That the Internet impacts business is now obvious. The Internet is, by essence, a total disruption to the usual governance of traditional corporate companies, business, universities, and even politics. To say it in a few words: there was the CEO, the Professor, the Expert, the Manager, God, and everybody was happily listening to the speech going down. The horizontal flow of information between people was badly considered, if not disallowed. The generation pre WWII did not permit children to speak when eating at the table. Even now, there are schools who prevent students to talk together; same as those corporate companies who block the access to facebook, or to any other social network.
Then came the Internet. We tend to forget that at its very beginning, in the 70s, Internet was genuinely in peer to peer mode. I could access the content of someone who could access my content. Every computer had an IP address, and amongst the very first services, were email in 1972, and usenet, the ancestor of modern bulletin boards, in 1981. Interestingly, the web, which was such a powerful invention that most people confuse the Internet and the Web, was a regression to the foundation of the Internet, because it reintroduced a client-server architecture. Many companies do consider their web site only as a way to deliver content, thus making it close to a television model. Funnily, the only category of services which are in the genuine type are the one many government try to hunt down, like napster, emule, edonkey, etc. Skype is another example of such service, and the viability of its business model has deeply impacted traditional telecommunication operators.
It is not that the Internet has invented peer to peer. Horizontal relation were always an important and efficient way of communicating. Resistance movements had, obviously, a weaker hierarchy, and were mostly functioning in peer to peer mode. In terms of commerce, it is well known that buyers tend to more listen their friends than the sales person. The huge impact of the Internet was to amplify this social form to an extent where we can easily say that it is the main social relationship people are wanting now. Facebook, by reaching 400 million users, at the time I write this article, is the third country world-wide, after China and India, but before the US…
So we are facing two extreme governance models :
|Value is in :||Production||Transaction|
|Information flow is :||Vertical||Horizontal|
|Meaning comes form :||Decisions||Interactions|
|Leader is :||Manager||Moderator|
|Decisions are :||Imposed||Emerged|
|Structure is :||Designed||Self Organized|
There is no judgement so far, between one model or the other. Both have advantages, both have drawbacks, and, as usual, it is a pure matter of context to decide which one is the best.
However, what is happening is more subtle:
- customers are in network mode. The are part of forum, social networks; they exchange lots of information, they are in the “usage” layer, they are smart, and the real innovator emerge amongst them, or, to put it in a more business oriented manner, the Internet allows to see which are the best customer to work with.
- enterprise’s boundaries became porous. Not only because any customer can access to IT system through web site, but also because any employee is much more well equipped at home than at work: he has a PC or Mac brand new, he can surf where he wants without any firewall, he can go onto youtube, dailymotion, vimeo or any video site, and, much worst, by surfing on blogs, forum twitter, etc. he can see his enterprise from outside; he can see what people say about it, and then he feels the contradiction between what corporate communication says, and what he experiences…
- The enterprise remains in hierarchical mode, with silos, departments not talking each other, based on a competitive model.
This combination of a hierarchical enterprise, with porous boundaries, and networked customers, is not sustainable. The silo model is slower than the network model, it does not allow information to circulate freely; employees are not encouraged to work in a collaborative manner. Customers, on their side, see one brand, want more fluidity in their relationship, are not interested in internal wars. As an example: when a customer buys a product on a web site, or even in a physical shop, and want to return it in another physical shop, he does not understand why this may not be possible.
The Internet is bringing tension on this matter, but positive tension. How it is solved (or dissolved) depends upon many factor, but we can express two extremse : in some big corporate groups, employees who are close to customer are going to network mode, whether it is official by introducing social networking tools inside the company, or totally uncontrolled by hierarchy, who suddenly discovers that few thousand employees have opened subgroups in facebook, linkedin, or any social network. Another extreme is a little enterprise who has the capacity to change itself, by reshaping the enterprise around processes, training people to digital tools, and introducing Web2.0 tools to support information backbone. In any case, middle management is the layer which does suffer the most.
Enterprises should no longer deny this aspect. They should really move to another governance, more networked, where middle management role shifts from controls to support. This is not an easy task. But enterprises who do not switch may be one day in dire straits.