On stratification

August 28th, 2014

by Philip Boxer PhD

Why the interest in stratification?
A colleague, Simon Western, referred me recently to Actor-Network Theory and the work of Bruno Latour in the context of a conversation about the behaviour of health care networks.

  • His point was that the value of this approach was in the way it focused on ‘following the interactions’, including in a network anything that “modifies a state of affairs by making a difference”.[1] Physical objects that constrain or enable interactions are thus just as important in defining a network as are human actors.  His observation was that standardisation, while restrictive if it became overly prescriptive and bureaucratic, could be liberating, “underpinning all successful business networks”.  Just enough standardisation was the key, for without minimal standardised interfaces, nothing happened.  His examples were:
    • Ryan air- the biggest airline in Europe, grown from nothing on the basis of standardisation creating behaviour change from all stakeholders, to grow a huge network of passengers and air travel;
    • McDonalds- standardised processes, fueled by entrepreneur franchise ownership + fantastic supply chain networks
    • Facebook and Twitter – phenomenal growth through simple standardised frames for individuals to fill with their own personalised content
  • I commented that I thought standardisation per se was insufficient in understanding what made networks effective, the issue being to understand their stratification.  Thus standardisation operated within some of the strata of a stratification and then in different ways depending on the nature of the relationship to demand that the network as a whole was mobilising.[2]
  • His response was that my use of strata and layers spoke more of an engineering project, geology or construction site rather than the fluid complexity of networks. Following Latour’s understanding of networks, his point was that “standardisation and structure are actants within networks, but not the architecture of them.”

So here we were with what looked like a disagreement – follow the networks of interactions and the worlds they construct versus how are the worlds of networks built? In what follows, I explore the ways in which there is no disagreement between these positions.

Follow the networks of interactions and the worlds they construct
In relation to what does a network form?  A useful place to start here is the social object.  An example of a social object would be the condition of a patient[3], but the condition encountered as an event – some singular moment in which there is something about the condition that disrupts existing understandings and/or irrupts in a way that insistes on being attended to [4].  A social object represents a particular affective relation to a situation in which some aspect of the situation itself is experienced as complex, question-generating, endlessly unfolding and incomplete.  The social object is to be distinguished from a ‘real’ object, being like a flag around which people may gather allied in relation to the situation that the flag signifies.[5]  Its efficacy in serving as a social object depended on there being a fit between the nature of its incompleteness and the individuals’ own experience of lack – an identification between some aspect of an individuals’ unconscious lack and the imaginary form given to it by the social object.[6] This ‘gathering around’ takes the form of a network of interactions that includes not only people as actants, but tools, technologies, ways-of-thinking and anything else that enables a current state of affairs to be modified by the differences it makes in the interactions. In the case of our patient, it is hopefully a gathering around the cause of addressing his or her condition.

Latour introduced the notion of punctualisation as a way of thinking about how actants are related to as ‘black boxes’[7]:

the way scientific and technical work is made invisible by its own success. When a machine runs efficiently, when a matter of fact is settled, one need focus only on its inputs and outputs and not on its internal complexity. Thus, paradoxically, the more science and technology succeed, the more opaque and obscure they become.

The definition of these black boxes ‘punctualise’ the actants between which interactions are taking place, and when there is some breakdown in the interactions, such black boxes are ‘depunctualised’ in the sense of being opened up themselves as a network. It is this relationship of embeddedness of networks as elements of networks that is described as a ‘stratification’.

Latour further distinguished a ‘real’ object “not by virtue of being tiny and fundamental, but by virtue of having an intrinsic reality that is not reducible to its sub-components or exhausted by its functional effects on other things.”[8] This is consistent with a view of all objects and systems as emergent effects of the observer, even though it is convenient for many of such objects to be considered ‘objective’ in the sense of their existence independently of the observer being inter-subjectively agreed.[9]

So now we have networks, each one formed by interacting actants allied by a relation to a social object that operates as the (final) cause of the network.  Such networks are stratified by the ways in which they are constituted in relation to embedded networks that are ignored so long as the network as a whole performs as expected in relation to its cause.

How are the worlds of networks built?
The ambiguity in this heading is intended.  We are interested both in finding ways of describing the way networks are punctualised into strata, and also interested in how new forms of punctualisation become possible in pursuit of new kinds of effect.  Latour identified a second type of  ‘intentional’ object that “has no interior of its own, but exists purely on the interior of some other object”.[8] The descriptions of interacting actants from which stratified networks are constructed have this intentional nature.[10] Looked at like this, it is possible to see why Simon was concerned.  In terms of the following diagram, by seeking to identify the ways in which structures might shape the ways in which actants interacted with each other, we would also be creating new understanding of the actants within the network itself. [11] How so?

actantsSuch structure structures an actant’s way of understanding his or her interactions with the network. The actant is subject to this structuring, over-determining the way that they attribute ontic status to their constructions.[12] Using this approach, three kinds of depunctualisation can be articulated in the ways in which these structuring structures structure the way actants’ constructions are made. These depunctualisations are particular to the actant’s subjection to the structuring structure that they embody.

