The Guerilla Guide to Social Business Slightly Dystopian Essays on Enterprise 2.0 Venkatesh G. Rao
104 pages, 29,000 words. Suitable for a 3-hour flight.
Most of these essays were originally published on the Information Week “Brainyard” site, between 2011 and 2012.
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Contents Preface .......................................................................................................................................................... 5 Social Media vs. Knowledge Management: A Generational War ................................................................. 7 Hard Power and Soft Power in Enterprise 2.0 ............................................................................................ 15 The Four Horsemen of the Enterprisocalypse ............................................................................................ 21 Shifting Visions and Agile Missions ............................................................................................................. 27 Zen and the Art of Enterprise 2.0................................................................................................................ 31 Simpler Organizations are Harder to Design .............................................................................................. 35 The Heart of the Enterprise ........................................................................................................................ 41 Social Wars I: A New Hope .......................................................................................................................... 47 Social Wars II: The Enterprise Strikes Back ................................................................................................. 51 Social Wars III: The Return of the Radicals ................................................................................................. 55 Managing the Enterprise Stream ................................................................................................................ 59 Towards the Superlinear Corporation ........................................................................................................ 65 Digital Native versus Digital Migrant Businesses ........................................................................................ 71 The Trifecta is Complete: The Enterprise 2.0 Grand Unified Equation....................................................... 75 Management for Opportunity Part I: The Origin Story ............................................................................... 81 Management for Opportunity Part II: The Theater of Leadership ............................................................. 85 Management for Opportunity Part III: The Gambler-Manager .................................................................. 89 A Crowdsourced Definition of Collaboration .............................................................................................. 95 The Enterprise 2.0 Backlog: A List of 100 Items .......................................................................................... 99 Acknowledgements................................................................................................................................... 105 About the Author ...................................................................................................................................... 106
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Preface In 2008, annoyed by the saccharine positive thinking and collaborative Kumbaya singing around the Enterprise 2.0 movement, and driven by a rather bloody-minded impulse, I wrote a deliberately provocative post for the Enterprise 2.0 blog titled Social Media vs. Knowledge Management: A Generational War. As I expected, the post turned out to be very controversial. More so than I had expected. I had frankly only wanted to do a bit of trolling and poke fun at the too-earnest and selfserious messiahs of 2.0, but the reactions suggested I’d hit a raw nerve. But the posts did start a genuine conversation that went beyond bright-sided cheerleading by the terminally clueless. Many of the people who initially reacted with anger at the post have since become good friends, and we’ve kept up the conversation over email. The reaction intrigued me, and I began contributing occasionally to the blog, developing what has since turned into a rather dark and borderline dystopian view of the Enterprise 2.0 and Social Business trends. In 2011, when TechWeb launched the Brainyard as part of the Information Week site, I signed on as a columnist and have attempted, over the last 18 or so months, to develop this darker view into a systematic philosophy that (hopefully) rises above the level of blogosphere flame wars, where I started. This philosophy isn’t for everybody, but I have genuinely come to believe in this darker view of what’s happening. I think it is a more realistic philosophy for informing the design of 2.0 businesses. Since I began writing about these topics, I have had a few opportunities to speak about this approach to social business, and the reaction has been uniformly positive. I find that people harbor genuine and intelligent skepticism about 2.0 ideas, and I find it vastly more productive to engage the skepticism creatively than to attempt to neutralize it with the kind of motivational cheerleading that I myself do not buy. And let’s admit it, it is not only more pragmatic to start with the Dilbert mindset, it is more fun. Elsewhere, on my personal blog, ribbonfarm and in my book-in-progress, Game of Pickaxes, I am developing the views in these essays in broader ways. Those posts are not included here, since they venture beyond the set of themes associated specifically with the Enterprise 2.0 and Social Business movements, but if you are interested in exploring further, you should check those out.
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Social Media vs. Knowledge Management: A Generational War Note: this is the only piece in the collection that appeared (in 2008) before I started writing for Information Week. The piece was intended as flame bait to a certain extent, and should be read as such. But it has provided the motivation and overall voice for all my writing on the subject since then. You’d think Knowledge Management (KM), that venerable IT-based social engineering discipline which came up with evocative phrases like “community of practice,” “expertise locater,” and “knowledge capture,” would be in the vanguard of the 2.0 revolution. You’d be wrong. Inside organizations and at industry fora today, every other conversation around social media (SM) and Enterprise 2.0 seems to turn into a thinly-veiled skirmish within an industry-wide KM-SM shadow war. I suppose I must be a little dense, because it took not one, not two, but three separate incidents before I realized there was a war on. Here’s what’s going on: KM and SM look very similar on the surface, but are actually radically different at multiple levels, both cultural and technical, and are locked in an undeclared cultural war for the soul of Enterprise 2.0. And the most hilarious part is that most of the combatants don’t even realize they are in a war. They think they are loosely-aligned and working towards the same ends, with some minor differences of emphasis. So let me tell you about this war and how it is shaping up. Hint: I have credible neutral “war correspondent” status because I was born in 1974. Anatomy of a Hidden Corporate War The three incidents which got me clued in, suitably anonymized, are the following. I end each anecdote with my in-the-moment reaction. Ask yourself, as you read these, what caused the dissonance at the heart of each incident. The Reassuring Consultant Early (and by that I mean less than two years ago of course) in my social media cheerleading efforts at work, I was a participant in a workshop organized by our IT organization, led by a self-styled middle-aged social media consultant who’d been brought in to help us think about 2.0 strategy. He was a great guy and engaging speaker, and made several sophisticated and thought-provoking points. But throughout, he kept returning to the reassuring theme that there wasn’t much new going on. He reassured us that these things come and go in cycles, and that 2.0/SM were really just the latest labels for what used to be called KM. And then he told us all about his recommended KM-informed strategy to respond to the social media trend. Throughout the talk, I had a distinct sense of unease, of being on the deck of the Titanic listening to a fiddler playing a soothing melody designed to distract from the consequential elements of the situation. But I couldn’t figure out the source of my unease. 7
The Skirmish at the Conference A few months later, I was one of four panelists at an industry symposium, where our theme was social media. An older panelist from another company, architect of a major, moderately successful, stable and decade-old KM effort — call him B — went first. He completely ignored new elements in the technology and forcefully presented the design pattern for his success as the design pattern for success (his was an approach I’d call waterfall social engineering, involving elaborate up-front charters, courting of subject-matter experts (SMEs) and “stakeholders” and formal launch events). I admit I sometimes like to set the cat among the pigeons just out of sheer bloodymindedness, so when my turn came, I changed my prepared script on the fly, and turned my talk into a deliberate antithesis of B’s talk. Partly I did it to wake up the somnolent audience, but partly because I truly did disagree with almost everything B said. Where he advocated planning, I advocated ad-hoc experimentation. Where he advocated charters to declare expected value, I advocated a you’ll-know-it-when-you-see-it approach to discovering value. Where he talked about convincing SMEs, I argued that you should just watch for opinion leaders to emerge. Now, a year later, I know what subconscious itch made me play contrarian. At the time though, it was just me having a bit of fun (and the audience enjoyed it — several people came up to me later and said they really appreciated me saying the things I did). Still, I left the event feeling rather bad about having caused some polarization instead of driving towards a synthesis. Though he had a rather annoyingly pedantic manner, B really did know his stuff, and there was value in what he said. The Insistent Expert The third example came via a meeting where I was supposed to informally provide some consulting input to a manager from another internal organization at my company. The manager in question had been chartered by a senior manager to look into creating an online community for a certain purpose, and had probably been asked to “reach out” to me. This sort of thing happens fairly often to me (once you get labeled as a social media go-to guy, you get sucked into all sorts of “reach-out” conversations). In this particular case though, I recall the conversation being particularly difficult and going nowhere. At least three times in the conversation, the manager repeated, rather insistently, “I am a certified Knowledge Manager; I know how to do this stuff; I’ve done this before.” Finally, I gave up and closed the conversation politely. We were talking at cross-purposes, and he clearly had no intention of listening, being influenced, or acknowledging that changes in technology ought to motivate a re-examination of existing best practices. Again, I did not doubt the good faith or competence of the person on the other end of the conference call, but I was left wondering why this conversation had been so frustrating when other, similar conversations, had been vastly more productive. 8
I have a whole bunch of other examples filed away, but these should be enough to give you an idea of what’s going on inside and in-between enterprises today. The 5 Social Dimensions of the War I believe these incidents are symptoms of a hidden KM-SM war. You’ll either dismiss this inference as a figment of my imagination, or enthusiastically resonate. I am not attempting to persuade the doubters as to the existence of a war, but to educate the resonators about some of the details. So I won’t attempt a detailed argument, but just move ahead with the assumption that there really is an ongoing cultural war. If you aren’t in the choir, well, move on. Nothing to see here. The uber-cause of this war is that Knowledge Management was conceived as a top-down Boomer (born 1946 – 62) management effort, created by this generation just as it was moving into leadership positions. Social Media, on the other hand, is a Millenial/Gen Y (born 1980 -) movement. This overall generational cultural divide has shaped the ongoing corporate cultural war. This leads to vast, and I mean truly VAST, differences in how the two movements approach enterprise social engineering (for background, try Generation Blend by Rob Salkowitz, which I reviewed and summarized on my blog). The salient points: 1. Gen X is Currently Neutral: Crucially — and this is why I am a neutral — neither movement reflects or overtly conflicts with, the values of Gen X (born: 1963 – 1980). I was born in 1974, which should explain why I claim neutral status. This neutrality of Gen X is crucial: they were the foot-soldiers of the top-down KM movement, and are today the leaders and mentors of the bottom-up SM movement, as they move into middle and senior management. Neither set of ideas is due to X’ers in any significant degree. Due to its small size (in the US, there are 78 million Boomers, about 51 million Gen X’ers and about 80 million Millenials) and its fundamentally pragmatic, as opposed to visionary/world-changing mindset, Gen X is the crucial swing vote in this culture war — we don’t have either the personalities or the numbers to dictate how the world should be run, but we are smart enough and numerous enough to make a difference by picking a side. So far, we’ve been neutral. Which way we eventually swing will be the most important element of this war. 2. KM is about ideology, SM is about the fun of building: Salkowitz notes that the Millenials are the first generation since the “Greatest” (WW II veterans, born 1901 – 25) generation that likes to build (social institutions that is). Building for the sheer pleasure of building, and because the possibilities exist. Nothing describes the motivation behind the creation of Facebook better than “because it was possible.” KM on the other hand, arose from a generation that cut its teeth on disestablishmentarianism (I’ve always wanted to use that in a sentence!). The Boomers objected to the world built by the “Greatests” and their kids the “Silents,” (b. 1925 – 45) on moral grounds, and tried (and failed, outside, say, Ojai, California) to reinvent the world. So they reluctantly “sold out,” went all establishment, and when they finally got those Vice-President titles and a chance to set the agenda, they 9
revived the ideology of their counter-cultural youth and made it corporate policy. KM came from that ethos, and is still more idea than reality. SM, on the other hand, is mostly cool stuff without any grand ideological design behind it (which explains in part why it is so hard to define). 3. The Boomers don’t really get or like engineering and organizational complexity: This is a provocative statement, to be sure, but I stand by it. Yes, some of the most brilliant conceptual advances in information technology came from Boomers. They built the early prototypes behind most of the computing infrastructure of the world (the PARC personal computing pioneers were Boomers for instance). But it was Gen X that actually scaled-up and built-out the complex production-standard IT infrastructure of the world (and thereby learned about complexity by creating it). The Millenials learned to understand complexity even better than us X’ers, by being born into it. By contrast, not only do Boomers not get complexity, they are suspicious of it, thanks to their early cultural training which deifies simplicity. The result of this difference is that Boomer management models rely too much on simplistic ideological-vision-driven ideas. Consider, for instance, the classic Boomer idea of creating “communities of practice” with defined “Charters” and devoted to identifying “Best Practices.” No Gen X’er or Millenial would dare to reduce the complexity of real-world social engineering to a fixed “charter” or presume to nominate any work process as “best.” At best, X’ers and Millenials might create the first iteration target of a Scrum-style sprint and let the charter just evolve. I suspect, as Gen X’ers and Millenials take over, that the idea of vision and mission statements will be quietly retired in favor of more dynamic corporate navigation constructs. 4. The Millenials don’t really try to understand the world: If us X’ers share with the Millenials an appreciation for complexity that the Boomers lack, we share with the Boomers a taste for big-picture synthesis that simply doesn’t seem to attract the Millenials (perhaps they are just too young at the moment). This is a subtle point, so let me try to explain it. The Boomers liked the idea of world views, and tried to frame both what they were for, as well as what they were against (think Star Wars) in monolithic ways. Mental models of the world that a single person could get. James Michener’s The Drifters represents one articulation of such a world view. Here’s the thing: Millenials fundamentally cannot think this way because of the deeply collaborative nature of their cultural DNA. They seem happy understanding and working with their piece of the puzzle, trusting that the larger body politic will be manifesting and working according to a reasonable understanding of the world. Gen X, in this sense, manages a curious compromise. We like world-views, but as antivisionaries, we don’t like to just make them up arbitrarily (and definitely not in the form of a novel or the lyrics to a song). Our world view is a pragmatic one that accommodates complexity by trying to make it a very rich, data-driven one. Wikipedia (founded by Gen X’ers, Jimmy Wales, b. 1966, and Larry Sanger, b. 1968) is a classic Gen X-led attempt to understand the world. It has none of the incomprehensible complexity of Facebook-as-implicit-model-of-the-world, but neither 10
does it have the doctrinaire vacuity of typical Boomer manifestos that try to dictate how the world should be, with no real attempt to figure out how it is. 5. Boomers speak with words, X’ers with numbers, Millenials with actions: If you are wondering how a significant corporate cultural war can be in progress without making headlines, it is because the three generations involved process the world with different primary cognitive stances. The Boomers attempt to understand the world with words, and the best they can do is talk to themselves. The Gen X’ers try to avoid conflict by seeking solace in data and a relentless focus on reality. The Millenials are blissfully unaware of larger dynamics and just go ahead and create. So that’s the war for you, from a social perspective. These five major dissonance themes are at the heart of many an inconclusive and unproductive business meeting around social media. But it isn’t all a social story. Technology matters. The 5 Technological Dimensions of the War One of the statements I’ve heard repeated endlessly and moronically, is that the technology does not matter. That it is all about the people. This is simply not true for all sorts of reasons (the most important being the medium is the message, per Marshall McLuhan, b. 1911, Greatest Generation). One of the clearest pieces of evidence that technology matters, is in the subtle differences in emphasis for comparable technologies from the KM and SM eras that are helping frame the ongoing war. 1. Expertise locators are not social networks: Many companies today want internal “Facebook” (Millenial) or LinkedIn (Gen X) type systems. In management conversations, you’ll often hear the overall requirement being described as an “Expertise Locater” systems. While technically, all three may be similar, the idea of an expert really comes from the Boomer yearning for community opinion leaders with the moral authority to form a priestly elite. Gen X’ers just want to see social graph data, Millenials just want to connect indiscriminately. For the X’er and Millenial, an “expert” is a situational role based on whoever owns the eyeballs for whom a bug is shallow. X’er and Millenial designed Q&A forums tend to be egalitarian. Boomer KMers though, love the idea of a “subject matter expert” or SME and design this preference into technology. Systems designed around “ask an expert” design principles — the signature of a Boomer at the helm — are subtly different from epistemologically-egalitarian ones. 2. Online Communities are not USENET V3.0: Three generations of online community technology, reflecting distinct cultural values, exist today. The distinctly countercultural USENET is a Boomer technology (culturally). Though USENET was organized by content, its overarching architecture is driven by a communityconsensus ontological process with its own dark side (the alt.* groups versus the ones created through RFC-RFP democratic processes). Gen X’ers, responsible for 11
the anarchic proliferation of organized-by-content Web bulletin boards and the anticommunitarian construct of the individual blog, true to their data-driven pragmatism, made content (data) king. Finally, the Millenials created their generation of ideologyindifferent online communities around social networks where groups are not Good or Evil, but just are, and where people again are the focal point, over content. I am uncomfortable even applying the “container” metaphor of “community” to the Millenial architectures — they have a leakiness and porosity that only works with the label “network.” Curiously, Facebook groups typically allow anyone to join via a network affiliation. LinkedIn groups tend to have a lot of gatekeeping. 3. RSS and Mash-ups are Gen-X ideas: Like Wikipedia, RSS and Mash-ups are culturally Gen X ideas, since they are motivated by the pragmatic intent to reuse code and content to conquer overwhelming complexity. 4. SemWeb Isn’t Next-Gen, it is Last-Gen: If the Gen X’ers adopted the idea of a folksonomy-driven world-view (Wikipedia) for pragmatic purposes, and if the Millenials are merrily tagging everything in sight with no larger end in view, the Boomers didn’t go away quietly. Curiously, what is billed as a modern, nextgeneration, “3.0″ idea — the Semantic Web — is actually a Last-Gen idea in some ways (Tim Berners-Lee, evangelist-in-chief, is a Boomer, born 1955). SemWeb was born of the same culture as KM (and separated by birth from it by the firewall). Characteristically, both KM and SemWeb set a lot of store by controlled vocabularies and ontologies as drivers of IT architecture. The idea that Web 2.0 distracts from SemWeb isn’t a technical opinion: it is the Boomers expressing disappointment in their children for not caring about World Peace. Now this isn’t to say that the idea of systematic ontological engineering is a bad one. At a purely technical level, chances are that some mix of folksonomic and more deliberate approaches will prevail (and here you hear my pragmatic Gen X voice, so this isn’t as “technical” an opinion as I’d have liked it to be). The interesting thing to note is that the technical argument tends to be largely a rationalization of a psychological one. 5. SOA and SaaS are Gen X; Clouds are Millenial: It seems likely that Service-Oriented Architecture and Software as a Service will play a big part in the creation of Enterprise 2.0. The lack of right-brained creativity in the acronyms alone should tell you that they represent Gen X attempts to conquer complexity in a pragmatic and potentially ugly way. But the notion of “Cloud” is a curious one. It is in the same family of technology ideas as SOA and SaaS, but unlike them, is metaphoric. But it is curiously devoid of ideological overtones. That signals that it is culturally a Millenial idea (I’d bet a small sum that whoever came up with the term was born after 1975 — a late X’er or a Millenial).
