Posts Tagged ‘IBM’

New American visionaries at IBM and Cisco

Monday, October 26th, 2009

IBM Cisco 3

It’s become customary to bash American business. Global analysts talk about a secular decline. And yes, US business has become a bit sad and dreary if you’ve spent any time around Detroit lately. But new US business leadership is emerging. Not from small start-ups this time, but from large corporations.

Take IBM. Yes, IBM. Lou Gerstner famously ridiculed the quest for a corporate “vision” in the early ’90s. His vision was only to serve customers and buy back the stock. I still get goose bumps just thinking about it. But Sam Palmisano and his team have crafted a true vision for the company. These guys believe in global collaboration. You can say it’s self-serving, since IBM sells hardware, software, and consulting services that rely on collaboration. But all good visions are self-serving. After all, IBM is a business. The vision of Palmisano’s team also goes beyond business. Their view of the future is centered on humans living on the earth, and how the interaction between both can generate new opportunities for IBM and for its clients.

I like the human centricity and breadth of ambition it conveys. It’s vintage American brassiness on a planetary scale, with a new 21st-century sensitivity. The basic belief is that if you engage a large number of people in a firm – say, 50,000 people in a large corporation — with a large number of its customers – say, another 50,000 – you’ll see new opportunities pop up from this massive co-creation of ideas. IBM has a process and technology called Innovation Jam that makes this Web-based dialogue happen over a period of 72 hours. It’s a messy process – structuring meaningful initiatives out of it is no picnic, and IBM understates the importance of live interactions — but it’s the first approach I’ve seen that approximates global democracy in business.

Taking a (good) page from the Gerstner book, IBM has first transformed itself using this mass co-creation approach internally. They shaped their new values and strategy by connecting the software technician in his Armonk cubicle all the way to the management team. The company’s omnipresent sales force is now running around the world telling customers that IBM has done well using this approach, so now it’s their turn. It’s a bit early to know how successful the approach will be. Because of Innovation Jam’s massive mobilization power, companies tend to use the approach for big issues, such as social responsibility or sustainable development, giving America an opportunity to provide new thought leadership in areas where the US has arguably been lagging (remember Kyoto?).

John Chambers and his team are largely doing the same at Cisco, where the company vision is about the “human network.” Again, Cisco has a vested interest in selling routers and other equipment that equip this human network with hardware, software, and consulting services, but there is a rich, humanistic backdrop to the business which captures the imagination of many. Cisco has even jumped ahead of IBM in thinking through the organizational implications of this new view of innovation. Their experiments provide the freshest ideas in organizational design I have seen in years.

You out there betting on the death of American thought leadership in business do so at your own risk…

Co-creation as cost reduction

Sunday, September 13th, 2009

Co-creation is getting other people to do the work and love you for it. While most people think of co-creation as a way to innovate and change the competitive rules, it is also a way of cutting cost. Why is Apple so profitable? Among other reasons because it gets its customers to market to each other. If my friends sell me on the latest Black Eyed Peas release by sharing their play list with me on iTunes, Apple doesn’t have to spend marketing dollars to promote it to me. And by the way, my friends love selling me on this new release because it allows them to show how far ahead of me they are in their understanding of latest trends in rock music. Why is IBM able to reduce its R&D cost? By setting up “collaboratories” where its partners not only bring their expertise in specific domains, but also underwrite some of the cost of that research. Not only do these partners do what would have been IBM’s work in the past, but they also see unique value in engaging IBM in a proprietary development from which they will benefit.

Many companies are in retrenchment mode in this down-cycle. In their renewed attention to cost, they are reverting to the quality and re-engineering paradigm of the last century, attempting to take cost out by streamlining business processes, shortening cycle times, or implementing enterprise resourse planning software packages. While this approach is helpful to create a performance baseline, the traditional efficiency reserves in most organizations have been tapped out. Most of these companies will die completely healed.

A more fruitful avenue is co-creation. In general, organizations bite off more than they can chew. They think of themselves as having to control and optimize a wider set of one-sided processes than is necessary. They want to single-handedly deliver predictable outputs from those processes using only company resources, failing to recognize that people at the receiving end of those processes no longer want to be passive, but want to engage in the design of the process and the co-creation of their experience. And they’re willing to do the work required to get there, therefore allowing companies to externalize some of that cost. The cost saving opportunity lies in letting go.

The two areas best known for co-creation are at the two extremes of the value chain: in customer-facing processes (like Apple) and in the product or service development area (like IBM). We routinely see companies able to cut their marketing, advertising, sales, or customer service costs by 30% or more by involving customers in the design and delivery of those processes. We witness the same order-of-magnitude improvement when companies engage third-parties in their product and service development processes.

Ultimately, though, the greatest gain lies in applying the principles of co-creation inside the company. Individual functions inside a company suffer from the same evil as the company as a whole. They try to do too much on their own, attempting to create value by defining themselves as “process owners” responsible for delivering a repeated and predictable output to their “process customers,” typically another function in the firm. Whenever sourcing views manufacturing as its client rather than as a co-creation partner, it inevitably generates too much cost for itself and for manufacturing, and destroys some experience value for both. The same is true when an actuary in an insurance company views marketing as its client, when a chemist formulates a product “for” marketing, or when the Human Resources department views the management team as its client for coaching services. Most cost to be “engineered out” lies at the intersection between company functions.

Eliminating this cost requires setting up platforms that engage both parties in a dialogue where the processes on both sides are made transparent, enabling a new dialogue between them and leading to the development of new experiences beneficial to both parties at a fraction of the cost. Unlike in the old re-engineering and quality paradigm, these platforms do not attempt to create a deterministic process that optimizes the flow of goods and information between functions based on some perceived need. Instead, they enable faster, more contextual decisions that dramatically reduce cost and improve cycle time by tapping creativity on both sides in continuous fashion. These platforms sometimes require some form of information technology investment, but they often involve a simple reconfiguration of basic day-to-day interactions between people.

In that sense, co-creation is the new frontier of productivity.