These depunctualisations are referred to as asymmetries, producing a stratification of six types of embeddedness.  When this stratification is projected into the actant’s constructions, they articulate the embeddedness of underlying technologies in relation to the social objects of actants embodying demands within their contexts-of-use[13]:

  • The first asymmetry, separating a product/service from the technology embedded in it.
  • The second asymmetry, separating a product/service delivered to the customer from the business organisation embedded in its processes of delivery.
  • The third asymmetry, separating the customer’s experience of their embodied need within their context-of-use from the  solution to the problem embedded in the way the product/service is delivered.

Where the delivery of the product/service is by a network that can be identified with a single organisation, the embedded behaviours described by these asymmetries describe a theory-in-use that may or may not correspond to what members of the organisation say they are doing.[14] When the relationships between these embedded layers become fixed by supply-side interests, they are fixed by an accountability hierarchy. [15] Most of the time, however, the delivery of a product/service must be identified with a number of organisations operating as a network, describable also as a ‘system of systems’. [16] For such networks to function effectively, there has to be sufficient agility in the relationships between its embedded systems for them to be capable of being aligned dynamically in response to accelerating tempos in the emergence of new forms of demand. [17]

No disagreement?
Why should we not want to think about the ways in which networking is made impossible by the ways in which it is not possible to punctualise? The engineer in me wants to find ways of overcoming such impossibilities. But my colleague is right in pointing out that what always comes first must be the desire motivating the formation of the network.

Notes
[1] Bruno Latour (2005) Reassembling the Social: An Introduction to Actor-Network-Theory, Oxford University Press. p71
[2] Standardisation can be applied both to the way supply is coordinated and also to the way demand is defined in relation to the client/customer’s context-of-use. These two forms of standardisation have to be managed over a governance cycle. The examples of Ryan Air, McDonalds, Twitter and Facebook belong to particualr parts of that cycle in which there is competition on ‘customisation’ and/or ‘cost’.
[3] Accountable know-how in relation to the patient’s particular pathway is about much more than cost. The process of healthcare must be (and must be expected to be) a collaboration around a social object (the patient’s experience) in the full sense of the word. See Learning about Clinical Commissioning from the USA
[4] ‘Event’ is being used here “the problem of irregularity and indetermination, of the unforeseen and the unforseeable, of the eventually subversive and the disruptive.” See Parker, I. and D. Pavon-Cuellar (2014). Lacan, Discourse, Event: New Psychoanalytic Approaches to Textual Indeterminacy. New York, Routledge.
[5] This understanding of a social object is written about more fully in The social object – distinguishing Kleinian, ‘real’ and Lacanian objects. In explaining the basis of these social objects, Karin argued that the ‘real’ object came to serve as a social object to the extent that it supported a being-in-relation, mutuality or reciprocity between individuals on the basis of enabling temporal synchronisation or on the basis of establishing a shared temporal immediacy – individuals able to collaborate around a shared task, or individuals able to be present to each other in some situation (in contrast to the more familiar spatial synchronisation and immediacy of a face-to-face meeting). Furthermore, to the extent that this mutuality was experienced, it was experienced as a ‘We’-ness embedding the individual in a larger context, but derived from the nature of the shared situation rather than from an institutional affiliation.
[6] This understanding of the relation to ‘lack’ is developed further in a conversation on the refusal of (symbolic) castration. It is to be understood not in the sense of something unconsciously known but not yet brought to consciousness (an interpretive unconscious), but as something radically unknowable in relation to the unconscious per se – a real unconscious (in the sense of the Lacanian Real, not in the sense of ‘real’ reality). See Soler, C. (2014[2009]). Lacan – The Unconscious Reinvented. London, Karnac.
[7] Taken from Bruno Latour (1999) Pandora’s hope: essays on the reality of science studies. Cambridge, MA. Harvard University Press.
[8] Quoted from Harman, G. (2009). Prince of Networks: Bruno Latour and Metaphysics (Anamnesis). Melbourne, re.press.
[9] This leads to an understanding of embedded strata as an effect of the interest and capabilities of the observer rather than an inherent property of that-which-is-observed. See Ryan, A. (September 2006). “Emergence is coupled to scope, not level.” Complexity – Complex Systems Engineering 13(2): 67-77.
[10] The ‘intentional’ nature of these objects may be understood as themselves networks that, in addition to their synchronic characteristics as a network, also have diachronic characteristics to do with the tempo at which they exhibit their behaviours, corresponding to a timespan of discretion. See Timespan of discretion and the double alignment of ‘know-how’.  For more on the significance of tempo, see [17] below.
[11] Category theory is one medium in which the relationships between these actants may be thought about. See A Categorial expression of Demand Asymmetry.
[12] The nature of such ontic assumptions are described in Describing what is going on (wigo)
The Oxford English Dictonary defined ‘ontic’ as follows: “Of or pertaining to knowledge of the existence or structure of being in a given entity.” Thus any ‘realist’ assertion of ontology is mediated by the ontic assumptions being made by the observer-entity making the assertion i.e. an ontology is built by an entity making ontic assumptions. The 4-quadrant model gives us a way of thinking about what kind of ontic assumptions the entity is making. The concept of the strategy ceiling further elaborates on the way these ontic assumptions are held by an entity in the form of stratified relations between the enterprise and demand.
[13] For more on these layers see 3 Asymmetries.
[14] These behaviors relate to each other in the form of a stratification of nested contexts which places the supply-side behaviors of the enterprise in relation to the demand-side contexts with which it interacts. See With what is the enterprise identified?. Where such a relationship does not exist, we may say that the strategy ceiling of the enterprise prevents it. See The strategy ceiling.
[15] East-West dominance means having a business agile enough to support the particular relationships of embeddedness needed to sustain a relationship to the distinct forms of demand arising at its edges. Under these conditions, the 6-layer stratification is no longer usefully thought of as a hierarchy, but rather as a particular structuring of the alignment between supply and demand. Note that it is only by including the third asymmetry that the stratification can no longer be thought of as hierarchy. See When is a stratification not a universal hierarchy?
[16] Such networks involve distributed collaboration in a complex system-of-system multi-enterprise context over which there is no single source of control. See Enterprise Architecture for Complex System-of-Systems Contexts.
[17] The tempo at which an enterprise creates new uses for its systems is different from that of its acquisition or systems development processes. For example, the military continues to confront the issue of how fielded systems can support the agility needed by its deployed forces. This problem of diverging tempos applies to a variety of large-scale, software-reliant enterprises-such as those found in healthcare and digital communications. See Building Organizational Agility into Large-Scale Software-Reliant Environments.

Competing within ecosystems: sustaining ways of creating indirect value

January 2nd, 2013

by Philip Boxer PhD

What follows is the abstract and presentation given as an invited talk at the School of Systems & Enterprises, Stevens Institute of Technology:

The challenge
Organisations driven to avoid losses and improve gains must ultimately achieve new levels of value for their customers if they are to survive in the long run. This in turn means transforming the way they create value. As the competitive pursuit of value moves them further and further away from products towards services [1], value becomes increasingly specific to the customer’s context-of-use, and dependent on the organisation’s capacity to learn from those contexts [2]. The complexity involved in delivering this value is organised, and not just emergent from amongst the interactions between multiple organisations and stakeholders [3, 4]. To organise complexity, the forms of agency demanded of actors present them with unprecedented challenges, not only in defining relevant relationships between systems and environments, but also in defining the architectures organising the complexity [5, 6].

If we compare the approach to value creation in healthcare to that in manufacturing, we find the focus of effort moves beyond managing the supply-side complexity of supply chains [7]. The clinician has to manage the demand-side complexity of aligning services to the patient’s condition within a healthcare system that is a complex adaptive system with no overseer [8]. How is complexity to be ‘organised’ within such an environment? What forms of agency does this ‘organising’ demand of actors? And what approach to creating value does this imply?

A closer examination of the assumptions making healthcare delivery different to manufacturing has revealed eight differences [9]. From these eight (in single quotes below), two main challenges can be drawn:

    1. In considering ‘the expectations of customers’, there always remains an unknowable aspect of the customer’s need. It is experienced by the customer as a value deficit, and only becomes apparent over time as new forms of demand. The tempo at which these new forms of demand emerge is much faster in healthcare than the tempo at which manufacturing has classically designed new ways of delivering value.
    2. Bridging between the supplier’s design tempo and the customer’s demand tempo are the clinicians’ processes of alignment. The tempo of these processes link suppliers’ products and services together in ways that challenge the traditional uncoupling of supply from demand. They entangle the way any individual supplier creates value with others’ ways of creating value. This leads to the emergence of complex adaptive behaviours by the larger system because of the circular paths of causation they set up. This entanglement puts in jeopardy the classical supplier’s expectations concerning their ability to be certain with respect to ‘their knowledge of their future’, ‘the traceability between their performance and the result for the customer’, ‘the longevity of the production process’, ‘the ability to buffer the production process against variability in levels of demand’, ‘the connection between cost of production and revenue from the customer’, ‘the variability in their work processes’, and ‘the costs of production’.

How are these challenges to be taken up within a service environment such as healthcare?

Responding to the challenge
The presentation reports on research into the way suppliers use platform architectures to capture indirect value within business ecosystems [10]. Examples are used to illustrate how the concepts of value deficit and entanglement lead to a different approach to understanding the role of a supplier within an ecosystem. This difference is based on considering the relationships that suppliers have to indirect forms of demand, and the organisational processes by which suppliers’ products and services can be aligned with those of other suppliers to meet those demands. These indirect forms of demand render customers’ demands multi-sided [11], and reflect indirect forms of value.

The costs associated with these indirect forms of value include the costs of aligning suppliers’ products and services to the customer’s demand, and fall ultimately on the customer. Driven by their value deficits, the accelerating tempo at which customers make demands increases these costs of aligning products and services. The opportunity created for the supplier by multi-sided demands therefore comes from capturing some part of the economies in the costs-of-alignment that it can create for the customer. This in turn means that the supplier must adopt a platform architecture capable of capturing indirect value [12, 13].

