Chez Serge

In my previous post, I briefly introduced how the Internet, by empowering peer to peer mode amongst customers, forced enterprises to reconfigure themselves, in a more cooperative manner. Now, once an enterprise is willing to move to 2.0, how can it be done ?

There have been many attempts to transform enterprises into horizontal mode. Quality circles, matrix model, lean management, etc. When looking at them, they may have brought slight improvement, but no major disruption. For most of them, they were used by people who had little understanding of the importance of technology. The general idea was that technology would follow business restructuration rather than playing a major role. Worst, none of them seem to have seen the impact Internet could have on enterprise restructuring.

However, even when considering the technology, and the major role played by the Internet, there are always many ideas that flows around. As an example, marketing must change its habit to do market studies, and should see what happens in blog, forums, twitter, social networks, etc. As pointed out nicely by Moore in “Crossing the chasm”, it is better to have less customers who talk together than many customers who are not exchanging.

Whenever an enterprise sees its customer exchanging, the value of it is big. As another example, sells people must go in the Internet, and meet their customers online, not only in real life. Working for Renault, I realized in a forum that one top car dealer was in a discussion forum about the brand, and was exchanging a lot with the brand’s customers, instead of waiting for them to come in his physical place. I think he should have been appointed as sales director !

A comment I often hear from CEOs is “there is so many things happening, how can I catch them ?” Well, in order to better track what happens on the Internet, everybody in the company should watch, and post whatever he or she sees. Only the network can interact efficiently with the network.

But all those are just tricks, ideas, which need to be ordered.

I consider an innovative process as a systemic relationship between three major components: structure, tools, and behaviour. By structure, I mean how an enterprise is configured: who reports to whom, what are the information and control flows, how decisions are taken, etc. By tools, I mean all information management tools: emails, intranet, ERP, repository, etc. By behaviour, I mean all the human aspects of an enterprise: fear, enthusiasms, desire, hate, etc. Any attempt to move one of those three aspects, and letting the other untouched, has lead to a failure.

The Lippi case is an interesting illustration of how to do. Lippi is a 300 employees French company which does industrial fences (France loves fences..). Amongst their customers, they have airports, industrial zones, etc.  To make the story short, Lippi decided to work on three axis:

• Lippi created a web school, and all employees without any exclusive were proposed to follow training. Courses were all about digital world, ranging from how to set-up a blog till digital video processing.
• Internet tools were used inside the company, on top of them an internal twitter, which acted as the information backbone of the company.
• The top manager decided to reconfigure the company, by taking some very disruptive decisions : traditional control was abandoned; middle management role was shifted to medium term thinking, and to support their employees when they had troubles;  organizational chart became fuzzy, but sociogram becomes stronger.

The outputs are interesting. Employees became more involved in the life of the company. A worker decided to bring his own movie camera to shot how fences were assembled, and posted them on youtube. Others decided to create a wiki. Pressure of middle management was replaced by pressure of the peers. On twitter, a delivery problem was solved in 20 minutes, without the customer even noticing there was an issue. Employees set-up a blog, which contains both nice or funny information about everyday’s life of people, and business information, such as the contracts Lippi signed with various airports. Well, this is so much human.

In 1996, I created the innovation tripod :

With this idea that all three components must be globally considered, in a systemic manner.

Lippi did it, and came the following scheme. They are really pioneers.

That the Internet impacts business is now obvious. The Internet is, by essence, a total disruption to the usual governance of traditional corporate companies, business, universities, and even politics. To say it in a few words: there was the CEO, the Professor, the Expert, the Manager, God, and everybody was happily listening to the speech going down. The horizontal flow of information between people was badly considered, if not disallowed. The generation pre WWII did not permit children to speak when eating at the table. Even now, there are schools who prevent students to talk together; same as those corporate companies who block the access to facebook, or to any other social network.

Then came the Internet. We tend to forget that at its very beginning, in the 70s, Internet was genuinely in peer to peer mode. I could access the content of someone who could access my content. Every computer had an IP address, and amongst the very first services, were email in 1972, and usenet, the ancestor of modern bulletin boards, in 1981. Interestingly, the web, which was such a powerful invention that most people confuse the Internet and the Web, was a regression to the foundation of the Internet, because it reintroduced a client-server architecture. Many companies do consider their web site only as a way to deliver content, thus making it close to a television model. Funnily, the only category of services which are in the genuine type are the one many government try to hunt down, like napster, emule, edonkey, etc. Skype is another example of such service, and the viability of its business model has deeply impacted traditional telecommunication operators.

It is not that the Internet has invented peer to peer. Horizontal relation were always an important and efficient way of communicating. Resistance movements had, obviously, a weaker hierarchy, and were mostly functioning in peer to peer mode. In terms of commerce, it is well known that buyers tend to more listen their friends than the sales person. The huge impact of the Internet was to amplify this social form to an extent where we can easily say that it is the main social relationship people are wanting now. Facebook, by reaching 400 million users, at the time I write this article, is the third country world-wide, after China and India, but before the US…

So we are facing two extreme governance models :

There is no judgement so far, between one model or the other. Both have advantages, both have drawbacks, and, as usual, it is a pure matter of context to decide which one is the best.

However, what is happening is more subtle:

1. customers are in network mode. The are part of forum, social networks; they exchange lots of information, they are in the “usage” layer, they are smart, and the real innovator emerge amongst them, or, to put it in a more business oriented manner, the Internet allows to see which are the best customer to work with.
2. enterprise’s boundaries became porous. Not only because any customer can access to IT system through web site, but also because any employee is much more well equipped at home than at work: he has a PC or Mac brand new, he can surf where he wants without any firewall, he can go onto youtube, dailymotion, vimeo or any video site, and, much worst, by surfing on blogs, forum twitter, etc. he can see his enterprise from outside; he can see what people say about it, and then he feels the contradiction between what corporate communication says, and what he experiences…
3. The enterprise remains in hierarchical mode, with silos, departments not talking each other, based on a competitive model.

This combination of a hierarchical enterprise, with porous boundaries, and networked customers, is not sustainable. The silo model is slower than the network model, it does not allow information to circulate freely; employees are not encouraged to work in a collaborative manner. Customers, on their side, see one brand, want more fluidity in their relationship, are not interested in internal wars. As an example: when a customer buys a product on a web site, or even in a physical shop, and want to return it in another physical shop, he does not understand why this may not be possible.

The Internet is bringing tension on this matter, but positive tension. How it is solved (or dissolved) depends upon many factor, but we can express two extremse : in some big corporate groups, employees who are close to customer are going to network mode, whether it is official by introducing social networking tools inside the company, or totally uncontrolled by hierarchy, who suddenly discovers that few thousand employees have opened subgroups in facebook, linkedin, or any social network. Another extreme is a little enterprise who has the capacity to change itself, by reshaping the enterprise around processes, training people to digital tools, and introducing Web2.0 tools to support information backbone. In any case, middle management is the layer which does suffer the most.

Enterprises should no longer deny this aspect. They should really move to another governance, more networked, where middle management role shifts from controls to support. This is not an easy task. But enterprises who do not switch may be one day in dire straits.