Enterprise 2.0

Martin Geddes over at STL Partners (with whom we collaborate on a number of projects, eg Interactive Advertising research) has written up an interesting precis of their broadband research on GigaOm. It only behooves us to fisk Martin as much as possible . Martin's piece:

1. Telecom is a logistics business for valuable data. It’s about providing personalized delivery of that data, and removing the “customs barriers” (such as network provisioning, authentication) to that delivery. This is much more complex (and profitable) than being a “dumb pipe,” but doesn’t mean being an applications or media business (something telcos are notoriously bad at doing).

True, we were calling it "digital logistics" and " 'net trucks and sheds" 10 years ago at BT. It represents the move from pipe to platform.

2. Broadband is just one of many distribution systems for data. Others include broadcast, physical media, circuit voice, SMS, content delivery networks, and edge caches (which capture and retransmit broadcast content, e.g. networked DVRs). The successful broadband services provider of the future will be able to mix and match multiple delivery systems, just as logistics companies blend road, sea, rail and air.

Indeed.....but, and "zis is ze big but", you can pump most of these other media over broadband, but not vice versa. and that, as they say, makes all the difference when it comes to strategic market options.

3. A key enabler for this will be home hubs, media servers and set-top boxes — whoever gets to deploy and manage these boxes will emerge as the winner in the space. As these boxes are the “ports” at which all the different delivery systems must dock, they will be critical to being a “logistics solutions” provider. The best examples today come from Iliad and Sky in Europe, which have the best blend of multiple-delivery systems, features and content. Mobile devices and networks will also need to evolve new provisioning, authentication, policy and retail models.

This is interesting...we thought the "battle for the home black box" would really have started c 2004 when (in the UK) BT started launching its home internet devices, but its been a phony war so far - even last year when we proved the PC was a STB and a mediacentre (see our MyPCTV posts) we were pooh-poohed - the PC will never come into the living room, we were told. We beg to differ, we think 2008 is the year the Digital Lounge will get media-ted...and don't ignore games machines either, the PS3+Linux has great potential...

4. Telcos will make increasing amounts of money from wholesale, not retail. Media companies, employers, merchants and government will pay BSPs to deliver content and applications on their behalf. So you’ll watch YouTube without worrying about fair use limits (on “unlimited” ISP plans), or going over your usage cap. Google wants you to watch and watch without having to worry if there’s a meter running. Wholesale markets tend to be concentrated, since the whole point is that buyers (like Google) don’t want to have to personally interact with dozens of sellers (like telcos). That means only a few large telcos or aggregators will prosper.

The emerging model is "subscribe to pipe, Ad revenues for content"...not sure that BSP's won't meter, as there is a 5/95 on network usage and its not clear Google et al are keen on picking up the CAPEX spend for upgrading the pipework. It'll be premium deals that get no limits in our view.

5. The ISP product suffers from severe economic problems. A few users are diverging in their usage from the rest, driving capital and operational cost. These users are different from day to day, so you can’t shed them. Attempts at traffic shaping to manage cost only work with a policy of “radical honesty,” such as that from PlusNet in the UK. Retail prices are falling to the point where additional usage is being priced below the cost of transit for that traffic.

See below.....

6. Nonetheless, the ISP product will continue to grow, but the emphasis will move elsewhere. Users will increasingly buy (or use ad-funded versions of) applications with all “postage and packing” charges included, for all the networks and places they wish to use that application or content. Amazon’s Kindle is just the start of a major shift in how we retail broadband services.

.....Freemium....low end free / ad supported, high end paid for, unmetered access is a premium esp with matched upload. There Is No Alternative......

7. Voice will be the catalyst. There will be a rapid rise of non-traditional voice services as voice is embedded into the general online experience. You’ll be able to call your date from your mobile dating application, without knowing your date’s mobile number, and the whole cost of the call will be borne through your dating application subscription.

So Facebook should be dealing with Skype, not Paypal . Can't argue with this, we did a study 2 years ago showing the same.....as you know, Mr G

8. Telcos will move towards “two-sided” business models, which involve not just wholesaling bulk capacity, but increased personalization of delivery to their own retail ISP end users on behalf of their “upstream” partners. This will include using location and presence to enable everyday business processes (e.g. parcel delivery, health-care services), ad insertion, or ecommerce services like credit checks.

Have to agree, as we did this work with you guys What I am now getting more curious about is something we have been working on this year, which is managing complex transactions in the network - this enables a huge amount more functionality to be made available "in the knitting" and in our view is very important for "big iron" SaaS/SOA rather than "presentation layer" Webservices that Web 2.0 is mainly about today.

9. This is part of a larger “platform” business model that involves opening up the telco to exploit underused assets. This is a much bigger activity than just enabling a few APIs, and requires considerable restructuring to achieve. For example, you need a sales force to find these new wholesale customers!

Or more likely, partners, distributors and an ecosystem.....we just don't believe the Telco on its own can drive a large enough channel

10. Network neutrality is a completely mis-framed debate. It assumes that the user has access to a single telco product: pre-paid (by the user) ISP access. The real market will be vastly more complex, with users having access to many “virtual” networks — some overlaid on the Internet, some private. All the bogeymen making noise about blocking and throttling are just the shadows of welcome improvements in the wholesale markets. This exactly mirrors what has happened in the financial markets over the last 20 years, where vertical integration ended and lots of wholesale markets grew up to repackage and resell debt and other financial instruments.

