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The Need for Enterprise Innovation

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Nicholas Evans looks at the future of innovation at the enterprise level, including key technology vendors and key applications such as infrastructure support, web services, peer services, real-time computing, security, and mobile business.
This chapter is from the book

"Computing is rapidly approaching an inflection point where science fiction writers' predictions of helpful, ubiquitous and seamless technology will become a reality."
—Richard Rashid, Senior Vice President, Microsoft Research

Underlying trends both within the business world and the software industry are driving us toward the need to extend the radar, to focus on emerging and disruptive technologies as the next source for growth and competitive advantage within the enterprise.

In fact, the need to extend the radar for competitive advantage will cause mainstream businesses to become more like the pioneers and early adopters of technology innovation. Over time, this may even reshape the classical technology adoption lifecycle—the current model for how businesses adopt new technologies. Rather than following the bell-shaped curve with the "chasm" or delay in adoption between the pioneers and early adopters and the mainstream business, the chasm will be pushed later down the curve between the mainstream business and the laggards. By extending the radar and acting on those radar signals as an early warning system, the mainstream business will effectively pull itself into the domain of the pioneers and early adopters and be able to gain the same level of competitive advantage by acting not necessarily as a first mover but as a smart mover.

This smart-mover approach will require much more than simply evaluating and implementing new software or "me too"-style technology adoption. It will require the mainstream business to rethink how it identifies and prioritizes emerging and disruptive technologies and how it applies them. It will require changes within both information technology departments and within business units in order to intelligently apply the right technologies to the right business challenges and opportunities at the right time.

In addition to looking at the trends and changes within the business world and within the software industry, we'll also take an advance look at some of the key application areas where these technologies can be applied, and at some of the key vendors who provide these solutions and hold the keys to the enabling technologies of the future. The software industry is transforming itself by moving from packaged software products to software as a service on the network. This transformation will have a profound effect on both the software industry itself and on many industries who rely on software for the delivery and exchange of value with employees, customers, and business partners.

Business and IT Trends

General trends within the corporate enterprise, on both the business and information technology sides, are numerous. On the business side, they have included increased uncertainty in terms of future business scenarios and economic outlook, an emphasis on "back-to-basics" operations for cost reduction and productivity enhancements, and a focus on improved business resiliency via the application of enhanced security. On the information technology side, there has been a focus on improved business management of IT in order to extract the most value from existing resources, and a general realignment of business and IT priorities from those of previous years.

Today's businesses are focused on defending and safeguarding their existing market positions in addition to targeting market growth. Cost-constrained businesses are generally focused on achieving more from the same amount of resources in terms of people, knowledge, and systems, and in optimizing their existing operations and business processes. As an example, within the supply chain, businesses are attempting to optimize their interactions with other supply chain participants in order to increase visibility of information and transactions and reduce the "bull-whip" effect on inventory due to changes in supply and demand. Any new initiatives have to have strong business cases in terms of the return on investment and the short-term and long-term benefits.

Increased Uncertainty

More than anything else, the year 2002 and beyond represent an age of increased uncertainty in the global business and economic arena. In the current economic climate and in light of recent world events, companies are focusing on a back-to-basics approach where the major emphasis is on taking care of existing customers, increasing resiliency of operations, and controlling costs within the enterprise. In addition, many businesses are focused on survival rather than expansion. Companies are trying to optimize their returns from investments in existing assets and resources rather than placing huge amounts of new investment in the "next big thing." All this means, at least in the short term, that new initiatives need to be very carefully planned and executed and a smaller number will be funded in the upcoming years than has been the case over the past three or four years.

Due to this increased uncertainty, businesses are proceeding cautiously and monitoring events both internally and externally. The vacuum created by the lull in business activity has created an excellent window of opportunity for businesses to reassess and realign priorities and strategic plans for moving forward. Even analyst firms are advising business clients to plan for multiple scenarios including best-case and worst-case outlooks for their business over the next 12 to 24 months.

Productivity

One of the many debates around technology in the business community has been the question of the extent to which technology has actually improved productivity, both within individual businesses and on a macroeconomic basis. An important point to bear in mind is that new technology affects the economy only when it has been broadly adopted and utilized. For example, the innovations in electric power took 40 years, from the 1880s to the 1920s, to be fully realized and leveraged effectively by businesses. Computing technologies have been with us since the 1950s, but it has been only within the last two decades that these innovations have been fully leveraged within the business sector in the form of networking technologies, low cost personal computers and servers, and enterprise software. Internet technologies, while with us since the 1970s in the form of networking protocols, have been fully adopted by the business community only over the past five years. Thus, in the software sector, we can expect the next 20 years to be just as eventful as the last, if not more so, as we enter an era where computing moves into everyday objects via embedded chips such as radio frequency identification (RFID) tags, and software becomes truly pervasive in our society.

