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Business Practice

Should Enterprise “Think Small”?

March 3rd, 2010 by Andrew Swenson in Business Practice

image credit: DeaPeaJay

As social business concepts emerge, there is a clear and growing divide between those companies that have embraced social modes of work and those that are still operating under the rigid rules of twentieth century enterprise.

This of course has lead to all sorts of misguided and mostly useless debate about whether or not the shift to Enterprise 2.0 is important.

But I’d argue that point is not whether or not social business models are “better” than traditional industrial models, nor is it about what’s profitable right now. The importance of this conversation is about how human connectedness through technology is changing the way we interact and do work.

My take on this is also most likely not completely new, but as I begin to piece all of this together, it’s my hope to continue the conversation about the changing nature of work (not just the changing nature of social interaction) and invite you to join in.

The Challenge of Being Big

It’s tempting to place the importance of social media solely on the outward-facing communication functions of an organization.

This, I think is a mistake.

Sure, as Stuart Foster recently pointed out, big brands have big challenges to overcome in order to reach the level of social marketing effectiveness some of their smaller counterparts enjoy. But Foster himself outlined relatively easy solutions to each of the social media marketing challenges.

What’s more difficult is the socializing of business itself, and more specifically, the socialization of work in the enterprise. It requires that we leave entire business paradigms behind. It means culture shift.

Slow, Complex, and Complicated

Letting your employees tweet at work does not equal socialization of work.

Because the socialization of work has to do with an adapting structure of an organization, smaller orgs seem to fit more easily within social models of business. Martinj Linssen suggested that if your organization is at the level of enterprise (or larger), there’s possibly no place for social in your organization.

Linssen explains that traditional enterprises are slower, more complex and entirely more complicated than their more socially inclined counterparts because of their size, their inability to let go of historically ingrained practices, their overly political systems of power, and the challenge of legacy apps.

All of these things are symptoms of the enterprise obsession with groups. It’s what Stowe Boyd has been saying for years: “the rights and responsibilities of individuals are derived from group membership, and these rights are granted by the enterprise.”

Compare this to the social web networks that provide individuals with rights and responsibilities without a transfer of power from a group.

The issue is human

As Tim Jahn recently articulated in my interview with him for the Ask Summit, larger organizations often lack humanity.

Once you attain a certain size, you become more or less defined by the sum of your processes. In order to maintain rule for the sake of the process, you must strip any humanity from the equation. Process trumps creativity and automation trumps innovation.

And that’s how we become the cogs Seth Godin keeps telling us not to be.

Economy and Scale

So why try to change the enterprise if it’s so riddled with challenges? Why not kick the whole model and shrink organizations?

Despite the growing commitment to creativity, collaboration and innovation I see in conversations online, me must nod to the economy of scale. Stuff simply costs less when it’s purchased or produced in bulk.

But what’s the cost of the supporting infrastructure for producing cheap goods? If we look carefully, we see that return on assets (ROA) has dropped over the last 40 years, even as labor productivity improved (source: Harvard Business Review). It’s as #smchat founder Chris Jones articulated:

How can we hope to make money, when the answer to every problem is to buy and/or build more infrastructure?  Large scale operations require maintenance and up-keep, care and feeding.  It’s a problem that doesn’t go away.  A viscious [sic] circle.

So should enterprise organizations “think small” and attempt to act more like their social counterparts to boost profitability as technology and human connection advance? Jones continues:

It’s no longer enough (if it ever really was) to try to ‘think entrepreneurial”.  Small and nimble companies are developing a clear advantage in the new global marketplace. They lack the bureaucracy that blocks collaboration, that shields executives from shifting market paradigms, that strands innovators in organizational silos.

A fractal sort of scaling

At the risk of oversimplifying the issue, I think some of the problems of traditional organizational scaling might be solved by rethinking scale altogether.

After sorting through all of this, it seems I finally understand what Stowe Boyd meant when he said that the future of business would face a fractal kind of scaling where “the same sorts of organizational principles are at work in the large and in the small.”

This type of scaling, as Bas Reus shows us, might appear as heterarchy, a wirearchy, or some other networked structure that resembles nothing like the traditional organizational pyramid.