Not just the financial markets - any market where you can differentiate the goods will eventually see them differentiated, and any market where some players are taking all the capex risk will see them attempting to pass the risk on by both charging for it and reducing unexpected demand variation. How that plays out....Freemium!

Great stuff, Martin - but nowt about bandwidth glut/shortage I note - now, when will we see the whole report

I just had to reply to this Nick Carr post...

accusing Krigsman of being the one who doesn't understand enterprise software, took a detour into Ross Mayfield talking about getting laid, and eventually ended up with all sorts of yo-mama-ing Enterprise Irregulars, Regulars, and Rubberneckers leaping gleefully onto the Techmeme pig pile. (Can pigs leap?) Bottom line: nobody understands nothing.

Well, yes........I guess we were earnestly yo-yo-mama-ing with Nick and the rest of the chorus (Isn't that the point of the blogosphere though), but as we've all been doing this stuff for 20 odd years (designing, building, implementing, running, fixing some serious-grade Enterprise systems) we thought we just may understand some of this stuff.

Anyway, Nick points to one of Sig's posts (I'm taking my laptop skiing over the break to see if E2.0 enlightenment hits me too ):

ERP actually stands for Easily Repeatable Process: "Processes that handle resources, from human (hiring, firing, payroll and more) to parts and products through supply chains, distribution and production. Known to be rigid, but handle events and transactions with precision and in volume. Systems deliver value through extensive reports and full control over resources. Resource oriented, transactional, event driven systems. Delivered by system vendors with roots in accounting using up to 25 year old technological solutions." But Sigurde is far more interested in the Barely Repeatable Process (BRP): "Typically exceptions to the ERPs, anything that involves people in non-rigid flows [like] the daily unplanned issues that happen in every organisation. The activities that employees spend most of their time on every day. Processes that often start with an e-mail or a call.

Precisely....any computer system is just a simulation of a real life ecosystem, and thus simplifies it - no simulation ever captures the full system. And sadly, often the more complex the simulation (and the more opaque it is) the harder it is to adapt it for the BRP

For example, take car manufacturing and supply - the western approach was to build increasingly complex MRP (later MRP 2.0, mutating into ERP) systems to control it. The Japanese just simplified it all with paper cards, lightbulbs and removing a lot of the supply chain complexity by removing the supply chain itself with JIT delivery.

The other thing about most (not all, but most) Enterprise systems today is they are based on systems that are 20 years old, and in fact many are just expansions of even older logic just coded into newer languages....and nearly all of this was built without the slightest consideration of a networked environment (this I know, my MSc was on networked enterprise software 20 years ago, it was radical then and remains unusual today in enterprise software - hence the market for EIN et al). The architecture is usually redolent of top down, mainframe based DNA - and this impacts the whole ethos of enterprise software.

The Baseband Internet shook up the supply chains first (EDI etc) as they were low bandwidth...but what has really changed in the last few years is that even the average dude at home now has the sort of bandwidth and computer power that is light years more than existed when most of today's Enterprise software was architected.

In other words, the LAMP based, Open Source sourced, distributed / widgetised / XML WebService coherent software which the broader "Web 2.0" community takes for almost a given is several generations ahead of most of the stuff sitting in the corporates today - and thus stuff that corporate systems find very hard (the "BRP" - as well as security etc) is in many cases easier - non trivial, sure, but easier - for this sort of software.

And its a hell of a lot cheaper to build and run - we are assembling software from open source components today that even a few years ago would have cost millions to develop, never mind maintain.

And this has only just started....with the emerging technology we will be breaking up enterprise applications into smaller modules and then using them interchangeably, and we will expect to be able to call on a many to many structure of databases, software modules and front end UI that we may assemple on the fly as we need it, and we will expect "the network" to manage complex messaging, identity and security.

...anyway, that all brings us to the same place as Nick:

That brings me, and Governor, to the present, and the impending web-spawned firestorm in business software.

You heard me: FIRESTORM!

And why do we think this?

(i) We're working on projects that are chipping away at it from a supply side via Open Source, XML etc (as I guess quite a lot of people debating Enterprise 2.0 are) and are starting to get a feel of the Art of the Possible

(ii) I can see that millions of consumers with big pipes and fast tins will change the dynamics of the supply side of enterprise software design structure...there is no hard and fast rule that says a lot of the functions in there have to be done there. I'm not advocating SETI 2.0, but it ain't going to be centralised like now. Also, it moves the poer - the thinking around VRM is one indication of this.

There is a view that it will be "Web 2.0" front ends and something akin to today's enterprise stuff in the back end. I don't think so....today's Enterprise stuff is largely obsolete, its a question of time and inertia (not budget - the business cases of new software are v good usually) as to how long it takes to get it out, but one of the traditional barriers - getting the data out - is much less of an issue with common network standards, and once the data is out then piping it between modular apps is far easier.

The curtain rises on a debate going on about whether the software for Enterprise 2.0 has to be the same dire stuff we have seen for the last 30 years.

Enter Mr Scoble, stage left, who notes that a certain Mr Gates complained that bloggers don't talk about Enterprise software:

Now, what’s going to get more of you interested? Consumer software that you actually have a role in adopting or purchasing or enterprise software where some CIO somewhere else in your organization decides on? I know that when I talk about enterprise software the numbers of viewers just don’t show up. So, tech bloggers quickly learn that if they talk about enterprise software they aren’t going to get many advertising impressions.

