Proprietary Innovation: An IBM i Ace In The Hole
March 12, 2018 Dan Burger
You may know a business executive who has been thrown off balance by the overwhelmingly positive reports of the superior technical advantages of startups compared to legacy businesses that have invested in modernizing or refactoring their existing systems. Well, consider that startup advantage to be a snowball in Phoenix. Organizations with the best opportunities to be powerful within their market segments are the ones that are smart about leveraging their data and increasing the skills of their employees.
Remember this term: proprietary innovation. Just when you thought proprietary and innovation would never appear in the same sentence, get ready to hear more about it. Proprietary innovation is more valuable – even when carrying some legacy hardships, than the fresh slate of technological promise.
We’ve been hearing about the technological advantages start-up companies have for years. Prognosticators bet on the start-ups to talk over the business world. Are you interested in hearing the other side of that story?
Make no mistake, ancient architecture left untouched will almost always cause unimaginable business pain. No one, least of all C-level executives in an IBM survey, would condone the stagnation of information technology. Of course, that doesn’t disavow the existence of companies doing just fine (for the time being perhaps) with hardware and software from the pre-Internet days. There will always be anomalies.
A new global C-suite study by the IBM Institute for Business Value backs up this presumption of proprietary innovation, which could be described as working smarter, not harder, or making more out of what you have (the proprietary stuff) rather being possessed solely by the digital glamor without accounting for the value of past investments. The real competitive advantage goes to those with best data, not necessarily the most data, but the combination of quality and quantity data is still the most powerful differentiator.
The cleverly titled report, Incumbents Strike Back, makes it known that nearly three-quarters of the surveyed executives believe well-established firms with a willingness to innovate are better positioned to dominate their markets than the new arrivals with all the bells and whistles, but little business knowledge specific to the industry and customer preferences.
We have start-up companies in the IBM i ecosystem, but they are rare. A few of the managed service providers and cloud service providers qualify. I’d consider IBM Watson as a start-up. But finding innovative incumbents is much easier. Some of the MSPs fit that description as do some of the vendors that are actively acquiring companies and developing wider business partner relationships. These are all examples of choosing innovation over institutionalization.
Based on the report’s analysis, the stakes in the “winner-take-most” business model are growing rapidly. “Ecosystem advantage” is a term that rivets the attention of top executives. And they are recognizing the key elements are developing partnerships even to the extent of sharing physical assets (new technology being one of those) and adding skilled people.
“For some time now, disruptive strategies have discounted the value of physical assets. That could be changing,” the report advises, “[as] the bridge between the digital and physical worlds – ignites the economy of things, value could shift to those that expertly orchestrate digital-physical ecosystems. Innovative incumbents can turn their ownership of infrastructure and assets, and their expertise at managing them, into new disruptive advantage.”
Surveys, and the reports they generate, place an emphasis on statistics and statistics that come from the top-level executives are generally assumed to be the sharpest tools in the shed. So, let’s look at the advantages (revenue growth and profitability are two touch points) that the battle-scarred organizations have based on the responses of 12,500 survey participants, including CEOs, CIOs, CFOs and several more C-level categories.
By a wide margin, the surveyed executives believe the incumbent organizations have the competitive advantage over smaller companies and start-ups. The final tally was 72 percent for the incumbents and only 22 percent for the start-ups. The distinguishing factor for the incumbent advantage is these organizations have strategies for developing digital skills and innovator talent. They also have a business model that facilitates exchanges between two or more interdependent groups, usually customers and business partners.
The incumbents’ most powerful asset, the study reveals, is data. Incumbent enterprises own 80 per cent of the world’s data. No one seems to have any trouble generating data these days. The trick is getting more value from that data (making sense of what is generated), becoming more agile in terms of continuous transformation, while not playing fast and loose with your most precious asset (sharing it only when prudent).
Taking care of customers is not lost in all this. Creating a more personalized customer experience remains a high priority. This survey reports 86 percent of organizations claim they are at least somewhat effective at creating personalized customer experiences and 53 percent consider themselves quite effective.
More than 25 percent of the innovative incumbents are turning to artificial intelligence (AI) technologies and cognitive solutions to better understand customers and improve the customer experience. More than 50 percent hope to achieve on-target personalization using cognitive solutions in the next two to three years.
Workforce skills – developing talent and skills by structuring work in new ways – is top of mind in this report. Reducing skills gaps, especially technology skills, remains important, but investing in talent and developing management skills are recurrent themes.
The Incumbents Strike Back report can be downloaded here.