Wikis, Weblogs and RSS

We’re gearing up for Kevin Werbach’s Supernova 2005 here in San Francisco next week.  JSB and I will be speaking there and there’s a host of interesting people featured on the agenda.  One person in particular that I am looking forward to seeing again is Philip Evans from Boston Consulting Group.  Philip and I go way back – we both entered BCG at the same time even though, to his dismay, I departed after two years to make the trek to Silicon Valley to do a business start-up.  Philip stayed at BCG, wrote a great book, Blown to Bits, and we have managed to stay in touch off and on over the years.

In preparation for Supernova, Philip did an interview on "Wikis, Weblogs and RSS" along with another friend, Ross Mayfield, and Janice Fraser, the CEO of Adaptive Path. It is an interesting read on what the new Internet means for business. For my money, Philip puts a bit too much emphasis on transaction costs and not nearly enough discussion of the role of the new Internet in driving innovation and capability building, but then I just wrote a book on this.

For those who haven’t seen it yet, JSB and I did a similar interview with Kevin Werbach on "Can Your Firm Develop a Sustainable Edge?" (accessing the interview requires a brief and free registration).

Cooperation and Competition

Thanks to Advancing Insights for pointing me to some interesting new reports from The Institute for the Future.

The first report, Toward a New Literacy of Cooperation in Business (link for pdf file download),  by Howard Rheingold, Andrea Saveri, Alex Soojung-Kim Pang and Kathi Vian, observes that "cooperation is one partner in a pair of strategic choices; its constant companion is competition.  The two go hand-in-hand, posing a choice at every juncture . . ."  It focuses on two key business questions:

• How can new insights about the dynamics of cooperation help us to identify new and lucrative models for organizing production and wealth creation that leverage win-win dynamics?
• How can organizations enhance their creativity and grow potential innovation with cooperation-based strategic models?

This report is a helpful review of the emerging inter-disciplinary field having to do with cooperation and cooperative strategy (the bibliography alone makes the report worthwhile).  The authors develop a map of the relevant disciplines comprised of seven lenses and seven levers, creating a very rich terrain to survey. In fact, at times it becomes too rich – I began to hunger for the classic two by two matrix that is the foundation of consulting.

More broadly, the report ultimately disappoints in terms of delivering on the two questions framed at the outset.  The raw materials are there, but the synthesis into actionable recommendations for business executives remains to be done. The final section outlining five key areas of potential innovation and disruption is suggestive, but the implications need to be developed more explicitly.

The second report, Technologies of Cooperation (link for pdf file download), by the same authors minus Alex Soojung-Kim Pang, is more satisfying, perhaps because it stays closer to the technologies that are reshaping the business landscape.  The authors focus on eight key clusters of cooperation-amplifying technologies:

• Self-organizing mesh networks
• Community computing grids
• Peer production networks
• Social mobile computing
• Group-forming networks
• Social software
• Social accounting tools
• Knowledge collectives

This report has an even richer map for the reader to navigate, combining the eight clusters of technologies with the seven key dimensions of cooperative systems discussed in the earlier report. The authors observe that

. . . each example of a cooperative technology is also a model for thinking about future social forms as well as future tools; each example embodies principles that can help us think more strategically about cooperation.

The report concludes by outlining seven guidelines for learning from cooperative technologies.  Each guideline has value, but the first one, for my money, is by far the most important: "shift focus from designing systems to providing platforms".  Understanding the profound implications of this one principle is challenging in itself. But it is also a huge mindset shift for most executives, even those in relatively enlightened technology companies as most recently (and repeatedly) illustrated by Steve Jobs at Apple.

At the end of this report, the authors come back to where they started in the first report:

One clear lesson from this research is that cooperative strategy does not replace competitive strategy: the two are inter-related and co-evolve. A key challenge is learning to understand the dance between the two strategies, their respective range of choices, and the conditions that urge an organization to follow one or the other at a particular time period and environmental context.

