The myth of the inevitability of social organisations

In the rush for the new-new thing we’re confusing the means with the end. Business – as currently practiced – has been built around the need to own and manage a central asset. This might be a factory, some IP or even a skilled team. The tools, technologies, and methods we deploy in business are used as they cause the business (the asset) to perform better: bottom line down or top line up, simple stuff. This seems to have been forgotten. Some of the newer tools – such as social business design – can add value in this content, but they are only tools. If they make sense and add value, then they will be adopted. If not, then they will wither and die. For many companies, it looks like they will only provide marginal utility.

Martin Linssen{{1}} seems to have started something of a storm on the Internet by pointing out that the emperor has no clothes{{2}}. He was responding to the noise around “social business design” and “enterprise 2.0”. Dennis Howlett{{3}} then published a nice missive{{4}} that builds on Martin’s observation.

[[1]]Martin Linssen[[1]]
[[2]]the emperor has no clothes[[2]]
[[3]]Dennis Howlett[[3]]
[[4]]Enterprise 2.0 is beyond a crock. It’s dead.[[4]]

The clarity Dennis brought was to highlight that, in the quest for the new-new thing, many marketing machines and practitioners have forgotten that for these tools to be adopted they need to add value, and that it’s hard for them to add value in the command-and-control structures that exist in most companies.

As Dennis astutely said:

When you get down to the nuts and bolts of the problems that prof McAfee correctly identifies but for which no amount of technology will solve it is really simple: the kinds of management and structures you need in order to make these ideas work in a sustainable manner is almost non-existent. Command, control, power and status have a huge part in this. And no amount of putting lipstick on those organisational pigs will change the fundamentals. In one well known case I still see individuals being taken to one side and asked: “Did you really have to say that? It’s not what we expect from people in your position.” Insidious isn’t it?

Today’s business are built around the concept of managing a central asset. This asset might be a factory, it might be a fleet of trucks, the deposits from a community of investors, it might be the methodology and tools a skilled team use, or it might be a brand. Regardless, structures are defined and people hired to support and drive this central asset, and not for any other reason.

Some companies, such as Zappos, have successfully used tools like social media to drive value by improving customer service and reaching customers earlier in the buying process. The problem is that companies Zappos and its ilk only represent a small proportion of the business community.

Think of the contract manufacturers who make the clothing that Zappos sells, or the outsourcers who run the supply chains to and from Zappos’ warehouse. These companies are trying to sweat an asset – the factory or a fleet of trucks and planes – and are usually chasing costs, often by moving to second or third world countries where wages are lower, or by automating first world jobs.

It’s the need to manage a central asset that has driven them to create these vertical command-and-control structures. Sometime the nature of this asset is compatible with the trendy new method – as with Zappos, social business design and enterprise 2.0 – but often it’s not. Yes, these companies could be better run (strangely enough, most companies are average), however, telling these companies to up-end their business models just doesn’t make sense. They’re focused on managing that central asset and there is currently no proof that these new techniques can do that any better than existing practices. As Dennis pointed out, the kinds of management structures to use these new tool in this context don’t currently exist.

Unfortunately the pundits are assuming that a few exceptional companies and individuals represent something the general business community should adopt as is. They are also mistakenly assuming that the claimed benefits – such as “improved communication and customer engagement” – requires us to deploy their favourite technology, tool or methodology.

Quest for the new-new thing

Quest for the new-new thing

Being better at the basics is more important. I know one executive that I had enough trouble convincing to get out of the office to say “Hi!” to his team who were only ten minutes away: he didn’t see the need to communicate with them. There wasn’t any point in even trying to convince him to use any sort of social media tool.

So we need to get a few things out in the open here.

First, social media, enterprise 2.0, and social business design do have the potential to provide value to a business. The case studies are out in the open, so there’s no arguing about this.

However, and second, is that these case studies represent the special case, and not the general case. YMMV{{5}}.

[[5]]Your Mileage May Vary[[5]]

Thirdly, we also know that social media, enterprise 2.0, and social business design require a different approach to command-and-control. Let’s avoid the value judgements as to whether this is good or bad, it just is.

