Showing posts with label component-based business. Show all posts
Showing posts with label component-based business. Show all posts

Saturday, June 26, 2010

What are silos good for?

@markgould13 tells us why the silo doesn't work

Of course they do work - after a fashion. As Mark points out, they are resilient structures, from which we can infer that they serve some purpose for someone in the organization, or the organization as a whole. It is common (Mark calls it a cliché) to reject information or work silos in most organizational contexts. But what exactly is the alternative?

Another useful observation about silos is that they generally represent some attempt, whether planned or emergent, to decompose an organization according to some notion of specialization and clustering. When people complain about silos this could be because they reject any kind of decomposition, but what is more likely is that they dislike this particular decomposition pattern. However, anti-silo rhetoric is often pretty vague about the difference if any between silo (=bad decomposition) and autonomous loosely coupled functional cluster (=good decomposition), and architects who automatically dismiss all previous attempts to structure an organization as "silos" create much the same impression as plumbers and electricians who automatically criticize the existing plumbing and wiring.


The main issue with any decomposition (whether or not we choose to label the chunks as "silos") is the coordination between the chunks, and I think this is Mark's main point. He quotes someone calls Ed Smith as saying

"Insight is the gap and overlap between silos."

Thinking about the requisite coordination between the chunks is an excellent route for understanding whether the architects should pay attention to the shape of the chunks or to improving the links and feedback loops connecting them. Or both. An architecture that is exclusively focused on cutting the enterprise into perfect chunks (relative to a fixed and abstract model of "the requirements") is probably not going to be much use in the long run.



Update

Chris Bird expanded his Observations on Silos (see comment below) on his own blog.

Excellent defence of silos by Venkat, The Silo Reconsidered

Interesting discussion on Linked-In - What are the advantages of working in silos?

 

Related post: Requisite Coordination (November 2010)

Tuesday, February 17, 2009

From Espresso to Instant

Starbucks is changing its business model. Or as CEO Howard Schultz tells the Huffington Post, Staying Real in an Instant. Starbucks will be selling shots of instant coffee, for under a dollar a cup. The UK price is said to be around 60p.

Some people may have thought that "espresso" was the Italian word word for speed. (It isn't - it means "pressed".) So what could be faster than express coffee? Instant coffee!

Of course the word "instant" isn't about getting the coffee more quickly either, it is about doing away with all that fancy machinery, in whose use Starbucks makes such a charade of training its baristas. (A year ago, Schultz ordered all US stores to close for a three-hour training session "as part of an effort to improve coffee quality and revive the chain's flagging fortunes" [Guardian, 26 Feb 2008].)

Shultz now claims to be responding to the increasing mobility of consumers. "Imagine a cup of Starbucks VIA Ready Brew on a mountaintop" he says, as if willing us to imagine millions of Starbucks customers on some remote and implausible trek.

But clearly his real interest is selling mass market coffee. He hopes that the Starbucks instant coffee will be not only better-tasting but also "paradigm-changing" (whatever that means), and hopes "to turn on a whole new set of coffee drinkers to the Starbucks brand". But the obvious risk is that the old set will be turned off. He acknowledges that this move is a gamble (he calls it "a considered bet"), and expects "to learn a lot ... over the coming weeks". You bet.

In what sense does this count as a new business model? Starbucks already sells ground coffee and coffee beans in supermarkets across the USA. Many rival coffee purveyors have already shifted to the Gillette model, in which the coffee machines are sold cheap or practically given away, and you make your money selling overpriced pods of coffee.

The challenge faced by Starbucks is not choosing one business model, but attempting to combine two or three different (and possibly incompatible) business models at the same time. Such composition faces questions of cross-subsidy, brand dilution or erosion. Are there any reliable rules or patterns governing the interoperability (compatibility and composition) of business models?

See also
Update

Tuesday, July 29, 2008

Another Brick

The Harvard Business Review has just discovered SOA - and guess what? It's like Lego bricks!

The article is written by Ric Merrifield of Microsoft (creator of the Motion methodology) and a couple of his mates.



The Next Revolution in Productivity. Ric Merrifield, Jack Calhoun & Dennis Stevens. Harvard Business Review, June 2008

Sunday, April 27, 2008

Merging Capability Modeling with Process Modeling

Nick Malik asks about the relationship between capability model and process modelling. "If your company is a process oriented one (or becoming a process oriented one), how do you fit in capability modeling? Do these two methods conflict?"

