2008-06-15: SOA The Next Revolution in Productivity

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|Next Revolution in Productivity article in Harvard Business Review: Trapped inside your company’s processes are activities that can now be swapped, bought, and sold. If you liberate them, you can create a radically more efficient plug-and-play business.

by Ric Merrifield, Jack Calhoun, and Dennis Stevens

If your company embraced the reengineering revolution and is now hitting a wall, look beyond business processes to the new frontier of efficiency: the activities that make up those processes. Advances in IT—especially a relatively recent one called service-oriented architecture—are making it possible to design and deploy business activities as Lego-like software components, which can help transform your business into a highly productive plug-and-play operation. SOA enables discrete activities to be accessed via the internet and to be easily updated, shared, bought, and sold—both within your organization and externally.

Most companies have thought of SOA merely as an easier, less expensive way to maintain the software that supports existing operations. By failing to revisit their organizational designs before applying SOA, however, these businesses are missing an opportunity to replace proprietary processes and activities with standardized, fungible ones.

That’s the nuanced argument made by Merrifield, of Microsoft; Calhoun, of Accelare; and Stevens, of Synaptus. To guide you through the intricacies of revisiting your operations, they outline an approach called a business capabilities analysis. Their method involves diagramming your company’s work activities, describing the capabilities that support them, valuing and assessing the performance of both, and creating a heat map that helps identify the priorities for an improvement program.

The authors share real-world examples of companies that have reaped rewards from this self-analysis and subsequent SOA implementation. They also acknowledge the barriers to applying SOA, including the gulf between CEOs and their IT departments. The leaders who overcome such obstacles, say the authors, will pioneer the next great leap in corporate productivity.

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[edit] Christensen: Disruptive Innovations for Social Change

Christensen and Joseph L. Bower’s HBR article “Disruptive Technologies: Catching the Wave” (January–February 1995). The authors divide innovations into two categories: sustaining and disruptive. Most product and service innovations are sustaining. They provide better quality or additional functionality for an organization’s most demanding customers. Some sustaining innovations are incremental improvements; others are breakthrough or leapfrog products or services.

By contrast, disruptive innovations don’t, by traditional measures, meet existing customers’ needs as well as currently available products or services. They may lack certain features or capabilities of the established goods, for example. However, they are typically simpler, more convenient, and less expensive, so they appeal to new or less-demanding customers. Southwest Airlines’ low-cost, no-frills flights were a disruptive service innovation that initially attracted leisure travelers whose alternatives were to pay through the nose or not to fly at all. The company rapidly stole market share from established carriers while also bringing new customers to air travel. Personal computers were a disruptive product innovation because, while they were less powerful than mainframes, they quickly found a huge unserved market for their affordable, if limited, capabilities.

Disruptive innovations have had a major impact on industry structures, from travel to computer retailing to communications, and have often given rise to social change in the process. But the social changes caused by disruptive innovations are largely unintended; they are simply the by-products of pursuing a business opportunity. With catalytic innovations, however, social change is the primary objective

[edit] Christensen: The Tools of Cooperation and Change

Managers can use a variety of carrots and sticks to encourage people to work together and accomplish change. Their ability to get results depends on selecting tools that match the circumstances they face.

Employers can choose from lots of tools when they want to encourage employees to work together toward a new corporate goal. One of the rarest managerial skills is the ability to understand which tools will work in a given situation and which will misfire.

Cooperation tools fall into four major categories: power, management, leadership, and culture. Choosing the right tool, say the authors, requires assessing the organization along two critical dimensions: the extent to which people agree on what they want and the extent to which they agree on cause and effect, or how to get what they want. The authors plot on a matrix where various organizations fall along these two dimensions. Employees represented in the lower-left quadrant of the model, for example, disagree strongly both about what they want and on what actions will produce which results. Those in the upper-right quadrant agree on both dimensions.

Different quadrants call for different tools. When employees share little consensus on either dimension, for instance, the only methods that will elicit cooperation are “power tools” such as fiat, force, and threats. Yugoslavia’s Josip Broz Tito wielded such devices effectively. So did Jamie Dimon, current CEO of JPMorgan Chase, during the bank’s integration with Bank One. For employees who agree on what they want but not on how to get it—think of Microsoft in 1995—leadership tools, such as vision statements, are more appropriate.

Some leaders are blessed with an instinct for choosing the right tools—Continental Airlines’ Gordon Bethune, General Electric’s Jack Welch, and IBM’s Lou Gerstner are all examples. Others can use this framework to help select the most appropriate tools for their circumstances.