McKinsey’s Business Trends to Watch

1 12 2008

McKinsey Quarterly offers some interesting observations on a host of key business trends that are being driven by the influence of technology like Web 2.0. Given the recent discussions, more food for thought.

These trends fall within three broad areas of business activity: managing relationships, managing capital and assets, and leveraging information in new ways.

I want to highlight the first and third in this post. Much of what os.a is all about relates to these MQ Trends.

You can find McKinsey entire article here.

Managing Relationships

Distributing co-creation

Technology now allows companies to delegate substantial control to outsiders–co-creation–in essence by outsourcing innovation to business partners that work together in networks. By distributing innovation through the value chain, companies may reduce their costs and usher new products to market faster by eliminating the bottlenecks that come with total control.

os.a Examples: New businesses created around networks versus traditional management hierachy

Using consumers as innovators

Consumers also co-create with companies… But the differences between the way companies co-create with partners, on the one hand, and with customers, on the other, are so marked that the consumer side is really a separate trend. These differences include the nature and range of the interactions, the economics of making them work, and the management challenges associated with them.

os.a Examples: Tapping end users to “co-create” content, product or services

Tapping into a world of talent

As more and more sophisticated work takes place interactively online and new collaboration and communications tools emerge, companies can outsource increasingly specialized aspects of their work and still maintain organizational coherence. Much as technology permits them to decentralize innovation through networks or customers, it also allows them to parcel out more work to specialists, free agents, and talent networks.

os.a Examples: Extracting more value from interactions

Technology tools that promote tacit interactions, such as wikis, virtual team environments, and videoconferencing, may become no less ubiquitous than computers are now. As companies learn to use these tools, they will develop managerial innovations–smarter and faster ways for individuals and teams to create value through interactions–that will be difficult for their rivals to replicate.

os.a Examples: Ride the LongTail , Web 2.0 Adoption by Companies by Global Region

Leveraging information in new ways

Putting more science into management

Leading players are exploiting this information explosion with a diverse set of management techniques. Google fosters innovation through an internal market: employees submit ideas, and other employees decide if an idea is worth pursuing or if they would be willing to work on it full-time. Intel integrates a “prediction market” with regular short-term forecasting processes to build more accurate and less volatile estimates of demand.

os.a Examples: Prediction markets for associations


Oxford University Institute Study on Open Innovation to Be Released

29 08 2008

A new study has been completed by Oxford University Internet Institute (UK) and will be published next month that was funded by McKinsey and Company.  Titled “The Wisdom of Collaborative Network Organizations: Capturing the Value of Networked Individuals” the study abstract says…

“Digital networks, particularly the Internet, are used widely to search for information and to share expertise and knowledge between peers. Such collaborative problem solving and co-creation of services and products go beyond traditional organizational boundaries and geographical constraints, raising major questions about how to manage networked individuals and capture the value of their activities. This paper conveys the findings of a series of case studies designed to explore these questions. This led to a framework for categorizing the networks which suggests the management and performance of ‘collaborative network organizations’ will be contingent on the ways in which they are used to reconfigure information and communication flows for the distributed sharing, generation or co-creation of content..”

OII’s research observations included the following:

  • Distributed Problem Solving Networks (DPSNs) do indeed present major opportunities to their participants. 
  • DPSNs offer clear challenges to managers and professionals who wish to create and sustain them that will address their goals and objectives. 
  • DPSNs encompass more approaches than originally envisioned which led the OII team to add new cases during the course of the project and to develop a range of competing typologies of these organizational forms. 

For those of you who need a non-research-centric translation… open innovation (and networking sites whose business models or product/service experiences are “open”) is indeed a significant and viable strategy to use to add member value.  We just need to think through the customer experience, governance, product development, and incentive model.

In the coming months, the OII will be considering ways to further develop selected case studies and topics, such as the investigation of governance structures and the multiple points of control within several distributed problem solving networks.

Among the current case studies is Sermo an online community of 50,000 licensed physicians in the US that we profiled last year on os.a. Physicians can ask and answer questions and surveys posed primarily by doctors and pharmaceutical firms. The Sermo community identifies interesting health trends, case and other novel health insights for the benefit of multiple stakeholders.