Then Mr Krigsman enters stage right and says Mr Scoble is just a gadfly and thus not a Serious Person, and Enterprise software is for Serious Business People:

Enterprise software is all about helping organizations conduct their basic business in a better, more cost-effective manner. In software jargon, it’s intended to “enable core business processes” with a high degree of reliability, security, scalability, and so on. These aren’t sexy, cool attributes, but are absolutely essential to the smooth running of businesses, organizations, and governments around the world.

Recently, I asked someone from SAP, “What percentage of the world’s economy runs through your systems every day?” While he didn’t offer specific figures, we both agreed the number must be significant. That fact alone makes enterprise products fundamentally different from consumer software, where ease of use and simplicity are paramount.

Hmm...I wonder how much of the world's economy runs through consumer websites and Google?

Anyway - to this, Mr Carr, descending from his Ivory Tower, argues that there is no reason why the turgid enterprise software of the past needs to be repeated unto future generations:

I'm sorry, but I think Krigsman is the one who doesn't understand enterprise software - or at least doesn't understand what it could become. The distinction he draws between business and consumer applications is specious. Are we really to believe that making software engaging is somehow incompatible with making it reliable and secure? That's just baloney.

To which Mr Krigsman retorts (loud-o-voce) that:

Since enterprise developers don’t deliberately set out to create hard-to-use applications, there must be reasons why this happens. Simply complaining and waving a magic wand, as Nick seems inclined to do, decreeing that “Ye shall make thy software better” hardly seems like a practical approach to solving the problem.

(Noises Off - a lot of Harrumphing by the Great and Good , who contribute Worthy Sounding Notes to the Debate)

Strewth - how many of these people have actually had to implement or run a large scale enterprise system?

OK, some thoughts.

Firstly, anybody who is trying to defend yesterdays' enterprise software as a Good Example needs to be shot at dawn - most of the stuff is dire, and was written by people who had no interest / budget / experience of making it user friendly (and I should know, was cutting my teeth on MRP 2 etc systems before the Web 2.0 kids were out of nappies - and have no desire to perpetuate that stuff). The design objective was too often hitting RFP ticklists, not usability / maintainability / cost of ownership etc.

Secondly, we need to differentiate between the Back End stuff, which only the Tech staff see, and the front end which the users.....Use. Daily. All the time. Why can't this User Facing stuff be delightful to use?

Thirdly, all the stuff about security / reliability / etc has got sweet FA to do with highly effective usability - totally different things - please stop confusing them. You can have highly reliable, highly secure and great to use systems. It is simply a choice of how you set up profiles etc in the systems, and most enterprise software providers are criminally lazy / cheapskate / vogon-like in this regard. There are some very secure customer facing systems (e.g. triple play provisioning) which would be booted out of court if they were hard to use at the user front end. All it takes is willpower and a smattering of empathy.

Fourthly, and very bluntly, employees and small companies are increasingly taking matters into their own hands - one of the benefits of the whole Webservice / Web 2.0 movement is, like the PC a generation ago, the User is starting to get back in control.

Fifthly, Open Source increasingly means that you can build very powerful back ends quickly, reliably and - strangely enough - they are more stable / usable / secure than a lot of Enterprise software. That gives you more budget to make better front ends.

Let us be very clear here with the megatrend - in the last decade or so there has been a flip flop - once upon a time, software was developed in Enterprises and rolled out to Users. For the last 7 or so years its being developed for (and by) Users and increasingly being taken in by Enterprises. Most of the the real innovation today is on Webservice / SaaS user facing software, thats why there is so much blogging about it.

Another big trend of 2008 - the encirclement of monolithic Last Generation software platforms by friendlier, easier to use, more flexible Enterprise 2.0 software.

Addendum - Joel Spolsky offer a good summary of the economics behind the reason so much enterprise software is crap (tip of hat to Phil Jones for link)

So...a company called Serena has adopted Facebook instead of an intranet. (Tip of beret* to Stowe Boyd for link)

Why?

They are going through a major transition as they move from more traditional enterprise applications to web 2.0 mashups. The leadership wanted all employees to be better connected so they could be on the same level of understanding, excitement, and commitment to this transition. They also thought that using a web 2.0 tool, like Facebook, represented the best way to take the whole company into this new space.

Like many companies their existing intranet was a poor platform for document finding, much less sharing.

OK, get that - and they felt that the intranet software wasn't doing it for them - but why Facebook? After all, its approach is famously clunky compared to email for fast low friction messaging.

Facebook, which is both free and a great example of web 2.0, seemed to be the right answer. They established a private Facebook group for Serena employees and they built a few simple custom Facebook apps to better enable intranet functions. Now they provide links through Facebook to documents stored securely behind the firewall. Access is just as secure as any other method. Serena employees go to specific people to get relevant information. For example, René and his staff provide press clippings and the HR people provide links to benefits information. In each case you learn about the people providing the information through their Facebook profiles, and not simply the content, itself.

Cough at Facebook Walled Garden being great example of Web 2.0, but get the picture - in essence, Web 2.0 functionality is very useful in Enterprise systems, traditional B2B suppliers don't have it, so you have to go to B2C platforms.

But, I do hope they've read the Facebook Terms and Conditions re data ownership, and are keeping abreast of how Facebook collects their data..........imho, unless they have already agreed all this with Facebook, then they are putting their company's data at considerable risk.

