The Click Company


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The Click Company is a metaphor to describe a company fully adapted to the Digital Medium.

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The Click Company

  1. 1. The Click Company Adapt to the Digital Medium or Die
  2. 2. The Click Company First Edition 2010 Copyright © 2010 Coffee Bean Technology 6601 Owens Drive Pleasanton, CA 94588 All Rights Reserved. This book may not be reproduced in any form without permission. ISBN 978-0-9826645-0-6 (First edition, paperback) Printed in the USA Illustrations and book design: Adriana Ayala Copy editing: Louise Halsey
  3. 3. The Digital Medium and You Rarely has a technology had such a transformational effect on business as the digital medium has. It is naive to think that it is passive and that you are in control. Its use is shaping minds, changing our behavior and affecting our attitude as customers and professionals. This booklet is a wake-up call to analyze the impact of this new medium on your business. 3
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  5. 5. ”Technology has a subtle way of changing people. People change business.” 5
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  7. 7. “Today anyone can address the world with a computer.” Jerry Walker, Californian Cowboy Table of Contents Preface 9 Introduction – Why Should I Read This Booklet? 11 The Concept of Medium 15 A New Mind Takes Shape 19 The Print Medium and Its Effects 23 The Digital Medium and Its Effects 27 The Classical Company 31 The Click Company 37 Why Should I Become a Click Company? 43 Business Effects of the Digital Medium 47 Conclusion 55 7
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  9. 9. “Control over change would seem to consist in moving not with it but ahead of it. Anticipation gives the power to deflect the control of force.” Marshall McLuhan Preface Before starting Coffee Bean Technology, I was one of the founders of Cyclades Corporation - a technology company based in the Silicon Valley. Cyclades eventually became successful, with a global presence and 85% of Fortune 100 companies as our customers; our journey ended in 2006 when the company was acquired by a larger entity. When I investigate the causes of Cyclades’ success I always reach the same conclusion: our very early alignment with and adoption of Linux technology. While we embraced and lived the emergence of the Open Source Software movement, I have always been intrigued with the social implications of the phenomenon and felt that I did not understand it completely. Prior to our relationship with Linux, Cyclades was paddling upstream, and it was a tortuous journey; suddenly we caught the wave and from that point on we were surfing and reaching success. We were engaged with the open source community where thousands of programmers worldwide have invested and continue to invest their time writing source code, which is available for free on the Internet. Why does it happen? 9
  10. 10. Would this phenomenon occur outside the field of technology? What follows is the result of my investigation on the impact of the digital medium (including the Internet, mobile computing, video games, social media, etc.) on business. This medium has initially affected technology, music and the publishing industries, but has now matured and impacts any business, independent of its size and sector. My goal is to understand why the digital medium has such a transformative power: it changes our behavior and that affects our attitude as customers and professionals; it changes business models; it propels innovation and competition. Why does it make some companies winners and others losers? My search for answers took me to the great work of Marshall McLuhan, a philosopher and media theorist, and his book Understanding Media where I have found a framework to analyze the digital medium. McLuhan’s ideas have strongly influenced this booklet, which is an initial exploration of the topic and far from complete. I hope it inspires you to analyze the impact of the digital medium on your business. John Lima CEO and Founder Coffee Bean Technology 10
  11. 11. “It is not necessary to change. Survival is not mandatory.” W. Edwards Deming Introduction – Why Should I Read This Booklet? When the railways were first built, they did more than simply expand commerce and the movement of goods; they affected everything from the type of jobs available, to the physical layout of our cities, to the dissemination of ideas, to the lifestyle of people in both remote areas and large cities. Similarly, the Internet has impacted our lives far beyond its ability to provide instantaneous access to information. It changes our interactions with others as well as the creation and transfer of knowledge. It is shaping the thinking and behavior of generations of workers and consumers with social networking, search engines and blogs becoming part of our everyday life. Focusing solely on the movement of goods or information is to ignore the most significant effect of new technologies. As McLuhan said, “The medium is the message.” The major impact of the Internet is not its ability to make data available instantly but how the adoption of new technology changes the way we think. New organizations, better adapted to the new reality, are challenging traditional companies. Several examples have 11
