“Well, in our country,” said Alice, still panting a little, “you'd generally get to somewhere else—if you run very fast for a long time, as we've been doing.”
“A slow sort of country!” said the Queen. “Now, here, you see, it takes all the running you can do, to keep in the same place. If you want to get somewhere else, you must run at least twice as fast as that!”
Lewis Carroll, Through the Looking-Glass, 1871
A couple of years ago, UK mobile phone company O2 undertook an intriguing initiative — to keep the doors of its Slough head office closed for the day, to tell people to work from home and see what happened. At the time, sustainability was all the rage — what with rising oil prices, all attention was on how companies could prove their green credentials. The headline statistics were impressive — 2,000 saved hours of commute time, which corresponded to £9,000 of O2 employees' own money; a third of the 2,500 staff claimed to be more productive; electricity consumption was reduced by 12 per and water usage by 53 percent.
All in all, a thoroughly good advert for working from home. What nobody seemed to notice, however, is that nobody outside the company batted an eye. O2’s business did not fall, or even stumble. Even with the doors closed, for O2’s customers, suppliers and partners it was like nothing at all happened. Business took place completely as usual — begging the question, precisely what purpose did having a head office serve at all?
While technology is not the only reason why companies across the board can operate more flexibly, it certainly helps. As we have already seen (and as most, if not all readers have experienced for themselves), our mobile devices can connect, via the Internet, to virtually (no pun intended) anywhere. Whereas once people would have to go into the office to meet or indeed, to access a computer system, they can now do so from the comfort of their own home.
Even more significantly, perhaps, has been the growing ability to use the cloud, a.k.a. “other people’s computers” to perform processing tasks that previously would have had to have taken place on a company’s own computer systems. Over the past decade or so, purveyors of computer services have grown and evolved, from the Application Service Providers at the turn of the millennium, to what has come to be termed Software as a Service, or SaaS. Pretty much anything a company might want to do in software — managing your customers or projects, keeping track of inventory, doing your accounts and so on — can be done using a Web-based package rather than installing something locally.
SaaS is very quick to get going: the low cost of entry, coupled with the minimal installation overhead, compared to deploying an in-house application, make it ideal to suit specific needs being treated as a one-off. And then some: a company can build an application on top of a business-class hosted back-end (such as Amazon Elastic compute cloud, Google App Engine or Microsoft Azure) and start delivering services to customers much more easily than 'the old way' of buying and installing servers, routers and all the other gubbins required.
This, minimal-overhead approach is ideal for anyone wanting to found a technology start-up. When I last went to visit my good friend Steve at his new business venture, above a high street coffee shop in Mountain View California, the only computers visible were laptops. “Even our telephone system is in the cloud,” he told me. SaaS has extended way beyond provision of basic services: whereas a few years ago, companies may have had to shrug off cloud-based software and start building their own data centres having grown beyond a certain point, these days it would be unlikely in the extreme for any organisation to make such a leap. Indeed, the last major US company to do so was probably Facebook.
As a result, new companies have everything they need both to start with very few infrastructure costs (a hundred quid a month or so is not unheard of), and then to scale. The consequence is a proliferation of possible ideas, not all of which will succeed — the very brainstorming effect we saw in the first section of this book. But every now and then, an organisation will appear, then grow to a global entity in the order of months, taking on the traditional ‘players in the market’ as it does so. The business term is disintermediation, as some unassuming startup recognises that it offer a service or supply a product to a certain customer base, in a way previously ignored by the incumbents. Uber and AirBnB are just the latest examples of how relatively new organisations can completely change how business is done, in the former’s case much to the consternation of Taxi companies around the world.
Companies new and old are responding to the technology-driven realities of modern business. The ‘platform’ upon which such startups are built is, of course, also accessible to traditional organisations, both private and public. As a result it has become increasingly easy to engage and communicate with others, so the costs of doing so decrease relative to the benefits. This gives us a business corollary to the Law of Diminishing Thresholds: in pharmaceuticals for example, it is recognised that you can get more bang per buck by funding a science park and supporting research start-ups, than trying to do all the research in-house. Unsurprisingly, big pharma companies are also big advocates of open data approaches: simply put, it’s good for business. Meanwhile doors are being opened between corporations and their clients, under the auspices of co-creation, for example working together on product designs.
