Tag Archives: culture

Rising Business Complexity Underscores the Need for the Connected Enterprise

Last week I wrote about the potential positive benefits of the connected Enterprise and social business. McKinsey found quantified benefits from the connected enterprise in both 2010 and 2011. Now they have doubled down on their forecasts for the business value of connectivity. See my post, McKinsey Projects Business Value of Social Business at a Trillion Annually, for a look at the bright side potential of the connected enterprise.

There is also a dark side potential for the disconnected enterprise. Forbes provides a number of recent examples in its article by Ron Ashkenas on, Wanted: Chief Complexity Reduction Officer. It notes how there is increasing complexity in the business world and documents how a number of formerly “best in class” companies such as Toyota, BP, and Johnson & Johnson took “huge hits to their reputations (and balance sheets) in ways that no one could have predicted.” This was largely because their dysfunctional internal communication failed to warn of early danger signs and ailed to provide an adequate way to respond to these crises.

For example, “Toyota found that its highly centralized, engineering-centric communication structure slowed down its ability to understand early warning signals about quality.” They added that, “Similarly, BP‘s response to the massive Gulf oil spill was clearly slowed down by its inability to easily coordinate the different businesses and functions involved in the crisis. You could also argue that J&J’s manufacturing problems can be traced partially to a fragmented organizational structure with diffuse accountability for quality and customer communication.” I also know that BP was one of the pioneers in knowledge management in the 90s, achieving significant success through shared learning. I stopped hearing about these efforts in the 2000s as management apparently went a different direction.

The Forbes article notes that a recent IBM study found that: “standout” companies (those who consistently improve operating margins) seem to be those that build “operating dexterity” and “reinvent customer relationships” without waiting for a crisis.” A cornerstone of this dexterity is the connectivity that McKinsey extols. It allows organizations to first learn about risks before they become disasters and to then provide a more coordinated response to reduce these risks.

Looking closely at the technical infrastructure required to support dexterity, we believe that application integration is one of the cornerstones of the connected enterprise. For example, is your issue tracking tool integrated with your collaboration tools to better monitor, manage, and mitigate potential risks?

This is why Appfusions has created plug-in connectors for Atlassian’s JIRA, the issue tracking tool used by 85% of the Fortune 100, to such collaboration and content management tools as IBM ConnectionsIBM Sametime, JiveBoxAlfresco, and Google Docs. We are continuing to build more plug-in application integrations to support the connected enterprise and help organizations better realize the bright side of social business.

Doing Well by Doing Good: Humanizing the Enterprise

Forbes recently ran in interesting article, A Cure For The Common Corporation by Dov Seidman. It reported on comprehensive research that examined how governance, culture and leadership influence behavior and impact performance.

It complied around 2 million observations by 36,000-plus employees in 18 countries, from the C-Suite to the junior ranks. The major findings are conclusive that trust and empowering employees has its rewards:

  • 93% of employees within high-trust and truly values-based businesses achieve financial performance greater than competitors vs. 48% of those at strict top-down organizations.
  • Employees in high trust organizations are 22 times more likely to take a beneficial risk and this enables 8 times the levels of innovation compared to the competition.
  • 92% of employees of trust-based businesses based plan to be working for their company in a year, compared to 46% of those in strict top-down organizations.
  • 99% of high-trust and values-based companies observe highly satisfied customers vs. 42% of top-down organizations.
  • Finally, in high-trust companies, only 24% of employees observed misconduct or unethical behaviors, compared to 47% in low-trust focused organizations that ironically establish too much control to prevent these behaviors.

It is great to see this data supporting something that makes sense. The research also reported that despite these results very few organizations actually operate in a high trust mode.

In the new, networked enterprise this trust is essential to realize the opportunities it provides. Hopefully data like this will speak to senior execs to reform their approach to management to keep up with the times.

Others have written on this theme. For example, Louise Altman, Partner, Intentional Communication offered us — Humanizing Workplace Relationships – People Aren’t Tasks. The tag line is the most significant concept. I recently re-watched an excellent video produced by the BBC in 1997, Intellectual capital: The New Wealth of Nations. It made the same point. The film portrayed the industrial revolution as a plague on people where workers were treated as mere extensions of machines.

Now the percentage of tangible assets in the corporations in the S&P 500 has shifted from 66% in 1982 to 16% in 1999 and likely continues to fall (see Juergen Daum, Intangible Assets and Value Creation). In its place is the rise of intangible assets as the creators of wealth. These are mostly the ideas in people’s minds. Yet, as Louise points out many organizations are still managing people as though the wealth was created by tangible assets, machines, and people are just servants of these machines.

According to another survey conducted by Deloitte executives rank tangibles like competitive compensation (62%) and financial performance (65%) as the top factors that influence culture. While employees have a different view and say intangibles such as regular and candid conversations (50%) and access to management (47%) rank higher than compensation (33%) and financial performance (24%)

The prevalence of these misguided concepts is consistent with what Dov Seidman reported on in Forbes. As his data support, wealth now comes from treating people as human assets and releasing their creativity to enable innovation and new wealth in organizations. Consistent with this premise, McKinsey found in 2010 that the lower the decision level was in the organization, the higher operating margin. As many studies are starting to conclude, top down authority is the enemy of profits.