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Process versus Practice

A former colleague of mine, Ken Norton, announced earlier this week that he is leaving Yahoo to join Jotspot as VP of Products.  I have written about Jotspot before and I think it is great that Ken will be joining that team.

In the course of his announcement, Ken made some observations that touch on some broader patterns emerging in the enterprise software business:

When I sat down with Joe to talk about JotSpot, I was a bit skeptical of serving the enterprise.  I’d sworn off enterprise software, and really wanted to keep building consumer Internet products.  What I realized is that Joe and Graham feel the same way, and that JotSpot is decidedly not an enterprise company.  My epiphany was recognizing that I don’t hate products that are used in a corporate setting.  I just hate products that aren’t built for users.  The vast majority of enterprise products are built for the people who are going to purchase, administer, configure, deploy, and provision them.  And these products are often despised by the people who ultimately do try to use them (duh).  No wonder a large percentage of enterprise software efforts go up in smoke.  The enterprise software market is broken for this reason.

And:

JotSpot also pushed some of my hot buttons around collaboration and community.  I’ve spent the better part of my career building applications that help people connect to each other and share knowledge (search is the best example of that).  I’ve always preferred solutions that let the users take charge to ones that assume an engineer knows better.  There’s something empowering about offering users a product that helps them kick ass – like the spreadsheet, the original Macintosh, desktop publishing, or the web itself.  The best products are the ones that slowly reveal complexity as you use them.

I think Ken is on to something really important here.  The primary driver behind enterprise software was efficiency and automation, removing people from business processes wherever possible and imposing standard procedures on people wherever they remained.  Business processes were the primary focus of business performance and companies generated considerable cost savings from this focus.

JSB and I have a strong sense that the focus on business performance is shifting from process to practice.  The real frontier for business performance going forward is on helping people to connect with each other and to build their capabilities more rapidly by engaging together on challenging problems and opportunities.  This will require a fundamental mindset shift on the part of executives and a different approach to technology infrastructure and tools, creating an opportunity for a new generation of products and services.  As people come back into the center of focus, enterprise software products once again will have to be built for users, rather than buyers. They will also have to focus on enhancing collaboration and community.  Ken is on to something significant here. The enterprise software game is starting to get interesting again.

Perspectives on The Only Sustainable Edge

For those who are interested in The Only Sustainable Edge, Harvard Business School’s Working Knowledge newsletter has just published an excerpt from the book and a Q&A with JSB and me.

Here’s one excerpt from the Q&A:

Q: The title of your book is The Only Sustainable Edge. Can you tell us what that sustainable edge is?

A: We make the case that getting better faster by working with others is the only sustainable edge. Structural advantages are eroding rapidly. Distinctive capabilities provide temporary advantage, but unless they are aggressively refreshed through rapid incremental innovation, they will be rapidly overtaken by other, more aggressive competitors. Relative capability is no longer the key strategic metric; it is the relative pace of capability building.

We also take to heart [Sun Microsystems co-founder] Bill Joy’s observation that "there are always more smart people outside your company than within it." So, if you are serious about accelerating capability building, you will need to focus on the edge of your enterprise and learn how to work more effectively with business partners in ways that help you to get better faster.

The Long Tail Goes Mainstream

Chris Anderson’s Long Tail meme is gathering steam – it is now getting picked up by the mainstream business press – The Economist runs an article on "Profiting from obscurity" in its current issue.

Some of the relevant quotes:

This has a number of intriguing implications. For one thing, opening up those previously uneconomic niche markets should increase overall demand: as people are better able to explore niches, they are more likely to find things they like, and may well consume more of them. This will then shift some demand, at least, away from hits.

And:

Perhaps the most profound implication of the long tail, however, is its impact on popular culture. As choice expands and people can more easily find niche content that particularly interests them, hits will be less important: so what will people talk about when gathered around the water cooler? In fact, says Mr Anderson, the idea of a shared popular culture is a relatively recent phenomenon: before radio and television, he notes, countries did not operate in “cultural lockstep”.

It is remarkable to me that most of the discussions of the Long Tail focus so much on the media business.  The Long Tail opportunity applies to all products, yet all the articles tend to focus on the same old categories – books, music and movies. Does this reflect the media bias of the media?

The Economist article briefly discusses the importance of mechanisms to help customers find the niche products most relevant to them. There’s a big opportunity here to create useful – and proprietary – meta-data about the products and services available in the Long Tail. Search is important – but unique and useful meta-data is even more important.  This is where entrepreneurs – and VC’s – should be focused as they seek to exploit the Long Tail opportunity.

