Thinking about the Big Shift and the Social Enterprise

Introduction

I think it was about three years ago that I first came across the Shift Index; I’d been reading about it in the blogosphere for a while, somewhat idly, my natural curiosity aroused; John Hagel, John Seely Brown and Lang Davison had begun to share their findings in public, and I’d found them intriguing. [I’d already become a big fan; I’d come across JSB via The Social Life Of Information a decade earlier, and met the two Johns a number of times while they were working on The Only Sustainable Edge, particularly when they shared some of their learnings at an early Supernova. [Shout-out to Kevin Werbach: We need more Supernovas!]. Fittingly it was at a later Supernova (2009) when I had the chance to spend time with John Hagel, both on stage and off, and I began to understand the sheer enormity of what they’d been working on.

The Big Shift is a monumental idea, which then spawned the Shift Index, which in turn gave rise to The Power of Pull. If you haven’t done so already, you should read about the origins of the Big Shift in their blog (after all, it is chronological); you should also spend time understanding how the Shift Index is measured, and why it’s important; and you should read the book The Power of Pull.

The ideas contained in the publications cited above may not be familiar to some of you. I shall therefore try and share them here very briefly, so as to provide you with the context for the crux of this post. [Sometimes, when I seek to summarise, I find it hard to avoid being influenced by other, related research. So if my summary has overtones and tinges of Carlota Perez, please forgive me. Similarly, if you see strains of Cluetrain waft into earshot, mea culpa. Forgive me. These things happen.]

The Big Shift and the Shift Index, summarised (my words)

There’s been a material, long-term shift in the nature and structure of business, whom we conduct business with, how we conduct that business. The shift covers many trends we have sought to document, understand and analyse: globalisation; demographic changes; the evolution of the digital infrastructure, of mobility, of ubiquitous connectivity; partnering, outsourcing, offshoring; open platforms and innovation; social networks, relationships and interactions; collaboration, co-creation, crowdsourcing and collective intelligence.

It’s been hard enough to bring these apparently disparate trends into one unifying narrative. It’s been even harder to quantify the impact of the trends, particularly when seen as a coherent whole. The Big Shift is the narrative the authors give to this whole phenomenon, and the Shift Index is their way of measuring the impact of the shift. As a result of the shift, competitive intensity has increased considerably over the years, and return on assets has fallen sharply over the past five decades or so. Companies that want to succeed must learn to innovate “institutionally”, taking advantage of the tremendous advances made in digital infrastructure, transforming themselves from focusing on “scalable efficiency” (operating cost reduction) to “scalable learning” (reducing the cost of adaptation and change).

The Big Shift is characterised by three “waves” of fundamental long-term change. The first wave sets up the foundations, leveraging the digital infrastructure and where appropriate the significant shifts in public policy that have eroded barriers to entry, participation and movement in most arenas. This accelerates change and intensifies competition, moving the source of economic value of companies from knowledge “stocks” to learning “flows”; static, codified knowledge is replaced by distributed tacit knowledge and collective intelligence, and, more importantly, the ability of the firm to generate new knowledge, to disperse that knowledge, to iterate it and learn from the iterations. The second wave concentrates on these flows and the ways they can be facilitated and amplified.

These two waves are necessary, but by themselves are not sufficient to deliver the radical performance improvements needed to respond to the Big Shift. The third wave is about that response, how institutions will have to learn to innovate at institutional level, truly transform themselves from the foundations outwards; how they will move from scarcity-thinking to abundance-thinking, from diminishing-returns models (based on knowledge stocks and experiences) to increasing-returns models (based on knowledge flows and learning); how the environments and participants and techniques necessary for this will manifest within and beyond the enterprise boundary.

The Shift Index therefore consists of three sub-indices, related to each of these “waves”: the Foundation Index, the Flow Index and the Impact Index.

Relationship between the Big Shift and the Social Enterprise

Marc Benioff’s vision of the Social Enterprise is nearly a year old now, and at salesforce.com (where I work) we’re learning about the meaning and extent of that vision with every customer engagement. While every engagement is different, the core principles remain the same: connect your staff and your partners; connect your customers, your products and your distribution; do this across public and private networks; ensure everything you do is in the context of a common, holistic view of the customer.

