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Digital is changing more than your product

When famous venture capitalist Marc Andreessen wrote that “software is eating the world” in 2011, he used a number of different examples of how software is disrupting traditional industries. Today it is even more obvious that software is fundamentally changing the way we as individuals interact with each other, companies and governments. We see software based and very successful business models in a wide range of different industries. Precondition for this rapid progression is that today’s software programming tools and Internet-based services make it easy to launch new software applications - without the need to invest in new infrastructure and train new employees.

As a consequence, the traditional paradigm where large or well established organisations hold a dominant position within a stable ecosystem has long gone. Facing a very agile environment, organisations increasingly have to reinvent what they do or to tailor their products to individual markets. To achieve this, organisations will utilize technology to create services – new ones or around established products.

Companies born into the digital world

For those unaware of the tectonic shifts, the rise of Uber is an excellent case study in how digitalisation can be harnessed to fundamentally change the way things work. And, while Uber is the epitome of a company born into the digital world, as later examples will show, there are many lessons to be learned from their story that can be and are increasingly applied to traditional businesses looking to make a digital transformation.

To understand how important Uber really is, it is important to have an appreciation of the way that the taxi industry works. Until very recently, the taxi industry worked in a fairly static manner. Taxi companies generally own significant assets in form of cabs, dispatching equipment, depots and proprietary metering hardware. The taxi process works in a way that a customer gives one of the several local taxi companies a call, the driver arrives, then starts the meter and at the end of the journey the passenger pays using cash or, more recently, cards.

This is a disconnected process where the customer has no awareness of the cab driver, payments are very manual, the customer has no idea of the cost of the trip until it is completed and there is no visibility over where the dispatched cab is at any time. For individuals who travel a lot and perhaps have to juggle the vagaries of multiple languages, currencies and taxi availability, this creates significant headaches.

Uber turns this model upside down. By downloading a free application, consumers can order a car from the mobile device. The application tells the customer how far away the car is, and the customer can even track its progress as it makes its way to the pickup point. On top of this the customer sees the name of the driver, the license plate number of the car and the rating that other Uber customers have given that particular driver. Once the destination is reached, the transaction occurs seamlessly on the Uber platform – payment is made from the credit card that customers enter into the application when they sign up. An invoice is automatically emailed to the customer and they can rate their driver – all within the application.

In the case of the Uber drivers, they have a companion application on their own mobile device which dispatches them to jobs, gives them contact information for the customer and directs them to the best route for the particular trip.

Applying digital to classical B2B businesses

Uber is a perfect example of digital disruption. It takes an industry that was static, deeply rooted in archaic regulation and that delivered poor service, and flips it on its head. But digital isn’t just for new businesses. Digital transformation is also the way in which existing businesses can innovate, find new business models and maintain competitive.

A company quite aware of the current situation is the truck company MAN which has been established in 1758. According to Maximilian Nowroth MAN is afraid that in the future trucks are just a replaceable piece of hardware and trying to answer the underlying question: What is the future business model in the evolving digital world? MAN chairman Joachim Drees is convinced that only those companies will survive which offer software based services around the classical hardware product. As he states, a first step in this multi-stage process includes the collection of data like speed, fuel consumption and data related to the condition of the truck. Subsequent steps include data analysis and the development of new data related business models. As a long term result, and similar to Uber, MAN could imagine to provide an online platform to act as an agent for transport services independent of single haulage contractors or truck manufactures.

A company which has already moved further along this path is Sick. Being in the field of factory and logistics automation, they provide networks with belt conveyors, sensors and analytics software which are now responsible for a quarter of the company’s revenue.

Further areas of applications are currently under development. In manufacturing industry for example, process parameters shall be adjusted in case workpieces start vibrating, which provides lower costs at higher overall product quality.

Rapid response to this digital opportunity

Now that we understand the changes occurring within and outside of organisations, and the value that software can deliver, it is time to think about the best practices and optimal tools to employ when it comes to developing, deploying and operating applications in the new digital age. There is little argument about the premise that organisations need the ability to rapidly innovate and differentiate their digital presence via unique digital systems that can change and adapt as fast as business demands. Most traditional application development methods and tools just aren’t scalable in today’s rapidly changing app development landscape. They simply take too long, require very specific knowledge from several fields, and make rapidly changing and adapting the app extremely hard.

Because of this, we think there is the need for a new era of application delivery via platforms with a structure illustrated in the following picture. These platforms provide pre-build components and interfaces to the different development systems and combine these with intuitive modelling and strong analytics capabilities.

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One of the benefits of such a platform is to increase the velocity of creation, deployment and management of enterprise or technical apps. They can also speed up the cycle of application change as well as create stability for users by providing abstraction and insulation from the significant amount of technology churn happening in underlying IT systems and processes.

Those platforms should cover off on a range of different customer needs including:

  • - Pre-build components which can be used to build own applications or as a quick solution for the individual business needs
  • - Integration with different development environments, sensor systems and databases
  • - Capability to manage the entire lifecycle of applications creation, management and iteration
  • - Enterprise-grade architecture that supports security, governance, transactional integrity, and scalability.

By meeting all these needs, an application delivery platform can help organisations to achieve greater efficiencies, higher output and better business performance.

Posted by Lars Lambrecht on February 11, 2016