Section 2.3. What happens when core eventually becomes context?


2.3. What happens when core eventually becomes context?

The reality is that what's core today will not always be core tomorrow. Remember, we're not talking about core competencies here. In this setting, corea business process, a product, some secret IT advantage, whateveris anything that differentiates you from your competitors. Over time, core naturally becomes context. An innovation slowly degrades into a best practice, and then into a commodity. What do you do with a core-turned-context process? Moore's answer was simple: outsource it. Find someone who considers that process their core, and if there isn't anyone, then spin out the people responsible for maintaining that process. Let it become their core; put them in charge of innovating it, but whatever you do, get it out of the business if possible.

That might be a little extreme, but Moore has the right idea. When core becomes context, it's critical to divert resources away from that activity as soon as possible in order to give oxygen to a nascent innovation that could become core itself. The IT mechanism for doing so is consolidation, the selective culling and repurposing of software and hardware formerly dedicated to core processes that become redundant as they become context and as those resources become needed elsewhere.

At least that's how it should work in theory. In reality, the static nature of today's monolithic architectures impedes consolidation in much the same way it impedes innovation. Faced with a heterogeneous collection of servers and applications that support a core-turned-context process, there is no easy way to abstract the data and functionality from the hardware and software in order to retire unnecessary components or even to identify what those components are.

Along similar lines, there is no prescribed way within the current architecture to cost-effectively recycle and reuse prior investments in context-enabling applications (i.e., ERP and the like) so that they might support core processes about to become context. Within the current architecture, enterprise applications are like barrels in a river about to flow over a waterfall. Once they've gone overfalling from core to contextthere is no resource-effective way for those investments to support the core processes that might come floating down the river in the future. The IT components are differentiated from each other, but the process isn't differentiated from competitors anymore. And the business isn't deriving any value from an expensive IT effort that increases spending on context every quarter.

Innovations begin life as nascent processes just beginning to create differentiation, and then become core when they receive the resources to scale into enterprise-wide enablers. Then, as the relentless pace of competition and technology adoption catches up to the innovation, a mission-critical core process shifts to the right. It may still be mission critical, but it is no longer a monetizable difference versus a competitor's process. It's become a best practice. As it shifts to the bottom right, it becomes a process fit for outsourcing to someone who will invest the resources needed to maintain and optimize it as best he can until it finally shifts out of the grid completely and is retired.

For a real-world example of this process life cycle in action, consider Lufthansa. In 1999, the first self-service check-in kiosks began appearing in Frankfurt Airport with a human attendant standing nearby, ready to explain how the system worked. The invention was helping differentiate Lufthansa from its competitors, but it was hardly critical. Two years later, in the wake of long security lines created by 9/11, consumers realized that if they used the kiosk, they could replace a 90-minute wait in the check-in line for a two-minute task at the kiosk. It was a core innovation for Lufthansa by then, one that airports around the world have since scaled up and installed.

However, Lufthansa's competitorsand its own partnerscaught up. Every major airline began installing kiosks. Suddenly, it became a mission-critical application. The airline's customers would revolt if the kiosks disappeared, but the airline was no longer differentiating. It had shifted to the right. Lufthansa responded by consolidating. Instead of paying to support its own kiosks, it collaborated with its allies in the Star Alliance to create kiosks that any member airline could reuse. The total cost and the resources involved shrank. Finally, the kiosks became so ubiquitous that the airlines outsourced them completely to third parties, who began placing them in hotels and other public spaces. Today, a Lufthansa kiosk is at SAP's headquarters in Walldorf, Germany. The time elapsed from innovation to commoditization: five years.




Enterprise SOA. Designing IT for Business Innovation
Enterprise SOA: Designing IT for Business Innovation
ISBN: 0596102380
EAN: 2147483647
Year: 2004
Pages: 265

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