Enterprise 2.0 by Frederic Martin

How the Next Generation Enterprise (nGen) is Different

How the Next Generation Enterprise is Different

1. From Multinational to Global

2. From People Management to Harnessing the Global Pool for Talent

3. Beyond Hierarchies to Peer Collaboration

4. From Behind Closed Doors to Open Innovation

5. From “Plan and Push” to “Engage and Co-Innovate”

6. From Process Optimization to Process Innovation, On-Demand

7. From Knowledge Management to Content Collaboration and Collective Intelligence

8. From Opacity to Transparency

9. From Products/Services to Comprehensive Customer Experiences

10. From Traditional IT to a Next Generation Enterprise Platform

Companies are facing a perfect

storm of

globalization, talent wars and consumerization of technology...

How will they navigate successfully? The vast business information systems of today have a prosaic origin – the double-entry accounting system and the general ledger. Information Technology grew from the challenge of automating accounting. As nGenera CEO Steve Papermaster puts it: “Corporations today are structured like giant income statements and for decades IT has been about automating old transactional processes.” The general ledger is the basic system of record and all automated information flowed to it. CRM, supply chain management, ERP, and other enterprise systems throughout a company consolidate into accounting statements. As a result, information technology has been backward looking, transactional in nature and locking companies into old business practices and old organizational structures. Companies implemented computer systems when the technologies matured to the point where cost beneficial applications were feasible. Such systems tended to be planned within the context of the income statement – discrete systems for production, marketing, financial management and research. Technology was not used to change the nature of work but to automate old ways of working – in other words, paving the cow path leading to the general ledger. Transaction systems, based on accounting, determine the flow of information. As a result, companies remain saddled with legacy systems that are impediments, rather than catalysts, to change. Transaction-based systems are inadequate for the demands of the global economy. A new age of collaboration is emerging where, thanks to the internet

(the Web 2.0 as it’s called) companies can now use IT to orchestrate capability, innovate and engage with the rest of the world in powerful new ways. The transactional DNA of information systems must give way to a new DNA – one based on interactions, and enabling human collaboration. nGenera has spent millions in research that shows how companies which embrace these new models perform and compete better – a lot better. The fundamental unit of information in an interaction-centric enterprise is different from one that is based on transactions. In fact, there is a general ledger of collaboration. It is possible to enable collaboration across masses of interactions just the way companies did with transactions. The key is to link information about people and entities such as customers, partners, and other organizations. For the first time, it is possible to construct an analogue to the general ledger, and in doing so, to use the new web to transform the modus operandi of the firm. Information Technology matters, but not in ways that most firms understand. On-demand information about people, relationships and entities is going to become the new system of record and deliver competitive advantage. Rather than systems looking backwards, they will enable everyone within an enterprise to better understand where we are headed, in real time. And tools for human collaboration become the foundation of networked business models and success. nGenera is building such a GL of collaboration, and in doing so, is building the platform required for the nGen.

From Multinational to Global

The globalization mantra is, “Think global, act local”– meaning, “Have a global perspective but behave according to the requirements of local markets.” However, the corporation is being transformed by a merging of the world’s economies; the rise of Asia as the global engine of growth; the development of a highly skilled, low-cost, and mobile global workforce; and the rapidly declining costs of collaboration. Yet today, most companies are still operating in a regionally-focused, multinational mindset. To compete in a global market, corporations must Think Global and Act Global, adopting common business practices and standards for business processes and technology, and harnessing the best talent and skills around the world. Corporations that adopt a Think Global, Act Global strategy can improve efficiency and leverage economies of scale while increasing their flexibility, their ability to innovate, and their responsiveness to local markets. Our research shows that it pays to have global capabilities – including truly global workforces, unified global processes, and a global IT platform to enhance collaboration amongst all parts of the business, as well as a company’s web of external partners. By definition, a truly global company has no physical or regional boundaries. It builds planetary ecosystems for designing, sourcing, assembling, and distributing products on a global basis. The emergence of open IT standards and platforms makes it considerably easier to build a global business by integrating best-of-breed components from various geographies. Ralph Sygenda, the CIO at General Motors, envisions how such unity might play out for GM. “Whether we’re developing a product, manufacturing, sourcing, or distributing,” he says, “we’ll be able to link up all of our activities in a seamless global operation.” GM has already taken large steps towards this vision, which may well be the company’s ticket to recovery.

