I Know It When I See It

More and more often these days I get asked “Does [offering X] from [vendor Y] qualify as an Enterprise 2.0 product?” Established vendors of collaboration software are modifying their offerings and repositioning them as social software platforms that have all the features and functions necessary to support the new modes of interacting and getting work done. Smaller companies and startups often say that the established vendors “just don’t get it” and that the new features they’ve incorporated –  blogs, wikis, discussion forums, tags, etc. –  are just windowdressing on products that are still essentially geared for Collaboration 1.0.

So who’s right?  Whose products at present come closest to enabling Web 2.0-style collaboration and interaction in enterprise environments? Honestly, I have no idea. It would be a huge amount of work just to learn about all the vendors and their offerings, let alone to evaluate them. And evaluating them “fresh out of the box” wouldn’t be that relevant anyway; collaboration software usually gets highly configured and tailored by companies before it’s turned on, with only some features activated and only some of those highlighted. One company, for example, might want its employees to be able to blog, while another wants no such thing.

Because of these facts I usually dodge questions about specific vendors and their offerings, and instead answer how I’d look at any particular deployment of collaboration software to see if it met my definition of Enterprise 2.0.

I find this pretty easy to do. I check to see if the environment meets three criteria: Is it freeform?  How frictionless is contribution? And is it emergent? To put some flesh on each of these terms…

Freeform means that the technology does not in any meaningful way impose, hardwire, or make and enforce assumptions about
- Workflows
- Roles
- Privileges
- Content
- Decision right allocations
Instead, people come together as equals within the environment created by technology, and do pretty much whatever they want.

I want to stress one more time that technologies that are not freeform are not bad or shortsighted or somehow deficient. If I were in charge of a retailer, for example, I’d want an ERP-ish system that my customer service reps used to take orders from customers, then send them to the warehouse for fulfillment and also to accounts payable. I’d want that system to have a standard order-to-ship workflow that was very hard to deviate from. I would NOT want this system to consider all employees to be equal, to assign them all to the same roles, or to give them equal privileges or decision rights. Finally, I’d want it to never accept a ZIP code that contained letters.

In addition to this system, though, I’d also certainly want to have one or more completely freeform digital platforms in which employees and other constituencies could come together as equals to decide what topics were important for the company, and how to attack them. My experience is that over time people place themselves into roles within these platforms (As USC’s Ann Majchrzak and her colleagues found in a study of corporate wiki users), but the important point is that they’re not assigned into roles up front, or by any external party.

Frictionless means that users perceive it to be easy to participate in the platform, and can do so with very little time or effort. One measure of friction is the total time required between having an idea for a contribution (while sitting in front of the computer, carrying the iPhone, etc.) and the appearance of that contribution on the platform.

Sign-ins, navigation through many web pages, and clunky user interfaces are all perceived as hurdles by a platform’s potential users, and increase friction. So does the need to massage a contribution like a blog post to look like it wasn’t put together by a complete hack. I can already tell, for example, that I’m going to post to this version of my blog more often than I did when it was hosted under the hbs.edu domain name and used a different and clunkier interface for posting. I felt like I had to tweak each entry for a long time to make it look OK, and it was a disincentive to post.

Tweetdeck, on the other hand, makes contribution to Twitter pretty frictionless. It sits on my desktop as a separate client, and I zip over to it whenever I have an idea. It’s quick and painless to send a standard tweet, a reply, a direct message, or a retweet, and to shorten and include a URL. With Tweetdeck I can convince myself to take a timeout from my deep academic thinking (coughcough) more often because each timeout is so short –  literally just a matter of seconds.

Emergent is both most intuitive of these three terms and the hardest to pin down. It really does bring to mind Justice Potter Stewart’s famous yet unhelpful definition of obscenity “I know it when I see it.” My best-effort definition of the phenomenon is the appearance over time within a system of higher-level patterns or structure arising from large numbers of unplanned and undirected low-level interactions.

I wrote about the mechanisms of online emergence here and here; they include linking, tagging, friending (as on Facebook and LinkedIn), and following (as on Twitter). These are all activities that help patterns and structure appear, and that let the cream of the content rise to the top for all platform members, no matter how they define what the cream is.

Without these mechanisms, online content becomes less useful –  less easy to navigate, consume, and analyze — as it accumulates. With these mechanisms in place, just the opposite happens; the platform exhibits increasing returns to scale, and becomes more valuable as it grows.