So finally, and fourth, for mass adoption across the entire business community we must acknowledge that the foundation of many companies’ business models needs to change if these new tools are to add value. Zappos makes these tools work, as Zappos’ central asset is their brand, and brand (as an asset) benefits from these tools. Other companies – and this is probably the majority of companies in the business community – are not so lucky. They’ll see more benefit by focusing on the basics.

My view is that there is big shift that is currently building around the need to move away from the idea of a centrally managed asset as the foundation for a company. This is a big deal, as government regulation and accounting rules are built around the idea of a company owning a central asset. All the rules and regulation needs to be rewritten for this to happen. (Note to self: buy shares in accounting firms.)

The most likely new foundation for business is the ability to mobilise stakeholders – from employees, through partners to customers and the market in general. Your value will be defined by your ability to make things happen, rather than the assets you own. This would be world where all costs are operationalized, and our businesses look more like World of Warcraft than the hierarchal command-and-control structures of old. You, as an organisation, will be measured on the strength of your organisation’s social graph. Social business design will be the first port of call when designing your new business, rather than the last.

Until this shift happens it looks like social business design, social media, and enterprise 2.0 will be of marginal utility for many firms. Not useless, just less than revolutionary. However, I do think this (or something like it) will happen in the mid term. Someone will make it work in a private company, and then it will be copied. It will become increasing difficult for old school companies to compete with the new breed, eventually reaching the point where the old school pressures the government into changing the regulations and rules to suit.

Me, until the revolution comes I’m focused on getting out in the field and using all these tools in a new and interesting ways to create as much value as I possibly can, for both employees and the companies they work for.

Posted under: Enterprise 2.0, Mailing List, Strategy

20 comments

  • Des Walsh on 2010-11-12 at 9:14 am said:

    A fascinating post, as is Dennis Howlett’s.

    I believe Altimeter’s Charlene Li’s book Open Leadership and the arguments therein deserve acknowledgement in this context.

    I worry about conflating “Enterprise” and “business”. It is my belief (based on not much more than personal experience and observation) that a lot of things can be done – and ways of doing things changed – in small business which are harder to achieve at the enterprise level.

    I’d be interested to know your take on “government 2.0”.

  • Peter Evans-Greenwood on 2010-11-12 at 9:40 am said:

    It’s a controversial topic, so I’m glad you liked it :)I haven’t read Charlene’s book, though I have a lot of respect for what the Altimeter is doing in this space. They seem to be one of the few who have cut through the hype, and who are starting to chart a course forward. Good, pragmatic stuff. I’ll add the book to my to-read pile.You’re spot on with this observation. I don’t think it’s due to anything other than the challenge of working with, and changing, large groups of people. To a large extent, Gary V. and Zappos are a distraction to the enterprise: the problems they solve are interesting, but it’s a completely different scale to do this for a 100,000 person company, and this brings new challenges. This is where I choose to work though.Gov 2.0 is probably worth a chat over beers if we find ourselves in the same city. A good starting point on my thoughts would be The changing role of government and What is the role of government in a Web 2.0 world.Briefly, I think that O’Riely, TBL et al have taken Gov 2.0 in the wrong direction, as their focus is in realising a personal vision of how they want to live, rather than a vision for how we can all live together. The style of ultra-libererian view that many Gov 2.0 advocates promote marginalises too many people to be a viable option for society as a whole.Bing me if you’re in MEL and we’ll hook up :)</a

  • aqualung on 2010-11-12 at 1:09 pm said:

    Des – that was one of my points as well – maybe we should leave the existing enterprises to fall where they will – it’s newer, smaller, more human-scaled businesses (like yours and mine) who will see more benefit from “social business”

  • Martijn Linssen on 2010-11-12 at 2:35 pm said:

    Peter, thanks for contributing to the #e2conf story – I always value your experienced and wise words

    TG we’ve now arrived at agreeing on the combined mix of people, process and technology – in the order most suited to every particular occasion

    In http://www.martijnlinssen.com/2010/01/cloud-and-social-tectonic-plates-of-it.html I sketch where Cloud belongs, and Social: infra=static, business=dynamic. Each movement of the past decade(s) centres in a different OSI layer and can only travel so many other layers before dropping dead: like a cohort attacking and breaking through enemy lines, fighting itself to death, thinning and fanning out on its way

    You sketch absolutely perfectly which businesses can not benefit from E2.0 at all. Although I think that most enterprises do and deal with people as most important asset, I also agree that the current C&C just won’t allow its power to be eroded

    I’m thinking of making an old-fashioned SWOT of today’s enterprise – that would be fun, at least for me
    Meantime, thanks for the explanation and quantifying it all!