This is the crux of the matter.  These two reports do a great job of surveying the landscape and even creating some interesting maps to orient us. What we need now is a more prescriptive view of the paths that are most promising through this landscape – constrained by the awareness that the landscape continues to evolve and that individual context does matter.

I should mention that the bibliography in the first report rightfully highlights the work of Elinor Ostrom, especially her book Governing the Commons: The Evolution of Institutions for Collective Action.  For anyone interested in understanding the governance mechanisms that help to foster cooperation, her book is an essential read. 

Craft Manifesto

Thanks to David Weinberger for pointing me to Hobbyprincess, the intriguing blog by Ulla-Maaria Mutanen, a PhD student at the University of Helsinki, who is focused on the interface between technology, fashion and crafting.

In one posting, Mutanen comments on the rapid growth of the hobby and craft business in the United States.  It expanded from $20 billion in 2000 to $29 billion in 2004 – a growth of almost 50% in just 4 years. Clearly, more and more people are pursuing their passion to create things.

Mutanen has posted a Draft Craft Manifesto that does a great job of capturing the key dynamics shaping the growth of crafting. For example:

1. People get satisfaction for being able to create/craft things because they can see themselves in the objects they make.  This is not possible in purchased products.

6. Work inspires work.  Seeing what other people have made generates new ideas and designs.

10. Learning techniques brings people together.  This creates on-line and offline communities of practice.

I wish I had been able to see Mutanen’s presentation at Reboot7, the meetup for "practical visionaries" that just concluded in Copenhagen.  Entitled "Craftblogging – A Window into the Long Tail of Fashion?", this is the abstract for her presentation:

In Europe and Japan, the trend against mass-produced fashion is growing. An increasing number of people prefer to buy their apparel from a designer someone has recommended, or one that they personally know. This presentation is about craftblogging – producing hand-made fashion items and publishing them on weblogs. Examples of how people produce, tag and share self-made fashion items on-line provide an opportunity to understand the potential of the Long Tail of Fashion.

Mutanen is on to something very significant.  The urge to create is getting stronger and more distributed.  Technology is playing a significant role in connecting people who share this passion for creation and, in the process, it is intensifying the urge to create.

The Burden of Choice

Virginia Postrel has just written a useful article on "Consumer Vertigo". Her target is the growing body of literature making the case that the explosion in choice we experience as consumers in market societies is creating growing unhappiness and anxiety rather than satisfaction and fulfillment. She cites just two of the most critical books on this topic – Robert Lane’s The Loss of Happiness in Market Democracies and Barry Schwartz’s The Paradox of Choice. (One wag in a review of Schwartz’s book on Amazon commented that he came across 20 books on the same topic and couldn’t make up his mind, so he didn’t buy any of them.)

In her critique of these books, Postrel observes:

For good scientific reasons, psychology experiments systematically screen out the habits and business practices that make real-life choices, especially shopping decisions, manageable. . . Businesses have strong incentives not just to offer options but to help customers navigate these choices.

She makes the case that abundant choice serves us well:

. . . something is missing from the simplistic argument that people would be happier if we went back to the good old days of one-cut-fits-all jeans. That something is pluralism. People are different – in size and shape, in personality, in tastes, in values. . . . Abundant choice accommodates this variation.

But she observes that greater choice has consequences:

In a world of choices, virtue comes from learning to make commitments without regrets. And commitment, in turn, requires self-confidence and self-knowledge.

Although she doesn’t develop this further, Postrel has hit on something really significant here that helps to explain the paradox of choice that is playing out around us: expanding choice begets even more choice.  The more choice we have, the more we have to decide what it is that we really want.  The more we reflect on what we really want, the more we end up getting involved in the creation of the goods that we buy and use. This in part explains why, in a growing range of domains, we are seeing customers get more actively involved in co-creation of products and services. The more we participate in the creation of products and services, the more choices we end up creating for ourselves.

Managing Critical Talent

Thanks to a posting by Bruce Hoppe on his Connectedness blog last February, I came across an interesting study by Robin Athey, who leads Deloitte’s research on organizational performance.  Deloitte has just published a white paper written by Robin called "It’s 2008: Do You Know Where Your Talent Is?".

