Out of The Box: Strategies for Achieving Profits Today and Growth Tomorrow Through Web Services [Hardcover]

John Hagel III (Author), John Seely Brown (Author)

Book Description

Publication Date: October 28, 2002

Managers today are understandably skeptical of the promises of new technologies. During the 1990s, vendors of both enterprise applications and Internet platforms promised enormous benefits. Companies invested large sums, but the benefits either failed to materialize, or came at a high price. Managers sacrificed flexibility and struggled to collaborate with business partners - a crippling disadvantage in today's marketplace. Now, leading business strategist John Hagel III has a refreshing message for managers burned by over-hyped technologies, yet pressured to find innovative ways to deliver more value with fewer resources. He focuses on a new generation of technology - known as Web services. This technology connects existing IT platforms in more automated and flexible ways, leading to much lower operating costs. The premise is practical and devoid of "change the world" promises. That very pragmatism, says Hagel, will drive enterprises to adopt it.In this book, he provides a clear view of the business implications of Web services: its distinct capabilities, its power to deliver near-term profits, and its potential to drive long-term growth. Drawing from the experiences of pioneering adopters, Hagel shows how Web services will enable companies of all sizes to: realize bottom-line savings quickly with modest investment; leverage investments in existing applications and create more flexibility; target specific areas for near-term cost reduction; establish-or leave-business relationships fluidly and inexpensively; and, create leveraged growth platforms for long-term competitiveness.A landmark book for CEOs, strategists, and IT managers, "Out of the Box" addresses near-term cost concerns and requirements for future success. As it discusses Web services, it provides deep insights into business strategy. At its core, this book tackles the most fundamental business issue facing managers today: how to continue to create value as competition intensifies. It also outlines innovative approaches to business process management and organization. John Hagel III is a business consultant based in Silicon Valley, and is coauthor of two best-selling books, "Net Gain and Net Worth". He has served as a senior executive with various technology companies and spent sixteen years as a Partner at McKinsey & Company, Inc.

Editorial Reviews

From the Inside Flap

"Out of the Box is a thoughtful examination of how web services can provide real agility and help leaders in any business realize their company’s true potential." - Steve Ballmer, Chief Executive Officer, Microsoft

"Out of the Box provides a practical road map to the information age. In the never-ending chase of ‘better, faster, and cheaper’ business models, Hagel has written in simple English a guide to how Web services can enable businesses to leverage their existing technology while incrementally implementing new and more flexible business models. This is a must-read for any executive who expects to compete in the information age." —Bill Coleman, Founder, Chairman, and Chief Strategy Officer, BEA Systems

"Through simple, straightforward steps, Out of the Box deftly shows how Web services can lead to important increases in a corporation’s profitability and performance. Easy to read, easy to understand, and action-oriented, this book should be read by any manager wanting to get—and stay—ahead of the competition. John Hagel is one of the clearest thinking and straightest talking analysts in the United States today." —Richard N. Foster, Director, McKinsey & Company

"John Hagel has done it again with another compelling look at the role of technology in today’s turbulent business arena. Out of the Box should be on every leader’s desk. Your business and your customers will thank you for it." —Raymond Lane, General Partner, Kleiner Perkins Caufield & Byers

"Web services has the potential to be as fundamental in driving the transformation of the technology landscape as IP networks and HTML were in the ’90s. Hagel has always been at the forefront of each major paradigm shift, and now has done a great job in outlining a new roadmap for business and technology leaders to follow to leverage the opportunities Web services afford us." —John McKinley, Chief Technology Officer, Merrill Lynch

"Hagel effectively answers the ‘So What?’ question about Web services and its impact on business. Out of the Box is an excellent strategy guide for understanding the next ‘big wave’ of productivity and business functionality improvement and should be required reading for every manager." —Tony Scott, Chief Technology Officer, IS&S, General Motors

"A refreshing change from the scores of how-to books on technology topics. Out of the Box casts the next generation of software technologies in exactly the right context for today’s focus on execution and business results. His concepts are clear and insightful, and provide valuable tools for business and technology leaders." —Mark Tolliver, Executive Vice President and Chief Strategy Officer, Sun Microsystems

About the Author

John Hagel III is a business consultant based in Silicon Valley, and is coauthor of two best-selling books, Net Gain and Net Worth. He has served as a senior executive with various technology companies and spent sixteen years as a Partner at McKinsey & Company, Inc.