Nick suggests two answers. In this post I want to offer a third answer. But first we have to understand the purpose of each type of modelling.

Nick mentions two purposes for capability modelling - project planning and service design.

  • Project Portfolio Alignment - "With capability modeling, you create a hierarchy of the company's capabilities. You then identify the capabilities that best align to corporate strategy, and which one of them need the most work. Focus your work there, and you get a big payoff through focused investment."
  • Service Design - "The activities are where you actually perform automation. You connect services to these activities. This is where work is done."

Nick's first answer is that a capability is a top-level chunk of business, while processes are at a lower level. In a later post, Nick says this is how FEA handles capability and process modelling. As Nick acknowledges, FEA actually calls them business areas (or Lines of Business) rather than capabilities. In my 2001 book on the Component-Based Business, I called these things Business Components, and this terminology is still used by IBM in its Component Business Model. I think this is a useful construct, but that's not exactly what I call capability.

Nick's second answer is that a capability corresponds to the objectives of a specific organizational unit. Capabilities are not directly linked to processes; both capabilities and processes use and share atomic-level activities. This is better, but I am uncomfortable with the organizational tie-up.

Meanwhile, the latest version of MODAF does explicitly include "capability" as a first class construct. MODAF includes a hierarchical decomposition of capabilities, and a many-to-many mapping between capabilities and processes (which it calls "operational activities"). This is a lot closer to my notion of capability.

Another way of getting to my notion of capability is to take Nick's second answer and remove all mention of organization units. While the organization structure may give us some important clues about what an organization does and how it does it, I am careful to avoid hard-coding the organization structure into my business models.

So what is the point of modelling capabilities as well as processes? To justify capability modelling, I want to articulate two additional purposes.

  • Management of Variation - Capabilities can often be decomposed into highly generic elements and asset-specific elements. (See my example of Green Coffee Beans.) Decoupling these capabilities helps to drive higher levels of cross-process and cross-organizational sharing.
  • Viable System Design - A complete system needs to include management capabilities such as planning and coordination as well as operational capabilities. With a capability model, I find it much easier to check for completeness than with a process model.
So I end up with a notion of business capability which maps easily onto business services, supported by information capabilities which may be implemented as software services. This notion allows for a much finer level of granularity than Nick's first answer, but I think it is much more flexible and powerful than Nick's second answer.

The capability defines WHAT the business does; the process defines HOW the business does it (and the organization structure defines WHERE the business does it). So we expect the capability to be more stable than the process; many capabilities should be shareable not only between different processes within a single enterprise, but between multiple enterprises.

This then raises the question of capability modelling techniques - how do we analyse capabilities? We certainly need to map capabilities onto outcomes (as in Nick's second answer) , but we also need to analyse commonalities and variations within and between capabilities, as well as other dependencies between capabilities. In fact the diagram I find most useful, both for planning and for service design, is the capability dependency diagram. MODAF V 1.1 includes a suggested notation for capability dependency diagrams, but I use a slightly different notation.

Sources

Wednesday, March 26, 2008

Public Sector SOA

The UK Government has identified four primary opportunities for using SOA in eGovernment:
  • Syndication
  • Rule Engine
  • Joining up internal architecture
  • Hand-shaking between agencies
For each of these opportunities, I shall quote a brief description from the GovTalk website, and then add some commmentary of my own.

Syndication

"This is where the services of a single Agency are to be aggregated with that of others and delivered by a third-party. This approach is supported by the introduction of common vocabularies and category lists such as the Integrated Public Sector Vocabulary (IPSV). A potential example would be DirectGov."

This is essentially a call for public-private mashups - in other words, joined-up services. There are some interesting opportunities for voluntary agencies and community groups to create customized "added value" services for particular target groups. This kind of thing can help to extend the reach of government services into otherwise disadvantaged groups, and thereby supports an "inclusivity" agenda.

This can also support an agenda of autonomy and decentralization, including alternative notions of identity (e.g. Identity 2.o).

Rules Engine

"Where a number of Agencies are dependant upon the rules set by another agency, and where those rules are complex and likely to change. A Web Services ‘call’ can be embedded into an application to perform calculations and return results into local data."

