Ross Mayfield's Weblog

Decoupling Decision Rights and Decentralization

Andrew McAfee has an interesting post that challenges the trend of decentralization in organizations.  Noting Tom Malone's work on how decreased communication costs enable more decentralized decision rights, he makes a distinction between information and knowledge.  You can now provide information to any potential decision maker at a low cost, but the best tacit knowledge for a given decision may reside in someone the core of an organization instead of the assumed edge.

Let’s say that a mortgage company realized that a few of its loan officers were just better at assessing credit risk than all the others. For whatever reasons (intelligence, experience, intuition, etc. ), they just had superior specific knowledge. In that situation, it would make good sense not to decentralize, but instead to centralize that decision right within the company, taking it away from the other loan officers. All the general knowledge (income statements, credit histories, etc.) would be sent to these few people, who would apply their specific knowledge to it and made decisions. In this example low information costs are still important; they allow all the general knowledge to be zipped to the few good officers. But the effect of low information costs isn’t decentralization and greater empowerment. Instead, it’s centralization of an important decision right and reduced autonomy for most loan officers.

Thought experiments like this one indicate to me that the net result of disappearing information costs won’t necessarily be decentralization. It will instead be the decoupling of information flows and decision rights. Organization designers will be able to allocate decision rights without worrying about how costly it will be to get required information to deciders. Leaders will be able to ask "Who should make this decision?" without adding "Keeping in mind that it’s going to be slow, difficult, and expensive to get them the general knowledge they’ll need."

Will this work always, or even usually, lead to more decentralized organizations? I find myself less confident than Malone that this will be the case. I agree with him that we’re at a very interesting point in the history of technology and the economics of information, but I’d label it a great decoupling (of information flow and decision rights) rather than a broad decentralization (as decision rights lateralize along with information flows).

Information has no value until it informs a decision that results in an outcome.  This is part of why it wants to be free and increasingly is.  The decider certainly plays a role in this equation.  But something concerns me about this Carr-esque classification of decision making capabilities based on tacit knowlege (what is it about theories from Harvard on expertise ;-P).  And I don't think it is enough to buck the trend of decentralization.

Decreasing communication costs and ubiquitous information begets transparency.  While the future impact of IT provides both the directions of strong crypto and transparent society, with uncharted privacy implications and policy -- I believe transparency is a greater force.  Especially when it comes to revealing bad decisions.

Lets take Andrew's mortgage company example.  First, celebrate that the organization can change structure from the decoupling of information and decision rights.  Then, note it can shift back.  If a group gains centralized decision making capabilities because of their, augmented by "general" information, it is in a good position to execute the decision making process. 

But my read of Malone's book is it is not just about decreasing communications costs that enable decentralization, but how decentralized organizations can scale.  I believe Andrew is suggesting that information systems that automate information processing enables this group to scale its capabilities.  At first glance, this is similar to how trading desks work.  But approving a mortgage for an individual is very different from institutional trading.  Markets are social and the actors in institutional trading actually rely on relationships, and by doing so improve their tacit knowledge and handle exceptions better.  By taking the social interaction out of the hands of the mortgage officer who is closer to the actual customer and in a position to assess different kinds of risks beyond the FICO score.  And perhaps worse in the long term, it dehumanizes the organization's capability to develop a relationship with the customer.

Perhaps I am being too prescriptive with the business model, and maybe sidestepped the issue by hypothesizing there is a different kind of tacit knowledge at the periphery of the organization.   But the point is some kinds of tacit knowledge and decision making capability, those best at detecting and handling exceptions to business processes, may not be scalable through automation and centralization.

What I really like about Andrew's idea is the ability to reassign decision rights because they are decoupled from information.  Good thing too, because corporations don't have deciding who is best to decide down to a science.  Given the potential transparency in an organization, we may get better at more broadly handling exceptions and learning from decisions made.  We may actually discover who influences makes decisions. But my long term belief in decentralized organization recognizes that it is the environment the organization exists within, not that inside the organization, that creates the greatest amount of exceptions.  And the organizations that put decision rights closer to exceptions are more likely to adapt and survive.