The reason my view of Sermo is different than say InnoCentive as a model to consider is in how it constructs participation and information flow.  The former seems opaque to me while the latter is much more transparent.   Sermo needs to be more transparent and one would hope the AMA (if they are still involved) wants that too.

Here’s an interesting story from NBC’s chief science and health correspondent Robert Brazell from last month on Sermo.

There doesn’t seem to be any update in 2008 on this partnership and how it has worked for the AMA. If anyone can provide an update it would be appreciated.

How Big Is Your Brain?

27 08 2008

In our Monday session on open business models at the ASAE & Center Annual Meeting, we discussed one of the core tenets of open innovation and its value to organizations in the 21st Century. It is the notion that network-centric systems and processes are often far better structures for delivering value than hierarchies. Or to put it more simply, using more “open” methods of product or service development are far superior to more traditional “closed” methods.

Here’s why…

Presently, association management relies on membership and a cadre of volunteer leaders often vetted by a peer group to serve alongside staff to deliver the membership experience. By and large this model drives almost all association activities. Over time, we have ladened this with bylaws, policies and procedures that are most often governed by the volunteer leader system itself. In addition, a “culture” often exists with “traditions” and other “informal rules” that provides a hidden support system.

This system is deemed “closed” because to get access you must jump a series of hurdles: 1) become a member, 2) seek an invitation to serve as a volunteer leader, 3) follow the rules (as defined above), 4) play the game trying to fit into the volunteer management “culture” and its peculiarities. The latter may require waiting your time to contribute where and when you want or racking up enough tenure and political points to make a contribution.

To say that a growing number of professionals (in many age groups but most especially under the age of 35) prefer to pursue other avenues for creative professional outlets is an understatement. One need only look at renewal rates or the lower levels of younger professionals coming into membership after college to verify this trend.

Some call this a “walled garden” where you have to pay to play.

And then something amazing happens. Thanks to the Internet and collaborative software professionals anywhere can collaborate to create amazing value. In business history, we can point to the rise of the “opensource” software movement for creating “open innovation” practices that are being used by business today with great success. The Linux operating system which has now reached a 30% global market share versus Microsoft is a shining example of the power of “open” methods of product or service development.

So I ask you…if a few hundred software engineers working from a network model could create a product of such complexity and value that it competes successfully against Microsoft (a hierarchy by the way), what makes you think your own members or nonmembers couldnt make you more successful if you tapped into them more effectively?

The problem with our current volunteer leader model is our collective brain is no bigger proportionally than one from a brontosaurs. On average our volunteer leader population is maybe 1-2% of the total membership. That’s all the brain power you have. Contrast that with the ability to tap the entire membership AND nonmembers and your brain power increases exponentially. And we haven’t even talked about how unbalanced our brains might be geographically and how this could leave us less able to tap a more global perspective.

If you attended Dr Satish Nambisan’s thought leader session on Sunday, this is a over simplification of his whole thesis.

So how does one leverage this open approach?

You need methodologies that can work in an online networked world that can help you:

  • Define and measure member value
  • Create products and services
  • Govern
  • Adapt your business model

And you need to adapt your culture. Make sure to read Satish’s book. It is much more useful than Wikinomics in this regard.

The good news is we have lots of successful examples from which to study. InnoCentive who spoke at this session on Monday as well as Tuesday is but one example.

So if you have trouble attracting younger members or finding enough good volunteer leaders, try open models for delivering member value.

Some old posts to explore this topic further

A conversation with Satish Nambisan author of the Global Brain

Walled Garden Strategy Loses Another One

Networks vs Hierachies

Tuesday’s ASAE Session on Crowdsourcing

22 08 2008

Thanks to all for attending our session and for Moshe Pritsker, PhD from JoVE and Chuck Davis from InnoCentive for coming to the ASAE and Center AGM in San Diego this year.

Here are our slides from the session titled, “Associations Next Crowdsourcing the Creation of Value.”

Note: Session was recorded by ASAE & Center so you can play them together from here.

Session Introduction provided by Jeff De Cagna of Principled Innovation.

Peter & Chuck’s presentation (download and view in slide mode)

Moshe’s presentation (download and view in slide mode)

Samples of previous posts

What is crowdfunding?