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How the War Will End It takes no great genius to predict how the war will end. The Boomers will retire and the Millenials will win by default, in a bloodless end with no great drama. KM will quietly die, and SM will win the soul of Enterprise 2.0, with the Gen X leadership quietly slipping the best of the KM ideas into SM as they guide the bottom-up revolution. And it won’t be just a victory of fashion. It will be a fundamental victory of the better idea. SM is an organic, protean, creative and energetic force. KM is a brittle, mechanical, anxiety and fear-ridden structure. It is telling that the biggest KM concern is the potential loss of Boomer knowledge, a backward-looking preservation/archival concern, while the biggest current SM concern is probably the heart-stopping excitement around the possibilities of mobile devices and the potential Web-top-enabling Google Chrome. Let me end with a personal note that hints at how I was won over by the Millenial creation of Social Media. Back in 2002 or so, in a fit of enthusiasm, I created a virtual community for an organization I was part of, using the rather KM-style early SaaS offering, CommunityZero. When a young, Millenial colleague first enthusiastically told me about wikis, I actually resisted briefly, in a sort of passive-aggressive way, because I didn’t believe such a disorganized approach could work. I was wrong (obviously), and converted. The tragedy of Gen X is that we will not be remembered as a big-idea generation. We will likely be remembered, via a footnote (much like the Silents), as the generation which made the fateful decision to trust the creativity of the generation following it over the values of the generation that came before.
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Hard Power and Soft Power in Enterprise 2.0 I believe Enterprise 2.0 evangelists make a key strategic mistake in how they frame their efforts: they adopt an “all carrots and no sticks” approach. Diplomats and soldiers like to talk about hard power versus soft power. Hard power is all about guns, missiles, threats and coercion. It is the classical approach to both diplomacy and war (the latter, as the saying goes, is merely a continuation of diplomacy by other means). Soft power is a newer idea, and was born in the age of mass media and a thriving global trade in culture products, such as Hollywood movies and Japanese comic-books. The idea was formulated by Joseph Nye of Harvard in 1990. The idea is that you make friends and influence people through mutual cultural attraction, sharing and cooperation. To oversimplify a bit, two countries that both love Michael Jackson and MacDonald’s burgers are less likely to go to war. Diplomats and soldiers recognize that you need both hard and soft power to exercise influence in credible ways. Somehow 2.0 evangelists seem to miss this. Don’t believe me? I have proof. Framing Enterprise 2.0 Consider the most beloved words and phrases in the E 2.0 movement: Cooperation, collaboration, win-win, co-creation, delighting customers, social, word-ofmouth, authenticity, engagement, conversation, empowerment, strengths, true fans, tribes. And consider the words that are conspicuous by their absence: Winning, losing, out-maneuvering, competition, fighting, deception, coercion, exploitation, weaknesses, penalty, lawsuit, perception management, spin, inter-tribal warfare. When you study the contrast in the two vocabularies you realize that the E 2.0 crowd has made a huge (and unintended) leap of faith. Apparently, the invention of blogs, wikis, social networks and microblogging has transformed human beings into angels. The scary thing is that this is not a strawman criticism based on caricatures of 2.0 types. I 15
routinely meet people with such ridiculously unbalanced and idealistic vocabularies of persuasion. Sure, they are a minority, but they are not a marginal minority. They dominate the E 2.0 conversation. I have managed to offend a couple of them so badly, they refuse to talk to me anymore. Let’s call them Carrotists. The Myth of Abundance Though few Carrotists say so, this huge leap of faith is driven by a belief in the myth of abundance. That social media somehow transforms all scarcity, the root of all economic and military conflict, into abundance. Ask and the universe shall do thy bidding. From one defensible argument (Clay Shirky’s notion of cognitive surplus; that there’s more under-utilized brain power lying around than we think), people somehow seem to leap to a philosophy of peace and harmony in the world of business that can only work if everything that sparks competition and conflict, from oil to attractive people, were abundant enough to satisfy all. This is not only deluded, it begs the basic question any business is designed to navigate: that of maximizing the value of some scarce set of resources. Without scarcity, there would be no enterprises to 2.0-ize. There are both reasons and rationalizations at work here. The rationalizations offered are based on idealist visions. Empowered customers and employees living self-actualized lives and converting those oppressive capitalist pigs into suitably chastened believers in world peace. The pigs, so the theory goes, will eventually be humbled and won over by the grand drama of co-creation, altruism and empathy that social business is supposed to be about. Lions will lay down next to lambs. The meek want to inherit the earth. Today. Using peace and love. The actual reasons are that unfortunately, far too many in the Carrotists harbor repressed feelings of oppression and marginalization, under layers of denial. It’s revenge time, and E 2.0 is the weapon of choice, in the effort to occupy the moral high ground. Anemic Rationalism 16
Now, there are many smart evangelists who speak Carrot-talk in public, but in private, have their doubts. They try to make things more realistic by being more rational, which translates to focusing on the emotionless aspects of business: numbers and ROI. Now there are many reasons the whole ROI conversation has turned into a bad joke, but one of the main ones, and the one of interest here, is that the the Carrotists make a fundamental Psychology 101 mistake by turning to rationality. They think the hard-headed business types, the ones with all the power, are emotionless rationalists, who will only be won over by fact-based arguments. This is, quite simply, wrong. The prototypical hard-headed business types aren’t emotionless pragmatists. They are as emotional and irrational as the Carrotists. If anything, they are even more contemptuous of the rational bean counters than the Carrotists. Anemic rationalism and ROI-thinking is as alien to them as it is to the Carrotists. Faced with an ROI analysis, their eyes glaze over too. These are the powerful line managers. The bean counters are mostly powerless staff types. People to get around, rather than people to convince. The hard-headed business types are simply driven by a very different set of emotions and irrationalities. Emotions related to the excitement of conflict and competition. Bloodthirsty emotions. Irrationalities rooted in too much confidence and belief in their ability to win. Let’s call them the Stickists. The Stickists If the Carrotists hate the bean counters for attempting to reduce love and trust to dollars and cents, the Stickists hate them for staying away from the bloodsport of building and selling products. The Carrotists hate the bean-counters for their apparent lack of humanity. The Stickists hate them for their apparent cowardice. Stickist E 2.0 evangelists (I am one) exist, but they are rare. They like 2.0 for different reasons. Where Carrotists say that 2.0 levels the playing field, the Stickists say 2.0 levels the battle ground.
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To Stickist E 2.0 types, the new technology is not about peace and harmony. It is about enabling asymmetric guerrilla warfare that allows anyone in any position to challenge people with nominal power and big titles. Wikis are IEDs. Blogs are places to ambush your enemies. Twitter is hand-to-hand combat. Email is trench warfare. Ever wonder why World of Warcraft is more popular than the Sims? Business 2.0 as Asymmetric Warfare You see, the “business is war” approach is not a reluctant choice on the part of fundamentally peace-loving types. To the Stickists, “business is war” is what attracts them to the world of business in the first place. If the Carrotist utopia is about peace and harmony, the Stickist utopia is about constant conflict, a sense of urgency, and a heady, addictive cocktail of fear and excitement. To them, peace and harmony equals death by boredom. The Stickists are driven by a fierce competitive spirit. A combative, take-no-prisoners attitude to getting things done. These are people who not only enjoy a good fight, but thrive on a diet of conflict. Conflict brings out the best in them. These are people who pay more attention to threats than inducements. People who are contemptuous of those who offer feel-good validation to others, and even more contemptuous of those who actually need it. These are people who enjoy winning, watching competitors bite the dust and persuading reluctant customers with psychological manipulation. They prefer win-lose to win-win. Even if they lose. They especially love big upsets, when a nobody takes down a C-suiter. And when it comes to the front line of business, selling, these are people who at least partly view the customer as an enemy. Somebody to be engaged in a game of negotiation, where to win is to walk away with the better end of the deal. Paradoxically, this attitude is actually more respectful of customers, one that doesn’t insult their intelligence or capacity for independent thought. An approach that views them as full human beings with their own agendas and motivations, rather than intimate friends who are either in your “tribe of fans” or out of it. An approach that boils the business of selling down to its essence: haggling. Only lofty cult-leaders refuse to haggle with their followers. Peers haggle. These are people who suspect that any approach based on denial of this irreducible 18
adversarial element in selling creates cults of consensus rather than thriving markets. And they are right. Red-Blooded Evangelism How do you get out of this unproductive framing? How can you make your evangelism work a tasteful and artistic blend of Carrotist and Stickist thinking? How can you deploy hard and soft power in concert? The key is to get away from the heart-and-brain frames (which leads to emotion-draining Kumbaya-and-ROI tactics), and move to heart-and-guts frames (which leads to emotion amplifying Kumbaya-and-War tactics). And the way to do this is to learn and enjoy the language that is alien to you. Carrotists need to learn to speak Stick-talk, and Stickists need to learn some Carrot-talk.
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The Four Horsemen of the Enterprisocalypse Here’s a basic Enterprise 2.0 adoption analysis question. The owner of an business process within business function X, within corporation Y, operating in market Z, comes to you for help. Her process involves collaboration among multiple contributors to certain business documents. The incumbent process is a nightmarish COBOL-backed beast comprising klutzy editing and messaging workflows, reporting logic and various business rules. Most of the byzantine complexity does not even apply to 90% of the cases the process handles. What would you recommend? Did you say something along the lines of “use a wiki for the 90% of the cases, and put in a simple exception-triggering process for the 10%?” Sorry, wrong answer. Try again. Are you starting with a thought like “Well, you’ve got to talk to all the stakeholders, understand their concerns and roles, and the costs of the legacy system...?” BZZZZ!! Sorry to cut you off, but that too is the wrong answer. Give up? The reason these are the wrong answers is that they cut directly to the fourth stage of a four-stage analysis process I like to use, which I call Dissolution, Disruption, Disaggregation and De-engineering. Call it the Four Ds. I like to think of them as the four horsemen of the enterprisocalypse. They ride in that order, not abreast. Tool-happy evangelists are eager to rush to engage the fourth D. The reason is that that’s where they can add value and do business, by de-engineering (simplifying cumbersome old processes using 2.0 tools). The problem is, in more than half the cases, you should be giving up by the 3rd D. Unless the target adoption opportunity survives the first 3 stages of analysis, it is not even a problem worth solving. So why might the problem not be worth solving? Changing Lightbulbs
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Okay, my original question was a bit of a trick question, but I did give you a hint by pointedly using variables instead of specific details. Unless you are incredibly naive or in the snake-oil business, you would never diagnose an E 2.0 problem, or offer a prescription, without knowing the details. There are no general answers. The correct answer is “insufficient data.” Depending on how you fill in the three placeholder variables, business function (X), corporation (Y) and market (Z), you might never get to the fourth stage of analysis. The mistake tool-happy evangelists make is a very simple one: they assume that E 2.0 is about a function-by-function, process-by-process replacement of E 1.0 elements with corresponding E 2.0 elements. They think it’s like making a building more energy efficient by walking around, switching out all the incandescent bulbs for compact fluorescent bulbs. It sounds incredibly naive when I put it this baldly, but you wouldn’t believe how many people think and talk along the lines of “well, sales is ahead in adoption, and the HR people are starting to get it, but the marketing guys are resisting and behind the curve.” The reason this is naive though, is quite subtle. You see, E 2.0 is about helping corporations adopt 2.0 for their internal processes, while their businesses are under threat of complete annihilation by the very same 2.0 forces operating on other fronts. The situation is like the run-up to World War II: some corporations in the Allied world were doing business with the Axis powers, knowing full well that a war was brewing, and had already started on some fronts, like Spain. There are no big moral dimensions here, but it’s still tricky, eh? So how do you analyze a given adoption situation? The XYZs of an Adoption Situation So why do the X, Y and Z matter? X, the business function in question, matters. Would you bother solving the problem if the business function in question were the stateside customer-service department of a company in an industry where every competitor has successfully outsourced its call-center operations to India or the Philippines? Of course not. You’d wait for the outcome of a C22
suite decision on the outsourcing question first. Y, the corporation or organization matters. If we are talking about the US Army, and the document process in question generates intelligence reports, the solution is going to be very different, and rely on special precedents like the CIA’s Intellipedia, and specialized technology of the sort being developed by Palantir. Commodity 2.0 tools are doomed. Z, the market, matters. Would you bother solving the problem within the classifieds sales department of a major paper newspaper? Of course not. That market is gone, and the elements of the business designed to serve it should be put on end-of-life support. Putting more money into them is stupid. If newspapers survive, classifieds are unlikely to be part of the solution. To think more systematically about how the X, Y and Z variables matter, you need to understand the 4Ds. Dissolution Dissolution is the effect whereby many old economy sectors are shrinking dramatically or vanishing entirely due to mass de-professionalization and free agency. There is no longer a “there” there where you can drive E 2.0 adoption. Traditional journalism, retail paper bookstores and CD-based music businesses are already dying. There is no point doing any E 2.0 evangelism in any business that is being torn apart by these acid forces. Ronald Coase, the Nobel-prize winning economist who recently turned 100, first studied these “dissolution” forces (transaction costs). Dan Pink chronicled the rise of free agency in 2001. Dissolution is destroying entire sectors of the economy, and affecting every sector at least a little. The smart business are harvesting and exiting or shrinking their businesses. The dumb ones need to be put out of their misery. Disruption Disruption is a somewhat weaker effect, first studied properly in 1997 by Clayton Christensen in The Innovator’s Dilemma, but dating back to the Bronze Age. It is an effect by which a small agile company on the margins of the markets of a bigger company eventually grows up and disrupts the incumbent. While many innovations can cause disruption (such as the Wii remote in the gaming market), what is special today is that the same innovation (2.0 technology) is enabling disruption in multiple markets at the same time.
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Unlike dissolution, which replaces paid professionals with unpaid or low-paid amateurs, 2.0enabled disruption replaces one class of professionals with another. Businesses will survive in these sectors, but the question is which ones? The forces of 2.0 are enabling disruption in many industries. Advertising is an example. Traditional advertising businesses are being killed by 2.0 based substitutes, as well as by market share being grabbed by the adjacent industries of PR and direct sales. This is because the latter are much friendlier to word-of-mouth messaging that piggybacks on content, instead of broadcast messaging that interrupts it. Creative copywriters are losing ground to SEO specialists. Ad salespeople are losing ground to PR pitchfolk. For many sectors that are weathering dissolution, disruption is undermining an entire generation of incumbent companies at the same time. The smart people are switching sides: leaving the disruptees and moving to the disruptors, creating a massive talent migration. Disaggregation Disaggregation is weaker still. Companies that have the capacity to survive both the dissolution and the disruption forces are being forced to reorganize dramatically. John Hagel, in a prescient 1999 Harvard Business Review article, Unbundling the Corporation, predicted that the economy was separating into three kinds of businesses: those with core competencies in managing marketing, innovation, and infrastructure respectively. We are not talking about older patterns of disaggregation here, such as vertical supply chain disaggregation in the auto industry in the 80s or software/BPO outsourcing in the 90s and early 2000s. Hagel’s point was that a three-way watershed was emerging in the landscape of business models. Twelve years later, we see exactly that happening. Companies like Groupon and LivingSocial are thriving in the first category, innovation pipelines like Y-combinator in software are producing a mini-bubble of baby companies, waiting to be snapped up by bigger companies that are cutting back on traditional R&D. And finally, cloud computing leads in the infrastructure category (“cloud office space” in the form of coffeeshops and coworking locations, will be the next big infrastructure category). Companies that survive both dissolution and 2.0-enabled disruption (the steel industry is in no danger of either for instance; it is simply too capital intensive) must still respond to the disaggregation forces and “unbundle” and “rebundle” themselves the right way. In steel, Arcelor-Mittal has taken over the infrastructure side of the business. Boutique electric-arc players are taking over innovation on special alloys and materials. The customer24
relationship side of the industry is being slowly taken over by players like mfg.com, a B2B marketplace for machine shops. De-Engineering Which brings us to the least important of the four forces, the one that evangelists obsess far too much about. If a company survives dissolution, disruption and disaggregation in roughly the same shape that it was 10 years ago, then you can ask how to adopt E 2.0 within a specific business process. You can go around replacing the E 1.0 lightbulbs with E 2.0 lightbulbs. So remember the handy mnemonic: XYZ and the 4Ds in order. Don’t mistake it for a formula. It is merely a reminder of what you should be thinking about, and in what order. I’ll be writing more about how to do that in future columns. But for now, I can’t resist the obvious joke: it takes five E 2.0 evangelists to change a lightbulb. Four to analyze each of the four D’s, and one to actually change the lightbulb.
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Shifting Visions and Agile Missions Preaching Enterprise 2.0 ideas to old economy companies can be like pulling teeth. Preaching them to companies founded after 2000 is pointless: they are 2.0-native companies that couldn’t think in 1.0 ways even if they wanted to. But companies that were born in the two-decade transition between 1.0 and 2.0 cultures present unique cases. Microsoft and Google are two such companies. Neither needs any preaching at the tool level: after all they supply half the tools we use. Presumably, they’ve got their tool level problems whipped. But they don’t get top grades in 2.0 capability maturity because at the very top, the companies are still run in 1.0 ways. This shows up most clearly in their adherence to completely broken “mission/vision” models for setting corporate direction. Mission, Vision, Petrification Microsoft’s problems today are almost entirely due to an impoverished vision, a consequence of their extraordinary success in fulfilling their original vision: a computer on every desk. Done, and then some. Check that box. A+. They are struggling today partly because they’ve never really had a clear mission. A set of guiding values and a direction that represents an eternal journey of inexhaustible challenges. They’re not out of ideas, but they are short one vision. Strong missions are like renewable-passion sources. They help manufacture new visions that build on accomplished past visions in powerful ways. So Microsoft almost seems like it is groping in the dark, without a clear idea about why they are doing anything or where they are going. Google has the opposite problem. They’ve never had a clear vision with a definition of a “done” state, but they have had a clear mission: “To organize the world’s information.” That’s obviously something that can never be marked “done.” It’s merely a design principle that helps them pick consistently among various options in major and minor decisions. They also have a non-trivial, non-banal guiding value that informs that mission: “don’t be evil,” that makes them vulnerable to a real moral police. Google is struggling today because the mission has become somewhat irrelevant in the context of the social web. In an online discussion about Google’s role in the social era, I half-seriously remarked that the right mission for the social Web is “organize the world’s delusions” (what else can you call Foursquare with its “Mayors,” Facebook with its farms, mafia wars and chicken throwing? “Information” seems like exactly the wrong word).
