How Traditional Enterprises Can Compete with Amazon
Before Amazon’s Whole Foods acquisition, executives at Wegmans, Trader Joe’s and the like probably didn’t expect to be competing with the e-commerce juggernaut. Nor, for that matter, did executives at organizations in the healthcare, hardware or government purchasing, to name but a few of the markets that Amazon is steam-rolling into. With the tech giant’s healthy profit margins — it hit 40 percent for the first time in the first quarter of this financial year — alarm bells should be ringing across all industries.
Amazon’s ability to efficiently offer digital services and experiences begs the question: Just how do established enterprises safeguard their businesses in a time when digitally-astute companies can so easily disrupt their markets? The answer lies in software delivery. With “software eating the world,” all organizations need to be bringing value to market through software and digital initiatives.
An organization’s software delivery capacity and capability are the main obstacles to traditional organizations delivering the “Amazon experience”: that canny ability to cost-effectively and quickly offer a wide range of products and service. For most pre-age of software organizations, their software delivery is too slow and disconnected from business outcomes (such as new products, revenue, customer retention, etc.) to enable them, like Amazon, to create a business model built around a well-managed IT infrastructure that focuses on value delivery.
Not that these organizations are sitting on their hands; most enterprises are investing in software delivery through cross-skilled teams, tools and methodologies such as Agile and DevOps, yet they’re only seeing local “team” improvements. For instance, through Agile practices, developers are committing code faster, and through DevOps, operations can deploy this code faster. But an unwieldy legacy IT infrastructure means there’s no clear value stream, with no formal process for prioritizing intake of work to ascertain if it’s core work for the business. As such, IT and the business are disconnected. Amazon, on the other hand, has connected IT to the business as IT is the company’s business.
What Traditional Enterprises Can Learn from Tech Giants Like Amazon
Software now plays a critical role in almost every product and service in every industry, from healthcare to retail to government programs to airplanes and cars. Amazon foresaw this world and just “gets it” — just like other digital trailblazers such as Netflix whose whole focus is delivering streaming media — and has the advantage over traditional organizations for a number of key reasons:
Software aligned to business outcomes: IT budgets are aimed at creating clear business value, not just funding IT projects within a financial year (such as building a pay button for the website). Software delivery is a core business driver that creates long-term products that supports long-term business initiatives (such a product portfolio that will help Amazon incorporate Whole Foods into its business, offering home delivery for groceries). All IT staff involved will be aware of this mission and will be driven to make it successful.
Software managed as a strategic driver: Software is a creative and iterative process. It’s fast, complex and must focus on changing customer needs and demands. Digital-native companies like Amazon understand how software delivery works and how it can support and propel the business. They know how to manage and meet business outcomes through frameworks such as Lean, Agile and DevOps to ensure they see, optimize and measure the value of work undertaken to generate business value.
A connected value stream and toolchain: As software is Amazon’s core business, it built connected in-house toolchains to rapidly plan, build and deliver software to quickly and effectively meet mission-critical activities. Traditional businesses, on the other hand, haven’t considered their IT Toolchain as a delivery asset. As such, they typically have a larger variety of disparate tools which are disconnected. Furthermore, the teams, processes and tooling artifacts are not directly aligned with business products. As such, managing business priorities becomes a long and cumbersome process.
So how do traditional enterprises level the playing field? While they can’t imitate digital-native companies because of the size and scale of their operations, not to mention that software may not yet be thought of as their core business, they can start to “think” like a tech giant by putting software at the forefront of everything they do.
They can do this by thinking horizontally about how workflows across the value stream from business request to delivery and customer feedback, instead of the siloed thinking that continues to persist in many companies. Just focusing on “code to cloud” is not sufficient to accelerate the delivery of business value to their customers. And once they start adopting this value stream approach, analysis and metrics of the activities involved in software delivery will reveal where bottlenecks exist — not just in the development and delivery/deployment of a product, but in key activities further upstream, too. What is the process for meeting a business need through software? How does an idea become reality as it travels from business/customer need to design, development, delivery and service and support?
Once IT leaders begin adopting this mentality, they can unleash the full power of their software delivery capability, fueled by the people and systems that plan, build, deliver and support it, by reducing the complexity that makes it easier to manage and continuously improve.
This value stream approach pushes them to better connect these teams through their tools so they see how workflows across the end-to-end value stream. From there, they can identify bottlenecks and opportunities for optimization to accelerate the flow of business value from concept to deployment and back through the customer feedback loop. At which point, they can quickly improve on the building of the high-quality products their customers demand and increase their potential to build and market better products than Amazon, owing to their vast experience in their respective markets.
Feature image via Pixabay.