SXSW reflections will come soon, but first…

On the opportunity (and dying, crushing need) to revamp organizational structures:

• John Hagel, Attracting Talent in Spikes and Firms (via Ethan Bauley):

  Attract and retain vs. access and motivate. Talent strategies of companies often focus too narrowly on the talent that resides within the enterprise. … Few companies make a systematic effort to map the relevant talent that exists outside the company. Even fewer companies develop effective strategies to access and motivate that talent through networks of relationships, including positioning in relevant spikes around the world.

  … At the most fundamental level, the rationale for the firm is shifting. As JSB and I have written, the rationale for the firm articulated by Ronald Coase back in the 1930s – that firms exist to economize on transaction costs – is diminishing in importance as continued innovation in IT systematically drives down transaction costs. In its place, we are seeing a new rationale for the firm emerge – firms exist to accelerate talent development. This is increasingly the reason why people choose to affiliate with firms. They believe they can get better faster by working with others within the firm, as well as with others across firms, through the privileged relationships built by the firm. If firms can’t find ways to deliver on this promise, talent will exit and Tom Malone’s e-lance economy will flourish.

  And a more recent refresh:

• John Hagel, John Seely Brown and Lang Davison, Tomorrow’s Talent Networks:
  

  Operations, organization, and strategy must all be reconceived through the talent lens. They must be re-thought as part of pull platforms that treat all workers as capable creators who are continuously improvising in response to unanticipated situations. In this view, talent isn’t just the highly trained and deeply skilled knowledge workers one typically thinks of as talent: they’re just about everybody.

  Push programs have enabled scalable, cost-effective operations. But they’ve come at a steep price: the rigid standardization and specification of activities and tasks they require. What if instead companies were to create more flexible pull platforms to help employees access resources whenever and wherever they are needed? What if, rather than treating exception handling as a nuisance to be eliminated, companies welcomed these problems as opportunities for participants to tinker and experiment?

  Pull platforms are essential to fostering learning on the job since they can make it easier to access unexpected resources in unexpected ways and thereby encourage participants to try new approaches that simply would not be feasible in more rigid push programs.

  Structures compete for talent; as much as I talk about the frames creating the opportunities for a larger scale of entrepreneurship based on the structures for personal, distributed, collaborative value creation, the issue is truly about economic organization and the rationale for the firm. In essence, firms will adapt to create better structures for organizing and utilizing talent to compete for talent being lost to better organizing firms and to new ventures.

  How?

• John Hagel, John Seely Brown and Lang Davison, The Strategic Advantage of Global Process and Practice Networks:
  

  … No matter how much talent a company might have, there are many more talented people working outside its boundaries. Yet all too many companies focus solely on acquiring talent, on bringing talent inside the firm. Why not access talent wherever it resides?

  … Companies must also participate in (and sometimes orchestrate) new organizational forms and structures called global process and practice networks.

  … Both kinds of global networks — process and practice — create opportunities for talent to come together and generate “productive friction”: a powerful force that shapes learning, as people with different backgrounds and skills work together on real problems.

  While many executives pursue the nirvana of a frictionless economy, aggressive talent development inevitably and necessarily generates friction. It forces people out of their comfort zone and often involves resolving differences among people with divergent views and experiences.

  How? Organize the right environments to generate productive friction and innovate talent management within the firm. Read the rest of the post for details.

  What are firms doing to create better structures for organizing value creation?

  (Note: organizing value creation is not the same as organizing people.)

• Morten T. Hansen, Harvard Business Review April 2009, When Internal Collaboration is Bad for Your Company:
  

  Internal collaboration is almost universally viewed as good for an organization… But the conventional wisdom rests on the false assumption that the more employees collaborate, the better off the company will be. .. Our research [into 100 experienced sales teams at a large IT consulting firm] yielded a surprising conclusion about this seemingly sensible practice: The greater the collaboration (measured by hours of help a team received), the worse the results (measured by success in winning contracts).

  Wait, that’s a surprise? Since when was collaboration merely about the HOURS of knowledge sharing? Since when was collaboration merely about sharing information?

  The rest of the article spends its entire time creating a decision framework based on calculating the “collaboration premium” using the benefits and costs from collaboration. Yet no time or thought is spent on the strategies or tactics behind collaboration; the entire article is based on the premise that internal collaboration is equal to time, when in fact many of the real opportunities behind current technologies are to create better structures for collaboration, making time a much less important driver behind collaboration. Collaboration is much more than just sharing information. A waste.

  How about a better example?

