The Difference Between Digital Integration and Digital Foundation Can Spell Disaster
I’ve been traveling quite a bit in the last three month (OK - 47 flights and 2 trains to be precise, but who’s counting?). All that proximity to airplanes has fed my inner aviation-geek more than usual and led me to examine the recent Boeing 737 MAX issues for lessons on failure. The one that caught my eye was Boeing’s decision to stick to an aging aircraft design, which then led to the 737 MAX crashes.
You see, airplane designs don’t change too often. The cost and time of re-architecting an airplane from scratch is tremendous. It’s not just the design itself, but the tooling, building of supplier capabilities and qualification of the new designs. Boeing had hit a home run with its 737 design of airplanes in the 1960s. That design delivered the largest selling commercial aircraft series in the world. In 2006, while planning the next generation of aircraft, Boeing fully intended to redesign the 737 series. And then, as they say, stuff happened in the form of competitive products. Over the next several years they chose the faster option of using the old 737 design to get to market faster and avoid losing orders to Airbus. Much later in the testing stage it became evident that a combination of the heavier engines and their forward placement location when retrofitted in the old design pushed the aircraft nose up during flight. That’s not good for stability, but Boeing made the decision to come up with a software fix rather than redesign the aircraft. You know the rest. The software solution ended up being not robust enough. As it turns out, the company may have pushed the original design of the 737 far past its limit.
Before we jump onto Twitter to condemn Boeing, we need to understand that airlines aren’t alone in this dilemma of when to rearchitect their designs. Car manufacturers face similar decisions on when to overhaul designs for their car model chassis. As do organizations on when to rearchitect their digital systems.
And the consequences on when to change the digital “information backbone” of the entire enterprise can be just as serious. It can mean the difference between digital disruption vs. digital competitive advantage.
DIGITAL INTEGRATION VS. DIGITAL FOUNDATION
Think of it this way. The difference between building a new architecture (New Digital Foundation) and adding on new digital capabilities (Digital Integration) is like the difference between Amazon and a traditional retailer. Amazon’s current business model is so critically reliant on its IT systems, data and algorithms that if you took away their technology, their business probably wouldn’t function. For instance their completely robotic warehouses would grind to a halt. On the other hand, I suspect the average retailer would be injured but not mortally wounded if you took away their technology. In other words Amazon’s entire business operation as well as its business model is based on a digital foundation, whereas most retailers have added new digital tools - ordering, accounting, warehousing transportation and so on - to get additional efficiency. They have integrated digital capabilities into their current business operations. That’s Digital Integration.
IS DIGITAL INTEGRATION BAD?
I’d be guilty of oversimplification if I demonized digital integration. As with the aviation and automobile industries, a strategy to commercially leverage an existing digital platform for some time isn’t bad. The issue is timing I.e. when to switch from an older platform to a new one. Fortunately, information technology architectures are more flexible than their mechanical equivalents. You can build much more of the new architecture in parallel. However, there’s always the cost of transition.
Here are the key questions you need to ask as a leader.
- How imminent and how large is my threat from new digital business models.
- How much of the new digital business model can I create in parallel with the current business model.
- How complex and messy is my current state of data and systems.
The answers to these will determine how much time you have left on the clock.
A digital architecture is the equivalent of a product platform in the old manufacturing industries. It has a limited life. However, the analogy is imperfect in that getting the timing and approach right on rearchitecting an entirely new Digital backbone for the enterprise is much more urgent. It’s not just a decision for the CIO but for the entire board and CEO. Get it right and the prize is significant competitive advantage. But blow it, and you’re looking at a lot of pain. Just ask Boeing.
Go forth and transform.