From Supply Chains to Markets: The Evolving Context of Disruption

There is something distinctly ironic about how enterprise social business tools have actually become a disruption agent outside of the enterprise. Those who have made the long march from E2.0 to markets see the aspiration for a more social enterprise being realised now but in the turbulent transformational clutter of the startup community. That argument is simple and powerful – the biggest impact of social is in generating new economic models, and new structures of commerce that force change on incumbents from the outside-in.
One example of this in action is ET Water (pronounced E.T. Water) covered in this Gigaom report.
ET Water has been exploring disruption in the water supply industry over the past four years and is headed now in the direction of markets –  according to Lee Williams, company COO, in interview. That’s after trying its hand at reconfiguring the supply chain in water consumption (a work in progress but disruptive in its own right) and the more mundane task of porting intelligent irrigation from agriculture to urban settings.
water
ET Water is part of the burgeoning O2O service arena, Online to Offline, where Uber is the poster child but where on-demand services are beginning to make a big mark (and might still be swallowed up ny mega platforms like Alibaba and Amazon). It is interesting to see the platform service model at work in America (take a look at Dispatch.me), where there is more scope for the startup community to make its mark.
ET Water’s mission is intelligent water use. The system or service is cloud based and allows people to control water use by mobile app, but, because it is intelligent, it takes data on local rainfall and related weather conditions, particularly evaporation, matches it to a database of plants types, and doses vegetation with the right amount of water.
It has multiple market opportunities – landscape managers, commercial property owners and domestic property owners, in conditions of worsening drought, but in truth would probably grow its business faster in markets where water usage is metered, common in Europe, less so in the USA, ET Water’s home market.
There are now a numnber of Nest-like competitors in the domestic irrigation market – companies like Blossom and Skydrop, both of which have simpler propositions targeted at domestic irrigation – save water through the use of smart sprinklers linked to weather forecasting. ET Water is more sophisticated in that it doses for specific vegetation as well as for weather conditions.
The question though is whether solutions not linked to services have a long-term future. Is it enough to buy a Blossom controller or for that matter Nest and simply rely on the IoT to improve heat or irrigation performance?
We live in a world where many people have spare time. Some of them are using it to repurpose their own cars as a taxi for Uber, or use the front room as a bedroom for AirbNb.
This activity has somehow acquired the sobriquet “sharing economy”. We know it is anything but. It is pretty Darwinian, though not necessarily bad. It’s about carving out some extra cash or creating a portfolio that can give you a step up on the property ladder, subsidise your own car use or simply form the basis of a regular revenue.
The big surprise, going back five years with Mechanical Turk was that the penny paying collaborative work platform attracted more down at heel middle class Americans (40%) than poor Indian grads (19%)
The need or desire to regrow a career through diversification is an interesting option and it is absolutely central to the reconfiguration of the economy.
The Mechanical Turk model of microtask is impoverishing. The new marketplaces seem not to be. By  creating markets where there is personal contact, and by replicating existing value chains, companies are able to create work at a living wage.
Uber and AirbNb are comparable in price to their competitors, regular taxis, Bed and Breakfast, and hotels. They have strong traction because they are not that radical – cross Couchsurfing with Booking.com and you have AirbNb. Want to know how my neighbors got by back in the 60s? They took in lodgers.
What’s of interest for the disruption observer, is that ET Water is pondering whether the real future of irrigation is not intelligent systems but a market for real people who will check on the yard or the Mall greenspace, do the necessary adjunct tasks – clear leaves, cut grass, tidy, or maybe more adventurously bring additional plants or grow a herb garden, at a cost that brings landscape support into the reach of a domestic budget.
To be successful at growing marketplaces it pays to be good with social tools, particularly those that support trust building. Likewise with anything in the domestic environment. Being able to grow trust online is a maturing skill and because of it we are reshaping the labor market around social platforms rather than using social platforms to reshape the enterprise.
New value chains, new attitudes to work, new revenue portfolios. Behind these developments individual behavioural changes are reshaping the economy, just like we see experience-sharing becoming the new context for marketing. Recognising the revolutionary power of behavior change – now that would be disruptive.

Where are the boundaries in a rapidly changing world of business?

I had a number of interesting conversations with readers, colleagues, and vendors last week, some inspired by posts published here, particularly Shadow IT is growing because everything is IT, BYOD, and various discussions around the idea of placeforms (markeplace + platforms = placeforms). I think these are all working together to indicate a shifting of boundaries and certainties in the business, and I think it is critical to get a sense of where this is heading, both on the IT side, and for business strategy in general.

Everything in today’s business hinges on IT. There is no sector of any market where digital literacy and mastery is not critical, and in many areas, those skills and techniques are the most critical for competitive advantage. Every waitron, retail clerk, police officer, and GigaOM analyst of the near future will find their personal digital tools central to the majority of work the perform each day. Most importantly: these tools — both apps and devices — will become so embedded in our work patterns that we will no longer be able to accomplish our work without them, just like telephones were essential in 1970s business, and email was in the 1990s.

The difference is that today’s work tools are increasingly personal. They are ‘proximal’ devices: always close to hand, and they travel with us at all times: in the bus, in the rest room, watching TV, and in meetings.