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Sure, there’s a lot of information-organization left to do, but the reason Google is struggling is that it never properly defined a concrete “can be marked done” vision consistent with the mission. At least nothing that has the clarity of Microsoft’s “computer on every desk.” But the troubles of both companies are symptoms of a deeper malaise: our entire management model for enterprises is broken. Google and Microsoft at least had some substance to their mission/vision pairs. This has been due to the influence of the 2.0 world, which does not suffer banalities gladly. But for most old-economy companies, the whole exercise of using mission/vision pairs, to align corporations and set up a steady drumbeat for action, is broken. These companies are used to marching rigidly, in one direction, towards one uselessly distant vision, informed by vacuous missions and banal guiding values (like “help every employee grow”) that are of no use in day-to-day decision-making (unlike “don’t be evil” which obviously gets tested frequently at Google). When 1.0 companies maneuver smartly in the marketplace, they do so despite their petrified mission/vision pairs, not because of them. We need to throw traditional mission-vision thinking into a bonfire of the banalities, along with every other ossified management 1.0 practice. We need, as Gary Hamel declared in The Future of Management, a whole new conceptual apparatus for management. And to start, we need to reinvent the very concept of missions and visions. Shifting Visions and Agile Missions If you think about it, the entire 2.0 world of management is defined by fluidity, agility and rapid maneuvering in the marketplace, in response to real-time data about competitor moves and the most ephemeral of micro-trends. Software development (and product development in general) has gone agile and iterative. Marketing has also gone agile and iterative. And since Eli Goldratt’s The Goal hit the shelves in the nineties, most manufacturing operations have gone agile, thanks to the philosophy of repeatedly hunting down shifting bottlenecks on the shop floor. The only thing that hasn’t gone agile is management. Why are we surprised when 20-year-horizon visions turn out to be useless for fruit-fly corporations that expect to go through their entire birth-death life-cycle in 2 years? Why are we surprised when missions that aspire to almost heavenly levels of gravitas fail to help us navigate in murky and volatile environments here on earth? And in an age where young corporations adopt very practical models of philanthropy, such as giving away a free pair of shoes to a needy child for every pair sold (TOMS), why are old 28
corporations surprised when lofty sentiments like “improve the communities we are part of” fail them? We need a management philosophy that relies on shifting visions and agile missions. Shifting visions first. In rapidly evolving marketplaces, big 20-year visions (what James Collins and Jerry Porras called “Big Hairy Audacious Goals” or BHAGS) are basically irrelevant. They may help create excited brainstorms and get creative juices flowing at leadership retreats, but in my experience, BHAG-thinking usually ends up being a case of sound and fury signifying nothing. What we need are visions that are allowed to change in response to market realities. The driving philosophy should be based on the Clausewitzian notion of Schwerpunkt. A fluid idea of a temporary, dancing focal point; a center of gravity that draws all action towards it, but can shift in a moment if conditions change and new realities emerge. To my knowledge, Chet Richards, author of Certain to Win, is the only business author to have focused on this approach (HT, Daniel Pritchett, who writes the excellent Sharing at Work blog). A concept tossed around in the lean startup movement, known as a “pivot” (a new business model that builds on one that has been abandoned) is a weak version of the idea of Schwerpunkt. Naive practitioners of lean startup ideas assume you just need a few deliberate pivots as you hunt for a viable business model. That’s amateur stuff. In the 2.0 era, every business model has an expiry date of just a few years. Continuously hunting for the next business model needs to be the lifelong concern for every company, not just startups. Even if cash is gushing from the pipes, you still need to dance the Schwerpunkt dance. Similarly, missions need to be agile. “Organize the world’s information” is a BHAGcomplement mission. What you need is not guiding principles for decision-making that stay stable for decades, but far smarter principles that help you make decisions for a year or less. My favorite example of this approach is Living Social. As a recent profile in the Washingtonian noted: At its holiday party in December, LivingSocial—still an intimate group with 30-odd employees—continued its annual tradition of voting on a motto for the following year. The year before, they’d selected “Go big or go home.” For 2010, as the party at M&S Grill on 13th Street wrapped up, the group selected “Strong moves.” That’s what I mean by an agile mission. Something that will be really useful for a year instead of completely useless for twenty. That’s what Microsoft and Google both need right now: pick a Schwerpunkt focal point. Pick a motto for a year. Hit “Go.” Rinse and repeat as often as needed. 29
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Zen and the Art of Enterprise 2.0 The Angry VP As he pondered the curious and unexplained uptick in sales over a sushi lunch one day, the VP of Sales recognized the voices of a few of his people chatting idly a few booths over. “Yes, closing that last lead from the blog was easy enough. The customer had already sold herself, thanks to that video from that other user.” “Fine, I’ll take the next one, the guy who’s posting the long comments on the last interview we posted about custom Widgets.” The VP was furious. He marched over to the booth. Two of the people in the booth he recognized. The third person though was a young woman he hadn’t met before. He yelled, “are you guys using unqualified leads from sources I haven’t approved?” He paused and turned to the young woman. “And who the hell are you? Are you even with our company” he demanded. “I am over in Marketing; my name is Ms. Miagi,” the young woman replied calmly. “We’ve been running a blog, and your guys here have been getting great leads through it. You should be happy and rewarding them, so why are you yelling?” The VP calmed down. “Well...sure, yeah. I mean that’s great. But really, my only concern is that I need to know about such things. We have well-designed systems and processes for this, and a whole Marketing-Sales coordination committee that meets regularly about such things. It would be best if such things were cleared with the committee first. I am sure your boss would feel the same way.” “What do the well-designed systems and processes do?” “Well, it’s hard to explain to you marketers,” said the VP, with a condescending smile. “Sales operations are very complex and we have to keep track of everything, measure our lead conversion rates and so forth.” “Why are the operations complex?” Ms. Miagi asked, idly snapping at a passing fly with her chopsticks.
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The VP was nonplussed. Ms. Miagi continued, “Your people are getting the sales, I can get the lead conversion data anytime you want from the blog traffic reports. Do you really need complicated systems, processes and a coordination committee to sign off on things, adding delays?” “Now, wait a minute,” the VP fought back. “I am all for asking for forgiveness instead of permission, but without systems and processes tracking operations, eventually there will be chaos. The system will become stupid and fall apart.” “Does it matter if the system is becoming stupider, if the people in it are becoming smarter?” At that moment, the VP of Sales was enlightened. The Gift of the Retiring Boomer With great fanfare and a cocktail party, a Community of Practice was launched around Widget Supply Chain Operations. A wiki was unveiled and Richards, the aging Boomer Subject Matter Expert, proudly gave the rest of the group a tour of the thoughtful ontology he’d created. “I’ve seeded the wiki with a couple of dozen basic documents which should be useful to new employees, and hopefully that’s enough to get us started. I’ve put in stubs for a lot of the rest.” He paused to sip his champagne. “Most of the raw material is in PowerPoint or PDF format in various places, and I’ve compiled a list of a few hundred links on a temporary page on the wiki. If we all pitch in and do even one link a week, we should get it all moved to the wiki in a couple of months. He paused to put on his best grandfatherly look, the one he used to guilt his grandson into picking up his toys. “Forget the gold watch. If I can delete that temporary links page before I retire, that would be the best retirement present you guys could give me. I can move to Florida content that my life’s work won’t be lost.” Over the summer, Richards tried hard to get the project finished, but to no avail. The wiki slowly became a ghost town. 32
Time went by. With only two weeks remaining, Richards gave up. He sat down and began composing a rather bitter email to the COP, expressing the forlorn hope that perhaps some day a young new hire would decide to take over stewardship of the project. To make his case about the sad neglect of the wiki, he decided to look up traffic statistics. To his surprise he found that the page of links had been attracting large amounts of traffic. People had even been adding new links to the list -- there were at least a hundred new links. Far from shrinking to nothing, the list was growing. He could feel the anger welling up in his stomach. What did people think, everybody could dump their links there and somebody else would wikify the content? What sort of tragedy of the commons was this? He was about to start writing an angry email to the group, when one of the new links caught his eye. It said “Pave the Cowpaths” and seemed to have been added by a Ms. Miagi. He frowned. There was nobody by that name in Supply Chain Operations as far as he knew. He clicked the link. To his surprise it simply reloaded the page. Inspiration struck. Working through the night, Richards set up an open-source social bookmarking server, and moved all the links over. The next day, he took a deep breath, uninstalled the wiki and redirected the domain to the new bookmarking server. When he sent out his announcement about the change, the Thank You emails flooded in. Even the CEO chimed in, “thanks for doing this Richards; just what we wanted.” Over the next two weeks, to his shock, the new bookmarking server crashed three times, thanks to the traffic from all over the company. Several of the links sparked busy conversations. On his last day, the retirement party turned into a standing-room only free-for-all. People from all over the company showed up. There wasn’t enough cake. A young Japanese woman caught Richards eye. A suspicion grew in his mind and he went over and asked, “Are you Ms. Miagi by any chance?” “Why Yes!” she replied. “I saw that link you added to the links page, paving the cowpaths. Was it supposed to go somewhere else? It seemed to link to the same page.” 33
“Oh did it? I am so sorry. I am such a klutz sometimes. But I am sorry, I must be going now. My neighbor’s kid promised to come over and paint my fence. Perhaps I’ll see you around.” Ms. Miagi walked away. Ms. Miagi and the CIO Ms. Miagi, the smart new hire in Marketing, had cajoled and sweet-talked a few of her peers into helping start a content-marketing blog. Word got around that a steady stream of highly qualified leads was flowing from the blog to the sales department. Somebody posted a link to a spreadsheet with the conversion rates on that bookmarking thing Richards had set up before he left. The CIO spotted it and was amazed at what he saw: the blog was driving sales far more strongly than the best advertising campaign he could recall from his many years in the business. Intrigued he called her in for a meeting and asked, “How can we take blogging to the rest of the company?” For a moment, Ms. Miagi looked at the CIO with a curious expression. Then she said, “You cannot take blogging to the rest of the company. The rest of the company must take to blogging.” At that moment, the CIO was enlightened.
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Simpler Organizations are Harder to Design I once heard an anecdote about a certain uber-hippie cafe in an uber-hippie college town that made me want to drive a sharp pencil into my skull through my ear, to use comedian Lewis Black’s memorable imagery. This cafe had an open-mic night tradition. Anyone could sign up on a chalkboard to recite a poem, sing a song or put on any other kind of performance. But instead of signing up on a simple list, you had to scrawl your name randomly somewhere on the chalkboard. Lists, apparently, were “too hierarchical” for our hippie friends. So what’s wrong with this approach to thinking about social design? Everything. But above all, it is the idea that simpler organizations are easier to design. They are not. They are harder to design. Values versus Organization Designs The problem with most people who utter profound inanities about “networks versus hierarchies” is that they have almost no understanding of either. What’s worse, they think no understanding is even possible. So they turn organizational designs into moral values, like so: “Networks are better than hierarchies.” “Horizontal is better than vertical.” Such statements are ludicrous because organization designs are not values. They are structures that enable communication, management and operational execution. To conflate values with organizational design is sheer intellectual laziness. Egalitarianism is a value. “Horizontalness” is not. People can be evil or good. Hierarchies and networks can’t be either. Horizontal structures are sometimes, but not always, more egalitarian than vertical ones. Sometimes the reverse can be true. Under some conditions, in a system with slaves, serfs, feudal lords and a monarch for example, removing or curtailing the powers of the monarch (making the system flatter and more decentralized) can actually make the lot of the serfs and slaves worse rather than better. Nobody likes to hear this, but unfortunately the only certain relationship between 35
governance values and organizational structures is “it depends.” Yes, there ARE forces emerging today that favor network designs over hierarchies and horizontal dynamics over vertical dynamics. And yes, these changes DO coincide with (and to some extent are even correlated to) greater empowerment of traditionally weak classes like low-level employees and consumers. But as statisticians never tire of reminding us, correlation is not causation. Networks do not “cause” justice and hierarchies do not “cause” oppression. If only it were that simple. Why People Make the Mistake Let’s analyze the open-mic example. As a performer, you probably don’t want to go right after somebody you know is way better than you. The organizer wants the right choreography for the whole evening. Some audience members are selfish and only want to see the performers they are interested in. Other audience members are community-spirited and want to encourage young performers and cut egoistic stars down to size. Every participant in a social situation has unique tactical preferences. These preferences are a function of their values and their immediate practical concerns. Organization design has to do with how you balance those competing concerns given the practical constraints of the domain. If you want to level the playing field among performers, randomize the order (putting names into a hat is a better model than scrawling on a chalkboard though). If you want to be respectful of people’s time, and allow them to do something else until their favorite performers are on stage, create a list and give each person a time limit. If you want to choreograph the whole evening to maximize the average number of occupied seats through the evening, put your most popular performer on at the end. If you want to lend the evening a relaxed, laid-back ambiance where people lose their sense of time and settle in with herb tea and interesting brownies, the random chalkboard might be a good model. As Alfred Chandler famously noted, “structure follows strategy.”
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So why do people default to simplistic solutions when there is so much complexity and richness? Because it is easy, and because the real problem is far harder than amateur organization designers can even imagine. How Hard is the Real Problem? My favorite example of the complexity of organization design is from Alfred Thayer Mahan’s classic, The Influence of Sea Power Upon History. Until about the 12th century, naval warfare was galley warfare. Galleys were powered by primitive sails and oarsmen, and naval warfare used line-abreast formations. Lines of ships would face off and then charge ahead, trying to ram each other. If a galley rammed an enemy galley, a hand-to-hand melee would follow. Between the 13th and 17th centuries, advanced sailing techniques were developed that allowed much larger ships to sail efficiently against the wind. These larger ships were equipped with cannons (over a hundred, on multiple decks, at the peak of sail warfare), and dispensed with oarsmen (since they were too big, and the more efficient sailing techniques made human muscle power less critical). As a result of these innovations, naval strategy shifted from line abreast formations to line ahead formations. Ships would line up stern-to-bow, allowing their cannons to be pointed at the enemy line. A simple change, right? The organizational structure didn’t even change its fundamental shape. It simply went from one kind of straight line to another: from line-abreast to lineahead. A simple “turn ninety degrees” command. How long do you think this shift from line-abreast warfare to line-ahead warfare took? By Mahan’s estimate, about thirty years after all the enabling technologies were in place. If that shocks you, it means you simply don’t understand the scope of organization design. The Scope of the Organization Design Problem If a simple change from one line formation to another, based on just three point innovations took thirty years, how long do you think a fuzzy shift from “hierarchical” to “network,” driven by dozens of simultaneous innovations (the entire 2.0 technology set) is going to take? The reason things take so long is that the devil is in the hidden details. Here’s just a sampler of the details that matter, in thinking about hierarchies:
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1. Span of control: the well-studied empirical idea that an individual can manage between 3-8 direct reports, depending on the level of autonomy 2. Decision-making speed: an aligned hierarchy where the lower levels are not rebelling can understand and act on ground-level information exponentially faster than an arbitrary network 3. Abstraction: authority hierarchies naturally induce abstraction hierarchies: higher levels get information at different scope/resolution levels and develop different kinds of situation awareness.
These are neutral, mathematical properties that can be formally stated, quantified and studied, based on patterns of information flow. If you are ready to do some heavy thinking, you can even figure out conditions under which each property turns into a strength or liability. Generalizing, organization design is a problem with a vast scope. It involves information structure (who knows what, when), status dynamics (which arise from our genes), information flow patterns, financial versus social incentives, the speed at which the domain is changing, and many other factors. The point is, all this has to be studied, experimented with and thoughtfully considered in coming up with a design, and a process to realize that design. Here too, the naive make simplistic assumptions that “emergent” designs are always better than “top down, imposed” designs. The biggest irony perhaps, is that hierarchies are in fact networks themselves, in mathematical terms. It takes quite a bit of work to come up with realistic examples of networks that don’t behave like hierarchies. A famous example is Arrow’s Paradox. Kenneth Arrow, who studied the paradox in his PhD thesis, went on to win a Nobel prize for his work on social choice theory. That’s how hard organization design is. Nobel hard. Simpler is Not Easier Let me conclude by countering a common reaction to this sort of analysis: “all that complexity is unnecessary, with the right tools, you don’t need any of it and it’s all simple. We can dismantle the whole useless structure.” If the critic is a little better-read and knows his/her McLuhan, he/she might claim, “we are retribalizing, the medium is the message, and networks are fundamentally friendlier to 38
equality.” Such “well-read” critics are even more clueless than the ordinary ones: they do not understand McLuhan or his theory of media, and manage to confuse themselves even more comprehensively than the regular clueless. Are 2.0 organization designs fundamentally simpler? Absolutely. Are 2.0 models “retribalized forms” in some way? Without a doubt. Is every organizational structure a “medium” that has a “message?” Yes. Do 2.0 models rely on “pull” more than “push,” as John Hagel has said? Yes. Are 2.0 models less waterfall and more agile? Right again. Should they be grown via orchestration instead of being designed dictatorially? In most cases, yes. Does that mean they are actually easier to create? Absolutely not. As Oliver Wendell Holmes said, I would not give a farthing for the simplicity on this side of complexity. I’d give my life for the simplicity on the other side of complexity. So how do you actually achieve all these beautifully simple states? Stay tuned, we’ll explore that in a future article.
