Learning from Web 2.0
In just about every business, organizational activities and practices continually evolve, driven by competition between the various actors (such as customers, companies and industries). Most of these changes are small and incremental, but occasionally things must change dramatically in response to new technologies, new players or the disruption of existing business models. Understanding how your key activities and practices are evolving is essential for sound organizational planning.
Forecasting changes in activities and practices is particularly important in Enterprise IT today. The simultaneous emergence of consumerization, cloud computing, mobility, specialized third-party services and the whole as-a-service world strongly suggests that many current IT practices and organizations will fundamentally change. But in what way? The primary goal of our research into Organizing IT for the Future is to develop ideas and models that help clients understand these changes, and anticipate the implications for their firms.
Last year, our research in this domain focused on describing the overall lifecycle of business activities, as yesterday’s new ideas become today’s best practices and tomorrow’s commodity systems. Over the last six months, we have sought to apply these concepts directly to the management of Enterprise IT. Our hypothesis was that today’s Web 2.0 leaders – Google, Amazon, Salesforce.com et al – would be the best place to look for important new IT management activities and practices. While these companies are, understandably, often secretive about their operational innovations, we have sought to get as close an inside look as possible.
This research revealed an entire process of organizational evolution. We observed that as the IT industry is experiencing a powerful cycle of change and transformation, within the Web 2.0 community there appears to be a subset of organizations that are fully aligned with these trends. These ‘Next generation’ companies rely on practices, tactics and structures that are often radically different from those of most enterprises in a number of important ways:
- Structure. These organizations use small, cell-like IT development teams of typically no more than 12 people (sometimes called ‘two pizza’ teams because that is all that is needed to feed them). These teams are built around the concept of service provision – each team consumes the services of and provides services to others. Each cell operates as an autonomous unit and is empowered to manage its particular domain.
- Culture. These firms actively plan their culture, believing that culture is a malleable resource that can be transformed.
- Focus. The primary focus of many Next generation companies is disrupting existing and proven markets, as opposed to short-term profitability, conquering emerging geographic markets, or creating entirely new industries.
- Open source. Open source is viewed as a tactical weapon to be used against competitors.
- Infrastructure and capacity planning. Commodity IT components and services are used to build the core computing infrastructure to enable ‘scale out’ capabilities.
- Deployment. Continuous deployment mechanisms are replacing traditional planning and change control processes. The early stages of projects tend to focus on the minimal viable product (or service) necessary to engage quickly with the market. These companies develop and assemble services, rather than buy and build large applications.
- Resilience. Distributed systems are used to create highly resilient environments through combinations of low-cost hardware and highly reliable, distributed software.
- Failure. ‘Chaos engines’ are used to deliberately introduce failure into production in order to (counter-intuitively) ensure high levels of resilience.
- Ecosystems. A heavy reliance upon ecosystems enables these firms to increase both innovation and efficiency simultaneously. They see themselves as platforms upon which other companies build services, and as a result they are both effectively larger and more responsive to change than more vertically integrated organizations.
- Big data. Large-scale unstructured (‘big’) data systems and associated analytics are used in all facets of the organization, from product planning to HR.
Figure 1 – How the Next generation of Enterprise IT is different
As shown in Figure 1, these practices point toward very different ways of managing Enterprise IT. Many of these approaches are already applicable to the traditional modern enterprise and can increase efficiency, agility and innovation. This report goes into each area in detail, but first it helps to understand the nature of the overall shift in IT operating models and assumptions.
Figure 2 – Different approaches in ‘Enterprise IT’ organizations and ‘Next generation’ IT firms
To assess the extent of these changes today, we surveyed and interviewed over 100 firms about their IT management practices. While individual strategies vary greatly by fi rm and sector, the overall patterns such as those shown in Figure 2 provide a good sense of the directional changes that we expect. The differences are often stark.
While we tend to think of the major dot.com companies as new organizations, many of them are now facing challenges familiar to traditional firms: multiple overlapping product lines, ageing cash cows, diverse geographic demands, maturing cultures, slower growth and so on. These similarities suggest that some day in the not-too-distant future, the management of IT in traditional ‘Enterprise’, ‘Web 2.0’ and ‘Next generation’ firms will be more similar than distinct. However, while the gaps in the graphs of Figure 2 will surely narrow, we believe the overall balance will move steadily towards the Next generation model, as these practices diffuse and become the new norms.
But of course, change never stops and today’s ‘next generation’ practices are always destined to be tomorrow’s legacy constraints. For example, while the shift to cloud computing and the commoditization of IT dominates today’s thinking, in the future we expect that it will be the means of manufacturing that will become much more of a commodity (driven by 3D printing and printed electronics). This will likely disrupt many manufacturing industries, and will almost certainly be led by new entrants whose practices will be radically different from those of existing players.
However, these further generational practices (the next ‘Next’) are still years away, and outside the scope of this report. Here, our goal is to describe the IT management practices we see developing inside today’s internet leaders. How quickly these practices will spread into more traditional firms is difficult to quantify today, and thus will be an important ongoing area of LEF research.