By The Open Group
The term “disruption” has been the de rigueur description for what’s been going on in the technology industry for a number of years now. But with the pressures of a digital economy facing all industries now, each is being disrupted in numerous ways.
Although disruption is leading to new and better ways of doing things, it can also be devastating for businesses and industries if they choose to ignore the advances that digitalization is bringing. Companies that don’t want to be left behind have to adapt more quickly than ever—or learn to disrupt themselves.
Sriram Sabesan, a partner with Conexiam, believes that a certain amount of disruption, or mitigations to disruptions, can indeed by architected by an enterprise—if they have the foresight to do so. We spoke with him in advance of his session at The Open Group San Francisco 2017 event to learn more about how enterprises can architect their own disruptions.
We’ve been hearing a lot about disruption over the past few years. How do you define disruption and what is the disruption curve?
Disruption normally happens when you don’t anticipate something and the change suddenly occurs on you. In fact, the changes have been happening, but no one has taken the time to connect the dots. To give an example, let us consider an individual holding a mutual fund, which has significant stakes in property and casualty (P&C) insurance businesses. The impact of a shared economy (Uber, Lyft, Airbnb) is that the number of ‘owners’ is likely to stay flat or see marginal increase. This cascades into a smaller number of insured people, hence diminished revenue for the insurance provider. This impacts the stock valuation of the P&C companies, finally, impacting the individual owning the mutual fund with interest in P&C sector. And that’s a foresight people might not have. This is not about crying ‘wolf,’ but about mitigating potential risk to an asset—at every step of the chain.
Let us take another example. Most manufacturing businesses hold reasonable stock of spare parts to their machinery. Even at home, we hold metallic clips, nails, etc. With 3D printing, one may be able to reuse the raw materials—sheet metal or plastic or whatever they’re trying to manufacture for the main product to create the spare-parts. At home, we don’t have to stock clips, pins or nails—but raw material. 3D printing impacts the businesses that are producing these products todays. Some positively (example e-Nable – http://enablingthefuture.org/) and some in unknown ways.
It is about walking the chain. The company adopting a new technology or approach may not be the one getting impacted. It may not be about the industry vertical that is adopting a new model. It’s mostly likely the cascading effect of people taking part in the diluted chain that are impacted. It’s a system of systems game.
The Disruption Curve is based on product maturity ‘S-curve.’ Familiarity breeds contempt and raises expectations. As people get used to do something in a certain way, some start to notice the little annoyances, and others want to do things differently or better. For businesses, it is the necessity to create a new revenue model. The next S-curve is born when the old S-curve approaches its top end. The best definition is given by Prof. Clayton Christensen from Harvard Business School. However, the simplest interpretation could be ‘an unexpected change to the way one does things or when someone is unseated.’ For this topic, I think everyone is trying to improve their personal productivity, including better disposable income, a dose of vacation or a personal moment for themselves. Any and all of these will cause a disruption.
In your opinion, what have been the biggest industry disruptions to occur in the past 10 years?
Most of the changes happened in isolation in the past. There was no significant combinatorial effect that could transcend multiple industry verticals like today.
Google disrupted search; Amazon disrupted in-store purchase models; Netflix the DVD rental market. They all leveraged the internet. Google was able to capture and connect contents of websites, scanned copies of books, triggering the birth of ‘big data’. And Amazon on the other side, when they started having too many products, they couldn’t have an ecosystem that could support the enterprise across the globe and they came up with the AWS system. What they made internally, they also made a commercial, external facing product. Skype changed telephony; Paypal changed money exchange.
Growth in metallurgy and medical sciences evolved from the foundations laid in the later half of last century. Growing human body parts in lab, implantable devices, etc. The last decade made remote, continuous monitoring of human behavior and health possible.
But the biggest change is that all these companies discovered that they actually depend on each other. Netflix on AWS, AWS on fiber optic cable owners, both of them on the last mile internet service providers, etc. That realization, and the resultant collaboration via open standards is the biggest of all.
All of them changed some of the fundamentals of human-to-human interaction and human-to-machine interaction. The new model made any individual able to provide a solution rather than waiting for large enterprises to initiate changes.
Who have been the most influential disruptors—is it just the usual suspects like Uber or Airbnb or are there others disruptors that are having a greater influence on industries that people are less aware of?
It depends on the vertical. As I said before, the past decade has been limited to a single vertical.
If you think about tax filing, Intuit has been the most influential in that area with Turbo Tax. They made a lot of things easier. Now you can take a picture of your W2 and 80% of your filing work is completed. Using another product, Mint.com, they became a personal finance advisor in a non-intrusive way—working with your banks, investment accounts and credit card accounts. PayPal and Square are disruptors in the ecommerce and money movement sectors.
Each vertical had its own set of disruptors, not everyone came together. But now more and more people are coming together because the services are so interdependent. Apple with its iTunes changed the whole music industry. Amazon Kindle for books. IBM with its Watson is changing multiple verticals.