  12. 12. emerged: free online, collaborative encyclopedias vs. printed authoritative encyclopedias, informational blogs vs. printed newspapers, downloadable music and software vs. shrink-wrapped CDs and software, virtual retailers vs. brick-and-mortar retailers, online travel sites vs. local travel agencies. This new reality has taken hold and will soon appear at the company near you. The effects of the adoption of digital technology in companies have been predicted for some time, from McLuhan work in the 1960’s to the “Cluetrain Mainfesto” in the 1990’s to “Enterprise 2.0” movement in the 2000’s. Technology changes people. People change business. Changes gain critical mass now, as a new generation of workers and consumers who grew with the Digital Medium take decision-making positions as managers and consumers. If we see that, we can better understand how newspapers are being forced to change business model, why Google has taken the initial lead Yahoo! had on Internet presence, and how each and every business (including yours) need to adapt or be challenged by new players. Our goal here is to study this shift and provide an analytical framework to understand how companies must evolve to tap into human potential in the 21st century and be successful interacting with the new generation of consumers and business customers. We call an organization operating under the influence of the print medium a “Classical Company.” The Classical Company is hierarchical, linear and functionally segmented, and views customers and the market as external entities. The Classical Company will not survive in the increasingly competitive marketplace. The organization that WILL survive is called the “Click Company,” so named because it has adapted the digital medium to fully leverage the impact of new technology. The 12
  13. 13. Click Company enables and encourages its employees and customers to co-create its value. We will then apply our framework for analysis and build the bridge between old and new, suggesting the direction business leaders and organizations can take to evolve and adapt to the new reality. There is some irony in writing a printed book about the shift that, we argue, is taking us irreversibly towards a new digital medium, but change starts with awareness. One could say we should have moved away from classical business language and adopted ”Click-language” as well, but we are writing it for the business leader trying to cope with changes. We hope it inspires you to take the first step and we invite you to join us in this journey towards the future. Marcio Saito President Coffee Bean Technology 13
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  15. 15. “In a culture like ours, long accustomed to splitting and dividing all things as a means of control, it is sometimes a bit of shock to be reminded that, in operational and practical fact, the medium is the message. This is merely to say that the personal and social consequences of any medium – that is, of any extension of ourselves – result from the new scale that is introduced into our affairs by each extension of ourselves, or by any new technology.“ Marshall McLuhan (Understanding Media, 1964) The Concept of Medium Most of us think of media as communication: press, radio and television. McLuhan thought of a medium or technology as an extension of our bodies, senses and minds. To illustrate this point consider the use of firearms. Obviously, an assault rifle is not by itself good or bad. It is fair to argue that the person holding the gun is the one who chooses how to use it and therefore is solely responsible for the consequences of its use. Knowing someone should tell us what that person is capable of doing with a gun. But the argument is more complex than that. Anyone who has held a gun in her hands remembers the feeling of doing it for the first time. There is a rush of adrenaline and a strong sensation of power. Guns are effective extensions of our hands, which enable us to protect, save, intimidate, kill or hurt others without engaging in direct physical aggression. Seeing them just as passive tools is ignoring their power to influence the human 15
  16. 16. psyche. Similarly, the power to affect the user applies to new technologies and media. The use of the digital medium employed by the Internet is not only changing our habits and behavior on a superficial level, but it is changing our thinking by shifting the balance between interaction and reflection, and affecting how humans interact with each other. Because the medium affects each of our senses and how we use them, it has a profound effect in our minds. “The effects of technology do not occur at the level of opinions or concepts, but alter sense ratios or patterns of perception steadily and without any assistance. The serious artist is the only person able to encounter technology with impunity, just because he is an expert aware of the changes in sense perception.”(Marshall McLuhan, Understanding Media, 1964) It has become commonplace to state that the Internet is changing our lives. But the real change has not yet happened, as societal changes happen slowly and adaptation takes time. We have so far used the Internet primarily as a new container holding old content. Most web pages today are static, mere electronic replacements of the printed page. The true nature of the digital medium and the associated social, participative and collaborative behavior it triggers is just starting to emerge. Our focus here is the effect of the shift in the human mind from a model influenced by the print medium to a model defined by the digital medium. But, before we go into that, here is how the American anthropologist Edmund Carpenter describes our shift from the previous tribal culture defined by oral communication to a segmented society defined by the print medium: “Tribal men everywhere regard themselves as integral parts of nature. They belong to a seamless web of kinship & responsibility. They merge the individual 16
