Ross Mayfield's Weblog

What they say about statistics

JupiterResearch says 70% of large companies will be blogging by the end of the year, but the Fortune 500 Business Blogging Wiki finds only 5.8% so far.  The Diva Marketing blog even tried to fact check the numbers with Jupiter, but was denied because it is a blog.

I welcome JupiterResearch's future contributions to the wiki.

Ten Trends That Matter to Business

Notes from a session at Brainstorm 2006 led by Diana Farrell, McKinsey Global Institute.

Macro

1. Shifting centers of economic activity

China and India. From global GDP, in 15-20s years from now, non-Japan Asia will be 25%. The US will continue to represent 35%. Industry shifts: deindustrialization towards services. Even in China, 15M manufacturing jobs have been lost.

2. Overburdened public sector

20-30% of GDP in most countries. Health care and pension burdens are more drastic than we believe. In Japan, they would have to increase taxes by 125% to make good on obligations. This is not going to happen, perhaps a new social contract, or a massive disruption. This is the case in Europe and to a degree the US and UK. Appetite for 1st world services from the 3rd.

3. New Consumers

In the developing world, 975M households becoming consumers over the next 10 years. From $4 trillion to $9, which is the consuming power of Europe today. This consuming class will be quite different, will require innovation to market to them. New entrants from the developing world will capture this as well. Population 60 or older is increasing at 2x the pace of the rest within the developed world. The Hispanic market in the US has 60% of the purchasing power in the US in 10 years.

Social & Environmental

4. Social Life in a Connected World. 2B use cell phones, 9trillion emails, 1B searches, $1 trillion invested in fiber. The impact this is having socially -- the percentage of internet newlyweds last year is 12%. Vendors, consumers, price transparency. Online retail is 13%, 54% of computer sales.

5. Turbulent Tides of Talent

Emerging global labor market for talent. Young professional (university grads with 7 years exp) 33M in the developing world, twice that of the developed world.

6. Social Cost of the Free Market

Markets as social weapons. Business has never been loved, but there is a different tone, fueled by tech and edu. No high school grad can get into college without community service. Danish cartoons was an expensive proposition for their economy. A clash of civilizations. $639B socially responsible funds.

Business

7. Limited Resources, Unlimited Demand

Like the demands on the public sector, can't happen, so a place to look for discontinuity. The growth of every commodity is 200% over the past two years in China. Water as a resource may be more constrained than energy, takes 39k liters of water to produce a car. China emits 12% of CO2, in 12 years will be 40% unless something changes. Potential for innovation and discontinuity (particularly regulatory).

8. New Global Industry Structures

A few patterns: Massive scaling of large companies, market cap of the top 150 companies from 2 to $11 trillion over the last 10 years. Average of 123k employees. Blurring of organizational structures into ecosystems. Disaggregation of thte value chain that comes from integration India and China, not just call centers. Gives rise to a whole other kind of innovation. Because of a capital to labor tradeoff. In the developed world 70% labor, 30% capital, so they are optimized around labor. In the developing world it is the inverse. $3k car is possible because of this shift. Role of Private Equity, a catalyst for transforming sectors. Shift from public equity will provide performance pressure.

9. New Science of Management

Reliance on local and technology driven management. Data driven market capabilties, complex logistics, science management systems. Value creation over time when innovation is commoditized quickly, becomes adding value upon what was just created

10. New Economics of Knowledge

Rise of patent production, R&D investment, time and energy going into knowledge creation, when it is easy to access and harder to keep. Consumers creating knowledge themselves. Wikipedias of the world suggest a very different notion of generating knowledge.

My reaction, posted in the private event wiki.