In any case, the future of business in the social realm is more than a marketing program or a mindset.

It’s a complete restructuring.

What do you think?

Are you caught an an immobile enterprise that’s seeing your market share being eroded by start-ups or smaller, more nimble organizations?

Do you sense a coming change in organizational scale?

Do you think I’m completely wrong here?

Leave a comment if you’re so inclined.

-Andrew

Image credit: DeaPeaJay on Ficker; see original for copyright info

Related Posts

No related posts were found, so here's a consolation prize: Process won’t solve ambiguous problems.

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  • http://twitter.com/tasmijn Bas Helderman

    I used to work at an enterprise. After exactly 6 months I left :)

    When I look back on that short period, I think their biggest problem is a lack of trust and big egos. They see the opportunities and the need to become more social. In other words, their revenue is dropping eventhough “they're doing the same as before”.

    So there's something wrong with the business and that social stuff, that might be the answer! They know they don't have the expertise to take the step into social, so they hire some professionals (i.e. me ;) ).

    Before hiring me, they set certain goals and revenues. They had the strategy all figured out. They read a book, you know… So I told them that the strategy and the results they have in mind are plain wrong and way too ambitious. They reckoned that couldn't be right.

    I also joined a project group to optimize emailings. They were doing a great job optimizing shit. Most members were, ofcourse, traditional marketeers. I figured that the project had taken a wrong turn and wrote a plan that could save ~250k euro in the first year alone (at least, that's appr. what I almost sientifically calculated). The project managerS rejected my proposal and rather continued the way they set out.

    So you're constantly clashing, cruncking on their egos. They might ask for advise, but in the end they go along doing what they think is best.

    In an hierarchic environment like that, social anything doesn't get a chance. If professional employees aren't taken seriously, they surely look down on “regular” employees, let alone the customers.

    At least, that's my experience ;)

    • http://wordpost.org Andrew Swenson

      Thanks for sharing this Bas.

      I'll agree that lack of trust and ego are two huge issues in enterprise.

      One of the worst things that lack of trust leads to is micromanagement. This not only frustrates the micromanager (because they aren't really fulfilling their job function), it also frustrates those who are being told what to do. Worst of all, teams that are micromanaged rarely accomplish as much as more freely managed teams.

      And about ego…I won't even get started. Although I will say that it's my opinion that the worst display of egoism is when a person in authority makes people under him or her afraid for their jobs if they don't do exactly what he or she wants. It breeds a culture where everyone nods, no one challenges, and ideas stagnate.

  • http://twitter.com/tasmijn Bas Helderman

    Oh, great article btw ;)

  • http://www.blogcastfm.com/ Srinivas Rao

    I've worked in companies both big and small. I worked at a huge company for my summer MBA internship. The amount of meetings I had to sit in on when compared to actual execution of social media strategy was really frustrating. Smaller companies have a definite advantage because of the ability to take action. 25 layers of approval makes something that should take days take months.

    • http://wordpost.org Andrew Swenson

      The barrier to action observation is right on. Small companies can test two or three ideas in the time it takes a large company to approve getting started testing their first idea.

      I think it goes back to the concept of failing fast and failing cheap, something that large organizations have a rough time doing (at least from my vantage).

  • andreavlewis

    I think successful companies, no matter what their size, need to be both flexible and adaptable, in order to keep up with consumer demands. With that being said, I believe it's much easier for smaller organizations to make these changes because they often times don't have the political hierarchy that large corporations do.

    • http://wordpost.org Andrew Swenson

      Thanks for bringing up the politics issue Andrea! I think you're not alone in exposing that challenge…

      Linsssen, who I linked to above, wrote a phenomenal article on politics earlier this year entitled, “Politics – what's the ROI of that, actually?”

      http://www.martijnlinssen.com/2010/01/politics-…

      Which was actually a partial response to David Armano who wrote in a list of 5 reasons you're failing in social media:

      “4. Politics.”

      http://darmano.typepad.com/logic_emotion/2010/0…

      …and even though we agree that politicking stupid, many keep doing it.

