Innovation and Business Platforms

Using Platforms | © IBM Corporation 2012

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Using Platforms

Jeremy CaineIBM Executive Architect

25 June 2012

Managing the Strategic Value of Innovation


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Agenda

Innovation through Platforms

Current Trends

Discovery Techniques

Example

Exercise


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Innovation through Platforms


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Why Does Innovation Matter?

� Generates high-value, higher-paying jobs

� Fuels wealth creation and profitability

� Creates new industries and markets

� Spurs productivity and economic growth

� Raises standard of living

� Goes beyond invention


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Do you have an Innovation ‘Ambition’?

Source: Harvard Business Review, May 2012 (R1205C)

� A novel creation that produces value

� Invest along a broad spectrum of risk and reward

� Transformation requires you to do things differently

� Key management dimensions of a Total Innovation System:

� Talent; Integration; Funding, Pipeline, Metrics


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© Apple Inc© businessmodelgeneration.com

2001 20082003

Switch to multi-sided

platform business modelConsolidation of

platform business model


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What can you expect from Innovation activities?

70%

20%

10%

70%

20%

10%

INVESTMENT RETURNS

Source: Harvard Business Review, May 2012 (R1205C)

� Focus of innovation activity translated into returns

� Companies targeting the “Golden Ratio” typically outperform peers with P/E premium of 10-20%

� Different ambitions, different allocations

� Transformational initiatives are the engines of blockbuster growth

CORE

ADJACENT

TRANSFORM


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Implication

� Optimised infrastructuresAutomation

Technology Area

� Informed customers, network

effects, richer databases

Access to

Information

� Potential exploitation of

unstructured dataDigitisation

� Total transaction history

availabilityStorage

� Increasingly sophisticated, real-

time analysis Analysis

� Rich local ecosystem (suppliers,

partners, customers.)Instrumentation

� Digital natives viewing using

services as part of ecosystemCollaboration

Cloud computing, BPM

Public sources, real-time feeds,

event systems

Real-time video analysis,

semantic tagging

Increasing affordability, online

backup

Stream Processing

Event Processing

Smart Planet

Web 2.0, Mobile, Social /

Real-time Media

Emerging Technologies

Technology is changing business


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Required shifts to keep current and competitive

Make and sell � Sell and make

Product-centricity � Customer-centricity

Output � Performances

Transaction � Relationship

Value delivery � Value co-creation

Competition � Co-supply

Value chain � Value networkMiraglia and Davies 2009

Client relationships and ecosystems matter

What does your ecosystem look like?


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Digital Platforms for Transformational Growth

BusinessBusiness Business Platform

Business Platform

Disruptive Business Platform

Disruptive Business Platform

� Products & Services

� Capabilities

� Costs, profits

� Strategies

� Revenue streams

� Capability enhancement

� Technology enablement

� Processing efficiency

� Increase straight-through processing

� Per-click business models

� Integrated Product-Service systems

� Value creation and market control

� Multi-sided business models

� Open connectedness to partners and suppliers


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Business Unit

Cross Industry

OpenStandards

None

UTILITYPLATFORM

INDUSTRY

PLATFORM

INTERNALPLATFORM

VALUE NET

PLATFORM

Value derived from Platform

Level of S

tandard

isation

Innovate through a Platform evolution strategy

External Connectivity

Supply Chain


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Current Trends


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Percentage of Consumers with Accounts on Social Sites

Source: IBM Institute for Business Value Analysis, CRM 2011; sample size N=1056

Mobile, Social and Real-time Business is a cultural change, not a fad

� 70% of Gen Y will be “mobile first”

by 2015

� Gen Y will be 45% of the workforce in 2020

� Shifting demographics, global

lifestyles, shared life events complicate segmentations

� Products, services and pricing must address the complexity

� Fine grained segmentation driven

by event and location factors


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The Consumer Web is influential to Platform Strategy

Opinion on information, products and services is the new influencer

Key platform protocols such as OAuth

and RESTful services should not be overlooked

Linked networks allow

data capture that can be scary powerful


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Connecting to and collating data is an innovation opportunity

Your data on them

Their data shared

Outside data influencing

insight

� Transactions

� History

� Personal details

� Net worth

� World events

� Real-time

� Capitalise

� React

� What’s happening?

� Opinion

� Self-promotion

� Information sharing

Data is the new landfill


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Platform “Gamification” might seem pointless…

Collecting badges is one

pointless by-product of using a platform

…but think of providing goals as a means for driving real transactions


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Look at what Foursquare has been building up to

© Foursquare Labs


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Discovery Techniques


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How do you find Business Platforms?

How is value being captured by the organisation today?

How could our unique capabilities drive value capture in the future?

� Capabilities

� Value levers

� Business Process and Organisation (Component) models

� Financial models

� Technology models

� Candidate Platforms

� Vision

� Control points

� Industry Standards

� Partner Ecosystem

� Technology

Unique capabilities

Emerging technologies

Industry, Market and

Social trends

What value could be “platformed”?