  17. 17. with the whole society. They’re involved with life: they experience a participation mystique. This experience is one in which people are eager to merge with cosmic powers. The print medium made us isolated, linear, uniform, homogenous, sequential, hierarchical, specialist and visually-oriented. Beginning with the phonetic alphabet & the Greeks, there came a habit of detachment & noninvolvement, a kind of uncooperative gesture toward the universe. From this refusal to be involved in the world he lived in, literate man derived detachment & objectivity. He became alienated from his environment, even from his body. He believed there was elegance in detachment. He valued the isolated, delimited self, especially the mind. He became an island, complete unto himself. Today we are entering a relatively dim, resonating tribal world in which the electronic extensions of everybody’s nerves involve him deeply in all other lives. Where writing & printing technology tore man out of the group, creating the great misery of psychic alienation, suddenly & without warning the electronic media hasten him back into the embrace of the group. Electricity binds the entire human community into a single tribe, with much resulting erosion of individualism.” (Edmund Carpenter, They Became What They Beheld, 1970) The saga of humanity is to reach further by being more efficient and effective. To some extent the history of humanity is the history of technology as we see our evolution imprinted in technology. New technology creates a new medium and as we experiment with it, it affects our life pattern and we start changing with it. The changes in patterns are reflected in our psyche. A new medium is inherently related to the 17
  18. 18. changes it brings about. It is time to look at the digital medium beyond its mere usage and explore its effects on behavior and mind formation. It is time to stop looking in the rearview mirror and focus on the present and what lies ahead. 18
  19. 19. “They became what they beheld.” Edmund Carpenter A New Mind Takes Shape I recall the early Internet days when my business partner asked me why I was so argumentative in my e-mails (more than I was when we were using the fax machine to communicate over distance). His question struck me, as I could not find an adequate answer. I now understand that the e-mail medium is closer to oral communication than to the print medium. When writing letters we have the time to elaborate our ideas and separate them from our emotions. For e-mails the situation is rather different; it is quasi-instantaneous and has real-time characteristics – something similar to oral communication – it can convey our emotions. This episode illustrates how a new technology/medium affects our behavior and our mind. When we deeply investigate what influences the mind we encounter the realms of philosophy, ideology, psychology, religion, education, etc. However, technology’s influence on our behavior and mind – which accounts for radical mind transformation – is consistently underestimated. Technology has the power to slowly and without resistance transform us, and ultimately it models the mind. 19
  20. 20. Because the use of the digital medium dramatically influences the way we do business today and society as a whole, let us look at its effects on the development of the human mind in comparison to the use of oral and print media. 20
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  23. 23. “Cogito ergo sum.” René Descartes (Principles of Philosophy, 1644) The Print Medium and Its Effects When humans lived in small tribal communities, knowledge transfer and aggregation required the direct and rich interaction among individuals. The introduction of the written language and then the print medium were advances that helped to build modern civilization but, at the same time, had the powerful effect of segmenting knowledge and isolating us from each other. The print medium and less evolved broadcast media are well suited for unidirectional transmission of knowledge and are relatively limited in medium access. The dominant use of print and broadcast media for communication naturally imposes a hierarchy where a select set of experts in a specific field communicates to a broader audience that is less informed and has no opportunity to question or actively participate. That simple concept affects our lives in ways that are more profound than we realize. Let us look at a few examples. When we read the newspaper, we rely on an editor to review all news articles gathered during the day by professional reporters and select the pieces judged to be the most relevant to the average member of the reading audience. The newspaper is delivered to us the next morning under the assumption that the content is both comprehensive and 23
  24. 24. relevant to us so that it can support the formation of our perspective of the world. In most companies today, we rely on top-level managers to define the corporate mission and goals and translate them into smaller components, which are then delegated to the next layer in a hierarchy of functionally segmented groups of people. If the process of decomposition of tasks and distribution across the organizational chart is perfect and everyone does “their job,” the company achieves its goals. When we elect a representative to defend our interests in an association or political body, we are relying on the delegate to correctly synthesize the overall will of the constituency and to represent their interests in collective decisions. The actual result is often alternating shifts between intrinsically biased positions from one election cycle to another. What do newspapers, classical companies and government bodies have in common? They all require us to give up control and autonomy and trust the hierarchy, delegating judgment up the chain to an expert, manager or representative in charge of aggregating collective interest or knowledge and expressing into the system. That trade-off is an efficient way of coping with the intrinsic limitations of a system modeled after communication within the print medium, where there is no efficient way to aggregate and express collective knowledge in real time. The use of printed medium supports: hierarchical structures, segmentation and fragmentation of knowledge, linear and sequential processes, specialization and isolation of individuals. Those effects are incorporated in our psyche and are manifested in our behavior. Later in this document, we will analyze how the use of the print medium affects the business environment of classical companies. 24
