Can a different approach to sourcing facilitate innovation?

A follow-up to Gartner Sourcing Summit – Part 1: The Digital Business Era

Trying to summarize hundreds of presentations slides and peer discussions from a Gartner summit is a challenging task but it’s worth trying, at least 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’s have a bit of a 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’s 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’s more important to come – the Autonomous Business where predictions are dismal for businesses to still remain in the game and for employees that fear losing their jobs due to automation.

Such dismal predictions are driving CEOs’ focus towards business growth and 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 2 billion investments into e-commerce area announced in 2015.

But this time, innovation might be different for mid and large size organizations, as the acquisition tactic is limited and it will require a new mindset –  sharing a journey with your provider’s ecosystem and get 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 their own rhythm instead of acting 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. As, in fact, every business unit could be considered being a technology company in its own in this new context; this also means that you should be aware that technology companies might become your competitor (Amazon and Uber speak by themselves as ex.)

Gartner also came with a framework where they consider four steps with associated competencies for defining new digital business services.

What about Bimodal?

Gartner is still on an evangelization phase of this concept and tries to shed more light and remove confusion around as there is a polarized debate out there.

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 a brain: left side – logic, right side – creativity.

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

Mode 2, on the other hand, is exploratory. It’s about using the tumble dryer while, in the meantime, 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 see this approach as one which can ignite conflicts within the organization between different teams. Despite the debate, no other viable alternative approach seems to exists and despites of struggles to implement this approach, the predictions are that 67% of enterprises will be adopting Bimodal and this is a big challenge for CIOs and sourcing managers.

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