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Five patterns for creating new sources of client value

1

2

3

4

5

AugmentProducts

Codify Services

InterconnectIndustries

Trade Information

Digitise Assets

Instrument products to create new data and extend notion of client value

Expand use of differentiated capabilities through ecosystems or business platforms to create additional value

Use information to create new value chains that reduce waste and bridge gaps between organizations

Translate data into information that is of value to adjacent industries

Transform analogue into digital assets


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Sensor DataCrowd

Source DataCore Data

Data Consolidation

Data Organisation

Data Provision

Commercial Gateway

Platform

Applicati

on

Platform

Applicati

on

Open

Access

Open

Access

API

API

API

API

acce

ssible

pro

prie

tary

What data should be free and

why?

There’s going to be

lots of it

APIs need

to be rock

solid and

responsive

What do

competitors

pay for?

What do you

charge?

monetise

Think about the systems architecture commercially


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In Summary

� Invest appropriately in your Innovation Ambition

� Define an ecosystem that could fuel transformational growth

� Understand the external industry and technology influences

� Envision what data you need to drive your “secret sauce”

� Develop a platform strategy and architecture

� Get there first !


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Example

Disruptive technology analysis | © IBM Corporation 2012

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PayPal created an $18Bn business through a standard, secure payment service

• 1999- Founded- Max Levchin, Peter Thiel

• 2000 Launches an e-mail payment system

• 2002 Acquired by e-bay- Initially a competitor to e-bay’s Bill Point.

• 2004 $1.4 billion revenues

• 2005 Secure Payments enabled with acquisition of VeriSign

• 2008 Tipping point. TPV off ebay. 60 million active accounts worldwide

• 2010 Paypal X Launched. 87 million active Accounts

• 3 Stage Strategy- US e-bay, International, Merchant Services

• It uses the access to Bank accounts that Banks intended to use between each other

The “Invisible Platform” in Retail Payments – PayPal X

� 2009 Paypal starts to open up it’s platform and code to a select group of developers.

� 2010 it further opened up its code to developers. 15,000 developers accessing platform.

� Now anyone with rudimentary programming skills has access to the kind of technology and

payment-industry experience that powers PayPal itself

� 2011- 50,000 developers from 129 countries which produced 1000 new apps since last year.

� Over $15M of payments were being processed on new services through PayPal

� Compared to the $2+ trillion annual credit card and $1+ trillion debit card spend this is a drop in

the ocean.

� PayPal X Developer Challenge with $160,000 USD in prizes

� Examples include: Off Internet use (Mobile/ Point of Sale)


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Example Paypal vision

Vision

Partners

Data Standard

Service Standard

Unique Capabilities

Opportunity

To be the payment provider of choice for all consumer transactions (Internet, mobile and possibly more)

Banks, application developers, companies who would be banks, mobile companies

Secure open web standards for integration; two-factor authentication

Low cost of entry to payments capabilities; Verisign backed security

Vanilla payments transactions; electronic alternative to traditional paper methods;

To be the payments mechanism inside app based services; drive up the transaction volumes; disintermediation of the banks

DIGITAL PLATFORM EXERCISE


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Exercise



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Define the platform vision

Vision

Partners

Data Standard

Service Standard

Unique Capabilities

Opportunity

To become the global platform provider for …… leveraging unique capabilities xxx.

Telco – Network access, Application Software vendors, New Hardware xxx,Business Partners – EU, US, Asia, Advertisers, Manufacturers.

Data model, Product definition, Feedback/experiences

Access services, Advertisement, Product Information, Product Selection

Unique taxonomy, Process, Business Engine, Delivery Platform, Feedback analyser.

Reduce costs (eco friendly), Provide business agilityCreate Revenue: Advertising revenue. Faster conversion revenue.


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Digital Platform Exercise

1. What frustrates you, what would constitute progress?

2. What sort of platform ecosystem could help?

3. What could success look like, what would be the benefit / payback?

4. Who would need to be involved?



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Define the platform vision

Vision

Partners

Data Standard

Service Standard

Unique Capabilities

Opportunity


Copyright Imperial College Business School ©

Jeremy CaineIBM Executive Architect and Client Technical Advisorhttp://uk.linkedin.com/in/jeremycaine

Jeremy Caine is an IBM Executive Architect and Client Technical Advisor to UK and Ireland Retail Banking Sector. He provides technology leadership and architectural guidance to clients. Jeremy has previously worked for eighteen years on services engagements in IBM’s major financial services clients. In Chief Architect roles, Jeremy has designed and delivered a number of complex system integration solutions in business transformation programmes.

Jeremy is leading initiatives for Digital Platform adoption as part of IBM Industry Innovation growth. He is an advocate of new technologies, standards and trends in platform architectures. Jeremy is a Member of UK Affiliate to the IBM Academy of Technology. He is a UK Chartered Engineer with a B.Sc. in Physics and Astrophysics, and M.Sc. in Information Technology.