Robin does a very good job of re-framing the talent challenge faced by companies around the world.  As Robin points out, most companies still tend to focus on attracting and retaining talent.  Unfortunately, at the same time, they neglect the opportunity to more effectively deploy, develop and connect their employees.  As she rightly observes, if companies do a better job of deploying, developing and connecting their employees, they will have much greater success in attracting and retaining talent.  On the other hand, without more focus in these areas, companies spend much more than they have to in efforts to attract and retain talented people.

She makes a strong case as well that development of talent does not primarily concern investment in formal training but instead involves thoughtfully structuring experiences that accelerate learning:

The best way to develop critical talent is through the collaborative resolution of real-life issues ("action learning") . . . . People learn the most in situations that stretch them – the "trial by fire" experiences that put them slightly outside of their comfort zones. . . . People also learn from those they trust: bosses, subordinates, and mentors, both internal and external.

Given this perspective, it becomes clear that development, deployment and connection are all closely related.  Development does not occur unless talent is deployed into opportunities that stretch them and unless talent is able to connect with appropriate and trusted expertise to accelerate their learning.

I have three broad comments on Robin’s excellent white paper.  First, I agree with everything she says, but she tends to adopt a relatively narrow "enterprise-centric view"  – an increasing amount of development, deployment and connection for talent occurs at the edge of the enterprise in collaboration with talent from suppliers, partners and customers.  This is the reason that JSB and I in our book The Only Sustainable Edge put so much emphasis on "productive friction" at the boundaries of the enterprise as a key driver of capability building.

Second, she correctly emphasizes that talent strategies must focus on the "critical talent" of the firm – "the first step is defining exactly which jobs are critical" – meaning "people who create the value an organization needs to succeed." I couldn’t agree more (although I would tighten the definition to focus on distinctive or differentiated value), but then I would ask a second question: for any jobs which are not classified as critical, why is the company still retaining those jobs?  One of the reasons that companies don’t do a great job on talent development, deployment and connection is that they are spread too thin, trying to do too many things.  For any non-critical job, the company should be aggressively trying to shed these jobs and collaborate with companies that view these jobs as critical.

Finally, Robin makes the case that talent is increasingly becoming a scarce resource, giving rise to active talent markets. I mentioned in an earlier posting that economic value gets created around scarce resources.  From my perspective, attention and talent are the two scarce resources that will shape value creation opportunities over the next decade.

Social Network Analysis

Social networks are becoming increasingly critical to understanding business performance.  On my web site, I posted an entry almost three years ago mentioning a variety of books on social network analysis and their relevance to business. I just came across a good bibliography by Patti Anklam and Bruce Hoppe that covers a broader range of resources that others might find useful in understanding social network analysis. Bruce Hoppe’s Connectedness blog (where the bibliography was posted) is a good way to keep current on some of the developments in this field.

Goldhaber and Attention Economy

As analysts try to discern the contours of the Media 2.0 industry (to use Umair Haque’s felicitous term), the economy of attention is emerging as a central construct.  Often this term is used rather loosely, but it has deep meaning.  Many years ago, I first read Michael Goldhaber’s seminal writing on The Attention Economy and I have been greatly influenced by it ever since (a version appeared five years earlier in 1992 as an essay entitled "Attention and Software" in Esther Dyson’s Release 1.0). I continue to be surprised at how little recognition it receives.

Goldhaber rails at all the hype about "The Information Economy":

Information, however, would be an impossible basis for an economy, for one simple reason: economies are governed by what is scarce, and information, especially on the Net, is not only abundant, but overflowing. We are drowning in the stuff, and yet more and more comes at us daily. That is why terms like "information glut" have become commonplace, after all. . . .

There is something else that moves through the Net, flowing in the opposite direction from information, namely attention. . . . Attention, at least the kind we care about, is an intrinsically scarce resource. . . .

Earlier, I suggested that when information flows one way through the Net, attention has to be flowing the other.  Now I want to say that it would be even better to think in terms of attention of some kind flowing both ways.

