Resource Efficiency 2.0

In 1972 the Club of Rome published its controversial “Limits to growth” report. The authors concluded that “If the present growth trends in world population, industrialization, pollution, food production, and resource depletion continue unchanged, the limits to growth on this planet will be reached sometime within the next one hundred years”. At our home and school the report was widely discussed. The Club of Rome started a first wave of consciousness about the environment and the threat of gradually depleting resources. The following year, in reaction to the West's support of Israel in the Yom Kippur war, the OAPEC stopped supplying oil to these countries, which led to a huge increase in oil prices and ultimately an economic recession. In Holland many belt-tightening measures were introduced. The best of these was the “car-less Sunday”, which allowed us to rollerblade on the highway. In the US the Government launched a conservation program, called ''Don't Be Fuelish,'' urging the public not only to use less gasoline, by reducing the speed limit to 55 miles an hour (yes that's the explanation), but also to cut back on heating and air-conditioning. Shortly after being elected in 1977, President Jimmy Carter, sitting fireside in a beige wool cardigan, told the nation to “tighten our belts, turn down the heat and wear a sweater”. We were asked to reduce, reuse and recycle. Emission standards for cars were set, waste was being sorted for recycling and “green” political parties were founded to pursue an environmentally and ecolologically responsible agenda. The first wave of resource efficient products hit the market in the late seventies. Then it went quiet.

Decades later, in 2006 Al Gore's Oscar/ Nobel Prize winning An Incovenient Truth made an impact on virtually everyone who wanted to listen. The documentary warned us, in a much better researched and packaged presentation than “Limits to Growth”, that the end is neigh: “Humanity is sitting on a ticking time bomb. If the vast majority of the world's scientists are right, we have just ten years to avert a major catastrophe that could send our entire planet into a tail-spin of epic destruction involving extreme weather, floods, droughts, epidemics and killer heat waves beyond anything we have ever experienced. “ Tom Friedman published “Hot, Flat and Crowded”, a call to arms to deal with the challenges and opportunities of global warming, growing population and expanding middle class. Darn...even George W. Bush pleaded with Americans to conserve gasoline by driving less and issued a directive for all federal agencies to cut their own energy use and to encourage employees to use public transportation. And this week Obama said that the US must move quickly to develop clean and innovative sources of energy after years of delay. "We've seen enough. We can remain the world's leading importer of foreign oil, or we can become the world's leading exporter of renewable energy."

Nowadays the concept of “sustainability” has full credibility, almost to a point of becoming fashionable (like Jimmy Carter's cardigan ). We have come to learn about sustainable development, housing, agriculture and even the sustainable South Bronx. The facts are that “the average American generates about 15,000 pounds of carbon dioxide every year from personal transportation, home energy use and from the energy used to produce all of the products and services we consume”. The energy consumption of the average American is almost twice that of a German and three times that of a Pole. Playing on people's conscience may help change behavior. We can trade in our SUVs (disclosure: I am driving a Lexus Rx400h), turn off some lights and empty the jacuzzi (the biggest consumer of electricity). The real change though will come from solutions that not only address these huge issues, but make business sense as well. And there is light on the horizon. Huge companies like General Electric and IBM have developed solutions for the “smart grid”. Highly entrepreneurial green enterprises are getting substantial investor attention. Examples are companies like Better Place, which has launched a new businessmodel for electronic cars, or Tendril, which develops smart grid software.

