Sunday, September 04, 2005

The final sustainable edge

I’ve finished reading “The Only Sustainable Edge” by Johns Hagel and Seely Brown. At the risk of boring my readers with a third entry on the subject of this book I think it deserves a wrap up - and a slight correction to some of my initial comments.
(See 20 August, and 18 August.)

The books central argument is that sustainable competitive advantage (to use a loaded term) is only achievable by companies that can adapt and change to take advantage of changing markets and environment.

I can agree with that central argument. In fact, I can imagine a lot of people agreeing with that statement. Problem is, it is incredibly difficult to do, far easier to find something that gives you and advantage now and try to guard that.

So how to the two Johns propose we do this?

When I started reading the book I thought one of the pillars of this was going to be the development of your employees. Helping your staff to learn, grow and change. Maybe I was guilty of reading what I wanted to read but I think the start of the book, and the epilogue do emphasis this idea. However, in the middle it gets lost.

The authors advocate the creation of “process networks” and “process orchestrators.” (Curiously, the word “orchestrator” is used a lot but doesn’t appear in the index, this makes me wonder if the book was rushed, or maybe is was just poor indexer.)

In a process network a variety of different companies come together to produce a product. Each is specialised in some aspect (e.g. design, manufacture, end-customers) and one company takes the lead in organizing all of these - the process orchestrator. Importantly, the orchestrator has a wide network of firms it operates with, for any one assignment it will choose which of its partners best fits the need and bring them together.

Li & Fung (of Honk Kong) are cited again and again as the canonical case of an open network, a company that maintains a network and works on behalf of its own clients. Nike and Cisco are examples of closed networks maintain networks for their own products.

This model works well for these companies but the authors then make the jump and claim that this will become the dominant model in the future. I’m not sure of this. I can believe that this model will work for some, there probably will be more companies working like this, but the dominant model? The way things “will be” ? I think not.

(I often find this is the case with books published by Harvard Business School Press. The authors (often management consultants) find some examples, say “look this works well for companies Z, Y and Z” and then jump to the conclusion: “this is how it will be for all companies, change now or die.” There is a singularity to the authors’ argument which isn’t the case. They show a model, it works yes, but does this mean the whole world will be like this one day? No.)

According to Hagel and Seely Brown the way to achieve these networks is through “loose coupling”. This takes a number of forms, and they openly admit they’ve stolen the term for the IT world. Given how much trouble software developers have actually implementing “loose coupling” (and the corresponding “high cohesion”) one wonders how much trouble business will have with it.

On the whole this is an interesting book. It takes a number of current trends to their extreme and shows what could happen to businesses. As such it may give you a new perspective on things. So should you read it? I’d say yes, its not very long (173 pages) so the cost of reading it is low.

One thing that will stick with me from the book, and is interesting as a stand alone subject is their discussion of offshore-outsourcing operations. According to the authors, it turns out that the advantages here are not only cost. Sure, you can save some money by moving your call centre or IT to India but there is another benefit.

In offshore environments you are likely to get better workers. Two reasons: first, the workers are more highly qualified; second, because this is a green-field site, and costs are lower, many of the “best practices” of management can be followed to help develop the workers. So, for example, lower wages mean a higher manager-to-worker ration so managers can spend more time helping the worker develop, e.g. feedback, coaching, etc. Consequently, the workers improve faster and the whole company will benefit.

One example of this benefit is apparently that “Most Indian outsourcing firms operate at [CMM] level 5 ... while most internal departments in the US will likely operate at level 2 or 3.” (page 38.)

Now, switching back to more general comments about the book...

Unfortunately, I’ve never met any practicing software developer who believes CMM level 5 is either a good thing or good measure of success. In fact, most of the code-face people I’ve met who have experience of offshore software development believe it is pretty much a disaster both for their own jobs and technically.

For two authors well versed in IT I find their faith in CMM surprising. Likewise, they see the rise of SOA (Service Oriented Architecture) as a building block for their “process networks.” I think on both counts they’ve drunk too much Cool-Aid.