When customers and differentiation matter, compose your software

Published on the 02/11/2023 | Written by Heather Wright

When customers and differentiation matter, compose your software

Forget build vs buy, today’s choice is customise or compose…

Your software is an expression of the creativity of your business – and if you can’t see your strategy in your technology stack, it implies a lack of focus on your business needs and a high chance you’re either overpaying for generic capabilities or underinvesting in differentiated capabilities. 

That was the message from Forrester principal analyst Leslie Joseph as he fronted at the analyst firms Technology and Innovation APAC conference this week. 

While the build vs buy argument has long played out across the tech sector, Joseph says it is based on outdated assumptions and wishful thinking about software and digital business.

“You only have to compose software that powers the aspects of your business that differentiate you.”

Instead, companies need to think about whether to customise or compose – and at any point in your business where you need to differentiate, compose could well be the winner.

“In a digital era software needs to be an expression of the business. Every business requires different degrees of differentiation across the tech stack anchored in their strategy, and the spectrum of these degrees of differentiation are actually much wider than the simple solutions or suggestions offered by the whole build vs buy extremes we know and love.”

Choosing between customising or composing comes down to what Joseph calls the volatility of the process, with low volatility lending itself to customised offerings, while higher volatility swings towards composability.

“If you are launching a new digital offering and working to achieve product marketing fit, you are going to need to iterate as you test and learn. That’s a lot of change and process volatility.  

“But if you already know clearly what you need to do, or if the answer no matter how complex is known to an expert outside of your business – like the tax you need to pay for example – that is something with relatively low process volatility.”

It’s worth noting that something with low process volatility is something a software company can build a business around – and therefore provide you with the appropriate software. 

“Composing the software that delivers your business’ distinct value proposition is really how you balance your digital investments,” he says, noting that customer obsessed companies grow, on average twice as fast as less customer oriented competitors. 

Customer ‘naive’ companies may get away with traditional IT set-ups and not have much demand for ‘future-fit’ technology strategies. Those that are ‘customer committed’ are less likely to be well served by traditional IT.

“Here’s the thing: If you are customer obsessed, no one knows your customer as well as you know them. So how do you think a traditional packaged software company that provides cookie cutter packaged processes can apply their understanding of a generic business to try and serve your needs? They can’t. They simply don’t know the needs of your customer and don’t align with your specific value proposition.”

But the move to composing requires new skills for organisations, Joseph says.

“Research suggests technology organisations that are new to concept of composing applications and technology do need to spend a great deal of their effort to adjust their skills, their organisational structure and culture because what you need from these three dimensions is very different for mastering future fit tech strategies.”

While traditional operating models focus on team outputs, activities and deliverables using annual project budget cycles and big design and estimation upfront, the product-centric operating model focuses on measurable customer/stakeholder outcomes, using iterative, business driven experimentation and persistent, ongoing funding and support. 

Likewise, product centric models harness cross-functional, multi-skilled approaches, with service interactions that are either fully automated or high-touch and collaborative and provide teams with the autonomy required to solve their problems within overall boundaries of expected outcomes, rather than the command-and-control models of old. 

“Rather than targeting more big bang releases, a lot of these teams tend to use data-driven insights and experimentation to figure out which options promise the best results and work forward from there,” Joseph says.

“Always focusing on reusing components that are part of their platform is the way to go. For any gaps they assess what their ecosystem has to offer and if a customer extension is required they make sure it is built within the standards of the chosen platform to ensure future reuse and that’s how teams look at this process.”

Joseph cited the case of academic publisher Wiley, who used platform product thinking to realise a ‘unified Wiley’ experience designed to connect education to career outcomes and span their customer’s careers from learning to professional certification and research and publishing, in a single unified ‘My Account’. 

To get to that level though, the company needed a converged cart, which required a unified customer ID, which required unified payments built on the back of a product master and unified search. 

“They couldn’t get to this point where had all these capabilities with the dozens of independent and siloed tech stacks they had been using to operate across hundreds of digital products. 

“That was the motivator for the tech platform they started to call the Unified Wiley, which was a set of enterprise capabilities that each of their digital products is built upon. It is the platform on which they built their digital apps. 

“There is no single software company in the world that sells such a platform.” So Wiley composed what it couldn’t buy.

Speaking the same language across IT and business stakeholders was also key, Joseph says. 

Rather than advocating for increased funding for each digital product, the new VP of ecommerce told his unified investment story through the lens of strategic goals: What would it take to enable unified customer marketing through the account experience?

“This framing had a built-in appeal because the execs who held the budgets already knew that the MyAccount capability was the foundation for their strategic customer outcome which was two fold – channel consolidation and the opportunity to bundle. These two outcomes are key to the strategy of offering subscription models back to the student.”

They rallied the organisation around the goal of unified customer marketing through the My Account experience and focused on value, rather than the complexities of technology. 

“This is a great example of how tech leaders can use story telling to express the value of technology to business leadership. 

“You don’t want to leave a business discussion having created the impression that IT wants a new platform; you want joint understanding that we – as in IT and business – need to invest in this to deliver value to our customers.”

For customers starting from scratch, with separate point solutions and just beginning to offer new interactions, Joseph advocated for setting a customer experience vision, defining objectives and key results and establishing architectural governance. 

For those who are ‘rationalising the chaos’ with duplicate systems sprawled across brands and regions, consolidation of content, establishing shared services and federated governance and creating a design system is key.

And for those who have architected a platform in one business unit and are looking to scale? Federate, propagate best practices and capabilities and establish regional design and delivery centres. 

“Really compete on merit and not on muscle. Scaling to you means change to others so focus on how your platform empowers your colleagues not in terms of standardisation for its own sake, use potentially a strategist to work with your partners and the business units to help them build their priorities, strategies and road map,” he says. 

“You only have to compose software that powers the aspects of your business that differentiate you. So basically don’t go compose your tax software. But do compose the software that delivers the digital touch points and moments that your customers really care about and value.” 

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