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The Business of Teaching Elephants to Dance
belongs to Industry  by nGenera on 2007-12-03 10:45 AM read 407 times Source: http://www.readwriteweb.com/archives/teaching_elephants_t... |
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Yesterday I attended a “Chalk talk on Global Innovation and Collaboration” in New York, hosted by BSG Alliance. I went because it was led by Don Tapscott who wrote one of my favorite business books - Wikinomics, How Mass Collaboration Changes Everything. That book ranks up in my Top 10 Business Books of all time (and with 30 years in business, I have read quite a few).
Dan Tapscott is an example of what in my last post I called “consultants in a knowledge intensive space” who write to build their consulting business. He is clearly in the very elite category that writes books and not just Blogs (you can see others here). Since 1992 he has run a “think tank and strategy consulting” business called New Paradigm. The books clearly help him to a) think through major trends and b) increase visibility/credibility. At his level the book sales are probably meaningful as well.
Yesterday’s event was to publicise the fact that New Paradigm had been acquired by BSG Alliance, a company that has recently raised $20m and is on an acquisition spree, buying consulting firms that help Fortune 500 behemoths deal with what they characterise as a “category 6 perfect storm” brought on by Web 2.0 mass collaboration, Net Generation employees and globalization.
I call this “the business of teaching elephants to dance” after another one of my Top 10 Business Books, the epic tale of how Lou Gerstner took an IBM that was on the ropes in 1992 (having failed to adapt to a PC centric world) and made it great again, which he called “Who says Elephants Can’t Dance?”
I believe that BSG is correct in identifying this as a historic turning point for large enterprises. Large companies have periodically gone through wrenching change in the way that IBM did. Technology companies have been particularly prone to these large “transformations” as the period of sustainable advantage is so short. However what is historically different today is how many companies and industries are going through a wrenching transformation.
Helping Fortune 500 companies to make this kind of transformation is what companies such as Accenture and IBM do. They drive change all the way from strategic Board level objectives down to business process outsourcing. At one point a BSG spokesman said something as an aside along the lines of “of course we don’t want to be another Accenture” but at some level they appear to be aiming to get into that game.
From the Web 2.0 perspective, we see this as Enterprise 2.0 - the use of Blogs, Wikis and social networking type tools within the Enterprise. BSG appear to want to play in this space but were careful to downplay the technology and stress the strategic business drivers. This is smart from their perspective as the technology will increasingly be either a) open source b) priced at consumer levels or c) bundled into the “stack” of a big vendor such as Oracle, SAP or IBM.
The one aspect of change that BSG and the panel they assembled seemed most concerned with was the generational change. They are looking at the Net Generation (the people who Don Tapscot described in his earlier book Growing Up Digital). It was slightly surreal to listen to lots of Baby Boomers in suits using “corporate-speak” describe their teenage children multitasking homework, iPod, Facebook and IM with TV in the background. Their point was that this is how the Net Generation will expect to work and Fortune 500 companies need to find ways to attract the best and brightest talent from this generation.
This is such a superficial view of what matters to this generation. Like every other generation they are simply impatient to make a difference and the communication tools are pretty incidental.
We are still at the early stages of Enterprise 2.0. Most enterprise technologies go through three overlapping waves of adoption (you can map these to Crossing the Chasm):
1. Media Wave. This is when you make money from seminars, workshops and research reports.
2. Lighthouse projects. These are often “skunk works” projects done for very little cost, under the corporate radar. There is not a lot of revenue in this phase, but the leading vendors are identified here.
3. Rollout. This is when the big money is made. This is when one sees lots of M&A and roll-ups to create scale.
Today we are at the intersection of 1 and 2. Whether BSG will emerge as a winner remains to be seen. It is a big and ambitious play for sure.
I suspect that consultants are useful and do well in periods of incremental change but not in the kind of wrenching transformational change that BSG identifies. In periods of incremental change, top management stays in place and needs help implementing objectives they have defined. In periods of wrenching change, the Board (goaded and pushed and motivated by Private Equity and Hedge Funds) change the top management. The IBM board did not bring in consultants, they brought in Lou Gerstner who could not stand behind a bunch of consultants to make the changes that were needed. That form of leadership takes a huge amount of emotional authenticity.