Infomation Technology is at the heart of the solutions that aim to optimize our scarce resources. IBM claims that “if the U.S. grid alone were just 5% more efficient, it would be like permanently eliminating the fuel and greenhouse gas emissions from 53 million cars. Billions of dollars are wasted on energy that never reaches a single lightbulb.” Tendril has a solution that uses smart plugs containing sensors. A transceiver sends information about energy consumption and patterns. The data gets analyzed and instructions are sent back to the the plug to switch the appliance on or off. This can easily save 10-15% in power consumption at the home or office. Every kilowatt saved in the home saves three at the generating station. Even Google has stepped into the game with their PowerMeter doing what they do best: collecting information, applying analytics and providing users tools to make decisions to reduce energy consumption. Rolls Royce now tracks the performance of 3,500 jet engines around the world in real time, as data is beamed satellite to the company's control room. By analyzing the data it has steadily improved fuel efficiency and over the past 30 years has extended the operating life of engines tenfold. These systems are fairly straightforward control loops: gather the data, analyze it and adjust the settings.

CK Prahalad suggests that government, civil society and companies collaborate to tackle this new phase of resource optimization. The government should contribute with focused investments and regulation, civil society with ideas and grass root approaches and companies with the entrepreneurial and operational capabilities to create commercially viable products. There are big opportunities to improve the supply chains of WalMart (importing over $20Bn in goods from China alone each year) and other large retailers from a green perspective, applying concepts like reverse logistics and extended supplier responsibility. Civil society should look at Walmart as a potential ally rather than a big bad capitalist.

But Sharon Begley writes in this week's Newsweek: “while you're doing all that to reduce the world's energy use and cut emissions of greenhouse gases, keep this in mind: even if we scale up existing technologies to mind-bending levels, such as finishing one nuclear plant every other day for the next 40 years, we'll still fall short of how much low-carbon energy will be needed to keep atmospheric levels of carbon dioxide below what scientists now recognize as the point of no return.” We need profound breakthroughs. Money should flow to where we have the highest chance of finding these and bringing them rapidly to industrial scale. This should be the number one priority after the financial system is cleansed.

By the way, don't forget to turn the lights off for an hour on Earth Day

Have we hit rock bottom?

We are all standing in amazement how fast and furious the decline has set in. No corner of the globe is spared. In China factories stand empty and twenty million workers got on the train back to the rural villages they fled years back. Once looked upon as economic miracles, the illustrious duo Iceland and Ireland have nose dived and are facing double-digit contracting economies. PIGS (Portugal, Italy, Greece and Spain) cannot fly and these countries came crashing down. Many large banks, including the financial behemoths Citgroup and RBS, bastions of capitalism, have been taken over by national governments in a desperate effort to keep liquidity in the economy. Large companies are collapsing under their own weight. Household names like Circuit City disappeared and the GMs of this world will shortly cease to exist (but not before burning billions of federal aid). This must be a wake up call. As Tom Friedman writes in the NY Times: “ What if it’s telling us that the whole growth model we created over the last 50 years is simply unsustainable economically and ecologically and that 2008 was when we hit the wall — when Mother Nature and the market both said: No more. “

It is the time for creative reconstruction. Most companies become conservative in the face of a downturn. They focus on relentless cost cutting and stop “discretionary spending” on innovative projects. While that may be necessary to remain afloat, at the same time new products and business models should be pursued. Like the famous Dutch soccer coach and philosopher Johan Cruijf (Holland's own Yogi Berra) proclaimed: “Every disadvantage also has an advantage”. Instead of putting moribund companies on life preservers, stimulus should be directed to “sustainable” innovation, aimed at long term growth without depleting the globe's rapidly diminishing resources. In a downturn, more than ever, should we get entrepreneurial instead of risk averse. We need agile local businesses in large global networks instead of huge, heavy weight multi-national companies.

I attended a round table with CK Prahalad last week to discuss sustainable solutions for a planet in distress. As a staunch believer in the positive forces of capitalism he pointed out the opportunities of green solutions, such as “extended producer responsibility” or “reverse logistics”. These concepts look at extending the life cycle of products and giving the producer responsibility from cradle to grave. So, old PCs or cars will be returned to the manufacturer who can re-use and recycle. Tom Friedman has been writing regularly about the need for the US to be become a global leader in green energy. Buildings, cars and appliances will be equiped with networks of sensors that continuously monitor resource usage to optimize and replace parts in time. New business models will be built around true resource optimization.