Once this framework is established, companies can transform the way they engage with the customer: how they communicate with each other, how buying and selling takes place, how service is provided, how marketing is carried out; they also transform the way they work: how they collaborate within the firm, with partners, across distribution networks and with customers. As more and more companies become “social enterprises” we’ve been learning about the common elements as well as the distinctive differences.

I’ve had the privilege of observing what’s been happening across a range of customers, contexts, geographies, cultures and markets. And, as you would expect, I’ve sought to apply a series of lenses to those observations. Not surprisingly, one of the first lenses I chose to apply was that of the Big Shift. I felt I understood the Big Shift, that I believed in it. I also believed that the Social Enterprise was an idea whose time has come, particularly when I saw the kind of impact it was having on the market. So it behooved me to reconcile the two ideas.

Which is where this post is leading.

The concept of the Social Enterprise is underpinned by the cloud: a public digital infrastructure based on open standards, scalable and elastic. In effect, it represents the Foundation “wave” of the Big Shift.

The core of the Social Enterprise is connectivity, bringing about collaboration and co-creation; customers, staff, partners and products are all connected, using common “language”, facilitating the transformation of the organisation from experience-based to learning-based, from stocks-based to flows-based. In effect, this represents the Flows “wave” of the Big Shift.

The construct of the Social Enterprise is institutional innovation: innovation in engagement, in sales, in marketing, in service, in product engineering and design. The scalability and flexibility of the infrastructure, combined with the ease of identification and access to the right resources at the right time, allow the enterprise to find areas of high growth potential simply, effectively and affordably.

The networked character of the Social Enterprise means that innovation takes place at the edge of the organisation, where customers and partners come into contact with staff; processes are created, repaired, eradicated by people who use them every day, who derive value from them every day. When areas of high growth potential are identified, the cost of building products is kept low because of the cloud infrastructure; you can rent the compute, storage and bandwidth needed; using internet-quality development processes, product launches take place quickly; using social media monitoring tools, feedback loops are effective and meaningful.

The Social Enterprise is a self-reinforcing process where growth opportunities are identified close to the market and in conjunction with partners and customers, where the right people and information is made available at the right time and in the right place, where experimentation is economically sustainable, where true learning takes place, where the quality of the feedback loops is unsurpassed. It works well for existing products as well, not just by reducing the cost of change, but by allowing exception handling to take place using the power of connected communities, within and without the enterprise.

Maybe I’m a hammer, and I see everything as a Social Enterprise nail. If that is the case, I’m sure you’ll tell me, call me a shill, whatever. But I’ve had time to think about this. I’ve spent years trying to understand the Big Shift and the Power of Pull, and studying their manifestations. I think I can see, with some clarity, the emergence of institutional innovation across the customer base; the construction of creation spaces; and the gentle growth of collaboration curves based on increasing-returns models.

Maybe I’m a hammer, and I see everything as a Social Enterprise nail. But from what I see, there is every likelihood that companies choosing to become social enterprises are setting themselves up for radical upward shifts in performance.

That’s how I will know that the Social Enterprise represents the requisite response to the Big Shift, when I see performance levels skyrocket.

It’s early days. Many firms are still grappling with wave 1, and are confounding themselves with tautologies like the “private cloud”. It doesn’t matter if your cloud is Public, Private or Pink. What matters is who else is sharing your costs. If you’re the only one sharing your costs, then you’re also the only one kidding yourself.

It’s early days. Some firms have moved into wave 2, with a few finding it hard to create an environment of sharing. Often the constraints are technical, driven by the vertically integrated suites of the previous generation rather than the open platforms, ecosystems and federation principles of the new generation. Mistakes will be made, but learning will take place. For some it will be too late.

It’s early days. A few firms are moving into wave 3, really looking to raise performance levels radically and rapidly, transforming their DNA into one of institutional innovation and learning, with the right environment, techniques and participants in their creation spaces.

They are the ones that will succeed. Others may achieve those levels as well, but the odds against them increase every day….. the pace of change is punishing.