From People Management to Harnessing the Global Pool for Talent

The deep structures of the corporation are changing – the largest such change in a century. In his 1937 essay, “The Nature of the Firm,” Ronald Coase, Nobel Prize-winning economist famously asked, “Why do firms exist?” He questioned why companies were necessary to direct the coordination of resources rather than individual actors cooperating through a free market. After all, in an efficient free market system there should not be any need for another coordinating body or institution like the company. His answer was that the use of market pricing mechanisms entails its own costs. The transaction costs of operating in a free market create opportunities for companies that offer refuge from these higher transaction costs, coordinating the factors of production without incurring the same level of cost. Today, radical improvements in networking, storage and processing power are producing discontinuous transaction-cost changes. This process is in its early stages, and we can expect significant changes in the architecture of corporations for the next decade or two. Thanks to New Web, the old notion that you have to attract, develop, and retain the best and brightest entirely inside your corporate boundaries is becoming null. With costs of collaboration falling precipitously, companies can increasingly source ideas, innovations, and uniquely qualified minds from a vast global pool of talent. An nGen deploys talent on-demand. To get the right talent, it engages and develops people in a wide variety of ways, from full-time employment to anonymous collaboration over the Web. Employees, especially younger ones, bring their experiences and expectations as consumers to the job.

They expect not just friendly technology, but lots of information and lots of communication. They expect to collaborate, to co-create, to be treated individually every day. In the process, they may present an unprecedented and inexorable challenge to corporate culture and style.

Beyond Hierarchies to Peer Collaboration

In the past, corporations have organized themselves according to strict hierarchical lines of authority. Everyone was a subordinate to someone else – employees versus managers, marketers versus customers, producers versus supply chain subcontractors, companies versus the community. There was always someone or some company in charge, controlling things, at the “top” of the food chain. While hierarchies are not vanishing, companies are beginning to conceive, design, develop, and distribute products and services in profoundly new ways. Peers within a firm can collaborate across old silos. Companies can collaborate as peers rather than as superiors and subordinates in a supply chain. And peers can create value outside the boundaries of traditional companies – social networking is becoming social production.

After all, if you can make an encyclopedia through mass collaboration, consider what else? How about an operating system (Linux) or applications software (Sugar CRM is one of 125,000 open source applications projects underway). How about a mutual fund (www. marketocracy.com), a peer-to-peer lending system (www.zopa.com), designer t-shirts (www.threadless.com) or other physical goods (www.cambrianhouse.com)? Perhaps a complex physical good like a motorcycle? The Chinese motorcycle industry – now the largest in the world – is a sprawling network of parts makers with no single company like Harley Davidson pulling the strings. Or take the most complicated product you can think of – a new generation jumbo jet. Rather than creating a specification for its supply chain, Boeing coinnovated the 787 Dreamliner with thousands of partners around the world in a mind-boggling peeroriented ecosystem. While some fear that these heaving communities and new business models will reduce the proportion of our economy that is available for profitable activity, leading firms are proving otherwise. Collaborative innovation can bring the prepared company rich new possibilities to unlock innovative potential in a wide range of resources that thrive inside and outside the company.

From Behind Closed Doors to Open Innovation

Conventional wisdom says you should control and protect proprietary resources and innovations – especially intellectual property – through patents, copyrights and trademarks. If someone infringes your IP, get the lawyers out to do battle. Of course, most of the IP a company develops should be protected. But business today is more complex. A new economics of intellectual property is arising. Increasingly, and to a degree paradoxically, firms in electronics, biotechnology and other fields find that maintaining and defending a proprietary system of intellectual property often cripples their ability to create value. Smart firms are treating intellectual property like a mutual fund – they manage a balanced portfolio of IP assets: some protected and some shared. Yes, companies should always protect their crown jewels – but they can’t collaborate effectively if all of their IP is hidden. It may make sense to share some IP within your business web or more broadly with customers. And it may make sense to give some away – to place it in “the commons.” Our experience and research shows that is not altruism; it’s the best way to build vibrant business ecosystems that harness a shared foundation of technology and knowledge to accelerate growth and innovation.