• Aaron Chua, A crisis in human resources. My comment:
  

  The biggest opportunity is to change the structure of management, the hierarchical systems we created in order to pass down structures and tie people to processes. As our ability to communicate processes and needs improves through better, cheaper, transparent and archivable communication tools management will be less needed, leadership will be more important, and “linear progression” career paths will be less necessary and lucrative.

  People follow value creation, and people will follow the value creation to the edges. Now if the edges could just make money

  Maybe they can…

• Via Ed Cotton, The Open Company – Running your business as if it were an Open Source Project..

  Based on the idea that “self-organizing groups in many cases can outperform traditional organizations”, E-Text Editor is working to create structures to give people “the freedom to decide for yourself what you want to work on”.

  Imagine you had a company like this. Totally open. No concept of bosses or employees. Anyone could join in at any time, doing whatever task they found interesting, for whatever time they found appropriate. How could you possibly find a way to compensate them fairly?

  The key is in a technology called Trust Metrics. In essence this is a technique for rating each other, but with the key distinction that the way ratings are calculated makes cheating ineffective. This is a new technology, which has not been applied for this purpose before, but it has already proven itself as the underlying principle behind such well known technologies as Googles pagerank and the certifications on Advogato.

  By basing the compensation on continuous rating by your peers, it becomes possible to start out by just participating a bit in your free time, and then gradually, as your ratings increase, spend more and more time on the project. It may eventually come to fully supplanting your day job, becoming your primary source of income, or you may choose to just keep it as something you do on the side. And not only can nobody stop you from participating, there is nobody who can fire you either. This makes it a far more secure way to make a living, where your status is solely dependent on your own ability and effort, rather than on arbitrary decisions from some superior.

Can we “pagerank” an organization?


• Developing open, flexible and transparent platforms to power a new breed of organizations has been a recurring topic of mine: how can we develop the funding and organizational models…
  … to incubate and “scale our lives” by creating personal ecosystems…
  … using systems such as peer-production and the social venture commons…
  … to power our personal “freemium” life models…
  … by enabling us to create and “exchange” social capital…
  … and lower our inter-personal transaction costs…
  … and create cheaper context behind our value-creating actions…
  … to create our own hubs on the edges of value creation?

  Much more on this later…

It’s funny how old ideas come back to you. Following up from my earlier post Hello, I’m Taylor. (And I’d like to meet you at SXSW), here’s your chance to view the presentation that won’t be “shown” in the SXSW Core Conversation room and your opportunity to participate in the discussion if you’re not at SXSW.

“Venture Capital for Long Tail Entrepreneurs” describes the need for a fundamentally different, economically viable model for creating and funding micro-businesses. Venture capital needs a new model to adapt to declining costs to start businesses, the impact of Generation Y and increased personal and corporate transparency and sharing.

• THIS IS NOT: “How to raise venture capital”, “How to fund your startup,” or “What is the right funding and operational model for a venture capital firm today.”
• INSTEAD: The future will be different than today; knowing that, what cultural, business, technological and political trends are “framing” our future?

Presentation and Talking Points
These slides won’t be shown at the SXSW Core Conversation itself, but will be available for anyone to view on their own devices in the room and at home.

Ten Frames (+1)

• A. Value is created at the edges, but captured at the hubs.
  B. The Long Tail has many edges ”and it better have a hub”.
• Broken or not, venture capital is ripe for creative destruction and reconstruction.
• Incubate people, not companies.

  “Lifestyle business” shouldn’t be a dirty word.

• Collaboration is a core competence.
• Companies are people.

  “Transparent lives” will create “transparent companies”.

• “Scaling people” is the untapped promise of the Internet.
• Creating context is more valuable than creating content.
• Social capital isn’t new, but everything about it is.
• Value (flow) is king.

  Value > Cash
  Flow > Stock

• “Passion allocation” is more important than asset allocation.

  Time, passion and attention are the most important costs of tomorrow’s economy.

• Generation Y isn’t waiting around.

  Conflicts create companies.

• Everyone is a futurist.

  Yet we’ll almost always be wrong.

Participate in the Backchannel
We all know the conversation is the most important part, but only a small part of the potential discussion will actually reach everyone in the room. Participate in the broader discussion in the comments below from SXSW and from home; I will answer all questions and dig into the backchannel after the “official” discussion ends.

Details

• “Venture Capital for Long Tail Entrepreneurs” Core Conversation on Sunday, March 15th at 3:30 PM in Hilton Room E.
• Short URL to this post: http://bit.ly/xxhRA
• Hashtag #SX09-682 to participate in the discussion on Twitter; admittedly, most people will simply use the #SXSW tag.
• Click here to read past writings and comments about the subject.

