The Networked Economy Forges New Force for Collaboration In Business and Commerce, Says Author Zach Tumin
The Networked Economy Forges New Force forCollaboration In Business and Commerce, Says Author ZachTuminBusiness networks are driving innovation and social interaction as new technologies and userexpectations converge.Listen to the podcast. Find it on iTunes. Sponsor: AribaDana Gardner: Hi, this is Dana Gardner, Principal Analyst at Interarbor Solutions, and youre listening to BrieﬁngsDirect. Today, we present a sponsored podcast discussion on how new levels of collaboration have emerged from an increasingly networked world, and what that now means for business and society. Well hear from a Harvard Kennedy School researcher and author on how deeper levels of collaboration, more than ever, can positively impact how organizations operate. And well learn from a global business-commerce network provider howthese digital communities are redeﬁning and extending new types of business and collaboration.[Ariba is a sponsor of BrieﬁngsDirect podcasts.]To learn more about how new trends in collaboration and business networking are drivinginnovation and social interaction, please join me now in welcoming Zach Tumin, the SeniorResearcher at the Science, Technology, and Public Policy Program at the Harvard KennedySchool. Welcome, Zach.Zach Tumin: Good morning, Dana.Gardner: Zach, youre also the co-author with William Bratton of this year’s Collaborate orPerish: Reaching Across Boundaries in a Networked World, published by Random House. Wewelcome you to the show.Tumin: Thank you.Gardner: Were also joined today by Tim Minahan, the Senior Vice-President of GlobalNetwork Strategy and Chief Marketing Ofﬁcer at Ariba, an SAP company. Welcome back, Tim.Tim Minahan: Thanks, Dana. Good to be here.Gardner: Gentlemen, lets set the stage here, because weve got a really big topic. Zach, in yourbook "Collaborate or Perish," youre exploring collaboration and you show what it can do whenits fully leveraged. Its very interesting. And Tim, at Ariba youve been showing how a morenetworked economy is producing efﬁciencies for business and even extending the balance ofwhat we would even consider commerce to be or redeﬁning commerce.
I’d like to start with looking at how these come together. First, we have new types ofcollaboration and then we have the means to execute on them through these new businessnetworks. What should we expect when these come together? Lets go to you ﬁrst, Zach.Tumin: Thanks, Dana. The opportunities for collaboration are expanding even as we speak. The networks around the world are volatile. Theyre moving fast. The speed of change is coming at managers and executives at a terriﬁc pace. There is an incredible variety of choice, and people are empowered with these great digital devices we all have in our pockets. That creates a new world, where the possibilities are tremendous for joining forces, whether politically, economically, or socially. Yet its also a difﬁcult world, where we dont have authority, if we have to go outside of our organizations, butwhere we dont have all the power that we need, if we stay within the boundaries of our charters.So, were always reaching across boundaries to ﬁnd people who we can partner with. The key ishow we do that. How do we move people to act with us, where we dont have the authority overthem? How do we make it pay for people to collaborate?A lot of changeGardner: Tim, weve seen lots of change in last 20 years, and a lot of times, well seebehavioral shifts. Then, at other times, well see technology shifts. Today, we seem to be havingboth come together. Based on what Zach has described in this unprecedented level of change inadaptation, where do you see the big payoffs for business in terms of leveraging collaboration inthe context of a vast network?Minahan: Collaboration certainly is the new business imperative. Companies have leaned out their operations over the past couple of years and they spent the previous 30 years focusing on their internal operations and efﬁciencies and driving greater performance, and getting greater insights. When they look outside their enterprise today, its still a mess. Most of the transactions still occur ofﬂine or through semi-automated processes. They lack transparency into those processes and efﬁciency in executing them. As a result, that means lots of paper and lots of people and lots of missed opportunities, whether its in capitalizing on getting a new product to market or achieving newsales with new potential customers.What business networks and this new level of collaboration bring is four things. It brings thetransparency that’s currently lacking into the process. So you know where your opportunities are.You know where your orders are. You know where your invoices are and what your exposure topayables are.