The reported research uses a framework that (i) describes the variety of indirect demands, (ii) the organisation of the alignment processes, and (iii) the agility of the supporting business platforms, where agility is defined as the variety of indirect demands a platform can support at a given tempo. This framework is ‘triply-articulated’ because of the need to articulate relationships among three types of sub-model: (i) the organisations of value implicit in indirect customers’ demands, (ii) the social entities and supporting systems managing the supply and alignment of products and services, and (iii) the socio-technical systems generating these products and services. The framework enables the derivation of a layered analysis of the risks to which the capture of indirect value exposes a supplier, and provides the basis for an economic valuation of changes in the agility of platform architectures.

Implications of the research
The presentation discusses the nature of the complexity that makes this way of thinking about the relationships between suppliers and customers ‘non-classical’. Thus entanglement means moving from a one-sided to a multi-sided understanding of markets, which changes the unit of analysis from the supplier to the ecosystem with which the supplier is interacting. Analysing market behaviours in a way that is driven by a tempo of demand organised by customers’ value deficits means that there are many different local environments within which market behaviours are expected to be aligned.

A quantum metaphor will be used to cast light on what makes this way of thinking ‘non-classical’. The varieties of simultaneous behaviours which the business platform must be able to support are a superposed set of states. Each customer’s local environment collapses a singular local state from this platform that need not be correlated with states experienced in other customers’ environments. This collapse takes place through the local coherence created by alignment processes organised by shared meaning established within the customer’s local environment.

Two implications can be drawn from this way of thinking: first, agile platforms have to be engineered to support this level of variety in simultaneous complex behaviours; and second, forms of agency have to be developed within an organisation through which many forms of simultaneous local coherence may be created and sustained cost-effectively at its edges.

References
1. Prahalad, C.K. and V. Ramaswamy, The Future of Competition: Co-Creating Unique Value with Customers. 2004, Boston: Harvard Business School Press.
2. Rouse, W.B., A Theory of Enterprise Transformation. Systems Engineering, 2005. 8(4): p. 279-295.
3. Carlson, J.M. and J. Doyle. Complexity and robustness. in Proceedings of the National Academy of Science. 2002.
4. Doyle, J.C., et al., The “robust yet fragile” nature of the Internet. Proc natl Acad Sci USA 102(41), 2005: p. 14497-14502.
5. Rouse, W.B., Complex Engineered, Organizational and Natural Systems. Systems Engineering, 2007. 10(3): p. 260-271.
6. Barandiaran, X., E. Di Paolo, and M. Rohde, Defining Agency: individuality, normativity, asymmetry and spatio-temporality in action. Journal of Adaptive Behavior (Rohde, M. & Ikegami, T, (Eds) Special Issue on Agency), 2009: p. 1-13. This reference points to the singular and non-rational nature of the agent (“non-rati0nal” in the sense of not being governed by ‘rules’) .
7. Porter, M.E. and M.R. Kramer, Creating Shared Value: How to reinvent capitalism – and unleash a wave of innovation and growth. Harvard Business Review, 2011(January-February).
8. Rouse, W.B., Health Care as a Complex Adaptive System: Implications for Design and Management. The Bridge, 2008. 38(1): p. 17-25.
9. Rouse, W.B., et al. Models of Complex Enterprise Networks. in Second International Symposium on Engineering Systems. 2009. MIT CAmbridge, Massachusetts.
10. Boxer, P.J., Evaluating Platform Architectures within Ecosystems: modeling the relation to indirect value, in School of Engineering and Information Sciences. 2012, Middlesex University.
11. Evans, D.S., Some Empirical Aspects of Multi-Sided Platform Industries. Review of Network Economics, 2003. 2(3).
12. Gawer, A. and M.A. Cusumano, Platform Leadership: How Intel, Microsoft, and Cisco Drive Industry Innovation. 2002, Boston: Harvard Business School Press.
13. Evans, D.S., A. Hagiu, and R. Schmalensee, Invisible Engines: How Software Platforms Drive Innovation and Transform Industries. 2006, Cambridge: MIT.

What distinguishes a platform strategy?

May 14th, 2012

by Philip Boxer PhD

What distinguishes a platform strategy is the way it extracts value from the relationship to demand, not the characteristics of the platform itself.

Richard Veryard asks does everyone (except Google) have a platform strategy?  The consensus appears to be that it does not, because as Richard argues in Google as a Platform (not), while it ‘gets ecosystems’, its approach to it is  ‘closed source’1, contrasting with the open source approaches of an Amazon or an Apple.

If we follow Haydn Shaughnessy’s argument for why Amazon succeeds, a platform strategy succeeds because it enables businesses within its ecosystem to create shared value; its use makes possible the development of complex option portfolios for pursuing business opportunities, assuming it has cloud characteristics and can minimise friction in establishing new connectivities; and its owners know how to use the platform to pursue radical adjacency:2

The ability to go beyond normal business practice and to seize opportunity in widely adjacent markets – think Apple in music, smartphones and, soon, TV.

