Who are you listening to? HAYDN SHAUGHNESSYBegan tech career at EU RACE programmanaging satellite service pilotsFormer partner at The ConversationGroup, the first social agencyFormer editor Innovation Management,Writer at Forbes.com, GigaOm, HarvardBusiness ReviewResearch Fellow Center for DigitalTransformation, UC IrvineThe Elastic Enterprise – new ways toscale businesses, new wealth creationmodelFuture enterprise project 30 in-depthCIO/Chief Innovation Officer interviews email@example.com
What’s The Big Idea?The human interest model is replacing the traditional business model
What’s the problem?From your study – the low priority give to partnership innovations
Global 2000 companies 2012, Source: ForbesUpUp8%8% $149 trillion assets Up Up $36 trillion revenues12%12% Up Up $2.6 trillion $2.6 trillion11%11% profit profit WE UNDERESTIMATE THE ACHIEVEMENTS OF THEENTERPRISE – HUGELY SUCCESSFUL WAY OF CREATING WEALTH.
BUT IT HAS HIT A LIMITShareholder returns oflarger firms were 70%below those of smallerfirms over a 10-yearperiod in USA Source Gregory V. Milano, “Too Big to Succeed?” CFO Magazine, April 29, 2011
Fastest growing socialnetwork, 50 m members13 employees 10,000 x Library of Congress photo library by 11.2012 – 14 billion images Low overhead high scale businesses ON THE OTHER HAND WE SEEM TO HAVE INVENTED A NEW FORM OF ORGANIZATION TOO
The old input model. Adam Smith Nail Makers Inc.Raw materials, capital, factory, labor….. management Manager Manager R&D, New Ways to Make Nails Change management Innovation – the – new culture of nail nail maker’s making dilemma
The old scaling modelPredictablescaling modelBuilt on wellunderstood factorinputs:1.Capital2.Labour3.Raw materials4.Education or IP
FIVE PILLARS1. Platform2. Ecosystem3. Connectors4. Cloud5. Sapient leadership
ECOSYSTEM 1 The Forbes’StoryFeb 2011 to Feb 2012 Opens potential for hundreds of new revenue Tapped into 800 streams ecosystems Acquisition of True/Slant MONTHLY UNIQUE VISITORS DOWNSIDE Declining ad impression prices, leading to real time ad management
Competing ecosystem modelshighly disciplined continuum fromhardware to software in standardizedenvironment$54 billion in revenue15,000 employees in California alonemultiple supplier and licenseepartners in fragmented marketsvs
The ecosystem as relationship building 100 employees 70th fastest growing company inLong term R&D partnership Uni North AmericaMichigan p/e 12.5Collaborates extensively via IP sharing About $300 million in revenuee.g. with Synopsis,semi-conductor Net income around $50 milliondesign tools, on low power chips2300 employeesP/e 6.95Turnover $780 millionProfit before tax $290 millionCEO salary $1.200,000
A simple ecosystem model ofbusiness Information layer A new hardware layer driven Apps market by data Developer network Platform 50,000 strongAndroid 48 member open Transaction engine 88,000handset alliance articles on pebble watch in 48 hours
ELEMENTS OF THE PLATFORM 1. A software or content platform has rules of the road 2. A developer or production community 3. Ingest to a platform 4. Transaction engine 5. Information layer6. New leadership role? ATTRACTION, attracting resources –managing the external world 7. Reinventing product around connections
Elements of the ecosystem1. They gather around a platform – like iTunes, Android, quirky2. Represent highly scaled partnerships, a forum formillions or tens of thousands of developers, or producersand billions of calls via APIs3. Take place in OPEN environments among peers, which hasimplications for leadership4. Represent new power dynamics around the firm,especially in the information layer, which is now built byeveryone5. Seem to accelerate the pace of innovation6. Are closely related to mass differentiation, they enableproduction for multiple global niches
The Idea of Ecosystems Shifting from oligopoly to ecosystem-based business Scale via Scale via partnership and specialization and spontaneous peer activity supervision Scaling is a Scale is disproportionate proportionally lower cost cost Partnerships are Partnerships are formed by bilaterally friction free negotiated contracts Attraction Command The information layer is The information layer is content push self-forming Mass market Mass differentiation Internalized Externalized Employed labour in decline
Why aren’t more companies adopting this model? 1990-92 2000-03 2004-06 2007 - 10 Services Services Employees Employees The CEO The CEO Risk Risk Finance Finance China China Global Global Random Random INTERNALITIES EXTERNALITIESTransition Transition point point A Semantic Analysis of 20 years of business writing in The Harvard Business Review, source Haydn Shaughnessy
Consequence?Most companies straddle the first two modelsand are simply not cognizant of the largertrend
CLOSE UPLab-based, driven by Attempts to interpret Externalization drivesoligopolies that shape and adapt to the and leverages newnew markets service economy strategies Old fashioned Massive activity double entry Data about “the logging world”
The New Emotional Capitalism– The Human Interest Model
Shift from the business model to the human interest model features of externalization: PEERS not bosses, Social Reputation, social network, sharing economy ECOSYSTEMS, Unpredictability, BYOD, randomness, social business, work-life integration, customer ecosystem crowd Crowdfunding crowdsourcing
Example: The peculiarities of crowdfundingVC Model – Surplus Capital Crowd model – emotive captialism1.Company based, must scale 1.Project based, no growth requirement2.Assumption of high failure rate 2.No assumption about failure3.High stress for proposers, barrier to 3.Self-imposed outcome burden,entrepreneurs supports entrepreneurism4.Antagonistic to cultural production 4.Culture-friendly and ideal foror lifestyle building emotional outcomes 5.Peer and social network based,5.Extractive, the money is taken out potentially with a positive loop for resources6.Utilitarian 6.Emotional connections through “extras”
As labour and capitalis changing: What areWe Trying to Produce in the New Wealth Creation System?
The new global middle class The new global middle class creates massively differentiated needs for low cost, good enough goods900 million – 2 billion people by 2030 = x 3 or x 71 single, global labor pooland converging incomes
The priorities that capital has driven: Scale, customer acquisition, the 1%Are now losing ground•Trust on the brink of collapse•An unworkable surplus of capitaldriving up asset prices
So what are we trying to create?New values –we are wrestling with a post capitalist value systemNew human capabilities- This is a capability building era both on the input andoutput sideNew experiences- That compensate for income insecurityNew shared emotions in work and at home- That give recognition to consumer-employee-homecontinuum
Kickstarter projectNew online magazine for serious, emotive journalismCrowdfunded, build audience through buzzDelivering what its audience/funders already endorsed.
Summary:NEW ENTERPRISE: Platforms and ecosystems give us a means toscale and to serve globally differentiated niches at low additional costNEW ECONOMY: They drive externalization of enterprise processes,in extreme cases leaving an enterprise with one role – relationshipbuildingIn all cases relationships are more important as our lives converge ascustomer, employee, home-makerEven capital is becoming ecosystem-centric and people-dependent andpossibly non-extractive, moving away from surplus capital modelNEW VALUES: We seek a new value system, the human interestmodel, to frame this new world and allow us to function within it.
In short:Nordic culture is extremely well placed to benefit fromthis emerging economyPartnership thinking is the missing link – in anexternalized economy partnership is everything.
THE END HAYDN SHAUGHNESSY Fellow Centre for Digital Transformation, UCI Irvine Blogs/forbes.com/haydnshaughnessy firstname.lastname@example.org