The fundamental issue is that the reduction in transaction cost enabled by the Internet reduces the value of scale and vertical integration that characterise Fortune 500 companies. This will level the playing field for smaller companies that trade together in semi-formal networks.
The lesson for start-ups who currently sell into consumer markets but would like to get more adoption in large companies? Don’t do anything different would be my advice. The new forms of communication will all get adoption under the corporate radar. As long as you have a model that is not dependent totally on advertising (i.e. you have an “ad free” version for a subscription fee) people will sign up with a credit card and expense it.
Scott, I think this piece is not in opposition at all. I think he clearly acknowledges the massive transformation going on in the space.
He does say a couple of things that I disagree with though.
First, he says that the focus working styles and communication of this generation is a superficial point. That is a pretty weak point on his part and he does not back it up with anything. Regardless, BSG's position and vision does not rest solely on that aspect of this generation and it's about consideration of the other characteristics of this group as well.
Second, he implies that change in organizations will occur thru board replacement at the leadership level not thru some Accenture-like approach. That is not in conflict with our vision, execution or ability to grow the business at all. However, I am not sure where he thinks the leadership will come from. This is a whole new era of leadership and as Brian Fetherstonhaugh, the CEO of Olgivy One, so eloquently pointed out, there is no baseline for these current group of leaders. They built their success and careers by totally different rules. Regardless, BSG Alliance will be there to help old and new leadership navigate the journey to be a Next Generation Enterprise.
Cyd
I don't consider the entire article in opposition. I agree Cyd that many points are favorable to the BSG-A position. Overall, I find it a balanced and well reasoned piece.
I was referring to the following opposing views (in article order):
"This is smart from their perspective as the technology will increasingly be either a) open source b) priced at consumer levels or c) bundled into the “stack” of a big vendor such as Oracle, SAP or IBM."
We have an Apps Team (although a tiny one) and a strategic intent that our corporate valuation be leveraged or driven by defensible IP (the "little p", as SteveD would say).
"This is such a superficial view of what matters to this generation. Like every other generation they are simply impatient to make a difference and the communication tools are pretty incidental."
You address this point in your reply.
"I suspect that consultants are useful and do well in periods of incremental change but not in the kind of wrenching transformational change that BSG identifies. In periods of incremental change, top management stays in place and needs help implementing objectives they have defined. In periods of wrenching change, the Board (goaded and pushed and motivated by Private Equity and Hedge Funds) change the top management. The IBM board did not bring in consultants, they brought in Lou Gerstner who could not stand behind a bunch of consultants to make the changes that were needed."
You touch on this point also. As the "consultants" prominently mentioned in this paragraph, I presume we see ourselves leading corporations fully through their transformation. The author obviously disagrees.
"The new forms of communication will all get adoption under the corporate radar."
Our position again appears very "on the corporate radar".
I agree with the points above. Overall, I think R/WW is a highly credible social media site, so we should have a reply or two to this article. I would like to craft one reply on the general model of BSG. The article is actually highly supportive of our approach, if they only understand the context.
A reply would include (a) briefly explaining the big P platform approach, (b) explain that the NP and Concours moves were to extablish a leadership beachhead in the Media Wave which is currently underway and (c) detail how having a defensible IP technology platform is not antithetical to opensource, third party best of breed SaaS apps and webservices (such as Innocentive).
I think also addressing the points Cyd raises could be worthwhile open debate on the R/WW site.
"I suspect that consultants are useful and do well in periods of incremental change but not in the kind of wrenching transformational change that BSG identifies. In periods of incremental change, top management stays in place and needs help implementing objectives they have defined. In periods of wrenching change, the Board (goaded and pushed and motivated by Private Equity and Hedge Funds) change the top management. The IBM board did not bring in consultants, they brought in Lou Gerstner who could not stand behind a bunch of consultants to make the changes that were needed. That form of leadership takes a huge amount of emotional authenticity. "
Above is a point that was discussed at our recent planning session. I think many companies will make the same mistake that IBM did in the late 1980's and early 1990's (referenced in B. Lunn's blog). So will consulting companies trying to help "elephants dance". I don't believe BSG will make the same strategic mistakes - the future is pretty apparent at this point.