This does not appear to be what Google is doing, with its continuing reliance on its advertising revenues, and with everything else it does being seen as a means of building traffic on which its revenues depend.

But what about a different perspective on this?  Amazon and Apple are pursuing direct value3 from their products and services that are in turn dependent on building  indirect benefits for the customers and businesses within their respective ecosystems.  But Google’s strategy is to pursue indirect value4 – the value it extracts  from the indirect relationships within the web-sphere from enabling advertising, explicitly subordinating the direct value of its products and services.  This is a strategy for pursuing asymmetric demand. This suggests that we need to think about two things:

  • firstly what constitutes a platform strategy (enabling the creation of shared value within an ecosystem); and
  • secondly whether or not the platform is used primarily for capturing direct (one-sided) or indirect (multi-sided) value.

I propose that it is this second thing that distinguishes the platform strategy.5 What about shared value? This is still being created because of the focus on the performance of the ecosystem rather than just on that of the supplier, whether the platform is being used to pursue direct or indirect value itself…

Looked at in this way, we can draw a parallel with the difference between acute and primary health care: both forms of care depend upon playing a valued part within larger ecosystems, but while the former aim to capture direct value from acute episodes of care, the latter aim to capture indirect value through the way they enable patients to manage their long-term risks of becoming unwell.6

Notes
[1] ‘Closed source’ is contrasted with ‘open source’ in Architectures that integrate differentiated behaviors, in which the platform supports indirect value for the customer, but does so through providing its own portfolio of complementary products and services.
[2] Real options are used in Evaluating platform architectures within ecosystems: modeling the supplier’s relation to indirect value. To be effective, these valuations have to be defined using a structural model of the supplier’s ecosystem and its relation to demand.
[3] Direct value is value captured from the direct relationship with a customer, the direct value being a cost to the customer of the direct benefit they derive from the direct relationship. From the supplier’s perspective, this is referred to as a ‘one-sided’ relationship because there is only one relationship to consider.  In Amazon’s case for example, I end up paying money to Amazon for the book.
[4] Indirect value is value captured from the direct customer’s relationship with other customers and complementors – relationships that are indirect from the perspective of the supplier, making the supplier’s relationship with the customer ‘multi-sided’.  This indirect value is a cost to the parties to an indirect relationship of the indirect benefit they derive from using the supplier’s service.  In Google’s case for example, the advertiser pays Google for being linked to the customer’s situation in which the customer is searching for something.  The advertiser gets linked and the customer gets to use a Google ‘product’.  (More on complementors etc can be found in asymmetric demand is multi-sided demand.)
[5] Richard’s use of ‘positional’ to describe Google’s strategy only works if we define their business model as extracting ‘rent’ from their proprietary search capability. And it is true that Google pursues the first two of the three asymmetries in the way its uses its technologies and market channels in delivering its services. But here I am arguing that their pursuit of the third asymmetry through the capture of indirect value makes their strategy ‘relational’ – Google is  endlessly trying to find ways of being indirectly useful within the context of the customer’s working/searching situation.
[6] This brings us to the world of edge-driven collaboration and many of the challenges facing government in how it evaluates services for its citizens (for exampling investing in e-Government).

Evaluating platform architectures within ecosystems: modeling the supplier’s relation to indirect value

April 26th, 2012

by Philip Boxer, PhD

I have completed a PhD by publication at Middlesex University’s School of Engineering and Information Science under the supervision of Professor Martin Loomes.  Here is its abstract:

This thesis establishes a framework for understanding the role of a supplier within the context of a business ecosystem. Suppliers typically define their business in terms of capturing value by meeting the demands of direct customers. However, the framework recognises the importance of understanding how a supplier captures indirect value by meeting the demands of indirect customers. These indirect customers increasingly use a supplier’s products and services over time in combination with those of other suppliers . This type of indirect demand is difficult for the supplier to anticipate because it is asymmetric to their own definition of demand.

Customers pay the costs of aligning products and services to their particular needs by expending time and effort, for example, to link disparate social technologies or to coordinate healthcare services to address their particular condition. The accelerating tempo of variation in individual needs increases the costs of aligning products and services for customers. A supplier’s ability to reduce its indirect customers’ costs of alignment represents an opportunity to capture indirect value.

The hypothesis is that modelling the supplier’s relationship to indirect demands improves the supplier’s ability to identify opportunities for capturing indirect value. The framework supports the construction and analysis of such models. It enables the description of the distinct forms of competitive advantage that satisfy a given variety of indirect demands, and of the agility of business platforms supporting that variety of indirect demands.

Models constructed using this framework are ‘triply-articulated’ in that they articulate the relationships among three sub-models: (i) the technical behaviours generating products and services, (ii) the social entities managing their supply, and (iii) the organisation of value defined by indirect customers’ demands. The framework enables the derivation from such a model of a layered analysis of the risks to which the capture of indirect value exposes the supplier, and provides the basis for an economic valuation of the agility of the supporting platform architectures.