About Me

• I’m currently driving cross-country from Virginia to California (and back) meeting interesting entrepreneurs, investors, photographers and change agents. Check out the full details on the trip so far. And yes, I took all the pictures in the presentation.
• I write two blogs, Unstructured Thoughts (about business, entrepreneurship and innovation) and Taylor Davidson | Photography, Travel & Culture (about photography, photography business models, travel and more), and I love to interact and comment across the web.
• I’m easy to reach by email, phone or @tdavidson, and I’m easy to find on the web on my photography and business websites, LinkedIn, Facebook, Backtype and many more profiles across the web.

Influences & Thanks
Umair Haque, John Hagel, Kevin Kelly, Chris Anderson, Ethan Bauley (@ethanbauley), Alan Patrick (@freecloud), Michael Lewkowitz (@igniter), Chris Schultz (@cschultz), Mike Bonifer, Aaron Chua, Sean Tario and many, many more that have commented, provided their thoughts and added to the conversation.

“Venture Capital for Long Tail Entrepreneurs” is an idea that describes the need for a fundamentally different model for for creating and funding micro-businesses in the Long Tail of the economy as our society shifts towards a more personal, collaborative and distributed system of value creation. Click here to read more about the subject. Details: Sunday, March 15, 3:30 PM, Hilton Room E (tag #SX09-682)

A bit about meet me…

• I’m at SXSW in Austin, Texas this weekend (Friday 13th through Tuesday 17th). Drop me a line to meet me at the event or come to the “Venture Capital for Long Tail Entrepreneurs” Core Conversation on Sunday, March 15th at 3:30 PM in Hilton Room E (tag #SX09-682) to participate in the discussion. Check out the basic details on the core conversation on the public SXSW and my.SXSW sites.
• I’m currently driving cross-country from Virginia to California (and back) meeting interesting entrepreneurs, investors, photographers and change agents. Check out the full details on the trip so far.
• I’ve got a variety of interests and “frames”; business strategy, photography, innovation, entrepreneurship, financial modeling, nomad, perspective and hope.
• I write two blogs, Unstructured Thoughts (about business, entrepreneurship and innovation) and Taylor Davidson | Photography, Travel & Culture (about photography, photography business models, travel and more), and I love to interact and comment across the web.
• I’m easy to reach by email, phone or @tdavidson, and I’m easy to find on the web on my photography and business websites, LinkedIn, Facebook, Backtype and many more profiles across the web.

But more importantly, I’m looking forward to meeting everyone else, listening and learning.

Also
Want to enjoy SXSW? Chris Schultz (@cschultz) of Voodoo Ventures created a list of practical details on How to Rock SXSW.

Have fun…

Updated
The original title of this post was “Hello, I’m Taylor. (Meet me at SXSW)”

And then I realized it’s really not about me, and that I’m more interested in meeting you; and thus I changed the title to “Hello, I’m Taylor. (And I’d like to meet you at SXSW)”

I feel much better about that…

Continuing the discussion from the last (real) post, Invest in the venture system, not venture capitalists…

Click on the graphic “Mapping Innovation Clusters” below to view larger.

CREDIT: McKinsey

A couple questions to start:

• Can governments create entrepreneurial hubs?
• What routes have governments taken to seed and direct innovation hubs?
• Is there a natural linkage between creating an environment for new ventures to creating innovation hubs?
• Typically entrepreneurial hubs require a base of entrepreneurs and venture capitalists to flourish; can governments replace venture capitalists?
• Will wee see a different kind of entrepreneurship hub (and innovation hub) emerge and flourish on its own terms in a world of a more distributed, collaborative and distributed system of value creation?

I have a feeling these themes are going to underline a lot of my upcoming thinking…

—

Starting with three separate but related thoughts:

• Paul Graham, Can You Buy a Silicon Valley? Maybe.:

  A lot of cities look at Silicon Valley and ask “How could we make something like that happen here?” The organic way to do it is to establish a first-rate university in a place where rich people want to live. That’s how Silicon Valley happened. But could you shortcut the process by funding startups?

  Possibly.

  Read the rest of Paul’s thoughts for the concerns, processes, issues and practicalities.

  … I realize the chance of any city having the political will to carry out this plan is microscopically small. I just wanted to explore what it would take if one did. How hard would it be to jumpstart a silicon valley? It’s fascinating to think this prize might be within the reach of so many cities.