Perhaps a better structure is to encourage decoupling of decision rights

Wikis at Work Compared to Wikipedia

Matt Mahoney spends most of his time working with enterprise wiki customers, cultivating adoption and best practices.  In his most recent blog post, he provides a practical look at how enterprise wikis differ from Wikipedia. Wikis evolve in the context of corporate culture and inter-personal communication styles, for good or ill.  The sense of ownership people have over pages is different than the norms that have arisen for Wikipedians.  After discussing work conversations and group memory in wikis, he leaves us with some tips:

5 Simple Tips
* Assign responsibility for workstreams, and as a result, pages
* Use comments to add your thoughts without crowding out the person stewarding the task
* Rely on abundance, use talk pages for lengthy discussion, then re-factor the discussion into a joint page
* Pair live on IM or a screen-share, alternate note-taking
* Have a meeting, take notes, post the output

The Wikinomics Playbook

UPDATE: An interesting related project by Penguin Books is A Million Penguins, letting anyone edit a book to be published.  The wiki is down at the moment, but PaidContent notes it began with “It had snowed, and was now raining. Gritty slush covered the pavement. Sharp crystals of snow decorated grass.”  Reuters notes the challenge is finding “believable fictional voice” within the mass collaboration.  This was a big challenge for group editing of the Wired Wiki story.

The last chapter of Don Tapscott's new book, Wikinomics, invites readers to write it: “Join us in peer producing the definitive guide to the twenty-first-century corporation on www.wikinomics.com.”  Today we launched a Socialtext wiki for the Wikinomics Playbook, where people can not only learn about the power of mass collaboration, but participate in it.  The book is already one of the fastest selling business titles and is an excellent primer on how models of collaboration are unfolding from open source to blogging to wikis in the enterprise to enable people to participate in the economy like never before.

The second to last chapter is about enterprise wikis.  Half of it discusses how Best Buy is using a wiki knowledge-base for the Geek Squad.  The other half is an interview with yours truly and shares some of Socialtext's success stories. The first chapter is available online as a pdf.

 

This is a great example of how a book can be augmented with a wiki, as most books are out of date by the time they are published, never quite finished and have the potential for participation. Last month we helped Larry Lessig share the entire Code 2.0 book in a wiki.  I expect that soon such commons-peer production, a wiki for every book, will be common.

Learning in the Shower

Eugene starts to shift towards an emphasis in learning in LearningCommunity, realizing he isn't learning enough, and shares this:

DougEngelbart often says that high-performance communities are experts at CoDIAK -- collectively developing, integrating, and applying knowledge.  I hate the acronym, because I think it's unnecessarily esoteric.  What CoDIAK boils down to is:    (LJ9)

• Learn.    (LJA)
• Share and apply what you know.    (LJB)
• Repeat early and often.    (LJC)

Do you ever find yourself in the captive audience of your shower, reading shampoo labels?  You know you aren't learning anything by reading them.  Yet you are trying to do more than kill time.  And there it is: Lather, rinse and repeat.  How many times have you thought of these instructions?  Not just because they are part of popular culture.  I personally think it is a scam to use more shampoo than is necessary to get the job done.

If there ever was a problem confronting eLearning, I think it is that enterprise users view their solutions in the same way people do instructions on shampoo bottles.

The fix, and this is where the shower metaphor breaks down for some people, is that 80% of learning is social.

SuiteTwo Launched: Enterprise 2.0 in a Box

A small dream of mine came true today.  We've been preaching an ecosystem of tools for some time now.  We've helped customers stitch them together in interesting ways.  In fact, Andrew McAfee's original article on Enterprise 2.0 was borne from observing what was happening in one of our customers and projecting into the future.  Well, future happens fast.