Crowdsourcing news

Crowdsourcing publishing

McKinsey study suports co-creation (e.g. crowdsourcing) practices

Having the courage to adapt your models of engagement

“Father of co-creation” speaks out

Tiny company with 12,000 customer product development community

Lots more by going to the right hand margin under “product co-creation.”

Monday’s ASAE Session on Open Innovation

21 08 2008

Thanks to all for attending our session and for Chuck Davis from InnoCentive for coming to the ASAE and Center AGM in San Diego this year.

Here are our slides from the session titled, “Associations Next: Using Open Business Models to Create New Value.”

Note: Session was recorded by ASAE & Center so you can play them together from here.

Session Introduction provided by Jeff De Cagna of Principled Innovation.

Peter’s presentation (downloads should be played in slide mode)

Chuck’s presentation (no downloads permitted)

Previous Related Posts

HBR’s take on the importance of openness in innovation

More background on open business models applied to associations

InnoCentive’s business model explored – TV interview

Make sure to review the posts and links of open innovation research from McKinsey, Forrester,etc as well as more examples of open business models from the column on the main page of os.a.

TED Conference Injects Crowdsourcing

27 02 2008

If you are a devotee of TED’s videos you know that this event has has some amazing presentations. I have been jealously watching them for years since the event was started by Richard Saul Wurman. But I always wondered whether people walk away from such an inspiring event and feel a little frustrated as the enthusiasm runs through their fingers like so much sand without marshaling that emotion into real projects.

This year TED looks like they are fixing that problem by bolting on a crowdsourcing attendee experience using a new software product called Kluster.

Watch this video to see how they plan to do it. (Click on image)

Over the 72 hours of TED, they plan to use the power of the audience and the rapid-prototyping system and software to develop a tangible product. And we can all join the party. You can sign up here.

Good luck guys.

Control? Due Diligence? Distrust? Lack of Imagination?

9 02 2008

For decades we operated closed systems controlling who designed, delivered and received the credit from standards to best practices to industry guidelines. To some members and observers it was seen as a kind of feudal system.You can almost envision a castle surrounded by a moat with kings and queens, dukes and duchess, knights and serfs. A cultural of entitlement reigned as IP protection systems safeguarded all who served the system inside the walls.

Kind of like this…

Today many IMO’s are tracking the slow trend of negative growth in membership as older players retire or change careers while student members “vote” with their feet as upon graduation they never take their expected place as young professional members around the roundtable.


Could it be they see a closed system that does not relate to their own views about career, profession and group interaction? Do they perceive a sense of distrust among the “chosen” or “entitled” class? Is the system stacked against those who prefer to pursue ideas and outcomes rather than to follow older “pay your dues” methods that keep power with those with tenure? Or is it a lack of imagination? A lack of recognition in how new generations want to interact, collaborate, and achieve?

Forrester Research conducted a fascinating study on how different generations use the Internet. It may hold part of the answer to these questions. And whoever is in charge of “due diligence” better study up.

Running from left to right in columns are the generations from the NetGeneration/Millenials (the largest – those under 22 years), Gen Y, Gen X, two groups of Boomers, and Seniors. The rows represent different types of ways people prefer to use the Internet. From top to bottom they represent preferences of engagement from the most (the lean forwards) to the least (the lean backs). Turns out just like different styles of learning, people have different preferences for online activity.

What is critical to appreciate is how from old to new you can see the tremendous change in how people prefer to create, consume and collaborate. As you might expect, the older you are the least likely you are to be active online. I saw this first hand in many board rooms and among established experts in the ICT industry who amazingly were totally ignorant of how the world is changing despite their expertise and credentials.

This slide is super critical to appreciate. If you are segmenting your customers be sure to include generational segmentation as you examine product design and delivery or governance models. You ignore the coming shift at your own peril.

Here is an interesting example of what I mean.This Millenial plays video games. He hates Sony’s new product so much that he created his own “video of complaint” and posted to YouTube…1.8 million views later I found it last summer. Today that number is over 3 million.

This couldn’t have been done ten years ago by one person with an idea and a PC. And would have cost $100,000.This video is an illustration of the expertise, passion, knowledge and creativity that “lives beyond the walls” of your closed system.

Do your due diligence…. Examine new models…. Embrace more open systems …. Or become marginalized slowly like the air running out of a balloon.