Product Details

• Hardcover: 240 pages
• Publisher: Harvard Business Press (October 28, 2002)
• Language: English
• ISBN-10: 1578516803
• ISBN-13: 978-1578516803
• Product Dimensions: 9.6 x 6.2 x 0.9 inches
• Shipping Weight: 1.2 pounds
• Average Customer Review: 3.9 out of 5 stars  See all reviews (16 customer reviews)
• Amazon Best Sellers Rank: #1,712,184 in Books (See Top 100 in Books)

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14 of 15 people found the following review helpful:

3.0 out of 5 stars Still early days for business models for web services, February 11, 2003

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Nigel Seel (Wells, UK) - See all my reviews
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This review is from: Out of The Box: Strategies for Achieving Profits Today and Growth Tomorrow Through Web Services (Hardcover)

The story in web services to date has been told by the technologists. That is why we see an endless supply of articles about XML, SOAP, WSDL, UDDI and the rest of the WSxL alphabet soup. Ditto for the .NET vs. Java wars. It's time to transition from architectures and protocols to business models - how does any of this help to run a business faster, better, cheaper? Enter John Hagel, who spent sixteen years as a Partner with McKinsey, and has recently set up his own consultancy company.

Hagel starts by noting that web services is the first IT technology which supports an organic and self-adaptive organisational model of the enterprise. Hagel introduces "the Service Grid". Above the computing and network protocols there is a conceptually-distinct layer of functionality which has to be there to make web services fly. We need solutions to problems such as: security; transaction integrity; billing; orchestration of functions; and in particular ontologies - the standardisation of the meanings of entities and attributes within and between businesses. (Note the "semantic web" activity in W3C).

Many people assume web services are just a re-run of the "application service provision" experiment we saw a couple of years ago. In chapter 3, Hagel provides an excellent review of the ASP wave, the business requirements which drove it and the reasons why the experiment failed. Business were keen to move from a license to a subscription model, they wanted to use enterprise application services without investing in technology and operations. But CIOs were worried about the performance and security of Internet-provided applications, and concerned that if ASPs went out of business, their own companies would be left in a lurch (and the CIO would lose his/her job!).

Although the technologies of web services are still in their infancy, some people out there are using them. In chapters 4 and 5, Hagel describes Dell's continuous improvement of its supply chain using web service interfaces to talk with its supplier systems. He points out that existing applications can be upgraded to expose their interfaces as web services to support new business processes relatively easily and cheaply.

Generalizing from his Dell example, Hagel argues that web services will be introduced from the edge of the enterprise, later penetrating the core. The "edge" is that part of the enterprise which deals with the environment: customers, suppliers, partners. The alternative view is that web services will see early introduction within the enterprise itself, as CIOs exploit the power of web service interfaces to kick-start enterprise application automation (EAI) for legacy systems, which to-date has been just too difficult, costly and time-consuming.

In chapter 6, Hagel uses the examples of Cisco and Nike to examine "process networks". The situation where an orchestrator (dominant company with market power) controls the activities of a veritable keiretsu of partners in its industry value-net. Not via micro-management or direct administrative power, more through "certification, coaching, promoting or dropping based on overall partnership performance".

In chapter 7 Hagel turns his attention to the enterprise itself. Most enterprises, Hagel observes, are coalitions of three very different kinds of business. Firstly a customer relationship business focused on "share of wallet" (customer-centric); secondly an operations business focused on low-cost, economies of scale and routine (process-centric); and thirdly a product development business focused on creativity and innovation (new-product-centric). These three business types have different drivers, cultures and types of people. Many commentators have pointed out that enterprises have to decide if their focus is to be "customers, price or product" and that it's foolhardy to try to be a bit of everything.