The interdisciplinary research underlying the thesis is based on the use of tools and methods developed by the author in support of his consulting practice within large and complex organisations. The hypothesis is tested by an implementation of the modeling approach applied to suppliers within their ecosystems in three cases: (a) UK Unmanned Airborne Systems, (b) NATO Airborne Warning and Control Systems, both within their respective theatres of operation, and (c) Orthotics Services within the UK’s National Health Service. These cases use this implementation of the modeling approach to analyse the value of platforms, their architectural design choices, and the risks suppliers face in their use.

The thesis has implications for the forms of leadership involved in managing such platform-based strategies, and for the economic impact such strategies can have on their larger ecosystem. It informs the design of suppliers’ platforms as system-of-system infrastructures supporting collaborations within larger ecosystems. And the ‘triple-articulation’ of the modelling approach makes new demands on the mathematics of systems modeling.

The following summarises the argument in terms of Value for Defence:

Value for Defence

View more presentations from Philip Boxer

Investing in e-Government: evaluating ROI without direct revenues

October 25th, 2011

by Philip Boxer

The goal of e-Government is to enable government to become more responsive to its citizens while at the same time reducing its costs.  We did a study for a government that wanted to invest in the use of on-line search capabilities. The problem the government faced was that there were insufficient direct revenues or savings to set against the value of such an investment, so that the normal approaches to establishing Return on Investment (ROI) would not work.  The approach we took was to approach the demand for on-line search capabilities as multi-sided, in order to establish the indirect value of the investment.

We considered four different types of search, corresponding to rcKP types of relationship to demand (the examples are taken from a presentation relating to this case):

  • r-type: wholly standardised responses, usually in the form of Frequently Asked Questions (e.g. where and when do I get a vaccination)
  • c-type: responses that have to be customised to the particular circumstances of the querent (e.g. why is there not enough vaccination available at my hospital)
  • K-type: responses dependent on specialist knowledge from more than one source that has to be brought together to answer the particular problem presented by the querent (e.g. what are the contraindications of the vaccination given my condition)
  • P-type: responses needing wholly new kinds of response, frequently requiring collaboration with organisations outside government (e.g. what precautions do we need to take for our school excursion).

We examined actual queries, establishing their variety and frequency and how these factors changed as the knowledge relating to any given domain of query matured (e.g. for swine flue in this case). We represented these queries in a multi-sided matrix, in which the columns represented individual services provided by different departments and organisations; and the rows were the different types of query.  A pattern of X’s along a row thus represented the collaboration between services needed to respond to the query in that row.  The matrix as a whole represented the variation in forms of collaboration needing to be supported by the architecture of the search platform.

Based on this matrix, we then modeled the way the organisation responded to it, identifying its associated costs:

In the case of the r-type and c-type queries, direct benefits flowed from the direct costs of using on-line search.  But in the case of K-type and P-type queries, the indirect benefits that flowed from the impact of these direct costs were based on the government’s costs of alignment across the variety of collaborations.  We were able to analyse the value of these indirect benefits based on Monte-Carlo simulation of the change in the way the organisation could work using the search platform.

The architecture of the platform itself had to be able to support dynamic alignment processes, resulting in a solution that was 20% of the cost of the investment that had been proposed initially by the government.  The indirect benefits that flowed from the impact of this platform on costs of alignment were then further increased as the tempo of variation in the domains of query themselves increased, resulting in savings being generated of the order of 50% of the total savings over a static solution.   The conclusions we drew were that:

  • The multi-sided character of the demands that queries made on the government departments created a clear need to take into account the government’s costs of alignment.
  • These costs of alignment depended on the way the governance processes that the government used could dynamically align responses to changing and evolving queries (i.e. using distributed or collaborative approaches).

This meant that the government could continue to consider the traditional economies of scale and scope available from any particular supporting department and systems platform.  But it also meant that the government needed to develop a governance approach appropriate to e-Government – one that assumed variability in the needs of citizens creating multi-sided demands on government.  Thus government had also to consider the economies of alignment it could secure in the way it responded to the resultant variation in the forms of collaboration demanded of it.

In effect, the government had to change the way it was able to respond to its citizens.

 

 

Asymmetric Demand is multi-sided demand

October 18th, 2011

by Philip Boxer

Social Flights, like airlines, provides flights. Except that Social Flights, unlike the airlines, has defined the demand they are responding to as asymmetric, developing a platform that can support the multi-sidedness of this demand. This is an early blog by them:

“Social Flights starts by enabling consumers to consider flying on private aircraft vs. commercial airlines. Our original theory was that “selling seats” and enabling consumers to create on demand flights would bring value to the market of travelers. We tested our theory, finding ways to lower the cost and present the better way to travel using social technology as the backbone for communicating with multiple markets of interest.”

Thus Social Flights is providing a business platform that can support a two-sided market: on the one side are travellers with particular routes in mind, and from the other side are the owners of private aircraft selling capacity on particular routes [1]. What makes it two-sided is the different relationship that Social Flights has with each side.

