Too big to last ?

August 5, 2009 By 1 Comment

Is the myth of the “critical size” close to its end ? The concept of enterprise always comes with the concept of “growth”. Growth of the turnover, but also growth of its size. Today’s big companies count tens or hundreds thousand employees. But, at a time when performance is not only about the net force obtained by adding up hands but about the ability to make brains interact together, does critical size become a weakness ?

Today, some voices are rising to say :

- current efficiency issues are caused by inappropriate size. That’s because enterprises are not as good as making people interact as they were at adding up hands 30 years ago, that they were forced to find on financial markets the growth they could not get at the operational level.

- once companies have reached a certain size, their impact on economy can be dramatic and their failure could cause a systemic threat to the whole system.

In short, we’re shiftting from a context where size was reassuring to a context when it may mean incontrolability and risk.

Can we think that a constellation of partners would be more efficient that the current mastodonts ? That businesses should lose weight and organize a their value chain with external partners ? An extreme application of value chain 2.0 ? Anyway, we still don’t know how Coase’s theorem will apply to our new born knowledge economy. No one knows what future will look like but it’s not irrelevant to think that value chain socialization will bring a new form of enterprise, more designed to hunt in packs than for solitary tracking because of their lack of agility. Or, maybe, some cleaver CEOs will manage to make  make elephants dance..

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Filed Under: Economy & New Models, Management & HR Tagged With: , , , , , , ,

Can enterprises organize themselves as markets

January 17, 2009 By 3 Comments

What’s a market ? It’s a place when offer meets demand.

Companies love markets because it’s the more efficient way to find outlets for their products and identify suppliers. It’s a competitiveness factor because of the outlets it provides and the optimization of costs that competition makes possible.

The “social” web is a market somehow. Contents can find an audience, ideas outlets, projects people who’ll make them become real, people partners, question answers. It’s because of this market that events as trivial as flashmobs happened, that some people had great carriers evolutions, that some companies where born. This huge self-organized space made possible things that would not have been in a classical, organized, regulated market, operation costs making it irrational the organization of niche micro-markets. It’s because it has no physical nor economic barriers that the web made all this possible : intermediation and transaction costs are near to zero.

There is another place that is full of ideas, projects, needs, competences, longings, question, which would gain a lot if the ones were able to meet the others within its walls : the enterprise.

Experience showed me this is definitively the place where exist the more questions and answers, and the place where we can be sure there are very few chances that the ones meet the others. Companies are traditionnally, on this point of view, the place for misses opportunities. It may sound surprising according to all the things companies do, to all their obvious successes, but when looking at what they don’t  or painfully do and would make sense, it may makes us feel dizzy. A kind of vertigo that is proportional with the size of the enterprise. Are there any reason to that ? Of course : high transaction and intermediation costs and the fact companies don’t want to give intermediation up.

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Filed Under: Economy & New Models, Enterprise 2.0 & Social Business, Knowledge & Information management, Management & HR, Web & Usages Tagged With: , , , , , , , , , , , , , , ,

Do enterprises really outsource the right things ?

August 28, 2008 By 1 Comment

Some of my reflections point to the slow but unavoidable outsourcing of the human side of the enterprise.

First because of organization models and systems that allow companies to focus on their core business : identifying key issues and needs, they can concentrate on elaboring a stragegy to respond…and let others do the rest. The rest, from innovation to delivery can be fully outsourced, to the general public or specialized partnes whose small size helps them being really agile and reactive. This organization model provides even more satisfaction to partners than if they were employed within the company. So, large businesses’ performance will highly rely on its ability to fin right answers and organize the competence chain to deliver.

We also have to know that incurate tools and organization causing high costs to access that so important ressource that internal information has become, Coase law could apply in reverse since outside expertise and knowledge is cheaper than internal one.

Then, and this previous post was only an example among many others, because knowledge process outsourcing becomes a real market and a source of growth for many countries that want to jump on this train et benefit from what will be their industrial revolution, putting an incredible presse on occidental companies that may see the advantages to outsource their knowledge processes.

There’s a simple reason to all that : since machines were there to imporve activities’ scalability, knowledge related activities still rely on people’s time. Even if some are slowers than others, it’s useless to replace them by more productive ones when the purpose is more qualitative than productive, the only solution is to hire more people, with the consequences we know about costs. Which must make us wonder more than ever on the question of work related costs in our occidental economies.

Sure, things will get balanced one day or the other, than one day the Indian worker will be as expensive as the european worker. But when ? Perhaps too late. And we can’t be sure there will never be a “new India”.

In brief, although it may looks very attractive, this trend is not a good thing for our economies.

Another point is that, since we all know in a knowledge economy people will be companies’ more important wealth, businesses are doing exactly the opposite of what they should : they keep control of their tools and outsource their people.

Whatever we could say, many IT depts step on the brakes as soon as they hear the word “Saas”, although the fact they will more and more need larger and more complex infrastructures to store more and more datas, will make it inevitable according to the experts.

