What Sells CEOs on Social Networking

Six years ago, MIT Sloan’s Andrew McAfee coined the term “Enterprise 2.0″ as shorthand for what collaboration and sharing tools such as blogging and wikis (and, today, Twitter) would mean for enterprises. In a Q&A, he talks about how CEOs see this world today — and what really sells them on the tools.

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From his base at the Center for Digital Business at MIT, Andrew McAfee‘s job these days is, he says, to “try to understand all the different things that technology is doing to the business world, all the different ways that it’s changing innovation and productivity and process execution, and then, at a higher level, try to understand how it’s affecting the work force and how it’s affecting competition.”

McAfee wrote the seminal piece “Enterprise 2.0: The Dawn of Emergent Collaboration” for MIT Sloan Management Review in 2006, and went on to expand on those ideas in our magazine and in the book Enterprise 2.0 (Harvard Business Publishing, 2009).

In a new Q&A with David Kiron, executive editor of Innovation Hubs at MIT SMR, McAfee looks back at the past six years and what he’s learned about the triggers that generate CEO interest in social networking, what he misread and why the idea of controlling information flows is becoming obsolete.

In 2006, you coined the term “Enterprise 2.0.” How did you come up with it?

I started to get interested in the phenomenon when I started to hear this phrase “Web 2.0” getting thrown around. For me, this was in 2004-2005. I thought it was just silly hype from the Web community at first, because it’s a really strong claim: There is a new version of the Web out there, 2.0.

But then I started to go look at the things that the Web 2.0 advocates were talking about. I started to use Wikipedia for the first time, and I saw that thanks to blogging platforms, we didn’t need to be tech geeks or have any money to put our opinions up there on this worldwide library and printing press that was the Web. This really was different from the first generation of the Web.

I wanted to think about what these tools and the communities and processes and philosophies that came along with these tools meant for good old-fashioned companies trying to get their widgets out the door every day. So I used the phrase “Enterprise 2.0” as the shorthand for what the Web 2.0 tools and that world meant for enterprises.

In retrospect, I should have anticipated that we’d be hanging the “2.0” suffix off everything, but I didn’t. We hadn’t yet been bombarded with “Everything 2.0,” so that suffix wasn’t as tired as it is now.

You deliberately avoided using the term “social.”

Yeah. I have always tried hard not to use the term “social,” not because it’s inaccurate, but because it has primarily negative connotations, especially for a really hard-headed, pragmatic manager in a business, decision-maker in a business, who just wants to get more stuff done. When that person hears “social,” he thinks of happy hours after work and the corporate softball league. I thought the word “social” would be not just neutral, but actually a bad way to do that.

When you come into an organization, are you often working with somebody who says, “Well, I see that my competitor is doing something with Enterprise 2.0 stuff. . .”

There’s a lot of that that goes on. Very often, when a company contacts me, it’s, as you say, “I’ve heard that my three competitors are getting social, so I’d better get social.” Or, “I read an article in” — name it, the Times, the Journal, Fast Company, Business 2.0 — “that talks about the social wave hitting business. I need to participate in that. What do I do?”

Who is typically in that conversation?

It can vary a lot. Very often, it is the IT department. The impression I get is that the CEO has walked into the CIO’s office and slammed some article down on the desk and said, “Okay, figure this 2.0 stuff out for us.” Just like, 15 years ago, they threw down the first article about the Internet and said, “Okay, figure this ‘Net stuff out for us.”

The HR community is often very interested in this because it is an inherently more empowering movement for the people in an organization. Sometimes marketing, who wants to do an experiment to reach out to customers differently, will come. And sometimes it’s just the top and middle of the company, the executive team, who has gotten together and said, “This is a big deal. We need to make some progress on this.”

When you’re talking to CEOs who haven’t gotten religion on this yet, what are the triggers you use that pique their interest?

The problem is that if “social” is a bad word in the enterprise these days, “knowledge management” is absolute kryptonite. It refers to a category of software and an approach for codifying knowledge that was hot in the ’80s and the early ’90s. A lot of software got sold with the knowledge management label, and it was largely a waste of money and effort by companies.

