Application of the Hypercube of Innovation to Business ...



Application of the Hypercube of Innovation to Business Objects v4.0

Context

The launch of the product Business Objects v4.0 is very complex. The context of this launch is very difficult to grasp because of several points that need to be analysed if we want to figure out what really happened :

• Business Objects v4.0 was totally recoded

• A lot of new core functionalities had been added (and not destructed and modified)

• It was synchronized with the launch of Windows 95

All this points made that the fail of the launch is not easy to analyze. We cannot remain limited to classic analysis of the product. Everything is mixed, and need to be see separately. That’s why we will use the Hypercube of Innovation theory developed by Alan H. Afuah and Nik Bahram.

The Hypercube of Innovation Theory

1 The main idea

Often the studies of innovation are focused on the end of the value-chain: the innovation are analysed through the product. We can refer to Abernathy and Clark (1985), Henderson and Clark (1990) who classified according different scales innovations in four categories. Independently from the extraordinary quality of these studies, the impact of critical complementary innovation, of learning by customer or positive network externalities (David, 1985 ; Kartz and Shapiro, 1985) due to the product are not seen. Considering products like Business Objects v4.0, it is not enough to focus only on the innovative product, too many changes had happened at the same time on different points of the value-added chain. Afuah and Bahram concluded that “an analysis must also look at the impact of the innovation on the capabilities of suppliers of components, customers, and complementary innovators[1]”.

In the hypercube theory, the questions about effects of innovation are not only limited to your core competencies and your assets. You decline this question to all parts of your value-added chain : you wonder how your innovative product will affect the customers’ capabilities, the suppliers’ capabilities…

2 The model

It is obvious that the model can be useful only under certain conditions. The product must have some specifities in order the analysis to be relevant. Its production needs “critical components or high-tech equipment” and either end-customers buy it or OEM add value to it before selling it to end-customers. Afuah and Bahram also distinguished bunch of propositions which should be true amongst these one :

• High level of skills or knowledge are needed, this implies formation of users

• Positive network externalities : the more users it exists the more efficient it is

• The innovative product needs other complementary to success

Considering a product which responds to these conditions, we can discern four steps in the value added chain :

• The supplier

• The innovator

• The customer

• The complementary innovator

So, if we take the quadrant of innovations of Henderson and Clark (1990) we can duplicate it in other dimensions ; we create an hypercube :

[pic]

However, the goal is to apply the quadrant to all steps of the value-added chain, that’s why we burst the hypercube in four different cubes where each step will be analyzed :

[pic]

As Afuah and Barham did in their work, we will analyze each cube created by the explosion of the hypercube of innovation.

3 The quadrant of innovation

The cube of the innovative product is the one which had been the most studied, almost the only one. We have already quoted the famous studies of Abernathy and Clark (1985) and Henderson and Clark (1990) which are the basis of the hypercube model in the extent that this structure remains.

Indeed, the last two has developed the quadrant of innovation according two axes :

• Core concepts : this dimension “captures an innovation’s impact on components[2]”

• Linkage between core concepts and components : this dimension captures innovation’s impact between them

With these two dimensions we can discern four types of innovation.

1 Architectural

In this case, the core concepts remain the same but the linkage with the components are changed. So the notion of architectural innovation is quite logical, especially in IT software we can find examples. Often the software’s new releases consist of architectural innovation.

We can quote “Windows Live Hotmail” and the former “Hotmail”. The design has changed, some functions about search or organization too, nevertheless, it’s still a mail account. Another example is the digital tuner where you can set directly the station by choosing the frequency whereas before you had to turned a button and it was more difficult to detect your favourite station and have a good quality.

2 Radical

It is the most innovative innovation ! Both core concepts and linkage between them and components are changed. It is a very complicated case because everything change and all the points of reference disappear.

It is not easy to find innovations responding to the two scales. We can think at the introduction of Compact Disc which replaced the magnetic bands of cassettes. Technologically speaking, this was a brand-new one ad moreover, people had to buy a new equipment to hear music.

3 Incremental

This innovation is the most spread in firms. Incremental innovations can be framed in process innovation. Basically, neither the core concepts nor the linkage between them and components had changed. This is a mean to keep in touch with the needs and demands of customers without changing everything.

At the supermarket, when a brand launches the same biscuit with a new flavour we can qualify it of incremental innovation.