Consider an ordinary conversation. You could describe it as the exchange of information, but except in a highly technical sense that is rarely a very accurate description of what takes place.  A conversation is primarily an exchange of attention. . . what really matters in every conversation is the exchange of attention – an exchange that normally must be kept more or less equal if one party or the other isn’t likely to lose interest.

Goldhaber spells out the implications of some of these basic insights:

In a full-fledged attention economy, the goal is simply to get either enough attention or as much as possible . . . getting attention is not a momentary thing; you build on the stock you have every time you get any, and the larger your audience at one time, the larger your potential audience in the future.  Thus obtaining attention is obtaining a kind of enduring wealth, a form of wealth that puts you in a preferred position to get anything this new economy offers. . . . since it is hard to get new attention by repeating exactly what you or someone else has done before, this new economy is based on endless originality, or at least attempts at originality.  By contrast, the old industrial economy worked on the basis of making interchangeable objects in huge numbers.

Now, I don’t accept all of Goldhaber’s speculations about the implications of an attention economy.  For example, he anticipated that all organizations would become temporary and that money would diminish in importance as a medium of exchange.  But his basic insights are profound and pinpoint some of the forces that will reshape the the structure and economics not only of the media business, but business in general, including such fundamental notions as brand (something I will be writing about shortly).

To make money, focus on the areas of the economy where scarcity reigns, rather than abundance. Goldhaber appropriately points out that attention is rapidly becoming the scarce resource in our economy. Of course, it has always been a scarce resource – after all, we each have only 24 hours in the day.  But what is changing is relative scarcity – relative to the growing abundance of products, services, content and people vying for our attention and relative to the steady erosion of shelf space and other distribution channel bottlenecks, our attention is becoming a much more scarce resource. It is one of the key reasons that customers are gaining more power in global markets – they own the scarce resource that will ultimately determine who creates value and who destroys value. We are accustomed to analyzing business performance in terms of return on assets but, if one understands the implications of Goldhaber’s insight, executives will need to focus on a new form of ROA instead – return on attention. Instead of looking at market share, we will be looking at share of attention (of individual customers) and share of wallet (again, of individual customers).

For some additional commentary on Goldhaber’s ideas, see Phil Jones’ wiki essay on "The Attention Economy".  Clay Shirky also has a provocative essay entitled "Who Are You Paying When You Pay Attention?", although he never explicitly refers to Goldhaber.  I mentioned Umair Haque earlier – he has some interesting perspectives on Media 2.0 in two presentations available as PowerPoint files here and here.

European Backlash

The French and Dutch have spoken and everyone is trying to decipher what they said.  We know for certain they have strongly rejected the proposed European Union constitution, putting into jeopardy the long-standing movement towards the political and economic unification of Europe.  But what is behind this rejection?

Many analysts are attributing the rejection to fear. The Wall Street Journal quotes European Commission President Jose Manuel Barroso as talking of a "federation of fear" emerging in Europe. At the surface, it appears that fear was a factor, at least in France where unemployment rates are high and the specter of "Polish plumbers" and Muslim laborers from Turkey pervaded the pre-referendum discussion. In the Netherlands, with a lower unemployment rate but slower GDP growth and employment growth, fear may have been less intense, but certainly the public is feeling more economic pressure as the government cuts back on its spending on entitlement programs.

But what really seemed to bring the French and Dutch people together was resistance to political centralization.  At a time of significant economic challenge as competition intensifies on a global scale, the voting public in both countries simply did not buy the proposition that Eurocrats in Brussels would be in a better position to address their needs than their own government officials.  Of course, the so-called constitution (better described as a treaty) did not help matters with voters.  Variously described as a 325 page, a 470 page or a 485 page document (whatever, it’s a lot of pages – a 325 page version of the Constitution is available as a 1 Mb. pdf file here), it offers little assurance that Brussels would be responsive to the European public. As one analysis summarized the proposed changes, the constitution moves powers away from elected governments to the Commission in Brussels, it shifts powers away from the European Council consisting of the elected heads of governments to unelected members of the European Commission and the European Court of Justice, it leaves the European Parliament relatively powerless and it expands significantly the power of the European Court of Justice, perhaps the most unrepresentative body of all.