So I’ve had to come up with a different way to get at this knowledge challenge in the company. One useful trigger is to use a quote that I first heard a while back that is attributed to Lew Platt, who was the old CEO of Hewlett-Packard. He looked around his organization, which is a big, very well-run, hugely respected company in America for decades. This is not a poorly run company. He looked around Hewlett-Packard and said, “If only HP knew what HP knows, we’d be three times more productive.”

Whenever I say that to a room full of executives, you can see the heads nod.

So you go after the sense CEOs already have that their companies are not fully capturing the knowledge of all their employees. What’s another trigger?

Another trick is to find a way to let them see that an enterprise Facebook or a social network would be an extremely valuable thing, instead of a vehicle for time-wasting. The way I found to do that is something that found its way into my book Enterprise 2.0 (Harvard Business Publishing, 2009) really prominently, which was this concept of “weak ties,” which is a connection you have with someone who is not your close professional colleague. In other words, you don’t sit side by side, you’re not part of the same team, you’re not responsible for the same deliverables; they are a professional acquaintance.

There is a huge amount of work in sociology, really beautiful work, that shows, especially if you want innovation and novelty, or introductions to other social networks, that your weak ties are a better place to go than your strong ties. Your weak-tie network is an extremely valuable thing for you. The problem is that before the 2.0 era, we had terrible tools for building and maintaining and exploiting a network of weak ties.

Once I phrase it to people that way, I show how, in this 2.0 era with these explicitly social, very network-based tools, you can build and maintain your network of weak ties. You can keep up to date with what all these people are doing. You can tell them what you’re doing. You can exploit them when you want to, even as you and they move around in your careers and your lives. You can stay in touch with these people if that body of work is right.

Is there another trigger, to round out the top three triggers?

Yeah, the other one that’s big is that all the executives that I talk to are aware that their kids are working very differently than they are. Their kids are part of the Facebook generation. They’re tweeting, they’re texting, they’re using these tools. And when these kids turn into the brand-new hires entering the workforce, there is a demographic change taking place. The millennials have some very different ideas about how they want to do their work, what tools will be helpful to them, what kind of constraints or limitations are and aren’t acceptable.

From your standpoint, is the issue of controlling information flows just the beginning of the story?

I’d say the idea of controlling information flows is becoming an obsolete notion. To me, the basic point of the 2.0 era is that we can get out of the business of predefining and controlling those information flows. We get out of the business of defining who is entitled to generate information, who’s entitled to share it with whom, who is entitled to talk on different subjects. When you get out of that business, you allow a huge amount of spontaneous activity, spontaneous collaboration, spontaneous interaction emerge. And then you can harvest for business purposes the good stuff that emerges.

How do you deal with the fear companies have institutionally of letting information flow freely?

It’s a very, very common fear, and the way I’ve found to deal with it is to ask people to be as specific as possible about what they are afraid of. Articulate the fears associated from that. They can do that pretty easily. They’re afraid of hate speech or harassment. They’re afraid of that one person whose idea of a joke is completely incompatible with somebody else’s idea of a joke. Afraid for security reasons, of the bad guys getting in or corporate secrets getting out. Afraid that there’s another body of information that could be part of a legal process, that could be subject to discovery rules.

The only way to combat that is to acknowledge that, while these are all plausible, all possible — they can happen — I’ve been trying to collect horror stories for five-plus years now, and the amount of bad stuff that actually does happen when you open up the conversation and let more people, particularly your employees, participate in this stuff, is shockingly low.

How much of this talk of fear really a cover for the fear that someone’s ego balloon is going to get busted?

It’s an impossible question to answer, but my impression is, much more than zero percent of the reasons I hear not to proceed are a cover story for what you just described, the fear of giving up control because control has been good to me. Some people definitely feel that, “I’m the guy in charge of innovation, why are we crowd-sourcing this? All we’re going to get is junk, and I don’t want to have to spend my time dealing with this. Let me go put my head down and be the expert in the field here.”

