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Chaos, Coordination, and Creative Evolution for OEMs

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On and on it goes with technology and business models trends.

We need to give up on the idea that the IT and Telco players will solve very much of anything, and start relying on a new generation of innovators.

ON AND ON AND ON IT GOES

It seems that the many observers forecasting the state of IoT technology adoption have split into two camps: Those that believe IoT is dead, and those that believe IoT continues to evolve (or morph) from hype to reality. Either way, it’s difficult at best to say conclusively what’s really happening.

Security is still an issue, blockchain is old news, open data and exchanges have fully entered our vocabulary, edge appears to have become a meaningless characterization of some sort of computing schema, along with machine learning, autonomous vehicles, drones, augmented or virtual reality—all still promising break through innovations and returns.

The mere fact that no one seems to be able to agree on the meaning of the term “Internet of Things” continues to challenge developing a deeper understanding of its combined technology and business impacts. While leadership across industries is awakening to the imperative of “digital,” the relative meaninglessness of these terms leaves executives continuing to hype the concept in their marketing programs, board meetings, and investor presentations.

And on and on and on it goes with forecasts and technology trends.

WHAT DOES SMART SYSTEMS REALLY MEAN?

While it’s still early in this market and in the technology shift toward a hyper-connected society and economy, make no mistake: the train has left the station and this evolution is inevitable. Because this era-defining sea-change involves a sweeping paradigm shift from human-centric computing to “ubiquitous” or “pervasive” computing, we like to use the term “Smart Systems” to describe this phenomenon—a new generation of computing and information architecture that looks very different from classical information, computing, and telecom systems.

New embedded intelligence, networking and software innovations are all attempting to break from today’s computing and telecom paradigms to enable real-time, state-based, context-sensitive capabilities. Smart Systems enable intelligent real-world physical systems to be integrated with virtual digital systems allowing the data from sensors, machines, video streams, maps, people, news feeds and much more to become an integral part of all information systems. The net result is creative combinations of new technology that integrates people, processes, and data in ways that enable collective awareness and better decision making.

The extent to which these technologies are clearly understood by the C-suites investing in them is not clear. What is clear is that with the emergence of connected sensors, machines, and new mobile information devices, the complexity of developing these systems, and the related organizational challenges driving organic growth is overwhelming to many companies. Because networks add yet more complexity and drive up the number of stakeholders and interactions, and because just about
everything will eventually get connected, we strongly believe that business model design is the most important challenge that needs to be addressed in the marketplace today.

This leads us to a simple conclusion: If we do not solve the business model challenge, no amount of new technology innovation will likely change the game for any company. We believe that we need to look at business model design challenges and related technology impacts across multiple dimensions, including user experience, core technology, data and content, behaviors, skills and relationships. Based on our examination, here is how we see business model challenges and related trends as we enter 2021 and beyond.

EXPERIENCE: COMPUTING FINALLY MEETS THE REAL “PHYSICAL” WORLD

Today, we can make a computer capable of beating the reigning genius of chess, but we can’t make a robot capable of walking across the street as well as any normal two-year-old child because the real world is not a strictly regulated, closed system like a chess game.

Of course, digital computing has radically transformed human affairs. But so far, that transformation has taken place on the computer’s terms. The marvels of computing have taken place in rigidly regulated, closed systems. So far, IT has floated blissfully above the profound messiness of reality. If you want the benefit of computing, you either sit down at your computer or stare endlessly into your smart phone. To this day, computing and smart phones are like a baby in diapers—cared for by people, coddled by people, tolerated by people and, rather astonishingly, people only expect it to continue to get cheaper, faster, easier to lift, and perhaps more entertaining, but they don’t seem to expect much more.

We think the challenges with integrating these systems into our everyday lives will require a far greater understanding of the user’s needs in a particular context-of-use. Smart Systems and the IoT push this even further. Computing power and networking is embedded in more and more of the objects and environments around us. Hence, the social and physical contexts in which connected
devices and services can be used is even more complex and varied, making the need to rethink
computing models essential to enabling effective or compelling user experiences.

TECHNOLOGY: IT & TELCO’s NEED TO “MOVE ON”

When it comes to preparing for the global digital economy, most people assume that “the technologists are taking care of it.” They take it on faith that the best possible designs for the future of information will emerge from large corporations and centralized authorities. But those are big, unfounded assumptions. In fact, most entrenched entities are showing little appetite for radical departures from current practice. Yet current practice will not serve the needs of a genuinely connected physical world.

As we have pointed out for some time now, the IT and telecom sectors have failed to reevaluate
their relationship to advancing technology and to their constituents. The business and technology paradigms to which these industries cling today are far too limiting, too cumbersome, and too expensive to foster and sustain new growth. The IT and Telco “arms merchants” are largely dragging yesterday’s
“sunk” R&D investments to tomorrow’s new smart system and services opportunities, and they’re conning most of today’s enterprises into believing they are investing in “new new” capabilities like digital, IoT, and who knows what else.

From a Telco perspective, today’s discussions of smart systems still focus almost exclusively on communications, but precious little on the information value. From an IT perspective, today’s cloud-obsessed enterprise IT function is a direct descendent of the company mainframe, and works on the same “batched computing” model—an archival model yielding a historian’s perspective. Information about events is collected, stored, queried, analyzed, and reported upon. But all after the fact. The reason is simple. Today’s computing systems were not designed for a real-time, state-based world driven by pervasive information flows.

We believe that a critical step in moving new digital opportunities forward is to give up on the idea that the IT and Telco players will solve very much of anything, and start relying on a new generation of innovators.