Among other things, this supports an agenda of "joined-up policy making", because it helps with the coordination, monitoring and maintenance of a broad range of policies across a broad portfolio of government systems and services. Ideally, government should be working towards closed-loop policy management, in which (i) policies can be directly associated with the sum of their outcomes, using service-oriented business intelligence and analytics, and (ii) policies can be adjusted in a coordinated manner to improve outcomes.

Joining Up Internal Architecture

"Where an Agency operates enterprise technologies, such as Workflow, Records Management, Middleware, Content Management. This approach avoids embedding API(s) from one component into another. The potential to create Web Services wrappers around proprietary technologies leads to the ‘swapability’ promoted by the e-GIF."

In other words, joined-up infrastructure. At the infrastructure level government requirements are pretty similar to those of any other large organization, except that governments often put greater emphasis on open standards, multi-vendor support and interoperability.

Handshaking with other Agencies

"Where an Agency wishes to interact with another Agency (G2G). This may be in terms of: Creating Workflow Instances, Making Appointments, Shared CRM facilities. Access to Data."

Finally we come to joined up business processes - orchestration and workflow, choreography and collaboration. This is perhaps the most obvious type of joined-up government, but not (as we have seen above) the only type.

So who does the joined-up thinking? Apparently, the joining-up initiative isn't imposed by any centralized planning body, but merely stems from "an agency wishing to interact with another agency". (So no arm-twisting from the Prime Minister then?)

Final remarks

Joined-up government is not just about joined-up processes - it also includes joined-up services, joined-up policy and joined-up platforms. There are some interesting initiatives underway in the UK government, and I look forward to seeing some practical results soon.

Sources


UK GovTalk e-GIF FAQ

[update] For a description of current initiatives in Canada, see John Gøtze: Aligning the Ducks.

Monday, June 12, 2006

Globally Integrated Enterprise

IBM boss Sam Palmisano has written an article for the Financial Times saying that "Multinationals have been superseded". [news report, article (subscribers only)] and portraying "the emerging business model of the 21st century".

Firstly, he restates the vision of the component-based business. (See my post on Project Catalyst from November 2003.)
"Because new technology and business models are allowing companies to treat their functions and operations as component pieces, companies can pull those pieces apart and put them back together in new combinations, based on judgements about which operations the company wants to excel at and which are best suited to its partners."
And includes a plea for new models of trust.
"We need new ways of establishing trust based on shared values that cross borders and formal organizations."
Palmisano doesn't explicitly mention IBM's recent announcement of increased investment in India, but his denial that the new business model merely involves exploiting cheap labour will undoubtedly be linked to this deal.
"These decisions are not merely a matter of off-loading non-core activities, nor are they merely labour arbitrage - that is shifting work to low-wage regions. ... The consideration driving most business decisions will be securing a supply of high-value skills."
James Martin said something similar in his BBC radio interview last week, which I reported elsewhere.
"Sometimes the reinvention is going to work best in countries which are not rich countries today. So India for example is creating software which is measurably better than in the United States or Britain. ...

[Describing a company he was involved in] ... In the beginning we thought it was just better programmers, but then it turned out that the Indian CEO was better than the American CEO, so the finance people replaced the American CEO with the Indian CEO."
My interpretation of this model is that it leads a power-to-the-edge strategy. You don't reserve the high-skill jobs (such as research-and-development and product design) to the centre, or to the home country.
"The globally integrated enterprise ... fashions its strategy, management and operations to integrate production - and deliver value to clients - worldwide."

For further commentary, see Colin Barker at ZDnet.

Update: Globally Integrated Enterprise 2 (May 2016)

Saturday, March 25, 2006

Lightweight Enterprise

One of the interesting divisions of opinion at the SPARK workshop (and surfacing afterwards in the blogs of some of the participants) was about something we might call the weight of the enterprise.

Dare Obasanjo asserts My Website is Bigger Than Your Enterprise. And Jeff Schneider retorts My Enterprise Makes Your Silly Product Look Like A Grain of Sand. So who is right?

The basic issue here seems to be the relative amounts of complex engineering required to produce enterprise-grade software versus web-grade software. Dare (and some other participants at the SPARK workshop, including the guys from mySpace) are producing web software with staggering user volumes - much greater than most enterprises have to deal with.

