Thursday, November 05, 2009

Is Enterprise 2.0 a Savior or a Charlatan? How Strategy-Driven Execution can pave the path to proving legitimate business value

I have followed the evolution of the topic since Andrew McAfee coined the phrase “Enterprise 2.0” in the spring 2006 Sloan Management Review article to describe the use of Web 2.0 tools and approaches by businesses.  I was also really excited to attend that Enterprise 2.0 2009 conference in San Francisco for the first time.  In this post, I want to describe what I saw at the conference, what I believe to be the missing components of the full Enterprise 2.0 picture, and also discuss how becoming "Driven to Perform" by understanding Strategy-Driven Execution is the best way to justify the value of Enterprise 2.0 in your organization.


It Starts With The Seminal Definition of Enterprise 2.0

First, we should start with a definition of Enterprise 2.0.  There are as many definitions as there are pundits, and I think it's important to stick to a definition that has been fairly widely adopted by a reputable authority.  Therefore I will use Andrew McAfee's definition that he provided here that most closely resonates with my own:

Enterprise 2.0 is the use of emergent social software platforms within companies, or between companies and their partners or customers.

Social software enables people to rendezvous, connect or collaborate through computer-mediated communication and to form online communities. (Wikipedia’s definition).

Platforms are digital environments in which contributions and interactions are globally visible and persistent over time.

Emergent means that the software is freeform, and that it contains mechanisms to let the patterns and structure inherent in people’s interactions become visible over time.

Freeform means that the software is most or all of the following:
  • Optional
  • Free of up-front workflow
  • Egalitarian, or indifferent to formal organizational identities
  • Accepting of many types of data
The organizers of the Enterprise 2.0 Conference delineate the difference between 1.0 and 2.0 as below:

Enterprise 1.0
Enterprise 2.0
Hierarchy
Friction
Bureaucracy
Inflexibility
IT-driven technology / Lack of user control
Top down
Centralized
Teams are in one building / one time zone
Silos and boundaries
Need to know
Information systems are structured and dictated
Taxonomies
Overly complex
Closed/ proprietary standards
Scheduled
Long time-to-market cycles
Flat Organization
Ease of Organization Flow
Agility
Flexibility
User-driven technology
Bottom up
Distributed
Teams are global
Fuzzy boundaries, open borders
Transparency
Information systems are emergent
Folksonomies
Simple
Open
On Demand
Short time-to-market cycles

The false dichotomy between the definitions of Enterprise 1.0 and Enterprise 2.0

These definitions of Enterprise 2.0 and their juxtaposition against the definitions of Enterprise 1.0 are misguided.  I am certain based on my experience that the free form emergent world depicted as Enterprise 2.0 is NOT an evolution from the structured world of Enterprise 1.0, but rather, the two will exist in an intertwined tapestry that defines the full breadth of what today's enterprises need to look like.  It's extremely unhealthy for our industry to pit these two worlds against each other because they will perpetually co-exist.

I believe a significant part of the problem that crops up in the Enterprise 2.0 value discussions stems from the fact that the champions of Enterprise 2.0 significantly underweight the complexity and pervasiveness of the existing information technologies in the enterprise and the reasons why these technologies evolved. Earlier this week, Miko Matsumura wrote an excellent blog entry entitled Top 5 Definitions of Enterprise: focusing on the Enterprise in "Enterprise 2.0" that really went to the heart of the matter, prompting Michael Krigsman to also reproduce it in his own blog entry to underscore its importance.

The modern information technology environment in the Enterprise looks a lot more like this diagram below from Driven to Perform than just a collection of e-mail, blogs, wikis, etc. that any Enterprise 2.0 overemphasize, although they are clearly part of the fabric woven together in what is commonly referred to as information work.



The Components of a Modern Automation and Information Infrastructure


The rich repository of highly-structured and semi-structured business processes and associated applications and infrastructure necessary to run a modern business can not and likely will not ever migrate to the Enterprise 2.0 definition, nor should they ever, but they will be augmented increasingly by it.  We discuss many of them in Driven to Perform and orient them in a cross-enterprise value chain based on Michael Porter's seminal work. 