DATA AND CONTENT: DATA DEMOCRATIZATION DRIVES A “POST-PLATFORM” WORLD

In today’s world, information is not free (and that’s free as in “freedom,” not free as in “free of charge”). In fact, thanks to present information architectures, it’s not free to easily merge with other information and enable any kind of real systems-based intelligence.

What would truly liberated information be like? It might help to think of the atoms and molecules of the physical world. They have distinct identities, of course, but they are also capable of bonding with other
atoms and molecules to create entirely different kinds of matter. In today’s world of information systems, such bonding is not all that easy. We need to creatively evolve to an entirely new approach that avoids the confinements and limitations of the today’s differing platforms. We need to quickly move to a “post platform” world where there is a truly open data and an information architecture that can easily integrate diverse machine data, information systems and people. A world, in other words, where smarter systems will smoothly interact to create systemic intelligence. A world where there are no artificial barriers between different types of information.

The innovators we think “get it” are focused on new tools to automate the provisioning and commissioning of complex systems, tools to let users develop their own apps more intuitively, and to develop new information architecture and data management tools that allow device and machine data to move among users, owners, renters, and brokers in a more intuitive, easier and much less expensive manner.

BEHAVIORS: CREATIVE DESTRUCTION FOR TRADITIONAL BUSINESS MODELS

Large corporations have many rules and policies that often seem completely disconnected. They have been creating language, processes and systems that seem to be a triumph of technique over originality. General managers, like cost accountants, claim to have developed uniform approaches for just about everything—including “organic” growth. In our view, mounting evidence suggests that most of the
existing approaches to creating new organic growth in established businesses are of little value when it comes to disruptive smart systems opportunities.

So how have manufacturers continued to grow and create value? Global expansion, reengineering,
lean practices, corporate business systems, mergers and acquisitions—all reasonable strategies for growth and value creation. But the marketplace is rapidly consolidating, and the world is increasingly driven by new and unfamiliar technologies. What worked in the past is less likely to work now or in the future. For many companies, those strategies have already reached the point of diminishing returns.

Unfortunately, while most businesses are now attempting to embrace new technologies and making bold pronouncements about digital maneuvers, many are not yet embracing new business models of any kind. Thus, we believe they are in serious danger of moving aggressively to implement—by about 2025—a 2010 era strategy. In so doing, they will destroy value rather than create it.

RELATIONSHIPS: TRUE COLLABORATION BECOMES LIKE PRE-SCHOOL. WE SHARE BECAUSE WE CARE.

Today, knowledge and expertise largely resides in functional silos and systems dispersed across organizations. Acting singularly, functional organizations are constrained by the resources under their control or the information available to them. Legacy processes and habits inhibit any natural ability to communicate and work together to solve big problems or create new solutions. The smart system solutions we envision are a significant departure from today’s organization structures and relationships.

Who will own the “platform”? Who will own the “data and information”? For that matter, who owns the “P&L,” and who owns which piece of it, and for what part, or for how long? We believe a whole new generation of smart system organizational “designs” are emerging today that cut across traditional lines of business ownership like Broadway cuts diagonally across Manhattan. The systems and platforms required to address critical smart infrastructure systems like transportation, water, the food supply chain, and smart cities will need to be based on platforms that enable fluid interactions, but that are also multi-company, multi-owner, multi-stakeholder, and multi-user. This is, of course, a radical departure from today’s world.

These new businesses will be based more on relationship design and will better leverage the collective creativity and intelligence available from multiple functions across multiple companies and interlocking value networks. In this new world, they will freely share information and collaborate to ensure creation and delivery of effective solutions to the wide range of infrastructure and resource-based challenges that society is facing.

Is that really so different from today. Yes, we think so!

The solutions we are describing here will have far less managerial hierarchy, command and control decision-making, or proprietary ownership of ideas than companies have been accustomed to. These
networks will be self-organized by manufacturers, service providers, partners and customers who are motivated to explore and develop ideas they care deeply about. Collaborative innovation will extend beyond ideas about new products and services to the very manner in which business is conducted.

SKILLS: HAS ANYONE SEEN A SMART SYSTEMS ARCHITECT?

Genuine smart systems completely reconfigure the relationships of people, machines and information devices to business systems and society. They must be built upon true, across-the-board digital computing and automation, accomplished by enabling everyday devices with a whole new generation of tools for managing rich, vast streams of meaningful data and intelligence. The goal is to organize smart systems that are self-sensing, self-controlling, and self-optimizing—automatically, without human intervention.

We believe this requires a new discipline where designers understand both technology and business architectures. We believe these two dimensions are becoming much more closely coupled and increasingly need to be viewed in close proximity. The two thrusts need to be mutually supportive without inhibiting one or the other. But that’s a tall order. Trying to coordinate and leverage the respective roles of technology architecture and business architecture often creates contention in today’s organizations. Just look at the endless attempts of IT organizations to deliver any real value to lines of business.

However, we see some new campfires ahead on the trail. We are seeing a growing number of players who view the continuously evolving relationship between these “architectures” as fertile ground for innovation. They see that the design of the technology solution and the design of the business itself need to be interwoven and mutually supportive. We now believe that success in either domain will increasingly go to the companies that recognize this skill and nurture it to the point where the organization can effectively utilize the combined potential of both.

ON A MORE POSITIVE NOTE…

Given the scale of the apparent opportunity, one cannot help but wonder if a more unified data management, application development and services delivery “post”-platform world will evolve to enable the “Internet of Things and People.” We look forward to new software and platform integration technology that will really provide collaboration and applications capabilities, and act as an orchestrator of the pervasive Internet of Interactions.


This essay is supported by Harbor’s presentation, “Developing New Growth Opportunities at the Intersection of Smart Systems, Services and the Internet of Things.”

Fill out the form below to download the entire presentation for free.

January 7, 2021
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