Monthly Archives: November 2010

Innovation [2010-11-29]

Another week and another collection of interesting ideas from around the internet.

As always, thoughts and/or comments are greatly appreciated.

Why Enterprise 2.0 and Social Business Design might be of marginal utility to most of us

It seems that I’ve been pulled into the storm that Martijn{{1}} started{{2}}, and as I live somewhere between the Enterprise 2.0 / Social Business Design cheerleaders and detractors, my position of “E2.0 and Social Business Design is of marginal use for many businesses, but that could change” might need some clarification. The following is a cleaned up comment from elsewhere{{3}}.

[[1]]Martijn Linssen[[1]]
[[2]]Enterprise 2.0 prodigal parent[[2]]
[[3]]It’s quite clear what I think in the post.[[3]]

While Enterprise 2.0 and Social Business Design have proven to provide some benefits by improving communication, the main point of my last post{{3}} 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 etc to provide a lot of benefit to a few companies, but little benefit to the majority.

[[3]]The myth of the inevitability of social organisations[[3]]

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. (Some people 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 is for E2.0 and Social Business Design 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.

At the end of my last post 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). Changing this (as I’ve said before) I a big deal.

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 used 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 naysayers that the business case for E2.0 etc “transforming business into a more social business” is not there today. I disagree in that I think it will happen, but we need to up-end regulation first.

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.

The Scoop: The future of software

Neill Rose-Innes (CIO @ Mortgage Choice) and myself are on Mark Jones’ The Scope this week.

The enterprise software market is growing again as cloud computing continues to dominate the strategic agenda. But what other long term trends do CIOs need to consider as 2011 looms.

  • Given the massive growth in SaaS, what are the implications for legacy software?
  • Is the focus is moving away from enterprise software? If so, does it have a future?
  • How can CIOs evaluate their options and make sound judgements on which SaaS products to introduce?
  • Does packaged software have a future?
  • In relation to cloud computing do software apps now live in the browser or with the cloud service provider? What are the implications of this?
  • Can software developers afford to be specialists anymore?
  • What are the challenges or writing software for mobile operating systems such as Android, Microsoft, Apple?

You can find the discussion on the AFR website.

About The Scoop

The Scoop is an open, free-flowing conversation between industry peers. It’s about unpacking issues that affect CIOs, senior IT executives and the Australian technology industry. The conversation is moderated by Mark Jones, The Scoop’s host and producer. More information about The Scoop, including a list of previous guests, can be found here:

http://filteredmedia.com.au/about-the-scoop/