4 Modular

This last type is special : core concepts have changed without changing the linkage between them and the components.

The genetically engineered vaccine are an example [3]: “Genetic engineering, recombinant DNA technology, genetic modification/manipulation (GM) and gene splicing are terms that are applied to the direct manipulation of an organism's genes. Genetic modification of an organism can be achieved through a number of methods, most notably traditional breeding and recombinant technologies[4]”

4 The innovative product

The risk with an innovative product is to be convinced that it is a revolutionary product, invest huge amount of money, and to figure out that we have re-invented the wheel. An innovative product has to evolve continuously to be most adapted possible to the market and the need discovered. The quadrant of innovation just before is very useful to classify his innovation and make out how to launch it and avoid disaster as it happened for Iridium (K. Coyne, J. Grazel, E. Hans, A. Haroche, and A. Matochak, 1999).

5 The customer

Concerning the customer, we must be careful on our point of view. For example, we know that our innovative product will provide him a fantastic service or giving him new advantages. Nevertheless, it is not enough, the consequences of our new product on the customer capabilities and/or current assets or knowledge have to be taken in account. That’s why a product can be located differently in the quadrant of innovation according the cube we are considering.

Indeed in the cases where the customer has to acquire new skills, or his positive network externalities developed is destroyed, or new investment has to been done in new equipment or facilities, he will be reluctant to adopt our product. That’s the four main points discerned by Afuah and Barham.

6 The complementary innovative product

Here it can be helpful or the contrary for the innovative product. For example if our brand new product A, need an evolution B’ or a complementary product B, it’s obvious that an alliances or a joint venture would be welcome. Else, the evolution B’ could not be launched or worse, a new product C could be launched with C = A + B’.

7 The supplier

This part is linked to the previous one, but on the upstream this time not in the downstream. An innovative product can obviously need an innovative component. But, this innovation can not be in the same quadrant.

8 The green-red map zone

In order to sum-up the explosion of an hypercube, Afuah and Barham develop a graph with in X axis the cube considered (innovative product, supplier…) and in Y axis the strength of the innovation. They make out three areas to have a visual representation of the analysis.

[pic]

Application to Business Objects v4.0

Firstly we need to show into which extent Business Objects v4.0 is an innovative product which can be analyzed with the hypercube. As we said before, there is some statements to fulfil. Next, we could apply this analyze and understand the complexity of the launch of this release.

1 Characteristics of Business Objects v4.0 and the hypercube model

1 Reminder

We said in II.2 that some proposals have to be true in order to apply the hypercube model relevantly :

• High level of skills or knowledge are needed, this implies formation of users

• Positive network externalities : the more users it exists the more efficient it is

• The innovative product needs other complementary to success

We will see each point separately to be sure of our analysis, nevertheless, we won’t be exhaustive in order to develop our analysis afterwards.

2 Users’s formation

It is obvious that Business Objects v4.0 (written BO after) requires skills and knowledge for the common user, the creator of the reports and of course, the maintenance.

Creating reports on BO need to be involved in all the projects since the beginning and work closely with the designer. To be clear, when a department of big company or smaller firm decide to use a BO platform they need :

• A BO designer for creating the datawarehouse, the BO universe and parameterize the software (for big company often there are BO specialist in IT, or it exists Bo consulting agencies for smaller firm) and then, the maintenance.

• On the side of customer, often people involved in the project, create some reports with the BO designer, and these one are the basis for the department. These people are responsible for BO on the user’s side.

That’s why, future users working on the project have to follow several days of formation for several reasons :

• Manage correctly the project with the designer

• Create reports

• Ensure reports maintenance for the whole users

Finally, it appears that BO fills totally this statement.

3 Positive network externalities

This point is almost obvious. It is one of the key of success of software : the more users there are, the more the software offers possibilities.

For example, let’s imagine that there are only two users of BO in a department. They did wonderful reports, they can print them. But in the case where, someone would like to use a report, but it doesn’t fit totally to his needs he couldn’t adapt it. The principles of BO reports is to have some basics reports protected by administrators (from IT for technical maintenance and users) that everyone can modify locally in order to get analyzes which fit perfectly his needs.

4 Complementary innovations

The launch of BO v4.0 happened in the same time that the launch of Windows 95, which was a brand new Windows very different from former 3.xx versions. Indeed, with Windows 95 the DOS disappeared for the basic users, they only deal with Windows.