The Web as a whole, and especially the Web 2.0 portions of it, is wondrously freeform, frictionless, and emergent. It stands as our clearest example of the kinds of energy and benefit that can be unleashed by the new technologies of interaction, and the communities that form on top of them. Some specific sub-segments of the Web like Facebook and especially Twitter are almost perfectly freeform and frictionless, but are less able to foster all forms of emergence. As I wrote here and here, it’s hard for me to use them to separate signal from noise and let the ‘best’ content rise to the top.

Too many corporate collaboration environments that I’ve observed, in contrast, come up short on the frictionless and freeform criteria. They make it far too difficult for prospective users to contribute, and they persist in slotting people into pre-assigned roles based largely on the formal org chart. In many cases they also impede emergence by having many small and mutually inaccessible environments, instead of one big one. The tendency to build walled gardens is evidently a deep-seated one, and one that should be questioned far more often than is currently the case.

Do these three criteria –  freeform, frictionless, and emergent — make sense to you and resonate with what you’ve seen and learned about the new technology-facilitated modes of collaboration? Am I leaving out any critical properties of effective technologies for supporting Enterprise 2.0? Do you agree that an enterprise’s chances of success rise significantly if it creates digital environments that have all three? Leave a comment, please, and let us know.

Find 100 things to say

I lost a bet recently, and soon it’ll be time to pay up. I bet my friend Amy Senger that she couldn’t go a week without using Twitter. She’s such a prolific tweeter as @sengseng that I thought there was no way she could give it up, even temporarily.

But she did, and since turnabout is fair play she gets to dictate that I do something outside my comfort zone. According to the terms of the bet I have to tweet 100 times in a single day. This daunts me; I’ve posted to Twitter fewer than 800 times since opening my @amcafee account, so 100 sounds like a lot. I really have no idea what all I’ll tweet about, so this post is an appeal for help on that front.

What territory should I cover in my forced march of tweeting? According to the terms of the bet, my #andyasks question and ensuing replies count toward to the total, but they won’t get me close to 100. There’s a lot of room left; please leave comments with your ideas about how to fill it.  I’m all ears.


And I have to add a postscript to this post:

The one thing I won’t be tweeting about is the minutiae of my day. I’ve felt the urge to do so, and have succumbed to it a couple times, but I’ve promised myself not to do any more such tweets. Because I can’t see how they’re anything except blind and bland narcissism, and therefore simply without value.

As I unfortunately demonstrated, I understand the lure of using Twitter and the other 2.0 platforms to talk about oneself. After all, don’t we all consider ourselves to be deeply interesting people? But look at the following tweets, which were pulled with very little effort from the recent Twitterverse:

Waking up mid-afternoon FTW”

my head hurts.”

just sittin here… watching a little tv

pretty much ‘cleaned up’ my facebook”

Getting dressed for a wedding”

Honestly, don’t these sound like dialog from one of Sartre’s less optimistic plays? Don’t they fail the test of “Does the world need or want to know this?” The response to this argument, of course, is “Just don’t follow people whose updates are not interesting to you.” But I follow a lot of people because I’m hoping that many things they say will be interesting. Since Twitter is inherently oriented around people rather than topics, I get all tweets from those I follow. And their narration of their own lives clutters up my “All Friends” column on Tweetdeck.

No one stops by my office, calls me, emails me, or texts me with updates like the ones above. Nor have I met anyone who’s confessed to emailing or texting their entire social circle every x minutes with “here’s what’s going on with me now” updates. So I’m really puzzled about why this is an acceptable and popular use of Twitter. If someone could explain it to me, I’d really appreciate it (and I don’t mean that facetiously). My guess is that this behavior arises mainly because it’s so fast and easy to compose and send a tweet, but if there’s more going on please explain it to me.

Am I wrong that just a little self-policing against narcissism would increase the value of the Twitterverse immensely? I think all of us fans of this technology would do well to keep in mind Voltaire’s insight that “The secret of being a bore is to tell everything.” Admiral Hyman Rickover, the father of America’s nuclear navy, quoted the admonition of an ‘unknown sage’ that “Great minds discuss ideas, average minds discuss events, small minds discuss people.” So what kinds of minds discuss themselves?

At its best Twitter is a novel and unparalleled way to meet, connect with, and share good stuff with other people. At its worst, it reminds me of the great story from the evil geniuses at The Onion: “Women now Empowered by Everything a Woman Does.”

If you see me confusing narcissism with empowerment, citizenship, helpfulness, or useful sharing during my day of 100 tweets (the date of which will be announced in advance), please call me on it. And if I’m being blind or unkind with these thoughts, please let me know.

