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.
20 thoughts on “Thinking about the Big Shift and the Social Enterprise”
No sir, you are not a hammer. I wrote about this today myself. Not as deep, but then neither am I. It’s on my G+ and FB posts now, and will be on http://blog.stealthmode.com in the morning:-) I am also seeing marketers caught in this shift.
Thanks Francine, always nice to hear from you. I will go look at your FB post, or maybe I’ll wait for the stealthmode update in the morning, it’s nearly one am here.
JP, fantastic post, very organic & thought provoking. I invoke Hagel often in the unbundling context & thanks for rEminding me to dial in to this book. Just heard Luigi Zingales & his meritocracy v. democracy argument, also useful in the current disruption… And creativity!
The cost sharing is surely key? Is not the definition of a true network that the costs are shared? I look back at the grand father Visa. Here the network adds 1,000 times+ the amount of terminals and processing power that each member does. In traditional organizations fixed process costs rise in tandem with revenues. In networks they rise at a linear rate versus an exponential rate of revenue. Look at Craigslist versus Newspapers
JO I am not sure though that a conventional organization can make this shift internally? For it would have to give up its core process to do that – The NYT will have to give up the paper – Oil companies their core processes for oil etc. Maybe the best they can do is a Visa where they join a network to offer a common purpose? I have always thought that the Airline Alliances were under networked – Could they not remove a ton more costs by sharing more?
I can’t think of a better explanation for how we conceived Anthemis. Networks not hierarchies. Ecosystems enabling the edge. Institutionally and structurally designed for continuous innovation and adaptation.
Great reminder of why we’re so fortunate to have JP as a Venture Partner: “what he said!”
While I agree with the idea of Social Enterprise, I am doubtful if the organizations are ready to adopt the idea. I remember your own post – Gamification as a lipstick on the pig – quoting that social enterprise would look for radical transformation of the workplace practices.
While the idea of customer centricity will pull the entire organization around social/collaboration tools, we also need to think about what it means for the individual employees and their growth within the organization. For example, the companies’ HR practices still measure individual performance, not a group or team performance.
In the context of social enterprise, I believe HR has lot to innovate and contribute to provide an organization structure and ecosystem that would be conducive to exist and deliver services to the customers. Am yet to come across innovation in organational structures, practices of performance measurement and individual employee’s career paths. Sustainable social enterprises can only be created if we have those supporting ecosystem in place. In summary, cloud/collaboration tools/technologies alone will not help to transform an organization into a social enterprise. There is quite a lot needs to be done outside of IT.
Another challenge would be the beneficiaries of not-so-social-enterprises (that is enterprises of hierarchial structure) would not be so happy to see a social enterprise emerging. So, its going to be a battle to implement the change, unless somebody radically demonstrates the results out of its social enterprise practices.
Inspite of thousands of references to innovations in Tech industry, organizations are comfortable in running their own way!.
JP – This is a fantastic post!! I wish we had been able to communicate as concisely and compellingly the key concepts in the Big Shift and the Shift Index. But, then again, if we had been able to, maybe we wouldn’t have needed to write a book – The Power of Pull.
I think you are spot on in your instincts about the intersection of the Social Enterprise construct and our narrative of the Big Shift and the power of pull. As I see it, the Social Enterprise is all about harnessing the knowledge flows that are enabled and amplified by new generations of technology, especially the cloud and social software to drive more rapid performance improvement. I applaud your emphasis on not viewing the enterprise in isolation but focusing on the importance of extending the Social Enterprise concept across larger and larger ecosystems of participants to tap into even broader and more diverse forms of knowledge flows.
You are also spot on in emphasizing the unevenness in the adoption of Social Enterprise concepts and practices – I would say most enterprises, especially larger enterprises, are still in the earliest stages of the adoption process. From my experience, the biggest barriers today to more rapid adoption have little to do with technology and much more to do with mindsets and institutional forms that discourage, if not punish, broader participation in knowledge flows. Until these are challenged and changed, people and companies will experience growing stress as they seek to respond to mounting pressure with practices and institutional forms that are increasingly inappropriate for the Big Shift. By focusing on institutional innovation, we have the opportunity to turn stress into success.
You have also keyed in on a key point which is that the Social Enterprise, by focusing on growth opportunities emerging on the edge of the enterprise, is uniquely positioned to exploit the potential for leveraged growth. In this case, we are not talking about financial leverage but capability leverage – the ability to connect with and mobilize complementary capability to accelerate growth in delivery of value to customers. Most executives still think in terms of two growth options – organic growth or M&A. The Social Enterprise opens up a very attractive third path to growth at a time when executives are under increasing pressure from investors to deliver not only near-term profitability but accelerating growth as well.
Bravo!! You have a very powerful hammer – let’s get to work in building some awesome foundations for business in the Big Shift.
It’s a great post JP, and I agree with everything in it. Because I’d like to have even the vaguest possibility of adding value through commenting, I might draw further attention to the role that complementary assets that John made reference to above, with “jobs to be done” thinking (no pun intended!). At the personal experience level, people pull capabilities together in order to get a job done. Many of these are information based these days, including “information about availability”, “information about expertise”, and “information about outcomes”. I think we have yet to truly see the nature of platforms “explode” the traditional concept of the enterprise. I was speaking with a guy from Autocad yesterday, and I asked him would “autocad create a platform where those seeing design issue resolutions could find those that could offer best outcomes/ related services” and his answer was that they were looking at ways of moving down this road, which was inevitable, given the overall move to the cloud. His words.
Really great post. Our question has been less about the shift … and more about what happens when everything is put into the cloud. How does “crowdsourcing organization” work? We think have the beginning of that answer. For example http://www.mozzoanalytics.com … We think intelligence can be brought to the cloud.