It brings new levels of efﬁciencies executing against those processes, much faster than you evercould before through mostly automated process. It brings new types of collaboration which I amsure we will get into later in this segment.The last part, which I think is most intriguing, is that it brings new levels of insights. Were nolonger making decisions blindly. We no longer need to double order, because we don’t know ifthat shipment is coming in and we need to stockpile, because we cant let the reﬁnery go down.So it brings new levels of insight to make more informed decisions in real time.Gardner: One of the things I sense, as people grapple with these issues, is a difﬁculty indeciding where to let creative chaos rein and where to exercise control and where to lockdownand exercise traditional IT imperatives around governance, command and control, and systems ofrecords.Zach, in your book with William Bratton, are there any examples that you can point to that showhow some organizations have allowed that creativity of people to extend their habits andbehaviors in new ways unfettered and then at the same time retain that all-important IT control?Tumin: Its a critical question that you’ve raised. Weve got young people coming into theworkforce who are newly empowered. They understand how to do all the things that they needdo without waiting online and without waiting for authority. Yet, theyre coming intoorganizations that have strong cultures that have strong command-and-control hierarchies.Theres a clash that’s happening here, and the strong companies are the ones that ﬁnd the path toembracing the creativity of networked folks within the organization and across their boundaries,while maintaining focus on set of core deliverables that everyone needs to do.Wells FargoThere are plenty of terriﬁc examples. I will give you one. At Wells Fargo, for the developmentof the online capability for the wholesale shop, Steve Ellis was Executive Vice President. He hadto take his group ofﬂine to develop the capability, but he had two responsibilities. One was to thebank, which had a history of security and trust. That was its brand. That was its reputation. Buthe was also looking to the online world, to variability, to choice, and to developing exactly thethings that customers want.Steve Ellis found a way of working with his core group of developers to engage customers in thecode design of Wells Fargos online presence for the wholesale side. As a result, they were ableto develop systems that were so integrated into the customers over time that they can move very,very quickly, adapt as new developments required, and yet they gave full head to the creativity ofthe designers, as well as to the customers in coming to these new ways of doing business.
So heres an example of a pretty staid organization, 150 years old with a reputation for trust andsecurity, making its way into the roiling water of the networked world and ﬁnding a path throughengagement that helped to prevail in the marketplace over a decade.Gardner: Tim Minahan, for the beneﬁt of our audience, help us better understand how Ariba ishelping to fuel this issue of allowing creativity and new types of collaboration, but at the sametime maintaining that the important principles of good business.Minahan: Absolutely, Dana. The problem we solve at Ariba is quite basic, yet one of the biggestimpediments to business productivity and performance that still exists. Thats around inter-enterprise collaboration or collaboration between businesses.We talked about the deﬁcits there earlier. Through our cloud-based applications and businessnetwork, we eliminate all of the hassles, the papers, the phone calls, and other manual ordisjointed activities that companies do each day to do things like ﬁnd new suppliers, ﬁnd newbusiness opportunities as a seller, to place or manage orders, to collaborate with customerssuppliers and other partners, or to just get paid.Nearly a million business today are digitally connected through the Ariba Network. Theyreempowered to discover one another in new ways, getting qualifying information from thecommunity, so that they know who that party is even if they haven’t met them before. Its similarto what you see on eBay. When you want to sell your golf clubs, you know that that buyer has aperformance history of doing business with other buyers.They can connect with known trading partners much more efﬁciently and then automate theprocesses and the information ﬂows between each other. Then, they can collaborate in new ways,not only to ﬁnd one another, but also to get access to preferred ﬁnancing or new insights intomarket trends that are going on around particular commodities.That’s the power of bringing a business network to bear in today’s world. Its this convergence ofcloud applications, the ability to access and automate a process. Those that share that processshare the underlying infrastructure and a digitally connected community of relevant parties,whether that’s customers, suppliers, potential trading partners, banking partners, or otherparticipants involved in the commerce process.Gardner: Zach, in your book and in your earlier comments, youre basically describing almost anew workforce and some companies and organizations are recognizing that and embracing it.What’s driving this? What has happened that is basically redeﬁning a workforce and how itrelates to itself and to the customer or, in many cases, for businesses across the ecosystem of thesuppliers and then the channels and distribution? What’s behind this fairly massive shift in whatworkforces are?