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The Heart of the Enterprise The description “he/she is a process person” is sometimes used as a dismissive insult in large enterprises, a reason to sideline people from important discussions. Why does this matter in the Enterprise 2.0 conversation? It matters because many 2.0 evangelists are process people, and they’re the worst enemies of the movement. Take a look at this picture. If you are not stirred by a sense of awe at some level, you are one of them. I am not asking you about your
intellectual understanding of this picture (I’ll explain that in a bit), but your emotional reaction to it.
How can you figure out if somebody is a process person? Ask them to point out the heart of their company. They will either not comprehend what you’re talking about and cover up their incomprehension with a superior, cynical air and laugh at you for being naively spiritual about your work; or they’ll provide a clueless answer that has nothing to do with the specific company or industry (like, “it’s all about our people, our values, our customers”). This incomprehension is the reason process people are generally relegated to the status of second-class citizens. They really don’t get it, and therefore can’t be trusted with anything important. Awareness of the existence of a corporate heart is actually the mark of the thard-headed business type who has a stake in the game and the skills to be a player. Even the corporate raiders out to prey on and cannibalize ailing companies believe in hearts (in fact, they’re often interested in stealing them).
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Corporate hearts are usually hidden in plain sight, in glossy pictures in marketing brochures. And no, I’m not talking about the barf-worthy pictures of smiling, multi-racial ensembles of the more photogenic employees. The heart is never people—something social media types find hard to fathom. What’s more, only enterprises have hearts. Startups and small businesses don’t. The former are searching for their hearts, while the latter borrow the hearts of their founders and become empty shells if the founders leave. Only companies that have outgrown their founders’ personalities and transcended human imagination have hearts. Bailey Yard The heart of Union Pacific is hidden inside a cathedral of the industrial world: Bailey Yard. Hidden on the outskirts of the obscure town of North Platte, Neb., it is the largest railroad classification yard in the world. I’ve been there twice. For $7 you can ride an elevator to the top of an observation tower at its edge. Only religious nut jobs like me seek out the place. I grab every opportunity to visit corporate/industrial hearts like Bailey Yard (if you can line one up for me, get in touch). For us capitalist-atheists, it’s the closest we get to religion. I have a growing collection of such pictures (I hope it is obvious why I picked Bailey Yard as the example for a post on The Brainyard.) Bailey Yard is incomprehensibly huge. You have to swivel your head (and camera) a full 180 degrees to take in the panorama. The picture above is about a 20-degree slice. If you can spot the small part within this cathedral that I consider the heart of Union Pacific, bonus points for you. I will reveal the answer at the end. Every enterprise that is generating economic value, no matter how Dilbertesque its internal workings, has such a heart. Some hidden part of its operations that will make you simply stagger back in genuine, religious awe. No matter how corrupt the management or incompetent its employees, so long as it has a true heart, there is something precious inside. If you cannot see this heart, and cannot feel the awe, you are a process person. You deserve your second-class-citizen status. Cathedral Builders And Stonecutters Process people were immortalized by Peter Drucker in an anecdote in Management by Objectives and Self-Control. A favorite story at management meetings is that of the three stonecutters who were asked what they were doing. The first replied, “I am making a living.” The second kept on hammering while he said, “I am doing the best job of stonecutting in the entire country.” The third looked up with a visionary gleam in his eyes and said, “I am building a cathedral.” ...It is the second man who is a problem… there is always a 42
danger that the true workman, the true professional, will believe that he is accomplishing something when in effect he is just polishing stones or collecting footnotes. (Aside: there is an excellent movie, Pushing Tin, about air traffic controllers, whose plot revolves around a cathedral builder helping an egotistic stonecutter see the heart of the airport industry.) We live in times when large corporations dominate our lives more than nations do. Generally, we view this fact as a bad thing. Loyalty to nations—patriotism—is viewed as a praiseworthy trait, but loyalty to businesses, especially large ones, is considered somewhere between pathetic and evil. This is justified if you are talking about loyalty to corporations as legal entities or to narrow and cancerous notions like “maximizing shareholder value.” But loyalty to the heart of a corporation is a different thing altogether. In a way, the heart transcends the corporation itself. If Union Pacific were to be broken apart or Bailey Yard sold to another company, it would still retain its spiritual significance. If it were shut down due to obsolescence, mourning would be called for. Enterprise 2.0 And Process People Process people are found both in staff and line functions, and inside and outside corporations. Ironically, they’re often found very near the hearts of corporations, oblivious to the spiritual significance of their privileged location. You can often find them by looking for signs of seething resentment at being sidelined. They often blame their condition on manipulative executives and peers, or their own lack of skills, degrees, or drive. They overestimate the impact of those factors. The real reason they have been sidelined is that they cannot see the heart of the corporation and therefore simply cannot be trusted with anything important, no matter how talented they are. They’re doomed to forever follow very specific orders under very controlled conditions. Wherever possible, their jobs will be outsourced, crowdsourced, de-professionalized, or automated out of existence. And this is as it should be. People who don’t understand the heart of a business are a liability for that business. Because they don’t understand priorities. The top priorities of a corporation always have to do with its heart. Strengthening it, preserving it, defending it, curing it of its ills, or mourning its passing and looking for a new donor heart.
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And unless the company is a vendor in the Enterprise 2.0 sector, the 2.0 agenda is never the top priority and never should be. If you don’t understand that, you’re hurting the 2.0 movement. East Hump Time for the answer to the spot-the-heart question. The heart of Union Pacific within Bailey Cathedral can be found in either of the two humps at the ends of the yard. Bailey Yard is a classification yard. It’s where trains coming in from the west are disassembled and reassembled into trains heading east, and vice versa. This process is accomplished by slowly detaching railroad cars from incoming trains at one of two “humps” at the eastern and western ends of the yard, respectively. Each detached car rolls down the hump, driven by gravity, and is directed to one of 114 “bowl tracks” where outgoing trains are being assembled. It’s hard to see the humps in the panoramic views from the observation tower (in the first picture, the East Hump is near the top right). But if you stand at the curve of Route 30 near the East Hump, you can watch the process up close. With a slow metallic thunk every 10 seconds or so, a car will detach and roll slowly down.
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That one scene is a microcosm of the railroad industry, the broader transportation industry (if you are watching an intermodal container train), and the world at large (if you ponder the role of container shipping in globalization), [http://www.ribbonfarm.com/2009/07/07/theepic-story-of-container-shipping/] That 10-second heartbeat at Bailey Yard is the heartbeat of the modern world. The next time you are arguing passionately about the values of collaboration and wikis, or railing against intransigent Luddites who don’t get why your tools are so great, pause for a moment and ask yourself: Do I know where the heart of the business is?
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Social Wars I: A New Hope If you thought Enterprise 1.0 has been retiring gracefully, handing power over to Enterprise 2.0 in a graceful and bloodless succession, you haven’t talked to a sufficient number of adequately liquored-up people in the trenches. Or you’ve been forgetting to take your Dilbert vitamins. To understand how individual battles are playing out in these early days of the war for the soul of capitalism, you need to look at the IT sales cycle, where much of the action is concentrated. Why is it important to look at the sales cycle? It’s because that’s where the mix of privately believed and publicly paraded visions collide. It’s where sales people make the tough decision: whether to pander to customers (or their own) delusions to close a sale, or make a sincere effort to work with prospects to discover the defensible truths, whether or not they help close the sale. The Practice of Enterprise 1.0 IT Sales The enterprise IT sales cycle used to have a certain leisurely ritual-like quality to it. You’d slowly discover the organization through networking, build up good relationships with the Purchasing and IT organizations, and get to know the middle managers of the organization you were targeting. You’d study the organization chart and figure out the best lines of access to the level at which the decision you wanted could be made. Usually this meant senior executive: VP or higher. You’d help your internal champions set up the committees and lay the paper trail -- internal seminars, case studies, benchmarking exercises, town-hall meetings and seminars -- upon which to base their recommendations. Once the dog-and-pony show gathered enough momentum, the stage would be set for a big multi-million-dollar sale. All stakeholders would be protected by reams of paper justifying their roles in the recommendation to be presented to the C-suiters in the Big Meeting. It was a sales cycle tailored to the waterfall model of enterprise IT planning (it is surprising how few people recognize the irony that the hearts of capitalism are governed by Sovietstyle Taylorist 5-year-plan thinking). The purpose was to engineer, not the best decisions, but the most defensible decisions. Decisions for which nobody could get fired. IBM’s sales mantra from the 1980s -- “nobody ever got fired for buying IBM equipment” -- is still the bedrock of the IT sales model. The result? Across the corporate landscape through the nineties, we saw a proliferation of 47
vast and clunky IT infrastructure systems designed by hapless developers listening to middle-management sadomasochists who would be the future administrators, rather than users of the systems. The outcome of course, was systems where usability was a pretty low priority. In the age of paper bureaucracies, it used to be said that forms were designed to protect those who had to process them, not serve those who had to fill them out. In Enterprise 1.0, that philosophy migrated to IT process design. It was an approach to IT designed to keep middle-management staff function employees uselessly and safely employed in sinecures, and armies of rank-and-file employees trapped in frustrated cubicle-dom, ranting against everything from travel expense reporting to procurement planning, with cartoonists like Scott Adams being the only beneficiaries. That great work got done despite these enormous burdens is a testament to the Herculean valor of the employees. It is perhaps no surprise that Atlas Shrugged has been the leading fantasy novel of the industrial age. The Theory of Enterprise 2.0 IT Sales Then 2.0 came along with a startling alternative model of enterprise IT sales, derived from the radical philosophy that informed the software design itself: the selling process, like the product design, should serve the end users, not bureaucrats and administrators. It is practiced today with varying degrees of success by every 2.0 vendor. In theory this is how it is supposed to work (this is a composite of the many selling processes I’ve heard 2.0 vendors describe): Phase 1: Start on the wild periphery Ignore the middle management level; drive up adoption among the rule-breaking experimental types in the rank-and-file with the free version. Phase 2: Legitimize the wild behavior Don’t pitch the million-dollar contract. Get ONE work group to upgrade to the premium, payby-the-sip version. Help the adopting group create a precedent by obtaining an approval with the purchasing and IT organizations. Fly under the radar of the purchase-order thresholds that might trigger more comprehensive reviews. Phase 3: Dominoes 48
Exploit the precedent by helping other organizations within the enterprise adopt the local, by-the-sip solution. Wait for the grassroots activity to get to the point where corporate IT decides it needs to have a policy. Phase 4: Paving the Cowpaths Help the IT organization study the scattered, localized patterns of adoption, encourage them to make the leap to the big idea: that corporate-wide adoption from globally-local to truly global might be a huge win. That the exception management model should become the default policy. Phase 5: Fait Accompli Short-circuit the paper trail, analyst reports and case studies from competitors and peers: use the company’s own data from the first four phases to make the case, not for a sale, but a pilot enterprise-wide deployment. You’re still not asking for the millions. You’re asking instead for a sign-off on a pilot to study the effects and value of an enterprise-wide deployment. If there has been grassroots adoption of alternative products in different parts of the company, this is face-off time, to determine if an enterprise-wide standard is necessary, and who gets to run the enterprise-wide standardization pilot. The early adoption phases function essentially as a fly-off. The sort the US Air Force uses to decide which vendor gets a big new fighter plane contract. Phase 6: Going in for the Kill You’re in. You’ve got what you really need to close the big sale: invested sunk costs and deep knowledge of the client’s systems and processes that can help you write the case study for that client. The decision for the C-suite now is not whether the multi-year license and support bundle is worth it, but whether the alternative: setting up a typical paper-trail committee is worth it. To the extent that it actually works as scripted, the huge benefit of the new model of selling is that risk is managed far better. You make the sale after the deployment kinks have been worked out and the adoption and diffusion patterns are clear. Since you only up-sell through the phases if previous phases are actually successful, there is little risk of an IT ghost-town effect, where a big centrally-deployed solution ends up not being used at all (or at best, serving as the useless core around which jury-rigged workarounds grow, to actually get work done).
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The new model has all the positive attributes of 2.0 thinking: it is data-driven, domainadapted decision-making at its best. Investment scales gradually as risks are squeezed out. You pave cowpaths around successful best practices rather than leaving adoption failures as a post-purchase failure risk. The model makes financial sense for both vendor and customer. Neither is investing beyond the level justified by the risks. As a bonus, there’s much less room for ethically dubious practices. It is much harder to win the sale by inviting key gatekeepers to thinly-veiled golfing vacations in the name of having them on as panelists at an industry symposium. There is fundamentally less room for dishonesty in the new model. This process is transparently, obviously, far superior. It should be a no-brainer. The traditional model should just collapse under its own weight once this alternative process starts to proliferate, right? I mean, who could argue with a data-driven, risk-managed, highly ethical process that scales investments a penny at a time instead of a million at a time, as data comes in? More importantly, why would anyone want to argue against such a process and prop up an obsolete incumbent process? We’ll see next time, in Social Wars Part V: The Enterprise Strikes Back.
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Social Wars II: The Enterprise Strikes Back Last time, we explored the vision for a brave new world of work. We explored how the 2.0 transformation begins, in theory, right at the level of the adoption and diffusion process. Now for the bad news. The script never runs this way. The Enterprise (1.0 that is) strikes back through an entirely rational-seeming process. It begins when the radical on the periphery who is driving change by adopting free (often open source) versions of 2.0 tools first encounters the institutionalized part of the corporation’s IT processes. The encounter has a predictable effect: the old paper-trails-and-committees model sneaks right back in. It’s a case of second-guessing masquerading as rational due process. Once the value of a given technology X has been proven by a wild periphery and a more legitimate dominoes phase, deep discomfort sets in. Can you really trust anecdotal evidence from random work groups? After all, they are not trained bureaucrats who see the big picture of corporate needs. And what about the fact that there was no RFP/RFQ process to ensure cost-effectiveness? Both IT and Purchasing have aligned worries: one is worried about costs, the other about support needs. On paper, this makes sense: the job of Purchasing is to get defined needs met at the lowest possible cost. The job of IT is to pick the solution that is easiest to manage (even if the nominal agenda is a high-minded “serve employees”). If this were an action movie, this is the point at which the FBI would step in and shove the local cops aside with an officious, “thanks, but we’re in charge now..” Once the FBI decides to take over, this process can only end one way: badly. Taming the Revolution What do you think is going to happen once the second guessing is underway? There is only one way it can end: the incumbent provider of the 1.0 IT infrastructure elements will generally win with their bolt-on, all-in-one 2.0 offering. Why? Consider a 51
simple example. Suppose a “wild” blog has grown popular in a given corner of a corporation, (marketing, say). It uses some random open-source blogging platform, with a rag-tag group of volunteers contributing the design and content. A quick and dirty analysis shows (say) shows that the blog generated a dozen leads which lead to one sale, as a result of 500 hours invested into it by the DIY rebels who started it. The local ROI for that very specific case is squarely in the “not significant enough to jump up and down with glee, not insignificant enough to ignore” zone. The one data point is wide open to spin. Depending on who tells the story, the blog might grow into a movement that could save the company or it might never amount to anything. But despite the lack of clear data, it’s time for a strategic bet on blogging. Mainly because competitors are betting on blogging too. The ready-fire-aim CEO says “let’s do this” and the CIO triggers the only process he/she knows: RFPs, RFQs, a study panel and a recommendation. Even though the move is a leap of faith, justification must be manufactured to make it seem like a reasoned move. So inconclusive data must be hastily assembled into an after-the-fact paper-trail, after the intent to “do something” has already been adopted. As part of this, somebody says, “Oh, and maybe we should cc those guys in marketing who had that one blog that started this ball rolling. Maybe have ‘em sit in on some of the meetings.” Everybody recognizes that the process of house-training and co-opting the radicals must be triggered at the right time. They must be made complicit in whatever decisions are made, to prevent future embarrassment. The radicals, long used to being ignored, are so flattered by the sudden attention and praise from former adversaries and the reasonable-sounding request to participate in an advisory process that they acquiesce. Refusal would seem childish and unprofessional. There are no real resources or skills on board to do a meaningful study, so the collection of vendor-supplied white-papers and case studies is strip-mined for raw material, and a semblance of an analysis is cobbled together as a PowerPoint deck, full of very adultsounding arguments about balancing competing concerns. And of course, 8 out of 10 times, the value and ROI picture will remain completely fuzzy, but the cost side will become crystal clear: the incumbent can do it cheaper than anyone else. Shortly after, Corporate IT announces that a major new platform has been purchased -surprise, surprise, it is the incumbent’s bolt-on to 1.0 infrastructure -- and that all new blogs must use that platform. In the rare cases where the incumbent is displaced, the new vendor will generally also be a 1.0 style vendor, angling to take over the entire IT infrastructure 52
rather than just the 2.0 layer, and able to absorb enough of the large switching costs involved. As a sop to the pioneers, the old blog is grandfathered in as a quasi-legitimate denizen of the company’s social Intranet. The grandfathered non-standard blog is privately treated as a liability to be tolerated, and publicly feted as a piece of history. It was born a rebel, and it lives on as a rebel, declawed. If this seems like a reasonable outcome to you, consider this exaggerated analogy. It is the 1970s. Silicon Valley is being born, and a whole new model of entrepreneurship is taking root. Traditional manufacturing is under threat from Japan. Then, President Carter appoints a committee to study why California is succeeding where Detroit is struggling. The committee goes through an elaborate process, studying American competitiveness, and reaches a conclusion: the lowest-cost and most rational growth strategy is to ignore Silicon Valley, and direct massive federal funding and corporate incentives to the big three automakers and the steel industry, and have them lead America’s charge into computing. It is of course, completely rational that Detroit and Pittsburg, the experienced and “adult” leaders of American industry should take over from the little boys in Silicon Valley in order to take the the game to the next level. So the governors of the Rust Belt states set up an industrial commission led by their local Captains of Industry to oversee the digitization of America. Instead of Macs and PCs, America enters the digital age choosing between GM and Ford computers. Unfortunately, this storyline is often the real storyline when it comes to 2.0 adoption within individual corporations. Mortality Blindness To understand why this happens, despite the best intentions of the people involved, recall Deep Thought, the fictional computer in Douglas Adams’ The Hitchhiker’s Guide to the Galaxy that computed the answer to Life, The Universe and Everything (which turned out to be 42). Deep Thought couldn’t compute the actual question but had enough self-awareness to recognize its own limitations and ended up designing its own successor, the computer that could figure out the question. Today’s organizations are like large computers, except that unlike Deep Thought, they lack awareness of their own limitations, and therefore do not recognize their own mortality or to gracefully deal with their own obsoloscence. Unlike the wise and enlightened Deep 53
Thought, they cannot design their own, more capable successors. They are not aware of the larger processes of creative destruction that govern their ultimate fates. They are blind and brittle, rather than self-aware and fluid. Most business functions are designed around the premise that work processes are static even if new tools sometimes replace old tools to drive them. Adaptation processes are designed to drive gradual evolution that hardens an organization rather than creative destruction that revitalizes it. The reality of course is that a truly radical new tool, if unleashed effectively, re-engineers the very processes into which it is introduced. A process that can do this sort of effective unleashing must necessarily be aware of its own mortality and be willing to gracefully die. A process that cannot do this ends up either rejecting radical change, or rendering it impotent. The result is that the process buys itself a few more years of life, at the expense of the resilience and survivability of the corporation itself. So how can we avoid this failure mode? Stay tuned for the conclusion to this trilogy. No prizes for guessing the title.
