Transaction Costs | Bertrand Duperrin's Notepad

10 things I believe about the ROI of Enterprise 2.0

July 28, 2009 By Bertrand DUPERRIN 1 Comment

The “ROI” question is still very discussed even if it irritates many people and is used as a pretext for many things. Here are 10 things I believe (right now, at the moment I’m writing…) on the subject. These are only personal beliefs and are subject to change once I find more relevant ones..

1°) This is not a trival point. When a company is asked to invest money, it’s logical they want to have at least as much money as they spent in a direct or indirect return. “Invest time and money..you want to know what you’ll get in return ?…. But we don’t care, it doesn’t matter” is a discourse that enterprises can’t hear. If you don’t agree with me, I suggest you to send me 1000 euros (I accept cheques and paypal), knowing I won’t explain you what I’ll do in return (and if I’ll do something in return). If I’m a milionaire at the end of the week, maybe I’ll change my mind.

2°) ROI may have new forms. The ROI as a predictable mathematic profitability model is not the only way to measure things anymore. R is not a function of I but also depends on peripherical elements (sense, alignment, management…)

3°) Agreeging to the previous point forces us to find new ways to trace created value.

4°) We have to admit that the “ROI question” is an easy way for many people not to do what they don’t want or do not have the courage to do. But it doesn’t mean than those who raise it necessarily want to lay a project aside.

5°) ROI has not to be measured in tools but in people’s and organizational performance. Measuring the ROI of a tool through its content is hazardous. Measuring how individual and collective performance is improved since a tool is used is more concrete. Measuring how a tool is used (contribs, comments…) is value less. Value is in the use of the contents for business purposes, outside of the tool.

6°) Measuring what is lost because of “not doing” is also interesting. In a transactions economy, measuring the cost of current transactions and the cost of missed opportunities due to transaction that can’t happen brings a new perspective.

7°) ROI is a systemic measue : tools + org modes, at an individual and collective level.

8°) Repeat that “no one cares about the ROI of electricity” makes no sens. More, all companies are trying to lower their electricity costs and improve their “energy performance”.

9°) If the value chain is protected from the E2.0 project, there are few chances any return will happen.

10°) If some businesses are successful with their E2.0 implementation and keep on thar way, that’s not for the pleasure of spending money and time. Using their case not only in order to know that “it’s possible” but as a laboratory to invent new ways to trace value would be worth.

Filed Under: Enterprise 2.0 & Social Business, Management & HR, Web & Usages Tagged With: enterprise 2.0 ROI, social computing, social media, transaction costs, value, value chain

Can enterprises organize themselves as markets

January 17, 2009 By Bertrand DUPERRIN 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.

Do enterprises really outsource the right things ?

August 28, 2008 By Bertrand DUPERRIN 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: coase, costs, india, Innovation, knowledge-economy, knowledge-workers, KPO, outsourcing, saas, transaction costs

Can we organize without organization ?

April 27, 2008 By Bertrand DUPERRIN 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: coase, externalization, hierarchy, intrapreneurship, organization, partnership, shirky, transaction costs

Enterprise 2.0 : the last step before the project economy ?

April 15, 2008 By Bertrand DUPERRIN 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...]