One bad way that I see this play out is when an executive says, “Okay, great, I’ve heard this is a great way to talk to your employees, I’m going to have an executive blog.” And what happens is he puts up one post a month, it reads exactly like a PR release, and they don’t even enable comments on it. That’s not a conversation with the employee base or customer base. It’s one more megaphone to go shout at the enterprise. And it doesn’t work too well.

But you bring up an interesting point. Historically, for both internal and external purposes, there has been one official voice of a company, and it’s blessed by the executive team and generated by the communications department. In the external world, on the Web, that world is over. You cannot be the only voice about your company and its products and its brands. Internally, you can try to stop that. You can shut off all the 2.0 stuff. My point is, if you do that, you’re turning your back on a huge opportunity.

So do you see Enterprise 2.0 as having a corroding effect on organizational hierarchy?

No, it’s not the death of the hierarchy, of the manager, of the org chart, of the job description, any of that stuff. Some of my colleagues who are interested in this phenomenon, I think take it a bit far, and they become zealots for the manager-free, hierarchy-free, gestalt organization. I don’t think that’s smart, and I don’t think it’s likely, and I don’t think it would be a good idea.

Everything we’re talking about is totally compatible with an official chain of command in a hierarchy. You still need someone to set direction and give marching orders. But the idea of input by many and decisions by few is a pretty powerful idea.

How can managers who are really excited about this phenomenon work with people who are in a position to fund?

You’ve got to listen to their objections as carefully as possible. I think the first thing you do is stop trying to convince, and listen to the reasons why not. Listen to them as carefully as you can. And then come up with all the evidence and arguments and case studies and anything else you can think of to try to address those real concerns. Everything from, here’s an applied theory, here’s a study, here’s a survey that was just done, here’s a case study, here’s a story in a magazine. Just keep the steady flow of persuasive stuff coming.

Increasingly, one of the things that makes me happy is that companies are turning their back on that really elaborate business case and the need for the ROI justification up front. They’re saying, great, we’ll do a trial, we’ll do a pilot, we’ll learn as we go, and if there’s a lot of enthusiasm and take-up for this stuff, then we’re going to go ahead and pull the trigger and fund it.

When I talk to CEOs, they desperately want to hear the voices of their customers, the voices of their employees. They want the straight talk to flow down and flow up in the company. But I also get the impression that there’s kind of a middle layer that has traditionally been the signal processor, both up and down, and some of them don’t want to see that role go away. The middle is very often a conservative place in organizations. The challenge is that the top can be sincerely interested, and there can be a lot of frontline people who are sincerely interested, but it’s what happens in the middle that can determine success and failure.

Are you finding that CEOs or people in the C suite, when you convey to them the power and the effectiveness of these tools, want to be active participants?

They do want to hear the voices of their organization, but it’s harder to convince them to be active voices. Number one is that the tools are unfamiliar, but number two is that they’re extraordinarily busy. They say to me, “How is this not just adding more hours to my workweek?”

Luckily, whenever I talk to groups of executives, there is very often at least one person in the room who is an active blogger or has joined a social network or is using a micro-blog like Twitter or some enterprise equivalent for that. And almost always, she will turn to her colleagues and say, “You guys don’t get it. Having this broadcast channel puts hours back in my week. It doesn’t take hours away, because I have to spend so much less time repeating myself and getting the story straight and saying the same thing to 12 different people.”

Is there evidence yet that there are competitive advantages that come from doing Enterprise 2.0?

At the individual level, like I said, the evidence is starting to mount that it will help you, as a knowledge worker, do better. At the company level, it’s an incredibly hard research question to answer, because you’ve got to, first of all, identify who’s good at it; then you have to isolate all the other things that could be affecting their performance; and then you have to watch them for long enough to see if their performance improves. So, no, I don’t have bulletproof academic research yet that will demonstrate that this stuff leads to superior outcomes at the level of the firm.

