All comments posted on this blog do not reflect the opinions of any organization that I am affiliated with. These are my personal perspectives only.

Monday, November 17, 2008

Enterprise 2.0 & The Economy

With the economy on everyone’s minds these days, it’s not surprising to see articles looking at the impact the economy has on usage of collaborative technologies (eg. enterprise 2.0).

I’ve found several articles interesting but not quite resonating with me. For example a recent Wikinomics article by Naumi Haque suggests that there are 2 emerging schools of thought on the subject: A) the need for productivity means greater investment in enterprise 2.0 or B) the need to focus on core takes priority over anything else. I actually don’t think it’s one or the other but both. If you could prove productivity/collaborative gains this actually enables greater focus on your core. But since it’s hard to prove, the concept of Risk/Reward needs to be considered.

In my opinion, there are 3 main variables that predict adoption of these tools: Corporate Risk Tolerance, Corporate Performance, and Perceived Risk/Benefit of collaborative technology. These variables are depicted in the visual model above.

The relationship between corporate performance (which is impacted by the economy) and risk tolerance is illustrated by the “U” curve. Basically, a corporation that is doing very poorly tends to take bigger risks as it becomes “desperate” or believes it has “nothing to lose”. Consider the example of Goldcorp that on the brink of bankruptcy decided to share it’s “top secret” data to the world in an attempt to crowdsource a solution to their pressing challenge of finding and extracting gold from it’s property. Would Goldcorp have been so eager to do this if it was doing well?

At the opposite end of the performance spectrum, those companies that are doing well can “afford” to experiment with new approaches and new opportunities while resting assured that the remainder of the business will still thrive and be able fund these initiatives. IBM’s investment in social computing and it’s World Jam for example are things IBM has been able to explore and develop while still maintaining sufficient resources in it’s other core business.

According to this model, companies that are doing “OK”, are least likely to accept corporate risk. “Why change if it ain’t broke”, and “we just simply can’t spend resources on things that aren’t proven to provide us a return”. These companies tend to be risk averse to supporting technologies which aren't core.

The curve is only part of the picture. The other variable is the concept of perceived risk. Risk in this model is loosely defined as the likelihood of an expected benefit versus the expected cost. Costs include implementation but also opportunity cost, and negative side-effects. For those corporations that view social computing investments as low risk/high reward the decision to implement social media in any economic climate is “obvious”. As perceived risk increases however, it would require the company performance to either increase substantially or decrease substantially relative to the perceived risk they place on collaborative technology.

So what does this mean when times are tough? Well, based on this model, I would speculate that corporate performance on average will decline creating a stronger likelihood for adoption of social computing initiatives even at higher perceived risk. Companies that in the past wouldn’t have tried to leverage social computing may actually be willing to “give it a try”. The success/failures of those initiatives will eventually have an impact on perceived risk as stories mount that either prove/disprove the real costs & benefits.

It’s a fairly basic exploratory model and I’d be interested to hear your thoughts. Is your organization about to implement enterprise 2.0 applications? Would they fit this model?


Adam Christensen said...

Rex, this is very interesting. You've hit on something I guess I intuitively recognized, but didn't really about at length. That the companies who are most willing to take risks on social media are those who either have nothing left to lose , or those who can afford to take some risks because they are doing rather well. I work at IBM. I think your thoughts are accurate. And I see my colleagues who are doing some of the most interesting work sit in one of those camps. They either got into their social media as a result of duress at that time (Dell, GM, JetBlue, etc.) or those who got into it because they were doing well and could afford to take risks. Intriguing.

Dennis D. McDonald said...


It's good to see this type of analysis.

One dimension I think that is also important to consider is the willingness of the organization to believe that there is a connection between social media and innovation and/or productivity. I think this willingness is related partly to whether social media are treated as an application (which impacts specific processes) or part of infrastructure (which impacts multiple processes).

When people are pushed to the wall some tend to look at multiple options and may want to try many different things; this argues for an application- or process-specific implementation of social media, since I suspect that many companies with their backs against the wall see infrastructure changes as potentially too disruptive.

Dennis McDonald

Rex Lee said...

Adam, Thanks for comment. I think you have some excellent examples. Another company we could add to the list would be Starbucks.

Anonymous said...

The real momentum, the proof of the pudding here, will I believe be if/when the ROI of can be demonstrated. In this I'm convinced that those organisations that adopt first will have a big productivity advantage over their peers.
The risk is however, that as the Credit Crunch continues and risk itself either increases, or is perceived to increase, that companies will become very wary of adopting 2.0.
In all of this however, people, i.e the employees are still going to carry on using social media and 2.0 at work as much as at home. I suspect here too that those most adverse to risk will want to close down those dialogues, a result that would be a loss to both parties.

deb said...

Heh Rex. I found this very interesting and very optimistic. Though I hope I'm wrong, I fear the challenge for the 'nothing to lose' end of the spectrum is that you still need to be smart and have people around you who know what Web 2.0 can and cannot do. If there's 'panic in the streets' it may be very hard to hear the few voices of reason who may be suggesting untried Web 2.0 solutions.