Dawn of the b-webs

Interactive innovations are bound to force a sea change in
the way companies do business. Collaboration between former business rivals and
the pooling of their talent, styled b-webs by Canadian e-business guru Don
Tapscott, will become the dominant corporate role-model to aspire to – and it
will call for a new form of HR management, management of the “Internet-worked
human resource”. Jane Lewis reports

 

 

Perhaps those pedants who insisted that the new millennium
really began in 2001, rather than 2000, had a useful point to make after all.
By staggering the turn of the century over the course of a year we have somehow
contrived to get over the worst excesses of millennial fever before the real
event actually happened, thereby enabling the new era to dawn in a fittingly
sober and thoughtful mood. And, let’s face it, there’s nothing like a few
whispers of recession to speed that particular process along.

Nowhere is this change of atmosphere more apparent than in
what used to be called the new economy. In the space of a year, many of the
precariously established tenets of the new order have found themselves if not
actually swept aside, then at least held open to question. It is no longer
possible to attribute the widespread fall of technology stocks (the shares of
those companies listed on Nasdaq fell by 54 per cent last year) to “necessary
corrections” in the wake of dotcom mania. With this declining trend predicted
to continue and even accelerate this year, it is clear that something more
serious is afoot.

As far as some traditionalists are concerned, this change of
focus is a welcome development. “Investors are returning to standard ways of
appraising businesses,” wrote Paul Havranek of Casenove’s venture finance
advisory unit last year.

“Companies of the ‘old economy’ are back in fashion. Indeed,
the lines dividing the old and new business worlds are increasingly blurred.”

All this sounds like great news for those bricks-and-mortar
organisations that have doggedly held onto their established modus operandi.
But a growing number of commentators contend that in trumpeting the virtues of
old economy practices over the new, companies are in danger of falling into a
false sense of security.

They argue that the market downturn in no way diminishes the
long-term impact that the Internet and other interactive technologies will have
on the way we do business and on the way we structure our future organisations
to best exploit the new model.

As one US commentator remarks, “The impact of technology is
typically over-estimated in the short term and under-estimated in the long
term.”

What then is the most likely shape this “long-term impact”
will take and what will be its effect on the way the HR function will have to
evolve to cope with the radical changes interactive technology will bring? Even
the most ardent proponents of change confess that it is still too early to call
with any real precision.

 

Triumphing over competition

“We’re still only 2 per cent into this thing,” says Don
Tapscott, chairman of the Canadian-based e-business think-tank Digital 4Sight
and self-styled change agent. But he is clear that if the future can be summed
up in one word, that word is “collaboration”.

Indeed, Tapscott maintains that collaborative business
models – premised on the way the Internet allows people to work together in
different ways than in the past – are already annihilating vertically
structured, “industrial age” corporations in many sectors, and will go on to
become the dominant corporate form of the 21st century. Prime examples of the
genre (which Tapscott calls business webs or b-webs) are Cisco, Nortel, Schwab
and Dell, each of which has already triumphed over the competition in its own
sector.

Simon Pollard, vice-president of European research for the
analysts AMR, agrees. Over the coming years, he argues, companies will face a
blunt choice between pooling talent and resources online – often with direct
competitors – or becoming outdated, isolated islands. Apart from anything else,
he argues, there is a strong economic motive for such a move. “The search for
internal efficiencies has reached a plateau, but the need to be efficient is
still there. When [collaboration] works, it can result in performance increases
of hundreds of per cent. Nobody can afford to ignore that kind of opportunity.”

What other traits distinguish these new players from their
traditional counterparts? By far the most important consideration, aside from
the use of the Internet as the main conduit of business, is
customer-centricity, says Tapscott. What sets b-webs apart from old forms of
alliance and existing supply chain and outsourcing arrangements, is that all
the partners in a b-web are focused on the end-customer, rather than concentrating,
as of old, on just the next link in the chain.

The onslaught of commoditisation in virtually every sector
has meant that the physical product per se is no longer valuable in its own
right – it only becomes enticing to customers once it is imbued with a range of
associated services and added-value extras. And no single company could hope to
provide all of these.

