November 22, 2007
Is General Management Being Transformed by IT?
It’s a commonplace by now to observe that many types of knowledge worker have had their jobs transformed by information technology. Most engineers, scientists, and financial analysts, for example, spend much of their time in front of a computer. The hardware and software they use let them investigate, analyze, simulate, and predict their worlds with ever-greater confidence. And the networks they belong to let them access seas of data, and share their work broadly and easily.
The list of professions being changed by IT keeps growing, and now includes some that are quite far away from white collar office work. Art and architecture, for example, are also being influenced by technology. Fabrication instructions for Frank Gehry’s fluid buildings and Richard Serra’s wondrous new sculptures now take digital form, and I’ve heard that it would be tremendously difficult, if not impossible, to translate their visions into physical reality without computers. I don’t yet know how far ‘upstream’ IT has penetrated the creative processes of these two men and their peers, but I wouldn’t be a bit surprised to learn that many creative artists at present use digital tools in the early stages of their work. As my HBS colleague Stefan Thomke has documented, BMW’s elite auto designers now use the computers along with paper, pencils, and clay when conceptualizing new car designs.
At the other end of some spectrum, I learned from James McManus’s book Positively Fifth Street that he got to the final table at the 2000 World Series of Poker in part by playing thousands upon thousands of hands using Wilson Software‘s products. I’ll vouch that these are brilliant tools for learning to play the game better (almost any version of the game: standard Hold ‘em, tournament Hold ‘em, Omaha, or Stud). I don’t have the talent or the dedication to play poker at a high level, but many hours of playing Turbo Texas Hold ‘em on planes have given me a good enough intuitive feel that I can avoid embarrassing myself against experienced players, even though I don’t spend nearly as many hours as they do playing for real money against real people. Wilson’s website states that players who use its software won over $47 million in tournaments in 2005 and 2006.
My point in citing these examples is to tee up a simple question: do ‘managers’ belong on the list of knowledge workers whose jobs are being transformed by information technology? Or, to ask the same question slightly differently, wouldn’t it be absolutely astonishing if this weren’t the case -- if the ecosystem of technology developers, entrepreneurs, and funders had somehow overlooked the profession of management, or failed to deliver powerful tools to help with this profession? Is it at all plausible that poker players have received a bigger boost from computers than general managers have?
In my MBA course we concentrate on information technologies that improve multi-party interactions rather than single-party tasks. And we focus most deeply on how various digital tools impact workflows, interdependencies, and decision right allocations. I call these the organizational complements of IT (see this HBR article for a fuller explanation of IT’s complements). The course examines two broad classes of corporate application: those that let managers impose these complements, often across a very large organizational ‘footprint,’ and those that let these complements emerge organically over time.
I frame the course around these complements because they’re at the same time precise (each can be tightly defined) and highly flexible. In every situation we study, the concepts of workflows, interdependencies, and/or decision rights help students ‘crack the case,’ showing them where to focus their attention and how they can productively effect change. And the cases that I and others have written illustrate just how powerful current corporate technologies are for general managers who seek to change and improve their organizations, either by intervening to impose new complements or by getting out of the way in order to let them emerge. Of the cases I’ve written on this topic, my favorites include Zara, Los Grobo, MK Taxi, and Dubai Ports Authority. I also teach (and have learned a lot from) the ITC eChoupal case by Dave Upton and Ginny Fuller, and the cases on Otis Elevator by Warren McFarlan and his colleagues.
My goal with the course, as with virtually all of my work, is to reveal to general managers what IT can do for them, and what they in turn need to do so that their organizations succeed with technology. I want my students to start their careers with the belief that IT is one of the biggest and best tools available to help them lead, change, improve, and create value in their companies.
My experiences in both MBA and executive classrooms, however, have shown me that relatively few of today’s general managers are predisposed to believe that this is the case. Many (most?) of them believe instead that IT is some combination of the following:
- Low-level. IT decisions can and should be made at relatively low levels in the organization. After all, what do senior executives know about the best router, or the most appropriate computer-aided design software?
- Able to be delegated. Top managers are busy people, and would love to have one less thing to do. If there’s no real downside to outsourcing IT decisions, why not do so?