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Social Wars III: The Return of the Radicals In the first two parts we saw how a high-potential revolution at the periphery becomes a tame and domesticated evolution as it makes its way to the center. Along the way, the radicals get house-trained and co-opted, or sidelined and ignored, and business as usual continues. We know how to start Enterprise 2.0 change processes. We don’t know how to finish them. What we need is a return to radicalism. But not the same kind of radicalism that started the process. There are radicals who start revolutions, and radicals who finish them. Call them type A and type B radicals. Marx vs. Lenin. A type A radical can paint inspiring pictures, spread exciting ideas, plant seeds, and is great at explosive and dramatic short-term action. A type B radical on the other hand, operates as a guerrilla and can win asymmetric wars against much more powerful and entrenched adversaries, and is great at sustained, lowintensity, long-term action. But before we get into that, let’s remind ourselves of how the change process goes wrong. Recall the roles of IT and Purchasing as I described them last time: the job of Purchasing is to get needs met at the lowest possible cost. The job of IT is to think about long-term support and pick the solution that is easiest to manage. Except that we’re not talking about buying container-loads of 3/4-16 bolts from the cheapest source in China. We’re talking about buying cultures. The basic framing that industrial era purchasing functions apply is the wrong one: they think they are buying tools, when they are actually buying the cultures catalyzed by the tools. Applying normal purchasing/procurement logic to E 2.0 systems is, as I noted last time, like asking Detroit to take charge of the revolution started by Silicon Valley. Or if you prefer a different example, it’s like looking at the cultural success of New York, deciding that more people need access to such culture, buying enough of the cheapest land available, and declaring a large tract of land in rural Nebraska as the site of a future new Manhattan. The IT approach to 2.0 decision-making is equally inappropriate. Looking at the costs and benefits of standardization and framing the decision in terms of some mix of “platform” versus “best-in-class” buying decisions is appropriate (to continue the “replicate New York” metaphor) if you are planning something like the modernization of the sewage system of a large city. It is completely irrelevant if the idea is to catalyze wide-spread cultural changes and revitalize dying workplaces. Enterprise 2.0 is not about plugging new tools into old processes. It is about using new tools as irritants around which a nascent effective culture can crystallize, eventually displacing old processes.
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But the logical failure is understandable. Well-intentioned people look at the anemic cores of aging corporations, full of disengaged employees, and notice the vitality and energy on the unruly edges (I’ve heard people describe these edges with terms like “Wild West”), where employees have cobbled thriving new work cultures for themselves. They ask the obvious question: how can we have this culture of engagement, excitement and vitality spread throughout the organization? This leads them to the mistake: People assume that their problem is adapting the tools that are working at the edge to the core of the organization, when the actual problem is rebuilding the organization around the edges where the new culture is successfully taking root. In other words, the Mountain must go to Muhammad. When revolutions start on the edge, the core must reorganize around the edge hotspots, making the old edge the new center. Of course, you need practical ways to actually do this, and you can’t be too literal-minded about it (for one thing, the “tools that are working” may be CRM tools in Sales, and it is unclear what it means to re-center the organization around the tools). What are some of the tactics you might employ?
1. You could expand the budget and scope of the organization that has gotten its 2.0 culture going 2. You could move the people involved in the successes to new assignments 3. You could move people from the failing locations to the success locations for temporary assignments 4. You could shorten the reporting chain between the successful organizations and senior management (especially the CEO), so the senior managers see the effects of success more frequently and reward it with more executive sponsorship 5. You could have successful organizations report to enlightened but behind-the-curve managers of more mission-critical organizations, and wait for them to do the natural thing: probe the strengths/weaknesses of their new babies (an idea becomes vastly more powerful if a senior manager discovers it for himself/herself by probing a success, rather than by being persuaded overtly about a process that might lead to success).
Notice that none of these ideas has anything to do with IT management or purchasing or even tools. These are all the classic moves of corporate reorganization games, applied to the problem of “moving the mountain to Mohammed.” But ignore the substance of the ideas for a moment and ask the question: who actually 56
thinks like this? Is this a portrait of a person who write or signs documents like the Cluetrain Manifesto for example? People with a taste for grand gestures and holier-than-thou preaching? Or is it the portrait of a veteran corporate guerrilla? Does this sound like a radical who wears a beard and flip-flops, or a wolf in a sheep’s twopiece suit? The juxtaposition of these two archetypes should feel incongruous and dissonant. The noble sentiments in documents like the Cluetrain Manifesto sound sadly polyannish and deluded about human social psychology, when you contrast them with the sorts of gamesmanship that can win corporate battles. In many ways the philosophy informing the start of E 2.0 transformations is an unreconstructed echo of 70s style radicalism; a confused mish-mash of individualism, egalitarian collectivism and half-forgotten memories of Ayn Rand’s writings from college. This does not mean it is useless. It is merely appropriate for the first phase of any revolution, which is necessarily about values and messages. But that phase is over. The time of the Type B radical has come. Radicals who Finish One reason change processes fail is that leadership transitions do not happen at the appropriate time. The original radicals either hang on too long, to the point that they become a liability, or are unable to find an appropriate successor. The distinction is very similar to the one between startup CEOs versus who figure out business models and growth CEOs who grow businesses. Sometimes, one person has the talents for both roles. More often, you need two people with complementary personalities. When the right type B radical takes over though, miracles start to happen, in unlikely locations. Instead of the 2.0 transformation turning into a procurement and deployment exercise, it turns into a business model re-engineering exercise that reshapes the entire organization. 57
Reporting relationships and organization charts start to change in anticipation. Key people are moved around. Unexpected new business ventures gain executive sponsorship. And somehow, through these cataclysmic shifts, the people who were formally at the edge suddenly find themselves in the center. The Mountain goes to Muhammad.
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Managing the Enterprise Stream In case you hadn’t noticed, the world of consumer social media has coalesced around an organizing high concept: the “stream.” Blog posts, wiki articles, tweets, “Like” actions, shared photographs, mobile check-ins -- all the action has become part of the a constantly flowing river of stimulation and eyeballs called the stream. It is not clear whether there are many interacting streams, or one global, capital-S Stream (I prefer the latter interpretation), but either way, the basic metaphor of a river of flowing information, arising out of social interactions, has become central to our experience of the Social Web. Exactly the same basic technological ingredients are going into the idea of Enterprise 2.0, but it is not yet clear whether the stream the only/best organizing high-concept for the social business. But assuming it is a pretty good candidate, how do we adapt the idea for the enterprise? There are two basic extreme positions: leave it untouched, or tame it. Should You Tame the Stream? I live in Las Vegas, a few hundred miles from the Grand Canyon and a few dozen miles from the Hoover Dam. The former is a vast and complex landscape carved out by the Colorado river during its violent and temperamental history. The latter is the biggest element of a large-scale physical and political engineering project that ultimately tamed the river, with the help of 10 dams and a water-sharing agreement involving seven states (the 1922 Colorado River Compact). The consumer Stream is basically like the untamed river, and the Social Web is its Grand Canyon. Communities rise and fall as the Stream changes course frequently and violently. The result is a vast, beautiful canyon, whose walls are the corpses of dead communities. The Stream itself digs ever deeper into the collective consciousness. Once the river was tamed, however, the violence basically stopped. The river became so completely predictable and managed that an entire (and unsustainable) metro region -- Las Vegas -- grew to depend on it for water and power. Two large metro regions actually, if you count Los Angeles. The benefits are tangible: previously uninhabitable deserts, subject to occasional violent 59
floods, became habitable. The costs are equally obvious: huge and growing populations living precariously and unsustainably off limited resources. The metaphor maps quite well to the enterprise stream and the social businesses they are carving out. Instead of the political map along the course of a physical river, you have the organization chart with its pre-stream boundaries. Instead of the “natural course” of a physical river, you have patterns of diffusion and adoption. We can extend the metaphor a bit: the enterprise stream has always existed underground, but social technology brings it above ground, where it can be managed more easily, for good or bad. Within the metaphor, the management challenges boil down to two kinds of actions: redrawing boundaries, and building dams. The two are strongly coupled functions. Redrawing Boundaries The bigger challenge is to decide whether to redraw boundaries to conform to the natural course of the stream, or to stick to boundaries drawn when the river was underground. In the case of the Colorado river, while most relevant boundaries run straight, ignoring the river, at least one crucial boundary, between Nevada and Arizona, follows the course of the river in the critical region around Hoover dam. In the case of the enterprise social stream, redrawing boundaries means re-organizing the corporation along lines dictated by the successful adoption patterns (where social activity is actually flowing, not dry river beds). As a simple example, imagine that a lot of customer insight data is accumulating in a successfully deployed customer service tool, with marketing, sales and engineering constantly bugging post-sales service personnel for access to intelligence. Perhaps it is time to create a new, expanded “Inbound Market Intelligence” department by transferring the right people from marketing, sales and engineering. Possibly the new department ought to be built out of cross-functional teams (with marketing, sales, engineering and customer service talent) that serve as higher support levels on difficult customer service requests. As another example, if an internal social network/expertise locator is taking off and people are investing a lot of effort in updating their profiles and keeping their relationship data current, perhaps it is time for the HR department to be broken up into two: a front-end 60
employee relations part that participates in the social network in an administrative/curation capacity, and a back-end records/compliance piece that retains the “HR” name (basically, separate good and bad cop functions). Some ideas will be stupid in some contexts, but smart in other contexts. Some ideas will be smart everywhere, and some will be stupid everywhere. The point is, the enterprise has to start rethinking org charts around stream dynamics. Building Dams This is where the Enterprise 2.0 world has to break fundamentally new ground, and go where the consumer social web cannot go (and does not need to). What does it mean to build dams? It means rethinking access control architecture. Access control architecture is simply the permissions, security, sharing and need-to-know principles implemented in a company’s IT infrastructure. This is a function we think we understand, but don’t really. We labor under a false sense of security and comprehension based on 1.0 sharing models. The reason is that in a previous era, access control was primarily a zero-sum function, with need-to-know as the operating principle. Dams were built primarily to manage and allocate information supply. Today, it is also a wealth-generation function: think hydroelectric power, rainwater harvesting, watershed management and smart agriculture. The stream does more than move value around. It creates value, and a yield management problem. Yield management is a new design problem to be solved by access-control architectures. The social business IT system, when it works, naturally generates a huge flood of structured and unstructured data: photographs of birthday parties, employee blog posts containing insights, viral slide decks, Yammer conversation streams, comments on big all-hands meetings. There is no way a few IT “professionals” can mine all the value out of this flood. The job needs to be crowdsourced. This means access control architecture has to comprehend both need-to-know principles and intelligence harvesting principles. 61
The latter requires a mindset shift because it is a probabilistic function. When you share (say) a tricky production line problem on a company-wide discussion forum, you don’t know a priori where the solution will come from. You are leveraging Linus’ Law: with enough eyeballs, all bugs are shallow. By contrast, need-to-know is a much more deterministic principle, based on nominal job descriptions. Traditional IT management has simply never had to perform this function: getting the right (large) set of eyeballs looking at the right data in a big stream. IT departments everywhere are comfortable with risk management roles. They are not comfortable with yield management roles. How many CIOs do you think would be comfortable with the charter: at least $3 million worth of “assists” to Sales via lead discovery in the stream? This is where the coupling between the boundary-drawing and dam-building components comes in. By defining boundaries appropriately, and controlling access with respect to the new boundaries, you get both risk management and yield management. Take the two examples I used before. An expanded Inbound Market Intelligence department can periodically create and share reports that go well beyond traditional post-sales metrics like “cost per call” and “mean service hours.” Instead, the reports can now capture insights that can make their way to sales, marketing and engineering, with appropriate accounting of value flows. Similarly, a restructured HR function, with separate good cop and bad cop parts, would get rid of the schizophrenia inherent in today’s HR models. Having the same organization trying to deal with soft-touch roles like attracting talent and maintaining motivation on the one hand and hard-touch roles like managing compensation structures and sexual harassment lawsuits on the other, creates huge internal cultural tensions (usually soft yields to hard). Reorganizing around natural good cop/bad cop fault-lines revealed by the course of the enterprise stream removes the schizophrenia. From Static Flows to Ad-Hoc Flows The basic geographic stream metaphor only takes us so far. The real potential of streambased enterprise IT will emerge when we move beyond static flow control models to dynamic ones. 62
Unlike a river system, where dams and canals are expensive and static control mechanisms, the digital stream can be dynamically managed with very cheap, ad hoc flow architectures (rather like the staircases in the Harry Potter novel, which dynamically changed their starting and ending locations). It won’t happen today or tomorrow, but it will happen today: the organization chart will be replaced by boundaries that morph continuously. The stream will be rerouted on the fly to meet new challenges or pursue new opportunities. Instead of new departments, we might see the equivalent of business flash mobs, miraculously generated by an adaptive and agile IT infrastructure, to swarm and solve a particular problem just in time. But that’s far ahead in the future. I’ll discuss that sort of management science fiction some other day. Putting it Together So what we are talking about here is the emergence of a whole new IT sub-discipline, the equivalent of hydrological engineering. Can CIOs and IT departments everywhere step up to the challenge? What will they need to learn to perform the new functions successfully? Who will need to be hired? Who will need to be fired? All good questions. You should be asking them.
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Towards the Superlinear Corporation Burn this phrase into your head: superlinear corporation. Burn this picture into your head too. You will likely see graphs like this, based on real data from individual corporations, in the next two or three years. I hope to help make this happen.