In this session there was a focus on data-driven decision making and operations. The example was given of a loan officer. 10-20 years ago a loan officer used a combination of data and more independent judgement to approve a loan. Now most banks have automated limits for what the loan officer can do. Competitiveness comes from continually advancing their models. Somehow this also implies the creation of new products by leadership, although this wasn't said explicitly

I'd beg to differ with this approach to competitive advantage. The loan officer of old outperformed in:

1. ability to manage exceptions to process
2. customer service
3. employee loyalty
4. understanding product development opportunities

But what the loan officer couldn't do was share the better practices learned on the job with peers. And of course, had less developed risk models to inform decisions.

Before we though out the loan officer of old for the new: Is there an opportunity for knowledge workers to actually make decisions? To share the innovations the occur through exception handling? Could this be a better source of sustainable competitive advantage?

The Global Rise of the Middle Class: What It Means

Notes from a session at Brainstorm 2006 led by C.K. Prahalad, University of Michigan.

1.5 B new consumers. Quality at 1/50th the cost. 10 developing countries can account for a doubling of the market opportunity for multinational corporations.

Ties between the developed and developing counties are becoming so strong (R&D and call centers, the ends of the value chain, are moving to India; rise of Brazillian ethanol), changing the nature of these organizations. How will this effect the composition of leadership? Some, like McKinsey have made a change.

The 10 hubs for R&D, manufacturing, product development have footprints beyond themselves in the developing world. A series of hubs, each catering to a significant portion of a similar or contiguous population. This could reflect the future structure of multinationals. Regional structures may be convenient for travel, but risk needs to be distributed across the network.

Getting global quality at 1/50th the cost with the ability to localize:

175	Local Markets
20	Marketing and Product Development Network
15	Manufacturing and Logistic Networks
6/8	R&D Network

You could not have the price of consumer electronic falling so low without this structure already happening.

Lingering questions:

1. what should be the composition and role of top management?
2. Business processes may become the next source of competitive advantage, so if you want this kind of hub structure to work, internal information becomes critical -- so IT backbone may be the source of advantage
3. The question of who is us changes. Is IBM an American company? or a global company with no nationality of it's own? Is nationality a dated idea?
4. How do we come to terms with multiple cultures working together as co-equals?
5. When you disperse the resources of a company, what is the glue? How do you get values that work across multiple cultures? Intercultural project management skills will become critical for managing this kind of organization.

The rise of the middle class is obvious. Not in our terms of purchasing parity, as consumers. The real beneficiaries will be the developed countries with the companies who can figure out how to compete in this landscape.

There are 3,000 companies that are less than $20B in sales that are all multinational. These micromultinationals arise from information arbitrage, not cost arbitrage. Lots of small companies are like in the silicon valley, but taking advantage of this global innovation arbitrage.

Discussion

Africa is very difficult. South Africa could become a hub. My hope is Nigeria becomes a hub, which creates a market opportunity of 200M relatively educated people. Egypt as well. Extraction, energy and consumer goods as verticals.

Esther Dyson comments that Russia retained their IT talent. In Africa, there is internal and export markets. CK says the hubs are not going to be selling inside.

Matt Mahoney asks about the role of entrepreneurs. CK: can't work without a total ecosystem. 80 factories supply Unilever, but they act as a hub. When large companies start R&D networks, some spin off. They will be trained by coming to the US but also staying within a hub. Degrees matter less, but short term training programs do.

The issue of US Visas came up, again, and CK says that every University president is complaining and beleives the situation will change. We still have a Just In Case, rapid reaction to disruption, and have the ability to adapt (e.g. autos, chips and other historical points).

Brainstorm: 4 Answers

Here are my four answers to the 4 Brainstorm Questions:

1. What is the most pressing problem to solve? Why?

Erroding trust in traditional political, economic and media institutions. However, solving this problem is not simply restoring institutions, but creating alternatives based upon social capital. The Edelman Trust Barometer shows a siesmic shift in trust from institutions to peers. But my suggestion is the shift to peer trust is an opportunity, not a threat.

2. Your biggest fear?

Our inability to make collective sense of technology-driven accelerating change. Can an increasingly fragmented, yet connected, media make sense of compunding complexity? Can the public understand innovation and it's implications? Can policy decisions be informed not just by the public's perception and lobbies, but grounded in science and forethought? I fear not.