There are quite a few Open Source platforms that do this work, and you get to write your own T&C and data mining rules. Caveat Emptor, boys.........

* Stowe says its a cap on backward - coulda sworn....

Its Friday night, and the weekend approaches - so what does a gentleman do in London Town? Thats right, he goes across town in the rain and dark, and approaches a dark dive deep in a basement - but not to partake of the sins of the flesh. No, dear reader, one goes to talk about Vendor Relationship Management (VRM) with other plotters of the Customer Revolution, including one Doc Searls, who having written part of the Cluetrain Manifesto was here in London to spread sedition this Guy Fawkes week.

(Aside to clarify - VRM as used here is the concept of turning CRM on its head, not to be confused with the ERP based module attached to Purchasing Management)

We (along with many others I suspect) have been working on some aspects of what is emerging as the "VRM thang" for several years, so it was very interesting to meet fellow plotters from various walks of life and compare notes, as it has become apparent to us over the last few months that the full articulation of the VRM concept taps into a number of parallel universes (Customer aggregation, C2B thinking etc, Social Networking), needs to understand complex Transcation Theory, the Semantic Web - or at least M2M comms - and has to deal with the emerging Digital Trinity (Privacy, Identity, Security). Plus there is enough cryptography and smart database design to keep even the Broadsight geeks happy (Quadruple-play real time OSS systems being pretty geeky, let me tell you...)

And be simple and instinctive to use, of course....

The net present value of the customers' future spend is a large number, and to return proper value to the user it has to be under the user's control. And right now nearly all the commercial interest is in building tools to disenfranchise the users, not empower them. (Despite the official blurb, many of the Web 2.0 sites are designed to monetise your work and content and hand you back very little value in return).

So, this Guy Fawkes week made it a very timely soiree - as you may have observed reading this blog, we are more than a bit concerned with the more Orwellian aspects of what players like Facebook and Google can do with data, and we feel that the customer needs a more coherent form of defence. If we don't hang out together, we will most certainly be hung out to dry separately.

Thanks also to Adriana Lukas for organising the soiree, the pizza, and the beers. If Guy Fawkes had had Pizza, who knows what turn history may have taken.

Read/Write Web has covered off quite a lot of the early ground here on Vendor Relationship Management or VRM (it intersects a lot with the older C2B models by the way). I quite liked this piece:

The irresistible force is personalization. This is the key to productivity. Personalization technology cuts through the clutter and saves time. The firm that delivers personalized content sits at the top of the attention economy food chain; all other content is “drive-by commodity”. Personalization leads to relevancy in advertising; and loyal customers.

The immovable force is privacy. You cannot do personalization effectively without knowing an awful lot of information about an enormous number of people. The privacy backlash is building. Today it is only techies who are aware of the issue and where it is headed, but when mainstream users get spooked by a few more high profile cases, we will see consumer backlash and then, with politicians on the bandwagon, more regulation.

We have been banging on about this (privacy) for some time, however (based on quite a lot of client work over the last two years) the VRM bit is non-trivial. Aggregating demand of many disparate people with different agendas is hard, never mind all the issue that instantly pop up around suspicions of just why a service would want to anonymise/aggregate its users (we have had "aids money laundering", "fraud abetting" etc etc thrown at us more than once).

Doc Searls has been putting some thoughts together on what a VRM service can look like, abetted by a number of people on the discussion list (we are on it, natch), but this article is a reasonable intro to the Story So Far.

The obvious area of work is how to integrate it with emerging Enterprise 2.0 thinking (and systems) - in Olde Times, car manufacturers for example handed customers a lot of personalisation options so the cars could be built to spec - but of course it relies on modular car design and aggregating a large volume of orders to achive any scale economy benefits.

Clearly, anyone who became a trusted C2B aggregator (which is in all likelihood what initial VRM implementations will be as well, I think anarchic/dispersed systems will be far harder to run with) would wield enormous influence over many current value chains. Its interesting to think about whether they will be generic ("BuySpace") or sector specific ("MySports"). In Web 1.0 the thinking was that this area would by and large be handled by Exchanges (remember VerticalNet anyone), but there was very little thought given on how to utilise social networks (though there was a lot of thought given to using behavioural data mining, which may turn out to be much the same thing).

One wonders also where the first players will come from - startups, eBay offshoots, Comparison sites or potentially existing Social Nets

Those who were around in Enterprise 1.0 (and before) may recall that IT automation was only a part of the whole redesign of business information flow. Another key component was the whole "Lean Operations" concept - achieving smooth flow of goods and information, Just in Time. All the Lean techniques also relied heavily on information flow (without information flow, nothing flows) so its worth examining these areas in the light of the new technologies and opportunities that Web 2.0 brings. In this, our 3rd post on Enterprise 2.0, we look at whether the concepts it uses can have the sort of high impact that approaches like Lean operations have had.

For those who are only really familiar with Web 2.0, the point of this post is that unless these technologies - social media, wikis etc - actually do stuff that helps solve the real business problems that Lean operations address, they are at best second order considerations, at worst just toys - entertaining but ultimately of little lasting value to any enterprise.