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  27. 27. ”Like it or not, we now belong to a clickocracy.” Jose Antonio Vargas, (Washington Post April 2008) The Digital Medium and Its Effects McLuhan differentiated between the printed medium modeled after the printed language and the digital medium, which included forms of digital technology that were in early stages of development in the 1960s and 1970s (realized today by the Internet and the different means of interacting with it). When a new communication medium emerges, it tends to be populated with content from the old medium. A quick examination of how the Internet has been used reveals lots of websites with static text content reminiscent of brochures and other printed material, instances where social media tools are seen just as new channels to influence customers in the classical marketing models, and CEO’s blogs are nothing more than sequential memos broadcasting their infinite wisdom. But when the digital medium is fully adopted, it will eventually become an extension of our minds. It will fundamentally change behavior, with its effect on society becoming more apparent. Already its ubiquitous use enables real-time, continuous multi-peer communication, which is shaping the minds of new generations. 27
  28. 28. The transition from jobs to roles With information and access broadly available, the digital medium empowers people to take on different roles beyond their education - and they do. In 2007, Business Week reported that middle-class Japanese homemakers were engaged in trading currency between doing their domestic chores, generating volumes of transactions capable of moving currency markets and blindsiding professional traders. With the adoption of the digital medium, individuals can no longer be placed in well-defined and self-contained boxes. They do not have static jobs; they take on different roles that change as the context changes. The death of the specialist In most areas of human endeavor only a small proportion of the knowledge is held by experts, those specialized individuals who spend a great deal of time aggregating and interpreting information in a specific field. But because the print medium is not suitable to the aggregation and expression of community knowledge, the word of the expert was the word of knowledge. However, with the adoption of the digital medium, which allows effective capture and aggregation of information, the synthesis and expression of collective knowledge no longer requires delegation of judgment to “experts,” and the force behind highly hierarchical structures and knowledge specialization ceases to exist. For example, volunteer contributors collaborate in creating online reference materials that challenge traditional encyclopedias written by experts who have spent their entire careers acquiring knowledge within their respective fields. 28
  29. 29. Personal identity in a collective context The individual in the digital era gains more independence, but it is not a self-centered individualism. It is personal identity in a collective context, using collaboration to solve problems and taking cues from the social environment to drive behavior. The effects of this interdependent personal identity are apparent first in areas most sensitive to real-time, multi-peer interaction but eventually will appear in every aspect of our society because the digital medium has re-shaped our thinking forcing us to change how we work and live; once we incorporate the effects of the new medium into our behavior we unconsciously drive change. 29
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  31. 31. ”I have my sales quota and you have your budget. I’m the seller and you’re the buyer.” The Classical Company The Classical Company has its roots in the print medium. It has already been influenced by the digital medium (it uses software to run the business, the Internet as a point of interaction, cell phones and mobile technologies), but its culture is still segmented, centralized and hierarchical. The Classical Company follows the “we design, we sell and you buy” business model. It operates under the assumption that customers and employees can be kept isolated and uninformed and from this belief attempts to control them. Processes are sequential and rely on specialists. Consider the example of a classical music publishing company. For decades, the music recording industry has taken full advantage of the classical business model. They control the supply chain (musicians, performers), use their influence and control over the delivery channels to influence their customers (the consumers), and package a bundled product (CDs) that maximizes profits and revenues and, to a large degree, prioritizes the needs of an efficient business model rather than the customer desires. The diagram below illustrates their business model: 31
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  33. 33. The thinking behind a Classical Company goes like this. We have experts that really understand the market and, after some data collection and research, can define and develop a viable product based on market requirements. Once the product is developed, we produce marketing messages and manipulate target customers’ desires to create demand for our products. We sell the products and make money. The classical model worked well for the recording industry until the first popular peer-to-peer MP3 music file-sharing system became popular in the late 1990s. The result was a system whose popularity generated an enormous selection of music to download. With the files obtained through Napster, people frequently made their own compilations without generating revenues for the recording industry or royalties for the copyright holders. By 2001, there were over 25 million Napster users worldwide. The recording industry