  • Jon Husband on 2010-11-12 at 2:47 pm said:

    My view is that there is big shift that is currently building around the need to move away from the idea of a centrally managed asset as the foundation for a company.As you said, this is the big deal.Thank goodness someone pointed out that the nature of the firm and the nature of the work carried out by that firm has already structure that’s pretty efficient.There are many examples of where leaders and mangers could communicate better or be more open, and where that could or might have positive effect .. but it’s not automatic. as you point out (and not necessary for productivity or high performance (you and I might not like to work there, but that’s a different subject).When the business ‘logic” changes and it’s no longer maximising return from a central asset, then yes, we are into revolutionary (or shall we say evolutionary) territory in an era where networks seem likely to become more important.

  • Gareth Jones on 2010-11-12 at 4:34 pm said:

    I hear a lot of talk about technology and assets and not a lot about the core of any business – the people. Without the people, you have no technology or assets. A ‘social’ organisation, however you want to call it, does not require a different approach to command and control – it requires the elimination of the command and control model as we know it. Who’s to say that you cant ‘sweat an asset’ with a different model?! Are you that short sighted or wrapped up in tehcnojargon that you don’t have an open mind? Is there any room for innovation here?

    Obviously, the vast majority of organisations run to the existing model, largely structured on the centuries old military structure and that aint going to change over night. As you point out above using an ‘astute’ snippet from Dennis –

    “the kinds of management and structures you need in order to make these ideas work in a sustainable manner is almost non-existent. Command, control, power and status have a huge part in this.”

    Of course they do but HELLO! the ‘social’ evolution will change this – and this is what i believe Mr McAffee is trying to say. The social technologies are enabling something that the technology you guys have been flogging, implementing and writing about for years never has. Hell, this isn’t even about enterprise technology or even technology that the company owns or controls. The social tech gives customers and employees an ability to connect and collaborate and talk, openly, whether the command and control jockeys like it or not.

    Agreed, the change wont happen overnight, probably more generational, but it will be the biggest shift in organisation dynamics in the last half century. And who are you to argue with me?! 🙂

    And finally, my tweet above has really been taken out of context. The point was that the writer i mention was implying that not all businesses need to engage customers or improve employee communications. Rubbish and lunacy. They absolutely need to, and should do. They don’t in a lot of cases, due in no small part to the fact that they are command and control based organisations run by people obsessed with sweating the assets without realising they’d get a lot more if they engaged their key asset – their people.

    You guys really are confrontational! You should all take a chill pill. 😉

  • Peter Evans-Greenwood on 2010-11-13 at 1:33 am said:

    The elephant in the room here is this concept that “people are your most important asset” that is use to justify a lot of the hand waving. It’s not that people are or are not important, but from a regulatory, reporting and structural view point, people are not the asset the business is built around. Banks take deposits, manufacturers have factories, Colonel Sanders had his recipe, SIs have “methodologies” and so on. We hire people to make the most of these assets. Let’s avoid the value judgements: this just is.

    Or put more concisely: people are the building blocks (that is what makes them valuable, after all) with which we make the building, but they are not (usually) the reason the building exists.

    As to the people-process-technology thing, I’m starting to wonder if this debate is missing the point. Being able to decide what is the right problem to solve is more important that deciding how to solve it. People-process-technology is all well and good, but people-process-technology to do what? All to often teams just race to the answer they want (business transformation!).

    Oh, and I think that all business can benefit from E2.0 etc. The question is to what degree. A few can leverage it quite heavily, but for many it might not be more than a tweak here or there.

  • Peter Evans-Greenwood on 2010-11-13 at 1:36 am said:

    It’s a good point, and I’m currently assuming (with no proof) that the trend will start in the smaller end of the market and then work it’s way up to the top of town. This is the journey most new ideas take, and I don’t see how e2.0 etc are any different.

  • Peter Evans-Greenwood on 2010-11-13 at 1:58 am said:

    A comment from Andy Mulholland, which the comment engine took a dislike to and ended up in email.

