SmoothSpan Blog

Web 2.0 is all about collaboration.  In fact, I mentally substitute the word “collaboration” for Web 2.0 in any context where I’m having a difficult time understanding and it generally makes things much clearer.  Thanks to O’Reilly for that!

Harvard professor Andrew McAfee got me thinking about the differences in the Trust Fabric (how Social Networks govern Trusted access to information) between Business users of Web 2.0 and Social users of Web 2.0.  His post, The Great Decoupling, gives some exciting insights into how information flows within corporate hierarchies.  The gist is that historically, information has flowed hierarchically within organizations.  This is because decision making requires information and historically, it has been costly to gather and disseminate information.  These “economics of information distribution” have largely restricted information flow to corporate hierarchies, but the times they are a changin’.  One of the two factors, the costs to gather and disseminate, have been greatly diminished and commoditized by the Web.  Nowhere is this effect more strongly felt than in the Web 2.0, which has become the ultimate evolution of that trend.

MIT’s Tom Malone has gone on to write about the effects of this in his new book The Future of Work.  In his book, Malone likens the changing topology of information transfer with the hypothesis that decision making will follow suit:

This all leads to massive decentralization of decision making in organizations.  It all sounds great, right?  But then McAfee starts to disagree a bit with Malone for a very solid reason:

But the fundamental rule about where decision rights should go has nothing to do with information costs themselves. Instead, it has to do with knowledge. The ground rule is: align decision rights with relevant knowledge.

This is an absolutely crucial insight.  McAfee goes on to give an example wherein some loan officers at a bank make better credit risk assessments than other officers.  Clearly, decentralizing the decision making to all the loan officers is counter productive–it should be further centralized to just those officers who make the best decisions.

There are many other examples.  I like to think in terms of categories of information that need to stay within the corporate hierarchy but that are essential to decision making.  Here are three examples:

Morale:  Do we really want everyone to know how poorly some initiative is going?  How will it help to tell those who can’t make a difference and would only be depressed by the knowledge?  Is it fair to expose some internal squabble that was mostly sound and fury signifying nothing?  Won’t that just unfairly tarnish some otherwise good people’s reputations and make them less effective?

Governance:  Is the information legal and appropriate for everyone to know in this age of SOX and Securities Laws?

Competitive Advantage:  Do I want to risk giving my competitors access to key information because I’ve distributed it too broadly?

The headlong rush the Web brings to expose everything to everyone scares the heck out of most corporate types.  Their two biggest requests for Web 2.0 initiatives are Governance and Security, and the reasons for it are exactly what we’ve been discussing.  It isn’t just that they have “control issues”.  There are sound business reasons why controls have to be in place.

McAfee alludes to this as well when he says:

The net result of disappearing information costs won’t necessarily be decentralization. It will instead be the decoupling of information flows and decision rights. Organization designers will be able to allocate decision rights without worrying about how costly it will be to get required information to deciders. Leaders will be able to ask “Who should make this decision?” without adding “Keeping in mind that it’s going to be slow, difficult, and expensive to get them the general knowledge they’ll need.”

The set of rules and data structures that define this mashup between information flows and decision rights will be an essential component of any broad-based Web 2.0 initiative for Business.  It defines differenes in how the Trust Fabric for a Business Social Network has to operate versus how a Social Social Network (sorry!) has to work.  This makes the Web 2.0 problem for business considerably more difficult than just firing up the LAMP stack to deliver a MySpace or Facebook clone to your chosen community of employees or customers.  It requires an odd combination of totally control-centric Enterprise Software think with the Laissez Faire mentality of the Web.

Dion Hinchcliffe over at ZDNet says:

Silicon Valley proper has for the most part become thoroughly bored with the Web 2.0 meme despite the largely superficial presence of the most powerful Web 2.0 concepts in many online products and services.

At the same time, mainstream business is just now getting ready for Web 2.0 adoption and are beginning to incorporate the underlying technologies, platforms, and concepts into their IT departments and lines of business.

The trouble is that so far Silicon Valley has largely built Closed Social Web 2.0.  It’s bored with that and is somewhat thinking about how to build Open Social Web 2.0.  There’s a lot of discussion about Social Graphs and Trust Fabric going on everywhere from Scoble’s Plan for Google’s Demise to the 2 Marc’s (Canter and Andreesen) Plans to Steal Away Facebook’s Crown.  Seems everyone agrees they want Web 2.0, and they want it delivered in such a way that it is open.  Business also needs to make sure it has a seat at the table as well so that its unique needs can also be met.

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