From “Plan and Push” to “Engage and Co-Innovate”

Next Generation Enterprises know more about their customers than any competitor. They constantly interact with them, collect and analyze copious amounts of data, and develop a knack for predicting great products. Great companies require their customers to help them develop the next big idea and to reinvent the customer experience. But more than this, they engage their customers in co-innovating value. We have called the modus operandi of the traditional company “plan and push.” You understand markets, listen to customers, develop great products and services and then “push” them out into the market place through effective mass media advertising campaigns. In the 80’s and 90’s, companies worked hard to make this model work better – called “sense and respond,” and to become real time firms. Today, customers expect to be treated individually. We expect products, services, and interactions with businesses to be customized for us – because we know they can be. Customers are more active, more knowledgeable and more demanding. As you continue to digitize your company, you can feel customers’ rising and changing expectations of how you do business and how your business presents itself.

In the new approach, think of your customers as being inside your business web, not external. In the new model, customers can participate in the creation of products in an active and ongoing way. In other words, customers do more than customize or personalize; they add value throughout the product lifecycle, starting with design and extending to aftermarket opportunities for customer-driven commerce and innovation. Products – everything from software and games to cameras and cars – become smart and enriched with knowledge and services. There are endless opportunities to turn consumers into “Prosumers” - who are both consumers and producers of your products and services.

From Process Optimization to Process Innovation, On-Demand

Traditional firms design and optimize efficient business processes and create information technology applications to support these – often implementing “best practices.” The upshot, often after 9-figure, multi-year IT implementations, is that you can be as good as your competition. Today’s market leaders (big and small) view themselves as a dynamic business platform and excel at inventing new processes instead of perfecting them. They are great at listening to their market and quickly bringing new ideas to it. They accept that some ideas may fail, but they detect and rapidly invest in the winners. Most organizations also seek to optimize core internal processes. However, as the corporation becomes open and networked and the axis of collaboration shifts to external parties, firms will need to build integrated

what flexes. This architecture enables the enterprise to change the mix of its portfolio of activities to focus more on innovation, value creation, and changing customer needs. An nGen executes process networks instead of rigid business processes. It enjoys a culture of experimentation and is willing to fail quickly at certain endeavors in order to ferret out successful, innovative new solutions.

external processes. This requires an IT capability attuned to the needs and expectations of users outside corporate boundaries; not just employees, but employees of business partners, customers and other participants in your business web. This means an “outside-in” perspective for the design of processes and roles. Most processes are also hard-wired and difficult to change as they are codified in software. But today’s business environment demands agility and business processes need to change. Companies must respond “on-demand” to constantly changing conditions. An nGen must have a business architecture with components that are modular, interconnectable, and easily reconfigured – just like the technologies it employs. There is a clear distinction between what persists over time and

In an nGen, work happens on-demand. If the business architecture is the map, then each process and capability is designed to work with the others. Standardized interfaces and shared components enable a new level of agility. Processes are designed for flexibility more than repeatability, designed to gather and deploy resources as needed. For example, innovation processes will need to be fundamentally reconfigured if businesses are to seize the Prosumer opportunity. Just as you can twist and scramble a Rubik’s Cube, prosumers will reconfigure products for their own ends. Static, immovable, non-editable items will be anathema, ripe for the dustbins of 20th century history.

From Knowledge Management to Content Collaboration and Collective Intelligence

The concept of knowledge management has achieved limited success. Most efforts to leverage knowledge in organizations have failed or fizzled out, for the most part, because current approaches view knowledge as a finite resource captured in containers and then made available through depositories. The focus of many knowledge management efforts has also been to acquire and leverage knowledge within the company. Knowledge management tools and repositories, directories, elaborate company intranets/portals, and reward systems for information sharing typify many corporate knowledge management efforts. However, a new approach is emerging where knowledge is understood as an infinite resource, often inside human brains, and generated and harnessed through effective collaboration both inside and outside of organizations. Today, powerful new collaboration tools such as wikis, blogs, social networks, search, tags, RSS feeds, jams, telepresence and content management enable what we call “knowledge collaboration.” This approach is a key to unleashing and harnessing the knowledge contained within and external to an enterprise and in turn, accelerating innovation and increasing competitive advantage. Collaboration also transforms Business Intelligence. In the past, business intelligence focused on internal information that supported tactical decisions aimed at cost avoidance. It informed a few select executives whose scope of analysis remained inside firm boundaries. Interfaces were complex and access was limited to sophisticated IT experts. The systems themselves were