You can not regulate yourself out of a recession. Nor will unfocused stimulus have the required effect. Money has start flowing to the companies that have the entrepreneurial and innovative capability to create long term wealth, while doing good. Economic nationalism and protectionism, fanned by populist slogans such as “Buy American” or “British jobs for British Workers”, are counterproductive and will prolong the recession. The limitation of H1-B visas as part of the bail-out is an economic blunder. Half of Silicon Valleys companies are founded by entrepeneurs born outside the US. Globalization has helped emerging economies to charge ahead and create a large middle class, which in turn fuels the global economy.

We clearly need a jump start, but the engine will keep sputtering and it will surely die again if we give in to conservative, myopic impulses. Money thrown at dying industries is unrecyclable waste. The future is in solutions that not only turn the global economy around but also the earth's decline.

The Truth...Nothing but the Truth

Early January Satyam, “truth” in Sankrit, admitted that $1.4Bn had been siphoned away from the company. No one knows what Mr Raju, the soft spoken CEO, thought when he held the coveted Golden Peacock Award for Corporate Governance in his hands. It is easier to imagine the reaction of the former prime ministers of Canada and Sweden, who were leading the Jury. Obviously the Satyam Fraud raised many questions. How is it possible that there is such a gaping hole between the business process documentation and reality? Why didn't the Board and PwC, who are supposed to audit the books, smell a rat? Is this cooking of the books a regular phenomenon in India? What is the impact on offshoring?

That looks can deceive we all know. Fraud and mismanagement are not confined to India and whistleblowers have a better track record in uncovering corporate wrongdoings than highly paid accountants. Satyam is also listed on the New York Stock Exchange and exposed to US regulation (no comment). My experience as vice chairman of the Board of MphasiS is that corporate governance in India is not better or worse than in Western markets. Every quarter one can expect probing questions from both auditors and analysts. Companies like Infosys are known for squeaky clean books and robust management practices.

Though irregularities from time to time surface in companies that are majority owned by promotors (founders and their family), the Satyam case seems to be more of an exception than a rule. The company was managed in typical “George W. Bush style”. Raju and his tightly knit circle of family members and loyalists ran the company in a centralized manner. Frances Karamouzis of Gartner comments in the NY Times that “Satyam was slow to transform, in part perhaps because of Mr. Raju’s management style. He was very old school management, very parochial and didn’t embrace change or implement anything differently.” Customers had complaints. “We are tired of being required to call up the top guy in India to get things resolved,” one Satyam client told Gartner in 2005. The Times of India reports that “ The customer list of Satyam during Raju times was a top secret that even senior company executives had no access to.” Maybe Raju suffered from deluded views brought on by power. According to The Economic Times he owned 320 pair of shoes and thousand tailored suits in addition to houses in 63 countries (!). Whatever the cause of his behavior, it is clear that management style and company culture make a difference. As this is hard to measure it is an often downplayed part of the vendor selection process.

What happens to the clients who have their IT managed by Satyam? While Satyam's new board is highly respectable, continuity remains in jeopardy. The company will not stay in its current form and will most probably be acquired by another Indian company. As cash is running out there is no investment in client relationships and the best talent is busy packing their bags. Moving vendors may be as hard as moving banks (according to a survey in the US you are more likely to divorce your partner than move your bank account, but that may have changed recently). Still it is advised to approach Infosys, TCS, HP or IBM and start a transition plan. These companies have the processes and people in place to migrate the work currently performed by Satyam. “Outsourcing” and “offshoring” carry inherent risk and “continuity of business” plans apply to operations as well as vendors.

The truth was revealed at Satyam and we have become the wiser. Despite this drama and a business pause, India will remain the most important destination for offshore IT and BPO work. Nowhere on the globe can you find the combination of scale, skill, service innovation and cost advantage. Companies will continue to source work from this vibrant country, as the advantages far outweigh the risks.

