Friday, October 24, 2008

Web 2.0 acts as accelerant in pending corporate Darwinian shake-out, says Palladium Group CEO

The impact of Web 2.0 technologies on the current global economic downturn will hasten the demise of closed and siloed corporate cultures while providing a reality-based balm on those companies that seek transformation and adaptation by tapping the wisdom of its communities.

These were some of the high-level observations from a chat I had this morning with Dr. David Friend, chairman, president and CEO of Palladium Group, a prominent performance management and consulting firm in Lincoln, Mass.

The swift and severe economic recession predicted by economists and presaged by plunging stock valuations worldwide points to a difficult period of months and possibly years, said Friend. And that means that the decisions that companies and government agencies make during the tumultuous period will carry more impact, perhaps making the difference between organizations becoming adaptive survivors or calcified road kill.

Companies in today's increasingly "hot, flat and crowded world," said Friend, need to make better decisions. Information alone does not do the job. A systemic and ingrained corporate capacity around decision making is needed. Former lions of Wall Street Lehman Brothers and Bear Stearns had oceans of data at their disposal, for example, but still made decisions that imperiled the venerable firms, such as allowing 40-times leverage bets against risky investment instruments.

Palladium Group, formerly the Balanced Scorecard Collaborative, works with companies to help develop strategy, performance management, and business intelligence (BI) methods that help implement "decision cycles" that foster better business outcomes. "It's about building decision-making engines," said Friend.

Today, more than ever, companies need to make decisions fast, based on accurate and comprehensive information. Those analytics need to reach the people who can act and communicate effectively. Yet even in good times, companies tend to take complexity and attack it via compartmental and isolated sub-problem-solving.

The result is that "IT people think about IT, budget people think about budgets, and strategy people think about strategy," said Friend. The decisions, therefore, are faulty or missing because the fuller implications and inputs are not assimilated. Companies, in effect, lack a figurative right brain function, or lose it over time.

New tools, collectively grouped under Web 2.0, however, have emerged in just the past few years that could have a dramatic bearing on how companies newly react to the pressures of the economic contraction. Severe downturns act in a Darwinian fashion, weeding out the ill-adapted and weak, and rewarding the fittest and agile. Web 2.0 will aid the agile and open while placing those who don't use tools such as blogs, wikis, podcasts, social networks at a disadvantage, said Friend.

Friend has a blog for his employees, he said, but it is not easily found via Web search. I find this a bit anachronistic given his stated fealty for the medium.

Nonetheless, BI and Web 2.0 can act in cohesion, said Friend, by allowing better communication about empirical findings and effects, and also injecting more valuable insights from more people with better access to changing environments. Friend cited the use of wikis by the U.S. intelligence community as a way of dramatically improving collaboration and cooperation among rival or siloed agencies.

For those companies that, by culture and tradition, act as dictatorships, with decisions that emanate from the top and which punish countervailing information from reaching decision makers, they will not benefit from the wellspring of information available from employees, customers, partners, and even competitors. Those who avoid or undermine the benefits of Web 2.0 tools will lack the information that leads to better decisions, will miss the ongoing refinement of strategies by those witnessing their impacts.

The power is in the "democratization of information," said Friend, and then of placing that information in the context of proper decision-making. The flow of information and its exploitation for the business's benefit will hasten the decision cycles, for better or worse, said Friend.

I fully agree with this assessment, and I also believe that the economic challenges will accelerate the transformation of both IT and business. IT needs to, as usual, reduce total costs while improving business outcomes. BI and Web 2.0 are essential ingredients for this challenge. But the business leaders must also see the value in these tools and expand their usefulness by integrating them into their decision cycles.

To do this means resisting the urge to slash IT budgets generally, but instead to fund the tools that will provide agility and better decisions, of investing in the means to increase revenue and improve the competitiveness of companies. The payback from BI and Web 2.0 collaboration are well understood. The decision on their use is what needs to be made -- not avoided or overlooked.