Despite the fact that these are early days for the software industry, the U.S. economy has seen considerable increases in productivity over the past decade that have corresponded with increased investments in technology. According to the U.S. Bureau of Labor Statistics, nonfarm business productivity, measured in terms of output per hour, has grown by an average of 2.7 percent each year from 1995 to 2000. There are still substantial productivity improvements to be gained as computing becomes ever more pervasive. It is estimated that the adoption of computing into everyday objects such as consumer and industrial products will create a total savings of $70 billion in the United States and $155 billion internationally. The cost savings will come from areas such as improved visibility into the supply chain, theft reduction, and improved operations.

Security

On the security front, companies are reassessing their exposure and performing risk assessments to uncover vulnerabilities. Once risk assessments have been conducted, companies can formulate appropriate strategies to implement the required processes and procedures in order to safeguard their people, physical assets, and IT systems. The events of recent cyber-attacks and even of September 11th have meant that the cost/benefit equation for enterprise security has been forever altered. The risks are much higher and enterprises must now invest larger sums in order to protect themselves as much as possible from the consequences of a variety of natural and man-made disasters. Of course, it is impossible to have complete security, and the costs to even approach this limit are astronomical, but enterprises can invest enough to give themselves an adequate level of protection for most common scenarios based upon the degree of risk they can tolerate.

Business disruption can not only cause problems in communications and business activities, it can also adversely affect a company's stock price and reputation with customers and suppliers. It is now more important than ever for companies to have well-rehearsed and frequently updated processes and procedures to account for a variety of adverse scenarios. These may include Internet email and denial-of-service attacks from worms and viruses, physical attacks on property, loss of communications, loss of documents, and information theft. With companies increasingly opening up their networks and applications to customers, partners and suppliers, and using an ever more diverse set of computing devices and networks, it is important to have the appropriate levels of authentication, access control, and encryption in place. These three forms of security help to ensure that only authorized individuals can gain access to the corporate network, that they have access to only those applications for which they are entitled, and that information cannot be understood and altered while in transit. In Chapter 7, we take a detailed look at some of the new techniques for authentication, access control, and encryption, including a number of biometric authentication systems and intrusion detection systems. We also look at security from the perspective of prevention, detection, and reaction.

Business Management of IT

Business executives and chief information officers are also placing more emphasis on the business management of information technology i.e., placing more controls on how information technology departments are managed and which initiatives get funded. With large percentages of organizations' capital and recurring expenditures going into computing infrastructure and applications, information technology departments are increasingly required to justify each and every investment and maximize their returns. During the last half of the 1990s, U.S. corporations spent an average of $365 billion a year on technology, about 70 percent more than in the first half of the decade.

To run IT departments like businesses, chief information officers need to know what they have in place already in terms of people and technology resources, and they need to minimize their cost of ownership. They need to understand usage patterns to determine how existing applications are being utilized and the value that is being extracted on an ongoing basis. They also need to be aware of underutilized assets and to develop strategies for improving their utilization and overall effectiveness across the corporation.

Keeping track of IT assets is becoming increasingly difficult as the number and variety of computing devices and applications proliferate. Employees now utilize a variety of devices including personal computers, laptops, personal digital assistants, cell phones, and pagers. Many of these are owned by employees themselves, but as these devices are standardized upon and become corporate-issued tools for mobile employees, they need to be carefully secured, controlled, and managed. Devices must be accurately inventoried and their usage patterns need to be tracked in order to report on the total cost of computing and return on investment for various application initiatives.

Companies such as mFormation Technologies provide wireless infrastructure management software to control and manage rapidly growing worldwide populations of wireless users, applications, and devices. Their Enterprise Manager software product helps companies maintain an up-to-date view of their wireless assets and how they are being used. It includes end-to-end, real-time performance management and fault localization capabilities to enable help desk and IT support staff to quickly pinpoint and resolve user, network, and device problems. This type of solution represents the next generation of software that we can expect to see in the infrastructure management space. It brings the same level of management to wireless infrastructure as IT departments have over the rest of their IT infrastructure. As the business management of IT becomes more of a discipline, these vendors will help to provide the tools necessary for IT staff to get a handle on their infrastructure and manage resources on a real-time basis.

IT Priorities

As business priorities change, information technology priorities are being changed accordingly. An Internet Week survey of 268 IT managers, shown in Table 1-1, found that the top e-business priorities for 2002 were improving customer service and reducing costs. Other priorities included increasing online sales to business customers, improving online communications with suppliers, developing and expanding electronic supply chains, and developing new Internet sales channels. The survey also found that 42 percent of participants stated that their top management was willing to invest in e-business but was more skeptical and scrupulous about return on investment.