  • MouyyadA

    Andrew I think you're right on point. I am currently employed by a big corporation and what Tim Jahn said was correct: they lack humanity. Companies are set up with the old hierarchical mentality of the pyramid where the heads of the organization are at the top. Companies that want to succeed from now on must flip that pyramid. The size of the bigger corporations makes that a very difficult change, but there is nothing wrong with dividing and conquering, and building smaller pyramids.

    • http://wordpost.org Andrew Swenson

      Building smaller pyramids in a sort of fractal way, I think.

      But one big pyramid isn't going to work any more. What's scary in this shift though, is that the people at the top have to give up some of their absolute power. And they don't like that…so we're stuck in the status quo until some market force pushes them to change.

      Hopefully that comes soon.

      • MouyyadA

        Hope so too man, great post

  • http://www.BeyondThePedway.com Tim Jahn

    I think enterprise should think small. Think about the giant crawler that carries the space shuttle to launch. Then think about the pickup trucks driving alongside it. Which one is more capable of turning quicker, swerving to avoid obstacles, and can stop more accurately?

    By the time the crawler has reached the launchpad, the pickup truck has been there and is already at the next launchpad, ready to go.

    • http://wordpost.org Andrew Swenson

      But I wonder if it's enough just to think small. How do we humanize the gigantic machine? Is it even possible?

      Or do we have to break the machine apart into smaller, more autonomous parts?

  • http://www.blackbeltguide.com/ Marc Winitz

    Andrew,

    This is a really interesting thesis and I am glad you have started the debate. My view is that while the sands are shifting nothing is settled yet and may not for some time. I have worked in both startups and in large enterprises (where I work now). While it's fairly true you have more flexibility in a smaller organization that doesn't always hold true. Larger organizations can be nimble and they can employ game changing technology. Just last week Dept of Defense announced broadscale use of social media platforms by virtually anyone in the US military. You don't get bigger or more structured than DoD. Also, it is not clear that social media or the emerging 2.0 enterprise (at least yet) necessarily replaces the need for larger scale structured organizations. The reason is that they are driven by profits and large returns. That is the purpose of scale for venture capital as an example. It's not about gaining efficiency although that is a nice by product that adds to overall profit.

    In the quote Chris Jones provides he states “How can we hope to make money, when the answer to every problem is to buy and/or build more infrastructure? “
    But I would argue companies want this current model because it is an argument for scarcity.

    What I believe your saying is move away from that model to one of abundance. Some of capitalism does this now (versus socialism for example) however there is too much profit in the ongoing infrastructure model for companies to walk from that – yet. And this only works in real “Long Tail” environments. There is no “Long Tail” for manufacturing (e.g. cars, consumer products or largescale infrastructure businesses like wireless networks).

    So, returning to your central question “So should enterprise organizations “think small” and attempt to act more like their social counterparts to boost profitability as technology and human connection advance?”

    Sure they should, if there is enough incentive that it fits a model that generates profits and enterprises can either see this or the market moves to it (so enterprises follow). The challenge for social entrepreneur-ism is how to achieve this and make it attractive enough for those that are less socially inclined, or in business models that cannot currently participate in that way (because they are too big and by your admonition they lack humanity). Unfortunately, that's also a question of greed, which is a very human characteristic, and happens to be the one that large organizations organize around for growth (which is not necessarily a bad thing always).

    Great thinking, writing and discussion here, I enjoyed this.

    • http://wordpost.org Andrew Swenson

      Marc,

      To quote Puff Daddy, “It's All about the Benjamins, baby.”

      So while I value the organic and human feel of social business as a whole, I understand at the end of the day, the model that will triumph is the one that allows organizations to make the most money. It's the nature of any capital economy.

      The incentive, I think, will come as the importance of networks begins to supersede the importance of process. Any attempt to articulate this on my part would really be an echo of this post:

      http://www.stoweboyd.com/message/2009/11/17/the…

      In short, it's my opinion that only when the market demands that organizations act more like humans—and provide products that help to facilitate the transfer of meaning between humans—will we see a large scale shift to more social business platforms…because that's where the money will be.

      Of course, I'm on the edge with that theory. There are plenty of people smarter than me that are making the case that enterprise 2.0 is a crock.

      But we'll see in a few years. If we listen, the market will tell us.

      Thanks again for commenting, and sorry it took so long to respond!

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