Scale and IT Services in Asia

The McKinsey Quarterly earlier this year published a research brief asking "Can China Compete in IT Services?"  Briefly the argument of the authors was that China is disadvantaged in competition with Indian IT services providers because its industry is more fragmented.  I’d like to take a contrarian view on this.

Fragmentation may actually be an advantage, especially if it means higher specialization.  One of my concerns about the way the Indian IT services industry is evolving is its propensity towards monoliths who try to do everything for everyone.  Especially if we are talking about leading edge software development, specialization is critical.  It is very difficult for a single company to develop world-class skills in all areas of software development, particularly if we include deep business domain expertise as a requirement.

Now, admittedly fragmentation can be challenging in the marketing and sales side of the business.  Fragmentation becomes an advantage only if there are more specialized customer relationship businesses that focus on acquiring customers and orchestrating the more specialized expertise available from a variety of independent software providers.  What the Chinese industry needs is the equivalent of Li & Fung or Taiwanese ODMs for the software industry.  By the way, that is a role that the major Indian IT services providers themselves might play in China, but only if they adopt a different mindset.  They must begin to appreciate the value of independent specialization and resist the temptation to try do do everything themselves.

Hitchhiking through the Galaxy

If you’re not a nerd, you probably don’t appreciate the significance of this day.  Today is the release of the long-awaited movie version of The Hitchhiker’s Guide to the Galaxy by Douglas Adams.

I had to go all the way to Norway (well, figuratively, not literally) to Espen Andersen’s Applied Abstractions to find this really great blog note offering a link to the video of a presentation by Douglas Adams at the University of California at Santa Barbara on "Parrots, the Universe and Everything". It is a real treat.  A couple of Espen’s observations that hit home in particular:

I thought the most interesting idea, however, was his point that science is changing – that we no longer (at least not to the same degree) take things apart to understand them but instead put them together so that we can watch them interact.

And:

Nice quote: "We don’t need to save the world. The world is fine. It has been through at least five periods of massive extinction before. [..] The world is big enough to look after itself." Though he is less specific on what to do about saving the world for human habitation.

Douglas unfortunately died four years ago, at the untimely age of 49, so he did not live to see the long-awaited movie project come to fruition.  For nerds around the world, though, his death left another powerful message – he died while exercising at a gym.  Maybe exercise really isn’t all that good for you, after all . . . 

What, Me Worry?

The Only Sustainable Edge, the new book that JSB and I wrote, will be officially released on Monday, May 2nd.  We got some powerful advance publicity from Thomas Friedman in his column, entitled "What, Me Worry?", in the New York Times this morning.

Tom zeroed in on the public policy implications of our perspective and suggested that this might provide a focusing theme for Bush’s domestic policy during his second term. Here’s an excerpt from his column:

Meeting this challenge requires a set of big ideas. If you want to grasp some of what is required, check out a smart new book by the strategists John Hagel III and John Seely Brown entitled "The Only Sustainable Edge." They argue that comparative advantage today is moving faster than ever from structural factors, like natural resources, to how quickly a country builds its distinctive talents for innovation and entrepreneurship – the only sustainable edge.

Economics is not like war. It can always be win-win. "But some win more than others," Mr. Hagel said, and today it will be those countries that are best and fastest at building, attracting and holding talent.

There is a real sense of urgency in India and China about "catching up" in talent-building. America, by contrast, has become rather complacent. "People go to Shanghai or Bangalore and they look around and say, ‘They’re still way behind us,’ " Mr. Hagel said. "But it’s not just about current capabilities. It’s about the relative pace and trajectories of capability-building.

"You have to look at where Shanghai was just three years ago, see where it is today and then extrapolate forward. Compare the pace and trajectory of talent-building within their population and businesses and the pace and trajectory here."

Tom concludes his column by observing

India and China know they can’t just depend on low wages, so they are racing us to the top, not the bottom. Producing a comprehensive U.S. response – encompassing immigration, intellectual property law and educational policy – to focus on developing our talent in a flat world is a big idea worthy of a presidency.

Tom did a great job of capturing the essence of our perspective, but we’re not going to be holding our breath waiting for a call from the White House.  By the way, Tom’s new book, The World is Flat, is doing great – #2 both on the New York Times bestseller list and on Amazon.  If you haven’t read it yet, click on the link and order it – it is a powerful statement of the challenge confronting businesses around the world.