Dare is scornful of enterprise architects, who (he says) "tend to seek complex solutions to relatively simple problems". He and David Heinemeier Hansson are particularly rude about James McGovern.

But as Jeff points out, "most people who have never seen a large enterprise architecture have no concept of what it is". CIOs and enterprise architects generally regard enterprise software (their own realm) as much more challenging than web software, involving much higher levels of complexity, and much stricter "non-functional" requirements (security, robustness, and so on). Are they right, or is this just narrow self-interest?

Size, complexity, weight - these are basic architectural concepts. Part of the difficulty with this debate is that we simply don't have an agreed language for discussing architecture properly. In my opinon, IT education is very deficient in this area. (See Footnote 1.)

Enterprise Mashup

One way of thinking about enterprise mashups is that they provide a way of achieving enterprise-grade systems without enterprise-heavy engineering. Let me give an example of something I regard as a business mashup. My example doesn't involve Ruby, it doesn't involve web services, and many people might say it doesn't even count as SOA. But it has always been my favourite example of the "plug-and-play" business that I describe in my book on the Component-Based Business.

Tesco Personal Finance (TPF) is an example of what I would now regard as a business mashup. It combines (mashes together) banking services (provided by the Royal Bank of Scotland) with retail services (provided by Tesco).

From Tesco's perspective, this mashup provides an extremely lightweight way of entering the banking business. In the old days, if you wanted to open a bank, you had to collect a large amount of gold, which you had to deposit with the banking regulators to satisfy them of your financial stability. Then you had to open a number of branches, and employ a small army of clerks and managers. This represented a considerable investment and risk - which meant that the existing banks could earn high profits behind high entry barriers.

In contrast, TPF represented for Tesco a low-cost, low-risk way of entering the banking industry. Simply plug in some external banking services (which already satisfy all the necessary banking regulations), and a humble retailer can become a bank overnight.

SOA

Although the Tesco Personal Finance initiative predated the SOA and Web 2.0 technologies we have today, we can now interpret it as a precursor or harbinger of these technologies - almost a non-technical proof-of-concept. (See Footnote 2.)

SOA enables the lightweight enterprise. It does this not through services but through architecture. (That, in my view, was the primary justification of SPARK.)

The challenge of architecture is to deconflict the enterprise software space - to create a genuine separation of concerns. This is easier said than done, and it requires some complex architectural thinking. One of the products of this thinking may be platforms on which developers may use small-scale and simple development techniques to produce large-scale and complex solutions.

See my recent posts on the Business Stack (SPARK Workshop 2) and Enterprise Mashups and Situated Software.


Footnote 1 - I have always been critical of university IT courses that teach students to write small programs, and fail to teach them the differences between small stand-alone programs and large interconnected suites of programs. If you go to architecture school, you may never build anything larger than a garden shed with your own hands. But you will have looked at skyscrapers and understood the relevant design and construction principles. You won't qualify as an architect without understanding the scale differences between garden sheds and skyscrapers. But in IT there is no such educational requirement. Vast numbers of people get university degrees in IT-related subjects, and even fancy job titles including the word "architect", without having a clue about effects of scale on software.

Footnote 2 - Sometimes technology seems to make new things possible. But we often find that these things were possible all along, they were just too difficult or expensive or risky. In the 1950s, Stockhausen was producing music that predated the modern synthesizer - and it took him months to produce music that later composers would produce with a few quick knob-twiddles. Some might argue that Stockhausen's achievement was all the greater because of his lack of tools. Similarly, many Renaissance painters might have been able to produce their pictures more efficiently if they had had digital cameras. But perhaps their paintings (and their artistic innovations) were all the greater for being done without modern technology. See my post on Art and the Enterprise.


Saturday, January 28, 2006

Capability and Business Strategy

In their book The Only Sustainable Edge, John Hagel and John Seely Brown describe two main schools of business strategy: the Core Competence school and the Leverage school. The approach advocated by Hagel and Seely-Brown represents a synthesis of these two schools. A closely related approach is advocated by David Alberts ("Power to the Edge").


Core Competence Leverage Sustainable Edge
Focus Resource-Based Network-Based Edge-Based
Source of Strategic Advantage Identifying and strengthening core competences within the firm Mobilizing resources outside the firm Taking power to the edge of the organization.
Key advocates Gary Hamel and C.K. Prahalad Adam Brandenburger and Barry Nalebuff, James Moore John Hagel and John Seely Brown, David Alberts.


