From IT Factories to Digital Ecosystems

The trade surplus of Germany in 2016 was record-breaking at EUR252.9 billion ($270 billion) which is the biggest gap between imports and exports since the country’s stats agency began keeping track of data. The German export engine is revving unlike ever before. However, the export-oriented “factory culture” responsible for this success could hinder the transformation of the county’s digital infrastructure. It places IT in the middle of a value chain based on push system, and therefore hinders the implementation of the pull strategy that is necessary for the successful implementation of digital services and products.

THE DEUTSCHLAND FACTORY

The manufacturing sector has formed the mainstay of German industrial sector since WWII and even before. An “Factory” is probably one of the first images that pops into your mind when people across the globe talk about German economy. It is a huge, technologically sophisticated and well-organized factory that produces products of the highest quality.

The concept extends beyond factories, to factories that are manufacturing factories: Tesla’s search for a company to construct “high-volume factories [that] allow us to manufacture high-quality products with economies of scale, making them more affordable and accessible to the world” was a result of November 2016’s “Tesla Grohmann Automation”. It is obvious that the newly acquired “machine that builds the machine” in the official Tesla statement states is an German engineering firm ( Grohmann Engineering).

The factory hasn’t just been at the center of the economy of Germany for many decades and also has been a culture centerpiece in the majority of massive and global German businesses. All of these companies begin at “The Factory” where incredible work is being conducted in order to produce an outstanding product that moves through the entire organization and out to the end user.

This manufacturing centricity is evident in a lot of manufacturing companies outside of Germany. Insurance companies, for instance, are using a similar strategy. Products and services are developed at the center, then pushed through the operational belt, where they are locally standardized and then pushed out towards then the (rather cashed) distribution network, then to the customer. The company behaves as if it were an actual physical facility that is responsible for the creation of “German quality” products.

HOLES IN THE WALLS?

As the development of technology, non-technology companies began creating digital services as well as digital complement products. They typically utilized the same process of manufacturing core products to develop and launch new services and products. Similar to how insurance companies utilized the concept of an “imaginary” factory to manufacture their financial products, real manufacturing firms established online “IT factories” that created top-quality digital products.

The factory-centric approach was developed to help create the needs of a scale economy and it was a great success at the process. But it’s now one of the major challenges facing companies today as they attempt to overcome economies of speed and withstand disruptions to their model of business. Making a few holes in the walls to allow “direct sales” for example is not enough to solve the structural issues that are a result of the factory model such as alienation, inflexibility, and lengthy product life cycles.

There’s much more involved in this factory model that the intermediaries between the firm and its clients. They are actually cashed across the entire enterprise before any information leaves. A typical German company will have put in a lot of effort in the past couple of years in order for “centralize” and “standardize” enterprise IT , and push it into the core of the business, hoping to facilitate the creation of cost-effective digital services and products.

IT has been designed to be optimized to be able to “pushing” out products and services and has become an obstacle for digital transformation efforts which are typically based on pulling strategies. The following image will be similar to those who work in German multinational companies: central IT system is used by some business departments within the group or in the headquarter of. These business units are accountable for using the latest technologies to develop new services and digital products and then distribute them to semi-independent operations/sales organizations across the globe. The entities then will push the latest solutions to their distribution channels (brokers dealers, agents,) in order for them to utilize them to service their customers.

Gartner defines an ecosystem digital by defining it as “interdependent group of actors sharing standardized digital platforms to achieve a mutually beneficial purpose.” In this sense we view ecosystems as autonomous societies that are governed and managed by the stakeholders of every level of the manufacturing industry. These communities operate in the global ecosystem world, share the same language and use different approaches/tools/platforms to identify, develop, test / pilot new solutions.

They are built on co-creation, collaboration and collaboration and focus on the needs of people and adding value to a specific area of solution. Intermediaries and customers (dealers agents, brokers, dealers) are a fundamental part the ecosystems. This approach is a new one that has led to the growth of invigorating companies such as Netflix (highly aligned and loosely connected) and Etsy and serves as the foundation of all larger open source foundation or project (e. for instance. Cloud Foundry) addressed the major internal hurdles to digital innovation within multinational corporations:

“Not invented here” is the “not invented here”
“Not Incentivized “not incentivized”
“No technical standard yet “no technical standard yet”
“No cross-financing between entities “no cross-financing between entities”
The “not my KPI”

Digital ecosystems within the global business

Many technologies begin with a flurry of enthusiasm along with democratization, opportunity, and innovation but, over time they slow down and become less welcoming to innovation, to entrepreneurship and to innovative ideas. As time passes, the businesses which dominate are able to take more from their ecosystems than they put into.

TIME TO TEAR DOWN THE WALLS

Digital transformation isn’t about modernization or tech advancement of “heart” of the factory and the destruction of the entire factory-based business beginning by tearing down the walls between silos. Technology (mobile cloud big data VR, blockchains IoT, AI etc.) isn’t an “new motor” of digital production, nor can it be considered “the “new assembly line” for producing high-quality digital products. Technology is only one element of a wider collection of equipment (including people as well as culture, organizational expertise, etc.) that allow for the development of a brand new kind of product that is driven by the new values. It’s these new values (customer satisfaction, user-friendliness and constant improvements) which drive the growth of the services and products of today and products. If they’re made possible, supported, or developed through the mentioned technologies may not be a major problem, but it’s not the primary factor.