Flight of the Creative Class

JSB pointed me to a new interview with Richard Florida in Salon.  It is a great introduction to Richard Florida’s new book, The Flight of the Creative Class.  Richard gained quite a bit of attention with his earlier book, The Rise of the Creative Class, which made the case that economic growth essentially depends on three elements: technology, talent and tolerance.  His new book is basically a wake-up call to U.S. policy makers regarding the "creative talent drain" we are starting to experience.  His thesis is summed up in an article on "America’s Looming Creativity Crisis" in Harvard Business Review he wrote in October 2004:

The United States of America is on the verge of losing its competitive advantage. It is facing perhaps its greatest economic challenge since the dawn of the industrial revolution. . . . Terrorism is less a threat to the U.S. than the possibility that creative and talented people will stop wanting to live within its borders.

In his Salon interview, Richard summarizes the two factors which drive his current concern:

There are two factors interacting here. The first, which would have happened anyway, is that other countries realized how important talent is and cities in those countries have become really effective in competing for talent. So the playing field has been leveled. In the past, people would have said, "Absolutely, my first choice is to move to New York or Boston or San Francisco or Seattle or Chicago …" Now cities like London, Dublin, Amsterdam and Stockholm have become extremely attractive to talented people, not because of any particular public policy but because of the way they’ve developed over the past decade. And I’m not just talking about the relocation of Americans, I’m talking about the location decisions of people on a world scale.

The second factor is that — obviously spurred by this so-called threat of terrorism — we’ve become far more restrictive in our ability to absorb and attract foreign talent. The numbers are all there, showing the decline of foreign students in the U.S. and the decline in the number of visas issued. So many foreigners have visa troubles now, even great scientists, artists and musicians. . . . Not surprisingly, there’s a general sense in the world that the United States isn’t as welcoming.

For those who think that Richard is an alarmist, I can only say that I share his concerns.  BTB and BTC are back in Silicon Valley, only this time they mean "Back to Bangalore" and "Back to China", as talented immigrant entrepreneurs here pick up stakes and head back to their homelands.

JSB and I observed in our new book, The Only Sustainable Edge, that

Where value originates and who captures it will increasingly depend on the evolution of talent markets and the relative capability of firms (and nations) to rapidly develop and amplify the value of this talent.  Product markets and financial markets will of course still matter, but the center of gravity for value creation and capture will inexorably migrate to global talent markets

I worry that the U.S. is far too complacent about its ability to compete in global talent markets. Richard Florida provides a timely warning.

Remix at ETech

I continue to regret that I didn’t make it to O’Reilly’s Emerging Technology Conference last month.  O’Reilly Radar has now posted Rael Dornfest’s presentation on Rules for Remixing – both audio and slides.  It’s a very nice overview of remixing in a broad range of domains. In contrasting remixing with hacking, Rael makes an important distinction:

Remixing is inherently more conversational than hacking

More on cities

To follow up on my post yesterday on Kotkin’s new book, The City, I just came across a great blog posting by Tim O’Reilly at O’Reilly Radar on a talk that Stewart Brand recently gave for the Long Now Foundation on urbanization.  I wish I could have been there – it is filled with classic Brand insight.  Here are some of the notes:

I conjured some with a diagram showing a pace-layered cross section of civilization, whose components operate at importantly different rates. Fashion changes quickly, Commerce less quickly, Infrastructure slower than that, then Governance, then Culture, and slowest is Nature. The fast parts learn, propose, and absorb shocks; the slow parts remember, integrate, and constrain. The fast parts get all the attention. The slow parts have all the power.

I found the same diagram applies to cities. Indeed, as historians have pointed out, "Civilization is what happens in cities." The robustness of pace layering is how cities learn. Because cities particularly emphasize the faster elements, that is how they "teach" society at large.

This is consistent with my view that cities are powerful concentration points for flows of people, goods and ideas to accelerate capability building.

Stewart Brand has a related article that was just published in Technology Review.

Speaking of aggregation . . .

There’s a great chart making the rounds on the Internet that shows Wikipedia surpassing the New York Times in terms of daily traffic ranking – as usual, the real message is not in the snapshot, but in the trend line over time.  Contrast the no growth traditional media site with a high growth open source media site. As I keep telling my clients, it is relative performance that counts – and trajectories in relative performance count even more.  If you are curious about what other sites Wikipedia is more popular than, check out this listing – it’s impressive.