Table 1-1 Companies' Top E-Business Priorities for 2002. Source: Internet Week.

Rank

Feature

Percentage

1

Improving customer service

68%

2

Reducing costs

60%

3

Increasing online sales to business customers

24%

4

Improving online communications with suppliers

24%

5

Developing/expanding electronic supply chain

21%

6

Developing new Internet sales channels

21%

7

Increasing market share via the Web

20%

8

Launching/expanding online procurement

19%

9

Increasing online sales to consumers

18%

10

Participating in an Internet exchange

11%

11

Other

15%


According to the same Internet Week survey, the main challenges facing companies' e-business efforts included cost and tight budgets, security, measuring return on investment, Web-to-legacy integration, data and content management, customer or partner resistance, and complexity of technology. The most important group targeted for e-business initiatives in 2002 were customers at 67 percent, followed by internal employees at 17 percent, and suppliers and dealers/resellers both at eight percent, according to the survey. Information technology priorities undoubtedly will change from year to year or even from month to month, but the numbers help to illustrate the renewed focus on the basics such as improving customer service and reducing costs.

Emerging Technology as the Next Competitive Advantage

Within this context of the back-to-basics approach, emerging technologies can be applied as an enabler of cost reduction, increased resiliency and security, and competitive advantage. They can be applied within the business for both offense and defense. Emerging technologies provide new ways to deliver value and can dramatically reshape business processes. Disruptive technologies can reshape entire industries. They effectively allow us to rewrite the rule book and define new forms of value creation and value exchange. They can empower corporate planners and strategists to go beyond traditional, linear business development strategies and to explore new directions and new business models for their organizations. Despite the demise of the dot-com economy, software is the main engine for innovation across almost all business processes from design and production to fulfillment. The bursting of the dot-com bubble merely illustrated that not all businesses can be executed in terms of pure-play dot-com models. Moreover, the Internet should be viewed as an additional channel rather than as a replacement for traditional channels to consumers and business partners.

The New Technology Adoption Lifecycle

The need to extend the radar will cause mainstream businesses to become more like pioneers and early adopters and over time may even reshape the classical technology adoption lifecycle which is shown in Figure 1-1. This adoption lifecycle was first developed during the technology diffusion studies of rural sociologists in the 1940s. The researchers were looking at the adoption rates of hybrid seed among Iowa farmers.

Figure 1-1Figure 1-1 Traditional Technology Adoption Lifecycle.

While the classical adoption lifecycle and its symmetric bell-shaped curve have held true and have been extensible to the software industry and business adoption of new technologies, this is no longer the case. The traditional curve took shape because communication channels were constrained and even the innovations themselves were not immediately widespread or accessible. Today, with the ability to communicate globally via the Internet and with the immediate accessibility of software innovations to those enterprises who are extending their radars, the diffusion and adoption of innovation can occur at a more rapid pace and via a skewed adoption curve. Figure 1-2 shows this new form of the technology adoption lifecycle.

Figure 1-2Figure 1-2 New Technology Adoption Lifecycle.

When contrasted with the traditional technology adoption lifecycle, this new model illustrates how the chasm, or gap in the timing of further adoption, will be pushed back between the late majority and the laggards instead of between the early adopters and the early majority. While there will be a shift in the distribution of the adoption lifecycle in terms of the number of businesses adopting new technologies over different periods of time, there will still be a considerable time lag between the early adopters and the laggards. This is because certain innovations are not production ready upon initial discovery. It often takes time for the surrounding ecosystem of companies and products to create the mass market for the solution and to establish a baseline level of confidence and trust among the adopters.

Adoption of emerging and disruptive technologies is a high-risk, high-reward proposition. Those who enter early and intelligently stand to gain considerable advantages but also expose themselves to an increased level of risk. Correct timing of market entry in terms of identification, prioritization, and adoption is critical. One of the benefits of extending the radar is that businesses will have more time to make these business-critical decisions since they can identify opportunity earlier. According to Charles Marinello, Director of Corporate Strategy at Texas Instruments, this is like having a more powerful missile detection system. Early warning of incoming threats can help provide more time to make decisions and to launch countermeasures in response.

The new technology adoption lifecycle is really a call to action for the business executive. You should plan to extend your radar, reshape your adoption curve in terms of how you identify, prioritize, and implement new technologies, and become a smart mover around new technologies and solutions. Chapter 8 presents some process steps for implementing this call to action to extend the radar.

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