static, producing a series of standardized reports. BI supported sporadic strategy planning processes that were subject to rigid rules. Most important BI was seen as a tool to support individual decision makers, rather than to aid in collaboration and team activities. The new approach extends business intelligence to virtually all employees, as well as external stakeholders. It enables and supports collaboration within and outside the enterprise. An articulated transparency strategy defines who receives what information, under what conditions, with what frequency and in what formats. Integrating internal and external information enables competitive advantage. Cost reduction is no longer the only focus: managers use data about customer behavior, supply chain performance and the market to drive revenue growth. Tools are visual and interactive, enabling non-specialized users to identify and act on opportunities and challenges. Information delivers predictive insights in addition to historic analysis, enabling a continuously evolving strategy plan guided by corporate performance management criteria. In particular, the new approach builds “collective intelligence,” enabling professionals and managers to effectively collaborate and act based on valid and reliable information. Companies that execute this new approach make better decisions, achieve agility, and lower transaction and control costs. Moreover, decentralized and collaborative decision-making leverages the power of human capital.

From Opacity to Transparency

Information in the old corporation lacked liquidity – it tended to be locked up within the walls of the firm and even then, often difficult to access appropriately. Corporations had high information opacity – both within their boundaries and with external parties (stakeholders). Our research shows that companies that open up, embracing transparency as a strategy, perform better. Transparency is far more than the obligation to disclose basic financial information. People and institutions that interact with firms are gaining unprecedented access to all sorts of information about corporate behavior, operations and performance. Armed with new tools to find information about matters that affect their interests, all sorts of stakeholders now scrutinize the company like never before, informing others and organizing. Customers can evaluate the worth of products and services at levels not possible before. Employees share formerly secret information about corporate strategy, management and challenges. To collaborate effectively, companies and their business partners have no choice but to share intimate knowledge with one another. Powerful institutional investors today own or manage most wealth, and they are developing x-ray vision. Finally, in a world of instant communications, whistleblowers, inquisitive media and Googling, citizens and communities routinely put companies under the microscope.

Corporations have no choice but to rethink their values and behaviors – for the better. If you’re going to be naked, you’d better be buff! By that we mean you’d better have the best value (as value is evidenced like never before) but you’d also better have values – of honesty, accountability, consideration of others’ interests and openness – built into your corporate DNA, operations and systems. Companies that embrace new IT services to become open have lower collaboration costs, higher performance and better trust.

From Products/Services to Comprehensive Customer Experiences

Goods and services everywhere are being commoditized — bought and sold almost exclusively on the basis of price. Some companies are working hard to create new genres of economic offerings that center of a customer experience – memorable value and events that engage each customer in an inherently personal way. In a world where customers are informed, fickle, and have choice, and where margins are thin, and profitable growth can be elusive, delivering a compelling customer experience can make all the difference. To be sure, the everyday experience customers have dealing with your business can determine its success, regardless of industry – financial services, retail, consumer products, business services, energy, industrial products, or commodities. The character

and quality of the customer experience you provide governs your ability to acquire, retain and improve the profitability of customers. Despite widespread recognition of these facts, most organizations neither deliberately design nor effectively measure and manage their customers’ experience. For customers, the experience is fragmented, inconsistent, and frustrating more often than comprehensive, customized, and compelling. Moreover, leading organizations are beginning to deliver a Next Generation Experience that enables customers to configure, customize, or co-create the experience they want to have – not just consume the one you want to give them. Preliminary research suggests organizations that make such meaningful improvements in their customers’ experience, can realize bottom line performance improvements of 10% to 25%. This comes from increased retention, additional sales, reduced customer acquisition costs, and strengthened price performance. This required re-thinking everything in the customer experience value chain– from value creation and co-innovation, channel management, marketing programs, customer engagement, new models of the brand, sales programs, support and service and distribution platforms. The four P’s of marketing (product, place, price and promotion) are no longer a valid framework to think about the totality of customer experiences and relationships.

10.