A recent tweet by @rossdawson alerted me to a new post by Oliver Young at his Strategic Heading blog titled “Web 2.0 Represents A Fundamental Rethinking Of Business, And The Theory Of The Firm.”

This is a self-explanatory title, and an accurate summary of Young’s beliefs about the impact of 2.0 technologies.  As he states:

 ”So what do I see when I look at Web 2.0, social media, social software, and whatever else you want to call this thing? I see a fundamental rethinking of the definition and function of the firm; the single biggest change since the industrial revolution” (emphasis in original)

Young believes this rethinking of the firm comes about because “businesses are opening the doors to the product development, marketing, packaging, and distribution process to customers who add value every step of the way with their preferences, ideas, and reactions. The firm is no longer creating value alone, it now has help.” (again, emphasis in original). This is in contrast to the previous model of capitalism in which “firms acquire capital, labor, and resources, combine them into a valuable product or service, and sell the product or service to individuals or other businesses who consume that value. In this system is it incumbent on the firm to create value, and the role of the buyer is to consume value. End of story.”

Young believes that “Over the next 10 to 15 years, on the back of social software, we will go from a fundamentally closed value creation system to a fundamentally open one” (emphasis, yes, in original).

Most of us who study the new technologies of interaction, collaboration, and collective intelligence agree that they have great potential to enable more open systems for creating economic value. But we need to be very careful with our claims about how closed things are at present.

It’s not useful to present our current system a fundamentally closed one in which firms work only within themselves to create value. That’s not a helpful strawman; it’s a counterproductive caricature.

Outsourcing, joint ventures, industry consortia, partnerships with academia, network organizations, vertical disintegration, a focus on ‘core competencies,’ comparative advantage, transaction cost economics, the theory of the firm, lead user innovation, and countless other trends, concepts, arrangements, and bodies of theory all predate the 2.0 Era and the current crop of social software. And they are all about ways to create value than are more ‘open’ than doing all work within individual firms.

The function of the firm is to add (and capture) economic value. This was the case before 2.0 technologies came along, and will the the case after they’re widely deployed. It’s also the case that many entrepreneurs and other innovators of capitalism have realized that they could add (and capture) more value by being more open to outside influences and outsiders, and have found very clever ways to become more open. Some of these ways have involved technology, some have not.

I am sorry if this sounds like I’m picking on Young, a very smart guy who I’ve met and whose work I find valuable and insightful. I’m singling out his post because it’s an example of a harmful tendency that I’ve seen many times over the years. This is the tendency that many of us technology enthusiasts have not so much to oversell the virtues and power of new tools, but instead to talk and write as if there was no progress on important topics before they came along.

I agree with Young that we’re headed into an era of overall higher levels of openness, but I strongly disagree that what’s coming is going to be like day after night. 2.0 technologies give us revolutionary capabilities in some areas, but they’re not going to revolutionalize capitalism. Capitalism’s been doing that to itself for quite a while now anyway.

 

I’m Over Here Now…

This is my first post in my new blog home, and the first using the WordPress platform. I’d like to thank Alistair Morton of Toronto’s PeapodStudios for his excellent work on the redesign, and his patience during a laborious migration process. I’m really happy with how it looks, but would love your feedback –  please leave a comment if you have anything to say about the design and layout.

Also, please comment with anything a WordPress newbie should know –  tools, resources, tutorials, communities, etc. I am a complete neophyte here. My blogging career to date has consisted almost entirely of typing posts into a text box then hitting ‘Publish,’ and I’m eager to become more proficient. I don’t want to excessively pimp my blog, but I would like to have decent capabilities, analytics, etc. So any advice or pointers would be much appreciated.

I hope you’ll find it useful, and I hope you’ll visit often.

Migration

I’m moving this blog over to andrewmcafee.org/blog . If all goes well the migration will place today (1/20/09) at 1 pm EST, and all the old content will appear in the new place. There will also be permanent redirects from all posts in the old domain to their equivalents in the new one (if you see that this isn’t working anywhere, please let me know ).

 The look and feel of the new blog will be different, and I’ll try to take advantage of some of the capabilities offered by the Wordpress platform, but the content will be the same. This will still be a blog about the impact of IT on organizations, industries, competition, and the economy. And I’ll still look at it primarily as a way of getting ideas out there in order to start a conversation around them. So please continue to leave comments, pass on stuff you find interesting, and be part of the dialogue.

I look forward to seeing you in the new neighborhood!