Its the demographicsTumin: It’s in the demographics, Dana. Young people are accustomed to doing things todaythat were not possible 10 years ago. The digital power in everyone’s pocket or pocket book, thedigital wallet in markets, are ready, willing, and able to deal with them and to welcome them.That means that there’s pressure on organizations to integrate and take advantage of the powerthat individuals have in the marketplace and that come in to their workforce.Everyone can see whats going on around the world. Were moving to a situation where youngpeople are feeling pretty powerful. Theyre able to search, ﬁnd, discover, and become experts allon their own through the use of technologies that 10 years ago weren’t available.So a lot of the traditional ways of thinking about power, status, and prestige in the workforce arechanging as a result, and the organizations that can adapt and adopt these kinds of technologiesand turn them to their advantage are the ones that are going to prevail.Gardner: Tim, with that said, theres this demographic shift, the shift in the mentality of self-started discovery of recognizing that the information you want is out there, and it’s simply amatter of applying your need to the right data and then executing on some action as a result. Yournetwork seems ready-made for that. I know that you guys have been at this for some time. Itseems like the events, these trends, have coalesced in a way that that really suits your strength.Tell me why you think that’s the case that this vision you had at Ariba a decade or more ago hascome about. Is there something fundamental about the Internet or were you guys just in the rightplace at the right time?Minahan: The reality of the community is that it is organic. It takes time to grow. At Ariba wehave more than 15 years of transactional history, relationship history, and community generatedcontent that weve amassed. In fact, over the past 12 months those, nearly a million connectedcompanies have executed more than $400 billion in purchase, sales, invoice, and paymenttransactions over the Ariba network.Aggregate that over 15 years, and you have some great insights beyond just trading efﬁcienciesfor those companies participating there. You can deliver insights to them so that they can makemore informed decisions, whether that’s in selecting a new trading partner or determining whenor how to pay.Should I take an early-payment discount in order to accelerate or reduce my cost basis? From asales standpoint, or seller’s standpoint, should I offer an early payment discount in order toaccelerate my cash ﬂow? There are actually a host of examples where companies are takingadvantage of this today and it’s not just for the large companies. Let me give you two examples.From the buyer side, there was a company called Plaid Enterprises. Plaid is a company that, ifyou have daughters like I do who are interested in hobbies and creating crafts, you are very
familiar with. Theyre one of the leading providers for the do-it-yourself crafts that you would getat your craft store.Like many other manufacturers, they were a mid sized company, but they decided a couple ofyears ago to offshore their supplies. So they went to the low cost region of China. A few yearsinto it, they realized that labor wages were rising, their quality was declining, and worse thanthat, it was sometimes taking them ﬁve months to get their shipment.New sources of supplySo they went to the Ariba Network to ﬁnd new sources of supply. Like many othermanufacturers, they thought, "Let’s look in other low cost regions like Vietnam." They certainlyfound suppliers there, but what they also found were suppliers here in North America.They went through a bidding process with the suppliers they found there, with the qualifyinginformation on who was doing business with whom and how they performed in the past, andthey wound up selecting a supplier that was 30 miles down the road. They wound up getting a 40percent cost reduction from what they had previously paid in China and their lead times were cutfrom more than 120 days down to 30.That’s from the buy side. From the sell side, the inverse is true. Ill use an example of a companycalled Mediaﬂy. Its a fast growing company that provides mobile marketing services to some ofthe largest companies in the world, large entertainment companies, large consumer productscompanies.They were asked to join the Ariba Network to automate their invoicing and they have gottensome great efﬁciencies from that. Theyve gotten transparencies to know when their invoice ispaid, but one other thing was really interesting.Once they were in the networked environment and once they had automated those processes,they were now able to do what we call dynamic discounting. That meant when they want theircash, they can make offers to their customers that theyre connected to on the Ariba Network andbe able to accelerate their cash.So they were able not only to shrink their quote-to-settle cycle by 84 percent, but they gainedaccess to new ﬁnancing and capital through the Ariba network. So they could go out and hire thatnew developer to take on that new project and they were even able to defer a next round offunding, because they have greater control over their cash ﬂow.Gardner: Zach, in listening to Tim, particularly that discovery process, were really going backto some principles that deﬁne being human -- collaboration, word of mouth, sharing informationabout what you know. It just seems that we have a much greater scale that we can deploy this. AsTim was saying, you can look to supply chains in China, Vietnam, or in your own neighborhoodthat you might not have known, but you will discover.