- Impenetrable. Many managers feel like they can’t get past the jargon, and can’t learn to ‘speak IT.’
- Overhyped. One of the most common complaints I hear is that IT proponents have an enduring tendency to overpromise and underdeliver. After managers feel like they’ve been sold a technology bill of goods a few times, they stop listening to the sales pitch.
A good bit of my writing, in this blog and elsewhere, tries to shift these perspectives and to convince senior managers that they can and should be involved in some IT efforts. But why do these perspectives exist in the first place? If IT is so great for general managers, why are so many of them so lukewarm on it? Why don’t more of them believe in the power of technology? Are they just missing the boat? Or are
we?
I want to suggest a third possibility, which is that until fairly recently the profession of general management was actually
not one of the ones deeply affected by technology. Prior to the mid 1990s the footprint of most corporate IT -- the sphere of direct influence for a piece of technology -- was the single function or task. This made for a happy marriage between technology and knowledge workers like engineers, scientists, and analysts because these workers stayed within a single function. But general managers, by definition, do not. They’re responsible for orchestrating the work of multiple groups. So from their perspective, IT
was actually delegable and low level.
And it had also been overhyped. The historian of technology
Thomas Haigh wrote a fascinating article in the spring 2001 issue of
Business History Review titled "
Inventing Information Systems: The Systems Men and the Computer, 1950-1968." Haigh resurfaces the extravagant claims made by the ‘Systems Men’ at the dawn of the era of corporate computing that they would soon be rolling out applications that would optimize, standardize, and monitor all of a company’s important inputs, processes, and outputs. The article documents how far ahead these claims ran of reality and available technology, and how the Systems Men were thoroughly discredited by the end of the 1960s.
It wouldn’t be until the middle of the 1990s that technologies appeared that could support at least some of these claims. The Internet and commercial enterprise systems such as ERP made the dream of cross-functional applications based around business processes a reality for many companies. These applications let general managers deploy redesigned workflows, specify interdependencies, and allocate decision rights across their organizations. They let managers, in other words, impose IT’s complements across arbitrarily large footprints.
More recently, Enterprise 2.0 technologies have come on line to offer almost precisely the opposite capability. These tools let the same complements emerge over time, instead of imposing them up front. Many questions remain about both classes of technology, but one thing is clear: both of them operate primarily at the level of the organization, not the level of the single task or process. Because of this, general managers are their most natural constituency -- the group of knowledge workers who will be most influential, and most influenced.
So as a result of some relatively recent additions to the toolkit of corporate IT I’m comfortable adding ‘general managers’ to the list of knowledge workers who have very powerful digital tools at their disposal, and who need to learn how to use them well. Does this also seem right to you? Leave a comment and let us know what you think.
November 14, 2007
Enterprise 2.0 May be Fine for the Business, But What About the IT Department?
In
my last post I asserted that blogs were relatively unpopular in current opinion surveys of Enterprise 2.0 technologies. A
recent article in
Information Week underscores this point; internal and external blogs were rated as "very important" or "critical" to the organization by only 13% of respondents in a poll of 110 IT and business professionals (it was not revealed how respondents were selected). The least popular technology of all was social networking software (SNS), about which only 5% of respondents were similarly positive.
At first I found these data a bit dismaying (let’s assume this survey is in fact representative). As I
wrote recently and discussed at last week’s
Defrag conference, SNS and blogs are prototypical E2.0 technologies to bring together weakly tied and potentially tied knowledge workers, representatively. SNS is
a powerful tool for building, learning from, and exploiting a network of people with whom you have weak ties, and a corporate blogosphere can efficiently let knowledge workers learn about people with whom they
should form ties. A great deal of research indicates that these are both very valuable activities within organizations, and that E2.0 tools and approaches might well have their greatest impact at the two middle rings of my ‘bullseye model’ (this model and the ideas underpinning it are explained more fully in
my post, and in several other blog posts
aggregated here.).