I’ll explain what this is all about in a bit, but the key conjecture is that corporations that are successfully adopting social business practices will be able to produce and brag about graphs that look like the upward arcing one labeled superlinear. The graphs are usually drawn on a logarithmic scale, on which the superlinear and sublinear arcs turn into straight lines angled at greater than and less than 45 degrees respectively, but I’ve used a regular scale to make the visual meaning clearer. The terms superlinear and sublinear were first used by Santa Fe Institute biologist Geoffrey West to describe processes and systems that get more efficient with scale, and less efficient with scale, respectively. West originally studied these phenomena in biological systems and has recently turned his attention to human social systems. One of his most interesting findings is this: cities are superlinear, corporations are sublinear. What this means is that cities get more productive, creative, energy-efficient and generally 65
better by just about every interesting metric, as they grow bigger. Corporations on the other hand, get less productive, less creative, more wasteful and generally worse in every way, as they scale. Makes intuitive sense, doesn’t it? Creative, energetic young people want to live in big cities, but work in small companies. On the macro-scale, this means that cities are effectively immortal, while corporations (like humans) are mortal. In fact, not only are they mortal, their lifespan has been falling rapidly. How rapidly? John Hagel pointed me to research by Dick Foster in his book Creative Destruction, showing that the average lifespan of companies in the S&P 500, which was 75 years back in 1937, had fallen to15 years by the early 2000s. While the results from West and Foster are empirical, we can speculate about the causes behind these phenomena. Cities versus Corporations My theory about why cities are superlinear, while corporations are sublinear is straightforward: cities are open, corporations are closed. People can move in and out of cities freely, and basically do whatever they want so long as they can pay the cost of living. So people naturally leave cities that don’t work for them, and flood into cities that do. This makes cities self-renewing and self-organizing. There is plenty of interesting research on these dynamics (the works of Richard Florida, Jane Jacobs, William Whyte and James Scott are particularly relevant in the social sciences, and work from places like the Santa Fe institute is relevant from the perspective of mathematical modeling). There’s more to be said, but the basic relationship between openness and vitality is clear. Cities are their own fountains of youth. By contrast, corporations and humans are closed systems. They age badly, and generally get less creative, slow down as they age, after a peak, and eventually die. Cities do die, but it is astonishingly hard to kill them. They seem resilient to everything from plagues to nuclear bombs, and resurrect themselves from ashes time and again. Shortening company lifecycles are harder to explain, but my theory is that it has to do with the interplay of two phenomena: shortening product lifecycles and inability to handle disruptive innovation. Shortening product lifecycles are a direct consequence of a growth-centric economy where the pressure to create shareholder wealth forces companies to aggressively compete in an 66
arms race of planned obsolescence, constant novelty, and increasingly aggressive pursuit of customers’ limited attention. This race was, of course, triggered by them in the first place, via the invention of consumerism in the early 20th century. In this environment, if a corporation cannot become more than its best-selling product, it faces a mortal threat every time a major product reaches end of life. If it cannot replace a vanishing market just in time with a market that’s growing exactly as fast as the old one is vanishing, it is in deep trouble. And generally, they do end up in trouble and die. The dynamics of disruption, by which smaller, lower-cost players on the margins topple incumbents, ensures that this happens. As a result, companies start dying with their major products. Product-line end of life often spells corporate end-of-life. Nobody -- not even the originator of the disruption model, Clay Christensen himself -- has managed to produce effective models and prescriptions for companies to “self-disrupt” and keep reinventing themselves with every mortal threat. A few, like IBM, have pulled it off a few times, but there appears to be no general formula. The result is that company lifespans have been falling along with product lifecycles. Is there a way out? Actually, there are two, and both are based on social business software technology. The Fruit-Fly and the Rainforest The shortening life-cycle is the more fundamental of the two phenomena we’ve discussed (the other being the sublinear nature of traditional corporations). Your solution depends on whether you want to accept and run with it, or fight it. If you decide to run with it, you are adopting a fruit-fly philosophy. This generally works better for short-lived market opportunities that require primarily human labor and software to exploit. This means, you give up even trying to build a company. You look, instead, for the most lightweight and transient mechanisms with which to milk a market opportunity while it lasts. This is often called the Hollywood Model (large teams coming together and disbanding around individual movie projects), but I prefer the Fruit Fly metaphor. 67
The software-hardware stack for such a company is out there, and mostly free. Start a blog to get the marketing going. Work out of a coworking space/Starbucks, find the people you need on online marketplaces. Boot up your servers on Amazon. If it is a hardware/physical product business, find an agile outfit in China that will manufacture widgets to your specification. Write a light-weight profit-sharing contract. Set up your business processes on Basecamp and similar SaaS services. Sell, take in the money. When the flow slows, shut down, divide up the profits, sell or give away any IP, move on. Alternately, you could choose to fight the shortening life-cycle effect. This is generally the wise course if you see the need for large capital investments, multiple related opportunities across which there are economies of scale and scope, and other indicators that the market opportunity is both long and potentially eternal, for the right kind of business model. Here, you necessarily run into the sublinear/superlinear challenge. As you scale, vitality will go, and mortality will loom. This is where the Enterprise 2.0 stack comes in. Consider the things we often talk about: blogs, wikis, CRM tools, more public communication, customer-driven innovation, social missions, conversational word-of-mouth, innovation portals... The unifying theme across all these technologies that we are struggling to deploy is openness. If that’s too abstract, I really mean, making the corporation more like a city. The metaphor here is the ecosystem. I like more vivid ones, so let’s call companies that try this rainforest companies. Google is one of these. The Googleplex is an attempt to create an entire rainforest inside a single building. Not only is this hard, I would say it is effectively impossible. You can increase your lifespan somewhat by trying to become a rainforest company, but you will not achieve the immortality of cities. You cannot transform a corporation into a city. No matter how good your social business toolkit. Why? Because cities subsume the entire lives of their citizens, while corporations, no matter how hard they try, will always subsume only a part of the lives of their employees, customers and suppliers. Instead, the Enterprise 2.0 stack should be used for a more modest goal: integrating more completely with an existing city (or cities, for multinational corporations spread across many 68
cities) Not “community” in the abstract, but specific cities. Where people physically live. It isn’t sufficient to integrate better with purely virtual non-corporate communities. This is what Zappos is trying to do in Las Vegas for instance. Modeling and Measuring Superlinearity Ever since I heard West talk about his work, I’ve been thinking about how to translate the ideas from the realm of empirical data and correlations to first-principles models and causality. Can you model corporations in such a way that they capture the essential dynamics of openness, fruit-fly/rainforest nature, degree of integration with host cities, and so forth? Can you use available data to flesh out these models and produce analytical versions of the empirical scaling curves? If the trajectory is sublinear, can you predict when it will die? Can we build a sort of litmus test to figure out of a company is succeeding or failing overall, in adopting social business ideas, tools and practices, using the superlinear/sublinear distinction? These are hard questions, and I am making some progress. Thanks to a couple of consulting clients who have shared some useful data, I am starting to get a handle on them. If you are willing to share data about your business to help me with this ongoing research project, get in touch.
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Digital Native versus Digital Migrant Businesses In the last couple of decades, we’ve seen plenty of discussion about digital native versus digital migrant people. But we’ve seen little discussion of the distinction as it applies to businesses. There’s a reason for that. At the enterprise scale, there are only a few companies that qualify as digital native. Though the definition of “big” has evolved as part of the transition to 2.0, the fastest-growing new businesses are still taking about a decade to get to a size we can reasonably label “enterprise.” What are the implications? Given that a 2.0 business architecture construction kit of sorts has been available since about 2001, though not in COTS form, the only digital-native Enterprise 2.0 businesses around today are those that were founded around 2000-03, and possessed the ability to build their own tools. This narrows the field significantly. Companies like Facebook and LinkedIn are examples. The problem with these examples is that they are all in the consumer social media business. They went down the 2.0 path because the possibility of eating their own dogfood was naturally available to them. In fact, they were forced to do so to make financial equations balance. But they are hardly representative of the economic landscape. They don’t make paint or shoes or refine oil. The first generation of digital-native future-Enterprise-2.0 companies is still young. About four years old in fact, since you really could not build a new business 2.0 from the ground up, based on COTS tools, before 2008. Of course, not all successful four-year old businesses today will go on to become large. Most will either fail or stabilize at medium size. But a few will grow big. Transitional E 2.0 Economics This means that this transition-era Enterprise 2.0 conversation we’re all so excited about today is going to be largely irrelevant by about 2018, when the first generation of digitalmigrant Enterprise 2.0 businesses grows up. There’s still plenty of action left in the old economy, but the emerging new management science will have be based on companies founded after 2008.
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What’s more, realistically only a fraction (perhaps a third) of today’s transitioning companies will actually make it. The rest will succumb to one of what I called the four horsemen of the enterprisocalypse: dissolution, disruption, disaggregation and de-engineering. Their stories will at best teach us how not to fail. Not how to succeed. This means we are mainly talking about maybe a third of the less relevant half of the industrial landscape that will eventually come to define the Enterprise 2.0 model, when a Peter Drucker 2.0 puts it all together in 2030. Which transitioning companies might make it? One obvious lead indicator has emerged: companies that own a valuable data flow are well positioned. If your competitive advantage is based on privileged access to some river of data, there’s a good chance you’ll make it. If not, there’s a good chance somebody will eat your lunch. Where the Future is Emerging Thanks to a couple of interesting consulting assignments that afforded me a rather privileged view of the emerging digital native landscape, some of the emerging digital-native E 2.0 corners of the economy are becoming clear to me. The suspects are the ones you would expect: media, gaming, entertainment, design, biotech and consumer retail. These sectors are starting to transform at their very core. Some sectors are transforming from the edges rather than the core. Previously weak parts of the supply chain are becoming strong. Such sectors include finance (innovative banking services), speciality manufacturing, education, contract labor, outsourced customer support, small business logistics and event management. What can we say based on early evidence? What do digital native companies look like today, and what are they likely to look like when they grow up? Defining “Big” for Digital Native Companies We are used to thinking of big companies as being big on three dimensions: revenue, staff size and value-addition. So typically, hedge funds are not considered “big” companies. Despite producing a lot of “revenue,” they have small staffs and do not do any value addition in the real economy. Digital native companies is that they look small on the staff and value-addition dimensions. It is possible to get to multiple billions in revenue with only thousands in staff and very little direct value-addition. To tell these businesses apart from businesses like hedge funds, you 72
have to look at how the staff strength and in-house value-addition are amplified via leverage. So in the case of the large consumer web E 2.0 businesses of today, user-generated content adds both de facto staff and a lot of the value that is being booked as revenue. Or to take a non-consumer-Web example, the transformation of retail through self-checkout, social commerce and other innovations has basically created a leveraged labor force. You are now a checkout clerk and bagger, as well as part of the marketing staff, since you spend more of your time checking out and reviewing businesses and selling to others by feeding recommendation algorithms and participating in online word-of-mouth. Leveraged Labor Economics Even adjusting for these leverage effects, digital native businesses cannot fully occupy the under-utilized labor force that is being created by the declining old economy companies. To understand this, you need to work through some 1:9:90 math (what is known as participation inequality). User-generated content tends to follow a pattern where for every one dedicated contributor, there are 9 casual contributors and 90 least-effort contributors (who do no more than the equivalent of hitting a Like button). Moving the contribution distribution curve higher up along the value-addition axis to prosumer economics, the word “ecosystem” that we all love so much gets defined as “9 contractors and 90 part-time freelancers for every full-time employee.” Making a living in a 1:9:90 economy is much harder than people think. The reality beneath exciting words and phrases like free agent, ecosystem and empowerment is a very harsh one. For those of us living in this world, it is still worth it, but firing your boss and being your own master comes with costs that not all people will be able to pay. The result is going to be a very tough transient labor market for about a couple of decades, until the imbalance between available productive work and willing workers is fixed naturally by an aging population and declining birth rates. In the interim, economic growth will also slow, flatten and possible enter into a long, slow decline, since a large, impoverished labor force can buy much less. There are those who believe that ingenious ways will be found to bring this under-utilized labor force into the 2.0 economy. I have grown increasingly skeptical of this position. The Shallowness of Cognitive Surplus 73
Clay Shirky’s notion of cognitive surplus is at the heart of the excitement about the future potential of E 2.0 models. Sure, everybody can take mediocre pictures, bag their own groceries and write restaurant reviews. But not everybody can participate in complicated and specialized activities like programming or airplane design. What would it take for that to happen? Is the current craze for DIY drone-building an indicator that LinusBus might one day disrupt Airbus and Boeing? For leveraged 2.0 labor economics to be extended to a greater envelope of more complicated industrial activities, businesses will have to learn to do complicated things by coordinating larger numbers of less capable (and lower-paid) people. This is not always possible, but where it is, failure to adopt the model will destroy companies. If you can figure out a mix of automation and clever coordination through which a hundred high-school graduates with pre-calculus level skills can somehow replace one aerospace engineer with a graduate degree, you could replace one labor unit paid $100,000 a year with a 100 labor units, each paid $900 a year (likely through a gamified compensation scheme that distributes rewards unequally, and effectively at a rate lower than the minimum wage). What this means is that cognitive surplus in the sense of Clay Shirky is a broad but very shallow resource. Using it effectively is a problem analogous to distributed computing. If you can invent a “Hadoop for people” technology, there is a good chance that you will become the next Internet billionaire. Amazon’s Mechanical Turk and flash mobs are the early signs of this kind of human-coordination-technology industry. The future of the E 2.0 revolution depends on the limits to distributed labor-computing with people clouds comprising cheap, low-power, highly replaceable and unreliable human parts. And the ability of those parts to survive on much lower real incomes through lifestyle design innovations. It may sound bleak to those rhapsodizing about how in the future everybody will be empowered to express their unique individual humanness and creativity, but it is where we are actually headed. You need to learn to see the deeper romance of this emerging world in order to not be depressed by it.
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The Trifecta is Complete: The Enterprise 2.0 Grand Unified Equation In the six or so years that I’ve been thinking about and working with enterprise IT technologies, I’ve seen three technology sets take off: social-and-mobile (2006-07), cloud computing (2008-09) and most recently, Big Data (2011-2012). Thinking about all three together recently, and pondering Drew Conway’s excellent Venn diagram defining “data science,” I had an epiphany. It took the form of a Venn diagram representing a sort of Grand Unified Equation for Enterprise 2.0. Here it is:
The conceptual equation is roughly “Enterprise 2.0 = (Social & mobile) AND (Cloud) AND (Big Data).” The fun part is in the labels for the parts of the diagram where you don’t have all three. I’ll leave it to you to figure out why I chose the labels I did, for the partials. If you drop any one of the three elements, the value doesn’t drop to 66%. It drops to like 5%. If you drop two of the three, you drop down to close to zero percent. Or if you are the glass-half-full type, you could say that when we just had “social+mobile” the potential value added to Enterprise 1.0 was x. This jumped to 5x with the addition of cloud computing and to 100x with the addition of Big Data technology. The cost-benefit argument with any one or two elements is hard to justify. But argue for all three intelligently (the key word is intelligently) and suddenly the equation starts to look really good and truly radical. 75
And what’s more, the implied organizational model no longer looks like a coat of paint. It starts to look radical enough to actually merit the 2.0 designation, rather than a 1.1 designation. A CEO who understands the Venn diagram above will realize that it represents a decision about a significant business model shift. He or she is no longer being presented with an expanded IT budget request. It is a business model decision now. To use a store-ownership metaphor, you’re no longer in repainting territory, or even in change-the-decor territory. You are in wholesale remodeling territory. And you no longer have a choice -- if even one competing store in the neighborhood starts remodeling, everybody else will be forced to follow. Now that the trifecta is complete, the potential value has skyrocketed. Half measures will no longer do. Data Ubiquity Changes Everything The reason you need all three is simple: E 2.0 business models are not actually very much better than regular ones when you are dealing with conditions of data scarcity. But under conditions of data ubiquity, they are radically better. The catch is they are only radically better if you deploy all three technologies astutely. If you are talking about a single Excel spreadsheet or warehouse-generated BI report, it is hard to argue that you need a wiki or a blog to make use of it, or a cloud vendor, or a MapReduce ninja. Even with a terabyte of data, nothing much has changed -- it will fit on a $150 hard drive these days. Move up to a petabyte of fast-changing, poorly structured data, and suddenly Excel and your old BI toolkit start to look like a joke. Your normal reporting and communication structures start to look silly. Data ubiquity changes everything. Nice-to-have technology toys turn into must-have survival equipment. All three technology sets really only come into their own when you are dealing with huge firehoses of data which would overwhelm traditional command-and-control management models. We’ve had access to the data fire-hoses in the enterprise for a while now, but lacking the ability to do anything meaningful with it, we’ve mostly thrown it away: what is starting to be known as data exhaust. 76
What happens if you decide not to throw it away? You get data flows voluminous enough to burst reporting pipelines. Flows so dynamic that data warehousing and reporting based IT falls apart. Flows so demanding that you need more infrastructure expertise than most IT departments can build in-house. Flows that are unstructured enough that SQL queries cannot probe them. Flows torrential enough that even after you apply all available process automation, analysis, dashboarding and visualization technologies, the flows are still too big to use summarize-and-funnel-up models converging at the CEO. To illustrate this “data ubiquity” regime of business operations, it is useful to speculate on the “perfect storm” business problem that E 2.0 does not just solve 10% better than E1.0, but provides a solution where E 1.0 fails completely. The Perfect Storm Problem Imagine a grocery store chain with 1000 employees getting opt-in permission from a customer base of 50,000 people to track location data, at city and in-store levels, as well as Facebook, Twitter and Foursquare stream data, in return for deals. Imagine that you also have POS data from a loyalty program that has high penetration (i.e., you can match the behavior data to purchasing history). And throw in video feeds from all store cameras for good measure. Yeah, this is Big Brother/panopticon territory, but we’ll glibly assume that you obtained optin permission in not-evil ways and your customers know what you’re doing. This is a huge firehose of complicated, loosely structured data. Clearly there will be immense value hidden in the firehose: sentiment data, competitive data, fine-grained lifestyle psychographic data, shopping patterns, price sensitivity data... the list goes on. It will not fit pre-defined data models very well. So it cannot be sucked into a traditional BI/warehousing infrastructure and turned into push-button reports. You will need Big Data technologies. It will have high volatility and unpredictable peaks, so fixed hardware infrastructure with worst-case sizing will not do. You will need on-demand infrastructure. You will need to use the Cloud or face ruinous costs. 77
And finally, when you’ve Hadooped and Cassandra-ed it for all it’s worth, and funneled the digested stuff into the best analytics and visualization dashboards you can build, it’s still too much for one mind to process. So piping it all into a huge wall-sized screen in the CEO’s office (which P&G reportedly does) will not be enough. You need social business models to throw collective intelligence into the mix. There is basically no way to get at the value of this data using a traditional organizational model. There is just too much of it, and it is too messy and fast-changing. There is also no way to get at the value with just one or even any two of the technologies. You need all three. From Universally Missed Opportunity to Survival Problem In the past, when the technology to do something with such situations was not available, these situations were not problems at all. Since nobody could solve them, they just became universally missed opportunities with low opportunity costs. It was data exhaust all around. Why low opportunity costs? Because opportunity cost is best defined by the marginal value gained by somebody who decided to do something that you decided not to do. If nobody does anything, an opportunity doesn’t have a meaningful valuation, and the cost of passing it up is relatively low. To go back to the store metaphor, the game doesn’t start until one of a set of competing neighborhood stores does something different. But once the first mover moves, the race is on. It happened most recently in the auto industry, once Toyota went hybrid. Suddenly it was go-hybrid-or-go-home for every other player. Now, as the E 2.0 technology stack comes together, we will see first-mover players in every sector who actually attack opportunities that were being thrown away in the data exhaust. Many will fail, but they will inspire others to start moving, and at least one will succeed in every industry. A grocery store chain that successfully tackles the example problem above will create a very high and real opportunity cost for competitors who don’t, and opportunity costs will turn into actual costs as customers migrate to the successful competitor. The True Cost of Half-Measures There is an unacknowledged watershed in the Enterprise 2.0 conversation between the 78
gradualists and the radicals. The gradualists look for an interpolated, linear path from 1.0 to 2.0. I don’t believe such a path exists. Half measures don’t deliver half the value. The return equation on the complete E 2.0 technology set is highly non-linear. You have to decide to go all-in. This does not mean a radical gazillion dollar capital investment. You have to go all-in in terms of commitment and determination to make the leap, but the execution needs to be agile, iterative and experimental. Not experimental in the sense of should we do this? Experimental in the sense of we have to figure out how to make this work or we’ll die. Because that’s the other thing about this technology stack. Outside experts cannot help you beyond a point. You have to put the thing together in your own unique way, around your own unique strengths. This makeover cannot be outsourced. Failure to adopt E 2.0 is no longer an option, because it means eventual failure of the business itself, so long as there is sufficient competition in a sector. But even effective monopolies are not safe for much longer. They may enjoy a few extra years, but the disruption will leak in from around them eventually. No industry sector is an island unto itself.
