Clay Shirky: How the Enterprise Moves to 2.0

By Edward Cone  |  Posted 04-27-2008

Clay Shirky: How the Enterprise Moves to 2.0

Clay Shirky's new book, Here Comes Everybody: The Power of Organizing without Organizations (Allen Lane, February 28, 2008), looks at the Internet's impact on the way people work together. "When we change the way we communicate, we change society," he writes. Web 2.0 tools have "altered the old limits on the size, sophistication and scope of unsupervised effort" required to communicate effectively between and among groups, with big implications for institutions and the people who manage them.

Shirky, a consultant and author, is an adjunct professor at NYU's graduate Interactive Telecommunications Program, where he focuses on the intersection of technology and sociology. He spoke with CIO Insight senior writer Edward Cone about the impact of social media on the enterprise; this is a lightly-edited version of their conversation.

CIO Insight: IT people say they want a familiar experience when it comes to buying and implementing Web 2.0 products--a feature-rich stack of software, delivered by an established vendor. That feels a little out of tune with the grassroots nature of social media, doesn't it?

Shirky: There is no million dollars to be spent on experimenting with this stuff to see how it goes; these tools don't get socially interesting until they get technologically boring. We're used to the CIO being presented with two lists: Product A has 17 features, and Product B has 32 features, so B must be better. With social tools, it is very often the opposite. I see this with my students in a seminar on the production of social media tools. They come back and say, "We took this out for user testing, and the users ask for fewer features." That's a persistent pattern.

CIOs are so beset by the sales community and these feature shootouts that it is often hard to see that for social tools, the kind of clarity that comes from having only five features--and everyone having the same ones, so everyone knows what's going on all the time--is an advantage that can't be expressed with a feature list.

The cognitive model is to treat the computer not as a box, but a door. It's something you need to get through to get to the value on the other side. People don't want a door with 32 different kinds of handles; they want a relatively transparent view of the other people who are using the system. The software that's become most ubiquitous has launched with almost no features--that's true for the launch of Blogger, the launch of Twitter, the launch of wikis. Now you've got blogs that have lots of features because they've become mature, but the basic idea of what a blog does was so simple, and it was that simplicity that drove it.

Clay Shirky: How the Enterprise Moves to 2.0

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It feels to me that IT departments are protecting their turf, perhaps out of fear that if anyone can handle this stuff, they could be out of a job.

Shirky: There's always turf protection, but I think the turf-protection model goes away in recessions because the job-protection model becomes much more important. If I don't cut costs, if I don't find some way to experiment with novel ways of producing value at very low cost, the effect could be much worse than my just losing a little bit of turf. So I think the era of getting additional value using social media is going to ride into most corporations, [but] not on the wings of some grand experimental vision. It's going to be people saying, "Our R&D budget just got cut 10 percent, how on earth can we get people continuing to think interesting thoughts, with less money?" A lot of this is going to move into the enterprise as a brute cost-cutting move.

Where do you see the most value for enterprise users of this software?

Shirky: One big thing that enterprises should know and often don't, especially large companies, is that the amount of collaborative value that can be tapped entirely among your own employees can be quite significant. For all the rhetoric about letting everything be open and free, there's a large pool of collaborative talent behind the firewall, and that's a really good place to look for coordinated value. The next bit of value created by your employees may be in ways that aren't about management directives, but about voluntary participation.

There's a great story out of IBM about a research group in Armonk and another in Cambridge, England, that discovered each other via a tagging system similar to [the popular consumer site] del.icio.us. They were looking at the same URLs and tagging them the same way. All of this information was behind the firewall. They contacted each other and said, let's work together. The only person above both groups in the hierarchy didn't know what the individual groups were doing, so their ability to find each other laterally across the hierarchy of the company could only have been produced with a tool that made those kinds of similarities available to everybody.

Collaborative value is in many ways the big surprise of this medium. It used to be that the costs of collaboration were high and the payoff was low. But with a medium that makes it almost effortlessly easy to create things like a community of practice as a side effect of people talking about things they think are important--that's a huge bundle of opportunity that's available to any company that manages information internally.

Clay Shirky: How the Enterprise Moves to 2.0

pagebreak title = 'The Promise of Knowledge Management'}

This all sounds great for certain kinds of workers and certain kinds of companies, but what if I'm an old-school manufacturer trying to compete with low-cost offshore production? What's in it for me?

Shirky: Think of the famous story about Cemex, the Mexican cement company. It turns out that dealing with cement is an IT problem. When you send the truck out with wet cement, it had better dump that cement on schedule or you've just bought yourself a big rock with an engine. The competitive advantage is about managing where the trucks go and when they go.

Over and over again, this turns out to be the case with robust and long-lived manufacturing processes. Managing information about downstream demand and upstream supply, which plants are online and offline, how do we continue to retool without disrupting supply-those kinds of questions are the competitive ones, and the people who know best are your employees. But they can't all get in a big room every day and talk to each other. A big part of the answer is, what if you took the 10 people who know the most about 10 different bits of that problem, and you put them together, with a mailing list or a wiki, nothing fancy, all of this stuff can be set up and tried basically for free. What would happen if those people started talking to each other?