The Integrated Business Processes of the Modern Enterprise

They key activity steps of enterprise business processes embodied into today's ERP, CRM, SCM et al software, such order-to-cash, procure-to-pay, hire-to-retire, or record-to-report need to be highly structured for a variety of reasons, not the least of which is efficiency, their primary reason for being, but also for the significant compliance concerns they address.  I don't foresee a point any time in the near future where enterprises will leverage Enterprise 2.0 principles in the core of accounting, or payroll, or order management because there are serious risks to doing so for a business.  These enterprise business processes are complicated enough without any unstructured processes surrounding them, as you can see here in this offer creation process, which we diagrammed in Driven to Perform in our chapter on Risk-Aware Marketing Performance Management:



Creating the Optimal Offer

However, what you notice in any enterprise business process like the one above is that there is a lot of white space.  The white space is where people are human integrators.  Where the various folks from marketing, the contact center, sales, and operations fill in the gaps that their enterprise software does a poor job of addressing today.  It is in these process contexts that wikis, blogs, instant messaging, etc. can perform a brilliant and valuable service, and for certain processes, form the entire substrate upon which the enterprise process can be manifest.  Thus, ultimately, the real Enterprise 2.0, the weaving of both the structured and unstructured worlds together, really looks a lot more like this:


The real Enterprise 2.0:  A combination of structured and unstructured processes 
and technologies woven together to achieve desired business outcomes

Enterprise 2.0 technology is only starting to become really enterprise ready

Because of a lack of understanding of how the modern enterprise infrastructure works, my belief is that a lot of the existing E2.0 offerings have gaping holes in them that must be addressed if they are to survive long term in the environment they wish to play in beyond the proverbial "server under someone's desk".  I was surprised, for example, during the Google Wave keynote that the speaker referred to the desire to put as few restrictions in place in the security model as possible to ensure the maximum degree of collaboration.  Examples like these, among many others, show that there is a long way to go before these tools can be used pervasively in the enterprise without serious repercussions.  I am certain that regulations around archiving, audit, document retention, privacy regulations etc. along with technical requirements like delegated authentication, encryption, etc. can not be adequately addressed with many of these tools in their current ungoverned state in the enterprise and this will be a liability in these tools adoption until it's addressed.

It should be noted that the more sophisticated vendors absolutely understand what they need to do to be viable in a truly enterprise context but they are decidedly in the minority.  Linden Lab, creators of the Second Life 3D virtual world, had a major announcement at the conference in unveiling Second Life Enterprise that had nothing to do with sexier avatars, but instead decidedly focused on the unsexy topics like providing a private and secure virtual environment with enterprise manageability capabilities.  Similarly, Novell, long a networking and infrastructure stalwart from Enterprise 1.0, unveiled Novell Pulse, with a set of enterprise class capabilities on top of Google Wave.  These vendors realize that completely unstructured capabilities that do not bolt into the enterprise mechanisms of governance have little chance for broadscale adoption.

Conversely, leading enterprise application players like Workday are starting from the robust ERP and HCM process perspective of the so-called "Enterprise 1.0" world and layering many social constructs such as tagging, inline collaboration, etc. into their applications to deliver on this converged Enterprise 2.0 notion I describe above.  This movement from the process-based applications to embrace the unstructured social world is well summarized by R Ray Wang's notion of Social Enterprise Apps, which combine the process and social worlds:


Source: Software Insider's Point of View - 10 Elements Of Social Enterprise Business Solutions and Platforms


The advocates and skeptics talk past each other when it comes to Enterprise 2.0

Unfortunately, the current Enterprise 2.0 dialogue has much room for improvement because we are all talking past each other.  When I was asked by Jennifer Leggio to contribute to her blog entry entitled 2010 Predictions: Will social media reach ubiquity? , I responded:
In 2009, a tremendous amount of noise in the marketplace surrounding social media has reached a fever pitch and this threatens to drown out its potential effect to be transformative in the enterprise. Those projects and vendors that customers were willing to experiment with in 2009 will need to tie their efforts to concrete performance improvements in order to remain viable as social media’s sheen of being the new kid on the block wears off.