It’s Like This…

A little while back interviewer extraordinaire Charlie Rose invited me and SAP co-CEO Leo Apotheker to talk with him about IT, particularly enterprise software, and its impact on business and competition. The segment aired this past Tuesday (January 6) following an interview with Joseph Stiglitz and Martin Feldstein about our parlous economy and approaches for stimulating it (talk about a tough act to follow!). Video of our segment is available here.

Charlie is not a time-waster; his first questions were around the big issue of IT’s impact on competition. And he immediately hit on an apparent paradox: how can universally available technology contribute to competitive differentiation?  Doesn’t something have to be scarce in order for it to be competitively valuable?

To address this excellent question I used an analogy that had occured to me only a short time before. Here it is, taken from a transcript of the interview (available from Factiva ) that I’ve lightly edited in order to make myself sound more intelligent:

CHARLIE ROSE: …Here is a piece that you wrote called, in "Harvard Business Review," "Investing in IT that Makes a Competitive Difference." It`s all out there for everybody.

ANDREW MCAFEE: Yes.

CHARLIE ROSE: So how does it make a competitive difference?

ANDREW MCAFEE: How could it possibly make a competitive difference if we can all buy it?

CHARLIE ROSE: Exactly.

ANDREW MCAFEE: Leo is happy to sell it to you and me if we`re direct competitors.

CHARLIE ROSE: Right, right.

ANDREW MCAFEE: The analogy I like to use is that — pick a manufacturing industry. Cell phones, lawn mowers, cars, doesn’t matter which. And let`s say that you and I were both inventors in that industry, and we had access to identical factories. Now, does anyone think that because we have access to identical factories, we`d have to turn out identical products? That doesn’t make any sense to me.

What Leo and his colleagues in the enterprise software industry do is build process factories. So instead of turning out products, we [use these digital factories to] turn out business processes — [sequences of interdependent activities that span many different people, groups, business units, geographies, etc.].

[These digital process factories] are very flexible, they are very configurable. So even if you and I buy the same basic factory from [Leo], we`re going to do very different things with it. If I do smarter things than you, I will get ahead over time.

I like this analogy, and plan to continue to use it.  It conveys the idea that today’s digital process factories don’t completely specify or pre-define all possible business processes, just like product factories don’t specify or pre-define all possible products. Instead, they both provide environments thatinventors and innovators use to bring their ideas to life.

So my question is, do you like this analogy? Do you find it helpful? More fundamentally, do you find it valid? In other words, is it missing or glossing over something important?  Is it inherently misleading? Does it need to be tweaked, modified, discarded?

I’ve done a fair amount of looking at and thinking about enterprise IT, and I think the analogy holds up.  But I’d love to hear your thoughts about it. So leave a comment, please, and let us know.

 

Curiouser and Curiouser

The WISE 2008 conference took place last month in Paris, and was a great experience. First of all, kind thanks are due to all the people who took the time to write with suggestions on how to have a good time in that city. Hemingway was right –  if Paris didn’t exist, we’d have to invent it. Every time I go there I’m reminded ofMFK Fisher’s wonderful observation that even though it’s an ancient town it’s always reinventing itself and offering something new, and that even those of us who have been coming for many years will never have to worry about it becoming stale. I remember when there were two classes of service on the Metro. Now the subway is highly egalitarian as is the Velib bicycle rental program, which is still used even on bitter cold winter days. It was good to be back.

The conference itself was a treat, as always. I think it’s the year’s best opportunity to catch up with both the top academic work being done on IT, and with the people doing it.  In the first session Erik Brynjolfsson and I presented our work using Gould’s Full House hypothesis to assess the effects of IT on competition in US industries. After that I got to sit back and enjoy the rest of the intellectual smorgasbord.

My favorite piece of work came from Adam Saunders, one of Erik’s doctoral students at MIT. I say ‘favorite’ not only because it was innovative, relevant, and rigorous, but also because it directly address the ways and the extent to which IT is reshaping the economy, a subject near to my heart.

In a paper entitled “Has Information Technology Leveled the Competitive Playing Field?” (email him for a copy, or to find out its status) Saunders investigated whether IT was like other forms of capital that a company can invest in, like warehouses, machine tools, and oil wells. Capital typically acts as a barrier to entry in an industry, making it harder to start up a new company because of the high initial investment required. Oil extraction, for example, is a highly capital intensive industry, and the expense of an oil well is one of the things (but not the only one) that explains why we see relatively few oil drillingstartups.

