A challenge with using scientific principles in a business context is that the system, i.e. the business world, is neither isolated nor in equilibrium. A soon as a new idea is formulated, some businesses will try to adopt it or defend against it, thereby changing their execution or strategy. In other words, the process of studying the system alters it, in contrast to the assumptions in the scientific method (and no, it isn’t like quantum mechanics).
Based on Ronald Coase’s theory of firms, Lars Plougmann argues that transparency is the next big thing, and offers specific advice for professional services. The core of his argument is that because trasactional costs for companies are ever decreasing, the business relationships that really add value are the ones where you are sharing business processes.
Managed to catch up and read The Economist this weekend. Their survey, The new kings of capitalism (subscription required for most articles – do yourself a favor and subscribe), considers the private equity industry and is recommended reading.
Any article that concludes in its very first sentence that
consulting is an industry that never goes out of style is bound to appeal to my consultant’s heart. The conclusions of Francesca Gino’s studies, as summaried in The Hidden Cost of Buying Information (Sadly lost to bit rot on the internet) over at HBS Working Knowledge, are not surprising to me: when you pay money for advice, you are more likely to use it. Our industry has built that into our fee rates, thank you for pointing it out. But there are still a few surprises in the study.
The applications of social software to the enterprise will profoundly change our business culture and therefore it will be a substantial force for shaping what our society will look like in the future. To understand the fundamental changes that are influencing us right now, changes of which social software is one manifestation, and to try to predict where it may lead us, we should look to the past where strikingly similar forces applied to society and science lead to the most significant cultural change in Europe and arguably the world.
Natural science is well known for using mathematical models over “common sense” and intuition, to the frustration of many students. The use of mathematics in social sciences is newer, and it is probably fair to say that this discipline is still not as completely reliant on mathematical models as for example modern physics.
Joe Kraus, who among other things founded Excite, has a new blog called Bnoopy where he recently highlighted three cost differences between starting a technology company in 1993 compared with 2004:
I am re-reading the classic articles from the Harvard Business Review, and the 1975 article by Henry Mintzberg titled The Manager’s Job: Folklore and Fact is not only as relevant as ever, but in the light of developments in using social tools in the workspace, Mintzberg seems to be advocating corporate blogging:
I have an interest in social software in the enterprise - the use of tools like blogs, wikis, document management, rss, communities, discussion boards, and so on within large organisations to foster “bottom up” knowledge management, collaboration, etc.