A Solutions Triptych, Panel II: Virtualization and Realization

Solutions, as they are defined and delivered in response to identified needs and wants, are manifested along a continuum of virtualization-to-realization. In the graphic below, the uncolored image of the portal diagram from Solutions Triptych, Panel I becomes the background over which the dynamics of virtualization and realization are shown. The portal acts as a lens to focus that which is conceived virtually in preparation for its eventual realization in physical form at a later time.

As information and communication technologies extend their capabilities, three key characteristics of virtualization will accelerate the pervasiveness and rate of adoption for these technologies:

  • Intuitive – human interaction with them will become easier and more transparent
  • Intelligent – they will become more human-like in their functioning so that people are able to engage in other activities rather than tending to the technologies or what the technologies are designed to do
  • Integrated – interfaces between one technology and another and one component in a system with other components will be designed so that the components in a system can be upgraded and the system’s overall functionality and effectiveness improved without having to replace the entire system

In fact, as people become more experienced with and confident in virtual solutions meeting or exceeding their needs, their expectations for more intuitive human factors, more intelligent functioning, and more integrated features will grow. The result will be a decided pull from customers for business investment to continue in developing even more powerful virtual solutions.

However, that which is virtualized must be realized at some point either with the means to experience the solution satisfactorily in virtual space or with tangible goods. The flipside to the three virtualization characteristics is another set for realization. These are extensions of what is commonly experienced within most manufacturing operations, namely:

  • Cost – related to the business providing the realized solution and to the customer who is “investing” in it
  • Quality – how well the realized solution performs according to specifications and for how long under diverse / changing conditions
  • Schedule – when the realized solution is available from the business and when it is needed by the customer

The perennial challenge within industry is how to balance these three realization characteristics. The rule of thumb in management is to emphasize any two of the three depending on the tolerance of customers then develop strategies based on those and letting the third “float.” This is not an ideal circumstance in which to manage, but a conundrum of significant familiarity with those in industry!

Through rapid and marked increases in virtualization techniques and capability, the formulae for managing the realization characteristics have changed. The diagram below illustrates some of these dimensions.

At the heart of the virtualization-to-realization transition is the spatial and distance relationship between the point where the solution is virtualized and the point where it is realized. For instance, in the bottom relationship one product solution goes to many customers. The “point of realization” (PR) precedes the “point of virtualization” (PV) as inventory is produced then presented to the customer through virtual presentation in hope that sales are forthcoming, inventory is quickly turned, and the cycle repeats. The customer has little influence on the specification and utility of what is represented by a particular business. Instead, the customer exercises choice by cost – quality – schedule comparisons among competitors offering similar solutions.

In the middle relationship, a system solution is packaged using components from “some” providers then delivered to a well-defined market segment comprising a distinct “some” set of customers. PR and PV are in very close proximity to one another. The customer has more direct influence over the specification of the system solution rather than component parts. Businesses are able to facilitate the customer’s choice by offering a wide range of configurations and feature combinations along a relatively lengthy decision-making timeline. As a result, the customer has longer to consider the alternatives in virtual space before making a final selection. Also, businesses can defer adding inventory until the last moment when the customer’s decision triggers realization of a solution already sold virtually.

The top relationship shows how a much larger population of “many” businesses bring products / services into a total solution in response to well-identified needs and wants of “one” customer. In this instance, the PV precedes the PR and each customer has the latitude to experience a total solution tailored specifically for their situation and distinct requirements. Oftentimes, the virtual experience of the total solution is so effective that the customer can sharply reduce the investment in physical / tangible assets required to realize the application value of the solution. This is a win for both the businesses providing the solutions and the customers acquiring them as the costs of operating in virtual space are much less than with tangible assets. While the conversion of virtual experiences into physical applications will be the mainstay in many transactions, it is trending such that this will be less the case as time goes by. This is significant for businesses and customers everywhere!

These three relationships – one to many; some to some; and many to one – play across a larger continuum of commoditization-to-customization depicted with the arrow in the background. Depending on the capability of a business to influence the juxtaposition of its “point of virtualization” to its “point of realization” determines the guidelines for an appropriate strategy for that business. Those that can adopt more intuitive, intelligent, and integrated information and communication technologies are better prepared to differentiate themselves from competitors by presenting highly customized total solutions in virtual space. Those less willing or able to do so focus directly on going head-to-head with competition in the delivery of singular products and services with a more favorable cost – quality – schedule result in the eyes of customers. An “appropriate strategy” keeps the PV and PR aligned with placement on the commoditization-to-customization continuum. This assures care is taken for the transactions passing through its portal from virtualization to realization, which is the real significance of any thoughtfully considered and well-executed business strategy.

Originally posted to New Media Explorer by Steve Bosserman on Saturday, October 1, 2005 and updated on Monday, October 3, 2005