Whereas the Core Competence school operates with a fixed notion of the required capability of the firm, the Sustainable Edge school involves dynamic specialization, connectivity and leveraged capability building. In other words, a successful business organization requires meta-capability – the capability to build capability, and the capability to build capability-building partnerships.

In our view, this kind of meta-capability is essential for the adaptive enterprise – after all, the defining capability of the adaptive enterprise is the capacity to adapt. However, in order to implement the adaptive enterprise, it is necessary to be specific about the nature of adaptation and adaptive capability required in a given context.

The capability model allows us to reason about which capabilities (or meta-capabilities) should be regarded as core competences.

 

Extract from Business Modeling for SOA - Part 1 What the Business Does (January 2006). See also Business-Driven SOA (May 2004), Business-Driven SOA 2 (June 2004), Business Systems Planning for SOA (May 2006). All available from CBDI Journal Archive.

Saturday, June 25, 2005

Business-Oriented Architecture

Hal Pierson writes: "if I had to guess what a service oriented architecture will eventually look like, I would guess that it would reflect the business architecture".

Here is the blurb for my 2001 book on the Component-Based Business.
New businesses can apparently be wired together from existing pieces at astonishing speed. A large grocery chain plugs in some extra "components" and becomes a bank, almost overnight. What are the rules of this game, and are there any pitfalls? And what are the implications for IT?

There is currently an explosion of new businesses - not just small start-ups but substantial launches. Many well-known brand names are cut-and-pasted onto new products and services. And not just e-versions of existing businesses either, although that's certainly part of the story. A grocery store opens a bank or insurance company. An insurance company opens a hospital or car breakdown service. Suddenly, and without warning, there's a major new player in the marketplace.

Is this new? No, of course not. But what is new is the way it's done, and the speed. Thanks to the plug-and-play approach, a new business can be rapidly assembled as a loosely coupled set of partnerships and services, with a complex business process spanning many organizations. These business structures (and the software and services that support them) evolve in complex ways, beyond the control of any single player. Even a substantial company can now be viewed as a component of a much larger system, rather than as a self-contained business operation, and this has huge implications for planning and managing at all levels.

In this book, we explore these new business opportunities in terms of components, relationships between components, and the assembled systems. We demonstrate techniques for planning and managing evolutionary change, and we identify strategies for business survival and success.

The issues addressed in my book are now becoming mainstream as the technological agenda of service-oriented architecture (SOA) starts to converge with the strategic agenda of the service-based business (SBB). This implies an approach to business strategy that involves dynamically managing the geometry of the business. (To achieve a fully adaptive enterprise we typically need to implement a variable geometry.) We can find elements of this thinking in some of the methodologies coming out of IBM and Microsoft, although from what I've seen so far I don't think any of these methodologies go far enough.

Hal calls this Business Oriented Architecture. If anything, I'd prefer to call it Architecture-Oriented Business. As Hal indicates, this calls for architectural thinking at the business level, which need to be aligned with architectural thinking at the information/software level.

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Monday, April 11, 2005

Business Unbundling

One of the key concepts of the component-based business or service-based business is that you can change the nature of the coupling or coordination between enterprise units. So we are seeing significant quantities of demerger, unbundling, outsourcing and so on.

Much of this unbundling is being pushed by regulators, especially in utilities (including telecom). See my previous note on Local Loop Unbundling. Think also of the structural changes that various regulators have threatened Microsoft with.

These are often formulated in terms of unbundling services, products or platforms. But they have obvious implications for organizational structure as well. (At one time it looked possible that Microsoft might be split into separate organizations, just as Standard Oil and ATT were previously broken up. And many years before that, IBM was also threatened.)

But the regulatory agenda should not make us think there is always a going to be a conflict of interest here. (Someone in a large telecom company once told me that the unbundling forced upon the company by the regulator had actually turned out to be beneficial for the company as well, because it had increased internal management visibility and innovation.) So sometimes unbundling is the right thing all round.

SAP has been making moves to support unbundling, and the SAP Roadmap includes guidance for unbundling (ECRM Guide, Feb 2005). There is also some standard IT support for inter-company collaboration and data exchange (SAP Press Release, Feb 2005).