Looking back, look what I blogged just before the first Web 2.0 conference:

I'm providing a workshop on Enterprise Social Software with Socialtext Customer Mike Pusateri from Disney.  You might recall his great presentation at the at the O'Reilly Emerging Technology Confererence in February. Mike and his team are leading the way with how they are using lightweight web-native tools as a platform for productivity. Not just how they use Socialtext for project communication, but how they stitch it together Moveable Type and Newsgator for an ecosystem of tools with RSS.

That was then, this is now. This morning I provided a workship on Enterprise 2.0.

Today we announced SuiteTwo, The Enterprise 2.0 Suite powered by Intel.  Intel is distributing the Best of Breed wiki (Socialtext), blog (Six Apart), Feed Aggregation (Newsgator) and Feed Publishing (SimpleFeed), supported by Spikesource, through its channels including Dell, NEC, Ingram, Novell and Red Hat.

This fulfills Andrew McAfee's vision of Enterprise 2.0.  In a box.  Made simple for Small-to-Mid-sized Enterprises.  Extensible because we've all supported open APIs.  Enterprise 2.0 is freeform social software adapted for organizations.  SuiteTwo is the first offering to realize the SLATES paradigm:

SLATES = Search | Links | Authorship | Tags | Extensions | Signals

In the latest issue of the Harvard Business Review, McAfee went further to distinguish this Network IT (NIT) from Functional IT and Enterprise IT:

As the DrKW example illustrates, NIT’s principal capabilities include the following:

• Facilitating collaboration. Network technologies allow employees to work together but don’t define who should work with whom or what projects employees should work on. At DrKW, ad hoc teams have formed because employees read one another’s blogs. These teams have used the wiki to accomplish tasks, and they have disbanded without orders from senior executives.

• Allowing expressions of judgment. NITs are egalitarian technologies that let people express opinions. DrKW employees use blogs to voice their views about everything from open-source software to interest rate movements.

• Fostering emergence. “Emergence” is the appearance of high-level patterns or information because of low-level interactions. These patterns are useful because they allow managers to compare how work is done with how it’s supposed to be done. Emergence is also valuable for users. For instance, employees can easily search and navigate DrKW’s blogs and wiki for trends and data even though nobody is in charge of making them easy to use.

...Employees exploit older NITs such as e-mail and instant messaging on their own, but business leaders have a role to play in exploiting newer technologies like blogs and wikis. They can help sustain and increase the use of complements to make the technology continually more effective, primarily by guiding users. Darren Leonard, a managing director in the global equity derivatives business at Dresdner Kleinwort, recalls how he got his colleagues to use the company’s wiki: “First, if a wiki has no structure, it’s perceived not as an opportunity but as anarchy, and our people have no time for anarchy. I went back to my initial pages and rewrote them to be a lot more directive. For example, I made a page with the agenda for an upcoming meeting and asked people to add to it. Second, wikis have to be clearly better than other ways of collaborating. There have to be uses [for them] that demonstrate their power. One of these uses came prior to a special senior management meeting where we could bring questions from our groups and get them answered. I put up a page…asking my [team members] what questions they wanted me to ask on their behalf. People used the page to post questions, edit them, and discuss which ones were the most important and why. That really accelerated wiki use. Finally, old habits are hard to break. The tendency is for people to keep using e-mail because that’s what they know....I have to [tell them], ‘I’m not reading e-mails on this topic. Use the wiki’ or ‘Everyone’s assignments are on this page—use the same page to report on progress.’”

Lead users and enterprises already work this way today.  Only they do so without usable efficiency.  Integrated single sign-on, search and tag cloud are just the beginning.  One click subscription to a page, blog post, search query, report, weblog and wiki make feeds usable (unlike today's user experience, when they click on an orange icon and think their browser is broken).  Rapidly form groups, draft together on a wiki page, publish to a blog and track results. 

