alookapart

Reflections on an academic conference

I’m not exactly in time with this, am I? I attended Mr. Prahalad conference in October and still I had to build up something from my notes… I wanted to share something anyway as his speech is not only sharable but in a sense inspiring, especially for someone like me who studied eBusiness and ICT management and especially in this times of crysis, when we urge to find new ideas and entrepreneurship initiatives.

Despite my delay in writing about it, Mr. Prahalad seems so far ahead in the scenarios he usually draw that this compendium of his 2 hours long speech isn’t obsolete at all. He was in Milan for an economic forum and had a speech at my university, the Politecnico di Milano, to introduce his new book ‘The new age of innovation‘.

The conference, which gone under the name of “Business Strategies: IT Matters” (Politecnico di Milano, 28/10/2008, Milan, Italy), focused on how ICT (Information and Communication Technologies) can be successfully integrated or even be the framework of new brilliant business models and their continuous innovation over time.

Three are the main ways to create value through a smart use of IT technologies:

• get “next practices” (not best practices) through amplifying the weak signals;
• create value and relationship between the firm and customers;
• gain a global perspective;

All of these focus on knowledge from the ecosystem and the company itself.

It’s important to consider, in this analysis, the future of technology:

• cheaper and available to a broader public;
• pervasive connectivity and digitalization;

The combination and evolution of these concepts allow the experience with new technologies to be personalized on each person, over millions of customers, very easily.

Albert Einstein liked to say that “learning for examples is not the best way to learn, is the only way to learn”, so let’s see some examples:

• Let’s consider someone who wants to build his own personalized toy bear. The experience of “configuring” or “building” his own bear becomes part of the product (or service) itself. The product becomes HIS OWN personal product, not one of billions. The production process and its output becomes personal and co-creative.
• For the second example we could consider pacemakers. The value is not in the object but in it’s interaction between various actors: patient, hospital, diagnostic clinics, etc. The whole process can’t be controlled by a single organization or company because it’s all result of a network. Well, it’s not hard to think about technologies that can made the networking better and allow all the companies all the network long to offer new and innovative services(ex. the pacemaker could automatically advise the patient about checks to be done or previously warn for abnormal parameters).
• Finally, truck tires! In this market, in the USA, some of the major companies already switched from selling the product (tires) to selling a service (pay per use, in miles). This goes under the name of servitization. Why is it so important? First of all the business model is no more base on a transaction (I give you tires, you give me money) but on suppling a service, which means guaranteeing a result. The focus is than on the RELATIONSHIP and no more on the single transaction. Moreover, offering new services is much easier and this increase customer’s fidelity. Last but not least, customers do not have to capitalize in advice, buying for example very expensive truck tires before even drive a mile, but they can pay just for the results they gain, in this case the miles they drive with TIRs. We could call this business model PAY-PER-USE!

All this means in the future firms will have to work with broader supply chains (or even supply webs), but there will be no commoditization of their business, because selling experience instead of products each relationship (not transaction) is unique!

How to do that?

• build the technological architecture (ex.the tire company has to invest in ICT)
• re-design business processes
• build the social architecture (actors involved in the experience platform: small and big)

This is a collaborative approach, not focused on the single company, which requires global competences and talents.

But unfortunately the “Italian truth” is that we are really far from this kind of ICT-based services and solutions, often base themselves of the value proposition of a company. In Italy the distance between the informatics organization (often called CED or IT dept.) is so oversized to seems unbridgeable. The IT, in fact, is often seen as a “support function” to the “internal client”, which are the business lines, the real value-factory for the final client. There is no or few integration and communication between technical and business people… we need a convergence!

As a first step of the long journey to the futuristic scenarios outlined by Prahalad, we (Italian companies) should at least thin the difference in perception between IT and strategy!