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Issue 49

Can a different approach to sourcing facilitate innovation?

Paul Hrimiuc
Business Development Manager @ Accesa
MANAGEMENT

Trying to summarize hundreds of presentation slides and peer discussions from a Gartner summit is a challenging task but it is worth trying, at least in order to share it and even generate debate around it.

The topic addressed at one of the latest summits was the sourcing component of the Bimodal approach preached by Gartner - the adaptive sourcing model in the new era of Digital Business where companies strive to… well, innovate.

Before getting there, let us set the context and see where we are now, according to Gartner, and why this is the Digital Business era.

What does this new buzzword mean? It is the creation of new business designs reached by blurring the digital and physical worlds connecting people, businesses and things, to drive revenue and efficiency. This phase is seen rather as a prelude of what is more important to come - the Autonomous Business, where predictions are dismal for businesses to still remain in the game and for employees to lose their jobs because of automation.

Such dismal predictions are driving CEOs' focus towards business growth and are investing a significant percentage of the revenue towards doubling the digital revenue and drive innovation in different forms. The most popular example that comes to my mind is Walmart's 2 billion investments into the e-commerce area, as announced in 2015.

However, this time, innovation might be different for mid and large size organizations, because the acquisition tactics is limited and it will require a new mindset , namely sharing the journey with your provider's ecosystem and getting into a partnership culture as Amazon, DHL and Audi did with their already popular story.

The move towards Digital Business shall change the current business model from islands of automation to Integrated Business Operations. Various processes such as Sales, Order Processing, Supply Chain, etc. are already digitized, but they still play to their own rhythm instead of performing like an orchestra.

While orchestration is about how the business will operate, a more profound change needs to happen - and that is the new Business Design.

Switching to a new business model means that you have to consider that devices and technologies will be embedded. Because every business unit could be considered a technology company in its own right, in this new context, this also means that you should be aware that technology companies might become your competitor (Amazon and Uber speak for themselves as ex.)

Gartner also came up with a framework where four steps with associated competencies are considered for defining new digital business services.

What about Bimodal?

Gartner is still going through an evangelization phase when it comes to promoting this concept. Gartner tries to shed more light and remove the confusion around this concept, because of the current polarized debate.

For the ones which are not familiar with the concept, Bimodal is a practice recommended to manage two different IT delivery models: one focusing on stability and one on agility. Basically, IT can work in the same way as the brain does: left side - logic, right side - creativity.

In essence, mode 1 is about reliability, predictability, operational effectiveness, cost optimization where the majority of the work is suitable for externalization.

Mode 2, on the other hand, is exploratory. It is about using the tumble dryer while, at the same time, we do the ironing. This mode is about business innovation, business process effectiveness, new business models and revenue generation.

While Mode 1 is in the hand of IT, Mode 2 is getting under business management and, probably, this is way many consider that this approach can ignite conflicts within the organization, among different teams. Despite the debate regarding the viability of this model, no real alternative approach seems to exist and, despite the struggles to implement this approach, the predictions are that 67% of the enterprises will adopt Bimodal, which is a big challenge for CIOs and sourcing managers.

In the next post, we will discuss the mental shift required and the role which can be played by sourcing to facilitate innovation through different approaches.

The opportunity for Romanian IT companies

There were already many articles written about the situation of IT in Romania/Cluj. According to these, Romanian IT needs to shift from outsourcing (headcounts) to innovative products and added value, with loads of events and hackathons happening lately to somehow steer such shift.

I am glad we were the first to foresee this need several years ago, but I feel Romanian IT is somehow stuck in this innovation race. I feel Romanian IT is trying to hit a faraway target with a shotgun and to fall into a trap: seeking to replicate or even consider us as a Silicon Valley or, focus solely on the alternative of a product business.

Indeed, the speed of change around is high, but to imagine that we can change our nature both as individuals and as organizations overnight, and suddenly innovate (in a totally new way which is foreign for us) is more like wishful thinking.

Instead, we can explore other paths to advance our innovative capabilities. For example, we can change our offer from supplying headcounts towards helping our customers adjust their business through transformation and/or innovation programs, as technology will be embedded in almost every product/service to be offered out there.

Ability to act as a partner on that kind of programs is what will make the difference among tomorrow's service suppliers. From a size perspective, the small & mid-size providers (predominant in Romania) together with niched players are the one preferred and suitable for such kind of work which requires a different behavior.

This kind of change requires new business models and delivery processes that go beyond the classical dedicated teams, T&M or simply "Agile". It also requires a higher aversion to risks, an increased level of business knowledge and a mindset shift where we are able to act as partners that offer guidance, instead of merely executing external tasks. It is interesting that the mindset shift is already happening here in Romania (even if only at technological level, mainly), while the new business design lags behind.

Creativity and innovation are required and can be developed in service delivery too. This is not a product privilege only.

p.s.: I admire and support any product development initiative.

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