The release of the Shift Index from the Deloitte Center for the Edge is an excellent occasion to come back on the foundations of the various Shifts that are currently redefining the way businesses have to operate.

The core digital infrastructure technologies (Computing, Storage, Networking) are showing an exponential increase of their cost/performance ratio, and there are no signs of stabilization. This exponential and continuous improvement in performance directly enables almost all the other shifts, most notably the accelerating pace of change. What is crucial however, is both the sheer scale of improvement and a pace which shows no sign of stabilizing in the near future, contrary to past groundbreaking infrastructures:

The exponentially advancing price/performance capability of computing, storage, and bandwidth is contributing to an adoption rate for the digital infrastructure that is two to five times faster than previous infrastructures, such as electricity and telephone networks.¹

The Foundation Index

The team has defined a Foundation Index that “quantifies the first wave of the Big Shift, which involves the fast-moving, relentless evolution of a new digital infrastructure and shifts in global public policy that have reduced barriers to entry and movement.”²

It is encompassing more than just the core technologies, but these are clearly one of the key driver of the index³:

If we now have a look at the 3 technologies that make up the “Technology Performance” index, the price/performance increase is drastic, and according to the report, shows no sign of stabilizing in the near future.

Computing

Over time, the Shift Index will look for changes in computing performance or cost curves. That said, we expect this metric to be highly predictable. While the history of technology is rife with predictions that turned out to be wrong, the ability of human intelligence to constantly extend Moore’s Law into a relevant future has persisted. Regarding the extensibility of Moore’s Law, Moore said, “One of the principle ways we achieve this is by making things smaller and we’re approaching the limit that materials are made of atoms. We’re not too far away from that. But talking to the Intel technologists, they think they can still see reasonably clearly for the next four generations. That’s further than I’ve ever been able to see. It’s amazing how creative the people have been about getting around the apparent barriers that are going to limit the rate at which the technology can expand.” Beau Vrolyk, former executive at SGI and current Silicon Valley investor with deep expertise in digital systems agrees: “As device physics approaches a limit to Moore’s Law, architecture innovations like multi-core and parallelism have allowed the industry to continue to provide signi icant advances in price/performance that resemble Gordon’s projections.” We can assume that the cost performance of computing will continue to decline at its current trajectory for the foreseeable future and to add to the forces underlying the Big Shift.⁴

Digital Storage

During the past 16 years, the cost of one gigabyte (GB) of storage has been decreasing at an exponential rate from $569 in 1992 to $0.13 in 2008, as shown in Exhibit 16. To put this into perspective, Sukhinder Singh Cassidy, Google’s vice president of Asia-Paci ic and Latin America operations, observes, “Since 1982, the price of storage has dropped by a factor of 3.6 million … to put that in context, if gas prices fell by the same amount, today, a gallon of gas would take you around the earth 2,200 times.”12 During this time, the compounding effects of technology innovation, competitive pressures, market demand, and the substitute effect (storage as utility) drove costs down dramatically while contributing to exponential increases in performance.

Will performance continue? There is no consensus on how long IT technology innovation in storage will continue at its current pace. Yet insatiable market demand and constant advances and new innovations coming from a raft of new technologies including nanotechnology, 3D holographic storage, carbon nanotubes, and heat-assisted magnetic recording13 suggest that the decrease in storage cost/ performance will continue for the foreseeable future.⁵

Bandwidth

Corning optical fiber scientists conclude that due to the decrease in bandwidth cost/performance ratio, iber network “traffic is going up by 2.5X every two years and capacity is going up by 1.6X and this trend is likely to continue on this trajectory for the foreseeable future.”15 This assessment implies that bandwidth cost/performance trends are also likely to continue in the future.⁶

As the name of this index suggest, the pace of improvement for these 3 technologies provide the foundations for the shifts redefining the way businesses (and any other organizations) have to behave and compete. I will reference this post in future analysis, but won’t expand here: I could not provide a better overview than the excellent report itself.

References

1. The Shift Index, Deloitte Center for the Edge, John Hagel, John Seely Brown, Lang Davison
2. The Shift Index, p. 20
3. The Shift Index, p. 22
4. The Shift Index, p. 25
5. The Shift Index, pp. 27-28
6. The Shift Index, p. 30

This will be a short and to the point post. I have sought to explain how this blog is (kind of) organized (see here). In the process, I have changed a bit the organization, and have now to comply with it :) So let me do a few posts that need to be there while not really bringing new content, for the majority that is.

One of the fundamental shifts brought by the emergence of the Internet as a common tool used by individuals is that the costs of interaction has fallen to zero. Umair Haque is one of the best references in this domain, and characterizes this new context as a world of “cheap, ubiquitous interactions”, or said otherwise a “hyperconnected” world.

At first through virtual rudimentary Bulletin-Boards, the Internet has enabled increasingly efficient, cheap and deep interactions. What started through mailing-lists or on ICQ, continued on forums, and evolved into tools like Facebook, Dopplr, and an infinite variety of means for individuals to find, connect, and interact with other individuals on nearly every possible topics or collective endeavors.

Of course, such a radical shift had many consequences. They range from radical transparency to the decay of brands. You may think that this shift has occurred a long-time ago and has now being incorporated in every domain: strategy, marketing, etc. You would be right for the first point, but unfortunately quite wrong on the second. We’ll delve into this in subsequent posts.

An obvious illustration would be how industrial-era organizations are seizing on these existing technological capabilities to improve their internal efficiency. Most aren’t, and the unrealized potential is simply mind-blowing. What is needed is a complete rethinking of organizations as institutions, with all dimensions redefined to take into account these shifts.

Umair has been banging on all of this brilliantly for several years now, if you are interested in this topic (and I would argue that you should), he’s now blogging at Harvard Business Publishing.

The rising scarcity of attention makes the concept of “features” increasingly irrelevant. IT and Business Executives need to unlearn using this concept as an evaluation tool for IT applications. If vendors want to increase their market share, they also need to make sure “features” is not the focal point of their sales pitch.

Initially, we identified a fundamental “Macro” Principle: attention scarcity is deeply reshaping businesses. To be actionable, this fundamental principle was translated into a strategic one: the use of Return on Attention (ROA) as a key metric within organizations. I am now looking at the application of this strategic principle to Enterprise IT, one of the critical areas that need to apply ROA much more rigorously.

Return on Attention as a metric to evaluate IT Projects

This metric needs to be used across all activities, but it’s nowhere as important as in evaluating the performance of current and future IT applications.

An IT application is indeed mainly consuming attention for its users. Information Technologies are also the domain where the opportunities to drastically improve ROA are the most prevalent. Depending on the application, you can achieve the same activity while consuming very different amounts of your attention. The variance is huge. Still, an IT system is generally viewed as a set of features.

How do you decide if a product is good? How do you choose between two different but relatively similar offerings? Too often, the main criteria is the functionalities provided. A Learning Management System can integrate and manage so many courses, use x types of media; an infrastructure can provide mobile email functionalities or not; a blog platform can embed x types of media, implement trackbacks or not, etc.

Unfortunately, features capture only a tiny fraction of the value provided to end users. In order to capture the full experience, you need to take into account:

• the usability performance: what are the results of usability tests?
• mix of features: not too simple, avoid feature creep. Ultimately, this needs to fit with the culture and workflows in place.
• adaptation of existing and new workflows and processes (this can be mandated by the tool itself of course).
• the “sexyness” of the user interface (benchmark is the consumer market): will your employees enjoy using the software? If not, unless they have to, they won’t use it.
• the training needs: most non-business specific applications should not need more than 20 mins of training for the new generation of employees.
• potential to develop increasing returns dynamics (via network effects for example).

All these criteria (and the list is not exhaustive) need to be combined to evaluate what will be (or what is) the value provided to your employees, and how much the application is improving their productivity. The aggregation of these criteria in a single concept can be thought of as “fluidity”, “flow”, but is best synthesized as the Return on Attention provided.

Examples

A simple example would be blogs in large companies. Provide them through SharePoint or Wordpress Mu, what you provide is still blogs. When evaluating the tools, the basic features of blogging will be identified in both applications—assume here that only the basic features provided by SharePoint are needed. In most organizations, the solutions will be seen as interchangeable, based on the feature set. Looking at usability though, and by merely using the two to create a few posts, you immediately realize that posting the same content in SharePoint will take at least twice the time (and probably twice the clicks) as posting in Wordpress. Managing the posts, reading them, and virtually all other tasks sports the same efficiency difference. And yet, the feature sets will be seen as identical. Do you think the ROA will be as well?

ROA needs to be used when comparing products 1 to 1, but it must also be used for all other strategic IT decisions. Not convinced? Let’s look at mobile email capabilities. The choices you make in terms of infrastructure design (as well as sourcing and other domains) will constrain your options in terms of mobile email deliveries. Your employees using Windows Mobile devices because of your MSFT infrastructure will know first-hand the loss of productivity compared to other devices, most notably the iPhone and Blackberries.

It is worth stopping shortly on this last example. How many IT executives are evaluating the potential platforms to be used by employees to manage email on the go? How many business executives are taking a strong stance and forcing their CIO to consider these issues? In my experience, close to none, the platforms available are just a consequences of other technical decisions. Yet, how valuable is it, for your company, that your employees can manage emails easily on the go? How much value is there by cutting in half (or doubling) the time it takes to write an email? Right, the value in terms of productivity is typically huge. The direct hit at your productivity will just be the consequence of focusing on features and ignoring the global Return on Attention you total infrastructure will end up providing your employees with.

Use ROA as an aggregated set of criteria

When comparing different offerings for the same project, or when optimizing your applications portfolio, ROA is a metric that aggregates all the single trade-offs each application incorporates. You should compare products, or even projects based on ROA. You can use a multifaceted list of criteria to evaluate individually, then create a weighted average. Criteria are split between the properties of the application itself and how these properties weave together with your corporate fabric. ROA can indeed be evaluated only with regard to the specific activities and actors the application is supposed to enable. A generic checklist can be established, but it will need to be adapted to each business process.

An ROA checklist contains items such as:

• how much training does the application require? Is it intuitive enough to skip a training phase altogether?
• is there increasing returns dynamics embedded in the design? If so, what is their level?
• how many clicks are required for all core tasks?
• how much loading time is there for all core tasks?
• are RSS feeds originating for core items? all items? no feeds at all?
• how does the application work on mobile access?
• how does it improve current workflows? how does it make new, more efficient workflows possible?
• what are the standards used? are they open? will they be easy to work with to spread data and notifications?

My last point is interesting in itself: considering the standards, it actually evaluates the ROA, not only through the end-users, but primarily through the IT function. A product with open standards will increase the ROA the end-users get from it through increasing the ROA reaped by the IT function with selecting this product. It’s not the point of this post, but remember that ROA needs to be evaluated for all actors in a system.

You have to build a complete list and adapt it to both your organization and the project evaluated. If you use poorly usable, not sexy, slow enterprise software but the manual workflows targeted are, as a result of the project, automated, no matter how poor the other criteria rates, the improvements at the workflow level will result in a very high ROA. But evaluating in terms of ROA can make you consider alternatives that you would not have evaluated.

How to put ROA into action?

The first take-away is the realization that ROA is actually what softwares compete on, and that the variance is huge. If you look at the consumer web market, all websites have to compete to provide the highest ROA for their users. The highest ROA provided selects the market leader in an area. In fact, the more you move towards the consumer web patterns of design, the more your application is likely to provide a high ROA. Brad Burnham, of Union Square Ventures, among others has characterized this very well:

The folks that built enterprise software were vaguely aware that their systems had to be accessible to the humans that used them but they had a huge advantage. The people who used them did so as part of their job, they were trained to use them and fired if they could not figure them out.

Today, no one tells you to use Facebook. There are no employer sponsored training sessions on the use of del.icio.us. The burden is on the designer of the system to meet a need, entertain, or inform their users. They also have to seduce those users, hiding complexity, revealing one layer at time, always enticing, never intimidating, until the user one day finds they are intimately familiar with power and the pleasures of the service.

It will happen in the same way within organizations. I have first-hand experience of teams not happy with SharePoint using Basecamp. The hazards of such situations are clear, but more rules or control won’t solve them, better ROA through corporate tools will.

How to use ROA for your organization? Here are a few leads:

When comparing alternative offerings, do spend 15 mins to understand the feature set, but stop after 15 mins and switch to actually using the product as an end-user and experiencing its usability level. Speaking to a sales person for more than 15 mins without experimenting with a demo is a waste of time. This is valid for IT and business executives. for your next sales pitch of 1h30, ask for a short presentation and demo after 15 mins. You will then focus on the right questions.

Make sure your partners within the organization have all completed at least one core task in each of the softwares considered. Make them do it within a meeting. Even with several products considered, you won’t spend more than 2 hours to do it. At the end of the meeting, you will have eliminated at least a third of them.

Favor applications that have their roots in the consumer market: they already provide a high ROA to consumers. While the criteria relative to their fit in your organization will need to be proofed, those related to their intrinsic performance will already be at good levels. Think about your recent 23 years old employees, and their first day in the company. They are either forced to use Outlook, which they likely never heard of before, or Gmail (through Google Apps for enterprise), which they likely use at home. WHich application will provide them with a higher ROA?

Incorporate ROA in your processes: make ROA a section on your risk identification checklist, include it in reviews, etc. Build a master template that needs to be used, with criterion adapted to your organization, and require minimum scores.

Consider the end to end user experience, and focus on the areas with the most risks for ROA, not for the technologies. Mobile email is an example of a project part with low technical risks but high ROA risks if not done well. If you are a business executive, insist on walking through the complete workflows considered with your IT counterparts.

How do you think today’s organizations handle the use of ROA as a metric? Do you see the advantages in using it?

Photo credit: Domibrez

“Nice content – awesome presentation! What did you use to make it?!”

That’s what everyone who sees my BRITE presentation asks me. It’s a new service called Prezi. And it’s insanely great — the minute I saw it I had to have it, no questions asked. So, for the first time in half a decade, I found myself doing the unthinkable: paying for software.

As Umair’s experience illustrates, Prezi is an amazing piece of technology. The Hungarian company has a great team, got a lot of press and recently set its sight on the US market. The service is obviously geared towards professionals: individuals or small companies, not consumers or large companies. I have embedded an example below (the embed feature is still in the works, so this is an example of no particular subject)

So how could Prezi best enter the Enterprise market? I don’t have the time to do a full strategy analysis, but here are the key points I would explore more deeply for such an expansion:

Provide an on-premise appliance ready for the enterprise context

Situation: Large companies are paranoid about their data being hosted outside of their network. The more valuable the data, the more paranoid they are. Presentations often contain the most sensitive data of a company, apart from its financial details: strategy roadmap, product pipelines, etc. Providing a SAAS version will be costly due to strict audits and certifications required (ex: SAS 70 Type II for data center).

Path forward: Provide enterprises with a non-customizable appliance that is deployed on their network and upgraded by Prezi at the same time the SAAS version is upgraded. Customers have no control on the software, similar situation as in the SAAS version. Only change is control on data location. This solves the cost issues associated with on-premise deployments. Appliances can be hardware or virtual machines. Only requirement is to provide built-in support for authentication through LDAP/AD and easy implementation of SSO. More details in this post.

Deploy appliance at cost, charge per activity

Situation: Prezi is a disruptive product that do not fit any existing box in this market. If approached in a classic way, the enterprise market will require long sales cycles, very progressive entry and a host of unnecessary difficulties. While competitors will use this time to imitate the product.

Path forward: As I detailed here, the best strategy is to offer a deployment at cost (this also works for a SAAS version at very low cost). Charge for the hardware and time spent, but nothing more. Then charge per activity or per active user. Also provide the first trials for free: either the first month completely free or the first XXX prezis completely free (to be adapted based on the size of the client of course). This would lower the cost for IT functions, eliminate the risks, and be scalable on Prezi’s side as you do charge at cost for the initial deployment.

Position as a visualization tool, not as a PowerPoint killer

Situation: Prezi cannot replace PowerPoint (or Keynote), as there is no way to produce complex enough graphs, diagrams, tables in Prezi. Strategically, Prezi should not try to match these features, this would be impossible. Keep in mind most companies actually use add-ins to complement even PPT.

Path forward: Position Prezi as a visualization tool for material produced in other tools, not as an equivalent to these tools, so that no credibility is lost. If this market is entered head-on as a replacement for PowerPoint, reputation will be damaged.

Provide users with standard templates, less choice, to appease fears

Situation: Prezi’s capabilities are impressive, but can be daunting for corporate users who may be afraid of designing a bad visualization, and look not so great in front of their peers. The total freedom offered by the infinite canva and scales may in fact hindering the adoption of the tool.

Path forward: Provide “templates” based on logical units to allow the creation of Prezi by specifying the materials and the logical flow of the visualization. This would be similar to the LaTeX typesetting software which separates the structure and the formatting. The user could build an outline, with sections, subsections, and items. For each item, he would be able to select a material (video, graphic, etc.) or type in some text. Prezi then takes care of converting the outline to a visualization, based on the logical structure, and without requiring the user to select himself the visualization details.

Charge support separately to discriminate among segments

Transparent.

Bring professional services to a Prezi platform

Situation: Prezi has impressive capabilities, but is much more fitted for presentations to large audiences on a big screen than your casual 10 persons meeting in a small room. The executives in charge of large presentations, however, are not the one in charge of the content. The responsible would welcome assistance to design a Prezi surelly to wow the audience. The manager wanting to design herself a Prezi will also likely not have the time to do it. What they need is assistance, in an efficient and trusted manner.

Path forward: An axis of development would be to offer, through the Prezi platform, access to designers offering to turn existing content into a a Prezi. Value added features would be the obvious ratings, feedback, reviews on the service providers. It would also be a legal framework in place, with insurance, that all service providers are required to have in place. This would ensure confidentiality for clients. No cost for Prezi once framework in place, multiple monetization points.

Why SAAS is not the easiest way to the enterprise

It is common among start-ups to think that large companies should just use the SAAS version. This is a mistake though, as the security risks are complex. The Cloud Security Alliance has produced an excellent document, title Security Guidance, that will give an overview of the broad security aspects of cloud computing. The executive summary is enough to grasp the challenges at play.

So what do you think of Prezi? How do you think they should tackle the enterprise market? Should they even consider it?

Clubatcost’s founder is a well established entrepreneur who is managing Orchestra, a children clothing retailer. Pierre Mestre’s video on the homepage of Clubatcost is self-explanatory, but in French only. He describes the confusion of customers faced with regular discounts of -50%, -70% online and never knowing if they are having a deal or not. He also takes aim at the accumulation of mark-ups charged by intermediaries. His proposition is simple: he will use its existing manufacturers network—well established through Orchestra; and by hiring a team of 20+ stylists to create exclusive designs, he will offer customers all articles at cost. New sets of items are released weekly for a limited time (usually a few weeks).

To build trust, all the articles presented are accompanied by an itemized break-down of the cost to provide customers with the goods (screenshot below). A discount comparing to the usual price of the item in regular stores is indicated. To be able to buy at cost, you need to buy a yearly membership, with different packages. These fees are the sole revenue of the company. Last point: to avoid gaming of the system and having groups of people ordering through just one paying person, there are limits to the amount of articles you can purchase on a single membership. If you reach the limit, you just buy a new one and continue. Finally, a show-room has been opened in Paris, where you can try the articles, and the company seems to be planning one in some European capitals, but certainly nothing more.

This is the model in brief, and if you read French, you can see that they are aiming at a very high level of transparency.

What is remarkable here is the pricing model: the revenue made by the company is not increasing with each sale, their revenue is fixed per customer. If you buy 1 or 10 items (and staying within the limits of 1 membership), their revenue stays the same. That is a radical departure of the classic “the more you buy, the more we earn”.

The future of this company will be fascinating to watch. For one thing: Orchestra Group is listed on Euronext (link). With this move (and though the capital structure of this subsidiary is not all clear), it is evolving from a classic textile retailing model into a radical company challenging many dogmas. Do you think investors will correctly anticipate the fate of this new model?

To succeed, it will also have to create strong relationships with its customers and prospect base. How they will use social media and crowdsourcing in particular will be interesting. I am personnaly puzzled by the lack of any form of crowdsourcing, and would be interested in knowing why they have not used it (yet?). Recommendations based on past purchases is also an obvious feature they will most likely launch later, along with individual reviews on each article (trust building again).

Imagine Threadless selling at cost in exchange of a $120 yearly fee, and you’ll get an equivalent with Crowdsourcing. The revenue growth and horizon is dramatically different, but which model is providing the “thickest” value, in Umair’s terms?

Executives need to understand how the increasing availability and depth of Cloud Computing technologies are impacting their organizations’ competitive advantages. After responding to A. McAfee’s challenge of a good cloud computing metaphor in a previous post, I felt compelled to clarify and complete. Cloud Computing technologies are not a miracle answer to all IT woes, nor are they suited for all types of use. But you need to take advantage of them where you can, otherwise you are at risk of seeing your competitive advantages slowly erode at many levels. The single slide below encapsulates the framework detailed in this post:

Cloud Computing technologies stack of Services (CCS)

CCS are suite of technologies delivering an integrated set of IT capabilities. Amazon Web Services is the archetypal illustration. CCS are a disruptive technology mainly due to their:

• scalability: scale up and down without any performance impact
• utility pricing: pay only what you use, no upfront costs
• immediate provisioning: get a server running in minutes for example
• reliability: benefit from redundancy and security investments at the platform level (across several data centers, etc.)

Amazon Simple Storage System (S3) for instance, has enabled a whole generation of start-ups to provide data storage services while disbursing absolutely zero in upfront capital costs. They were able to scale their use and pay exactly what they consumed. No capital investments on the balance sheet either to constrain their flexibility.

These CCS can be whole Infrastructure-as-a-service offerings (AWS for ex.), Platform-as-a-service (Google App Engine for ex.), or any other subset of technologies. CCS can be deployed internally (Appistry for ex.) as well—the utility pricing is done internally as cross-charges.

These technologies provide part or whole of the infrastructure on which IT applications are deployed, and this is our next layer.

The Applications layer

Companies take advantage of CCS in 3 main ways.

Use generic Applications hosted on CCS

The lowest level of exploitation is to switch existing, generic applications to CCS. Instead of running MS SharePoint and Exchange servers in your own data centers, you run them from Microsoft data centers and benefit from the economies of scale on their end.

What you gain is better execution through cost-savings, performance improvement and better provisioning and reliability.

Migrate or develop your in-house Applications using CCS

The next step is to use CCS to improve the capabilities of your in-house, industry specific applications. This is what hedge funds and other financial institutions are doing when running their models on the AWS infrastructure. In this case, the nature of the applications is not changing. You just benefit from a better execution, as in the previous case.

But you can also develop new applications, that are made possible only through the use of CCS. In that case, you don’t just migrate your existing applications to CCS, you develop entirely new applications that were not possible without the capabilities of your chosen CCS.

Amazon recent implementation of MapReduce is a good example, as this class of capabilities was previously too expensive, by an order of magnitude, to be used in anything but the exceptionally critical business cases. Thanks to Amazon’s incorporation of it in AWS, it is now possible to use it in many more situations.

Implement 3rd-party applications developed using CCS

The last use of CCS for companies is a second order effect. CCS dramatically lower the cost of developing a web application, or extending the functionalities of a desktop application. This has created an explosion in the number, variety and sheer performance of third-party applications available to organizations.

They can be used directly from the CCS, like Basecamp for example; or developed while taking advantage of the CCS, but provided to large organizations as self-hosted applications not directly using CCS: enterprise twitter-clones Presently and Yammer provide both options for example.

In either case, the economies of scale from the CCS used in the development are transferred to clients, albeit at different levels depending on the hosting options.

The key point here is that, in order for organizations to take advantage from these applications, they will have to adapt their management processes to the applications. It won’t be possible to deploy them and succeed without some degree of change. This is the whole “Enterprise 2.0” trend for example.

Execution and New capabilities: the two levels of Competitive Advantage impacted by CCS

Better Execution: must have but not sustainable

CCS enable first and foremost better execution of existing processes and efficiency given the current management structure and culture. Migrating your Microsoft Exchange server to CCS will lower your costs, improve your execution, but not create a sustainable competitive advantage for your firm. While not there yet, this use will be commodified in the near future and will spread globally to organizations of all size and in all industries.

In-house applications migrated to CCS, without any improvement, will produce the same effects: better execution, nothing more. Again, this will be a requirement but also a commodity. organizations will only be able to differentiate themselves negatively, not positively.

Using CCS to develop new capabilities

By far the most powerful use of CCS is to enable organizations to develop entirely new capabilities. This is the area where competitive advantages specific to each firm, and thus much more sustainable, will appear. The metaphor of CCS as an ever-expanding, round the corner and very cheap superstore for each organization describes this potential use:

In the world you operate today, imagine that literally all business managers, from CEOs of public companies to sole business owners, including would-be business creators, have a huge supermarket just round their corner. A special supermarket in fact. It sells a tremendous array of products and services, for every industry, need, or activity. It is also ever expanding: if you make two trips at just 1 hour interval, new products will have already been stocked and available for sale, in addition to the old ones and on new shelves constantly being added. On top of that, the price of each product is incredibly cheap: new cars for example, are selling for 1/1000 of their normal price, or even cheaper.

The last characteristic of this store: you don’t own what you buy, you just lease it. It can be a one-time fee, regular payments, or any other scheme, you lease it. What’s more, if for any reason the provider of your product disappears, then your product disappears as well. Let’s illustrate this with the car example: you can lease a car for, say $30 a month, and use it as you own it. You would then leave your “stuff” inside the car: some books, some papers, perhaps a watch, etc. If the producer or your car disappears, your car vanishes as well, with your stuff inside.

The trade-off begins to appear: $30 a month for a car is a really good price, but you are at risk of this disappearance. You can mitigate it however: choose a well-known and established vendor, or just leave only non valuable “stuff” inside. Many parallels can be made with this metaphor.It is for example really difficult to find your way in an ever-expanding, huge store, and find the exact product that would fit your needs. Then, how do you know if its producer is not on the verge of disappearing? You can stick to the big names only, but what this product taht would really fit your needs, would you try it?

Now, converting this potential into real competitive advantages sustainable at the firm level will require bold leadership. But the “Schumpeterian” pressure will only increase, so organizations will have to explore and act on this new context to maintain their market leadership.

There are no free lunch

Of course, the distinctions made at all 3 levels (Applications, Competitive Advantage, Sustainability) are heuristic. Google Apps, for example, can be used either as a migration of commodity email systems to the cloud (replace your expensive, self-hosted MS Exchange server with $50/user/year all managed Gmail) or be used creatively as an integrated collaborative suite to deeply modify the culture and level of agility of your company.

Businesses should of course aim to develop competitive advantages at the firm level, leveraging a range of innovative applications drawing most of their infrastructure on CCS. Some firms won’t survive the shifts in culture and management practice prompted by these tools though. But the main danger is ignoring the threats and felling into decay.

Note: An email exchange with Louis Naugès caused me to write this clarification post.

Photo credit: extranoise

The metaphors used to describe any technology strongly shape its future, through their influence on executives. As Andrew McAfee (now at the MIT after Harvard) notes about Cloud Computing, different imageries are currently competing. As Andrew points out, the electric grid metaphor can influence business executives to view Cloud Computing as a commodification of a class of IT services. Treating them as a commodity is of course a recipe for disaster. To counter this, Andrew evolves the metaphor into an “IT-as-change imagery”:

Cloud computing is moving us toward a world in which some kinds of business change come out of the wall. Not all types of business change will come out of this wall, but some will. A few of these will be easy, most will be at least somewhat difficult. Some will be profound, some trivial. The different types of cloud-enabled change will affect various constituencies, both internal and external.

Both metaphors are too abstract though, in my experience, to communicate non-IT executives the true and precise impact of cloud computing. Here’s how I would explain it outside of IT circles:

In the world you operate today, imagine that literally all business managers, from CEOs of public companies to sole business owners, including would-be business creators, have a huge supermarket just round their corner. A special supermarket in fact. It sells a tremendous array of products and services, for every industry, need, or activity. It is also ever expanding: if you make two trips at just 1 hour interval, new products will have already been stocked and available for sale, in addition to the old ones and on new shelves constantly being added. On top of that, the price of each product is incredibly cheap: new cars for example, are selling for 1/1000 of their normal price, or even cheaper.

The last characteristic of this store: you don’t own what you buy, you just lease it. It can be a one-time fee, regular payments, or any other scheme, you lease it. What’s more, if for any reason the provider of your product disappears, then your product disappears as well. Let’s illustrate this with the car example: you can lease a car for, say $30 a month, and use it as you own it. You would then leave your “stuff” inside the car: some books, some papers, perhaps a watch, etc. If the producer or your car disappears, your car vanishes as well, with your stuff inside.

The trade-off begins to appear: $30 a month for a car is a really good price, but you are at risk of this disappearance. You can mitigate it however: choose a well-known and established vendor, or just leave only non valuable “stuff” inside. Many parallels can be made with this metaphor.It is for example really difficult to find your way in an ever-expanding, huge store, and find the exact product that would fit your needs. Then, how do you know if its producer is not on the verge of disappearing? You can stick to the big names only, but what this product taht would really fit your needs, would you try it?

You can also see why small and large companies would react differently, with different risk aversion. Large companies would prefer to buy their cars, for example, and benefit from the certainty. Small businesses would buy the $30 a month car, and if it disappears, just buy another with a little it of trouble. You can already see how competitive dynamics would evolve, with small early-adopters buying everything at these stores and competing on equal standing with large companies, while having a risk profile much higher as well.

In the IT area, Cloud Computing represent such a shift: each business, no matter how small or remote, now has access to such a supermarket instantly. Now, think about your business, and examine how your competitive advantage(s) would be sustainable in this scenario. Some won’t resist.

At its core, Cloud Computing is nothing more than an irresistible way of enabling distributed economics of scale, that benefit organizations of all size. A second order consequence is a spur in innovative products and services that executives can take advantage of. Conceiving it as a huge, ever-expanding supermarket across all areas can help frame this new context.

Photo credit: Manel

Uservoice provides a quick, simple and very efficient means for users of a service to feedback their thoughts, both positive and negative, to service providers. Such applications are usually designed only for the consumer market, but can be used as internal IT applications as well—large companies can be targeted, but only for their consumer facing activities. In this case, all IT functions could (should I would argue) use a similar tool to monitor the pulse of the service and applications they’re providing to their end-users. Other uses are of course possible, but this is the most obvious one. Value is created at both ends: users can convey their wishes in 30 seconds instead of the usual 10 mins to fight with corporate legacy systems; application owners access an organized and prioritized list of requests.

Laser-focused, fluid and intuitive applications like Uservoice increase the velocity of information flows within organizations, and maximize the Return on Attention for employees. Vendors as well as IT functions often underestimate this potential value creation and these tools tend to be used only for consumer, external facing activities. But change is coming. Corporations are beginning to realize the need to optimize ROA and IT functions start to wake up to the necessity to treat their users as consumers who decide whether or not to use the services they provide. One actor is still not changing, as just illustrated by Uservoice: the startup vendor.

The reason is simple: enterprise sales are difficult, long, risky, expensive, caught in politics, etc. All this is true, but only in the classic enterprise sales approach. Startups need to shift their approach for a much better one, combining product architecture and pricing redesigns:

• Provide behind-the-firewall appliances: don’t allow customizations, ensure smooth deployment, manage your appliance. Easy to deploy by IT and secure. Multitenant SAAS versions are just not secure enough yet for the majority of products: SalesForce and similar achieves an acceptable level, but the price points associated would negate the benefits of simple, focused applications coming from the consumer market.
• Support authentication and SSO: authentication is the first level of security, and SSO is needed to ensure usability (what’s the point of feedback in 30s if I need to spend 15s to log-in?). LDAP/AD and Kerberos or similar are the key words here.
• Deploy at cost then charge for use: don’t try to reap all the benefits right-away through license fees, it won’t work. IT functions and organizations are not yet mature enough to invest a lump sum in these products. Instead, deploy the appliance at cost (at real costs: only hardware and time spent), and price based on the actual activity which creates value. For Feedback 2.0 tools, it could be the number of independent “forums” or the number of feedback items. You should also give away the first items for free. (I went in details in Enterprise Social Computing pricing here.)

Following these steps will give you a product that is enterprise-ready, easily deployable and attractive for the IT function in terms of both price and architecture. It doesn’t deliver a lump sum right away, but as it is used more and more, the regular cash flows are growing and your total install base yields a growing perpetuity. The better your product is, the more it will spread inside the organization, the more you earn revenues. Price/revenue is much better correlated with value.

Architecting products and redesigning pricing schemes to achieve enterprise sales is thus simple. But the strategic implications are much deeper than it appears at first glance. First, I’ve written before about the increasing returns dynamics that are exploited when the consumer and enterprise markets are combined in a single strategy. Second, it is becoming increasingly important for our largest corporations to adopt tools that will make employees as efficient as they are as consumers. But vendors need to get there as well.

Photo credit: philippe leroyer

Attention is increasing in relative scarcity (as explained in details in a previous post), and what is scarce is valuable. While any product, service or other activity costs attention to both the consumer and producer, attention is becoming increasingly valuable. It is hence essential to ensure that what you produce or consume provides your clients or your organizations with a high enough Return on Attention. This metric should be tracked by all businesses and its use adapted to each specific activity.

Measure and act on ROA for each role in the value chain

ROA should be tracked from the point of view of every participants in a specific value chain, and analyzed based on each roles and activities they undertake. The question each actor is asking is “Of the total attention I allocate to a particular source, what is the productivity of that attention in terms of value received for effort and time invested?”¹.

For instance, an organization is both a supplier and a consumer: the ROA should be measured for both roles, even if in a small organization the same person is doing both. ROA is a versatile tool that can be used in customer/producer relationships, from an organization or individual perspective. A couple of examples:

• Consumer: What does it cost me in Attention to consume this product or service?
• Producer: What is my ROA for each client? Which one is the highest? Which may be negative?
• Marketer: How to ensure we provide the highest ROA for each client? How to provide a good ROA through our communication, thus ensuring the messages keep reaching their targets?
• Organizations: How to maximize ROA for each employees? What can we modify to improve it or handle negative ROA situations? Are my communications and internal initiatives of a high enough ROA so that my employees will engage meaningfully with them?
• Individual: What are the activities that reward me the most for the time and effort spent? Are they aligned with the priorities of my organization?

  IT tools are key to improve ROA

Handling information and consuming mainly attention, IT tools are also a powerful means to improve ROA. Indeed, as with any ratio, there are two possibilities for improvement: increasing the returns or decreasing the amount of attention:

• Decreasing the amount of attention consumed: you can use workflow/process redesigns, along with automation to decrease the cost in terms of attention of a specific activity. For example, going from an approval process with 15 clicks on 3 different tools and manual entry to 3 clicks in one tool with automated data entry would improve the ROA.
• Improving the returns on the same amount of attention spent: this is the single largest opportunity. Take advantage of innovative IT tools that maximize the returns you get from the time you use them. Going from emails to information flows customized and prioritized based on your social network and relevant objectives will raise dramatically the returns an employee gets from spending 15 mins trying to get up to speed with a new project or client. Along this line, it is also possible, again by using the right technology, to increase altogether the total amount of attention an individual has to spend. “Flow applications” for example have the potential to allow an employee to dedicate not just 0 or 100% of her total attention to the activity at hand, but to start splitting it across several activities.

Where to start?

ROA is not easy to put in place and use effectively. Start by identifying the critical areas of:

• your business model and processes
• your clients portfolio
• your talent pool

Then, separate the different activities of each cycle and for each actor, analyze the ROA from their perspective (including yours as an organization). You will quickly zero in on the areas at risk due to poor ROA, and the diagnostic should provide the necessary indications for improving the situation.

Photo credit: vishy-washy

References

1. 1 John Hagel, Mastering New Marketing Practices

Organizations tend to concentrate on 2 different risks for IT projects, while a third one may be impacting the most their chances of success.

“Technical Risks” and “Business Risks” are widely used notions. The first comprises the risks that can affect the IT infrastructure (e.g., bring down the network, break a key business system, etc.); the second relates to the risk affecting the value of the project (e.g., how much time the new tool will save? by what level will it really cut the process costs?, etc.).

However, there is a 3rd risk component: the User Adoption risks. This component has been overshadowed by the Business Risks component. It should be considered as an entity in its own right, because given its growing importance, the consequences of overlooking it are dire. .

User Adoption risks are increasing rapidly with the changing global environment

User Adoption as a key risk area is nothing new (the first CRM deployments are a classic example) but its impact is rising sharply under the pressure of a key principle and a deep trend.

Attention Scarcity as a fundamental shift is well established. Attention scarcity impacts IT projects at 2 different levels. First, any new IT application rolled out by IT has to compete with an ever more valuable and decreasing fraction of end-users’s attention. If the cost/benefit ratio of using the new tool is not immediately clear, this attention will be invested in a more valuable tool or activity. At a second level, the scarcity of attention makes it even more harder to communicate the value provided to end-users. The volume of information bombarded on each employee in and outside the organization is growing exponentially by the day. Any communication plan or “change management” plan, as it is often called, will compete with this.

Of course, adoption can be mandated, and this is part of the cost/benefit ratio. If employees are fired for not using an application, they will use it, albeit mechanically, without extracting value, and more often than not decreasing their productivity by not using another, more efficient tool. Cost/benefit ratios can differ between individuals and organizations, and mandating can work, though this is more often termed “aligning the incentive structure.”

The other macro-trend that increases the pressure on corporate IT projects is the recent availability of applications spanning all domains, combining both excellent quality and very low cost. If users are not happy with their corporate-provided tools, they will just use these applications without making any effort to get past their first impression of the corporate tools. For instance, consider about the number of corporate teams leaving behind SharePoint for using BaseCamp or even Facebook.

The impact of a weak User Adoption

If your project is not reaching a successful critical mass in terms of user adoption, then your organization is exposed on several fronts:

• ROI is of course decreased, not to say negative. The time to implementation of the revised workflows is considerably larger, with the disruption and productivity loss that ensue.
• The IT function’s reputation is impacted negatively, as the project is seen as dragging over time and not satisfying the needs of users.
• Security exposures rise each time a team chooses to switch to a consumer web application to manage its team workflows.

Recognize corporate IT is now competing within markets, and manage accordingly

To avoid these pitfalls, the IT function needs to change its mindset and view of itself. Instead of deploying tools where user adoption is taken for granted, IT leaders must realize they’re competing with other applications and need to win the employee’s business, just as any product available on the consumer market. Of course, a large part of IT projects are simply required for end-users, but the difference in user adoption pace is not less significant nor less valuable to gain.

Simple change in theory but deeply difficult in practice. Indeed, this raises complex organizational issues at the group level, as well as drawing on skills not always existing among IT groups.

So, how to improve? For a start, User Adoption needs to be considered alongside Technical and Business risks from the start of project evaluation and planning. The projects that cumulate too much User Adoption risks should be modified or cancelled outright if their chances of failure are too high. Too often, User Adoption is addressed as “change management” only before deployment.

IT needs to implement an internal communication infrastructure that matches the one available externally. Communicating the value of an application to end-users with poor screenshots sent via emails will not compete effectively with the efficient screencasts available on YouTube or the vendor’s website. If your internal communication channels are not matching the external ones (how do you distribute a video for example? any medium with viral capabilities?), the first step is to close the gap. Doubt the impact? Look at the Basecamp tour and compare with your “training” for similar internal tools…

Forget communication and think marketing. IT must not simply communicate, it must grab the attention then convince, quickly. Again, the IT function is competing for end users’ attention as if it were yet another application in the wild. You of course have a huge advantage, but it is too often wasted. Make sure all your communication plans are not only excellent but also remarkable.

Another alternative is of course to simply use consumer applications as corporate tools. The Google Apps suite may not be the best in the world, but many of your employees use it at home and would be happy to use it at work too. If you implement blogs, why choose anything else than Wordpress Mu (or Movable Type if you prefer)? To survive among the plethora of choices, consumer applications must compete on design, simplicity, efficiency. When leaders emerge, you can safely assume that, if they meet your requirements, end-users will adopt them in heartbeat.

So, can you identify one past project which failed by not realizing its target in terms of user adoption? Would the outcome have been different if it had been recognized as an independent risk area on its own? Comment away!

Photo credit: - Nolly