Its also worth avoiding the buzzwords and multiple paths it all has taken since - Lean Telcos, Lean this, Lean that etc etc - and strip the concepts back to basics to understand how it may work today, as Web 2.0 represents a gear-shift in the way things can be done. As with any broad area, there are various flavours and schools and sects, but Lean can - broadly - be defined by 3 main concepts:



Flow

There are three key concepts in driving flow:

Kanban - literally the "card" that allows material to flow in the Toyota production system. But what this really represents is the way information is organised - Kanban cards only flow when material is required at the next workstation.

Just-In-Time (JIT) - the idea that not just production, but all material, is delivered "just in time" where it is needed. The main driver of the JIT process is that to make this happen, the systems have to be aligend so that all the items.

Kaizen - "continuous improvement" - understanding that any system is dynamic, and that the first steps will drive the next steps. In addition any system shifts over time, so needs to be altered rather than set in stone.

This is the "big picture" side to lean strategy- Attaining Flow:

"Just in Time" means connecting up the whole supply chain, so the information flows freely. In concept this means amalgamating the emerging Web 2.0 concepts (Trusted identity, social nets etc) being proposed in Vendor Relationship Management (VRM), Customer Relationship Management (CRM) - and not just for the enterprise, but along the supply chain. Old hands will recall the lessons of the Beer Game - if information only flows partially along the supply chain, imperfect decisions are made about ordering, provisioning, tinventory holding - leading to "boom-bust" cycles.

"Kanban" takes the concept into the Enterprise's "shop floor" - this is not just physical production, one of the benefits of digital information is that it is possible to track the production of digital goods too - the idea is to make workflow very clear, very visible so that if there are problems they can be rapidly acted on. In the Web 2.0 environment, this means allowing applications such as wikis to collate work, plus "user generated c" and cross- organisational "wisdom of crowds" to surface. Clearly internal social nets will be useful tools, especially given the structure of lean organsiastions around cell based workgroups (of which more later)

Kaizen - continuous improvement - is a philosophy rather than a technology, and maps closely to the Web 2.0 idea of the perpetual beta. In an Enterprise world the original offering probably has to be more complete initially than a consumer solution, however.

Eliminate Waste

At a tactical, executional level Lean Operations is all about the elimination of all wasted effort. There are three key concepts to Waste Elimination - muda or nonvalue-added work, muri or overburden and mura or unevenness.

Muda - Nonvalue added work, has 7 "deadly sins"

- Overproduction (production ahead of demand)
- Transportation (moving products that is not actually required to perform the processing)
- Waiting (waiting for the next production step)
- Inventory (all components, work-in-progress and finished product not being processed)
- Motion (people or equipment moving or walking more than is required to perform the processing)
- Over Processing (due to poor tool or product design creating activity)
- Defects (the effort involved in inspecting for and fixing defects)

Solving these issues relies on three capabilities - firstly, being aware of what is going on - ie creating visibility across the operational areas, secondly being able to collate the knowledge of staff (and the extended community), and thirdly being able to ensure that the enterprise can execute the changes.

Muri is defined mainly as the breaking down of tasks into their smallest constituencies, and standardising on how they are to be done before recombining them. The emergence of Open Source software, open standards, software libraries. This does not just apply to human work, but is also for example the underpinning of the low level XML transaction messages in a networked web service environment - in other words, the Semantic Web is unlikely to occur without a hefty dose of Muri across the information chain (It is for this reason that we believe the first Semantic Web execution will be in niche supply chains )

Mura refers to the need to make work flow from end to end by removing unevenness in the process rather than buffering it- the mathematics of parts flow in a factory, bits flow in an IP network, message flow in a commerce network are have the same basic systemic characteristics (and can be described by much the same maths). An interesting part of implementing this process is the use of "Andon" - lights - that signal where a process is under stress, and the process stops until this is fixed.

In Web 2.0 terms there are clear applications here for social networks, wikis, and any tool that allows information to move out of silos. The reduction in transaction and distribution costs in the broadband web also helps in this regard, as the economics of making information flow get to be increasingly better than the economics of storing it.

Organisation Design

The experience of early Lean Operation implementations taught enterprises that as well as the technical fixes, the organisation had to have the structures and culture to operate in this environment. Some of the main approaches used are:

WorkCells - teams are organised around the end to end task and are given the tools and training to all solve all the problems in the end to ned cycle, and are also usually kept in close proximity to minimise comms problems. The group is also made responsible for its own output. This combines forming social networks around tasks plus getting some form of "wisdom of crowds" effect to solve everyday issues. Use of ad-hoc tools in teams is also supported, which speaks to the ideas behind widgets, mashups and the like.

Quality Circles - much derided later, mainly because it was misunderstood, but the concept was to get the "user generated wisdom of crowds" effect in small scale (given only face to face comms were available) to fix problems. The Web 2.0 environment is a very effective way of allowing this to operate.

Lean Culture - In the West, Lean was seen as primarily tools and IT, in Japan it was - and still is - also seen as a way of working. Neglecting this has led to Lean operations in the West sometimes being discredited as just Taylorism gone mad, as it was too often used as a cost reduction tool without giving staff the tools (including rest and rewards) to do the job. Typically the culture has to be brought about by the correct performance measures, and in fact for system to work sustainably the organisation has to move away from highly heirarchical structures to more collaborative, knowledge based approaches.

In Conclusion

To have impact, Enterprise 2.0 tools need to show that they can bring new benefits to the major operational activities in enterprises. Lean Operations has been on of these high impact approaches.