claimed that illegal file sharing was hurting sales, while others claimed that file sharing actually stimulated the consumption of music and the problem was not about online distribution, but rather the structure of the industry. Legal challenges by the Recording Industry Association of America (RIAA) eventually brought Napster down. Napster shut down its entire network in July 2001. More than making peer-to-peer file sharing popular, Napster exposed serious flaws in the music industry’s business models. There was unsatisfied demand for music from consumers and a lack of access to the market by new, unknown musicians. Only the companies between the creators and the consumers maximized their benefits. As we will analyze later, that situation was sustainable in the past only because the limitations imposed by a business model based on unidirectional communication. The new vision exposed by Napster was based not only on 33
  34. 34. the users’ freedom to select the music they wanted, but also the users’ ability to interact directly with musicians to participate in the process of creation and promotion. While the recording industry could stop Napster, it could not sue and shut down the 25 million people participating in file sharing. So change was unavoidable. Where there was Napster, now there are other file-sharing sites and new, legal music distribution business models emerging, forcing the industry to evolve and change. 34
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  37. 37. “Give a person a fish and you feed them for a day; teach that person to use the Internet and they won’t bother you for weeks.” The Click Company We are now witnessing changes caused by the digital medium and how these changes are affecting customers and employees. These changes are forcing business and its leadership to adjust and fundamentally change how they engage with individual stakeholders to create value. The world has changed. Customers talk to their peers, so you better not try to excessively segment them (as airlines have done with ticket prices and are now backtracking, for example). They can easily compare and often know your products and the competition better than you do, so you better leverage their knowledge rather than try to teach them about your product. They can see through the intentions in marketing, so you better send messages that resonate with them rather than try to manipulate them into liking your company. Customers demand participation. If you let them co-create value by allowing their direct influence in your product’s roadmap, they will become your true advocates. The same applies to employees. If providing transparency was difficult in the past and segmentation and specialization was an efficient way to divide company objectives among specialized groups, unleashing their creativity so that they 37
  38. 38. can create real value depends on leveraging the digital medium to provide them with the holistic view they need to understand the business. With the proper communication infrastructure in place, there is no need for multiple layers of filtering, specialization and analysis-synthesis to let a large number of people collaborate to reach complex objectives. The trade-off between specialization and efficiency will become obsolete. The focus of businesses will shift from efficiency to the ability to understand the market and react in real time. That is only possible in an environment where transparency, openness and individual empowerment are part of the company culture. Employees demand participation. If you communicate transparently and provide business visibility, they will “do their jobs” while enjoying a sense of purpose and satisfaction, and also collaborate, create value and contribute for collective success. We call the company that has adapted to this new customer and workforce the “Click Company.” The Click Company communicates both internally and externally, and structures itself using a model based on the digital medium. This model goes beyond the superficial adoption of digital tools (such as collaboration and communication software), and encompasses a change in values, culture and business models. Consider the same example of the recording industry we examined before. The diagram below illustrates what the equivalent Click Company business model would look like. The business model of a Click Company is centered on customer experience, not the company itself. The research/ design/manufacture/market/sell cycle happens in real time and in parallel, not sequentially. Market input is not synthesized though customer surveys, but through direct engagement of customers in the design process. Marketing messages are 38
  39. 39. intended to resonate with, not to manipulate customers. The customer is in the driver’s seat and is the source of the business knowledge and value for the Click Company. Let us further compare the Classical Company and the Click Company. 39
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  43. 43. “If it works, it’s obsolete.” Why Should I Become a Click Company? As a business leader, you may be asking the very relevant question: why should I promote the transition? We are experiencing profit and growth, why change? The answer is very simple: because your customers are changing. The digital medium is shaping them and they are moving towards the characteristics of the Click Company. If you ignore this fact, your profits and growth will eventually suffer. Why has the Classical Company been successful for so many years? The classical model works because customers have not had access to information and options outside the Classical Company model. Classical Companies have invested in efficiency to gain more profits. Customers were under control; there were battles among competitors for profit, growth and market share. In summary, the model was stable and the competitive forces in balance. The digital medium and the Internet have created conditions for new competitors to bring new products to the market and have also empowered customers to access information and interact with peers, exchanging knowledge and experiences. Customers have now a holistic view of their needs and 43