Saunders obtained from the Census Bureau data on the number of establishments each year between 1998 and 2005 for every US industry. An ‘establishment’ is simply a location where business is conducted. He also gathered data on the amount and type of of capital within each industry over the same time period. He reasoned that if basic economic theory about capital as a barrier to entry was correct, than as an industry became more capital intensive over time (in other words, as its companies acquired more warehouses, machine tools, etc.) then its rate of new establishment formation should slow down.  The greater the required capital, in short, the fewer new establishments we should see.

And this is exactly what Saunders found. As he writes, “as an industry becomes more ordinary capital-intensive, there is less entry of small firms and fewer establishment openings by large firms.”

Note that in that sentence he was careful to say ‘ordinary capital-intensive,’ a phrase he invented out of necessity. This is because he went a big step further with his analyses and took advantage of the fact that the Census Bureau breaks out IT as a separate form of capital. Saunders did the same, and found something remarkable: while other forms of capital (’ordinary capital’ ) had the effect predicted by theory, IT behaved very differently. In fact, it had precisely the opposite impact. As industries became more IT-intensive they saw higher numbers of new establishments over time. IT capital, in other words, appears to be unique in that it lowers barriers to entry rather than raising them.

Saunders’ analyses assessed both the effects of both IT and ‘ordinary’ capital simultaneously, so he could draw conclusions about the effects of IT not in isolation, but instead in the presence of other capital. He also took the very smart step of excluding from his analyses all the industries that produce IT — hardware, software, and networking gear. This means that there’s no chance that his findings are are distorted by the peculiarities of the high tech sector. Instead, Saunders has uncovered a phenomenon taking place in the mainstream economy where most of us still work.

Saunders hypothesizes that IT has this barrier-lowering effect because it lowers many of the other costs associated with starting up a new establishment. For example, since communication is now so cheap many types of company locate themselves wherever they like. And computers can also substitute for costly human labor.

One other important aspect of Saunders’ work, and one that yields further surprises, is that he looked primarily at establishments rather than companies. An establishment can be a standalone firm (think of your local dry cleaner) or a part of a larger entity (which would be the case if your local dry cleaner was part of the Zoots chain). Saunders found that as an industry becomes more IT intensive, both kinds of establishment become more plentiful –  new small companies appear, andpre-existing larger companies open more locations (it also appears, furthermore, that companies from other industries start “spilling over” into the IT-intensive ones). So one big surprise in his work for me was the finding that IT capital actually appears to lower barriers to entry rather than raising them. And there was also another major surprise.

One of the most persistent pieces of lore around IT is that it levels the playing field between big and small companies –  that in the era of the Net and fast computers startups and small businesses have the same reach and have access to the same technology-based capabilities as large enterprises. All other things being equal, this fact should favor small companies relative to larger ones, and lead to a greater percentage of small firms. If IT removes one of the disadvantages of being small, after all, we should see more small companies in IT-intensive sectors.

But Saunders’ analyses revealed that the opposite dynamic is taking place. As industries became more IT intensive they became less hospitable environments for small companies instead of friendlier ones. it’s true that as industries computerized they saw morestartups, but it’s also true that they saw more deaths among startups , and greater expansion of establishments that are part of larger incumbent companies. Overall, greater IT intensity was associated not with a more even battle between large and small firms, but instead with greater concentration –  a trend toward domination a few large players.

Here again, the opposite pattern held for non-IT capital; greater capital intensity was associated with greater fragmentation rather than concentration. As ordinary capital increases, small companies appear to have an easier time defending their niches against big established rivals.

Saunders used different data and a different methodology than Erik, Michael Sorell, Feng Zhu, and I did in our paper “Scale Without Mass” but reached just the same conclusion: that greater IT intensity is associated with greater concentration. Evidence is mounting that technology is not the great competitive leveler. Instead, it is helping separate winners from losers and leading to the creation of a smaller number of more dominant companies within an industry.

I believe that this is because modern IT increases the scope, the precision, and the fidelity with which a business innovation can be propagated throughout a company. To put it as tersely as possible, good ideas and good execution separate winners from losers, and IT helps companies execute on their good ideas (technology also helps companies generate good ideas, but that’s a subject for other posts).

This explanation could be wrong, of course, and it could also be the case that something other than technology, something correlated with IT investment but totally separate from it, is actually driving the changes in competition we’re observing. But I don’t think so. I see a compelling story coming together about how and why IT separates winners from losers, and I see this story being backed up by a growing body of data and research like that done by Saunders.

Do you see the same thing?  Leave a comment, please, and let us know.

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