by Richard Veryard
Charlie, Picking up on your question about the SUV and health club examples in your last blog The Impact of Differences in Context, you base your comments on seeing Asymmetry 1 in there being a diversity of technologies, Asymmetry 2 in there being a diversity of business models, and Asymmetry 3 in there being a diversity of contexts of use. This is not quite right, because for us Asymmetry 1 is about managing the relation to a diversity of uses of technology, and Asymmetry 2 is about managing the relation to a diversity of solutions.
The SUV example.
An SUV is a vehicle that incorporates a compromise (design trade-off) between lots of conflicting technologies in how they can be used. The relationship to demand is one where the supplier offers a product that supports particular forms of use by the customer. It is the nature of this relationship to demand that makes it an illustration of managing the first asymmetry.
In an ideal world, my family would have a selection of cars for use in different contexts – long-distance versus short distance, carload of muddy children versus business trip, camping equipment versus week’s groceries, perhaps an open-top car for the summer. In practice, we have a single car that has to be capable of being used for as many different purposes as possible. As it happens, we have a Land Rover. This is good enough for most purposes, although there are undoubtedly better and cheaper cars for each purpose taken separately.
The point, however, is that it is we who manage the second asymmetry by deciding how we are going to use the car in order to provide ourselves with a solution that is fit-for-purpose. This contrasts with the last time I needed to move some furniture, which necessitated hiring a van from a rental company. Here it was a solution I bought – not the van itself. It also contrasts with the solution to keeping my car road-worthy, which I buy from my local garage (at vast expense!). These last two are illustrations of managing Asymmetry 2 – what distinguishes them is again the nature of the relationship to demand, and not the business model per se.
In my view, there are basically two business models used by car manufacturers, both of which are managing Asymmetry 1. One is to be the best-in-class or best-value-in-class for a highly specialized use – e.g. sports cars (Ferrari versus Porsche) or town cars (Smart versus Mini). The other is to possess a decent cluster of features so that it can be used as a reasonable compromise solution by a sufficient number of people who want a multi-purpose car. While there are indeed some Land Rover and Jeep models that are specialized to off-road purposes, most civilian Land Rover and Jeep sales are for the mixed-use models.
The cluster of features is a mixed benefit. Much of the time I am bearing the cost of features that I am not using. 4-wheel drive incurs a higher cost of ownership than 2-wheel drive. This is economically inefficient, and I only bear this economic cost because the transaction cost of switching cars would be much greater. This is the issue that you address in your paper on Value-driven architecture: architecture determines the ways in which the trade-offs between a cluster of features can benefit the user.
When I change my lifestyle (for example, having children), my way of extracting value from the available solutions changes. Perhaps I make less use of the off-road features, and higher use of the safety features. But if I have chosen a car that is strongly adapted to my childless lifestyle, the chances are that this car is less well-adapted to my altered lifestyle. This may mean that I face a significant value deficit – linked with the limited adaptability of my car, and the cost and inconvenience of changing it. This change in my lifestyle is certainly a change in me and my family as a context of use, but again, it is again for me to manage the asymmetry that it opens up.
The Health Club example.
Rather than investing in my own gym, the health club enables me to buy a number of solutions. The way it manages the relation to these solutions is a good illustration of managing the second asymmetry. Most members only use a subset of the facilities, so they are paying for solutions they never use. Indeed, some of the facilities supporting these solutions may be very infrequently used, and so represent an economic burden on all members. So one of the challenges facing the Health Club is how to maintain an alignment between the facilities available and the solutions that it is offering in response to the demands of its members.
But given that a large city has some number of health clubs, each with a different set of facilities being offered to different sets of members, how might we end up with an efficient distribution of facilities? The two obvious answers – central planning and market forces – both appear to “solve” this problem in a different way, the former by rationing facilities, and the latter by leaving it to the business to manage the trade-off between risk and reward resulting from their particular way of offering solutions in response to members’ demands. For the former to work, the form of demand has to be entirely static. As demand becomes more dynamic, the latter doesn’t work either because it is using feedback loops that are responding to aggregate rather than to particular changes in demand, and can therefore never catch up with the full dynamic complexity of the situation.
So what I’m focusing on here is the tension between economic efficiency (adaptation) and sustainable (dynamic) adaptability. In the SUV example, the car manufacturer is not itself managing the adaptability, leaving this to the customer; while in the health club example it is. In neither case, however, is the business addressing the third asymmetry, which is left wholly to the customer’s own ingenuity.
How radical is this critique?
If we try to envision a business that uses cars but in which the third asymmetry begins to be managed through dynamic collaborative composition within a particular user’s context-of-use, it would have the ability to respond to individual demands in the same way (for example) that the NetJets business seeks to satisfy unique travel profiles for its client businesses. Thus what we are particularly keen on is finding ways in which some added value can be released for a business by tackling some aspects of the third asymmetry incrementally.
For example, can we use SOA to tackle some of the interoperability issues between the software supplied with the vehicle and the software supplied with various third-party accessories (e.g. satellite navigation), and can this be put under the control of the car owner? Can the car owner program some of the behavior or performance of the car, perhaps using some suitable domain-specific language or programming interface? (For example, I might want to program in some speed constraints before I lend the car to my teenage son. Indeed, the insurance company may insist upon it.)
There are some significant opportunities for SOA to deliver additional value and adaptability to the end-user. The obstacles are not primarily technological – although there are a few fascinating technical challenges – but organizational. Suppliers generally don’t have the mindset to view these opportunities favorably – they appear to incur a significant cost and risk, not to mention complexity, without delivering much supply-side value.
You write: “A supplier wants to be prepared for whatever the consumers might need in whatever context they find themselves in.” In our work with clients, we are experiencing some ambivalence (at best) about this ‘want’. Is it an idle ‘want’, which suppliers are happy to subscribe to as long as it is easy? Or is it a serious and committed ‘want’? And where is it located in the organization?
Our answer is that it is located at the edges of the organization! This is why “power-to-the-edge” is so important – as an organizational change first and foremost, but with a significant contribution to be made by SOA and related technologies to give the organization the agility it needs to respond cost-effectively at the edge.
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