Why not unbundle these functions into separate enterprises? Conventionally the answer is that excessive transaction costs load the scales in favour of retaining vertical integration of these functions. However, visionaries have long argued that eBusiness, with its dramatically decreased transaction costs, will permit a generalised outsourcing model leading in the limit to the virtual corporation. Hagel's view is that rather than atomization of enterprises, we can expect to see significant consolidation, particularly in the areas of customer relationship and operations-focused companies, where strong economies of scale exist.

Concluding, Hagel has a vision of the web-services-enabled company moving over a period to a fluid, decoupled "process-network"-type architecture. I imagine this will work for some companies and not for others. Company architectures are solutions to multiple complex constraints, and web services modify the parameters of some of them, but leave others unchanged.

Conclusion

John Hagel writes in the fluid style of the McKinsey consultant, short sentence constructions embedding abstract nouns and appropriately well-judged adjectives. But it's so bland that at the end of a long day, one can barely keep one's eyes moving along the lines of the pages. It's hard to know what to advise. The parts which read best are the case studies, where the arguments are locked into real experiences. Perhaps the problem is that the ratio of ideas to words is just too low.

Is this a book about business trends or is it a book about web services? There is a reasonably familiar story about eBusiness, the "frictionless economy" and the industry-architectural consequences of increased service velocity and very low transactional costs. Anyone who has looked at web services has experienced the "aha" feeling that at last we know what will actually make eBusiness work.

Except that eBusiness and web services are both very much works in progress. We don't know exactly how web services will transform business, and we don't know exactly how the needs of eBusiness will shape and form web services. This book is a great scene-setter at some level of generality, (although it is too long), but it flies a little high over the terrain, and we don't seem to see where the major issues will be over the next two to three years. I guess that book remains to be written.

17 of 21 people found the following review helpful:

3.0 out of 5 stars Web Services... more spin and hype, November 6, 2002

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T. Noyes (Charlotte, NC USA) - See all my reviews
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This review is from: Out of The Box: Strategies for Achieving Profits Today and Growth Tomorrow Through Web Services (Hardcover)

John's book is very well written, and the subject matter is timely. But the fact remains that the content is a 200k foot vision. Web services is the next BUZZ and the hype machine is being driven by consultants, software vendors and authors (constantly looking to create case for change).

I have been in front of 30 of the Fortune 100 CIOs, and heavily involved in high tech initiatives. Few production operations do anything beyond traditional EDI, and file transfer. The case studies within this book (ex Dell and Cisco) are very mis-leading. In both cases the suppliers, CMs and 3PLs are largely (90%) translating EDI to hub specific XML formats. Which leads me to believe that: a) the execs at Cisco and Dell don't know what is going on, b) case studies are part of the hype, c) not properly interpreted.

Integration and exposing web services is too expensive, which is why few companies have sucessful hubs or service based architectures. This book confuses business strategy and software "mechanics". I would make the case that there are very few truly "new" things in software.

The connected business models which have matured are prospering in EDI particularly within Aerospace and Automotive. What "new" business models are supported by WebServices? What is the case for change from EDI? What is the cost of implenting now? The opportunity cost for waiting until they are packaged in latest version of ERP? ... Many questions that need to be answered.

If you are looking for a good vision book, on what is possible, then this is a very good book. However, there needs to be some critical mass of success stories before mainstream business starts to act on these ideas. As well as an assessment of cost.

I do agree with John that Business Strategy must be the driver. My question is why are we confusing the software mechanics of interaction with the strategy?

