In Part One and Part Two of this series, we explored the idea of a "Capability Case" and argued that this approach will be essential for firms who want to align IT with business strategy in the future. In this installment, we’ll look at the *process* of creating a capability case in more detail, and we’ll look at a sample of what the result of that process might look like.
Specifically, this Capability Case, which we call "Technology Radar" is an example of a Capability Case which a software vendor (like Fogbeam Labs!) might develop to use as an exploratory tool to for helping customers understand their solutions. In this example, the case uses a fictional (we hope!) firm as the subject, and is, by it’s nature, a little more generic than a Capability Case which is "cut from whole cloth" by a firm running through the process from scratch.
In either case, developing a Capability Case begins with an analysis of the business and its current status, the forces and trends affecting the business, and the desired results. Porter’s Five Forces analysis is the gold standard of strategic analysis tools, and a firm will usually choose to engage this model to start the process.
Given the output of the "Five Forces" analysis, and a survey of significant trends affecting the firm and its industry, the firm leadership should begin to design a strategic direction to address these forces and trends. It is only then that the firm should begin to look at technological capabilities and start building the bridge from strategy to concrete capabilities. This however, is exactly where the CIO, CTO, Director of R&D, and other technology experts must be directly engaged with the highest levels of firm leadership, so they can articulate what capabilities exist (or could be developed or acquired) which could support the strategic direction and desired outcomes.
Candidate capabilities may be drawn from a catalog of pre-existing capabilities which exist within the firm, or they may be created from scratch and proposed for development. Vendors may also provide lists of potential capabilities which they can provide through their products. In the end, a proposed Capability Case may feature a mix of existing capabilities, ones which will be developed from scratch, and ones which will be purchased from 3rd party suppliers. Once a list of capabilities for the proposed Capability Case have been developed, a "solution story" is generated, which puts the use of the capabilities, and their mapping to the strategic objectives, into a narrative form.
Identify technological developments - which may present either a threat to the enterprise, or a groundbreaking new opportunity - as early as possible.
New technologies are being developed at a dizzying pace. Worldwide, private enterprises, academic researchers, and open-source hackers are all constantly pushing the envelope, developing new approaches and tools. Some of these advancements may represent a huge threat to your organization, perhaps by enabling a competitor to cannibalize your existing business model with a much less expensive alternative. Others may represent an opportunity to break new ground with products, product features, or services that can represent sizable new revenue streams. It is advantageous to identify these advances as soon as possible, in order to outmaneuver the competition and take maximum advantage of new developments.
As Downes and Mui point out in their book Unleashing the Killer App, this kind of awareness requires a technology radar consisting of a fat pipeline, a sensitive radar screen and sophisticated intelligence.
Porter’s Five Forces
Threat of New Entrants - there are low barriers to entry for manufacturing many textile products. Capital to build or purchase a mill, knitting machines, looms and other equipment is the largest barrier. For technical textiles, intellectual capital is also a potential barrier. More specialized products are harder for new entrants to duplicate.
Threat of Substitutes - many textile product are substitutable for others. Polyester, for example, is gaining ground in my applications formerly served by natural fibers. This is less of a problem for specialized materials and advanced technical textiles.
Bargaining Power of Customers - Moderate to high, especially for commodity products such as denim. Smaller mills are especially prone to being “bargained down” by customers working in concert with each other.
Bargaining Power of Suppliers - Moderate, especially for raw materials like cotton whiche are widely available from multiple suppliers.
Competitive Rivalry - Intense. This industry has relatively high fixed costs, especially for labor. This subjects American manufacturers to intense competition from imports from low-wage countries like China, Malaysia, or Korea.
Customer co-creation - Textile firms are working more closely with their customers, doing joint R&D, to develop new products. Using computer based collaboration, companies are becoming more value-added partners with customers, and co-creating value through developing innovative products together.
New Fiber Development - There is a trend towards the development of bio-based products, including fibers made from raw materials like corn, wheat and beets. These new fibers are being used to create a variety of high-performance textile products with unique properties.