So a continued lack of enthusiasm for these tools is not good news for us E2.0 optimists. But it’s way too early to despair, or even to start getting discouraged. We need to keep in mind that most
E2.0 tools are new, and that their acceptance depends on shifts in perspective on the part of business leaders and decision makers, shifts for which the word ‘seismic’ might not be an overstatement. Enterprise 2.0 tools have no inherent respect for organizational boundaries, hierarchies, or job titles. They facilitate self-organization and emergent rather than imposed structure. They require line managers, compliance officers, and other stewards to trust that users will not deliberately or inadvertently use them inappropriately. They require these stewards to become comfortable with collaboration environments that “practice the philosophy of making it easy to correct mistakes, rather than making it difficult to make them” as Jimmy Wales has said. They require, in short, the re-examination and often the reversal of many longstanding assumptions and practices. It is not in the least disrespectful or contemptuous of today’s managers to say that it will take them some time to get used to this.
After a little reflection, the survey results didn’t distress me much. They indicate that E2.0 evangelists and optimists have some work ahead of them, but we already knew that.
Another aspect of the article troubled me a lot more. This was the assumption, at times almost explicit, that information technologies should be evaluated based on their impact on and benefits to the IT organization, not to the business as a whole. The article contains a remarkable
"Impact Assessment" table that purports to evaluate the risks and benefits of Web 2.0 to the IT organization, the Business organization, and Business competitiveness. It appears as if each of these three is given equal weight, which is simply extraordinary. What kind of responsible decision maker within a company would treat the three areas as equally important?
What’s even more amazing is that Web 2.0 had the maximum possible benefit score for business competitiveness and a greater level of benefit than risk in this area, yet the table concluded that "Web 2.0 technology looks like a losing proposition for large organizations in general, IT departments in particular." I may be missing something fundamental, but it seems that the losing proposition is to
not adopt technologies that help with competitiveness. The table and the article as a whole, though, apparently make the opposite point. This just makes no sense to me. Lively debates continue over what the purpose of a company is or should be, but I haven’t yet heard that its purpose should be perpetuation of its existing ways of doing business, or of its IT organization, and I can’t see why these considerations should be given any real weight when novel technologies are evaluated.
Among the least kind terms I hear used to describe IT organizations are ‘priesthood’ and ‘empire.’ These words imply a belief that corporate IT departments consciously exclude outsiders and outside influences, and are concerned primarily with expanding themselves. If this is the case, then Enterprise 2.0 will certainly be resisted by IT; its tools are cheap, often housed outside the firewall, and require relatively little configuration, support, and maintenance. Enterprise 2.0 comes from outside the priesthood, in other words, and doesn’t expand the empire. As the article says in its opening sentence, "forget outsourcing. the real threat to IT pros could be Web 2.0." I think a larger threat to the continued health and relevance of corporate IT departments might be the worldview underlying that sentence.
November 03, 2007
How to Hit the Enterprise 2.0 Bullseye
My colleague Clay Christensen stresses that managers are voracious consumers of theory. In other words, they value ways to think about their world, and mental tools that will let them make decisions and predictions with a level of confidence higher than they get from experience and intuition alone.
I've been reminded of Clay's insight because I've recently had some success using a longstanding theory to explain to executives the value of social networking software (SNS) like Facebook. As I wrote earlier, the sociologist Mark Granovetter's theory of the 'strength of weak ties' provides a great way to conceptualize the value of SNS. These technologies increase a knowledge workers' number of weak ties (and hence access to non-redundant information and bridges to other networks), and also provide an easy and convenient way to exploit these ties from within the tool itself.
But the intersection of ties and Enterprise 2.0 technologies goes much farther than this. In fact, ties provide a great base for understanding the benefits provided by many E2.0 technologies, and for understanding when each one should be deployed. Thinking in terms of ties, in other words, let managers select from among the grabbag of available technologies and also anticipate the benefits they'll get after successful deployment.
Consider the prototypical knowledge worker inside a large, geographically distributed organization (all of what follows also applies for smaller and more centralized organizations, but probably to a lesser extent). She has a relatively small group of close collaborators; these are people with whom she has strong professional ties. Beyond this group, there's also a set that includes people she with worked on a project with in the past, coworkers who she interacts with periodically, colleagues she knows via an introduction, and the many other varieties of 'professional acquaintance.' In Granovetter's language, she has weak ties to these people.