But even if you can’t demonstrate with bulletproof research that competitive advantage comes, go back to Lew Platt’s challenge, “If only HP knew what HP knows, we’d be three times more productive.” Do they think they’d be better off knowing what their company knows? The answer is almost always yes.

Tell us about a company where you’ve seen this play out.

Here’s one example I heard a while back that I thought was fascinating. I talked to what I would call the Enterprise 2.0 group at TCS, Tata Consultancy Services, Indian software development outsourcing company. It’s got 200,000 people all around, a behemoth company.

They put in place what I would call a 2.0 tool that lets people ask questions to the enterprise as a whole and get answers from the enterprise as a whole. One of the interesting things they did was ask people to categorize their questions, so this is a question about Windows, or about Java, or about Ruby on Rails. They had it running for a while, and they did some analysis. One of the other things they did was keep track of who were both the most prolific and the highest-rated respondents in each category.

And they noticed something that really surprised them: They noticed that over and over again, some of the people who were on the leader board in the Java category, for example, were not hired for their Java. It wasn’t their job. It wasn’t even anything that TCS knew they were good at. But these people were manifesting not only an ability, but a willingness to share their knowledge and be helpful to colleagues. Some combination of the peer recognition and being on top of the leader board, that kind of status, was so valuable to them that they were doing stuff that was exactly outside their job description.

This was completely voluntary?

Yes, completely voluntary and unrelated to formal performance review. A huge amount of energy unrelated to anything you’d find on their CV or job description. Doing it for the joy, doing it for the peer recognition, doing it because of the game-ification. Making visible how good you are.

To my knowledge, TCS has not yet baked that into the formal performance review. This is actually one of the things that I’ve been advocating: why don’t we make enterprise-level collegiality 10%, 15% of performance reviews every year? We now have great tools to let people be collegial across the enterprise, and to measure it pretty precisely, so why are we completely ignoring this when we try to evaluate employees?

Should there be mechanisms that allow these voices from below to be recognized higher up?

Yeah, and the great way to do that is for the voice at the top to say, “Hey, thank you for the comment. I think it’s really insightful. I agree with the following three points and not with the others, but keep it up.” That tends to lead to a good cascade.

You’ve been heavily involved in this space for six years. What has been most surprising to you in its evolution?

I think on the plus side, I’ve been surprised at how eager people are for very simple tools that will help them express themselves. So to make that concrete, when I first heard about it I thought that Twitter was a really silly, kind of a stupid thing. And then I realized it’s actually just this great environment for you to get thoughts out into the world: very little friction, very low overhead, great ability to forward them and share them. It’s this idea of small pieces loosely joined. I should have been more aware of that right from the start. The thirst for tools that let us express ourselves and share information is huge, absolutely huge.

On the negative side, the resistance of organizations to some of these tools and modes of use is surprising to me. One of the things that makes me really pessimistic is if I ask an organization for their social media policy and I get back a 50-page document. They might as well just say, “we’d prefer it if you don’t use social media.”

Again, I should have been smarter about this. After I got excited about it, I have this natural tendency to think that everybody else is going to be equally excited about it, and that’s just not the case. One of the things I’ve learned to do in the past six years is to just keep going slow, to re-explain the reasons to do this, to re-explain what’s going on, and to not to get frustrated because everyone doesn’t find it as cool as I do. Of course they don’t.

Are some organizations just better suited for this? Just more ready to adopt?

Yes, and they’re more full of young people, they’re more full of geeks, they have more enlightened management and leadership. Definitely. As those three things decrease in an organization, the receptiveness is going to go down and the work is going to become more difficult.

Finally, what are the chances that Enterprise 2.0 is a fad?

You know, six years in, I think it’s very, very unlikely that it’s a fad. I have never spoken to an executive or a manager who says, “I just long for the days when we collaborated in the old style, and e-mail was all we had, and nobody had a voice. Man, that was so fantastic. Let’s please go back there.”