IBM's biggest mistake was - not wanting to cannibalize their high margin markets (plus, I believe they arrogantly thought PC's and RISC microprocessors were a fad just like many orgs think MySpace/Facebook is for kids - funny thing is that IBM invented PC's and RISC). So, I disagree with the author on this point - technology is at the center of this Cat 6 storm. It's not "incidential"
"It was slightly surreal to listen to lots of Baby Boomers in suits using “corporate-speak” describe their teenage children multitasking homework, iPod, Facebook and IM with TV in the background. Their point was that this is how the Net Generation will expect to work and Fortune 500 companies need to find ways to attract the best and brightest talent from this generation... This is such a superficial view of what matters to this generation. Like every other generation they are simply impatient to make a difference and the communication tools are pretty incidental. "
(I put an excerpt below of something I wrote back around 1997 which documents the IBM saga)
As I've said many times - technology does not solve problems per se. I've seen companies pay consultants to configure multi-million dollar fully integrated Web-based ERP systems to look just like their old, wildly inefficient existing processes. Companies need help seeing what's coming over the horizon - and - they need technology properly implemented to keep pace.
The other big "gotcha" is not understanding the true nature of the corporate mission. A good example is Apple. They believed they were a hardware company more than a software company. If they would have allowed the MAC OS to run on PC's much sooner, Microsoft would have been scrambling or on the ropes (in 1996, Apple had only 5 weeks of cash on hand). I think history will repeat itself. There's a natural eb and flow to corporate dominance (see Fortune 500 picture below).
So - it is about technology and it is about people. Companies need to think creatively about what will drive value in the future and get working on it - in the midst of this Cat 6 storm. Having been through two category 5 hurricanes in a period of three weeks in Louisiana, I can tell you these things aren’t very much fun. You can't stop the storm from coming, but you can prepare for the inevitable.
Where did they go, and why?
The IBM saga
IBM was “the Blue in Blue Chip”. They were so dominant in fact, the Justice Department considered them a monopoly, and by a Consent Decree, prevented IBM from bundling software with hardware and entering the services market. As pointed out by Intel’s CEO, Andy Grove in his book – “Only the Paranoid Survive” - John Ackers, IBM's CEO in 1985, said, "we are not a networking company." Top management at IBM viewed themselves as a mainframe company. Internally developed open networks and inexpensive RISC computing platforms were considered a threat to their high margin “big-iron” business. The problem with this thinking is – if you don’t re-invent your business model to thrive in emerging markets – whether or not it will cannibalize your existing sales – someone else will fill the void. Then, you get the worst of both worlds – reduced revenues from core business due to substitutionary products, and higher costs due to under-utilized capacity.
IBM’s stock was essentially flat for the better part of a decade - from 1985 through the early 1990’s when it tanked. This was the time period where the market was demanding alternative solutions to IBM’s expensive, proprietary offerings - and enabling technologies quickly emerged to deliver these solutions. Lou Gerstner was hired as Chairman and CEO of IBM in 1993. They had to create a $11.4 billion work-force-related reserve in 1992 and 1993 to plan for worldwide staff reductions of approximately 110,000 people. The cost cutting and subsequent brain-drain was devastating. Many of the best and brightest employees took a buyout package, while many of the less productive stayed on.
Today, IBM is a very different company. They are offering open, network-centric solutions - and a major portion of their revenue is now derived from services versus hardware. The lesson here is that IBM ignored substitutionary products. They did not provide market leadership into emerging technologies. They were neither providing leadership, nor were they able to react quickly to reposition their company. Being slow and mis-positioned proved to be a very bad combination.
Bernard says BSG "is on an acquisition spree". I wouldn't characterize what we're doing as "an acquisition spree". We're just carefully picking out the most nutritious items at the "sea change" buffet.
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BernardL raises some interesting points here and I'd like to stimulate some discussion on our answers to his arguments.
Thoughts?