Engineering (Hoboken, NJ: John Wiley & Sons, 2003): 202.

16. Birgit Seeger, “Tackling Complexities of In-car Embedded Systems,” The PA Consulting Group’s Viewpoint on Complexity (2005). Online at http://www.paconsulting.com/insights/managing_complex_projects (accessed February 2008).

17. Barry Boehm and Richard Turner, “Observations on Balancing Discipline and Agility,” Agile Development Conference (2003): 1–8. Online at http://agile2003.agilealliance.org/files/P4Pa-per.pdf (accessed April 2011).

18. Ibid.

19. Martin Lippert, Stefan Roock, Robert Tunkel, and Henning Wolf, “XP in Complex Project Settings: Some Extensions,” Schweizerischer Verband der Informatikorganisationen, no. 2 (April 2002): 33–37.

20. John Rymer, Connie Moore, and Forrester Research, Inc., “The Dynamic Business Applications Imperative,” September 24, 2007. Online at http://www.forrester.com/Research/Document/Excerpt/0,7211,41397,00.html (accessed May 2011).

21. Ibid.

22. Peter Sterpe and Forrester Research, Inc., “Application Development and Program Management First Look,” November 15, 2007. Online at http://www.forrester.com/FirstLook/Print/Vertical/Issue/0,,940,00.html (accessed January 2011).

23. Mark Frederick Davis, “SOA: Providing Flexibility for the Health and Life Sciences Industry,” July 2006: 2–5. Online at http://h20247.www2.hp.com/publicsector/downloads/Technology_Davis_VB.pdf (accessed April 2011).

24. Mary Pilecki and Forrester Research, Inc., “Organizational Silos: Can’t Live With Them and Can’t Live Without Them,” October 2, 2007. Online at http://www.forrester.com/rb/Research/organizational_silos_cant_live_with_them,_cant/q/id/43457/t/2 (accessed Mary 2011).

25. Elizabeth Herrell and Forrester Research, Inc., “How To Evaluate Business Value For Unified Communications,” December 27, 2007. Online at http://www.forrester.com/Research/Document/Excerpt/0,7211,42895,00.html (accessed May 2011).