3. Three global leaders who will set next decade’s course?    

* The next American president

* GoogleBorg

* Someone born in the last decade, from a country you can't anticipate, whom name we do not know, who will transform cultural production through technology

4. Your most cherished value?

Optimism

Brainstorm: 4 Questions

1. What is the most pressing problem to solve? Why?
2. Your biggest fear?
3. Three global leaders who will set next decade’s course?
4. Your most cherished value?

These four questions were asked of the attendees of Brainstorm 2006 by the editors of FORTUNE magazine.  From John McCain to Ray Ozzie to Queen Noor, the answers are being deliberated within a private Socialtext wiki.  I'll try to see what can be shared publicly, and don't want to give away my answers just yet -- but thought I'd ask four bloggers these questions.  Calling out:

1. Joi Ito
2. Dan Gillmor
3. Rebecca MacKinnon
4. Gary Bolles

If you want to answer these questions yourself, please comment or trackback to this entry.

ANSWERS: Rebecca MacKinnon, Dan Gillmor, Me, Diego Rodriguez, Steve Jurvetson (questions 1-3, question 4)

Wiki Case Study

Socialtext released an update to the Dresdner Kleinwort Wasserstein (DrKW) case study on enterprise wiki and blog use.  Based on the usability interviews performed by Suw Charman, the case addresses ease of use and adoption issues that lead to wiki traffic outperforming the intranet within six months.  Specific use cases such as managing meetings, brainstorming and publishing and creating presentations collaboratively are explored in depth.

We had to move away from a static, dead intranet," says Myrto Lazopoulou. "The wiki has allowed us to improve collaboration, communication and publication. We can cross time zones, improve the way teams works, reduce email and increase transparency."

The case study is also available in PDF format and complements other research done on this leading deployment:

* An Adoption Strategy for Social Software in the Enterprise
* Enterprise 2.0 article in the MIT Sloan Management Review
* Harvard Business School Case Study: Wikis at Dresdner Kleinwort Wasserstein
* JP Rangaswami's blog

RSS Intranet

David Berlind builds upon a Cnet article on Enterprise 2.0.

So, after reading LaMonica's story and reading about how Microsoft is adding wiki functionality to Sharepoint and how an IBM executive — the top guy at the company's collaborative software division — is saying that the existing way of doing things is "fundamentally flawed," I see companies that understand the extent to which RSS, wikis, and blogs can be extremely disruptive to the status quo.  A status quo that's largely been upheld by them.  I see the new intranet, the new protocol of which is RSS.

I should probably acknowledge Microsoft and IBM's entrance into the market Socialtext created.  They definitely get it, which has been part of the View Source plan.  Within a year, the market will grow more than ever, a function of the exposure and credibility incumbents bring.  The litmus test will be if they adhere to the openness they seek to extend.  As the best of breed, with the openness to breed, our fun is just beginning.

Explode the Room

For my first presentation at at CTC, I tossed out the powerpoint, exploded the seating into a circle, and held a town hall Phil Donahue style on Social Software.

Jeffrey Treem and Renee Blodget have notes, the participation was fantastic.

JSB on Social Learning

Notes from a talk by John Seely Brown at the Collaborative Technologies Conference, on a new kind of participatory learning.  The social life of learning lives all around us.  The strongest finding of learning: the best indicator of success in college is whether that kid as figured out how to join study groups.  The social construction of understanding. John's interest is if this social learning can happen at a distance.

In an early UK Open University control group test, those who learned remotely had a half a grade better performance.  Study groups were not just talking about content, but relational skills.  And the person who was the best moderating participant later advanced to the highest level, as an HP executive. 

