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Jan Bosch is a research center director, professor, consultant and angel investor in startups. You can contact him at jan@janbosch.com.

19 September

One of the models I use frequently in my consulting assignments is the 10 Types of Innovation model by Doblin/Monitor Group. As suggested by the name, it identifies ten different forms of innovation arranged around the business ecosystem, the offering and the customer experience. This model is important as most people think about improving the product when they hear the word “innovation,” but in practice, as the authors of the model show, product innovation has the lowest return on investment (RoI) of all the ten types. Instead, innovating the business model, customer experience and surrounding processes have significantly higher RoI.

One of the innovations not necessarily concerned with the product but with the other dimensions is DevOps. Although the term is used frequently, I still notice that many fail to identify how deep the impact of the adoption is. DevOps fundamentally changes, among other things, the interface to the customer, the product in the field and, frequently, the business model. As we’ve discussed throughout this series of posts, digitalization is concerned with continuous value delivery to customers, which is predominantly driven by releasing new software to products in the field. As the customer often is the owner of the product, there frequently is some involvement by the customer to ensure that the update happens when it’s convenient for the customer.

The relation to the product in the field changes in several ways. First, software traditionally was extensively tested as part of the integration into the product before being shipped to the customer, and this included several manual steps and activities. Now, the software is released and the product is expected to update itself without causing any issues or concerns. Also, if an issue is detected, the product needs to be able to roll back to ensure availability.

Second, with the continuous connection to the product, we also want to collect performance and quality data and bring it back to the company for analysis. This connection forms the basis for all subsequent technology innovations, such as A/B testing and the use of artificial intelligence.

Third, accepting a cost structure associated with continuous deployment of software to the field but failing to capture the additional value you’re providing is suboptimal in that it decreases margins. So, the adoption of DevOps often causes a change in the business model as well, with the transactional business model being replaced or complemented with a continuous one, eg subscription, usage or performance based.

In my experience, there are at least two challenges that many embedded-systems industries are experiencing when digitalizing: certification and the operating models in the business ecosystem. First, most certification approaches assume a ‘one-off’ certification of a system, including all its technologies. This is very labor intensive and expensive and consequently, many companies are very careful to conduct it as infrequently as possible. This is diametrically opposed to DevOps, where we want to update our systems in the field as often as possible. Several approaches address this and offer continuous models for certification, but in practice, these haven’t seen major adoption in many industries yet. Depending on the class of certification needed, it requires process innovation not just at the company level but at the business ecosystem level as well.

Second, the operating models in the business ecosystem often complicate the adoption of DevOps. For instance, in the defense industry, the customer, typically the military of a nation-state, assumes a transactional model where all requirements for a new system are defined before a tender and the winner is selected based on price while satisfying all requirements. This way of operating severely complicates the adoption of DevOps and again requires changes at the business ecosystem level before the full benefits of DevOps can be captured by everyone involved.

Although the term “DevOps” is widely used and many assume that it’s simply the combination of development and operations, in practice, it significantly changes the relationship with the customer and the products in the field as well as the business model. DevOps is a keystone technology that drives many changes in the company as well as in the business ecosystem. Its adoption is often complicated by certification needs and existing work practices in the business ecosystem, which requires a multi-pronged change management approach to realize it. But, as we all know, the best way to get better is through continuous improvement. As Mark Twain said, continuous improvement is better than delayed perfection!