The previous
post (here) showed increasing use of
externalisation. In this post, I’ll
touch on ‘How’. It can be used to reduce
costs and improve effectiveness.
Recap, what is externalisation?
It is a way of working.
Instinctively we
execute tasks, achieve goals and work within the organisation, something we
have been doing for centuries.
Externalisation allows the same, say a task, to be accomplished using an
external element. Contracting is already practiced today but it is the unconventional
(for now) extension to involve customers and the public that is changing how
organisations operate. Payment too is
not usually made and unlike contracting which plays a peripheral role, externalisation
can be strategically used or simply to provide a better alternative.
It can be a task
like building an alternative review team (Alibaba) - externalising a task, at
little cost
It can be a
function like designing a car part (BMW) - externalising a function.
It can be a goal
like developing closer customer relationship (Goldman Sachs) - externalising
business goals.
It can create an encyclopaedia
(Wikipedia) – externalising fact finding.
It is strategic
like Uber – upending the taxi industry.
[These examples
are elaborated in the previous post]
Societal
connectivity brought about by the internet made this possible. Used by internet startups and some of the
more progressive firms like GE, this form of externalisation lowers cost and
improves effectiveness.
If you’re asking “isn’t that crowdsourcing?”,
the difference is that externalisation is a way of thinking and is a working
practice while crowdsourcing is a method to engage the community (public, customers,
industrial ecosystem). Externalisation
efforts use crowdsourcing as a tool.
Tapping
this process
Unlike what we are used to, it is difficult
to simply order a task to be carried out by externalisation.
This is because it is mostly an indirect
technique. You are not paying the
‘workers’. You cannot force your
customers to use the internal tools (Goldman Sach) or review suppliers
(Alibaba). Uber needs to coerce the
‘drivers’ who can leave anytime.
Nevertheless it is a deliberate process and
a continuous one to make it work. You
must find value for the ‘workers’ because in most cases, you just don’t make a
payment. It destroys the nature of the
task. It is, for example, ridiculous for
Goldman Sachs to pay their customers to use its in-house analytic tools and
data platforms. In some cases, money can
induce like BMW’s case (leads to a contract) or prizes for winners of
hackletons but that’s mostly it. And
it’s indirect with Uber - the customer pays the driver with Uber getting a cut.
This post – value-of-free – explains this digital economy
dichotomy of ‘working’ with no pay, showing how value for the ‘workers’ is
created. It is this alternative value that makes externalisation efforts work.
There is a degree of volunteerism and
community.
The ‘workers’ need nurturing.
And to make it work, a different kind of
skill is required. Tweaking the
corporate culture helps.
I
think [in a certain traditional way], therefore I am
Change is bugbear. Senior management recognise the problem of
inertia within their organisations.
Those charged with transformation know that messing with their
operational culture is tough. But also
that untangling it is critical for long term good of the firm in a digital era;
otherwise transformation will only be at the fringes.
Recognition of the issue is the starting point
Most
organisations today have a top-down command-and-control culture. They tend towards being closed, hierarchical
and inward-looking. Trust is within.
Internet
startups that perhaps are showing the way of new (internet) culture operates
quite differently. They are
peer-oriented (vs command control), inclusive (vs closed) and likes partnership
(vs inward-looking). They operate with an
open ethos. Millennials like such
environments so it is not just about transformations but the workforce.
Loosen up
If executives can
grasp this working culture they will start to think differently and perhaps become
more effective in their transformation efforts.
They will, for example, be more willing to consider the outside beyond
the limitations of their personal network.
More on internet culture here:
Most of
all, be open!
In the meantime, turn it into a process
Our long
tradition with internalisation (see previous post) makes it hard to
practise externalisation. Try to turn it
into a process, something managers are familiar with. Think of it as a deliberate process.
The operative
words are engagement and ‘outwardness’.
Take small steps
such as the use of reviews and comments but this time take it seriously and
certainly more than a suggestion box.
‘Online reviews and comments on social media help consumers see a
product’s underlying merits and demerits, not the image that its makers are
trying to build around it.’
– “It’s a real thing” - Economist
14 Nov 2015.
But obviously
not all tasks or organisation functions can be externalised. Understanding crowdsourcing, the open-source-business-model and the peer-to-peer-business-model helps.
For the long
term, build a community around your products and firm. Engage this community continuously. New job titles I expect will emerge in the
industry – community leader, engagement executives, collaboration evangelist….
Tools
Tools for
externalisation include crowdsourcing, open API, OpenData, open
platforms, blogs, social media, messaging and hackeltons but it can be as
simple as “BMW hosting a ‘virtual innovation agency’ on its website”. The habit of collecting emails (even if
there is no obvious reason) and building communities (even if it is not obvious
yet) are all part of long term externalisation efforts.
But bear in mind that it’s mostly in the
mind.
Yours externally,
As
internalisation is embedded in today’s operational culture so externalisation
will too. If your mind instinctively
considers external elements as much as internal ones when you are tasked, you
are there. Like, I believe, Elon Musk.
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