More on the Power of Pull

The world keeps changing. There was a time when all the conversation related to a blog post could be found in the area around the post, the blog itself. Nowadays things are somewhat more complex. Today, if I want to find out how my post is being received, I have to do a number of things:

1. I have to tweet the existence of the post on twitter. I spent time not doing this, but for the past six months or so I’ve been doing this. Since I’ve only written twenty or thirty posts in that time, my followers have not complained so far.
2. Then, having tweeted about the post, I have to watch for the RTs, twitter retweets. The number of RTs, the people doing the RTing, how people I’ve never heard of then RT the RTs, all this is part of watching localised viral action. And learning from that.
3. In parallel with this, I have to watch for people “liking” the post on Facebook, ever since they bought FriendFeed. And the comments they make. Similarly, I have to watch for comments on LinkedIn as well as”notices” people publish on identi.ca. Why do I do all this? Because the conversation is important to me. That’s why I blog. That’s how I learn. So if the conversation is taking place in a number of places, then I have to go there.
4. Finally, I have to watch for DMs, twitter person-to-person mail, along with trad email on the topic, as people reach out to me privately about the blog post. Some prefer it that way. It’s not for me to decide or judge. What matters is that I can get to the feedback and learn from it.

Which brings me nicely on to yesterday’s post, on Push and Pull, reviewing The Power of Pull (John Hagel III, John Seely Brown and Lang Davison).

Lots of retweets, some nested retweets, but so far not a peep on the blog. I guess people are still taking it in, I have this penchant for the longer post every now and then. But. What I have had are DMs, and a few emails. And strangely enough, all the private comments were the same. Two comments, usually in tandem, both about The Power Of Pull.

“I don’t see it”. “I don’t think that the institutions are ready as yet”.

These are important comments and deserve a response in public.

In some ways, all this reminds me of two earlier small shifts I’ve had the joy of participating in/catalysing, both while at Dresdner Kleinwort Wasserstein. The first was to do with embracing opensource, which we did in 1999. Not just using opensource, but contributing to opensource. By early 2001 we were already launched as www.openadaptor.org, thanks to my erstwhile boss and mentor, Al-Noor Ramji. How wonderful to see that it continues today.

The second was to do with regular use of IM, blogs and wikis, which started in the 90s but crystallised in 2002-03. They became the basis for a number of case studies at Harvard Business School, and then formed part of the impetus for Andrew McAfee’s excellent book on Enterprise 2.0.

In both cases, resistance from the core of the organisation was high, and the immune system did everything in its power to prevent progress. Over time, the people and personalities changed, and life moved on. So what happened? Opensource stuck and grew. Social software grew, but less well: the use of IM and wikis continued apace, but blogging dropped off, a trend I want to come back to.

There was a third small yet significant shift I sought to catalyse, one that led to my having the mail address [email protected]. At Dresdner Kleinwort, we had a real challenge with Slammer. There was this awful weekend where we were hit early Saturday morning, had a huge team working round the clock throughout the weekend (I can still remember the problems with patch 39 and patch 61), and just about managed to get our desktops ready for Tokyo trading for their Monday. That led to a management team powwow where we decided we would put forward a plan to replace all MS in the bank with Apple. Project Jobsworth was born, a pun on Steve Jobs and on the likely response of the powers-that-be. Remember, this was at a time when I was one of the powers-that-be. We were only given permission to pilot up to 650 desks; so we started learning about OSX (which was easier than it sounds, there were a bunch of Objective C enthusiasts in my department, collective relics of a NextStep initiative in an earlier life), we brought in a bunch of G4s and laptops and cinema displays, even had a co-branded online shop. But it led nowhere, we could not solve simple yet critical issues to do with Reuters and Bloomberg and Excel and that was that. No more “linux with QA and style”.

Today, looking back, I tend to colour all this with my learning at BT, particularly to do with Ribbit. How to acquire a startup in Silicon Valley, something we hadn’t quite done before. How to acquire said startup pre-revenue, something unheard-of. How to run the business for capability rather than for revenue, yet build a strong springboard for real growth, revenue and profit. How to ensure that the wheel of BT does not crush the butterfly of Ribbit.

And what I see is this:

Dresdner Kleinwort allowed us to bring in opensource pretty much according to the Power of Pull playbook. Introduced as an edge activity, spikes of talented people working to their own rules, “controlled” only by capital and operating expense annual envelopes, left to their own devices as to how to create and extend value. So it happened.

Dresdner Kleinwort couldn’t do much about IM, Bloomberg had made it an industry standard via their chat, and things like ICQ and Jabber had evolved into Parlano and everyone used it. And they still do.

