I recently read an interesting article by Donald Sull entitled “Why good companies go bad” – Financial Times (3 October 2005). In it he expands on the concept of “active inertia”, saying that “companies often respond to even the most disruptive market shifts by accelerating activities that succeeded in the past. When the world changes, organizations trapped in active inertia do more of the same. A little faster perhaps or tweaked at the margin, but basically the same old same old.”
Sull uses the example of organisations trapped in active inertia as resembling a car with its back wheels stuck in a rut. Managers step on the petrol and rather than escaping the rut, they only dig themselves in deeper.
He talks about clear commitments being required for company’ initial successes, but he says that these commitments harden with time and ultimately constrain a firm’s ability to adapt when its competitive environment shifts. He discusses distinctive success formulas which focus on employees, confer efficiency, attract resources and differentiate the company from rivals.
Five categories of commitments comprise the success formula for organisations:
- Strategic frames – What we see when we look at the world, including definition of industry, relevant competitors and how to create value;
- Processes – How we do things – entailing both informal and formal routines;
- Resources – Tangible and intangible assets that we control which help us compete, such as brand, skills, technology, real estate, expertise, etc.;
- Relationships – Established links with external stakeholders including investors, technology partners or distributors; and
- Values – Beliefs that inspire, unify and identify us.
Initial success reinforces management’s belief that they should fortify their success formula. With time and repetition, people stop considering alternatives to their commitments and take them for granted. The individual components of the success formula grow less flexible – Strategic frames become blinkers, resources harden into millstones hanging around a company’s neck, processes settle into routines, relationships become shackles and values ossify into dogmas.
Ossified success formulas are fine, as long as the context remains stable. However when the environment shifts, a gap can grow between what the market demands and what the firm does. Managers see the gap, often at an early stage, and respond aggressively to close it. But their hardened commitments channel their responses into well-worn ruts. The harder they work, the wider the gap becomes. The result is active inertia.
One seismic environmental shift, apart from structural changes in the global economy, is the advent of web 2.0 or the interactive internet. The new Internet has radically changed the rules of the game, customers have more power, companies have the ability to harness the Internet to apply many minds both internally and externally to collaborate and innovate.
Many companies are investigating Enterprise 2.0, but they are still filtering their interpretation through their existing success formulas.
In organisations I have worked with, I often see the role out of Enterprise 2.0 technologies from the IT department as though it was any other Enterprise technology like SAP or Oracle. Whilst there is nothing wrong with the technology being owned by the techies, web 2.0 has fundamentally changed the way that businesses will do business in the future and should be owned by the business. Often web 2.0 seems to be interpreted as the technical ability to blog, or a wiki, bolted onto a content management system for a website, or the document management system within an organisation.
In reality Enterprise 2.0 should be accompanied by a strategic review of how a company is doing business, its environment and its new, empowered customers and expanding markets. Processes need to be reviewed and designed from the user backwards, the way we handle orders and complaints needs to be streamlined, or the world will know all about a company’s unwillingness or inability to address issues. People’s skills need to be analysed, have they got what it takes to be able to communicate across porous company boundaries, do they know how to maintain their personal and company brands in an increasingly transparent business environment, has the organisation got enough dedicated resources to engage with powerful consumers and other stakeholders? What relationships are going to be key to the future of doing business and are the entrenched value systems compatible with a new business environment?
Many companies are looking to their suppliers for advice on how to roll out Enterprise 2.0, if the suppliers are technology companies or PR companies, firms need to realise that they will approach web 2.0 from their own mindset. PR companies see web 2.0 as an extension of the companies’ communication. Technology companies see it as an addition to the application architecture.
Microsoft has just released their magnificent SharePoint 2010, but it is important to realise that this is still just a software application. Granted its potential is fabulous, but until organisations review their strategies, processes and competencies, they are not going to realise the full power of the web. If they don’t think through their success formulas, the application will be implemented in such a way as to reinforce or aggravate the “active inertia”, enabling people to do more of the same more quickly. Generally the skills in technology suppliers are geared towards rolling out seats and adhering to good project management principles. They are not strategic business thinkers and need to partner with people who are focused on how companies create competitive advantage and function in the business environment.
Applications do not conduct business, people do. If employees in the organisation are required to collaborate for the organisation to become more successful, then the fact that they now have the tools to do so is not necessarily going to improve collaboration, they may need to be taught to collaborate – when, why, how? If people are required to engage with customers to shorten sales cycles, but the value system within the organisation is all about risk mitigation and proprietary methodologies, then the value system may need to be adapted to fit the modern business environment. If processes are designed from a point of view which suits the organisation and call centres have been deployed to cut costs, then no amount of wiki’s and blogs or the ability to “share” on Facebook is going to appease outraged customers who will take their gripes public.
Enterprise 2.0 requires greater levels of maturity within organisations and sophistication in how they function successfully in an ever changing environment. By reviewing their success formulas companies can use the web to compete in an extraordinary way and conduct business in a structurally changed business environment.
About Digital Bridges
Digital Bridges creates high performance organisations by unlocking the business value of the web. We create digital strategies, user requirement and functional specifications for Intranets, websites and web applications. We also develop and implement social media strategies and create powerful digital brands using eMarketing and Communication and manage brand conversations with consumers.
Digital Bridges approaches the web from a management consulting position and relies heavily on rigorous academic thinking as well as business experience. It is headed up by Kate Elphick who has a Law degree and an MBA from GIBS. Kate has spent the last fifteen years of her career on the business side of the IT industry with companies such as Datatec, Didata, Business ConneXion and Primedia.
Digital Bridges has a broad range of experience working with significant, successful clients in the Financial, Gaming, Tourism, Pharmaceutical, ICT, Legal, Airline, Professional Services, Media and Public Sectors.
To find out more about Digital Bridges, please visit www.digitalbridges.co.za or contact Kate Elphick on email@example.com