Lean operations were developed in a world with far poorer information flows, so if Web 2.0 techniques can make it more effective, then clearly Enterprise 2.0 has a reason to exist apart from just being todays cool tech. This analysis suggests that Web 2.0 techniques can potentially add significant benefits.

That does not mean that some structural changes to move from consumer to enterprise grade, but it seems that there is useful potential.

It also does not mean that the Broadband internet will not change Lean Operatons , due to its own characteristics - after all, Kaizen is enshrined in the philosophy.

This is the second in a series on Enterprise 2.0. In the first post, we looked at what parts of the "2.0" environment were on most CIO's agendas. This post looks at what is highest on a CEO's Agenda with respect to all IT, not just Enterprise 2.0. The reason for talking about this is that a lot is written about how wonderful Enterprise 2.0 systems are conceptually, but much less about how they will work in the actual ecosystems they will find in situ.

We love the Gartner Hype Curves - and you will note Enterprise 2.0 is still at the early hype levels, when, as Gartner puts it, it is in the:

"Peak of Inflated Expectations" (an irrational exuberance)
In this phase, a frenzy of publicity typically generates over-enthusiasm and unrealistic expectations. There may be some successful applications of a technology, but there are typically more failures.

They also point out that at this stage there is far more conferenceware than working software......

But, as a bunch of hard bitten guys who have actually put some of this stuff into companies successfully over the last few years (and have plenty of experience from Enterprise 1.0), humour us and allow us to opine from the digital coalface:

The chart below is recent (August 2007) and gives a fairly common view of a business's IT priorities today (and most days really):



Fashionable though the Long Tail is, its worth paying close attention to the "hit head" here, as that is what is perceived to be the most important, so these are the key hurdles:

- Enabling Business Growth - i.e focus on approaches to increase sales volumes and ARPU

- Integrating IT with the business - i.e. making IT do what the business needs it to do

- Improving IT service delivery - translation: this means making things work, not doing new things that don't

- Developing / Managing flexible technology infrastructure

- Demonstrating business value of IT

All very sensible if you actually have to run a business - so how does this impact the Enterprise 2.0 play (apart from E2.0 being primarily IT based). The last point pretty much says it all - any new initiatives, including E 2.0 plays, need to demonstrate business value - aka have a business case.

The lines above it give a good view of what that case entails - in a nutshell, does the business case (i) help to grow the business, (ii) use technology that is synergistic with what it has already, (iii) does what it says on the tin and (iv) doesn't go down a unique path and drive technology lock in.

So what does that mean when the CIO turns her beady eye on the hopeful Enterprise 2.0 purveyor? There are 3 big hurdles the E 2.0 vendor must jump - the "3I"s as it were.

Impact.

What does this do to drive sales, increase retention, reduce OPEX etc? Now at one level that is probably the easy part, all the Web 2.0 technologies have screenfulls written about their benefits. But there is a level below that question, i.e. what does it do that my current approach won't do well enough - and how much will this make things better by?

This is a bit harder...one has to move from belief to proof, to case studies and the like, or pilots that prove the concept. CIO's have had 40 years of hearing "trust me, it'll work". It didn't and they don't. If your company does not have a reputation for delivery, it means either you'd better be prepared to put in and support some form of (discounted) trial system if you have no reference sites, or you need your references pronto.

Another part of the Impact equation is Return on Investment Risk (ROIR). This has 3 components:

- What is the benefit?
- What will it cost?
- What is the risk if it doesn't work?

The cost (and risk) to an organisation of putting in any complex (ie wide reaching) system comes far more from the opportunity cost of the disruption caused than the actual cost of the software. Anything that minimises the disruption to the staff is greatly welcomed.

For these reason services that are Web Service based are an easier sell, as the CIO can see it up and running and also know that the impact risk on their organisation is minimised - so long as it can jump the next hurdle....

Integration

How does this system deal with the existing data, workflow, system design etc. In other words, know your niche - what systems are you likely to be sitting nearby in the ecosystem - and how do they work? It is extremely naive to think that any organisation will willingly hand over data for yet another silo to be created.

Now, before everyone wails that This Is Not the Point of Web 2.0, its worth going back a bit and asking "what was the point of Enterprise 1.0 and what were the lessons learned". The idea was to have deeply integrated systems, seamlessly operating together, and sharing common data. That it was hard to do, and had to be executed in large ERP and CRM packages was part of the "then" technology and learning, but the desired direction is more, not less integration at a data and infrastructure level. The point is that a Point Application that wants to create a nice little separate data base (potentially not even stored on the enterprise's architecture) is a harder sell at CIO level - deja view as it were.

To be sure, it is possible to sell point solutions at a divisional level, even better if they are Web Services (or SaaS if you prefer), but this is not the desired direction in any major enterprise play and is likely to bring any vendor into conflict with IT policy. By the way, they are not "out to get you" as some of the literature on CIO unreasonableness would suggest, but like parents contemplating a puppy for christmas, they know from bitter experience who gets to walk the dog every day.

What they will also want to know is "Is this a technical one way street with no future proofing?". Open Source is a major step forward, as are use of standards at all levels, and far better data import/export tools. In fact, the whole point of the ASP/SOA/SaaS/Next TLA movement is to try and make the data independent of the application, so if your stuff stinks they (the Enterprise) can haul their data off it and onto another one without missing a heartbeat. That is the endgame of Integration.

Assuming that integration is a surmountable problem, the next hurdle is good old....

