Network Effect

Colabria Gossip Girls There has been some encouraging blog chatter recently linking process engineering and the law of decreasing returns to scale for business. Business has discovered their near clinical preoccupation with process and malignant overuse of BRP and its exponents is leading them down the path to oblivion. Process has it place in business. Just as function, hierarchy, bureaucracy and other important organizing foundations have theirs. However, the addiction to process is killing the patient.

The historical context of business is scarcity. It is often a zero-sum game: you need to choose between two options – one wins, one loses. For business computing, it is manifest in rigid analytical reductionism, controlling dominion and a very confining process engineering mindset. It is the Newtonian model of business computing: linear, mechanical, ordered. It has always been about controlling scarcity – memory, CPU, network, man-hours, etc.

The height of business process arrogance was the gurus’ mantra circa 1990 in response to complex business ecosystems, “Don’t Automate, Obliterate!” Some will even ask for large sums of cash today to tell you their advice in the 1990s was completely wrong. Wow! What chutzpah!

Colabria Abundance

 Today, business computing is about abundance. The economics of abundance and information turn standard principles of business governance and leadership on their head. The networks mindset introduces the law of increasing returns to scale for business. It is eponymously known, of course, as the network effect

In the new world of abundance, only the whole system view makes sense. Breaking things down into little parts, then reassembling them, like BPR, and expecting a different result, never works. The system level view and networks approach is how to comprehend and lead environments of overwhelming fullness and diversity.

Only by serving the networks, embracing variance and really understanding how things organize themselves, can firms begin to enjoy the law of increasing returns. Social networks are the net-centric, quanta model of business IT: networked, complex, diverse, outcome-based.

The social network effect inhabits the complex ecologies and whole ecosystems. It is released, realized through visualization and comprehension of the whole system, not the constituent parts.

Colabria Network Effect

For example, the old business process stalwart of supply chain management (SCM) is being crushed by increasing complexity. Trusty ERP applications are being asked to span organizations, to be mashed up into diverse, socially mediated, individuated ad hoc solutions. Network visualization and analysis provide the whole systems view that achieves mastery, governance and leadership of these complex, boundary-spanning information techniques. They  are so critical to enterprise knowledge workers and the network effect.

Knowledge management, another misconstrued and maligned yet essential organizational foundation is about connection not collection. The network effect creates fundamentally advances in KM.

The Social Enterprise is leading the headlong business transformation from scarcity to abundance, from process to network and from ordered mechanics to network patterns. It is not easy. The network effect shift in comprehension is the first step in mastering the law of increasing returns for business.

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