As I stated in Shadow IT is growing because everything is IT,

Bring Your Own Device is really Bring Your Own Mind

These devices are a central aspect of personal productivity and identity. People want to choose these tools based on how they do their work. So BYOD should really be considered a shift of the boundary where the company’s control over the way we work — which equates to the way we think — is receding.

The takeaway from the BYOD trend is not just the company saving a great deal of money, or the furor about what can and cannot be used (The War On Dropbox). It is the strategic withdrawal of the business from one of the traditional border zones between the company and the employee: the sanctioned computing foreground.

As we have moved to an always-on world it is the average staffer who is always on, always connected. It is their hand on the tablet at 11pm on Saturday, dealing with a client emergency, or preparing for Monday’s briefing. So perhaps this is a tradeoff, a shifting of the social contract. But my bet is that in the final analysis, the decision on BYOD will be part of a larger withdrawal by the company, a part of a greater loosening and relaxing.

In a world where decision-making has to be decentralized in the company is to react in a timely way to market shifts and customer needs, what do you continue to centralize? Or, where do you decide to remain slow and resistant to change? Today, CIOs are drawing their Maginot line somewhere near  BYOD, but in a few years this will be a forgotten battle, and CIOs may be fighting for a table at the chair.

In a world where everything is IT, the CIO might start to seem like the Chief Breathing Officer. But the IT staff can’t do the breathing for everyone in the company. There is no boundary there, anymore, between the worker and their tools. And increasingly, full-time employees will want to be more like freelancers, in this regard. Every freelancers owns their own shovel, and digs their own hole. The days when a division VP would email the CIO about having a hole dug, and get back an estimate of six weeks and twenty staff days of work, well, those days are over.

There will be a very fast retreat of IT’s domain in the business, like the fall in sea level just before a tsunami.

One Certainty: The Retreat Of Business

The tsunami is the withdrawal of a great many conventional business functions in the business from direct interaction with their corresponding marketplaces. This first diagram is a (poor) attempt to characterize the traditional arrangement with functions in the business and their interaction with markets. Note that I have two-headed arrows since these functions may have already adopted social communications with the various people involved, like HR using Linkedin and Twitter communications with potential job candidates. But the shift I am talking about is post-social.

circle

We are witnessing the emergence of placeforms that act as brokers, as intermediaries, between job candidates and possible employers (see HireArt is another placeform interceding in the broken labor market), between freelancers and client companies (oDesk, Work Markets, Elance, etc.), or even between interns and businesses seeking them. And that is just focussing on HR. The same sort of intermediates can appear in marker research, sales lead generation, and customer support (e.g., call centers).

How will that look? Where will the new boundaries be?

placeforms

 

The business will retract from direct interaction with these markets, and individual marker participants — customers, freelancers, prospective employees, etc. — will welcome intermediation as well, and for simple reasons:

  1. These intermediaries will specialize at  narrow and deep knowledge, relationships, and technology, and all but the very largest companies will not be able to match the placeform’s ability to amass and mine big data regarding their niche. For example, a company that routinely has 20 or 30 freelancers working for it simply will not know as much about them and their relative value as a freelancer placeform company that works with hundreds of companies and tens of thousands of freelancers.
  2. The intermediaries will be able to scale their operations — based on working with large numbers of clients and large numbers of individuals in the market — in a way that is not possible for other market participants. So, they will be able to make serious profits while market participants benefit financially. For example, a company using a placeform to manage call centers will spend less and get better results, because a specialized placeform with scale advantages will be better able to match workers with the type of support needed, and can invest more in training, for example.
  3. The scaling of the intermediaries acts as a check on the information imbalance in many company-individual interactions. For example, a freelancer dealing directly with a company is unlikely to be able to determine if that company has a good track record of on-time payments to freelancers, or whether other freelancers believe the company is a fair partner. However, a placeform company can amass that information, and actually influence companies’ behavior by threatening sanctions, like closing their access to  its freelancers.

Businesses will still use conventional branding and marketing to get their story across, but the transition to marketing through social platforms — Facebook, Pinterest, Tumblr, Twitter — will accelerate, and increasingly those ‘social networks’ will be evolving into placeforms themselves, providing tools and programs to better position the company in a social mediated world. As these companies do more, the corresponding functions in the business are pulling back, and relying more on the data analysis and trend spotting of outsiders to help guide their direction.

So, on two major fronts, business is pulling back, redrawing the boundaries at the edge, and reconsidering where the edge should be. This is happening in parallel with the general loosening of ties within the business, and the overall increase of connection: the fast-and-loose business that I have been discussing here the past several months. The connections between the core of the business and the intermediaries that help implement the companies objectives will continue to grow, so along with the retreat from the direct market, the company is also advancing into the market through its intermediaries. A business working with oDesk, for example, is privy to more information about the freelance market than it could ever amass independently: it is made smarter by the sum of its connections.

The Final Word

So, the final word is that the enterprise is retreating form many areas it once considered central, and its is handing over a great deal to employees and to placeforms. This will make businesses leaner, faster, smarter, and looser.