  44. 44. realize that a company’s product is only a small part of the experience that they are creating for themselves. The classical model is collapsing due to innovation from outside its model. Your competition is not the other Classical Companies in your market. The real competition is the Click Company that sooner or later will disrupt and dominate your market. Quoting from a late 2007 article in Business Week: “The driving forces of innovation and globalization are pushing companies to revamp their managerial ranks and hire people with new skills. Surprised by the rise of consumer power, companies are seeking people who can connect with customer cultures online and overseas. And in an era of constant change, they want people who are comfortable with complexity and uncertainty. Schools that teach design thinking, with its emphasis on maximizing possibilities rather than managing for efficiency, are in high demand” (“Design Programs Are Shaping a New Generation of Creative Managers,” Business Week, October 4, 2007). This idea correlates with the characteristics of the Click Company listed above. Let us spend some time analyzing it: “The driving forces of innovation and globalization are pushing companies to revamp their managerial ranks and hire people with new skills…” Both consumers and the workforce are changing, shaped by the digital medium. Leaders need to have the skills to inspire and engage people with an attitude of open communication rather than leadership by access and segmentation of information. “Surprised by the rise of consumer power…” The digital medium has shifted power from the company to 44
  45. 45. customers; customers are empowered by unlimited access to information. They can exchange experiences with their peers and learn how to customize their unique experience. “…companies are seeking people who can connect with customer cultures online and overseas.” The digital medium breaks the geographical ties and instantly connects everybody on the planet; we are now living in a ”global village.” Companies do not need to be big to be global. “And in an era of constant change, they want people who are comfortable with complexity and uncertainty.” The digital medium is instantaneous and distributed; companies are in need of people that are adjusted to the new medium. The digital medium has dramatically empowered customers and competitors resulting in a shift in competitive advantage from efficiency to innovation. Being able to live with constant change is a requirement for success. 45
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  47. 47. Business Effects of the Digital Medium Business simulation “Rapidly, we approach the final phase of extensions of man – the technological simulation of consciousness, when the creative process will be collectively corporately extended to the whole of human society, much as we have already extended our senses and our nerves to the various media.” Marshall McLuhan (Understanding Media, 1964) Our relationship with technology started long ago when we invented artifacts to extend our reach; initially these tools were used for hunting and then for agriculture. The day came when we invented sophisticated machines that embodied processes; as an example, the dishwasher includes a four steps process: water injection, soap, rinse and dry. Originally these processes were stored in mechanical systems that later evolved to computer systems based on microcontrollers and memories. Computer technology started replacing mechanical devices, such as digital clocks replacing analog clocks. Soon this technology delivered the capability to simulate other systems, and in some cases software has become the virtual replacements of some device. For example, smart phones are replacing cameras, watches, compasses, calculators, maps and so on. Gadget simulation is very tangible and visible, the question 47
  48. 48. now is: can your entire business be simulated by the digital medium and its technologies? Absolutely. This is what online retailers have done to the process of buying books (and more recently, reading books), for example. Travel agencies are another example where the entire business is simulated and presented as an online experience. Simulation is a very disruptive technology that can make entire businesses obsolete. Customer participation vs. customer centric “Without customers, there is no need for your job.” Participation is the most important effect of the digital medium; it fuels the success of all the collaborative communities and associated companies emerging on the Internet. Under the influence of this medium, ordinary people (like your customers and employees) have changed their behavior to become more participative, connected and informed. They invest a considerable amount of time and energy in sharing their knowledge and experience in areas ranging from how to bake a cake to how to heal from a disease. Over 60% of the information available on the Internet is not commercial but is content created and used by ordinary people; the Internet provides the opportunity for us to express our passions. But the effect of the digital medium does not stop at individuals; it will also turn the corporate world upside down. It will tear down office walls and open meeting rooms. It makes secrecy counterproductive. The power in controlling and segmenting information is gone; information is now available to everybody. What about the customers? They are using the digital medium to explore new options to solve their problems, perhaps even replacing your products. They are building a trusted network with peers; you need to be transparent and authentic to be part of that forum. Do you think customers, particularly business customers, are unaware of the intention 48