I realize that Jennifer's request was about social media, and social media does not equal Enterprise 2.0, but I think it's fair to equate the usage of social media technologies within the Enterprise as a loose approximation of the term, and that is what spurred my response.


To be certain, there is a raging debate in response to this hype in the enterprise and as supporters become more zealous the detractors become more incendiary.  Dennis Howlett kicked things off with his August 26, 2009 post Enterprise 2.0: what a crock, arguing that:

Like it or not, large enterprises - the big name brands - have to work in structures and hierarchies that most E2.0 mavens ridicule but can’t come up with alternatives that make any sort of corporate sense. Therein lies the Big Lie. Enterprise 2.0 pre-supposes that you can upend hierarchies for the benefit of all. Yet none of that thinking has a credible use case you can generalize back to business types - except: knowledge based businesses such as legal, accounting, architects etc. Even then - where are the use cases? I’d like to know.

Needless to say, it received a lot of attention.  In response, an entire panel discussion was convened at the Enterprise 2.0 Conference literally entitled "Is Enterprise 2.0 A Crock?".  In the panel, an excellent summary of which you can read here by my ex-SAP colleague Timo Elliott, it was absolutely clear that the customers, represented by marquis brand names like EMC, Eli Lilly, and Alcatel-Lucent, saw clear value in their deployments, but it was also clear that it was very hard to quantify what that value was.  What was most disappointing however was that there was no debate.  All the participants were predisposed to believing Enterprise 2.0 was not a crock, which defeated the point of such a session.  This spurred yet another round of salvos such as Enterprise 2.0 - the non-debate from Dennis Howlett, where I was quoted about my disappointment in the lack of debate, and Miko Matsumura's balanced perspective in The Enterprise 2.0 Crock.  This prompted Susan Scrupski, who has done a remarkable job in a short period of time with the 2.0 Adoption Council, to fire back with her own post entitled "Checkmate" which listed a veritable who's who list of incredible brand names who are all part of the council and who clearly see the value in Enterprise 2.0.


Who's right? They are actually both legitimate perspectives, and I am convinced they can be reconciled.  Fortunately, I am not the only one.


Strategy-Driven Execution is the path to legitimizing Enterprise 2.0 business value

Sameer Patel who writes the excellent Pretzel Logic blog and Oliver Marks, whose Collaboration 2.0 blog is very popular are both highly-regarded thought leaders in the Enterprise 2.0 space, reflected in them being nominated to the conference's advisory board.  What I appreciate about both of their perspectives is that they clearly understand the enterprise in Enterprise 2.0 and have a very pragmatic approach to championing adoption, driven by prioritizing business value, which aligns exactly with my way of thinking.  This mindset of business-value first first was clear even in the session names of their track, such as "Selling the Case for Accelerating Business Performance with Enterprise Collaboration and 2.0 Technologies", "Collaboration at Scale", "Lowering Customer Service Costs Via Social Tools", and "Launching Winning Products in the Market: How Social Software Improves Your Odds".  Notice that the sessions explicitly talk about how collaboration facilitates existing enterprise business processes.  With that as a lens, it suddenly does become possible to quantify the value of Enterprise 2.0 tools.

In Driven to Perform, we looked at dozens of business processes and described the key roles, collaboration points, and metrics that surround those business processes to drive business performance.  Using this framework, we can now start to ask questions that put serious metrics on top of Enterprise 2.0 investments.  Let's return to the example of the offer management process.  In the original "creating the optimal offer" business process diagram above, there is a lot of white space because the existing structured marketing enterprise systems do not address the entire end-to-end offer management process.  I argued above that this white space could be filled by collaborative tools.  What are the metrics that a head of marketing might care about surrounding offer management?  The head of marketing would certainly care about the speed of campaign development as measured by the time to develop new offerings.  For example, today, it might take her and her organization 6 weeks to develop a full offering, which is much too slow in the competitive environment her company is in.  Can an Enterprise 2.0 tool like wikis significantly reduce the offer creation time, perhaps even by half, by opening up the process and allowing people to collaborate to generate better offer ideas faster?  Absolutely.  Could an Enterprise 2.0 community forum significantly reduce the time to get responses to various offers from trusted customers?  Absolutely.  CRM thought leaders like Esteban Kolsky on his CRM Intelligence and Strategy blog and Paul Greenberg on his blog Social CRM: The Conversation would tell you the same thing in their excellent treatises on Social CRM.  And there is the business value.  Hard, quantified ROI.  You can only get that once you understand the goals of your organization, the current business processes in place that are set in place to achieve them, and the metrics used to instrument those processes.  That's what I call Strategy-Driven Execution, and you will need to understand it if you want Enterprise 2.0, the real Enterprise 2.0, to flourish in the enterprise.