“We’re talking about taking the main transaction, and then
adding value services along the way, each from a different partner,” says Mark
Barratt, director of Cranfield Management School’s e-supply chain research
forum. What counts ultimately from the customer’s point of view, therefore,
isn’t the product itself so much as the whole experience it encapsulates. In
the new order, claim the pundits, customers will eschew making one-off
purchases in favour of paying for the flow of an experience over time. In many
ways, the medium becomes the actual message.

“For example, if I buy a car, what I am going to be
interested in is what sort of in-board computer it has, and the services I’ll
be able to access from it – how efficiently I can order takeaway food, or learn
when my dry cleaning’s ready for collection,” says Tapscott’s colleague Phil
Hood. “Obviously, these are things that the car manufacturer will have
outsourced to third parties. So the ability to manage, tie together and build
on these collaborative networks ultimately has more value than building
engines.”

If this sounds far-fetched, consider what’s already going on
in the music industry where, accelerated by developments like MP3, the value of
the recorded product is now far exceeded by that of spin-off merchandise,
including the “experience” of seeing the star relaxing at home in the pages of
Hello! magazine.

No wonder, then, that Tapscott and others insist that the
real indicator of a company’s worth in the new order will lie in its ability to
strike long-term and productive alliances with both partners and customers.
Success will depend on how good it is at generating “relationship capital” in
Tapscott parlance. “We have concluded there’s no such thing as good B2B unless
there is a C [customer] involved,” he claims. “All good B2B networks need to be
B2B2C.”

 

Triumphing over competition

The question, of course, is how well this theory of an
integrated network in which all parties, including the customer, join together
to create an “integrated value offering” will work in the real world, and what
effect it will have on existing structures. The key change wrought by b-webs is
they redefine the traditional boundaries of firms. This means effective
management, including that of the HR function, can no longer exist within a
tightly defined space – it has to extend outwards across the b-web. In fact,
claims Tapscott, an entirely new form of HR management is called for. He calls
it IHR – management of the “internet-worked human resource”.

To illustrate the point he asks, “When Amazon.com CEO Jeff
Bezos claims ‘Our people are our greatest, greatest asset’ to whom is he
referring?”.

The answer stretches way beyond the confines of Amazon’s own
payroll and incorporates countless other individuals; from the authors and
readers who generate online book commentaries, through publishers, distributors
and tens of thousands of Amazon associates “who hotlink to the site and
participate in its extended sales network”. In other words, “Amazon draws most
of its human capital from its b-web.”

A similar point of view has also been embraced at network
parts distributor Cisco. As Steven Behm, the company’s former vice- president
of global alliances once claimed, “We have 32,000 employees, but only 17,000 of
them work at Cisco.” When the company takes an order, which it does over the
Internet for 85 per cent of its business, the contents of the order get
transmitted to a factory, usually run by a partner company which then takes
over the responsibility for making and delivering the product to the customer.
The product itself may never touch Cisco on its way to the customer, but Cisco
nonetheless collects the money.”

The greatest difficulty companies face as they consider how
to re-jig operations to fit this new “horizontal” model might be described as
entrenched verticalism. Indeed, Tapscott claims that most business schools
continue to teach management in terms of the stand-alone, vertically
hierarchical, “industrial age” model. No wonder then that in many companies
“the HR function remains an obstacle to change”, says Tapscott, more caught up
with internal organisation than with looking outwards. “As we move into the
world of b-webs, the HR profession must reinvent itself… management should
define and communicate an explicit b-web culture to guide the deployment of
human capital,” he says.

“It’s a different way of thinking, because you’re asking
people to change their habits,” concurs Barratt at Cranfield. “Even blue chip
companies have a lot to learn – you often find companies don’t know what’s
going on with their trading partners. That means decisions continue to made
locally because they don’t know the whole picture.”