Implementation

Can you deliver? Who is going to pick it up at 3am on a Sunday morning when it goes pear shaped? Is this secure? How do I reverse my position if your stuff sucks?

These are all Implementation questions.

We can all talk about the sunny uplands of Enterprise 2.0, of joyfully collaborative Wikis and customer-seducing Blogs, of widgets that delight and truly cool mashups - but what any hard bitten organisation wants to see is how the service traverses the rocks and bogs of actually making it work in a 24x7x365 production environment, where real users - busy, ham fisted, non techie types - are thrashing the sh*t out of your software on daily basis.

Guess what - this means user testing, adding robustness, testing for scalability, and so on and so on ad nauseam until you get it right and it won't fall over at 3am on Sunday morning.

Without a doubt, Enterprise 2.0 platforms such as Amazon's Cloud and Grid are a huge step forward over the ASP's of the 2000 era, and Open Source software is inherently a lot more reliable that the proprietary hacks of yesteryear - but this is not where it ends. In our experience the biggest issue we have come across talking to young startups, is their frequent inability to imagine the torture to which a service can be put through in a production environment.

It's no accident that new technologies are typically introduced into organisations "off the critical path" - into HR, front end demand generation etc - because the last thing anybody wants is to bring the Line of Business to a standstill. So to that end, the more stress testing a new application can be put through first, the more robust its initial infrastructure design, the better.

There is a corollary to this - no matter how sexy the Presentation Layer, any hard boiled enterprise crew will immediately want to look under the hood and see how it works. Why do you think Google's office suite had so few serious takers and they have had to build Gears?. Why have so few pure web apps been taken up in corporation sane? Its because people who live in a production environment know that if your app f*cks up it has all sorts of knock on effects - organisations are not just social networks, they are social networks with a purpose - to do stuff.

In Summary

The point of this post on Enterprise 2.0 (if you will excuse the slight rant-ish tinge) is to counterbalance some of the - frankly - over-hype over Enterprise 2.0. In Gartner speak, we are trying to get it off that "Peak of Inflated Expectations" and look at what it must do in reality to be useful and used.

Thus we are trying not to bury Enterprise 2.0 as it were, but not to overpraise it either - more to appraise it sensibly.

There is a very reasonable discussion to be had about using consumer based Web 2.0 tools in the workplace, as they can be much more powerful than the older business based ones - we would argue that this is true today for stuff that can be run behind the firewall (Wikis etc) and for point applications not in the Line of Business delivery (Salesforce.com is a good example here), and we will return to these issues in later posts.

In addition there is much to discuss on the impact of the reduced transaction costs of doing business that Enterprise 2.0 implies, as well as the increasing importance of the "Information Layers". We will also discuss what "Lean Enterprise 2.0" means.

But it needs to be put in context....there have been new "save the world" IT breakthroughs before, this is the next one, and there will be ones after it. Yes, there is a lot of merit in it, but it will sail - or sink - on the same practical issues that all the previous ones have - does it support the business objectives. In other words does it pass these hurdles:

- Impact

- Integration

- Implementation

Post-thought - in essence this is describing the "how" of the requirement to jump the "chasm" - the hard ground to cross between the prototype software that early adopters will use, and the more developed systems that are necessary to make it into the mass market. Consumer use is easy - you load it up, you drop it, no worries. It gets virusus - affects you, not anyone else (we hope) Using something reliably - and supporting it - across a whole network is much harder.

(In fact one of the biggest headaches of company IT support is the sheer amount of virusware, malware and other overall cr*pware that staff pick up when loading all the Cool New Apps on their laptops - Monday morning is always a nail biter in big companies .

Postscript - just seen this interesting article on Web 2.0 in Morgan Stanley.....it echoes a lot of the points made above, and akes the two Good Olde Points from software projects immemorial:

- Top Management support is essential
- large companies have incumbents (the name changes with the decade), its always a toss-up to use new startup or wait for incumbent to do it.

This is the first post in an "Enterprise 2.0" series of posts, reflecting on lessons learned and some of the debates in the space, and we'd like to use this to spark off several posts and a discussion on the use of these new technologies in enterprises. There was quite an interesting survey recently by McKinsey of what parts of Web 2.0 Enterprises were actually looking at using. Here is the chart from the paper:



This seems - in our experience, and with the exception of peer to peer networking - fairly sensible usage of Web 2.0 technology in terms of "bang for the buck" for any enterprise.

The use of Webservices is by far the biggest economic driver in the ability to restructure a business in studies to date, and companies are already driving tangible benefits from it. We see it as the "outsourcing endgame" as it allows "rightsourcing" rather than just shifting today's workpatterns to low wage economies.

The ability to build on the combined knowledge of staff - and beyond - is a major competitive advantage, in fact some people (eg John Hegel) believe that we are moving from a "transaction" economy to a "talent" economy, and the ability to use knowledge correctly will be critical. While not sure that transaction economics is going to die anytime soon, clearly making best use of the wetware - especially in high cost economies - will be critical

In fact we believe that the above two forces will be primary drivers of the "Lean Enterprise 2.0" (more in later post)

We can only assume that many webservice media providers were interviewed in the survey, as the high usage of peer to peer networking per se seems odd.