Shows a screenshot of a class being taught outside, in the virtual world Second Life.  The University of Phoenix just purchased and is building a massive learning island.  Wells Fargo island for teenagers to learn banking.  Shows the digitally enhanced collaboratory with backchannels rendered public (frontchannels) at USC.  The sage on the stage morphs into an emergent phenomenon.  The teacher either becomes a comedian/entertainer, or more interestingly an orchestrator and socratic challenger.  Getting students to think crritically about what they finbd on the web is an important 21st century skill, especially for our 21st century democracy (media literacy +1).  In an architecture studio, all work in progress is made public -- learning as enculturation into a practice.

Does this generalize, or scale?  So much of our schooling is Learning About, or the Explicit.  But that you can get from Google. Architectural schools are about Learning to be, the Tacit.  How do we look at learning to be, sooner?  Learning to be: enculturating into the practices of a field often via legitimate peripheral participation -- apprenticeship. 

Non-obvious examples... More and more of entertainment has you engaged in productive inquiry.  Learning environments you get for free: open source where you write code to be read, engagement through useful additions and social capital matters.  A form of apprenticeship (cognitive apprenticeship) to a virtual community of practice.  Open code, open system, open community discussion. 1 million people do open source -- and more kids today will learn about programming through these communities than in all the universities in this country. Conversations about code are rounded, where you reflect on why something is done.  A practice and a reflection on a practice.  Very powerful.

The rise of the Pro-Amateur Class (from Latin - amator: lover).  In Astronomy, a $3k Dobsonian 10" f/4.9 telescope can be added to a cheal camera, leverage open source DSP and other software and you have the equivalent of a 200" telescope that changed history just some years ago.  You can suddenly do triangulation by cooperating with other amateurs.  Nice communities of co-creation, learning and sharing.  Pro Astronomers are great at differential equations, but not good at looking at things.  Amateurs are always watching, immeadiately blog findings, gets picked up by Pros and validate and then send a signal to turn the Hubble Telescope.  Interesting discussions happen between the Pros and Ams, which is why we call them ProAms.  None of this has been planned, but we have a community of learning around concrete artifacts.

WoW and it's 8.8m players.  Saw this first in China when there was a software update and there were 150k players lined up to get the latest beta.  Quests become increasingly difficult, but from the beginning require the formation of a guild.  If you are good at pulling people together, you become a leader.  Studying the social, political and leadership skills in Warcraft, particularly with at 27 year old named Stephen.

• Creates a vision and set of values that attracts...
• Finds, evaluates and then recruits players that have a set of diverse skills and fit with your norms
• Creates a platform for apprenticeship - newbies (noobs)
• Orchestrates group strategy and governance
• Creates, sells and adheres to the governance principles for the guild and adjudicates disputes. 

Wow -- are these the fundamentals of leadership in the corporate world?  When he was doing M&A with another guild, the end of the negotiation the other guild leader asked if he could borrow his credit card.  Why?  I didn't tell you something, Stephen, I'm only 12.  If you ran a buisness like a guild it would be a disaster.  But if one imagines that a business is like a guidl the lessons learned from virtual worlds become powerful tools for effective leadership.  Don't look for direct transfer, look to imagine.

The way kids are growing up today is a lot like the way we did.  Tinkering, building, learning (and sharing more than we did).  The essence of participatory culture.

Remix has a lot to do with deep reading.  Creative reading where people fill in the backstory.  Creating meaning by integrating their imagination with that of the 'author' in remix.

A fundamental transition is happening from supply push to demand pull. It is happening in every part of our business life (from retail to media to advertising.  Finding ways to participate in the flows of knowledge -- the first reach chance to reinvent learning.  The Long Tail in education, ecology of learning/doing niches.  Demand pull: I am passionate about this niche topic.  I want to learn/do more!  Then I, as a Student, might move up to the fat part of the curve.  How do we leverage joining niche communities that are their passion to the fat tail of a core curriculum that expands upon those activites?

Email is not Collaboration

This is just a pet theory of mine, but email is not collaboration.  You can't have collaboration without a goal.  And when the goal is to get out of your inbox, the only thing you are collaborating with is the tool itself.