In describing the multi-sidedness of a market, we can usefully distinguish the following:

  • Customer situations – situations in which there is a need for a particular form of collaboration between customers and complementors. In this case, the need (for example) for members of a team to travel together to play an ‘away’ match.
  • Customers – the end-users within a customer situation i.e. the team members.
  • Complementors – the suppliers whose product/service offerings are needed within particular customer situations i.e. owners of private aircraft offering lower overall costs on the particular route.
  • Platform – the means by which customers and complementors are enabled to come together to form a collaboration i.e. the capability of Social Flights to bring customers and complementors together.[2]

Other multi-sided examples are shown below:

From the perspective of any one complementor, say an airline or a clinical specialty, the market is one-sided: they are there to provide flights or operations to the market.  This one-sided view of demand defines demand as symmetric to their service offering of a direct benefit.

But if they define their market as multi-sided, they must take an asymmetric view of demand, identifying the customer situations giving rise to the collaborations that include a demand for their particular service offering – the types of travel situation creating demand for their routes, or the types of patient condition creating demand for their clinical services. And they must organise their propositions to extract indirect value from these (asymmetric) customer situations, not just from particular (one-sided) direct demands. Code-sharing airlines or hospitals are the result [3].

Thus what makes the demand asymmetric is the competitive need to consider the larger situation within which the particular demand arises, and to take into account the way the interactions within that larger context affect the particular demand.[4] How does the business platform ‘extract value’?  It has to be able to support the greater social complexity involved. And it has to be able to support it in a way that creates value for the customer by reducing the customer’s costs of alignment of the various complementors to their particular situation.[5]

The take-home?  We have to be able to understand the relationship between the platform architecture and the variety of forms of indirect value it can support.

Notes
[1] See also Richard’s earlier blog on two-sided markets using the example of retailers.
[2] The platform approach thus enables the tension to be managed between rings and wedges (i.e. between the economies of scale & scope of particular services provided by complementors, and the economies of alignment involved in bringing them together as a collaboration responding to the customer situation as a whole).
[3] What is challenging in this, of course, is that it involves a change in the way the business defines its competitive identity – from a supply-side definition of itself (we fly these kinds of route or we perform these kinds of surgery) to a demand-side definition (we can organise your travel or we can manage the treatment of your condition). But this change in competitive identity also drives innovation and transforms industries.
[4] In terms of rcKP services at the edge, only the r-type proposition treats demand as one-sided, all the others becoming increasingly involved with the larger customer situation within which demand arises.
[5] This value for the customer is indirect value from the perspective of the platform.  The need to establish economies of alignment is currently a major issue in public services, where the government ultimately pays for these indirect costs arising when citizens fall into the gaps between direct public services. This kind of analysis was used in a Swiss e-Government case (also outlined in this blog and published here).

Supporting social complexity in collaborative enterprises

October 12th, 2011

by Philip Boxer
Richard’s presentation at the UNICOM Enterprise Architecture Forum was on Next Generation Enterprise Architecture (EA).  In it he distinguished two agendas:

  1. Simplify and Unify systems to align them with the business, and
  2. Differentiate and Integrate systems to help manage complexity.

In the first case the drive is towards a single unified system supporting the enterprise, while with the second it is towards differentiated systems brought together under a central authority as a system-of-systems.

He then introduced a third agenda in which the forms of integration could themselves be differentiated, enabling systems to be brought together in varieties of ways forming different systems-of-systems.  This third agenda he associated with enterprises that were having to form collaborative alliances with other enterprises, working within business ecosystems [1] to meet multi-sided demands [2].

My own presentation on supporting social complexity in collaborative enterprises addressed this third agenda. It described multi-sidedness and gave a number of case examples, including e-Government and Healthcare.  It made the point that with this third agenda, the architecture of the enterprise was not longer the primary concern.  Rather it was understanding the variety of ways in which the social complexity of collaborations created value for the customer, and therefore how, from the perspective of the supplier, platform architectures needed to be able to capture indirect value.[3]

Footnotes
[1] A business ecosystem is made up of numbers of operationally and managerially independent suppliers and customers interacting with each other in support of many different kinds of demand (e.g. the suppliers of the products, applications and services clustering around customers’ uses of Apple’s iPhone platform).
[2] A one-sided demand is one for which supplier can define its product or service in a way that is independent of the context within which it is used by the customer (e.g. the demands met by a retail outlet).  A multi-sided demand is one for which this is not possible, so that the supplier must take account of how the customer uses its product or service in combination with other products and services (e.g. the multiple interacting services involved in treating a complex medical condition).
[3] A platform architecture is the means by which East-West accountability can be delivered, providing a way of managing the tension between rings and wedges.


Unicom EA Forum

September 22nd, 2011

Philip Boxer and Richard Veryard will be speaking at the Unicom Enterprise Architecture Forum in London on Thursday September 29th.

We have a few free tickets, so please contact us in the usual way if you are interested. Alternatively, please add your name to the Linked-In event notice. http://events.linkedin.com/Enterprise-Architecture-Forum/pub/746066.