Beyond this group there's a still-larger set of fellow employees who could be valuable to our prototypical knowledge worker if only she knew about them. These are people who could keep her from re-inventing the wheel, answer one of her pressing questions, point her to exactly the right resource, tell her about a really good vendor, consultant, or other external partner, let her know that they were working on a similar problem and had made some encouraging progress, or do any of the other scores of good things that come from a well-functioning tie. By the same token, if our focal worker is a person of good will, there are many other people in the company she could help if her existence, work experiences, and abilities were more widely known.
Of course, there's also a large group in the organization who are just not going to be of much use to our prototypical worker, and vice versa. These people will not form ties. They're simply co-workers, not actual or potential colleagues. It seems at first glance as if it wouldn't be valuable to use any type of technology to bring these people together. This, however, is too hasty a conclusion, as I'll discuss.
The bullseye figure below is an extremely simple and not-to-scale representation of the relative size of these groups, from the perspective of our focal knowledge worker. The small core of people with whom she has strong ties is at the center, surrounded by her larger group of weakly-tied colleagues. Potential ties are in the next ring, and co-workers -- people with whom valuable ties do not and will not exist -- make up the outermost ring. My intuition is that for most knowledge workers the four circles in the figure are nested accurately -- that the number of potential ties, for example, is greater than the number of weak ties -- even if their relative sizes are way off.
What does all this have to do with the emergent social software platforms of Enterprise 2.0? Well, there are several such platforms, each of which is valuable in a different way. Wikis, a blogosphere, social networking software, and prediction markets all facilitate Enterprise 2.0 as I've defined it, but they're clearly not identical technologies, or even closely similar ones.
But how are they different? Do they to dissimilar things for companies, and to them? And when is each the 'right answer?' Answers to these questions arise from the realization that a knowledge worker will want to use a different E2.0 technology at each ring in the bullseye.
A wiki is the classic Enterprise 2.0 technology for a core of strongly tied knowledge workers who are collaborating on a deliverable. They can use it to generate documents, to debate their contents and structure, track project status, link to other resources, etc. Google Docs and Spreadsheets, Zoho, and other online office productivity suites are similar to wikis in that they allow egalitarian editing of documents, spreadsheets, and presentations by all group members; they're just not currently as extensible as a full wiki.
Evidence suggests that wikis let strongly-tied collaborators get their work done better, faster, and with more agility than was previous possible. With a wiki, what's emergent is the document itself, with 'document' defined broadly.
As I wrote earlier, enterprise social networking software lets our prototypical knowledge worker stay in touch with a large network of colleagues, allowing her to keep up to date with that they're doing, working on, and producing. It also lets her tell this network what she's up to.
This might sound like an only marginally useful exercise, but it can in fact be quite powerful because it's a quick and easy way to form connections and make associations that might not ever occur otherwise. I saw this firsthand a couple days ago when one of my Facebook friends told his network via his status message that he was going to accompany a foreign head of state to a high-level meeting on technology issues. Because I was only weakly tied to this person I had no idea that he was that well connected or interested in public policy. But as a result of his Facebook update, which took him about ten seconds to type and me one second to read, I now know who to reach out to should I ever want to dive into European IT issues, or desire an invitation to the Elysee Palace 
. SNS lets its users build bridges to new human networks, and to let non-redundant information emerge.
Facebook currently lets members ask their network a question, then collects their answers on one globally-visible page. I imagine that successful enterprise Facebook equivalents will have much more advanced tools to allow members to actively exploit their networks by asking them for assistance, pumping them for information, etc. I also imagine that they'll let users post answers to their most frequently-asked questions, then simply point seekers to this resource. The facts that Facebook has opened its platform to outside applications, and that a consortium of social media providers anchored by Google and MySpace has just announced a common specification for developers, will no doubt hasten the arrival of robust enterprise SNS.
And what about all the people in the third ring of the circle in the figure -- the potentially valuable colleagues who our knowledge worker just hasn't met yet? Wikis and SNS in their current configurations don't help her learn of the existence of such people, but an internal corporate blogosphere could. Imagine a large company in which most workgroups (divisions, labs, departments, project teams, etc.) blogged, as did many individuals. No one would have time to read all the resulting blogs, of course, and most employees would probably read few of them regularly. But I imagine lots of people would set up searches for words, phrases, or topics of interest (as is possible with Bloglines, Google blog search, and other tools), then check in frequently to see what recent posts show up in their search results. This is the main way that I keep up with the latest writing on "Enterprise 2.0." Even articles in print publications get discussed almost immediately in the blogosphere, so I learn about them, too.