Skepticism among voters about the growing power of Eurocrats in Brussels certainly does not translate into confidence in their own government officials.  What is truly remarkable about the votes in both countries is that they soundly rejected the recommendations of all major political parties and leading newspapers to vote in favor of the constitution. These votes reveal the profound chasm that has emerged between the public and their own political and press elites.

The "no" votes reflect a failure of political leadership.  This failure in part stems from the need for a new grand narrative.  As George Parker observed in an analysis in the Financial Times on June 3, 2005:

The EU has a serious existentialist question when its citizens cannot remember why it was created, they do not appear to like what it has become and they are frightened of what it will be in the future. . . . As the union’s original emotional power over its citizens – its ability to deliver postwar security and prosperity has waned – they have started to see the EU more as a bureaucratic machine.

Whatever form this new grand narrative takes, European leaders would be well-advised to reconsider the current march towards centralization and "harmonization" of regulatory policies.  The answer to Europe’s economic challenges is likely to lie less in the halls of the EU headquarters and more in the active experimentation and innovation in public policy in provinces and countries around Europe.  This certainly seems to be one of the key drivers of economic growth both in China and India, where local and provincial governments vie to attract entrepreneurial talent and investment.  Adam Segal’s Digital Dragons: High Technology Enterprise in China analyzes the role that this experimentation in local policy has played in the evolution of China’s high tech industry.

Kenichi Ohmae’s  The End of the Nation State: The Rise of Regional Economies provides a broader and more provocative perspective on the growing economic importance of what he describes as "region-states", defined as "an area (often cross-border) developed around a regional economic center with a population of a few million to 10-20 million."  His words on the European Union, written ten years ago, retain their relevance:

In Europe, for nearly four decades, the continent’s leaders have been trying to implement the Treaty of Rome.  But they have been outrun by events. . . . just when nation states began to lose their primacy as economic actors, Brussels created a supernation state.  This is ironic.  It is also tragic.  Of all the developed world, Europe has the richest and densest history of regionalism. . . . In a borderless world, it could draw upon and leverage that heritage with immense profit.  Instead, it has purposely organized itself to stamp that heritage out.

Maybe the people of France and the Netherlands intuitively sense that their future lies in another direction.  Perhaps Europe’s leaders should take this opportunity to reassess their initiatives on a more fundamental level.  They might even discover a new and more powerful grand narrative built upon decentralization, talent building and innovation, both in business and public policy.  Certainly the public in two of the six countries that founded the original European Union have soundly rejected the current direction.

Diamonds and China

The New York Times ran an interesting article by Keith Bradsher today called “Suddenly Sparkling” (available only with registration). It’s about the rapidly growing diamond polishing industry in China, which currently represents 6 percent of the world-wide value add in diamond polishing.

It’s fascinating on a number of levels.  It is another example of China’s ability to compete on skill, rather than simply wage rate advantages. As the article reports,

“With a potent mix of experience, cheap labor, advanced technology and strict quality controls, they are challenging the industry leaders . . . China took over much of the international costume jewelry business in the late 1980’s and 1990’s. . . . diamond businesses in China have rapidly moved beyond  . . . the polishing of the smallest, poorest-quality diamonds. . . . workers in China ae moving to bigger and bigger diamonds.”

China in this case is competing with highly experienced masters of the craft in Antwerp, Belgiumand Tel Aviv that specialize in handling diamonds of a carat or more.  But China is also competing with India, a country with a million diamond workers and an 80% share of the diamond polishing industry.  While China has a distinct labor cost advantage relative to Antwerp and Tel Aviv – compare labor costs for cutting and polishing diamonds at $17 a carat in China with $100 a carat in Israel and $150 a carat in Belgium– it actually competes at a substantial labor cost disadvantage relative to India, where workers are paid $10 a carat. Yet India is on the defensive and expects to lose share. Antwerp, which still specializes in polishing larger diamonds, also expects to lose share to China.