Medical devices are also undergoing a lot of change in terms of things that could be planted in human beings and monitored wirelessly so it can give real-time information to doctors. The most common human behavior is to visit doctors when we are not healthy. Doctors don’t have data points on the transition from a healthy state to an unhealthy state, what happened, why it happened. Now they can monitor a person and behavior continuously. I recently read about an emergency room operation that used the data from a FitBit to figure out what happened to a patient and treat the patient very quickly. They saw the transition and the data points stored in the device and were able to diagnose the patient because the patient wasn’t conscious.
So, I guess, there are more unusual suspects and players. To name a few: Khan Academy and Open Courseware in education, e-Nable for exoskeletal structures, derivatives of military’s ‘ready-to-eat-meals’. There are also new products like ‘Ok Google,’ ‘Alexa’ and ‘x.ai’ which combines several aspects.
Your talk at The Open Group San Francisco advocates for an “architected approach” to disruption. Can disruption be architected or is there a certain amount of happenstance involved in having that kind of impact on an industry?
There is some element of happenstance. However, most of the disruptions are architected.
An enterprise invariably architects for disruption or reacts rapidly to mitigate disruptive threats to sustain a business. There are some good examples that go unnoticed or written off as the natural evolution of an industry.
I believe Qantas airlines was the first to realize that replacing seat mounted inflight entertainment (IFE) units with iPads saved at least 15 pounds per seat. Even after adding 40% more seats, eliminating these devices reduced the overall weight of a Boeing 777 by 7%. Simply by observing inflight human behavior and running test flights without IFEs, airlines architected this change. The moment the savings was realized, almost every airline followed. This is an example of architected change. As regulators started accepting use of wifi devices at any altitude, compliance work done at the gate, by the pilot and maintenance crew also switched to hand-held devices. Less paper and faster turnaround times. Savings in weight resulted in lower overall operating cost per flight, contributing to either lower prices or more cargo revenue for the airline.
Every enterprise can anticipate changes in human behavior or nudge a new behavior, build a new business model around such behaviors. Apple’s introduction of touch devices and natural interfaces is another example of well-architected and executed change.
There are parts of a business that need significant effort to change due to cascading impacts, say an ERP system or CRM or SCM system. Even shifting them from on-premise to cloud would appear daunting. However, the industry has started to chip away the periphery of these solutions that can be moved to cloud. The issue is not technical feasibility or availability of new solutions. It is more about recognizing what to change and when to change. The economics of the current way of doing things balanced against cost of change and post change operations will simplify decision making. The architect has to look outside the enterprise for inspiration, identify the points of friction within the enterprise, and simply perform a techno-economic analysis to architect a solution.
Sometimes a group of architects or industries realize a need for a change. They collectively guide the change. For example, consider The Open Group’s new Open Process Automation Forum. What would normally appear to be disconnected verticals – Oil and Gas, Food Processing, Pharmaceuticals, Fabric and Cable manufacturers have come together to solve process management problems. Current equipment suppliers to such companies are also part of the forum. The way the forum works will lead to incremental changes. The results will appear to be natural evolution of the industry but the fact that these folks have come together can be called a disruption to an otherwise normal way of operations. With this, there is the possibility of collaboration and mutual learning between operations technology and information technology.
I know of car companies, insurance companies and highway management companies who started silent collaboration to explore solar panels embedded on the road and live charging of automobiles. An extended ‘what if’ scenario is the use of GPS to identify the availability of solar panel embedded roads matched with driving behavior of the car owner to make a decision whether the charge on the car’s battery can be used as source of power to reduce the burden on the electric grid. Last month I read an article that the first solar panel road is a reality. For metering and charging of power consumption, this may not be much of a disruption. But other adjoining areas like regulations, parking privileges, toll charges will be impacted. It is a question of how soon the players are going to react to make the transition gradual or suddenly wake up to call them disruptions.
Is it possible for established enterprises to be the arbiters of disruption or is that really something that has to come out of a start-up environment? Can an architected approach to disruption help established companies keep their edge?
Yes and no. The way most companies have grown is to protect what they’ve already established. A good number of organizations operate under the philosophy that failure is not an option, which implies that taking risks has to be reduced which in turn stifles innovation. They will innovate within the boundaries and allowances for failures. Start-ups have a mindset that failure is an option because they have nothing else to lose. They are looking for the right fit.
To be an arbiter, start-up or established enterprise, take a page from the research on Design Thinking and Service Blueprinting by Stanford University. It provides a framework for innovation and possibly disruptions by any organization – not just the start-ups. Progressive’s telemetry device is just the beginning. Once the customers understand the limits of privacy management, all insurance companies will change the way they rate premiums. Just learn from the rapid changes the TSA made for full-body scanners. Scanned images rapidly changed from close to real body shape to a template outline. Customer outrage forced that change.
Some big enterprises are actually working with start-ups to figure out what changes the start-ups want to do, what kind of pain points they’re offsetting. There are companies who work with an agenda to change the operating model of the whole industry.