What with social media and generally improved communications, any organisation large or small can get a direct line to its customers, which it can use to better understand what products to develop, test out new services, , to support marketing initiatives and even to act as service and support, in the case of GiffGaff, or, indeed, ask for money in advance. First to discover the potential of such models was popular beat combo Marillion. Back in 1997, unable to tour the US due to a series of convoluted circumstances, faced with broken promises and inadequate representation from the industry, the band turned to their devoted online fan base for help. The masses may have been marshalled via email lists rather than social networks back in the day, but Marillion can quite comfortably claim to be the first band to undertake a crowdsourcing campaign. Even the idea itself was triggered by the fans; the resulting ‘tour fund’ not only raised $80,000 and enabled the tour to take place; it set the scene for an album pre-order campaign which, effectively, freed the band - and all bands — from the clutches of an oft-indifferent industry.
A couple of decades on, pledge-based platforms like Kickstarter and PledgeMusic have become part of the vernacular for established acts and fledgling bands. Indeed, when Steve Rothery, Marillion’s longest-serving member launched a Kickstarter campaign to produce a solo album, The Ghosts of Pripyat, he achieved his £15,000 target within 48 hours of launch. “Isn't it good when a plan comes together,” he remarked. And meanwhile, Seedrs, Angellist, Indiegogo, Kiva and a wide variety of other funding platforms ensure that just about anyone in the world, with any kind of idea or need, can have access to funding. Indeed, these models are now big business: peer-to-peer (P2P) lending platforms also exist for wealthy and institutional investors, disintermediating even the banks.
This change is starkly illustrated1 by research company Ocean Tomo's presentation of S&P 500's tangible assets over the past 40 years. In 1975, 17% of assets were listed as 'intangible', that is, not directly owned by the organisation but still a source of value. in 2015, this figure was 84% — a complete flip. These are “sea changes in the world right now in terms of the way we are globally transforming the way we live and work,” says2 Dion Hinchcliffe, one of a group of bloggers3 called the ‘Enterprise Irregulars’. But such a mindset or the presence of certain tools might not have an impact on real business outcomes, beyond general notions of knowledge sharing and engagement, argues4 Information Week’s Rob Preston. “The movement's evangelists employ the kumbaya language of community engagement rather than the more precise language of increasing sales, slashing costs, and reducing customer complaints,” he says. While the startup working environment might sound exciting to some, it doesn’t necessarily have the mass appeal that the pundits and commentators who embrace them might believe. “I’m an electronic engineer,” said one person to me when I asked about his company’s use of social enterprise tool Yammer. “What time do I have for filling in my profile or joining in some chat?”
As they try to balance the need for change with the need to ignore transient distraction, the main issue for older companies is their own inertia: they simply can’t change the way they have always done things, for reasons to do as much with internal politics and structures, as any technical or process challenges. In some cases, whole businesses have crumbled because they failed to keep up with innovations that undermined their business models — Kodak5 is a reminder of the cautionary words documented by Lewis Carroll, now known as the Red Queen’s Race. As organisations new and old are moving to a new state, ’business transformation’ — that is, helping organisations through the changes they need to make to stay competitive — is big business in itself.
Governments could also be gaining more benefit from the potential of technology, not to make a profit but to reduce the burden they put on taxpayers — but they are also undergoing difficult changes in how they operate. For example central government has not, traditionally, had a great track record with procurement. Big departments have tended to buy from big companies, for the simple reason that the overhead of responding to the still-onerous tendering process remains too great. A number of initiatives are underway to make things simpler — both for smaller companies to tender for business in general, and (in the shape of G-Cloud and its associated Application Store) for smaller SaaS companies to get a foot in the door. “The government sees SMEs as key players in the new Government ICT market economy,” says John Glover, director of SaaS-based collaboration software company Inovem.
The Law of Diminishing Thresholds has no national boundaries, of course. Over the past 10 years for example, developing nations have moved to a majority position, delivering nearly three quarters of the 5 billion global mobile phone subscriptions. For various reasons, from copper theft to straightforward building expense, it has been more efficient for such countries to jump straight to mobile, without bothering with the ‘fixed’ telephone service. This ’leapfrog effect’ describes how countries without existing infrastructure are in a position to get ahead those who had decades of embedded kit to cope with. In consequence, what developing countries lack in internal compute infrastructure, they make up in terms of mobile comms and device prevalence. The massive adoption rate offers a salutary tale for programmes such as Nicholas Negroponte's "One Laptop Per Child" (OLPC) project which has been dogged by controversy.