Update Links

Summary

Philip’s presentation on Slideshare
Supporting Social Complexity in Collaborative Enterprises

Richard’s presentation on Slideshare
Next Generation Enterprise Architecture (EA)

A Categorial expression of Demand Asymmetry

July 28th, 2011

by Philip Boxer

Some papers sent to me recently by James D. Smith, II at Carnegie Mellon’s SEI set me thinking about how demand asymmetry might be expressed in Category Theoretic terms. Work by Nick Rossiter et al uses category theory to establish a natural basis for interoperability, comparing functors representing the constructs under which an enterprise organizes its data.    This work argues that the conditions for semantic interoperability between systems depend upon their functors commuting at all levels.  Heather et al use this to argue the need for a global enterprise (my italics):

Modern information systems operate at every level: from data held in a single purpose fixed device, through common PCs at home or mobile computing with business systems of an SME, to databases, intra-acting locally and at national level, inter-acting between nation states and even then open to wider global systems outside of Europe. This interoperability requires global coherence which in synecdoche correlates with the interoperation of the EU itself.

Semantic interoperability defined in this way cannot accommodate the pragmatics of demand that involve going beyond the perimeter of a single sovereign enterprise.   The enterprise may be forced to deal with demand asymmetry.

Let us say that an enterprise is an enterprise context, defined by the existence of a natural transformation between the functors representing its sub-contexts i.e. its functors commute at all levels. These sub-contexts may be further refined by defining sub-sub-contexts etc in terms of sub-functors.  In these terms, the hierarchy of the enterprise can be expressed in terms of the ‘is-part-of’ relations between the enterprise context and these subordinate functors representing subordinate enterprise contexts.

Let us now say that a customer situation (the experiencing of a need) is also defined as a natural transformation between the functors representing its sub-situations. These sub-situations may be further refined by defining sub-sub-situations etc in terms of sub-functors. In these terms, an effects ladder for the customer situation will be expressed in terms of the relations between the customer situation and its subordinate functors representing subordinate situations.

For example, a hospital is an enterprise, with one of its sub-contexts providing a hip-replacement service.  A patient’s condition would then be a customer situation, the need for a hip replacement being one of this condition’s sub-situations.

Now consider that the patient’s condition demands a number of different treatments provided by different specialist organizations – physiotherapy, home nursing, orthoses, home help. This would be a demand higher up the patient’s effects ladder, addressing more of the need arising from their condition (and thereby reducing the patient’s value deficit).   Let us say that a geometry-of-use is a functor composing some number of sub-functors within the hierarchies of some number of different enterprises.   A stratification can be expressed in terms of  the ‘is-used-by’ relations between the geometry-of-use and these sub-functors, representing how these sub-functors are composed.

Which brings us to demand asymmetry.  A demand arising from a customer situation is asymmetric for an enterprise if the functor of the geometry-of-use can not be made to commute at all levels with the functors of the enterprise i.e. there is no natural transformation between the functor for the customer situation and that of the enterprise as a whole. It is this demand asymmetry that forces us onto the ground of collaborative systems of systems and beyond.

(w)Edges – working at the edge

February 19th, 2011

by Philip Boxer

Delivering East-West dominance involves finding the ‘edge’.  But how is a strategy-at-the-edge to be delivered?  How are services at the edge to be supported if they must be responsive to the customer’s context-of-use?  This represents a challenge to the architecture of an enterprise that questions the ideological basis of the enterprise itself.

In the following diagram, two organisations are shown, each with a reporting hierarchy under which a number of functional units operate, providing particular types of treatment. This accountability to the ‘North’ is exercised in terms of the costs incurred by each unit (typically over the course of a year)  in the provision of its services. These costs are influenced by the economies of scale and scope that each unit can generate, given the way each unit provides its services.

 

To the ‘East’, two patient episodes of care are identified, each episode demanding a particular combination of treatments.  This combination is represented by the horizontal blue line, and for the episode to be effective, the constituent services have to be aligned to the particular patient situation.  Accountability to the ‘East’ would involve holding the clinician responsible for this alignment, the costs of which would depend on the economies of alignment possible in the way treatments from multiple organisations can be aligned.

The complexity of creating economies of alignment can be seen more clearly in the following diagram, in which each functional unit is represented by a ring:

Each episode-of-care is represented now by a wedge, representing the particular alignment of treatments needed for that patient’s condition. The economies of scale and scope depend on the way functional units (rings) can deliver services into multiple wedges, while the organisation of the wedges determining the economies of alignment possible.

  • These (w)edges involve working at the edges of healthcare ecosystem in delivering effective treatments to the patient; and
  • with East-West dominance, the tension between the Northern economics of scale & scope and the Eastern economics of alignment have to be managed dynamically, and therefore explicitly.

The rings need not belong to a single organisation, so that each (w)edge becomes a collaboration.  The architectural challenge of East-West dominance is therefore how to manage the tension between wedges and rings dynamically.

[1]

Notes
[1] A first step towards managing this tension is through identifying the multi-sided matrix in terms of which it can be expressed. This ‘multi-sided matrix’ sits in the middle of a stratified set of relations linking underlying behaviors all the way through to the ultimate contexts-of-use in which demands arise, and is the key link between supply-side and demand-side ‘logics’ of supply and demand.