It’s a strange paradox to see competences, skilles, expertises, slowly going out of companies that, at the same time, don’t want their information systems to go out of their firewal : common sense would make companies keep their people, their knowledge and outsource their IT. I can’t see the benefits of investing in technologies that allow businesses to take the most of their talents if the talents have left the company.

Filed Under: Economy & New Models, Intranets and digital workplace, Knowledge & Information management, Management & HR Tagged With: , , , , , , , , ,

Once knowledge will be outsourced, enterprises will only be expertise coordinators

July 14, 2008 By 1 Comment

In a previous post I was saying that, one day, enterprise’s main role will be to organize a value chain and coordinate expertises, some of them being internal and some others internal. Economy’s “knowledgization” where assets resides more in individual knowledge, transaction costs near to zero which may cause a reversed application of Coase’s law,  and the ability go organize without organization can make us think that enterprises will only have a role of principal and skills unifier.

I won’t be listing again the long list of thinks that are or can be outsourced today, from recruitment to innovation, without forgetting manufacturing, invoicing, R&D.

Fortunately, companies keep what matters : knowledge, expertises. But, perhaps, not for long.

Have you ever heard of KPO ? No ? So please be informed that after Business Process Outsourcing, here comes Knowledge Process Outsourcing

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Filed Under: Economy & New Models, Innovation, Knowledge & Information management, Management & HR, Software & Tools, strategy Tagged With: , , , , , , , , , , , , , ,

Can we organize without organization ?

April 27, 2008 By 2 Comments

In a previous post I was wondering if we were heading to what I called a project or a partnership economy. In the same way, after meeting Don Tapscott and read “Wikinomics”, the idea came to me that we could soon experience a reverse application of Coase’s theorem. Nothing but logical : if high transaction costs made organization become larger, low transaction costs on immaterial capital may cause exactly the opposite.

This is exactly the theme of an interesting discussion that emerged on Transnets[fr], following the reading of Here comes everybody. [Read more...]

Filed Under: Management & HR Tagged With: , , , , , , ,

Enterprise 2.0 : the last step before the project economy ?

April 15, 2008 By 1 Comment

A few months ago I wondered if we were on the road to an externalisazion of enterprise’s non structuring function, which may paradoxally put value creation outside the enterprise. In this situation the enterprise’s only job would be to manage outsiders according to its needs. I don’t say it’s a good or a bad thing, it’s only an objective possibility.

Someone reminds me of this note and told me : “it’s more real than you may think : if we could measure ressources used to fight against the weight of the system compared to those reallu used to create value it would scare a lot of people”.

Let’s come back to the model that may be offered by the future enterprise. Let’s have a look on the engagement model proposed by the digital natives which looks more like partnership than employement. Let’s, at last, have a look at the Coase Theorem (enterprise’s size depends on transaction costs…but how much costs information today ?). Let’s also consider solutions like innocentive for example…

The most obvious conclusion would be to say that if companies can’t, internally, combine employement and partnership model, decreasing not only information acquiring costs but also the cost of use of all its intangible assets (ie making them available and usable, not only being satisfied they are “inside”), we may soon reach a tipping point. [Read more...]

Filed Under: Enterprise 2.0 & Social Business, Management & HR Tagged With: , , , , , , , , , ,

Wikinomy will deeply affect enterprise’s size and structure

January 5, 2008 By Leave a Comment

I fully agree with Don Tapscott’s wikinomy concept. We’re not talking about the massive use of wikis but about the mass collaboration phenomenon.

The fact is there is more knowledge and innovation outside your company than inside. Some understand it, and among them few are taking benefit from it and many fear it. To make it simple some chose blogs and the innocentive way and some raised walls.

According to me the question is not about walls and frontiers between inside and outside but about enteprise’s structure and organization, HR, and…money of course.

The reason why enterprises became so huge is a matter of transaction costs. As it was more expensive to get something from the outside than having it home made, companies had to hire people to lower their costs. (To learn more about it, have a look at Coase‘s theories).

Today they can get informations identify experts outside for free or paying the “right price”, just when needed. Worse, the may also find this information inside but it’s harder, longer, and…more expensive. And as knowledge and information are becoming essential in value making….

Some should say enterprises will downsize in the upcomming years, parting from people they pay and can’t fully exploit, considering it’s better and more profitable to have outside partners.

Another way of seeing things would be to say that some “intensive thinking people”  who feel underemployed and need more recognition will leave the enterprise. It’s not quite the same thing as the previous point : one is a corporate choice, the other is a situation imposed by employees to the enterprise.

A third aspect of the question would be to consider it at a macro scale, and think about balancing costs. The best way for companies not to decide to rely on the outside and for employees not to find that things are better outside is to make inside information as accessible as outside, and at the same costs.

This implies that enteprises have to adopt the same social dynamics as the web, share a part of its philosphy in their management, and provide people with the same tools to make it work.

People who only focus on numbered ROI should be interested by this approach of transaction costs…

Enterprise 2.0 ?

Filed Under: Enterprise 2.0 & Social Business, Innovation, Management & HR Tagged With: , , , , ,