But blogs were about something different, social software in general was about something different. About conversations to do with ideas, some of which actually had to do with work. This attacked the intellectual core of a company’s existence. I began to realise that watercooler and washroom conversations were tolerated because they were “not part of work”, and that social software was threatening that divide. Which made control freaks very uncomfortable. Particularly as blog posts began to deal with sensitive subjects such as the process of performance evaluation and review, sales commission plans, forecast quality, even corporate strategy. This. Would. Not. Do. So as soon as management support dwindled, so did the initiative.

The move to Apple was similarly stalled, because it attacked another “central” heart. The right to decide who to buy services from. The right to decide who made preferred supplier lists and who didn’t. I was actually told categorically that a key reason not to proceed with Apple was their financial instability in comparison with MS. That’s why I’m not a banker. Just look at the stock market behaviour of those two firms since early 2003 and you can decide for yourself.

Why bring all this up? Because I think it has everything to do with The Power of Pull and the question of whether institutions are ready for the implications.

• I think everybody knows that from a theory-of-the-firm perspective, things are broken; that transaction costs are no longer as important as relationship costs.
• I think everybody understands that there is a shift from hierarchies-of-businesses-with-products-in-silos to networks-of-relationships-and-capabilities.
• I think everybody realises that partnership and open innovation is a must, despite natural monopolistic urges to have end-to-end-control.
• I think everybody appreciates the importance of talent, of knowledge capital and of social capital, all these are understood and responded to.
• I think everybody has bought into the need for agility in business, the importance of lean processes and quick-turnaround decisions.

The problem is not in the changes and shifts above. It is in what people don’t talk about, don’t want to talk about. What they can’t talk about.

And that is this:

How do we account for all this? How do we make all this work in our current paradigm of management and control and resource allocation and hierarchical empowerment? And the sobering answer? We don’t know.

Anyone who has worked in “agile” environments to any significant extent will be aware of the “planning horizon” problem. There is an implied “it is done when it is done, and it will cost what it will cost” principle in agile environments, and this militates against traditional financial disciplines.

Over the last two decades, this planning horizon problem has gotten a lot worse. On the one hand, the markets and analysts have colluded to get more and more short-termist in their thinking and in their expectations, and this has been reflected in the savagery of valuations and responses to quarterly earnings statements and forecasts. On the other hand, more and more organisations are finding that it’s not just product development cycles that have gotten shorter, product life cycles have collapsed and compressed as well (a point well made in multiple places in The Power of Pull). So sales, revenue and margin forecasts are harder to manage. To make matters worse, software development/integration is becoming an increasingly significant part of product development, management and operations, and we all know what software estimation has been like. [I’ve tended to believe that software estimation is like a man growing ear hair. It takes time to get good at it.]

This Scylla and Charybdis scenario is making life very difficult for management everywhere. Increasingly shorter reporting cycles, higher expectations of accuracy, in an environment where business forecasting has been made much harder as a result of software-driven products and services with compressed life cycles.

All good reason to throw The Power of Pull into the bin, isn’t it?

Yes.

But do realise that you’ll be throwing the future of the firm into the same bin when you do that.

Because what we need is a class of person whose forecasts are reliable despite supply and demand volatility, despite cost and revenue fuzziness. Agnostic to market ups and downs. What we need is a class of person who understands how to convert the swords of traditional factories into the ploughshares of the creation spaces that the Power of Pull speaks of. What we need is a class of person who not only knows how to make use of geographical spikes of talent and passion, but one who knows how to make the spikes happen in the first place.

The institutions that win tomorrow are those that get better at having access to such a class of person, at attracting such a class of person, at knowing how to relate to that class of person in order to achieve a significantly higher level of performance. Which is what the book is about.

We’re going to have to learn about measuring and valuing “flows” rather than “stocks”. We’re going to have to learn about valuing social and relationship capital, at a time when we’ve resolutely refused to allow any form of human capital to be appreciated, much less actually valued. We’re going to have to learn about trusting the talent at the edge to do the right thing, and to keep doing the right thing, because historical forms of cost and revenue control are no longer effective.

The old ways do not work. That’s what the Return On Assets motet of the Big Shift is all about.

The old ways provide us examples every day of major companies having to announce major writedowns, confess to major disasters in estimation and forecasting, even collapse as a result of not being able to bear the Scylla and Charybdis burden. If you think the last two decades were tough in this regard,  you ain’t seen nothing yet.

So, to everyone who says to me “I can’t see it” or “I don’t think the institutions are ready for it”, all I can say is “It’s too late for debate. Be there. Or be not there.”

In this context, one of the big reasons why I liked the book is that it’s written by people who really understand the world of accounts and accounting. Much of the book is empirical. Disregard it at your peril.