The story is also interesting because the diamond polishing industry in China has concentrated in Panyu in Guangzhou province, about 80 miles from Hong Kong. Much of the competitive strength of China comes from highly specialized local business ecosystems like Panyu, where businesses in particular niches tend to concentrate. In this case, Panyu is reproducing the history of cities like Antwerp, Tel Aviv and New York’s diamond district, where specialized expertise and trust-based personal networks developed.  No doubt this gathering of highly specialized businesses helps to explain the rapid capability building reported in the New York Times. Apparently, one of the big reasons Panyu emerged as a center for diamond polishing is because in the late 1990’s local officials chose not to enforce strict laws of the Chinese government restricting transactions in diamonds.

Finally, there is an interesting personal dimension of who is behind the highly entrepreneurial diamond polishing businesses emerging in Panyu.  In many cases, they are Belgian and Indian.  In this case, China appears to be able to attract talent from other specialized ecosystems to be able to bootstrap its growth in this industry. One of the Indian entrepreneurs in Panyu, Vijay Nahata, is quoted as predicting that, in the highly competitive diamond polishing industry, “China is going to be the leader of the world in two years.”

Accelerated capability building, specialized local business ecosystems and competition for talent – these are all key themes in The Only Sustainable Edge.  We didn’t think to look at the diamond industry but even here these dynamics are playing out with a vengeance.

Re-Making Ourselves

Perhaps the sharpest edge of all is the edge between life and death.  It is an edge that we will all personally experience.  It is also an edge that is spurring significant technological innovation, with widespread economic, social and ethical implications.

Medical science and technology historically has focused on treating diseases of the body.  Increasingly, scientific inquiry and technology innovation are taking on two broader goals: extension and enhancement.  Extension involves understanding the aging process and developing technology to extend our lifespans.  Enhancement involves the development of software (in this case including pills) and hardware (e.g., implants) designed to augment our performance on a variety of dimensions, including cognitive capabilities, resistance to disease, strength and endurance. What used to be considered fringe(another form of edge, if you will) is now rapidly becoming mainstream.

It may be my imagination, but I have a sense that technological innovation is accelerating in these domains.  In the words of Joel Garreau, author of the intriguing new book, Radical Evolution: The Promise and Peril of Enhancing Our Bodies, Our Minds – and What It Means to Be Human, four related technologies are now advancing at an exponential pace to enhance our performance and, indirectly, extend our life spans. Garreau refers to these as GRIN technologies: genetic, robotic, information and nano.

Certainly there has been a wave of publishing in this domain over the past several years. In addition to Garreau’s book, some of the better books providing an overview of developments in extension and enhancement technologies are:

• Ramez Naam, More than Human: Embracing the Promise of Biological Enhancement
• Gregory Stock, Redesigning Humans: Our Inevitable Genetic Future
• Ray Kurzweil and Terry Grossman, Fantastic Voyage: Live Long Enough to Live Forever
• Andy Clark, Natural-Born Cyborgs: Minds, Technologies, and the Future of Human Intelligence

For a different take on these developments, focusing more on the people and personalities shaping the innovation in these two domains, I can recommend:

• Brian Alexander, Rapture: How Biotech Became the New Religion
• Stephen S. Hall, Merchants of Immortality: Chasing the Dream of Human Life Extension

Both of these provide an intriguing view of how the fringe and the mainstream have interacted and shaped innovation.

This posting has become more of a book citation list than I had intended. I have a strong interest in this topic because it  reflects some broader trends in society and in turn is being shaped by these trends.

Just as we are becoming more involved in making the products and services that we consume (see my previous post), we are becoming more involved in making, or more accurately, re-making our bodies rather than simply taking what we were given at birth.  Whether we look at trends in plastic surgery or body modification or some of the technology innovation described earlier, the pattern is clear: we are taking a more active role in shaping what we are and not just who we are.

JSB and I in our new book have written about the importance of accelerating capability building in a globalizing world.  This puts an entirely different, and more personal, lens on the notion of accelerating capability building.