As business is globalising, it opens the door to companies from a much broader palette of countries. Indeed, given the potential of the cloud/mobile combo, the opportunity for developing countries is not so much to leapfrog traditional infrastructure, but to get a head start in terms of innovation — sparking success stories like Zoho in India, and indeed, Alibaba in China: the latter deserves a chapter to itself.
The net effect for any organisation is that the once-valid model of creating a centralised corporation which sought to control the world from its monolithic headquarters has largely been eroded. We are moving from a business landscape of castles, to a dynamic marketplace in which big and small can co-operate, and compete, as peers. And as power moving from the entity to the ecosystem, there is one, additional factor which ensures that the door is slammed on traditional models: that is, the people.
Not an awfully long time ago, the simple reason why most people didn’t own a computer was the fact they were too expensive. The main option for most people (a PC running Microsoft Windows) would cost hundreds, if not thousands of pounds new; and the number of things that anyone could do with it were limited — one could write one’s memoirs, or perhaps send emails over a dial-up modem connection. Even a decade ago, computers were a luxury item. But then came the smartphone (essentially, a miniaturised computer with a built in wireless modem) and everything changed. Today, it is possible to buy such a device for tens of pounds, enabling access to all kinds of online services. Most people don’t, however — they’d rather spend hundreds of pounds and buy a more expensive model, or even a tablet computer such as an iPad. Which they do, sometimes as a luxury item but equally frequently, as a necessity.
As people think about technology differently, such views are spilling into the workplace. We get used to being able to send a message instantly, to see whether it has been read and to react to the messages of others. We expect to be able to send photos, often taking a picture of a document as a way of transmitting the information. And then we go to work, we see the kit we have been given to do the job. You can see where this is going: the fact is, all too frequently, people find themselves held back or even less productive in their jobs, due to inadequacies in office systems, compared to what they are used to.
The phenomenon of people using their own kit is known as consumerisation, or BYOD — quite literally, ‘Bring Your Own Device’. People in all roles and at all levels — from petrol station attendants to CEOs, from doctors and nurses, to truckers and sales people, have access to better technology than their organisations provide. Companies can try to harness the potential of not having to provide kit, with some offering a stipend instead — but its business benefits are not that obvious: indeed the net-net productivity gain can be marginal, suggests a study6 on consumerisation from technology industry research firm Freeform Dynamics. “Distraction and time wasting can sometimes offset any potential efficiency gains,” commented CEO and lead researcher, Dale Vile.
At the same time however, the workforce is changing: in some ways, the BYOD trend is as much a symptom of changing attitudes to computer equipment. While a company can’t just adopt a tool and become like a startup, staff and their habits are changing due to how individuals are adopting technology for themselves — including mobile and social tools, but also online services such as Dropbox. Quite often it can be a company that is dragged along by its staff’s use of, say, Facebook or Twitter to enable more direct relationships with customers. In social technology’s case, for example, getting a quick expert answer to a customer query, or as Rob Preston mentions, finding a spare part. Technology-savvy youngsters arrive with different expectations of how business could be done, in some cases they will be right. But they aren’t going to have things all their own way given the dual pressures of corporate inertia and the need to maintain governance.
All the same, we can see two major changes — the first being a reduced dependency on corporate infrastructure inside the company, and the second (as a direct consequence) being an increased flattening of the business ecosystem. That is, the corporate world is becoming a global village, with companies and their employees increasingly connected to their suppliers and consumers.
How can businesses ever get the balance right? Some might say existing companies are still in the grips of the industrial revolution, with Henry T Ford’s efficiency-driven approaches driving how we operate. Others might comment that corporations have become too powerful, that money and power have gone to the heads of the few, to the detriment of the many. Both are probably right, but overall, the thresholds have fallen to enable new to compete with old.
Who knows what the future holds — we are already seeing the up-starts becoming as big as the incumbents, suffering the challenges that only very large companies know about — such as managing an internationally distributed pool of talent. For many types of company the playing field is levelling, at least for a while. Those under biggest threat seem to be the ones whose bread and butter is based on fact that they are purveyors of content. Let’s take a look at those.