The really radical statement of this in a business context is in a paper by Ron Burt, Social Origins of Good Ideas. Burt says good ideas are not typically the province of an individual having a brainstorm, they're often an import-export business, they involve people who see across multiple lines of business and understand, ah ha, if the engineers knew what the designers knew and the designers knew what the engineers knew, we could actually do 10% more at 10% lower cost. Those kinds of intuitions can only be had when people are talking to each other outside the traditional lines. And the easiest way to do that is to use these tools.

The promise of knowledge management is quite extraordinary. What a company like Proctor & Gamble understood [in starting to use social tools] is that the issue is not storing all possible information in a database, but increasing the peripheral vision of the employees. That gives each employee opportunities to see something outside their immediate area of focus, so that they can say, we ought to talk to somebody else in the company who has faced this kind of problem before. The likelihood that somebody in a meeting knows what to do next is much higher when you work on creating peripheral vision rather than databases.

So a lot of this is about knowledge management, but without the big, expensive rule-bound systems that people hate to use. How do you motivate people to use these newer tools?

Shirky: The cynical view is that it's simply the company getting something for free, but that view assumes that all value is or should be rolled up in financial value. It's increasingly clear that that is not the case, that people are able to keep in mind multiple kinds of value, including the respect of their peers. People participate in communities of practice to get better at what they do. So, if you want to back it into the financials, the financial stakes are going to be, I can get better at my job, and you ought to be thinking about keeping me, because if I go somewhere else, all of those skills are going to transfer with me.

It's the dilemma of managing a smart group of people anywhere, which is that it's very difficult to keep them from walking out the door if they don't like their work environment. If you have identical salaries for a terrible job and a good job, you aren't going to have any trouble attracting people to the good job.

Clay Shirky: How the Enterprise Moves to 2.0

pagebreak title = 'Countering Nick Carr'}

This takes a certain style of leadership to really work well, doesn't it?

Shirky: Absolutely. It does mean a big challenge to current practice.  It's not an abstraction; it's your own employees doing things in ways that don't come from micromanaging. So the kind of leadership it takes is saying, we've hired smart enough people, and they know enough about the business from being on the front lines, that we're actually going to turn to them as a site of value. That's a big shift.

For instance, there have been a couple of imperatives pushed onto CIOs that are now shifting. One is the idea of having and managing a patentable portfolio of intellectual property, and the other is the perimeter defense of trade secrets. And those two things have gone hand-in-glove. IBM asked in its famous open source memo, where is the cost of managing the intellectual portfolio higher than the return on investment? And where is the cost to barriers to collaboration higher than the collaborative value we would get by sharing with people outside the four walls of the company? Decide which patents you want to lock down and which areas you want to put in the public domain to encourage cooperation.

Nick Carr writes that the heavy participation of companies like IBM, Novell, and Red Hat in open source projects like Linux "suggests that the Net doesn't necessarily weaken the hand of central management or repeal old truths about business organization." That seems to run counter to the themes of your book.

Shirky: A lot of the advantages of hierarchy that existed still remain. This isn't a complete reorganization of the business landscape. But what that kind of analysis is missing is that IBM is paying engineers to work on projects that IBM doesn't own, or solely direct. You pay these engineers, but of all the relationships between senior management and line employees, the fact you are paying them is about the least important, institutionally. The idea that the minute you pay people to do something, you have the right to manage them and the right to completely take over that work for the benefit of the company-that's not true.

IBM is not producing that code. IBM engineers are. IBM is paying those people because it's getting value out of them. Linux creates value for the enterprise, it lowers our cost of managing software, it increases peoples' budgets for hardware and services─but there's this crazy middle step where Linux is not now and cannot be owned or controlled by IBM. Linux is a brutal technical meritocracy, and there is no senior manager at IBM who can say, "I don't care what the kernel engineers think. I want this." They can't put it into the product without appealing to people who don't work for them. If they announced a strategic change in the kernel, they would be laughed out of the room. They have given up the right to manage the projects they are paying for, and their competitors have immediate access to everything they do. It's not IBM's product.

There is a kind of perverse misreading of the change here to suggest that as long there are paid programmers working on the project, it's not developing in any way different from what's going on inside traditional organizations. It badly misunderstands how radical it is to have IBM and Novell effectively collaborating with no contractual agreement between them, and no right to expect that their programmers' work is going to be contributed to the kernel if people external to those organizations don't like it. And that's a huge change.

When people read those statistics [about the professionalization of Linux development], they think, if there's a salary, then all the other trappings of management must go along with it. Not only is that not true, it actually blinds you to the fact that paying someone a salary without being able to direct their work is probably the biggest challenge to managerial culture within a business that one can imagine.

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