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Management for Opportunity Part I: The Origin Story New technological eras invariably create new managerial eras. Enterprise 2.0 is no different. In this three-part series, I want to argue that Enterprise 2.0 organizational technology leads to a management model I will call Management for Opportunity, a model which exposes managers to market risks in unprecedented ways. This model is contrary to the popular emerging idea that managers (especially the much hated middle managers) will become entirely obsolete. But to get to this vision, we need to situate E 2.0 management and technology ideas within the four-century evolutionary history of corporations. E 2.0 isn’t so revolutionary that it cannot be meaningfully situated within this larger tradition. It isn’t even the most revolutionary thing to happen within the tradition (the abandonment of slavery kinda trumps it). I’ll start the story around 1954 though, rather than going all the way back to 1600. If you are interested in earlier eras of management, you may want to check out my posts A Brief History of the Corporation: 1600-2100 and Hall’s Law: The Nineteenth Century Prequel to Moore’s Law. Let’s start by trying to characterize the job of the manager in the E 2.0 world. I assert that this job is to manage for opportunity (MFO), which is fundamentally a risk-management role that requires E 2.0 tools to fulfill. It is the newest layer in the functional organization of the evolving managerial mind, which I visualize like so:
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Let’s talk about this picture. I’ve tried to capture higher and lower level functions in a dependency stack. You need the lower layers before you can install the higher layers. There is a chronological anomaly in that the the second layer developed after the third one, but that was due to some historical peculiarities. Let’s start by tracing the evolution of the managerial mind. The Evolution of the Manager Skipping lightly over a couple of centuries of early evolution, the story gets interesting with Drucker, at a time when the default management culture was a layer of owner-executives on top of what you could call glorified shop-floor supervisors, whose job was to steward well-defined processes to met objectives set by owner-managers. Call this Management by Process, or MBP. In 1954, in a world where people management was still synonymous with MBP, but operations were growing more complex, large-scale and specialized by the year (especially due to the wartime increase in sophistication in many industries), Drucker offered an abstract principle for managing the emerging breed of information workers differently: management by objectives (MBO). It was, at the time, a somewhat revolutionary idea: that employees should participate in setting and monitoring their own performance goals. It was a natural consequence of selling complex products and services in a growing global market. In a way it was a return to the high autonomy enjoyed by managers in the sprawling flat-hierarchy railroad empires that came before Taylorism, but had been slowly eroded in newer vertically integrated industries like oil and steel. But where the pre-Taylorist autonomy was a sink-or-swim challenge to meet non-negotiable goals by any means necessary (Carnegie for instance was notorious for his tyrannical, hard-driving production targets), the Druckerian idea of autonomy was based on negotiated goals. This was a consequence of work becoming complex and specialized enough that senior executives simply did not know enough to set goals autocratically. They could predict demand to some extent (this was the historical anomaly, the 50s-70s being characterized by unusually predictable growth in demand), and use that to negotiate goals down a chain of command that collectively knew how to grow capacity. Druckerism did not replace process-oriented Taylorism. It created a layer of planningoriented information workers above it. The Taylorist factory remained, creating steady-state baseline performance conditions. Druckerian managers were taught to drive the underlying Taylorist machine into new markets, guided by demand forecast maps. 82
By the early 1980s, as the business environment grew increasingly uncertain and competitive, and the maps started turning into nonsense, a refinement was added: Management by Exception (MBE). I have not been able to trace the origins of the term, but I suspect it rose to prominence during the late 80s and early 90s, when business process re-engineering (BPR) was all the rage. BPR proved to be a short-lived fad overall, but it did achieve one thing: forcing a shift from a primarily deliberative management orientation to a deliberative-plus-reactive one. It was able to do this because it deals with end-to-end processes in a feedback loop with the external world, rather than functional silos, as the fundamental unit of organization. The result of this management architecture was that a new feedback stream of information was added to the feedforward stream that emerges from the forecasting models and long-range plans of MBO. MBE is best understood as a layer between MBP and MBO. Uncertain market conditions make operations messy, and exceptions start to become more frequent. At the bottom, the MBP layer requires frequent retuning as a result (an activity captured in late-Taylorist models like Lean and TQM). At the top, frequent reassessment of objectives becomes necessary (the aspirational state of “agility” is about being able to do this well), since plans may suddenly become infeasible. Old-school supervisor-managers who are used to fairly steady conditions can no longer keep the MBP machine humming smoothly as demand grows chaotic. On the other hand, the MBO managers who decide where to go cannot rely on the assumption that the machine is functioning and in control, or that the map -- forecasts -- will be accurate next month. Tom Peters rose to prominence by talking about this regime of chaotic operations as thriving on chaos, so let’s call MBE the Petersian model. Peters had a bold vision that you could actually feed on chaos and turn it into competitive advantage by doing MBE well enough. So at the dawn of the Internet era in 1993, we have a management stack that looks like this: MBO on top of MBE on top of MBP. Depending on environmental uncertainty, the manager does a better or worse job balancing MBO and MBE functions. Usually a worse job. As a result, the word “manager” became a dirty word by the late 80s, and a different archetype, the “leader” began to rise. 83
In Part II, we will look at the rise and impending fall of the idea of Leadership and how “manager” became a dirty word.
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Management for Opportunity Part II: The Theater of Leadership In the first part of this series, we looked at how the lower three layers of the “manager mind” emerged: Management by Process (MBP), Management by Exception (MBE) and Management by Objectives (MBO) and how, by the dawn of the Internet era, the three-layer stack was struggling to cope, with managers constantly fighting fires and spending most of
their time in the MBE layer. This time we will look at the rise and impending fall of the idea of “Leadership” as a popbusiness construct in the eighties. The role emerged of visionary leader to make up for the apparent failure of the manager mind, but evolved into something very different, illustrated in the picture: a role dedicated primarily to creating and maintaining an illusion of control in the markets interspersed with occasional Big Bold crisis management moves that generally fail. The brief story of “leadership” -- a mere two decades -- is only a small chapter in the story of professional management, but an important one. The Rise of “Leadership” As market environments became increasingly unpredictable, and managerial MBE functions began to swamp MBO functions (often referred to as “constant firefighting”), a culture based on pure “management” began to crumble entirely. Tom Peters’ vision had failed.
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Companies were not thriving on chaos. They were mostly succumbing to it. The beleaguered manager could not cope with the three-layer stack of functions expected of the role. As we will see, this was mostly a scapegoating. Their failure to cope was largely the fault of executive leadership. But back in the late 80s, managerial failure seemed to logically point to pure managerial incompetence. The stage was set for a Messiah figure. Enter the “leader” in the form of one initial role model: Jack Welch. Welch was the first modern example of “charismatic leadership,” and his was the first widely recognized business name since the Robber Barons. I challenge you to name, off the top of your head, one “celebrity” business name between Rockefeller and Welch that the average man on the street would have recognized. I guarantee you will fail -- the decades between mostly saw a parade of non-celebrity senior managers who were not very well known outside their own companies and industries. It is telling that the term CEO gained currency during the eighties, displacing older terms like President. The Charismatic Leader and his coterie needed to inhabit a layer that was not just above ordinary manager, but conceptually distinct from it. “Leadership” was a curious construct, and is still somewhat disreputable academically. And with good reason. It is the idea that one savant-like figure can intuitively read market conditions, spot brilliant strategic opportunities, create clarity of purpose in pursuit of that opportunity, and steer by an innate sense of True North, without a compass. And oh yeah, while performing this miracle routinely, the leader also models virtues and values that would put saints to shame. This idealized leader sparks a pursuit of a new era of corporate greatness with a brilliant strategic insight every few years, and ensures that the pursuit is conducted in accordance with values so unbelievably noble, you feel like writing epic poems in their honor. These charismatic figures are supposed to be capable of intuitively cutting through complexity and producing visionary decisions that make the managers’ jobs tractable again. The leader, since Welch, has been, as I have said, a Messiah figure. Do these Messiahs actually do the job required of them? Relieve beleaguered mere-mortal managers and steer the company towards greatness? Nine out of ten times, they do nothing of the sort. What they do is convince people that they are in control.
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Leadership as Theater Heroic, charismatic leadership in the context of large public companies is, mostly a myth. What makes it a myth is not that such figures don’t exist (there have been a handful, such as Welch himself, Jobs and Bezos), but the idea that the phenomenon can be studied in general terms, codified, and turned into a teachable skill. That in principle, every CxO is such a Messianic figure. True leaders are born, not manufactured. And they are quite rare. What the leadership cottage industry can manufacture is false leaders: people who can act like leaders. Act as in actors in a theater. That theater has two audiences: the media and Wall Street. The psychological allure of “leadership” as a concept is almost entirely due to its profitability as a business-writing cottage industry, which in turn is based almost entirely on appealing to the vanities of wannabe-Messiahs. On the other side, there is an entire shadow world devoted to manufacturing perceptions of Messianic capabilities, by “proving” claims to charismatic leadership using hagiographic narratives. But allure alone is not enough, the role must have some real function after all. What might that function be? The de facto job of a leader in a large public corporation is to manage perceptions on Wall Street and thereby manage the stock price. Projecting an image of charismatic leadership is the easiest way to do this. Managers fire-fight out of sight, creating a perception of normalcy and control around the company, and the Glorious Leader uses that blank canvas of apparent normalcy to spin tales that mesmerize Wall Street. The leader is the serenelooking duck that belies the furious managerial paddling below the surface. In general, the Glorious Leader does precisely nothing to actually relieve managers of the increasingly onerous burdens they are required to carry. Unfortunately, through the 90s and 00s, the Cult of the Charismatic Leader has only grown. It has now turned into a near-mystical world of tribal mythologizing. The cult has grown to the point where it is declaring managers and management entirely unnecessary. The ultimate scapegoating. The Fall of the Charismatic Leader Figure Charismatic theater-leadership is about to die a messy death, like Qadaffi, because the sheer amount of chaos converging in a bottom-up torrent to the apex of the organization -the CEO’s office -- is going to become unmanageable very soon. The theater will become 87
increasingly hard to sustain. Individual leaders fail when managers fail to keep up with the fire-fighting. Once the fires become externally visible, the apparent normalcy that is necessary for the leader to manage perceptions is gone. At this point, the leader is an impossible situation, but the theater must continue. And so we are treated to the grand finale of the tenure of a CEO: the Big Bold Move. The Bet the Company moment. The Big Bold Move by the Big Chief is the only substantive thing the theatrical leader actually does that is about managing the company rather than perceptions. And it is usually a Big Dumb Move. Typical Big Bold Move decisions include deciding to go after large new markets, bold new product initiatives costing hundreds of millions, or major M&A moves. It’s a high-stakes game, with a hundred-million-dollar minimum merely to sit down at the table. And usually these bets fail, because charismatic leaders are forced to make them at terrible times, with bad data, when growth has stagnated or is plummeting, and there is a need for an 11th hour business model shift to replace hundreds of millions of dollars of collapsing revenue streams within a couple of years. A case of too much, too late. The leaders who fail are sacked, land safely with golden parachutes and are quickly forgotten, and quickly proceed to loudly blame “culture” (read: “incompetent middle management”) for the failure. Those who succeed -- with more managerial help and dumb luck than they will admit -- produce fuel for more hagiographic narratives and leadership “theories” to fuel the cottage industry. The cottage industry of leadership feeds greedily on this material, completely ignoring survivorship bias, and the circus continues. What happens when the music stops? Tune in for Part III, where we will resurrect the much-maligned and consigned-toobsolescence middle manager.
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Management for Opportunity Part III: The Gambler-Manager
In the first part of this series, we looked at the evolution of the managerial role, starting in the 1910s, and its apparent failure at the dawn of the Internet era. In the second part, we looked at how the idea of charismatic leadership rose in response to the apparent failure of managerial models to cope with new realities, but failed to actually fix things. It created instead, a sort of Leadership Theater designed primarily to manage Wall Street perceptions rather than the company. Failures in leadership were blamed on managerial incompetence. Middle managers, fighting fires out of sight and unable to defend themselves in the media circus, became convenient scapegoats. Why scapegoats? Because they were exposed to the downside of risks without being given the ability to manage those risks or participate significantly in the upside. We wrapped up last time by noting that the leadership theater is no longer sustainable, due to the increasing deluge of relevant information that must be processed to steer a company. Much of which is starting to flow upwards to the C-suite, since managers are not empowered to handle it. The Management by Exception (MBE) pipes are about to burst. We’re now ready to get to the new vision for managerial thinking: Management for Opportunity (MFO). Risk and the Manager Consider why managers ended up in beleaguered, fire-fighting roles by the late eighties, fueling the rise of the false-Messiah leader. In our 3-layer model, in a chaotic environment, the Management by Process (MBP) layer gets destabilized, the Management by Objective (MBO) layer turns into garbage, and all the action moves to the Management by Exception (MBE) layer, which was supposed to be, in theory, an occasional exception-handling layer. Does this happen because managers are incompetent, risk-averse and bureaucratic? Charismatic leaders like to claim this is the case, but the real reason is much simpler: you can only fight uncertainty with uncertainty. To manage in uncertain markets and turn a profit 89
for a P/L with increasingly volatile cash flows, managers need risk-management capabilities. Managerial roles started failing because they were exposed to increasing downside risks without being given upside opportunity management capabilities of equal power. Leaders have monopolized risk-taking for nearly three decades now, and have used that monopoly primarily to manage perception risks rather than real market risks. During this period, all capacity (read: liquid assets) for risk was absorbed by Big Bold Moves scripted by leaders during times of crisis, perception-management quadruple bypass surgeries . There is now a chance to change this picture. Why a Fourth Layer? There is only one way to deal with the impending deluge of chaotic information converging on the C-suite like a tsunami: devolve the traditional leadership function of opportunity selection downwards through the managerial ranks. The idea of smaller bets, placed earlier, that mature as business model options exactly when needed, is the idea of innovation. That rarely works in isolation, because too much is expected of small seedlings, too soon, during moments of crisis. The only way to actually get to effective innovation is for the C-suite to give up its monopoly on serious risk-taking. Instead of a billion-dollar move every five years, during a crisis, we need a thousand smaller moves worth a million dollars each. That’s enough to turn every middle manager in a large corporation into an angel investor. We need a middle-management equivalent of Google’s famed 20% time. A way for corporations to make the best use of seasoned corporate warriors with deep domain knowledge, a couple of business cycles worth of realism and wisdom to offer younger employees. Line managers must now be required, enabled and trained to take on market risks (not just internal risks) on negotiated terms, just as they took on negotiated objectives in the MBO era. The culture that needs to emerge is a management for opportunity culture. 90
The Risk-Taking Manager What does the manager need today that he or she lacks, in order to take on a meaningful role in risk-management? How do E 2.0 tools play into this redefined role? The missing piece is the ability to gamble. E 2.0 tools provide the information advantage required for gambling at layers that traditionally did not manage external risk. But this information advantage is meaningless if it is not accompanied by resources with which to gamble. Line managers today are either P/L managers or cost-center managers. Neither truly manages much market risk. The first kind of manager is expected to hit targets within strategies thrust on them topdown, whether or not they believe in the market opportunity they are expected to realize. They are expected to do this with one hand tied behind their backs on marketing and innovation fronts. The second kind lacks even that minimum amount of control over revenue streams. He or she must service “internal” customers through murky “cost recovery” accounting for services billed at rates that have no meaningful relation to market rates. The accounting is basically a joke. It is more about balancing the books in nominal ways than representing financial realities in ways that actually help manage the business. How do we change this ridiculous picture? The Gambler-Manager, 2.0 Style The basic mechanism for creating more autonomous, risk-managing managers is to devolve authority over the two basic Druckerian management functions (“the business enterprise has two—and only two—basic functions: marketing and innovation”) down to the lowest possible level: managers who manage small workgroups of individual contributors. This means taking a sledgehammer to centralized corporate marketing and R&D models except in the very rare cases that really large amounts of capital, in the form of technological and marketing muscle (as a fraction of revenue) must be assembled in one place and time. This idea is generally anathema to large corporations, but once you understand the CEO 91
“leadership” job that I talked about last time, you realize why marketing and innovation are centralized today. On the marketing front, the need for centralized management of a corporate brand is vastly overstated: it is primarily needed for Wall Street perception management, not creation of demand (which is the basic textbook purpose of marketing). On the innovation front, large, centralized R&D centers are more about creating vanity poster-child advances to help CEOs manage expectations of future growth. In practice, most of these vanity projects fail to even reach the marketplace, let alone create new markets. Fortunately, they absorb a smaller fraction of the innovation budget than analyst column-inches. The rest of the budget is devoted to minor enhancements of existing products and reinforcing engineering firefighting in operations. In effect you have a centralized innovation and marketing circus designed to provide a background to the CEO’s antics on the stage of the perception management theater. In the Leadership Theater, the CMO is the art director. The Innovation CTO is the special effects maven. No wonder line managers charged with actually delivering revenue growth and increased profitability are starved of autonomy and resources. This needs to change. The New Middle and Business Everywhere When you put all these ideas together, the new middle manager starts to look like an angel investor or micro-VC inside the corporation, with sufficient liquid resources, innovation potential and marketing autonomy, to maneuver in the marketplace in a very agile way. The mantra of “innovation everywhere” by itself is meaningless. It needs to be upgraded to “business everywhere.” The Druckerian yin-yang of marketing and innovation needs to be the recursive, fractal DNA of the entire organization, right down to the individual contributor. To inform this organic, enterprise-wide maneuvering, you need information, which is where Enterprise 2.0 tools come in. We’ve talked enough about the tools (inbound social media analytics, blogging, word-of-mouth, crowd-sourced innovation, early-beta processes) as a community for the last three years that a word to the wise should be sufficient. And in this vision, middle managers, far from being dispensable, are absolutely critical. They are the ones who pull the entire organization together into a sort of negotiated, agile, 92
systemically risk-managed and dynamically stable vortex that is Enterprise 2.0. Take them out of the equation and you get a tribal lovefest between self-absorbed individuals and vain, celebrity “tribal leaders.” Something that looks more like a music festival than a business that steadily generates value. Middle managers everywhere, welcome to 2.0. You have a part to play. You are not obsolete.