Driven to Perform is filled with literally hundreds of examples of the ways Enterprise 2.0 tools can actually drive quantified business value by combining the unstructured and structured processes that drive business performance, but that that is not the way Enterprise 2.0 tools are being sold today.  If an Enterprise 2.0 tool can:  increase the average deal size, reduce cost to serve, increase customer loyalty, decrease new product development time, etc., than there is a legitimate business use case and a hard ROI associated with it. So my advice to both the zealots and naysayers of Enterprise 2.0 would be to take an existing, legitimate pain point, like offer creation, or product development, or customer service, and start by benchmarking your current metrics.  If an Enterprise 2.0 tool can move those metrics in the right direction in a provable way, you will have real, hard ROI. If the tool doesn't contribute to moving those process metrics in the way you hoped, then you might have a problem with your executive sponsor.


So, Is Enterprise 2.0 a Savior or a Charlatan?

It could be either.  The keys to answering this question lie in your understanding of your goals, your current enterprise processes, and their associated metrics.  Without knowing this, we'll all continue talking past each other to our mutual detriment.

 

8 comments:

  1. I find this definition that you cite of Enterprise 2.0 a bit awkward:

    Enterprise 2.0 is the use of emergent social software platforms within companies, or between companies and their partners or customers.

    The antecedent for emergent appears to be social software platforms, so it's easy to conclude that this definition is only valid during the time that such software "emerges".

    Another problematic aspect to this definition is the word "companies". This conflates the concept of a company with the Enterprise, when in fact I'm very deliberate to define Enterprise (as an organization whose mission requires size and longevity) in such a fashion so as to include Government organizations. In fact the "mission requires" definition actually embraces organizations that aspire to size and longevity but dont have them yet.

    The reason why I am choosing to pick on that definition is that it actually uses one of my favorite words from the #E2conf which is "emergent".

    I believe it should read in a way that disambiguates the use of the word and makes it clear that emergent refers to a property of the software in combination with its proper use.

    Since this comment is only about how Enterprise 2.0 is (poorly) defined, I'll reserve a comment for the rest of this well thought out piece in a follow on post.

    My 2 cents,
    Miko

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  2. My previous comment uses a somewhat skewed interpretation of the word "emergent", but the point remains that the antecedent to the word appears to be the software, which I consider to be awkward regardless.

    But on to your main points--I define Enterprise here as an organization whose mission requires longevity and size

    http://www.soacenter.com/?p=197

    If we take longevity as a part of the definition of Enterprise, we need to consider the long-term success of so-called "Enterprise 2.0" software.

    Successful software becomes a deep and permanent part of the infrastructure of the Enterprise, sometimes referred to as "Legacy".

    If we can look back in 20, 30 or 40 years and see some of the software we are developing today in perpetual use, I think we can consider it to have been a success.

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  3. For me, the key point here is that the "Enterprise 2.0" discussion offers a variety of new ways of working that can be incorporated into the business world we already occupy. You are correct, I feel, in saying that E2.0 is not an evolution of E1.0 (and for me the very versioning itself is presumptious).

    The capabilities and behaviours that people refer to as E2.0 need to be woven into existing successful business practices to replace or support those that are not fully effective. It is therefore neither evolution or revolution. It is simply a toolkit that we can select from as appropriate to our needs and circumstances.

    Regards
    The Enterprising Architect
    http://theenterprisingarchitect.blogspot.com

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  4. Agree a lot of what you posted here. I also wrote a fairly detailed response to Howlett http://bit.ly/j6xn7

    My response focused more on case studies and real world examples of business pain.

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  5. Hi.
    Excellent, thanks.
    I just question your definition of emergent - to check I googled 'define: emergent' and didnt find one answer that agreed with yours.