Eyeless in Gaza

As the Israeli's didn't allow any press into the Gaza strip, we didn't have our formal “eyes and ears”. Instead both the Israelis and Hamas blasted the Internet with blogs, videos and Twitter to shape public opinion. The war was being fought on two fronts: on the ground and in cyber space. The Israel Defense Force maintains a YouTube channel and the Israel consulate in New York held a press conference exclusively on Twitter. For a while this 140-character-at-a-time medium seemed more important than the message: the chatter on Twitter got quite a bit of coverage. But now the dust has settled it seems that Israel was outsmarted on the Internet, not by Hamas, but by ordinary folks uploading real time reports. Despite its understanding of the Internet channel, superb technology and clever PR machine, the Israelis couldn't weigh in on the avalanche of blogs, videos and messages.

It used to be that we got our news neatly packaged from a limited number of sources such as CNN, Reuters and AP, now it comes from thousands of people, reporting on the ground as events unfold. These reports may be raw, grainy and emotional, but they can hit their target because they are more passionate and immediate.

Here are some examples of how Internet is being used to shape opinion. We Will Not Go Down (Song for Gaza) has been viewed on YouTube by over half a million people and has become the rallying cry at pro-Palestinian demonstrations. QassamCount, tracks the number of Qassam rockets fired into Israel by Hamas. It has both a Facebook and Twitter account that provides real-time updates. Yesterday, this was posted on Twitter: “5:22pm: 2 rockets hit Israel on Sunday after Hamas announced an immediate ceasefire #gaza”. (Note the #gaza, which is a so called “hashtag”, a tag or label that allows broadcasting of the message to the group “Gaza” so that everyone with an interest in the conflict can get this message.) Pictures of destruction by the Israeli army can be found on Flickr. On http://www.israel-vs-palestine.com/ anyone can vote on their position. While this reduces the conflict to it simplest black-and-white form and strips out any nuance, it prompted around 1M people to cast their vote. It is questionable what, if any, impact a site like this may have, but it is clear that we're seeing the first steps toward engagement with conflicts by using the Internet. Conflict 2.0 in its infancy.

I am currently working with European Center of Conflict Prevention and their partner NGO's, such as Oxfam/ Novib, Warchild and Cordaid, on a technology platform that aims to bring together information from the stakeholders: the different party's spokespersons, aid organizations, the press and observers on the ground. The objective is to give the fullest possible picture, provide analysis and prompt action, which may either help preempt conflicts or resolve existing ones. The platform should make it easy for people around the world to connect, exchange notes and to collaborate. We will leverage the same tools that play such important role in today's conflicts.

Last month, Machiel Salomons, an officer with UNHCR, wrote on my blog: “video footage is beamed nowadays through mobile phones to UN Agency heads in New York and Geneva. It helps decision makers, is instrumental in raising funds, mobilizes opinions and contributes towards an early resolution of major problems and challenges. Evidence is found in the fact that the world really has become a saver place.” While information technology is neutral, it can play a major role in resolving armed conflicts.

Obama-style Leadership

I can not help getting emotional watching Obama walk onto the platform to the cheers of more than a million people, who brave the icy Washington weather to participate in the inauguration of the 44th president of the United States of America. The world is celebrating both the first black president to take office and the end of eight years of incompetent leadership. Bush hands over an entangled Middle East conflict and the biggest economic mess since the Great Depression. Old style politics, leadership and business are incapable of solving the profound issues facing us.

The Bush Administration typifies last century's business culture: command and control, centralized decision making by an exclusive group of loyal insiders, driven by ideology and arrogance. Just watch Rick Wagoner operate and you see the Bush of business. It is obvious where GM is going (oblivion).