Social Networking is a bit tougher to justify - its not clear if all that many enterprises have a real "need to belong" aura about them that will draw in their customers - and its also not clear just how many Social Networks any one person will join. Nonetheless, for an enterprise with a capability to attract a social network (examples we have worked with include Financial Services, New Technology development, Interactive Media ) they have proven values in customer attraction (Friend of Friends) and Retention (Sense of Community, warning of impending defection).

RSS, while great for geeks, has some real issues with monetisation of advertising, so we believe that it is necessary to balance out the positive benefits of such technology vs potential revenue loss. If it increases your site's helpfulness (exports "attention" as it were), and results in more transactions, its a winner. If it merely sucks users away from Ad impressions its harder to justify.

Podcasts and Blogs are interesting - fraught with problems of privacy, disclosure etc etc, they are - in our experience - very powerful demand generation ( mainly marketing and PR) tools. They have been shown to be fairly effective in transmitting the human values of enterprises (Robert Scoble at Microsoft, the recent J&J/Red Cross bunfight for example) They do have limitations however, namely the requirement for an enterprise to become more of a media business. However, it is our view that in the Broadband Net world all businesses will be Media businesses to one extent or another, so its best to act sooner rather than later.

Wikis and other in-house collaborative software - this to us is in the box of "Why wouldn't you" - but we see it happening at grassroots level and in reality part of any Collective Intelligence suit of applications.

So why are Enterprises doing things in some way in the opposite direction to Web 2.0 "coolness"?

The reason is that Web 2.0 fans forget that Enterprises are trying to optimally manage a far wider range of issue that just technology adoption. In some ways its very simple - value is created in essence by:

- Increasing volume of customers
- Increasing value of customers
- Reducing churn / increasing retention
- Reducing OPEX (operating expenses) per unit of sale
- Using existing CAPEX (Capital Expenditure) as efficiently as possible
- Maximising bang for buck of new CAPEX

And that is in the backdrop of faster pace of ever faster technological innovation, new markets opening up globally and online, existing customers getting sucked away by a plethora of "long tail" and global competitors - and the da to day of running a complex, dynamic social network called an Enterprise.

WebServices are an obvious choice - increasing reach, potentially value, certainly reducing Opex and potentially Capex as well - and have been shown to help prolong retention by offering self-service

Collective Intelligence (CI). If harnessed well CI will impact all the above areas. However, it is an emerging field an requires quite a shift in "ways of working" - from information hoarding to information sharing - to really gain from it. As noted we see Wikis etc as part of the overall toolset in this area, though we know of enterprising people who have developed very innovative customer and supplier interfacing wikis and save significant costs (and retained customers) in that way.

Social Networks - witness the furore over Facebook to see the current issues. Will they come - yes, but the current crop do not - in our view - have acceptable levels of privacy and security for use outside of any enterprise, and are not really structured for use within an enterprise yet. However, suitably modified we can see they will have major impact as overlays in B2B exchanges, as tools in CRM and VRM approaches, and probably as part of an CI system. More of this in a later post.

Podcasts and Blogs - mainly market making, but we believe they have a major potential role in customer retention as well. The more an enterprise relies on media, the more useful these technologies will be. (And Vodcasts more than Podcasts in our view)

RSS we have discussed already, in the light of the above forces it seems that it has to be an enabler of something bigger (ditto widgets).

Oh dear...it seems like there is another hoo-ha about who coined Enterprise 2.0 first....as you no doubt realise, it takes a rare flash of pure genius to add "2.0" to "Enterprise", so only a few people in the world have done this - according to Wikipedia, anyway.

The prior art must be somewhat thick on the ground (...heck, we wrote a short paper for a client presentation in late 2005 called "Enterprise 2.0" - the use of modern web technologies in e-Business, and I'll bet loads of people did likewise).

And while we're at it we've used B2B 2.0, e-Business 2.0, Transformation 2.0, Media 2.0, Customer Service 2.0, JiT 2.0, and even MRP 2.0 (yes, that old chestnut returns). And not even with "ironic" quotes either !

Question - if a term is not invented in California, does it count?

(By the way, reading through that paper now its interesting to see how "Web 2.0" has shifted away from some of the other original aspects and far more towards Social Networked media these days)

Main reason for posting this though was to pick up a point made in a comment by Ajit Jaokar on his post on the subject:

Within the background of these definitions; most of the thinking today is driven by tools vendors - and is based on 'Intranet 2.0' (if one may coin that phrase!) - i.e. some form of better 'in house' collaboration.

This approach has two immediate problems

a) The payoff with a collaborative tool implementation is difficult to quantify even with the best of implementations. For instance, Nick Carr believes that the best employees may be simply too busy to contribute

b) The implementation of a specific software/tool is viewed as a cost centre and not a profit centre i.e. not directly in the income stream of the company

Quite....some of what is being put out in the name of "Enterprise 2.0" is misleading (to put it politely), and, as Ajit notes, is more about pouring old wine into new bottles.

However, we believe the real value is not just within the Enterprise, but is released by allowing multiple Enterprises to communicate seamlessly with each other. We have been spending the last few months with a client working out how "Web 2.0" stays as an open network platform when used between Enterprises - but unfortunately there is quite a lot of effort being expended to "lock up" these sort of services (much as we now see with consumer social networks), or to prevent their occurrence in the name of Security etc.

While this is all very understandable, it will set back Enterprise service development - in fact probably to the detriment of the foot-shufflers, as the 'Net usually goes around obstructions, and thsi is unlikely to be an exception.