"Leadership" has changed when a decentralized group of people can take down a government. "The Value Chain" has changed when the customer is no longer just the "buyer" but also a co-creator. "Human Resources" have changed when most of the people who create value for your organization are neither hired nor paid by you. "Competition" has changed when individuals can create value through a centralized network of resources: for example, designing a product from anywhere, producing it through a 3D factory, financing it through community and distribution from anywhere to anywhere.
Yet our business models have not changed to keep pace with these shifts.
This five-part series has shared case studies and examples of how the social era affects all areas of the business model: how we create, deliver, and capture value. (See part one, part two, part three, and part four.)
Here's a quick visual summary of what we've covered so far:
These changes are not transitory or reversible, but fundamental and irrevocable. The social-era models are inherently more fast, fluid, and flexible than the models that preceded them. The big question is: how are we actually going to do this thing?
And it is a huge question: it is a life's work-sized-question that can't possibly be answered in a blog post, or even a series of posts. But I can offer three actionable, thought-provoking exercises that you can start with, today:
From paid to purpose-driven. In the social era, purpose precedes scale. And as we discussed in part two of the series, shared purpose allows many communities to engage with you — without you having to invest resources in controlling their actions. When TED unleashed TEDx, they created a force multiplier. Shared purpose aligns people without coordination costs.
Purpose is also a better motivator than money. Money, while necessary, motivates neither the best people, nor the best in people. Purpose does.
Actionable exercise: Have the people you work with write down the purpose of your work, then compare answers. Then ask, are any of these purposes something that would create a multiplier effect? Engage hearts and minds?
From isolated organizations to communities. The social era will reward those organizations that understand they can create more value with communities than they can on their own. Communities of proximity, where participants share a geographic location (Craigslist is an example but co-working locations are another) will allow people to organize work differently. Communities of passion who share a common interest (photography, or food, or books) can inform new product lines. Communities of purpose will willingly share a common task to build something (like Wikipedia) that will carry your brand and its offer to another level. Communities of practice, where they share a common career or field of business, will extend your offer because it extends their expertise (like McAfee mavens). Communities of providence that allow people to discover connections with others (as in Facebook) and thus enable the sharing of information, products and ideas.
Actionable exercise: Imagine that if you asked, you could get communities to co-create with you. What could you do together? What would be one way to try it out?
From centralized to distributed. While management often espouses the notion that good ideas can come from everywhere, in practice there are "thinkers" who create strategies and designated "doers" who execute those strategies. But that only leaves an air sandwich in the organization, where debates, tradeoffs, and necessary discussions are skipped. This air sandwich is the source of all strategic failure. Instead of centralized decisions, we need distributed input and distributed decisions.
Actionable exercise: Rather than making command and control a "bad" thing, discuss what areas needs which controls. Then examine how more, if not most, areas and decisions can distributed (and thus made radically more flexible). For the purpose of the exercise, say that you want 50% or 70% all decisions to be free of permission-seeking and check-ins. What would it take to get there?
When we emphasize purpose, engage communities, and distribute decision-making, we begin to stop talking about being fast, fluid, and flexible, and actually begin to make our organizations become fast, fluid, and flexible. This can change how we organize every single part of these organizations — from what we make, to how we product and distribute, to how we market and sell. Everything.
Disrupting How We Work
Many of you know of Clay Christensen's iconic work the Innovators Dilemma. Small newcomers eat off bits of an established leader's business through lower cost structure and a willingness to accept lower margins. This phenomenon has been seen in industry after industry, and usually focused on the cost of delivering goods and services. In other words, "Look how the steel mini-mills making rebar disrupt the established integrated steel mills making sheet steel." At each point in the disruption, it makes economic sense for the big company to surrender that bit of the market to the disruptor, and so big companies logically put themselves out of business.
I think there is an analogous process going on with the organizational structure of businesses themselves; that aside from market-specific competition from below, there is also competition from disruptive organizations that are finding new ways to get work done. This change is just as threatening to established businesses as the process competitors Christensen identified, and just as difficult to respond to.
Where once you could reexamine the organization's model (the how) every few years to support the rest of the business (the what), reinventing the how becomes its own muscle to develop.
How does this lead to disruption? To answer this question, let's look at Singularity University, which I mentioned earlier in this series. You might recall that they deliver an education curriculum of 300 hours with seven full-time staff. Their organizational model lets them then fluidly reinvent what they create next, thus baking innovation in with their disruptive design. In particular some 80% of their business resources are fluid. Their purpose doesn't change, but their "what" does. Their business model allows them to persistently review "what's the next big thing" and adjust. Using Christensen's metaphor, educational institutions are the sheet steel with its ever-increasing tuitions to support their tenured staff, while Singular University is the rebar. But their flexible design gives them the chance to keep being the "rebar."
What Happens Now
Rather than try to power through with size, we'll have to find power through shared purpose.
Rather than hiring and directing inside the walls of an organization, we'll tear down those walls altogether and allow everyone to own a part of the big picture.
Rather than taking long stretches of time to perfect something, we'll build fast, fluid and flexible organizations.
What we create in the end will be a different type of organization, one that embodies a culture of innovation.
Since I began writing this series, many of you have written publicly and privately asking, doesn't this just mean the "800-pound gorilla" dies? Entrepreneurs and the startup ecosystem who embody fast / fluid / flexible attributes certainly believe that the established players are fated to die. Many think of these big organizations as the dinosaurs of our time. But one can look at the history of dinosaurs and see that dinosaurs didn't really die. Paleontologists have suggested that dinosaurs are all around us today actually, as birds.
Applied to today's business giants, the analogy probably holds. The "species" that adapt to the changes in the environment faster will do better. That is for sure. What is less clear is what they will become as they adapt. Perhaps the new model for a successful business should be "Nimble." Or "Flux." Or "Humanized." Or "Networked." Frankly, I find the search for naming less-than-fruitful. We have plenty of names already; will another name really help you act?
Over time, there will be a lot more dots filling out this picture. But the fundamental principles of the social era are already clear enough to form a new set of organizing principles for business. The world has changed; how we create value has changed. Organizationally we have not. It's time to pay attention to these emerging business models now, to benefit our organizations, our economies, and ourselves.
Wednesday, 21 March 2012
Stop Talking About Social and Do It - Nilofer Merchant - Harvard Business Review
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