From Traditional IT to a Next Generation Enterprise Platform

Most companies have systems that address their basic requirements to execute transactions – ERP, CRM, supply chain and other transactional systems. But nGens go beyond traditional IT to build a platform that enables collaboration and business capability on-demand. Perhaps most familiar in the automotive industry, a platform is a common set of technologies, design principles, management processes, and other capabilities with which an organization can build a variety of things (e.g., car models). It’s a simple concept with profound implications for businesses, because there really are alternative ways to configure an enterprise - you can configure to do a few predetermined things extremely well, or you can configure to do a variety of things well, including accommodating unanticipated changes. The former approach, the industrial model, is still at the heart of most business designs today, and that explains the extreme difficulty they face every time customers or competitors force a major change in strategy and operation. The common analogy is “changing the wheels while the car is in motion.” Change is difficult, complex, and distracting, and the implementation project is often large, prolonged, and prone to failure or disappointment. Change is never accomplished as fast as needed. The latter is the platform approach. It begins with applying the principles of modularity and interconnectivity to every facet of a business – systems, processes, assets, people, organizations – and managing them to maintain flexibility (rather than dedicating them to fixed activities). The enterprise is configured to be able to rearrange its capabilities quickly and to connect in new ways, including connecting with the platforms of other enterprises. Change is a regular occurrence.

With a great platform you can gain flexibility and responsiveness without sacrificing efficiency (the primary goal of the industrial model). At any given time, resources can be efficiently deployed, the friction of redeploying them can be minimized, and you can keep your future options open. Traditional information systems or any other inflexible assets or procedures can paint you into a corner – as companies can automate change. We tend to use “automation” to describe the industrial-model approach of doing a limited number of things with great efficiency and repeatability. But the platform approach is about automation as well – the automation of change. When we can both operate efficiently at any given time and automate the accomplishment of change, then the industrial model really is obsolete. Information Technology, in particular Web 2.0, has a central role in an enterprise platform. You cannot have a flexible business platform – or the methods for managing a flexible business platform – without a modular, connectable, reconfigurable infrastructure, especially of software and information. The technologies of the Internet and Web 2.0 have the necessary combination of design and performance characteristics to create business platforms. They can enable a business to operate like the Internet – on-demand, always available, always connecting with additional resources as needed. The platform approach also changes the role of the technologist. In an nGen, technologists become architects, shaping the platform for agility and sustainability, implemented through modular components and on-demand services. It was possible to adopt a platform approach to information systems and infrastructure with earlier generations of technology, and progressive corporations did so and benefited. But creating a platform required large investment, and the results were limited if your business partners lacked platforms of their own. Today, with Web 2.0 technologies and with the Internet as part of everyone’s platform, the feasibility of creating a business platform has been raised – and the cost lowered – by at least an order of magnitude.

About the nGenera Innovation Network The nGenera Innovation Network is nGenera’s global community of thought leaders, researcher faculty, innovators and experts whose combined talents generate continuous insights and big ideas about the opportunities for Next Generation Enterprises. It delivers value to nGenera’s customers through world class research, peer-to-peer events, education and customization and continuously informs the platformenabled implementation strategies of nGenera. Since 1993, Don Tapscott (Chairman of the nGenera Innovation Network), thought leaders and faculty have produced breakthrough syndicated research that takes our customers “over the horizon” in their thinking about new business models, IT enabled competitive advantage, Enterprise 2.0 leadership, global talent and unique customer experience. Our peer-to-peer events enjoy an international reputation for engaging enterprise innovators with global thought leaders. Communities of interest made up of CEOs, CMOs, CIOs and the world’s leading experts meet throughout the year and throughout the world to share their issues and explore new ideas.

Don Tapscott: International leading authority on business strategy; prolific author, most recently published Wikinomics; Chairman of the nGenera Innovation Network

About nGenera nGenera Corporation provides an on-demand platform for business innovation, providing a suite of subscription-based offerings that enable the Next Generation Enterprise. Powered by software and people, nGenera’s on-demand category solutions give organizations sustainable, breakthrough capabilities in leadership performance, talent management and development, and customer experience. Customers that subscribe to the company’s on-demand solutions include a marquee list of Global 2000 companies in a range of industries. For more information, please visit www.ngenera.com.

Steve Papermaster: Leader, entrepreneur and investor; past recipient of the Ernst & Young Entrepreneur of the Year Award; active leader in key public sector roles; Chairman and CEO of nGenera Corporation

www.nGenera.com Headquarters 901 S. Mopac Ste. 100 Barton Oaks II Austin, TX 78746 Tel: (512) 904-3400