    My build on this would be that the revolution is in the ability to service the market of an enterprise and the challenge that technology is answering is how to do this more effectively around the edge of the conventional core competencies of an enterprise. the core competencies are slow to change, a huge investment in every aspect from people to capital, and the question is how to leverage them more effectively with in the market place. In this aspect technology is providing new capabilities that create real value – i.e. revenue, market share, etc but this is not at the expense of the traditional technologies of IT which are required to operate the enterprise legally and effectively.

  • Gareth Jones on 2010-11-13 at 12:39 pm said:

    I don’t get it, are you not contradicting yourself? Or just saying it is what it is now but it will change? You seem to be supporting Dennis in his ‘it aint proven and wont make a difference” yet you go on to suggest organisations will move to a ‘social business design’. I agree, they will. All i’m saying is that it wont be the organisations choice in terms of timing like it has been in the past.

  • Peter Evans-Greenwood on 2010-11-13 at 11:49 pm said:

    It’s quite clear what I think in the post. Start from “First, social media, enterprise 2.0, and social business design do have the potential to provide value to a business.”, about two thirds of way down. I can wait.

    While e2.0 etc has proven to provide some benefits by improving communication, the main point of this post was to outline how the nature of many businesses that exist today will limit the utility of these tools. Until we change that we can expect e2.0 to provide a lot of benefit to a few companies, but little benefit to the majority.

    We can argue that “people are your most important asset”, but the elephant in the room here is that “the people” are not the asset that the business is built around. For many organisations the best result is to remove the people, such as with lights-out factories, or some of the new SaaS plays which are replacing people-driven BPO with automated self-service solutions.

    All businesses today are built around some type of centrally owned asset. This might be a consultancy with it’s methodology (there to provide IP which can be valued on the balance sheet, and to ensure quality), a manufacturer with their factories, a logistics company with trucks and planes, and so on. The asset is easy to find: it’s on the balance sheet.

    We hire people to support these assets. Need a button pressed every few hours: hire someone. The people we hire are important, as they can have a huge impact on the efficiency and quality of the outcome. However, they are not central to the business – it’s reason for being.

    The nature of business today is to sweat these assets: leverage them as much as possible to make short term profits for the shareholders. (Many people – including myself – think that this is the wrong attitude, but it is the attitude that regulation and policy encourage and allow.) Most businesses do this by reducing the number of people they need. Swap people for software and see quality go up, costs go down, and capacity go up.

    The challenge for e2.0 etc is to succeed in this context.

    Some organisations are build around communication with the customer – such as Zappos – and their asset is brand value. e2.0 etc play to this very nicely, and we’re seeing this special case succeeding. There’s some very nice case studies out there.

    Other organisations just need someone to pull a lever. A happier and empowered employee is a more productive and effective employee – which is the driver behind human capital management, and one of the principles which underly LEAN – but the old rules still apply. The lever needs pulling, and we want to find the cheapest and most reliable way to do it. Maybe I can just use a rubber band which is replaced once a year? The improved communication e2.0 etc can bring might add some marginal value, but up-ending the business around social business principles makes no sense. This is the general case where we are yet to see e2.0 get broad traction.

    Finally, I posit that businesses will move away from the need to own a central asset. When this happens, then we can see broad adoption of e2.0 etc. However, and this is a big however, government regulation is built around the need for companies to have some sort of central asset. Look at regulations like Basel2 and SOX: having and maintaining this asset is mandatory. (The market is the beast that forces you to leverage it, as the government doesn’t care if you go bust).

    That said, we already have a limited general solution to using e2.0 etc. The dirty secret of e2.0 is that it’s being used the same way as most technologies to date: it’s being use to remove people from the equation. Rather than empowering the middle office, e2.0 is being used to eliminate the middle office, within the context of existing command and control structures. If you want to see where this is going then read up on the British civil service in India, where each manager had one hundred direct reports. The people left are the folk at the coal face and the thinkers in head office (or, as Seth Godin calls them, the architects).

    So, I agree with Dennis that the business case for e2.0 etc “transforming business into a more social beast” is not there in the current business environment. I disagree with Dennis in that I think it will happen, but we need to up-end regulation first.

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