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  6. Nenshad,

    It is apparent the current E2.0 dialogue misses a critical element; the enterprise. As you said, that ridiculed set of processes and software that manage/consolidate the operation of a company or government. E2.0 will continue to languish until it acknowledges that which already exists. To that end I posit a few additions to the E2.0 dialogue:

    Enterprise 2.0 applications fall into three categories: Communication - Operation - Customer. E2.0 applications have to follow two rules: 1) Do no harm - to existing business or business systems. 2) Increase revenue or margin as the result of their use.

    E2.0 has been too narrow in its definition (social) and too ignorant to the realities of all enterprises today. E1.0 made the mistake of ignoring the first rule and never quite made any confident that the second rule was ever achieved. E2.0 applications exist, are being implemented, and are strictly obeying the first two rules.

    One such implementation we participated in delivered a 300% increase in productivity, accuracy improvements from 99.6% to 99.9996% and consumables reductions of 91% without touching a single line of code in the host; done in less than 3 weeks. There was not a single social application in the mix; instead addressing all three segments of the customers business (F100 Mfg). In the near term we will do our best to contribute to the definition of E2.0 solutions by demonstrating their value and use to commercial benefit.

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  7. This is a very well done analysis - but am afraid that you are holding back at the conclusion part. Where you are not prepared to declare E2.0 a crock, and I am not either, you are giving it more time to prove itself and in the process validating its current standing as 'in process'. I am not sure I am so magnanimous.

    I see a steel-iron giant with feet of mud.

    Truth be told the present state of E2.0 is the fault of the very same people who are supposed to be propagating it. My perception at the conference was that (with large exceptions) these were IT people asking for permission from the business stakeholders to change things. They were trying to convince the rest of the organization that there is value here, that the tools work, and that the results are real.

    In other words, not even sure they were convinced themselves - or not even sure if they had the results to make the case. Asking for permission in the enterprise is tantamount to not getting things done. Ever.

    Look at the examples of those solutions that did make a difference and did make an impact (and still today continue to make one): ERP, CRM, KM (OK, debatable - but far from where we started) -- even CMS. They all took control and just set on a war-path to prove what they could do and changed the way we do business in the process. The "needs" that created them were not even close to the importance of E2.0 today.

    By contrast, we are talking about Kumbaya collaboration that (as you well put it) simply fills in blanks but accomplished no greater progress to the enterprise.

    I do believe that we are so very early on this process that we are all just not realizing what the changes will be. You will see the names E2.0, SM, S-anything begin to disappear in the next 2-3 years in favor of a "social business" (really don't like that name, but does a good job for now in describing what we are trying to build) model where all the tools are leveraged towards a better business model that does everything we are saying that E2.0 is supposed to do.

    I know, I am ranting and babbling. Bottom Line: E1.4 is as good as we are right now, and as good as we should be considering the many working parts that we need to make work together, and we are going to see lots of changes in the next 2-3 years and beyond that are probably going to surpass what most people are thinking is going to happen.

    After all, evolutions don't happen overnight - and in business they take even longer.

    Thanks for the platform...

    Thanks
    Esteban

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  8. There is a lot of white space in any enterprise. Companies that know how to execute have figured out how to make the white space work instead of leaving gaping voids that put a drag on the company. But it’s hard to do because making the white space work involves the V-word (values). Companies with strong corporate values make the white space work because people know what to prioritize. Values drive business alignment; employees can apply their own judgment and get things done. But this is hard for the vast majority of companies to do. It relies on the leadership investing in things they don’t get. In a recent McKinsey poll, only 8% of executives rated values as “crucial”. Yet the Conference Board reports year after year that excellence in execution is the chief concern of executives worldwide.

    Best Buy is a great example of a company with strong values made stronger through enterprise 2.0. The big question is, can enterprise 2.0 emergent social software platforms “employee-source” some of the missing values and alignment for the remaining 92% of the rudderless companies out there? I think so, and pretty much every department or company that has done even a half decent job of implementing these tools has agreed. “Emergent social software platforms” are a watershed in enterprise collaboration and communication, and that translates to real dollars through better business execution - and that’s no crock.

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