Help me understand why the scale here is important? We can scale up and scale down. How isthat fundamentally changing how people are relating in business and society?Tumin: The scaling means that things can get big in a hurry and they can get fast in a hurry. Soyou get a lot of volume, things go viral, and you have a velocity of change here. Newtechnologies are introducing themselves to the market. You have extraordinary volatility on yournetwork and that can rumble all the way through, so that you feel it seconds after somethinghalfway around the world has put a glitch in your supply chain. You have enormous variability.Youre dealing with many different languages, both computer languages and human languages.That means that the potential for collaboration really requires coming together in ways that helpspeople see very quickly why it is that they should work together, rather than go it alone. Theymay not have a choice, but people are still status quo animals. Were comfortable in the way thatwe have always done business, and it takes a lot to move us out.It comes down to peopleWhen crisis hits, it’s not exactly a great time to build those relationships. Speaker of the HouseTip ONeill here in United States once said "Make friends before you need them." That’s a goodadvice. We have great technology and we have great networks, but at the end of day, it’s peoplethat make them work.People rely on trust, and trust relies on relationships. Technology here is a great enabler but it’sno super bullet. It takes leadership to get people together across these networks and to then beable to scale and take advantage of what all these networks have to offer.Gardner: Tim, another big trend today of course, is the ability to use all of this data that Zachhas been describing, and you are alluding to, about what’s going on within these networks. Now,of course, with this explosive scale, the amount of that data has likewise exploded.As we bring more of these coalescent trends together, we have the ability to deal with that scaleat a lower cost than ever, and therefore start to create this dynamic of viral or virtual beneﬁt typeof effect. What Im alluding to is more data, the more insight into what’s going on in the network,the more the people then avail themselves of that network, the more data they create, andtherefore the better the analysis and the more pertinent their efforts are to their goals.So, am I off in la-la land here or is there really something that we can point to about a virtuousadoption pattern, vis-a-vis, the ability to manage this data even as we explode the scale ofcommerce?Minahan: Absolutely, Dana. Weve only begun to scratch surface on this. When you look at thedata that goes on in a business commerce network, it’s really three levels. One is thetransactional data, the actual transactions that are going on, knowing what commodities are being
purchased and so on. Then, theres relationship data, knowing the relationship between a givenbuyer and seller.Finally, theres what I would call community data, or community generated data, and that cantake the form of performance ratings, so buyers rating suppliers and suppliers rating buyers.Others in the community can use that to help determine who to do business with or to help todetect some risk in their supply chain.There are also community generated content, like request for proposal (RFP) templates. A lot ofour communities members use a "give a template, take a template" type approach in which theyare offering RFP templates to other members of the community that work well for them. Thesecan be templates on how to source temp labor or how to source corrugated packaging.We have dozens and dozens of those. When you aggregate all of this, the last part of thecommunity data is the benchmarking data. Its understanding not just process benchmarking butalso spend benchmarking.One of the reasons were so excited about getting access to SAP HANA is the ability to offer thisinformation up in real time, at the point of either purchase or sale decision, so that folks canmake more informed decisions about who to engage with or what terms to take or how toapproach a particular category. That is particularly powerful and something you can’t get in anon-networked model.Sharing dataGardner: To that same point, Zach, are there some instances in your book, where you canpoint to this ability to share the data across community, whether it’s through some sort of a cloudapparatus or even a regulatory environment, where people are compelled to open up and sharethat is creating a new or very substantial beneﬁts?I am just trying to get at the network effect here, when it comes to exposing the data. I think thatwere at a period now where that can happen in ways that just weren’t possible even ﬁve yearsago.Tumin: One of the things that were seeing around the world is that innovation is taking place atthe level of individual apps and individual developers. Theres a great example in London.London Transport had a data set and a website that people would use to ﬁnd out where theirtrains were, what the schedule was, and what was happening on a day-to-day basis.As we all know, passengers on mass transit like to know whats happening on a minute-to-minutebasis. London Transport decided they would open up their data, and the open data movement isvery, very important in that respect. They opened the data and let developers develop some appsfor folks. A number of apps developers did and put these things out on the system. The demandwas so high that they crashed London Transport, initially.
London Transport took their data and put it into the cloud, where they could handle the scalemuch more effectively. Within a few days, they had gone from those thousand hits on the websiteper day to 2.3 million in the cloud.The ability to scale is terribly important. The ability to innovate and turn these open datasets overto communities of developers, to make this data available to people the way they want use it, isterribly important. And these kinds of industry-government relations that makes this possible arecritical as well.So across all those dimensions, technology, people, politics, and the platform, the data has to lineup. You need governance and support people, and people to make it work and to trust each otherand share information. These are the keys to collaboration today.Gardner: Were coming up on our time limit, but I wanted to put myself in the place of alistener, who might be really jazzed by the potential here, but is still concerned about losingcontrol. How do you take advantage of the mobile extended networks of social media andnetworks, but without losing your basic principles of good business practice and governance?Is there something that youre seeing Tim, through your network and the way youre approachingthis, that is a balancing act? How can you give some advice to someone who can start to enterthese waters, but not drown or get lost?Minahan: First, I want to talk about the dynamics going on that are fueling B2B collaboration.There is certainly the need for more productivity. So thats a constant in business, particularly aswere in tight environments. Many times companies are ﬁnding they are tapped out within theenterprise.Becoming more dependentThe second is the leaning out of the enterprise itself with outsourcing more processes, moresupply, and more activities to third parties. Companies are becoming more and more dependenton getting insights and collaborating with folks outside their enterprise.The third is what Zach mentioned before, the changing demographics in the workforce, themillennials. Theyre collapsing the hierarchal command and control. They dont stand forsequestering of information with only a given few. They believe in sharing and in the knowledgeof crowds. They want more collaboration with their peers, their bosses, and their businesspartners.When you take that within a business context and how you put controls on it, obviously thereneeds to be some change. There is some change going on. There is change going on towards thiswave of collaboration. Zach said before that it needs a good leader. There is change managementinvolved. Lets not fool ourselves that technology is the only answer.
