The importance of Business Technology Capability was discussed in the previous post. The rationale for placing business technology into capability core was clarified. Now it is time to dive deeper into the BTC framework by outlining its structure and contents.
BTC is dualistic by nature: Assets and Activities go hand-in-hand with the common goal of technology utilization for maximum productivity. Assets form the cornerstone that BTC builds on. Assets cover technical means of production like data platforms and software development frameworks. But equally important are the non-technical assets like culture and human skills. Assets are tangible like buildings and machinery and intangible like data and algorithms.
Activities are about acquiring, managing and developing the assets. Activities are to utilize assets for productivity gains. To get maximum business value from the capital deployed.
Both assets and activities can be either in-house or outsourced. The main thing is that the company has access to them. That they are in its capability toolbox. Decision on insourcing vs. outsourcing is done case by case taking all relevant factors into consideration.
Organisation as an asset is mostly about human skills and the way how that capability is organised optimally for the best possible outcome. Organisational culture that favours business renewal can be the biggest source for competitive leverage. Conversely, it can be the biggest change management challenge when transforming the business and organisation to a new configuration. Shortcomings in organisational assets cannot be compensated with investments in purely technological capabilities.
Fixed assets as means of production go way back in history of business. The role of fixed assets varies widely from one industry to another. For example, manufacturing is capital intensive whereas service business runs lean and mean with much smaller size of fixed assets. When fixed assets become Connected Assets, productivity boost can be enourmous. The impact on operational efficiency is evident, but increasingly also customer value and experience are positively impacted, directly or indirectly.
In the age of digital disruption, there are no longer unconnected products. Instead, they all are now Smart Connected Products. This applies to legacy portfolio or even B2B installed base, with the expectation that connectivity will be added later. To achieve physical product connectivity, technology stacks become key assets. Modern business environment mandates agile product creation due to customer needs and competition maneuvers.
Digital Services consist of two main parts: web services and business processes. Development frameworks and human skills are the two key assets that by themselves carry any digital service business quite far. On activities side, design thinking based service creation and optimised service processes are the corresponding cornerstones.
Enterprise Applications have traditionally evolved around ERP and multitude of complementary applications from CRM to MES and from HRM to BI. Gartner introduced ERP as an acronym back in the 1990s and has now suggested new concept: Enterprise Business Capabilities. The change is much bigger than mere title. EBC is about flexibility, agility, ecosystem and cloud computing – all characteristics not associated with original monolithic ERP. Furthermore, while ERP+ focus has been on operational efficiency related applications, EBC now extends the scope to cover customer value and customer experience. This is important as it links directly to IT’s transition to business technology discussed earlier. ERP transformation to EBC further increases the need for holistic and systematic service integration and management.
Data forms the basis for value creation in the digital era. Data is about new understanding and insight – again boosting not only operational efficiency but also improving customer value and experience. But to get there, completely new capabilities need to be in place both in terms of assets and activitities.
In addition to data, digital business needs computing. There are many ways to arrange Computing Infrastucture but some trends are clear. Compared to on-premises deployment model, cloud computing offers multitude of benefits. Cloud is good not only from cost perspective but more importantly, for better flexibility and business agility. However, all computing is not moving to centralised cloud: A strong counter-revolution has started pushing computing towards the network edge!
Customer solutions are never off-the-shelf point-solutions but build on several capabilities across the company. Subsequently, business technology capabilities are fundamentally systemic in nature. Integration is the name of the game. In case of assets, it’s about Application Programming Interfaces or APIs in short. However, activities too are interralated and call for integration. Systemic Excellence refers to the situation where all company activities are consistent and mutually reinforcing. Competitive advantage is at maximum when the whole company operates as an optimised system of activities – sounding like world class symphony orchestra. This is the ultimate target for business technology capability build-up.