  49. 49. of your marketing messages? For many years, companies have claimed to be customer centric, implying that customers are their focus and the center of their strategy. However, the Classical Company customer does not feel at the center because they see that the focus of the company’s unilateral approach is to increase revenues and maximize profit. This is a result of the Classical Company’s model “we design, we sell and you buy,” which ultimately attempts to lead and control the customers. Such a view contrasts with the sense of freedom, empowerment and participation that people are experiencing as a consequence of the digital medium adoption. The medium has created an open environment of genuine participation that integrates customers and employees who share knowledge in social networks or other web initiatives. Click Companies directly (i.e., not through an analytical expert interpreting market requirements) engage the customers in marketing processes to co-create the products that will meet their expectations. They are re-designing the sales process to bring about customer alignment. We are watching a shift from a customer-centric focus, which was company-driven, to customer participation; this change is here to stay as it reflects a change in our behavior caused by the digital medium. It is impossible to fight behavioral change, so business leaders have no option but to adapt. To embrace customer participation is the first step in aligning your business with the digital medium and moving towards the Click Company model. Real time’s business impact “The world is changing very fast. Big will not beat small anymore. It will be the fast beating the slow.” Rupert Murdoch 49
  50. 50. Picture the 19th century when we lived in the pre-electric and pre-digital age. From books and newspapers we learned of remote lands we could only dream of visiting. Maps, encyclopedias and geography books illustrated a clear sense of space and distance within our planet. Although we had much information about the world, it seemed big and far away. The early ancestors of the digital medium – electricity, the telegraph, radio, TV – shrunk the world. Important events were broadcasted around the world. Today with the Internet, news and information travel at light speed collapsing our previous notion of time and space; our planet is contracted and we have instantaneous access to information. But the digital medium does more than broadcast events to a passive global audience. It provides real-time participation and has substantially accelerated the real-time factor in our life experience. The personal computer, the Internet, mobile communications and computing, databases, all form a massive network that extends our memory, our senses and even our mind. When we transition from our personal experience to business, we realize that the corporate world has not entirely adjusted itself to the digital medium. Business does not respond in real time, its culture and people operate in a sequential, hierarchical and fragmented world. The operation of a Classical Company is embodied in sequential workflows spanning functionally fragmented groups. Forcing business analysts to produce new reports at the end of every business day does not make your business operate in real time. That system is obsolete. The Click Company operates in true real time, where processes are continuous and parallel, and information flows directly from where it is produced to where it is needed without multiple analysis/synthesis steps. Hierarchical levels doing the “editing” of the information and introducing 50
  51. 51. delays need to be replaced by systems that can leverage the synergy between the people who really understand the problem being solved. Sales and marketing in the Click Era “To sell more and the sky is the limit” has long been hardwired in the minds of sales and marketing people. In fact, the motto is powerful enough to drive Wall Street to condemn CEOs who fail to increase sales quarter after quarter. Devotion to this principle has led sales and marketing professionals to operate in a frame of fragmentation and isolation where there is no responsibility or concern for the effect of the product on its customers or on the environment beyond the sale. As long as you sell more, you are a hero. An advertisement motivates us to eat all we can – the best value to for our money – while the next promises a magical medicine to heal us from our overconsumption. We do not repair our belongings; we simply trash them. A decent new bike priced at US$ 50.00 erodes any incentive to repair what is in the garage. Two forces are challenging the business motto perpetuo. The first driver for change is the ecological consciousness that compels business to be self-sustainable and to consider the environmental impact of products. The second force is the new customer’s mind-set shaped by the influence of the digital medium. Consider their experience on the web where they interact in social networks, blogosphere, user’s groups and specialized communities to share their problems with peers and to seek solutions. Today’s consumers are building trusted networks where people genuinely collaborate without the intention to sell to each other. The convergence of the two trends: ecological consciousness and new customer behavior points to the next stage of capitalism. 51