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Social Business

Social business research and more recent thought leadership explore the challenges and opportunities presented by social media.
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In the midst of the “wait and see” economy, companies are holding onto cash at historical levels – an estimated 11% of total assets.  Investments in new products or services are low, as companies anticipate and feel especially vulnerable to shocks that could put them out of business.  This practice of hibernation, however, could serve to destroy companies once economic growth begins.  Without new ideas, which require capital investment now for tomorrow’s launch, economic growth for the companies is at risk.  We may also find very little differentiation between companies, as each is reluctant to invest in ideas.

Our survey (Gary Carini and Mark Dunn @ Baylor University) of over 240 C-level executives indicated that innovation advancing the vision of the company is not occurring.  In fact, three out of four respondents revealed ideas usually remain department-centric.  Potential interdepartmental innovations, or those that would have a positive impact on the corporation, are neither vetted nor rewarded.  No process exists that looks at innovations across the corporate spectrum ensuring no good ideas are left behind.  Clearly, a few, company-destroying phenomena are at work.  The flow of ideas has been halted by the lack of investment through cash and employees.
We know that the counter intuitive way to improve our individual performance is to turn outward.  What does this outward focus look like?  How can companies, one unit at a time, get out of this rut – now? Word and concepts becoming part of the vernacular are “open innovation,” “open systems,” and “ecosystems” to name a few.  While there are several complex questions that remain unanswered, getting our minds around these concepts is a worthy pursuit.  These notions are about creating new systems of communication that stir innovation.
 
Engaging the interactive nature of an entrepreneurial ecosystem (EE), we believe, holds compelling promise for idea generation.  Two major tenets present in a thriving ecosystem are: 1) diversity promotes stability and 2) freedom within boundaries.  Diversity spreads the risk by assuring that each component of the ecosystem seeks to prosper while simultaneously enabling other components to thrive.  For ideas to surface in an increasingly uncertain environment, the risk must be dispersed among a diverse set of stakeholders.  The ecosystem, though, is grounded in rules that encourage symbiotic relationships such as mutualism and commensalism.  We suggest strong consideration of the EE concept and believe the increasing intensity of global interdependence will facilitate the ease of implementation.

Gust, with offices located in midtown Manhattan, provides the intellectual anchor for the entrepreneurial ecosystem concept.  After interviewing its Founder and CEO, David S. Rose, we confirmed that we were talking to an individual who is passionate about entrepreneurship and has a keen insight about the future.  He is a visionary with a passion to develop the platform for unlocking the entrepreneurial spirit and power of our economy.
Rose recognizes that technology is the key to developing and shaping the appropriate platform for exchanging ideas and resources.  With exponential growth, technology is impacting everything, moving at a rate that is almost incomprehensible.  As important, the cost of technology is decreasing at an increasing rate making the power of technology affordable to almost anyone.  Tailoring and adapting technology to an organization has the potential to decrease vulnerability and unshackle the dormant ideas residing in the minds of employees.
In the recent past, Rose viewed an asymmetric world where entrepreneurs had ideas, but not money.  Angel investors had money, but no ideas.  While supply and demand existed, there was no marketplace.  He identified a need for a collaborative space where maximum transparency between current and future stakeholders could occur at any time about any aspect of inventing.
 