Before the v4.0, BO was often running under DOS system, and the new architecture of v4.0 was designed for Windows 95. That’s why the utilization of BO v4.0 require to pass on Windows 95.

To conclude on these three points, we are now sure that the hypercube model perfectly fits BO v4.0 that’s why we will apply it.

2 The hypercube of Business Objects v4.0

1 Assumptions

We are going to modify some things in the model of Afuah and Barham. It is not that we think it is not good enough, but we just want to use a value-added chain more adapted to BO. That’s why we will use the following cubes :

The programmer’s cube rather than the supplier’s cube, indeed, there are no real suppliers for components here, it is more relevant to see the programmer side.

• The innovative product’s cube : this will be a classical study.

• The customer’s cube : this will allow us to see how the customer’s capabilities have been affected by BO v4.0.

• The complementary innovation : we will be able to take in account the parallel launch of Windows 95.

2 The hypercube

The figure following is our application of the hypercube model to BO. In the next points, we will analyze carefully each cube.

[pic]

1 The programmer’s cube

For this cube the analysis is quite easy : they begun from ex-nihilo. Thy entirely recoded the software for this release. That’s why the linkage between core concept and components has changed, but the core concepts still remain. Indeed, this is still a business intelligence software, there is no revolutionary way of coding that could decrease the cost or make it very faster.

Finally we assume this innovation as architectural.

2 The innovative product’s cube

This cube is very difficult to analyze. It is hard to figure out if this innovation is architectural or radical. What is sure, it is the fact that the linkages between core concepts and components have changed. Obviously, if we consider a totally recoded software with a lot new capabilities, new way of creating reports, these linkages have changed dramatically. Nevertheless, the thorny question is about the core concepts. Have they been reinforced or overturned ? Let’s see the pros and cons.

In one hand, they have been overturned. The newness of the capabilities and the new procedures are the main reasons. The new functions of projection or requests synchronization can be seen as architectural innovation, but their consequences are huge. Before the v4.0, we could only make one request by reports, but now it is possible to make several requests thanks the synchronization. And thanks the function of projection, the level of detail of data could be used in different requests grouped inside one report. Before, a lot of reports had to be created, and data treatment and analysis where made with Excel. This new points let us think that it is a radical innovation because these new functions overturned the core concepts in this way.

Nevertheless, on the other hand, this new functions didn’t change the core concepts if we consider the goal of BO. Indeed, this is still business intelligence : extracting data from database, loading them in datawarehouse on order to make reports and take decisions. We still need a relational database, an ETL step, a datawarehouse and OLAP intelligence. The new functions improve indisputably the capabilities of the software, but the core concepts have just been reinforced.

Finally, the less point seems to be the most adapted, even if that’s right, there is a part of radical innovation.

3 The customer’s cube

Now, we will demonstrate that it was a radical innovation from the customer’s point of view. Firstly, the v4.0 destroyed all the knowledge and the skills acquired by the customer. The new functions with multi-requests and synchronization made his former reports obsolete. There was no migration process clearly defined, a BO specialist had to make it reports by reports and most of time, the user was out and didn’t understand anything. The best solution was often to create new reports with the v4.0, and the utilization was so different with the apparition of tabs, arborescence, new objects and class definitions in the universe that the user couldn’t do this alone. The customer had really to learn new concepts to work with this new release.

Moreover, the shared reports with other users or the reports modified locally were useless. Until the basics reports weren’t re-created and that the people in charge of them didn’t master the new software, they couldn’t use their previous work. Furthermore, they had to start again all their work. Actually, the positive network externalities were destroyed and had to be re-built.

Finally, the customer lived this new release of BO as a radical innovation.

4 The complementary innovation’s cube

For BO v4.0, the launch coincided with the one of Windows 95. The v4.0 was only compatible with Windows 95, not with 3.xx versions. That’s why it was in the interest of BO to work with Microsoft to ensure a full compatibility and then for Microsoft, to encourage user to use Windows 95 since software were already available for it.

The complementary innovation Windows 95 can be seen as a architectural innovation. The core concepts of an operating system weren’t overturned but reinforced and in the same time, the linkages between them and the components were changed with the brand new interface.

3 The green-red zone map

We will sum-up in the green-red zone map the analysis above. This will allow us to have a visual impression of the application of the hypercube model on BO v4.0.