Military Fabrics - The Pentagon is a significant purchaser of textile products and military applications are a steadily growing niche. The military is constantly seeking textiles which perform better in extreme climates, are less bulky, and are lighter in weight. There is a significant opportunity to introduce new, specialized products catering to military applications.
Medical Textiles - Demand for specialized technical textiles is growing, especially for products which can help prevent infections during surgical procedures.
Nanotechnology - Research in the area of nanotechnology is advancing at a rapid pace, and innovations in this area enable a wide range of new, specialized, high-performance textile products. Universities are creating significant breakthroughs, but commercialization of this research is lagging.
Given these forces and trends, MegaCorp come to the conclusion that a primary strategic objective is to start introducing more innovative and specialized textile products, which are more difficult to copy, have no other suppliers, and are not subject to the same pricing pressure from imports as more commoditized textiles.
A technology radar is established to pull in information from many disparate sources: RSS feeds, Twitter streams, email lists, and user submitted links to websites, documents and articles. Collaborative filtering through collective intelligence is used to filter the lower value submissions, while ensuring the relevant information gains visibility.
Employees throughout the organization view the radar, through the “emerging technologies” channel and take advantage of the information.
In some cases this may represent a “bottom up” scenario, such as an engineer finding an interesting new library which enables a feature the engineer likes... he quickly knocks out a prototype, shows it to senior management, and it is eventually adopted into a product release. In another case, this may be a “top down” scenario, where a senior leader discovers a new technology, and issues a mandate that R&D investigate its applicability to their product.
The process of identifying a solution for this situation discovered the necessity of the following technological capabilities:
At MegaCorp, a North Carolina based manufacturer of advanced technical textiles, leaders are constantly jousting with rival HyperCorp, each striving to steal market share from the other. Recently, HyperCorp has released several innovative new products, with properties that MegaCorp had not considered possible, and were not able to deliver in their own products.
After the most recent release, MegaCorp leaders dug in and discovered that HyperCorp had integrated advanced technology developed by researchers at Miskatonic University.
"Why," asked MegaCorp CEO Howard Phillips,
"did we not know about this sooner? This is actually a better fit for our product.. if we had done this first, we could have taken a huge chunk of HyperCorp’s market share, instead of letting them jump out in front of us!"
In order to address this lack of awareness of emerging technologies, MegaCorp decide to implement a Technology Radar. An "emerging technologies" channel is created (Capability C2), where every member of the organization can submit links to documents, articles and documents (Capability C6) that touch on technologies related to MegaCorp’s industry, along with relevant news-feeds and data streams from external content repositories (Capability C3). Users throughout the organization vote, tag and comment on each submission, allowing the collective intelligence of the organization (Capability C1)to filter the less important items, while pushing the key ones to the top. Product Managers and executives begin to make browsing the latest ‘top items’ (Capability C7) on the channel a routine habit... and some users configure the system to send them a dynamic alert via instant messaging when an entry reaches a certain score (Capability C5) while other users choose to filter entries by keyword or topic (Capability C4).
A few months later, the Flozzit Product Manager receives such an instant message - the link is to a paper published by researchers at Arkham University, detailing the development of a breakthrough in nanotechnology which solves a problem that MegaCorp engineers have been struggling with. MegaCorp quickly contact the AU technology transfer office, negotiate to license the new technology and begin integrating the new approach. They also manage to recruit two of the students from AU who worked on the project to join their own internal R&D department.
Using the new technology, MegaCorp are able to release their "Flozzit" material with properties which clearly outclass the closest equivalent material from HyperCorp,which had been steadily eroding market-share away from MegaCorp until now.
CEO Phillips talks to his managers and explains why he’s happy with developments - "If we hadn’t rolled that new stuff out when we did, HyperCorp would have been able to put a dagger into our heart. Now we’ve shown them, and the market, that they aren’t always the ones on the forefront of technical advancements. And the two new guys we hired from Arkham are already hard at work on some stuff that’s going to blow everybody away."
RSS feeds, HTTP, OpenSearch