Shared systems and data have gone some way towards
alleviating this situation, but the real problem, of course, lies in politics –
it is unlikely that your partner companies will take too rosy a view of any
heavy-handed intervention into what used to be considered exclusively internal
affairs. Moreover, collaboration in the fluid b-web environment is an ambiguous
process at the best of times. Today’s partner, may well turn out to be
tomorrow’s competitor – and vice versa.

Indeed, ambiguity of relationship is a problem that returns
time and again in the b-web world. On the one hand proponents insist that
partnerships need to be long-term in scope and close enough to forge a common
culture if they are to service customers properly.

Yet they also insist that a defining characteristic of any
b-web is its fluidity, the speed with which it can adapt, change its
composition and be redeployed to meet new market opportunities. Indeed,
Tapscott claims it is precisely this characteristic which distinguishes b-web
alliances from the kind of tight, permanent linkages that caused companies so
many problems in the past.

The solution generally offered to the predicament is a new
kind of management discipline, poised somewhere between co-operation and
competition. But so-called “co-opetition” is a lot easier to preach than it is
to put into practice. Tapscott suggests it might just be a question of growing
up. “You have to shut off that part of your brain that wants to compete at all
costs,” he claims.

Senior UK management experts agree. “This is classically
non-John Wayne: I win, you lose,” claims David Norburn, dean of Imperial
College London’s management school. “There has to be a clear advantage to each
involved party. “The key to successful collaboration, he adds, can be
summarised in one sentence, “Don’t be greedy, make sure there’s enough in it
for everyone.”

Quite how you go about defining and implementing an
effective management structure across the b-web is also an exercise in horses
for courses – largely because the composition of different b-web types takes
many different forms, some more rigid than others. In his book Digital Capital
Tapscott has attempted to harness all the diverse iterations of the genre into
five main groupings. These range from the model most similar to the familiar
supply chain – in which one company, say Wal-mart, leads its partners in hierarchical
fashion, and therefore ultimately gets to define the terms of engagement.

At the other end of the spectrum, however, are much looser,
informal groupings organised along more “democratic” lines and largely
self-organising. Stock markets, online auction sites and industry exchanges
such as Covisint in the auto industry are good examples of this genre.

But Tapscott’s favourite is the Linux alliance: a loose
grouping of thousands of programmers around the world, with no master plan
governing their work, which nonetheless managed to produce a computer operating
system now rivalling Microsoft in terms of corporate take-up. In this type of
b-web, he argues, decision-making mechanisms are largely redundant: the network
ends up defining itself de facto. “It’s sort of like a vector. There’s a
direction and velocity: people’s ideas get quickly accepted or rejected through
the dynamic of the b-web.”

 

Developing trust

If you think all this sounds impossibly utopian, then
perhaps you’re right. As Tapscott concedes, the nebulous concept of trust an
indispensable condition of the b-web economy and, as Barratt helpfully points
out, “developing trust between trading partners doesn’t happen overnight”.

To some extent, they argue, the issue is self-resolving: in
the b-web world, what goes around comes around. If you break the trust of
partners, you’re marked down for life and will eventually suffer for it. Indeed
Tapscott argues that the recent misfortunes of Microsoft occurred precisely
because of its attempts to pull a fast one on its b-web collaborators. “That’s
the powerful thing about this. You can dynamically shift and change – it’s
easier than firing someone,” he says.

“Unless companies behave as they say they will, it puts the
whole relationship backwards,” claims Barratt. “When you start committing
yourself to collaborative working with another organisation, then start backing
out, you encounter much greater problems than if you’d stayed as you were, just
beating each other up.”

Are b-webs here to stay, or are they simply examples of the
kind of pragmatic alliances often seen in the early stages of any new market in
which smaller partners are soon subsumed into larger, dominant associates? You
might also question the extent to which these new forms really differ in
essence from traditional collaborative arrangements – “just outsourcing over
the Internet”, as one cynic remarks.

Pollard at AMR argues that the difference this time around
lies in the equal integration of all partners within the collaborative
framework. For b-webs to work successfully there has to be an end to the “us
and them” context of supplier and client, of master and slave. “It has to be a
peer-to-peer system,” he claims. Time will tell if he’s right.

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