[pic]

How take that theory into account

1 Reasons of a failure

The previous analyses show that it was a real challenge for the customer to use Business Objects v4.0 for many reasons.

With all his knowledge and skills destroyed, the customer didn’t want to change his version of BO. Why change something that fit me by something I didn’t understand ? This is just common sense and totally understandable. He had already had to learn the v3 and now he must learn how to use Windows 95 and then BO v4.0 ! This fact comes from one of strength of BO and the BI industry in general.

Softwares like BO are not only destined to IT engineers or SQL or database specialists. Their strength is to be simple enough to be used by any users. A marketing specialist to analyze the impact of his strategy can use BO, make request and create report to optimize his strategy. Basically, these people are not IT specialists and not obligatory keen on new technologies. If they are provided a good tool that fills their expectations and allow us to do a good job, they have no rational reason to change it. Even if they are told that this new tool is far better and more powerful, they have to start again everything from zero !

Moreover using the v4.0 meant that during the time of installation and learning the positive network externalities are not available, and besides, destroyed. So after a long learning period, everything has to be re-built !

As a conclusion, the new Windows 95 environment expands the fears of the users. They were parachuted in an operating system different from their current one and needing learning, and then they were told that everything about BO they have done or learnt was obsolete, and they have to re-start from zero.

2 What could have been done

In this last part, we will try to see how the managers of BO could have anticipated these problems and help the users to change their BO release.

1 Ensuring compatibility

Ensuring the compatibility was a tough work. Because of the new operating system Windows 95, the extension and the format of all the BO files generated by the users were different. That’s why the users generally cannot use their former reports.

A good idea would have been to ensure that these reports were available even if, the users could not modify them anymore. It would have alleviated the constraints for the users who can stop working during the learning period.

More than the technological compatibility, there is also the skills compatibility. The new version should have contained some modules you can use with the skills customers have developed. This could have also avoided destroying all the positive network externalities built by users. Indeed, with some of these modules, the network could have been operational during the migration.

2 A better support : ensuring the migration

Another very bad point is the problem of the migration. There was no migration process. And this for two reasons :

• Because of technological reasons explained before, the format and the extensions of the files generated by the user were totally different. Besides, the synchronization of request that allow several requests in one report was not adapted to merge all the mono-request reports into only one.

• BO specialists have to do this for all the reports and most of time users don’t understand anything and the results was a disaster. So, it was often faster to recreate a report than organize a migration. That’s why BO managers and consultants weren’t prepared for this at all.

Finally before releasing this new version, a migration process should have been set up very precisely. In this case, even if people had to learn how to use the v4.0, all their previous reports and positive network externalities would have been saved.

3 An intermediate release ?

Another solution possible would have been to release an intermediate version before the launch of the v4.0 and before the launch of Windows 95. Actually, launching the v4.0 in the same time of Windows 95 gave BO the advantage of first mover. Nevertheless, an intermediate release could have been launched before with some incremental innovations. The users could have been prepared to the new release with new functionalities implemented. It would have been more progressive.

Conclusion

To conclude on this point, BO managers have totally neglected how the capabilities of the v4.0 would affect the customers. These one were not prepared and didn’t want to use brand new software destroying all their work.

The problem was that BO managers focused too much on the technological innovative side. Even this release was a failure, especially in the United States, the quality of wasn’t really in cause. It was not adapted to the expectations of the customers.

An application of the hypercube model would have shown them a part of the impact on the capabilities of the customers. That’s why, without delaying the release in order to keep the advantage of the first mover, some actions or preparations could have been done for making ready the customer to Business Objects v4.0.

Appendix

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[1] Afuah and Barham, The Hypercube of Innovation 1993

[2] Henderson and Clark, Architectural Innovation : The Reconfiguration of Existing Product Technologies and the Failure of Established Firms 1990

[3] Brevet, innovation modulaire et collaboration : Le cas des vaccins géniques , A. BURETH, M. MUELLER, J. PÉNIN, S. WOLFF Juin 2007

[4] Wikipedia’s definition

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Degree of radicalness of innovation

Value-added chain

Innovator

Customer

Comp. Prod.

Supplier

Value-added chain

Programmer

Comp. Prod.

Customer

Innovator

Degree of radicalness of innovation

Radical

Architectural

Modular

Incremental

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