Obama is the best example of the new generation of leadership, the antidote to Bush-style government and business. For starters he has globality in his genes. His style is open, collaborative and inclusive. During the elections he effectively mobilized and engaged millions (by leveraging Web 2.0 technology). He believes that the economy can be brought back on track through innovation. Over the last weeks he worked closely with the House to create a $825 billion economic recovery plan, that includes money for education, infrastructure, energy investments and basic research, besides emergency spending for unemployment benefits, health care and food aid. His inauguration speech was sober and grounded in realism and pragmatism. Instead of talking in terms of “for us or against us”, he sees that there are no clear cut enemies, rather a “far-reaching network of violence and hatred”. He mentioned the need of close collaboration with other countries to solve the evil trinity of recession, terror an global warming.

While many business people worry about impending protectionism, his “Blue Print for Change” can not be clearer: “There are some who believe that we must try to turn back the clock on this new world; that the only chance to maintain our living standards is to build a fortress around America; to stop trading with other countries, shut down immigration, and rely on old industries. I disagree. Not only is it impossible to turn back the tide of globalization, but efforts to do so can make us worse off. Rather than fear the future, we must embrace it. I have no doubt that America can compete — and succeed — in the 21st century. And I know as well that more than anything else, success will depend not on our government, but on the dynamism, determination, and innovation of the American people.”

Obama is reactivating the American Dream. Let the USA again be an open place where talent from the whole world can come together, study, innovate and build companies. One of the reasons for the USA’s connection with the rest of the globe is its world class universities. Foreign students and immigrants account for almost 50 percent of all science researchers in the country. In 2006 they received 40 percent of all PhDs. By 2010, 75 percent of all science PhDs in this country will be awarded to foreign students. Those who earned their degrees in the US either stay in the US and tend to disproportionally contribute to the economic activity or they return to their home countries to establish and run companies that keep links with the US. Moreover, an open, well funded and competitive research environment has been the engine for much of the US growth, as major technology companies have sprung up around the major schools. Moreover, an open, well funded and competitive research environment has been the engine for much of the US growth, as leading technology companies have sprung up around the major schools, such as Stanford in Silicon Valley, the hot bed of technology with Google, Oracle, HP and Cisco, or MIT in the Boston Area, which has technology leaders like EMC. Dell is close to the University of Austin.

Obama's leadership style fits well with the post-recession business world. Successful companies in the next decade will have leadership that has more in common with Steve Jobs and Eric Schmidt (who was on Obama's Transition Advisory Board), than the leaders of the three of Detroit. Here's a summary of the style differences (thanks to Henk Bos who contributed to this list):

Leveraging the Brain Grid

When Alan Lafley took over the helm at P&G he initiated a complete transformation of the company. P&G opened up and tore down the walls between their marketing, customer service, R&D and product development departments. According to The Economist P&G has radically altered the way it comes up with new ideas and products. Harvard Business Review wrote about their “connect and develop” method: P&G connects with external sources of new ideas, university and government labs, Web-based talent markets, suppliers, even competitors. Then it develops those ideas into profitable new or refined products—swiftly and cheaply— using the firm’s R&D, manufacturing, and marketing prowess. P&G used to source around 15% of its new products and innovations outside the company. This is now approaching 50%. Their profitability and company value have appreciated accordingly.

Most organizations are set up to operate in a stable environment. Once their product is out there, they have Marketing run campaigns, Sales signing up customers, Customer Service supporting them, Purchasing getting the best supplier deals and Manufacturing delivering the goods. Each department follows its internal play book and time-tested business processes. Unfortunately earlier success is no guarantee for the future. Not only financial services, retail and commodity markets are subject to gyrations, most markets are getting more dynamic and unpredictable. Rapid adjustment and constant innovation are critical for survival, let alone market leadership. If organizations are ossified along their functional units they will not be able to preempt or react to a dynamic marketplace.