Tom Industry Analyst

11 of 13 people found the following review helpful:

5.0 out of 5 stars IT: An Invaluable Means...Not "The Answer", November 14, 2002

By 

Robert Morris (Dallas, Texas) - See all my reviews
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This review is from: Out of The Box: Strategies for Achieving Profits Today and Growth Tomorrow Through Web Services (Hardcover)

Co-author of two previous bestsellers (Net Gain and Net Worth), Hagel has now written what I expect to be his most influential work thus far. In it, he identifies and then discusses "strategies for achieving profits today and growth tomorrow through Web services." First, I want to express my admiration of the Foreword which John Seely Brown provides. Unlike most other such introductions, it offers substantial benefits of its own to the careful reader in addition to "setting the table" for the "banquet" which Hagel serves. I agree with Brown that decision-makers in all organizations (regardless of size or nature) must break out of the mental models and other barriers which hold them back. As he correctly observes, "The challenge for all of us over time will be to develop a deeper understanding of the practices required to create and capture even more economic value." It is indeed a formidable challenge to overcome what Jim O'Toole once characterized as "the ideology of comfort and the tyranny of custom." I also agree with Brown that Hagel provides in this book both the counsel and inspiration to do so effectively.

It is important to keep in mind that Hagel views technology as a means by which to increase the effectiveness of a given strategy. That is to say, a commitment to providing Web services should be driven by an appropriate strategy. At a time when change is the only constant, when those involved in a competitive marketplace must (in effect) thrive to survive, the importance of having an effective strategy is incalculable. I agree with Hagel that one of the most important lessons learned since the 1980s is that "information technology is at best a catalyst and an enabler. It is never an answer in itself." Nor could it be.

For non-technologists such as I, Hagel carefully explains "how a new generation of IT and related architectures -- known generally as Web services technology and distributed service architectures -- will provide a significant catalyst in helping management break out of the [four] boxes that confine it": (1) financial performance pressures, (2) enterprise infrastructures, (3) enterprise boundaries, and (4) mental models. "The real value [of avoiding or breaking out of these boxes] is the increased capability of business managers for flexibility and collaboration -- capabilities that can in turn produce significant operating savings and growth options across the entire business."

The material is organized as follows:

Part I: Finding Flexibility (i.e. how to identify and then respond to unmet needs, how and why Web services create new options, how and why Application Service Providers made a "false start")

Part II: Finding Near-Term Profitability (i.e. what a "pragmatic adoption" of Web services and "moving from the edge to the core" involves)

Part III: Creating Focus (i.e. how process networks create value through specialization, and, why it is necessary to "unbundle" inorder to "rebundle" core business processes)

Part IV: Accelerating Growth (i.e. how to create value through leveraged growth, and, what "reconfiguring" any organization involves)

Throughout this book, he includes several multi-purpose Tables which illustrate as well as clarify core topics such as "Four Management Boxes" (page 5), "Moving from the Edge to the Core with Web Services" (page 87), "Alternative Platforms for Leveraged Growth" (page 161), and "Migration Path of Layered Organizational Change" (page 187). It has always been my custom to highlight key passages in a business book for future reference and reacquaintance; I also plan to do so with all of Hagel's Tables.

What makes this book even more valuable is that it succeeds so well in discussing a subject which has not as yet received the attention it both needs and deserves. With meticulous care, Hagel explains how Web services can help any organization to realize bottom-line savings quickly and with a (relatively) modest investment, leverage other investments in existing applications while creating more flexibility, target specific areas for near-term cost reductions, establish or eliminate business relationships and do so with both expedition and grace, and finally, how to create leveraged growth platforms for long-term competitiveness and sustainable profitability. Out of the Box is a brilliant achievement.

Whenever it seems appropriate, I include in a review suggestions for "further study." It is highly desirable but not imperative to read Hagel's previous books (Net Gain and Net Worth) before reading this one. I do recommend Adrian J. Slywotsky's Value Migration: How to Think Several Moves Ahead of the Competition and his more recently published The Art of Profitability as well as Robert S. Kaplan and David P. Norton's The Strategy-Focused Organization: How Balanced Scorecard Companies Thrive in the New Business Environment, and Jason Jennings' Less Is More: How Great Companies Use Productivity as a Competitive Tool in Business.