John Hagel III and John Seely Brown have been writing about these issues for ages. John Hagel and Marc Singer had an article in Harvard Business Review called Unbundling in the Corporation (1999) (abstract only, purchase reprint). Hagel has been promoting a standard demerger pattern, which splits the enterprise into three standard chunks: infrastructure management, customer relationship or product innovation and commercialization. (This pattern has evolved in his writing, and his terminology has shifted somewhat.) In a recent blog posting (March 2005), he interprets recent developments at 7-Eleven as a successful implementation of this idea.

Hagel points out that these three activities operate with a different business logic on different timescales. Referring to
Disney, HP and Morgan (April 2005), he comments: "Product innovation businesses and customer relationship businesses have completely different economics, skill set requirements and cultures. These are incompatible business types that cannot co-exist successfully within a single corporation. By trying to straddle both, these companies found that they could not be excellent in either."

Hagel has identified some of the relevant factors for determining the best way of unbundling the business - but this is not the whole story.

There are two contrasting approaches for unbundling. The approach favoured by Hagel assumes we can establish broad patterns and practices of demerger and subsequent collaboration. This has some advantages - among other things, it suggests that there will be multiple organizations offering broadly similar interfaces, yielding commercial flexibility. But we have some doubts about the generality of this approach. The alternative is to carry out specific analysis for each particular situation. More effort, but sometimes justified.

Saturday, March 19, 2005

Component-Based Business

My book on the Component-Based Business was published in 2001. At that time, Component-Based Software Engineering (CBSE) was all the rage (kindof) and I wanted to demonstrate that the same principles could be applied to the design and construction of business as to the design and construction of software.

At that time, there was a fundamental tension in the CBSE world, which I can very crudely characterize as follows: On the one hand, there were OO people who, when they thought of components at all, saw them as glorified objects. On the other hand there were the ODP/CORBA people who thought of components as inherently distributed service packages, but who were often prevented from implementing interesting and viable solutions by the prevailing technological state-of-the-art. (I did say this was a crude characterization, I know there are loads of exceptions, but still ...)

My own alignment was always with the service-oriented rather than the object-oriented. (Historical note: I worked on ANSA/ODP in the early 1990s, participating in the Enterprise Computing Project within the ODSA programme.) In my book, I talk about the fundamental principles of decomposing business into independent chunks, from a component perspective, but I also devote a great deal of space to the (sociotechnical) relationships between the chunks, and to the emergent properties of the whole ecosystem that is composed of these chunks.

In the past few years, there has been some huge shifts both in the technology itself, and in the way people are thinking about the technology. People are starting to become much more comfortable in thinking about service-orientation, and the technology is becoming more credible. For my part, I have started to talk less about the Component-Based Business and more about the Service-Based Business, but I see this as a shift in emphasis rather than a fundamental shift in perspective.

Elsewhere, some people are starting to take much more interest in the potential business impact of web services and SOA. (In terms of RM-ODP, this is a perfectly valid separation of concerns: other people can worry about the Technology and Engineering viewpoints, leaving me to devote my attention to the Enterprise and Information viewpoints.) As one indicator of this, we can see people starting to talk seriously about the component-based business as well as the service-based business. For example, IBM has been promoting a method called Component Business Modeling (CBM), which serves as a front-end to its Service-Oriented Modeling Approach (SOMA). However, based on the materials I have seen, I don't think that IBM's CBM represents the full power of the component-based business approach. (See separate posting on my Software Industry Analysis weblog.)

In my view, the main challenges of the component-based (/service-based) business include those of governance. A component-based approach must have a clear strategy for managing complexity, not just denying or suppressing complexity, and is probably going to draw ideas from complex systems engineering (systems, not software). This calls, among other things, for new kinds of modelling and new approaches to architecture.

There are two reasons why it might be a good time for me to produce an updated edition of my book.
  • This topic is now getting much hotter, and I think people may be more ready to accept some of my more radical suggestions.
  • I am now in a position to update some of the material, reference more recent technological opportunities and threats, and introduce a lot of practical business examples.
Or perhaps I should devote my energies to writing the sequel, with entirely new material, based on my more recent work. Please let me know what you think.