Consider the ecosystem that David S. Rose is building with Gust. An inventor, Sue, needs an investor because she has developed a revolutionary CRM business model that she believes will provide solutions to customers’ yet-to-be-identified problems.  But, what if she, an inventor (and this could be an employee within a company) needs an investor?  What if the inventor needs more than one investor?  Sue would then share her idea through an Internet-based platform with angel investor groups seeking new ventures to fund.  Rose’s company has created a site for all inventors to be able to collaborate with all investors, regardless of geography.  Angel investors in Mumbai can easily find inventors in Granada Hills, California.
Why limit it to angel groups?  What about venture capital funds?  Now any inventors can be linked to any investors.  Rose also asked “who else would be interested in funding inventions?”  What about foundations and grants from philanthropic organizations?  What about clients who talk to their accountants who are thinking about investing?  Could they link to the ecosystem Gust has created?  Yes.  What about adding a job posting board?  In this instance, Sue has three positions that will need to be filled quickly if she were to receive funding.  Could she post these at the moment funding was confirmed?  Yes. Could there be a way to identify recently funded companies’ need for ancillary or supporting services?  Yes.  Gust then considered adding more to this ecosystem. On the early stage side, how about supporting business plan competitions that showcase the latest technology? On the later stage side, how about adding connectivity to a marketplace where strategic purchasers or private equity investors could find later stage companies to be acquired? Along the way, what about working with the new breed of incubators and accelerators, who provide mentoring and support for young entrepreneurs?  The Gust platform can connect all of these stakeholders – globally. Now.

Every player in the entire ecosystem is really working in a three-dimensional environment that is updated continuously.  Each has a vested interest in maintaining the integrity of its own information, thus ensuring that all information on the platform is current and accurate.  Each player chooses the level of transparency that is exposed to any other stakeholder, and that level could, conceivably, change over time.  Gust’s dashboard for each participant tracks the nature of the interactions and the behavior of the “marketplace” over time.  Gust enables the creation of value spontaneously.  The minute Sue hit the “share” button; her information populated 15 different stakeholder groups.  She gave permission for each of these stakeholders to share the information as well.  Where historically it has taken many months to finance even the fastest-moving start-ups, Gust can potentially reduce that time frame to weeks. In the future, as the number of connected participants increases and government regulations catch up with technological possibilities, it is possible to envision a fluid marketplace where innovation is funded in hours.
Recognizing the barriers that existed in the angel investing market, David S. Rose set out to create an ecosystem that encourages and supports entrepreneurial thinking and development.  The angel world before Gust was closed, static, hierarchical, disconnected, opaque and asymmetrical.  With the introduction of Gust, the angel investing world has the potential to become transparent, dynamic, creative, symmetrical, and integrated.  Technology is playing a critical role.  As important, David S. Rose serves as its major champion, motivating others to create something extraordinary.  The goal for corporate leaders is to develop a similar platform and establish a culture within their company similar to the one that Rose created for the angel investing/entrepreneurial market.

What lessons can we learn from Gust and its EE to unleash ideas across organizations?

First, look to implement an EE to close the gap between the level of innovation you want versus what exists.  The transparency and non-cumbersome nature of the ecosystem increases the likelihood of idea generation.

Second, a platform has to exist that fosters the candid sharing of ideas.  Resources must be expended to develop the platform that supports the system.  Technology holds the key to previously “hard to obtain” information and ideas.

Third, mutualism and commensalism are reinforced by the right amount of transparency.  Parasitism suggests too much transparency.  We observe, then, a curvilinear relationship between transparency and performance: minimum and maximum transparency is negatively correlated with performance, while moderate transparency – that which we observe in an ecosystem – yields the highest performance.
Rose left our interview with him with two additional thoughts:  risk increases by not having ideas surface.  For ideas to surface, we have to be willing to destroy ourselves.
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[...] Management Review has a great interview with Andy McAfee on What Sells CEOs on Social Networking. CEOs excitedly agree with Lew Platt’s old observation about Hewlett-Packard: “If only [...]
What Sells CEOs on Social Networking | weiterbildungsblog
[...] - ”If only HP knew what HP knows, we’d be three times more productive.” - “Your weak-tie network is an extremely valuable thing for you.” - “Yeah, the other one that’s big is that all the executives that I talk to are aware that their kids are working very differently than they are.” Interview mit Andrew McAfee, MIT Sloan Management Review, 7. Februar 2012 [...]
Harold Jarche » Enterprise 2.0 and Social Business are Hollow Shells without Democracy
[...] the employer/employee relationship the only way we can get work done? In describing Enterprise 2.0, Andy McAfee, who originated the term, says that our work structures will not change: No, it’s not the death [...]