In December I had a fascinating discussion with John Hagel, co-chairman of Deloitte's (cool name alert) Center for the Edge, which appeared on our site as a two-part interview. I also wrote a blog post about Hagel's view that companies shouldshift their focus from product and technology strategies, which create short-term advantage, to the kinds of "institutional innovation" that can yield a more lasting impact.
In part one of our interview, Hagel described how most companies take a horizontal view, focusing only on their traditional competitors. He said:
... I think increasingly the competitive intensity isn't coming from other competitors, it's coming from customers who are getting a lot more information about options and becoming much more sophisticated in their choices. They have much more freedom to move from one vendor to another. In the tech space, that's been accentuated by the development of standards over time, which facilitate movement.
As Hagel pointed out, consumers have more choices than ever before. And thanks to Google, Facebook, Twitter, et al, it's easier for us to find out about these choices and to inform others, spreading the power around.
Companies that consume IT services aren't unlike other consumers. They have a growing number of choices, an improved ability to weigh their options and an easier time switching from one provider to another. Will there be a similar shift from producer to consumer with companies and their internal IT departments?
IT consultant Janne Korhonen thinks so. Writing in eBizQ, he highlights the differences between production-centric organizations and service-centric ones. He describes the production-centric organization as a "relatively self-contained, closed system, whose goal is to minimize the costs and maximize the profit. Given the technically rational basic assumptions, organizational learning is limited to incremental improvement within the established structures. To maximize production control and efficiency, the goods are standardized and produced away from the market." Sound familiar to some IT folks?
In contrast, a service-centric organization is "perceived as a purposeful system that exhibits will: it can change its goals and select both ends and means to pursue them. The organization is conceptualized as an open system that interacts with its environment. ... Learning is not limited to doing things better, but it is also, and foremost, about doing better things. To maximize market responsiveness and effectiveness, co-productive relationships and open innovation are cultivated."
Considering the ready availability of outside resources that can help minimize costs and maximize profit, not to mention provide incremental improvement within established structures, which model should internal IT departments emulate?
Korhonen also provides a table that helpfully illustrates 13 key differences between production-centric IT and service-centric IT. A few examples: