Disintermediation in E2.0

Distermediation is a term that may be familiar to veterans of the dot com boom; it’s a fancy way to say the same thing that infomercials have been telling us for years:  “We cut out the middleman and pass the savings on to you” Which is great, because everyone loves a bargain.  Back in the dot-com boom, all of these new fancy websites told us they were going to “cut out the middleman”;  we were promised web based storefronts to appeal to every man, woman, and child, that would allow us to buy products directly from the manufacturer and bypass the costs that are tacked on by all of those pesky middlemen.  Why did we want to cut out the middlemen? Because everyone knows that the more people that stand between the customer and the manufacturer, the more expensive that product will cost.

In the enterprise there are also middlemen but what these middlemen add is something far more destructive:  Confusion

Remember playing telephone is grade school? It’s a simple game that illustrates a powerful point.  The game starts with the first person telling something to the next person, who then tells it to the next, and so on until you reach the end of the line.  Inevitably, you start with something simple, like “little jimmy smells”, and by the time it gets to the last person in line, it ends up as “purple monkey dishwasher”.  How did that happen?  There’s the rub;  this drastic change happens gradually, so much so that nobody notices the change along the way, but it’s easy to notice when comparing the starting phrase to the ending one.  This is the concept of Cumulative Error, which tells us that even small errors compound one another to produce drastic differences between input and output.

This same issues of Cumulative Error is present in many businesses today.  With each layer of management between the user of a technology and the provider of that technology, a little more confusion is added to the mix.

I’ve worked with a number of corporate clients, and in almost every case, we have not had to dig far to find the results of these Cumulative Errors in their organizations.  I often advise managers to look for employees “building bridges” around these errors.  In the past, more entrepreneurial employees would get around their corporate limitations by emailing spreadsheets, building Access databases or installing Media Wiki on a makeshift server under an employee’s desk.  Today, these same bridges are being built using E2.0 tools.  Employees build bridges over their IT department, legal department, and other layers that previously existed between the firm and their customers.  By using E2.0 tools, individual departments can easily and quickly deploy their own CRM, Collaboration, and messaging solutions.  These bridges, regardless of their materials, serve as signposts to tell us where and how we as an organization need to change.

E2.0 Changes Everything.

There.  I said it.  Hate me if you want to, but it’s true.  Never before have consumers risen to such an all-powerful status, nor have employees had the ability to get their work done without involving 20 layers of management.  Let me show you what I mean.

Lets talk about the IT department.  In my workings with large corporate clients, many seem to have a relationship with IT that is tenuous at best.  To be fair, the IT department has a lot on their plate.  Obviously, the connection of every desktop PC to the LAN and internet, plus in many cases, an IP phone system, and 3+ years worth of legacy hardware (or 20 years, in the case of the AS/400 wonderland that was Circuit City).  In the 90s and early millenium, all you heard about in every B-school case study was how we needed to maximize the efficiency of the enterprise by consolidating activities.  We suddenly saw the IT department saddled with the responsibility for fixing everything from a dead laptop to an installation of MS-Office.  The pileup of responsibility led to a department that does many things and has little or no bandwidth to help out with that marketing department skunkworks project in Social Media.

So, as always, employees do what they need to do to get things done, which these days means using cloud services to build bridges around an efficient yet inflexible enterprise.

Which brings us to our point.  Buying cloud apps or using social media at work need to stop being looked at as “workarounds” and we all need to realize that we are standing at the forefront of a new order of things. The cloud has driven costs down for serious business applications to a level that no longer requires the CFO and CIO to argue;  now you have a choice: you can buy a million dollar, custom made CRM or you can buy salesforce for your team at $65 per person, per month.  In the past, in order to make a significant expenditure, firms had to build a cross functional team to argue incessantly debate the features needed for the new software or hardware;  spec-ing and building a custom solution took years.

Those days are over.

Now is the time for each team or line of business or insert-silo-here to choose their own solutions.  Does marketing have their own special needs and desires for CRM? Great, let them be responsible for buying and updating the Saas app that they will use for their CRM system.  The relative low cost of these cloud apps makes it harder to argue for platform standardization in the name of efficiency.

IT needs to become one thing: a provider of connectivity.  Make sure that I can turn on my computer, open a browser, get online, make a phone call, and use my blackberry.  Why do I continue to argue for the reduction of the IT department to a provider of dumb pipes?  Because SaaS is only going to become more prevalent going forward, and web connectivity will be more important than ever.  On top of that, more and more workplaces are allowing, if not downright encouraging, their employees to work remotely some or all of the time; it behooves these firms to ensure that all of the applications used by their employees are accessible from either side of the firewall.  And if everything is accessible from both sides of the firewall, why have a firewall in the first place?

There are those that say the position of CIO is doomed, I disagree.  The last thing I would advocate for is some sort of work free-for-all of SaaS software;  someone still needs to stand at the top and govern these cloud apps: those who say different have never had to terminate a disgruntled employee at a company that uses dozens of unconnected cloud applications.

There are many organizations for whom this is not going to be an easy change.  It was Machiavelli who famously said:

It must be considered that there is nothing more difficult to carry out nor more doubtful of success nor more dangerous to handle than to initiate a new order of things; for the reformer has enemies in all those who profit by the old order, and only lukewarm defenders in all those who would profit by the new order; this lukewarmness arising partly from the incredulity of mankind who does not truly believe in anything new until they actually have experience of it.

There are still many out there that have not experienced the advantages that they will gain through this disintermediation.  There are many that are not convinced of the power of Social Media, of cloud apps, of SaaS.  This change is, I argue, inevitable.  In subsequent posts I will talk more about some of our success stories and some steps you can take with your firm that can show, at low or no cost, the advantage of corporate disintermediation.