A look at the average company shows us that Customer Service, with probably the best insight into customer requirements, is not talking to Product Management. Marketing still lives in the world of packaging and pushing the product, rather than engaging with customers. The Purchasing Department is specialized in getting the best transactional deals by issuing 1,000+ page requests for proposals. They are not an integral part of the company's value chain. Many contracts assume that the business will continue for the next years very much the same way at the day of signing. These contracts don't take into account that there will most likely be dramatic changes in the market place, regulation and that mergers and acquisitions may happen. Nor do they allow for strategic alignment, co-design and innovation. The IT department usually is a drag on progress, rather than an enabler. Introducing a new product-line for the company typically means that a multitude of systems need to be overhauled; from the rigid SAP or Oracle ERP system, to a cobweb of proprietary applications and CRM systems. As no project ever gets delivered within 12 months, the time to take a product to market will be measured in years rather than months, let alone weeks.

P&G broke with the traditional model and tied the various functions together into a cohesive set of connected business processes. They turned their organization inside out. It used to take P&G around two years to develop and launch a new product. Now it is down to less than a year. The apparel company Zara can modify their products within two weeks and get a completely new line in their stores in six weeks. They launch around 10,000 designs each year. These highly successful companies have done away with their silos and organized their company around rapid response to the market.

Even large companies can transcend not only the boundaries of their departments but also those of their company. P&G opened up to the outside world and created networks to co-design, collaborate and “crowdsource” for innovation. When P&G embarked on their Connect and Develop approach they decided to issue technology briefs that define the problem instead of publishing a detailed specification the size of War and Peace. Such brief is circulated not just within the company but throughout their global networks of individuals and institutions. Somewhere someone will probably have a ready-made solution available that will substantially cut down development time. If this is not the case then the “brain grid” can be utilized. In grid computing several networked computers, sometimes thousands of servers, are used to a single problem at the same time. Similarly the brain grid connects the best teams and brains across the globe to collectively solve problems or create opportunities. P&G uses both proprietary networks of trusted partners as well as open networks, such as NineSigma. This company “enables clients to source innovative ideas, technologies, products and services from outside their organizations quickly and inexpensively by connecting them to the best innovators and solution providers from around the world.” TopCoder nurtures a community of around 180,000 competitive software developers. A majority of the top performers come from China and Eastern Europe.

We will see the growth of large scale networks that support collaboration and development. Engaging a global community of supporters, being able to frame problems, managing on outcomes (rather than inputs) and understanding packaging are the managerial skills required to leverage the global brain power. Open, networked companies will innovate faster, get closer to customers and get to market quicker. They will emerge as the winners in the post-recession world.

Inverting the Organization Pyramid

It is the time for creative destruction. Many great companies were born in recessionary times. Microsoft and Oracle in the mid 80'ies, Berkshire Hathaway in the 70'ies and Rockefeller and Carnegie a century before that. Strong established companies will go back to the drawing board the coming months and redesign their business. They should take a good look at their organization model. It is probably outdated for a world of uncertainty.

Ashish Sahni wrote in a comment to my Open Source blog: “Organizations create boundaries. There is no room for folks to choose and show initiative. Most employees just wait for an assignment, innovation is only talked about, the element of fun is missing, risk avoidance is the mantra rather than encouraging bold initiative taking attitude, reusability never even reaches beyond the drawing board. Lastly the most important element of management practice is ignored at all levels ‘Put the right people in right place with empowerment’, which eventually results in an organization with very little collaboration.” Rob van der Kooij commented: “ …The issue is the lack of innovation of enterprise design and culture. Since the industrial revolution nothing whatsoever happened there!”

Both have a point. Most organizational models are still variants of the traditional factory model with strict division of labor, specialization ad absurdum, and rigidly defined hierarchies. Primitive carrots and sticks remain the most important behavioral instruments. Despite the omnipresent, employee-sensitive Human Relations “professionals”, your boss can still fire you and determine your annual bonus. Decision-making is concentrated at the top and slow to percolate down. Markets tend to move faster than the companies serving them.