Wednesday, December 15, 2004

From Patterns to Strategies

Found some interesting material by Peter Seddon and Geoffrey Lewis from July/August 2003 (html).
  • Strategy and Business Models: What's The Difference (pdf).
  • The Case for Viewing Business Models as Abstractions of Strategy (ppt)
Picking up on some of the ideas from my book Component-Based Business, they argue that business strategies may be composed from what they call business models, in the same way that software solutions may be composed from software patterns. The business model serves as a known successful building block for conceptualizing and building strategy. This is not something I discussed in my book, but it is broadly consistent with some of the work I've been doing more recently.)

(I prefer to call this a business component - I use the term business model for an abstract description at any level, including the component level, the strategy level and the ecosystem level.)

In answer to the question "Which comes first: strategy or business model?", the authors argue that the business model comes first. Of course, as with chicken/egg questions, which comes first depends what process you are describing.

Business Development Constructing/composing a strategy from abstract business models representing business components. (These components may be bundles of business activity or bundles of business interaction/collaboration.)
Business Intelligence Making sense of a complex business ecosystem by deconstructing/decomposing strategies into their components.
Business Innovation Introducing new components into a complex ecosystem, to produce (or inhibit) creative change. Among other things, strategies may be designed to alter market forces by reconfiguring the geometry of the ecosystem. At a higher level, strategy may refer to the mode of engagement with the ecosystem.

Seddon and Lewis are focused upon business development, and adopt a Harvard-centric notion of business strategy, based on the work of Michael Porter. This leads to a design approach known as Directive Composition. My most recent work is on business innovation, and this calls for a different design approach, known as Collaborative Composition.


Sunday, November 23, 2003

Project Catalyst

Project Catalyst was announced by IBM boss Sam Palmisano in a speech to the IBM Business Leadership Forum in San Francisco, November 12, 2003. He made the following key points.



  • Provides a method for identifying the key components of a business.



  • Provides a three-dimensional view - strategic, financial, transformational.


  • Provides a way to highlight those areas of the business that are differentiating.


  • Other components that are not differentiating can be evaluated on a cost basis.



  • The point of the exercise is to show where to start an on-demand transformation.



  • At Veryard Projects, in collaboration with the CBDi Forum and others, we have been championing the component-based business for many years. We naturally welcome the high profile that IBM is now giving this important topic.


    Update March 2005

    I was misled by Sam's speech. I have now been briefed about IBM's Component Business Modeling approach, and I now understand that this was an entirely separate initiative and not part of Project Catalysis. See new blog postings on Component-Based Business, Component Business Modeling.

    Wednesday, July 18, 2001

    Chrysler Has New Product Process

    According to AP, Chrysler has created a process to better develop, build and market new products. The process is based on the creation of 50 separate product innovation teams which would work closely throughout the design, engineering and marketing of Chrysler vehicles.

    Dieter Zetsche, Chrysler Group president and chief executive, said the new process would result in a greater "commonality" within the company which could result in sharing vehicle platforms and components with the automaker's Mitsubishi unit. There is also the possibility of sharing components with Chrysler's corporate cousin, Mercedes Benz. Greater commonality also would mean reducing the number of different types of the same component. For example, Chrysler currently has 25 kinds of batteries. Wolfgang Bernhard, Chrysler's chief operating officer, believes that only five are needed.

    Rich Schaum, executive vice president for product development and quality, said it was hoped the new process could accelerate the time it takes from idea to launch, with 18 months as an objective.

    Source: Chrysler Hatches New "Process" (Associated Press, 12 July 2001)


    The management of 50 separate "product innovation" teams brings up two important challenges.

    • Product architecture - How is the car decomposed into 50 chunks with maximum cohesion and minimum coupling. Assuming a degree of loose coupling (engineering tolerance) between the chunks, what are the consequences of this for the performance and reliability of the whole car? And how are the chunks assembled with minimum waste and zero feature interaction? 
    • Development coordination - How are interactions between teams negotiated and controlled? How are procurement and supply chain issues coordinated? 

    Another interesting aspect of the story is how the corporate interests within Chrysler appear to line up. At least as it is being described by Chrysler senior management, the new process seems to involve a shift of power away from "creativity" and "design" and towards "marketing" and "finance" - these are Chrysler's categories, not mine. A corporate programme of common components also helps to cement the merger between the US and German operations, and may also increase the bandwidth of the relationship with Mitsubishi.

    Originally published at http://www.veryard.com/sebpc/manufacturing.htm