  Although Paul wrote specifically about US cities, the idea applies to any city around the world. Alan Patrick describes how the idea could apply to London; by his estimation, not easily, or cheaply.

• McKinsey: What Matters: Building an innovation nation:
  

  Our analysis of the world’s must successful clusters shows that they have first established themselves as world-class players in an emerging specialty before expanding. This focus allows locations to concentrate limited resources, such as labor and capital, on developing competence and credibility. When successful, the result of these first two steps is the emergence of what we call an “innovation hot spring”: a small and fast-growing hub that relies on a small number of companies to establish itself as a relevant world player in a narrow sector.

  McKinsey identified three primary paths, which essentially break down to the usual: build (direct and indirect), buy (import) and luck into (R&D -> commercial success). Yes, I’ve over-simplified; but still, McKinsey over-focuses on “big innovation” and neglects the kind of daily innovation that occurs throughout the world every day as people adapt and create solutions to address their unique, local opportunities and problems.

  The graphic at the top of this post comes from McKinsey; while it’s interesting, it’s possibly misleading (focusing on patents as measures of innovation) and more worryingly, focused on an incomplete view of what innovation can and will be.

  Curious why?

• John Hagel, John Seely Brown and Lang Davison, The Case of Institutional Innovation:
  

  … existing institutions, firmly rooted in the world of push, will require significant redesign in order to effectively harness the potential of pull. Institutional innovation – redesigning the roles, relationships and governance structures required to bring participants together in productive endeavors – will be a key requirement. In fact, institutional innovation will trump either product or process innovation in terms of potential for value creation.

  … pull institutions will need to re-orient completely with regards to talent as we re-imagine corporations and other institutions as places where talented individuals experiment, learn, perform, and thrive. This will in turn require far-reaching changes to strategy, organization, operations, and technology.

I’m becoming increasingly interested by the examples, best practices and case studies around the roles governments can play in creating innovation and entrepreneurship hubs (and yes, those are separate entities) through direct government intervention and indirect incentive and system structuring.

But are governments paying attention to the right kind of innovation?

—

Aaron Chua (@aaronchua on Twitter) from Singapore’s Interactive Digital Media (IDM) Programme Office recently contributed to a great conversation on my recent post about the various ideas around a “entrepreneur / venture capital stimulus package” to jumpstart the US economy. Aaron has written extensively around the opportunities, challenges and processes behind government investing in startups in Singapore on his blog and has commented extensively on this blog; where are the examples from other governments throughout the world?

There are many, many opportunities for entrepreneurs, investors and innovators outside the US; where are the best places to read more about innovation and entrepreneurship outside the US echochamber?

I’m ready to dig in far, far more…

—

Lastly, food for thought: Michael Lewis, Wall Street on the Tundra.

Links for…

• Reviewing: Nate Silver, 538: Politics Done Right: Some Post-Oscar Thoughts on Forecasting.
• Deep, deep thinking: John Hagel, John Seely Brown, and Lang Davison: Why do companies exist?:
  

  … our economy is chock-a-block with businesses that exist to maximize efficiency at scale. Businesses presuming predictability in order to push out mass produced products supported by mass marketing programs. Businesses relying on command and control in a world that’s increasingly difficult to command or control. Businesses losing their leadership positions at an ever-faster rate because they continue to push in a world gone pull.

  Yes, the death of command and control has been greatly exaggerated for years now. The early prognosticators, however, mistook the lead times required for deployment of the new digital infrastructure. They also missed how long it would take to develop the new social and business practices needed to harness the capabilities of our new infrastructure–capabilities that are only now becoming visible on the fertile edges of business and society.

  What we need, rather than a managerial philosophy based on the communications and transportation infrastructures of the 19th century, is one geared to the digital infrastructure of the 21st. We need a new rationale for our biggest private and public sector institutions–to re-imagine them in line with the world around us. Rather than scalable efficiency, we need scalable connectivity, learning, and performance. Rather than push, we need institutions that pull.

• Revisiting: Paul Graham, Startups in 13 Sentences.
• Noting: My comment on Ethan Bauley’s post to social / viral marketing lessons:
  

  Interestingly, I think we may be in a world where knowing HOW to use information (and information asymmetries) may be more important than the information itself. Information is a commodity, but how we structure it (and what we do with it = strategy) is still a source of competitive advantage.

  For now …

• Using: Cameron Moll, 20 tips for better conference speaking.
• Exploring for a day or two (or three): Big Bend National Park.

Catch you on the other side.