The Evolving Nature of the Firm – Enterprise Social Architectures

7-15-2013 9-24-08 AM More and more enterprise focus is outside the bounded rationality of Coase’s transaction cost economics (TCE). The firms of the past were transactional by nature. Today, the firm is fast evolving to a interaction versus transaction model. This is called the knowledge-based view (KBV). The most valuable enterprise network structures are social. The network patterns have complex properties. The logic of the new firm is social. It’s the unique social networks and knowledge patterns that make it competitive in its markets.

This focus on external ecosystems and transorganizational knowledge networks is often orthogonal, at loggerheads with the traditional, rather introspective ‘organizational architecture.’

The IT infrastructure, development, and operations principles of the past and in the ‘Information Technology Infrastructure Library’ (ITIL) are oriented to stable, transaction-based equilibrium. They aren’t meeting the complex properties or requirements of transorganizational knowledge and social information management. 

In working with the largest ERP vendors at the most senior levels, it’s obvious this fundamental shift, The Evolving Nature of the Firm -Enterprise Social Architectures and the rise of The Social Enterprise gives them heartburn.

The reflexive response, of course, is service oriented architectures (SOA) and rigid standards. SOA has been around for quite a long while. The transformation to social network-based benefits, advantages, competition and economics is new and growing exponentially. Innovative IP networks will also see sharp growth. Social networks are fast becoming the central underlying principle and platform. I.e., It’s The Human Network, “…where people decide what’s possible…” (Cisco)

It is impossible to model, engineer, deliver and optimize complex knowledge networks with conventional, linear BPR-style process tools or the ITIL transaction models. The linear ‘chain’ mentality is out. The ridiculous farce of knowledge management standards is waning, dying a slow, painful death. 

Meanwhile, traditional process-oriented ERP systems, behind the firewall, are indeed very complicated needing very lengthy analysis, reductionism and linear modeling.

However, the new Enterprise Social Architectures (ESA) are complex network ecologies. They inhabit the white space within and across organizations. They are served not codified. They inhabit the cloud. The create the future. Users and consumerization determine implementations and standards.

Enterprise Social Architectures must be conceived, modeled and delivered using social network archetypes, kinetic visualizations and enterprise social network analysis (SNA). This approach achieves seamless business interoperability, security with openness, performance, reliability and above all, the law of increasing returns.

For example, because ‘organizational architecture’ is a structural mindset for the composition of governance, it is poorly suited to enterprise entities that are ungovernable by definition, such as complex business ecosystems.

Rather, complexity equips leaders with the logic to rapidly advance comprehension and optimization of critical business and organizational ecologies. The whole systems view and systems thinking have categorically and permanently replaced analytic reductionism as the core management archetype of the enterprise, business and government.

The ‘organizational structures’ of conventional IT by utility, use, advantage, standards and value are not fluid or dynamic. They help keep the lights on (KTLO) mostly. They are a cost center and necessary evil. They are central to the continuity, stability, predictability and equilibria of core operational activities of the firm.

The rise in social networks, complexity science and biological metaphors is symbiotic with conventional and future organizational patterns and ecologies. They optimizes and evolve the firm’s key business ecosystems such as peer production, crowdsourcing, transorganizational collaboration, edge-based innovation, prosumers, strategic diversity, intentional networks, intangible mastery and so forth and so on.

Faced with pernicious, circa 1990 KM Standards and obsolete process engineering these broad network patterns and ecologies wither and die w/in the structural confines of organizational architectures; they thrive and flourish in organizations fluent in complexity, systems thinking, social networks and consumerization. 

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The role of leadership in a complex network firm is coordination and cultivation, not organization, control, standards or architecture. The principles of benefits, advantages, intangibles are more complex. The new firm properties are more akin to biology, than the complicated characteristics of the relatively stable and uniform artifacts of enterprise infrastructure.

The great news is that comprehension, application and mastery of the complex network mindset is relatively easy. It’s because it has analogues in nature. It is something we all understand, yet have been trained for years to ignore in favor of analytical reductionism, empirical analysis and overbearing, linear process methods.   

Coase’s seminal paper, “The Nature of the Firm,” was written in 1937. He received the Nobel Prize in ’91. Ronald Coase passed-away in October 2013 at 102. Interesting, now, in 2013, a deeper comprehension of networks and complexity, allows leaders to fundamentally rediscover the true ‘Nature’ of the Firm.


Colabria Action Research

Colabria EET

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