So policies need to be put down. Just like many businesses put policies down on their socialmedia, there needs to be policies put down on how we share information and with whom, but thegreat thing about technology is that it can enforce those controls. It can help to put in checks andbalances and give you a full transparency and audit trail, so you know that these policies arebeing enforced. You know that there are certain parameters around security of data.You dont have those controls in the ofﬂine world. When paper leaves the building, you dontknow. But when a transaction is shared or when information is shared over a network, you, as acompany, have greater control. You have a greater insight, and the ability to track and trace.So there is this balancing act going on between opening the kimono, as we talked about in 80s,being able to share more information with your trading partners, but now being able to do it in acontrolled environment that is digitized and process-oriented. You have the controls you need toensure youre protecting your business, while also growing your business.Gardner: Zach, last word to you. What do we get? Whats the payoff, if we can balance thiscorrectly? If we can allow these new wheels of innovation to spin, to scale up, but also apply theright balance, as Tim was describing, for audit trails and access and privilege controls? If we dothis right, whats in the ofﬁng? Even though its early in the game as you pointed out, whats thepotential here? When can we expect this payoff?Tumin: I think you can expect four things, Dana. First is that you can expect innovations fasterwith ideas that work right away for partners. The partners who collaborate deeply and right fromthe start get their products right without too much error built-in and they can get them to marketfaster.Second is that youre going to rinse out the cost of rework, whether its from carrying needlessinventory or handling paper that you don’t have to touch where there is cost involved. Youregoing to be able to rinse that out.Third is that youre going to be able to build revenues by dealing with risk. Youre going to takeadvantage of customer insight. Youre going to make life better and thats going to be good newsfor you and the marketplace.Constant learningThe fourth is that you have an opportunity for constant learning, so that insight moves topractice faster. That’s really important, because the world is changing so fast, you have thevolatility, a velocity, a volume, variability, being able to learn and adapt is critical. That meansembracing change, setting out the values that you want to lead by, helping people understandthem.
Great leaders are great teachers. The opportunity of the networked world is to share that insightand loop it across the network, so that people understand how to improve every day and everyway the core business processes that theyre responsible for.Gardner: Well, great. I am afraid well have to leave it there. Id like to thank our audience forjoining us. Weve been discussing new levels of collaboration and how they have emerged withinan increasingly networked world and how thats all coming together to impact both business andsociety.I’d also like to thank our guests for joining us. Zach Tumin, Senior Researcher at the Science,Technology, and Public Policy Program at Harvard Kennedy School. He is also the co-authorwith William Bratton of this years Collaborate or Perish.: Reaching Across Boundaries in aNetworked World, and that’s published by Random House. Thanks so much Zach.Tumin: Thank you, Dana.Gardner: And, of course, Tim Minahan, the Senior Vice-President of Global Network Strategyand Chief Marketing Ofﬁcer at Ariba, an SAP company. Thanks so much, Tim.Minahan: Thanks, Dana.Gardner: This is Dana Gardner, Principal Analyst at Interarbor Solutions and you’ve beenlistening to a sponsored BrieﬁngsDirect broadcast. Thanks again for listening and come backnext time.Listen to the podcast. Find it on iTunes. Sponsor: AribaBusiness networking is driving innovation and social interaction as new technologies and userexpectations converge. Copyright Interarbor Solutions, LLC, 2005-2013. All rights reserved.You may also be interested in: • Collboration-Enhanced Procurement and AP Automation Maximize Productivity and Proﬁt Gains in Networked Economy, Says Aribas Drew Hoﬂer • Ariba Network Helps Cox Enterprises Manage Procurement Across Six Different ERP Systems • Ariba CMO Tim Minahan on how networked economy beneﬁts spring from improved business commerce and cloud processes • Ariba Dynamic Discounting Gives Companies New Visibility into Cash Flow to Improve the Buying Process • Ariba, IBM Deal Shows Emerging Prominence of Cloud Ecosystem-Based Collaboration and Commerce • Ariba Steps Up Cloud Efforts with StartContracts, On-Demand Contract Management for SMBs