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A Crowdsourced Definition of Collaboration
Socially speaking, are you most comfortable working in teams, tribes, or co-groups? Each has its strengths and weaknesses. I realized recently that my understanding of the term "collaboration," in the flavor-of-the-decade sense, was extremely poor, so I decided to do some digging. As this Google Trends view shows, popular interest in the term peaked in 2004. Media interest began in late 2007 and plateaued by 2009.
The flavor-of-the-decade sense of the term isn't the same as the dictionary definition, prescriptive definitions offered by major commentators, or technical definitions. So I decided to try to articulate, with hindsight, the zeitgeist definition in all of its sloppy glory. Because that's the definition that matters. There's also a sort of aesthetic logic to this approach: Shouldn't a definition of collaboration be collaboratively created? To construct my definition, I assembled a sort of tag-cloud of terms associated with collaboration, filtered out those that seemed to reflect the madness rather than wisdom of crowds, and strung together a strawman paragraph. Then I added some of my own theoretical ideas to make the strawman more coherent. Here's what I came up with: Collaboration: Generating value within a nominally large, leaderless, temporary, partly voluntary, loosely defined, and partially open group that comes together and figures out what do with itself at the same time. The group relies more on exit than on dissent to resolve conflict, is animated by a shared narrative rather than a shared identity, and is driven by a culture of consensus. The group possesses both mechanical and organic solidarity, and is indifferent to its institutional environment
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unless a conflict with that environment emerges. The group does not engage in direct conflict with alternative group models that compete with it, but instead lets some sort of broader market mechanism determine its fate. You can work out for yourself why each of the qualifiers and characterizations is in the definition. In crafting this definition, I realized that we need a word for the kind of group structure that does the collaboration, so I picked "co-group." This word makes the comparison with other forms of group work easier. Co-groups that acquire a layer of formal management can be considered communities, but most co-groups never acquire that level of structure. It's particularly useful to compare co-groups to two other group types. 1. Teams do teamwork. They work toward objectives defined before the team is. In contrast, cogroups come together before purposes are defined. 2. Tribes fight battles. They're temporary groups that form and disband as appropriate, within a "segmentary" society under situational leadership, to respond to external threats to a shared social identity. The team was the main group model studied by business thinkers until about 1997. It's still the dominant form within organizations. The tribe is a modern overload of a traditional construct championed by some writers, notably Seth Godin and Dave Logan. Let's contrast the co-group from the team and tribe. Collaboration Vs. Teamwork I put the transition date between teamwork, done by teams, and collaboration, done by co-groups, at around 1997, with the dissemination of Eric S. Raymond's The Cathedral and the Bazaar. The big jump in connotations was that teamwork referred to work by a small and closed group situated within a given organizational context and specifically chartered by some sort of legitimate authority (such as a CEO). In contrast, from the beginning collaboration has implicitly been based on the idea of a fuzzy, open group that spans organizational boundaries and isn't chartered by any recognizable authority to do anything in particular. You're either inside or outside a team, but membership in a collaborating group is a matter of how much you show up. You can be anywhere on the spectrum from completely indifferent to completely invested.
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Collaboration Vs. Tribework Tribes emerge from what anthropologists and sociologists call segmentary societies, which have an internal structure based on segmentary lineages (most commonly family-based). As an Arab saying puts it: me against my brother, me and my brother against my cousin, me and my cousin against the stranger. Such societies are highly autonomous at the lowest level, so the larger groupings aren't necessary for economic survival. There's low dependency among units and a great deal of homogeneity among them. Tribes come together based on shared identity, for temporary shared objectives (which is nearly always to combat a shared threat), under situational leadership. And then they disband. Crucially, non-zero-sum creativity and economic production occur at the lowest level (individuals and families), with higher-level groupings coming together only for zero-sum purposes such as warfare. Tribes still exist. Occupy Wall Street is a very large tribe (albeit one whose emergence was catalyzed by a savvy marketing agency). When sub-tribes band together to fight an enemy, they do so because they have a shared social identity at a certain level (for example, "Arab" vs. "Turk" in the 19th century). The shared experiences are later incorporated into different (and conflicting) narratives after the grouping disbands. In contrast, participating in a co-group like the "WordPress community" involves little by way of shared identities, but the shared narrative is much stronger and persists at a global level: the community stewards the "story of blogging." This is probably my most controversial claim: Tribes produce nothing. Only sub-tribal groupings like families produce. Tribes exist either to fight zero-sum battles or to create shared social capital through identity-strengthening experiences. The output of a tribe generally has no value outside the tribe and cannot be exported. So examples used by people who focus on sub-cultural tribes (rock climbing, surfing) at best create videos that the rest of the world may occasionally glance at. Tribes share behaviors (like surfing or rock climbing or picketing Wall Street). By contrast, members of a co-group do different things that can fit together into an organic whole. Co-group members may violently disagree with one another on ideological matters (both liberals and conservatives use WordPress, for instance). While co-groups have the deep mutual interdependence that you find within a team (with its rational, top-down division of labor), the dependencies are generally weaker. So the WordPress co-group involves core developers, casual developers, plug-in developers, theme developers, and bloggers
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themselves. Whereas the work of a team is like a precision-engineered Swiss watch, with many points of system failure. Most failures in co-group work will not crash the system. So there you have it: teams, tribes and co-groups. Each has its strengths and weaknesses. Pick your social poison.
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The Enterprise 2.0 Backlog: A List of 100 Items I have now been writing about Enterprise 2.0 and Social Business topics off and on for almost four years: since 2008. That’s a long time in business. Every business idea has aspects that are faddish and aspects that are substantial. As an idea evolves through its hype cycle, the noise eventually dies down and substance gets incorporated into “business as usual.” And within a few years, nobody is able to imagine doing things differently. The Enterprise 2.0 and social business conversation has now evolved to a point where we can take many things -- employees blogging for instance -- as part of the definition of “business as usual.” So in one sense, the revolution is over. Many individual threads of the broader conversation have hit diminishing returns. One sign of this is the recent rebranding and missionredefinition of the Enterprise 2.0 conference, which is now the E2 conference. But in another sense, the revolution is just beginning. This is a time of radical change in the very design of corporations, the likes of which has not been seen since the late 1800s. That revolution, which was triggered by the telegraph, did not fully play out until the mid-1950s, when thinkers like Peter Drucker and Alfred Chandler were able to describe the mature, classical form of the industrial age corporation. By that time, a few generations of the model had come and gone. We are at the threshold of a similar long plateau of maturation now, for the post-industrial, Internet-age corporation. The basic ideas have been identified, and the big changes have been set in motion. But it will be a few decades before the ideas play out in their entirety and become embodied in every aspect of business. When the logic of forces now in motion works itself out, we will be in an unrecognizable world. From work chairs (which may not exist if standing desks flood the information worker culture) to tools (what comes after tablets?) to the definition of leadership, to the very legal definition of a corporation, everything will have been transformed. Like many of you, I have moved on to more specific interests within the emerging business landscape. Among my current interests are the future of data, the Internet of Things and the future evolution of the larger business landscape. Many of these interests are informing my second book project, Game of Pickaxes, which I am beginning to work on now. So for now, I will be signing off here at the Brainyard. I’ll resume my writing here once I find a new theme that grabs my interest and seems like it would be worth exploring here. In the 99
meantime, you can keep up with my evolving thinking at my personal blog, Ribbonfarm. So I’ll leave you with what I hope is an appropriate conclusion to four years of writing about E 2.0: a “backlog” (in the sense of agile software development models like Scrum) of 100 items to get your creative juices flowing, as you dive into the extended execution and maturation phase of this long journey. You can also get the list in spreadsheet form here and edit and modify it for your own needs as you please. You’re welcome to contact me if you’d like to chat about the future of E 2.0 and social business ideas at your company. Au revoir folks! The Backlog This list is meant as a thought starter. The spreadsheet version also has a column of Scrum-style “point” values for each item, which total to 721. You may want to try a fun exercise: counting up the points you’ve already completed. 1. 2. 3. 4. 5. 6. 7.
Hire a new employee via a social media encounter Fire an employee for a Twitter indiscretion Release an interesting internal dataset to the public Release a significant piece of code to the open-source community Make a list of companies that might disrupt you using the Internet Make a list of companies that you could disrupt using the Internet Brainstorm a highly automated business model that allows you to do what you currently do with 10% as many employees 8. Identify a professional employee role that can be converted into an amateur prosumer role 9. Run an online innovation jam 10. Set up and run a prediction market experiment for a month 11. Convince your marketing department to modify your website logo in an interesting way for a PR opportunity 12. Create a useful ebook and associated microsite for your customers and get to 1000 downloads using only word-of-mouth techniques 13. Spin up a Hadoop cluster and run an experimental Map Reduce job on some large internal dataset 14. Pilot a "Bring Your Own Device" (BYOD) program with a subset of your employees 15. Run an online meeting involving at least 2x as many people as your largest conference room can hold 16. Convert a conference room into a Maker studio equipped appropriately for your industry 17. Mine your email servers to produce a map of the internal social graph of employees 18. Run a contest to discover the best personal blogs written by your employees and award prizes to the top 3 by popular vote 19. Create a Y-Combinator style incubator program within your company with funds amounting to at least 0.1% of revenues 100
20. Get a post on your company blog onto the front page of a major aggregator like Hacker News or Slashdot 21. Get a tweet from your official corporate account retweeted at least 100 times in 24 hours 22. Announce and enforce company-wide interface standards that allow anyone to access any newly created dataset 23. Instrument a critical business process and display real-time analytics on large hallway screens everywhere in the company 24. Estimate the number of people actually using their offices or cubicles at any given time in your facilities 25. Mine the calendars of your staff to compute the average number of 4-hour "maker time" chunks your typical employee has available in a week 26. Require all managers to schedule regular drop-in "Office Hours" for their individualcontributor employees 27. Close down enough office space so that you have fewer desks than employees 28. Connect two locations via a two-way permanent video link using wall-sized telepresence screens 29. Source 2000 hours (1 person-year) worth of work from online marketplaces like oDesk, eLance or RentACoder 30. Crowdsource a solution to a business problem 31. Choose a new product concept to fund and launch using an X-prize type internal contest between prototypes produced by competing teams 32. Declare a "Wikipedia Wednesday" and get your employees to create or improve at least 100 pages based on their expertise 33. Run an analytics exercise to compute the worst and best 10% customers based on margins 34. Run an internal faux-Dilbert cartoon contest among employees 35. Create a video of your newest employee interviewing the CEO 36. Ban PowerPoint at C-suite briefings and require presenters to submit a written narrative to guide the discussion beforehand 37. Install standing laptop desks with power supplies in all watercooler/break room areas 38. Supply high-quality free coffee to your employees 39. Install a treadmill in every break-room 40. Rewrite your employment contract so that employees do NOT give up rights to ideas outside of a narrowly defined scope relevant to your business 41. Get rid of desktop office software (for word processing, spreadsheets and presentations) 42. Create an internal version of Kickstarter (either in-house or using a white-label service) 43. Get rid of desk phones and issue work cellphones to all employees 44. Sponsor a local coworking location in your city and reserve a few desks for employees 45. Identify the savviest social media person among your employees and offer him or her a roving "internal blogger" job 46. Create an internal time marketplace and allow every employee to reserve 20% of their time for sale on the marketplace 47. Challenge every major function to put together a barcamp within a week of an announcement 48. Fire a customer 101
49. Run a C-level brainstorm to figure out what it would mean for your company to be a "platform." 50. Figure out whether your company's primary competence lies in infrastructure, product development or customer relationships (based on John Hagel's "Unbundling the Corporation" model) 51. Assess the value of your company as a software company, ignoring other kinds of assets 52. Have your Chief Strategy Officer develop and deliver a presentation on what your company would look like if it gets "eaten by software" 53. Construct a map of the long-tail of your marketplace and assess whether it is a threat to your business 54. Get your engineering and marketing teams to run an exercise to figure out a gamified version of your main products or service, no matter how silly the idea sounds 55. Get your finance department to figure out a radically different pricing model for your products or services, modeled on SaaS/on-demand ideas, no matter what you sell 56. Hire outside consultants to run an "outside-in" exercise to figure out as much as possible about your business model and strategy based purely on publicly available information 57. Create a special taskforce to figure out as much as possible about your main competitor using only public sources of data and see if you can beat traditional competitive intelligence practices 58. Run a "secret shopper" type exercise to do a touchpoint assessment on your sales and post-sales operations 59. Hire a writer to write a critical, non-hagiographic history of your company and distribute a copy to all employees 60. Analyze the lowest-wage category of workers and figure out if you can replace it with a mix of automation and a smaller number of high-wage workers 61. Analyze the highest-wage category of individual contributor workers and figure out if you can replace it with a larger number of lower-wage workers 62. Figure out what startups you would buy with next year's R&D budget if you shut down your R&D department entirely 63. Run an exercise to assess the quantity and value of data stocks and data flows in your company down to the nearest petabyte 64. Shut down your corporate website for a day and replace it with the message "under maintenance" and an email address for critical inquiries and see how many emails you get, and what people actually ask for. Then figure out if your website actually supplies that information. 65. Create an internal video channel and equip a studio where any employee can create and upload videos to the Intranet 66. Start a harmless but interesting "tracer rumor" and find out how quickly the message propagates to different parts of your company 67. Convince your board that you should stop providing earnings expectations guidance to analysts and renegotiate all C-suite packages accordingly 68. Get your IT department to define a vision of an "Intranet of Things" for your business 69. Run an internal hackathon based on one of your products or services 70. Estimate the amount of data living on employee hard drives 71. Get your employees to join Quora and create a large Q&A base that is useful to the public, based on your company's expertise 102
72. Release an interesting internal PowerPoint slide deck on Slideshare, that shows off something unique about your internal culture 73. Do a review of Glassdoor reviews of your company at the next C-level meeting 74. Design a useful iPhone app related to your company that is NOT a useless piece of marketing fluff 75. Create children's book about your company that convinces the average 5-year old that your business is useful and valuable to the world 76. Get employees to do a flash mob in the company cafeteria 77. Redesign your corporate home page to be as simple as the Google homepage and keep it up for a week. Analyze results and discuss. 78. Suspend all broadcast marketing and advertising in a sales territory and go socialonly for a quarter. Compare results to a control territory. 79. Construct a poster showing the source-to-sink how-it-is-made view of your operations and release publicly 80. Create an internal currency and a meaningful marketplace around it 81. Run an exercise similar to Zappos to figure out your internal company culture as your employees see it 82. Figure out the proportion of new hires in the last year that came via existing employee referrals 83. Sponsor a programming contest 84. Send a diverse team from all over your company on a study tour of Asia 85. Pilot a program at a single facility to create "smart infrastructure" that runs greener, cheaper and more profitably 86. Run a photography day asking all employees to use their smartphones to take pictures of things that could be changed or improved around the workplace 87. Install Intranet webcams and monitors at all watercoolers 88. Estimate your company's word-of-mouth sphere of influence by asking only employees to forward a funny YouTube video to friends and family 89. Inventory all unofficial online communities (such as LinkedIn or Facebook groups or industry-level bulletin board) and rank them by value against all official sites 90. Estimate the death date of your business based on current and planned product lines and innovation portfolio. If your answer is "eternal" you did it wrong. 91. Deliberately and secretly create a minor social media PR mess to test the preparedness of your marketing department 92. Design and administer a "technology literacy" test for your employees that is relevant to your company and the Internet Age 93. Charter a scenario analysis team to map out what would happen to your company in the event of an "Internet blackout" that takes all your company operations offline 94. Hire a security firm to create a Stuxnet-style intervention test against your most critical physical infrastructure 95. Run a what-if scenario at the C-level to gauge preparedness for being a target of an attack by Anonymous or Wikileaks 96. Offer all employees highly subsidized training in a programming or design skill relevant to your business 97. Issue a challenge, with a prize, to Silicon Valley, to disrupt your business 98. Cut the amount of paper used by your company in half within a year 99. Digitize all the archived paper documents in your company within a year. 100. Run a company-wide "work from home" day for all employees who do not need specialized workplace equipment 103
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Acknowledgements Thanks are due to all the people who’ve helped me think about Enterprise 2.0 and Social Business topics over the last four years. These include Steve Wylie, Paige Finkelman and Rob Preston at UBM TechWeb, and Mark Masterson and Doug Neal at CSC. Special thanks to Dan Pritchett for many useful chats.
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About the Author Venkatesh Rao is a consultant, independent researcher and writer. He is the author of Tempo (2011), a book about narrative-driven decision making. He writes the popular ribbonfarm.com blog, where he covers a wide range of subjects from a perspective that ranges between pragmatic and satirical, with occasional lurches into gritty optimism. He is an irregular contributor at Forbes and Information Week. His writing has been Slashdotted and mentioned in the New York Times, The Economist, BoingBoing and Kottke.org. He also speaks regularly on technology, business and culture. Venkatesh received his PhD in aerospace engineering (systems and control) in 2003 from the University of Michigan and has a decade of experience in startup, academic and corporate environments. Until early 2011, he was a Senior Researcher and Entrepreneur-in-Residence at the Xerox Innovation Group. Since early 2011, Venkatesh has been consulting for a variety of companies on technology and business strategy, marketing and organizational design. Details of current and past engagements can be found at:
http://ribbonfarm.com/consulting Venkatesh can be reached at [email protected]
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