This makes the Open Source model even more intriguing. How can it be that the opposite of the factory model is so successful? Open Source teams are ad hoc organizations, without strict hierarchies or sticks and no carrots beyond peer recognition. They also tend to move faster than traditional organizations.

A quick analysis of highly innovative companies shows that they have more in common with the Open Source than the Factory model. They realized that knowledge is more valuable than physical assets and that innovation comes from all nooks and crannies of the company. Innovation bellwethers like Google and Apple have fluid organizations with multi-disciplinary teams continually creating new products and services. Google tells its employees to spend 20% of their time on company projects that personally interest them and are outside their current assignment and competency. These organizations stimulate spontaneous brainstorming sessions, rapid prototyping and, similar to Open Source organizations, they have self-governing mechanisms.

Taking a step back, these companies actually reflect pre-industrial social groups: there is a strong sense of community, alignment of individual and group interests and the team (not the leader) provides the pressure for its members to perform. In the factory model control and governance are top down, in the open source model it is bottom up. With increasingly complex and dynamic markets, the top down model is showing major cracks. Just look at what has happened to some of the largest banks in the world. While all of these companies spent hundreds of millions on risk management they failed to manage their exposure and they let trillions evaporate. Bringing responsibility and self governance down into the organization is a good way to get started to fix these organizations.

Wikipedia is a good example of how self-governance works in an open environment. Of course the concept that anyone can contribute, invites all kinds of rubbish. My kids used to run contests to see how long it would take for Wikipedia to spot the nonsense they posted and rectify it. To govern the quality of their site, Wikipedia is using extensive Patrols to watch over a class of pages and take any appropriate actions. They also have a mechanism for dispute resolution, in case of conflicting opinions. “Most patrol actions are performed by individual Wikipedians, but some are performed by bots or other tools that monitor for potential integrity breaches. Patrols focus on various pages, notice boards and feeds. Many of the well-known patrols have hundreds of users, and are directly responsible as a first line against vandalism, or other potential problems” , according to Wikipedia. The mechanisms to control the quality of content have become truly sophisticated and continue to evolve. There is no reason some of these cannot be applied to the modern organization, specifically to financial institutions.

There is indeed wisdom in the crowds; it is how you bring it out and have it rise among the clutter. The collective knowledge of all folks at the front, dealing daily with customers, probably gives you the best insight in what customers need. If you combine this with the ability of your customers to provide direct feedback on your products and services, you probably get a good pulse on quality and competitiveness. This insight, in turn, will help you improve on your products and services with the highest impact, at the lowest cost. When we launched online banking for Citibank in the mid-90s, I suggested that we would allow customers to give direct feedback on the service through a bulletin board (fashionable at that time) and vote on the features they wanted to see in the product. Marketing was against this, as it would put out our dirty laundry for all to see. When we finally did this (on a much smaller scale than I suggested), it turned out that Marketing’s assumptions about what customers want, was completely different from what customers expressed as their priorities.

Self governance and “crowd sourcing” sound like great concepts, but Erik Bouwer wonders to what extent the communities are managed by time/money restrictions, pace setting and required quality levels. It requires the company culture, values and incentive system to drive collaborative behavior. Leaders in these type of organizations act more like coaches than micro managers. They will motivate the teams to set clear objectives and have the team agree on the collaboration rules. Some simple rules like “every team member will stick to his/ her commitments, because others are dependent on it”, will go a long way. The work has to be guided by an architecture framework to parcel out the work and later assemble the final result. Deadlines need to be set and agreed, quality control should be in place and progress monitored. With other words, having a community approach doesn’t negate the need for old-fashioned project or operations management practices. But it allows for a much higher level of engagement and input from all participants than in traditional organization forms. And yes.. the coach in a business environment will need to have the authority to move things along, when necessary. So while sense of community and peer pressure and recognition play the biggest roles, there is nothing like a good stick to be waved at the right time.