  52. 52. Such a scenario creates a great opportunity for sales and marketing people to join prospects and customers in conversations to understand the customer’s business. By participating in such a dialog you may gather information about your customers that may be used in product definition or messaging and positioning, or even sales and marketing strategies. It is important not to treat these interactions involving customers and peers as “sales leads.” Keep in mind that customers are now free and well-informed, and now more than ever have options beyond your product. Think about your experience as an online consumer comparing products (including products sold by competitors), reading peer reviews (including negative ones) and deciding what to buy instead of being convinced to buy what is available in a traditional store. The same experience has to translate to the business-to-business world. Is it possible to make your customers feel the same way? Of course it is, and this shift in the marketplace in inevitable. You can hope it takes a long time or you can prepare for it and lead the change. Strategic initiatives in the Click Era The classical approach to developing a business strategy or to solve complex business problem is familiar to anyone in management: define a mission and a vision, articulate strategic goals, and decompose those goals into functional components recursively until you can assign individual tasks. Manage people towards those individual objectives. If everyone does “their job,” the synthesis of the personal performance is the achievement of the organizational goals. That analytic method allows for great efficiency and supports automation, optimization and accountability. But perceived efficiency has several hidden costs. First, because the analytical process is not perfect, the sum of individual performance often does not make for collective success. When we decompose problems along pre-defined 52
  53. 53. functional lines or team skill sets, gaps and miscommunication affect the integration of the results. Second, the segmentation intrinsically dismisses synergy in the interaction among people. If specialization contributes to efficiency, it constrains people to contributions in their very specific domain areas. Rather than rely on collective wisdom, the classical approach is very dependent on the wisdom of management. Third, a functional organization is not good at perceiving and reacting to changes in the external context. To minimize that last problem, companies usually have a small group of people outside the normal operation focused on the external context (often in roles carrying labels like “Business Development“ or “Strategy”). Because they are not integrated into the normal processes, they operate through “strategic initiatives,” which are designed to drive change and are often threatening to the mainstream organization. In a Click Company, every member of the employee community is more aware of the overall goal than focused on individual success. Decisions are less centralized and the boundaries between roles in the organization are less strict. Decentralization creates a potential loss of the efficiency of specialization but, on the other hand, allows for collaboration and participation. The barriers to align people towards an objective are declining because the digital medium allows more effectively communication, both to inspire people towards a global complex goal and to truly capture the community knowledge and the synergy from interaction among people. When we reach the turning point where the benefits offsets the cost, the tide reverses in that specific market segment and Click Companies challenge Classical Companies. In a Click Company, ”strategy” is not a stand-alone entity fighting the status quo. Strategy becomes less centralized, 53
  54. 54. an integral part of the company operation. We trade efficiency for agility. Truly collaborative systems implicitly embed the strategic process. The role of the leadership or the “strategists” shifts from formulating strategies to be followed towards inspiring people to envision and pursue collective goals. 54
  55. 55. Conclusion In the second half of the 19th century, as the Industrial Revolution was unfolding, factories used belts and mechanical systems to distribute power from a large central steam engine. When the electric motor was invented, the first approach was to simply use it to replace the central steam engine, which did not produce great advantages. It took several decades to realize that the electric medium could be effectively used to distribute power. Small electric motors were designed and successfully applied at the exact location where mechanical power was needed. Application of electric motors eventually revolutionized industry. Industrial processes were no longer limited by power transmission using shaft, belts, compressed air or hydraulic pressure and the physical layout of the factories could be optimized for manufacturing rather than for distribution of mechanical power. The root of the 19th century problem was to approach a new medium - the electric medium - with the mind-set of the previous medium - the mechanical medium. It was necessary to fully understand the new medium’s effects and its potentialities to successful adopt it. But when that awareness arrived, changes accelerated. Today we are faced with similar challenges when dealing with the digital medium —we’re attempting to use it with the 55
  56. 56. mind-set of the print medium. The websites of the 1990s were a repository of marketing brochures – the user experience was to read a book on the web, it was linear and sequential. Only now, the digital medium is expressing its authentic personality though social networks, micro-blogs, social gaming, etc. To be successful, companies will need to understand the digital medium’s effects on people and then apply it effectively to their businesses. Most will not do it successfully and will be replaced by Click Companies. We hope we have inspired you to take the steps in that journey and apply the Click Company model to your business to discover new threats and opportunities. In conclusion, we would like to pose that “the intention determines the actions” and suggest you reflect on the ideas presented here and plan how to align your business with the digital medium. This medium will impact your business regardless its size and sector. “What is next?” 56
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