In the U.S., one can look at CaptialOne, Amazon (the retail business, not AWS), MegaBus, and Old Navy for creating new business models, if not a complete disruption. Expedia created GlassDoor, and Zillow; Expedia was founded on making search, comparison of competitive offers and decision-making simple. The bottom line is whether the philosophy with which an enterprise was created has become its DNA, resulting in new verticals and value creation in the eyes of the investors.
It is possible to have an architected disruption approach moving forward but it comes from a place where the company defines the level of risk and change they’re willing to bring. At the end of the day, public companies are under constant pressure for quarterly results so big changes may not be possible; but they may be doing small incremental things that morph into something else that we cannot easily see.
Is architected disruption a potential new direction that Enterprise Architects can take as either a career path or as a way to show their continued relevance within the enterprise?
Yes. Let me qualify that. As things stand today, there are three kinds of architects.
Architects who guide and oversee implementation—people who have to make sure that what has been planned goes according to plan. These architects are not chartered to create or mitigate disruptions. It is the task that is given to them that distances them from effecting big changes.
The second kind of architects focus on integrating things across businesses or departments and execute with the strategy leaders of the company. These architects are probably on the periphery of enabling disruption or mitigating impacts of a disruption using an architected approach. These architects often react to disruptions or changes.
The third set of architects are trying to provide the strategy for the company’s success—creating roadmaps, operating at the edges of corporate charter or philosophy, thinking about every moving part within and outside the enterprise. They are on the watch out for what’s happening in human behavior, what’s happening in machine behavior and what’s happening in automation and trying to modify the portfolio quarter by quarter, if not sooner. It is tricky for these architects to keep track of everything happening around them, so it is normal to get lost in the noise.
With the right attitude and opportunity, an architect can create a career path to move from the first kind to the third kind. Having said that, let me be clear, all three kinds of architects are relevant and required for an enterprise to function.
Is there a role for standards in architected disruption?
Yes. The standards provide a buffer zone to limit the impact of disruption. It also provides a transition path to adopt a new way of doing things.
The standards help in a couple ways—The Open Group sets standards for Boundaryless Information Flow™. At the end of the day, no business is an island. So when a payment or financial e-commerce transaction changes from a bank to a PayPal account to a mobile wallet or a phone number, you need to have certain communications protocols, certain exchange standards to be defined. What kind of failure mitigation one needs to have in place needs to be defined—that’s one.
Second is supporting management decision makers—CEOs, COOs. We have to provide them the information that says ‘if you do this within this confine, the possibilities of failures go down.’ It’s about making it easier for them to decide and take on a change effort.
The standards provide a framework for adopting the change as well as a framework for helping management decisions mitigate risk and for making an ecosystem work well together.
Are there any other ways that disruption can be planned for?
One way is to look at the business patterns, the economic indicators that come along with these patterns.
Would Uber have survived in the mid-to-late 1990s? Probably not, because of the growing and more affluent economy. The economic pressure of the late 2000s diminished total disposal income so people were open to certain changes in their habits. Not only were they open in their thinking about socializing, they were open to penny-pinching as well.
There are parts of businesses that are hard to change, like the logistics management and ERP systems of an airline; clearing house operations of banking systems; cross-border, high-value sales. There are parts of the business that can change with minimal impact. Gartner calls this concept Pace-Layering. We have to look for such layered patterns and make it easier to solve. And the growth part will be complemented by what’s going on outside the enterprise.
There are a lot of examples of products that were way ahead of their time and for users to imagine / accept the change, and hence failed. Uber or Ford, despite following different approach to deliver their product to the market, focused on the problem of mobility, the economic and social climate, and were willing to innovate and iterate. Oxo products, for example, though they cannot be technically classified as disruptors, changed the way we look at kitchen tools. Oxo focused on user research and product fit.
So the winning formula is to focus on market and customer needs. Start with accepting failure, test like there is no tomorrow. And at the hint of a tipping point, scale.
Sriram Sabesan leads the Digital Transformation practice at Conexiam. He is responsible for developing best practice and standards in the areas of Social, Mobile, Analytics, Cloud and IoT (SMACIT), Customer Experience Management and governance.
Over the past 20 years, Sriram has led teams specializing in system engineering, process engineering and architecture development across federal, technology, manufacturing, telecommunication, and financial services verticals. Managing and leading large geographically distributed teams, Sriram has enabled clients develop and execute strategies in response to shifts technology or economic conditions.
Sriram has been an active member of The Open Group since 2010 and is on The Open Group Governing Board. He has contributed to the development of Open Group standards, snapshots and white papers. He is an Open Group Certified Distinguished Architect and is certified in TOGAF® v8, Scrum Practice and Project Management.
Sriram holds a Bachelor of Science degree Mechanical Engineering and Master of Science (Tech) in Power and Energy. Sriram also received his Diplomas in Financial and Operations Management in 1998.