I've seen a few surveys indicating that blogs are currently one of the least popular E2.0 technologies among CIOs and other decision makers, probably because the business value of internal blogging isn't always clear. Maintaining a blog can seem like shouting into a void, and we all certainly have better things to do than that. The benefit of blogs becomes much more clear when they're seen as tools to convert potential ties, strong or weak, into actual ones. Prior to the Web 2.0 era I don't believe that good technologies existed to help with this conversion, and the overall toolkit for making employees aware of potentially valuable ties -- including newsletters, 'science fairs,' seminar series, etc. -- was pretty small. A lively internal blogosphere that includes good search and notification mechanisms represents a significant addition to this toolkit, and can allow productive ties and teams to emerge over time.
The outermost ring of the bullseye seems like the least amenable to technology -- how can the new crop of digital tools productively interconnect people who really don't have anything to say to contribute to each other? Prediction markets do exactly this. Prediction markets are very much like stock markets. They contain securities, each of which has a price. People used the market to trade with each other by buying and selling these securities. Because traders have differing beliefs about what the securities are worth, and because events occur over time that altered these beliefs, the prices of securities also vary over time.
In a stock market like the New York Stock Exchange the securities being traded are shares in companies, the price of which reflects beliefs about the value of the company. In a corporate prediction market, in contrast, the securities being traded are related to future events such as "How many units of this product will we sell next quarter?" "What will our market share be at the end of the quarter?" "Will our competitor release their product on time?" "Will we release our product on time?" Such markets can be designed so that security prices are the same as the estimated probability that the event will occur, according to the markets’ traders.
Prediction markets provide benefits to the traders in the form of ego boosts and monetary rewards (if a company decides to reward successful trading that way), and they bring substantial benefits to sponsoring companies by providing accurate and decisive answers to important questions. As James Surowiecki wrote in The Wisdom of Crowds, "Corporate strategy is all about collecting information from many different sources, evaluating the probabilities of potential outcomes, and making decisions in the face of an uncertain future. These are tasks for which [prediction] markets are tailor-made."
The participants in a prediction market don't have to have any dealings with each other beyond their trades, and often don't even know who they're trading with. So these markets aren't tools to help human networks coalesce; they're just ways to have answers emerge from the self-interested, profit-maximizing activities of a population of traders.
The table below summarizes the potential benefits, candidate technologies, and type of emergence at each ring of the bullseye (in other words, for each type of tie). Like the bullseye figure itself, it is a drastic simplification of a large and complex set of phenomena. In particular, the entries in the three rightmost columns of the table aren't meant to be mutually exclusive or collectively exhaustive. They simply highlight some important differences at each of the four levels.
|
Tie Strength
|
Potential Benefits
|
Technology Example
|
What is Emergent?
|
|
|
Strong
|
Collaboration, Productivity, Agility
|
Wiki
|
Document
|
|
|
Weak
|
Innovation, Non-redundant information, Network bridging
|
Social Networking Software
|
Information
|
|
|
Potential
|
Efficient search, Tie formation
|
Blogosphere
|
Team
|
|
|
None
|
Collective Intelligence
|
Prediction Market
|
Answer
|
|
I'm hearing from a lot of people that late 2007 is much like late 1997, when technology specialists were getting asked by senior executives "What is the Internet, exactly, why is it a big deal, and what's our Internet strategy?" The question now is "What's Web 2.0 / Enterprise 2.0 / social media, exactly, why is it a big deal, and what's our W2.0 / E2.0 / social media strategy?" The table, bullseye figure, and arguments presented here can help frame discussions around these questions by encouraging decision makers to first focus on what ring(s) of the bullseye they're most interested in targeting. Lots of subsequent decisions and actitivies flow from the answer to this question, and from applying a bit of well-established theory (the theory of strong and weak ties) to technology considerations.