Beyond making such tasks efficient, the benefits to productivity, discovering emergent intelligence and high-engagement marketing are significant.  Very soon a user will wake up in the morning, log in to SuiteTwo, immediately recognize something emerging.  With the top blog posts telling her what the company is talking about, the top wiki pages showing her what people are working on, top posts from the outside that her company is subscribed to and the feedback from what they are publishing
-- something will emerge.  She recognizes the opportunity, pulls on the social fabric and easily forms a diverse group of experts.  They follow new feeds and generates others while working with a little productive friction.  They develop a plan and draft a new offering in the wiki.  They publish to a public blog and track where it goes. The feedback loops continue, she goes home for the day and the organization is bound to adapt again.

This isn't your Dad's enterprise, but one you will be working with soon.

Abundance, and Five Years of Blogging

When I sat down in my first economics class at UCLA, the professor wrote on the blackboard all we would learn, in really big letters:

SCARCITY

I've been blogging for five years as of this month, and here's what I've learned:

ABUNDANCE

I have discovered I have a lot to give.  And when I give, I notice others give more.  Some of them I've formed relationships with, and trust opens giving, but I have also learned to trust strangers to share in abundance.  Life is iterative, markets are not transactions and scarcity of attention is false. Our learnings compound abundance and there may be no limit to what we can produce.

David Hornik strikes again with Chris Anderson Strikes Again: The Economy of Abundance:

The basic idea is that incredible advances in technology have driven the cost of things like transistors, storage, bandwidth, to zero. And when the elements that make up a business are sufficiently abundant as to approach free, companies appropriately should view their businesses differently than when resources were scarce (the Economy of Scarcity). They should use those resources with abandon, without concern for waste. That is the overriding attitude of the Economy of Abundance -- don't do one thing, do it all; don't sell one piece of content, sell it all; don't store one piece of data, store it all. The Economy of Abundance is about doing everything and throwing away the stuff that doesn't work. In the Economy of Abundance you can have it all.

I trace a lot of my thinking about abundance to Jerry Michalski's, here's a small chunk of it:

It drives me nuts that scarcity is seen as such a fundamental requirement for creating a business. Sure, there are plenty of businesses built around scarce resources, and sure, Dave's time and my time are scarce, but that's no proof that businesses can't cruise along profitably creating voluntary loyalty by knowing their customers better, never betraying them, always being available and fixing problems, responding more quickly than others.... you get the picture. But go to business school and what they teach you is how to create artificial scarcity. That's the kind of thinking that got us into the present mess.

Digging deeper, Howard Reingold is fostering a discipline of cooperation studies. You can also find this wiki page, with a link to a 1994 essay by Flemming Funch who I used to blog alongside a lot in the early days.

I suppose that abundance economics would include giving one's ideas and actions freely, because one feels like it, because one sees the need for it, and because one understands that when you contribute to the whole, we all benefit.

The Internet is a good example of some of the principles of giving freely and of abundance. So many resources here are given freely, without expecting anything directly in return. So many people are willing to help each other, even though they don't really have to and they don't get "paid" for it.

I think there are many times more power in actions that are done freely, because one sees a need for improvement, than in actions that are done reluctantly, because one is forced by lack.

I believe that abundance thinking, and actions, trumps the minds and greed of the scarce.  That the one overarching pattern in the present wave of innovation is share control to create value.  That what powers it isn't Moore's Law processessing infinite supply or Metcalfe's networking choice and collective wisdom.  It is the capacity of people to produce when old frameworks don't in the way of each other.

So much of this is about how we envision the future.  Not in the grand sense that the rules are changing.  But when two or more people can believe in an opportunity, they can share cost and risk to get there together, in the process reduce them -- and learn so they and others can build upon it.

Manage Knowledgement (MK)

Manage Knowledgement is a way of describing KM that's backwards but works.  With KM, users were supposed to fill out forms as a side activity to extract their tacit knowledge.  Then some form of artificial intelligence would extract value.  Turns out, users resisted and the algorythms didn't match reality.  With MK, through blogs and wikis, the principle activity is sharing, driven by social incentives.  Contribution is simple and unstructured, isn't a side activty and there is permission to participate.  Intelligence is provided by participants, both through the act of sharing and simply leaving behind breadcrumbs of attention.