Enterprise 2.0 and the VC Industry
Enterprise 2.0 came to Boston this week and it provided an interesting snapshot of an emerging market. At the same time Deloitte and the National Venture Capital Association (NVCA) released a study that calls for a more robust IPO market. I see connections.
First, E2.0 as it is abbreviated, made its annual visit to Boston. The show is gaining momentum and with it the paired ideas of the social customer and, I hope, the social enterprise. E2.0 moved out of a big hotel and fit comfortably into the Hynes Convention Center where there is room to expand over the next several years. There are also many more places to hold after parties in the new location, something that many vendors and analysts took full advantage of.
E2.0 is the leading edge, the point of the social spear. It is the place where people of a certain mindset go to share big ideas about the future of business but it wasn’t that well attended. I thought more people representing more companies wanting to get on with socializing their businesses would attend but I was wrong. I chalk it up to social being still in its early days.
There were not enough customers telling their success stories and too many vendors attempting to be neutral thought leaders, which I don’t think worked. And ironically for a social show, the big established vendors of everything technology related made their best old school attempts to own the space.
IBM emitted a press release with this headline: “IBM Named Worldwide Marketshare Leader in Social Software for Business”. The PR contained this: “IBM social software including IBM Connections provides tools such as communities, forums, wikis and blogs and new capabilities like advanced special analytics, enabling users to expand their network with recommendations of people to connect with based on prior connections and similar interests.” It was only missing a concluding, “You all can go home now, we’ve got this.”
But in fact, no one has this and no one probably will for a few years. The thing I find odd is that there was little discussion of the need for the enterprise to change, to morph from a hierarchy to a community, to become social. It felt like the only thing the big guys were concerned with was corralling the social customer while leaving the hierarchy intact. Good luck with that one.
Conspicuously absent from the festivities was Salesforce.com a company with as much to say about the social enterprise as anyone. But it seems like Salesforce only goes to its own shows where it can be the star and control the message. That will work in this market’s earliest days but if Benioff, Inc. wants to capture the vast social enterprise market they’re going to have to start coming to some of these events.
I think Salesforce has a good message as evidenced by the company’s Cloudforce event last week. They’re talking about the social enterprise and the social customer in ways that the others are not. The others, IBM and company, are still proselytizing about their technology while Salesforce is relentlessly pushing a message of empowerment, of how to be better at what you do through the use of social technology. That’s what I thought was missing from E2.0. I didn’t get to all the sessions but I spoke with a lot of vendors and some, especially the smaller guys like, Clearvale (BroadVision) and Saba and very small guys like Yammer and DoubleDutch each in their own ways gets it and is pushing the ball toward the goal line.
Future editions of E2.0 need to sell that new religion and it might be helpful if they reduced the number of shows to one per year rather than the current East and West approach. I might suggest turning one of those into a virtual event to showcase another part of the social revolution. The show’s got to start eating its own dog food.
In a related matter, the NVCA issued a report that takes a polite shot at the financial community by pointing out the obvious. The financial meltdown of a couple of years ago still emits a kind of financial cosmic background radiation which has made IPO activity difficult and since the IPO is essential to a healthy venture industry, the industry has a bit of a cold. From the release:
“Clearly the industry continues to feel the ripple effects of the global economic downturn — most notably in the form of limited exit opportunities,” said Mark Jensen, partner, Deloitte & Touche LLP and national managing partner for venture capital services. “However, with signs of improvement in the economy and easing of the liquidity crisis, the tide may be turning. Innovation continues to be an important driver in our economic health and a strong exit marketplace is critical to the venture capital ecosystem driving much of that innovation.”
Low IPO activity means it’s harder to raise funds and for investors to take on risk if there’s limited upside. That’s too bad because when you think about it, the hundreds of billions of dollars that have been invested in the last thirty-five years have generated many tens of trillions of dollars worth of business activity. As I wrote in a recent post, building the information economy has driven U.S. GDP from $1.6 trillion in 1975 to over $14 trillion today. That effect has been mirrored all over the world. So while it might seem like the venture industry is a remote part of our lives, it’s critical to our well-being. I take this report very seriously.
No doubt some new investment is flowing into social technology vendors but the amounts are still small and judging by the number of booths at E2.0 there aren’t enough new companies dipping a toe in the water. Disclaimer — I am not giving financial advice here.
Still, what I gave seen in the last couple of weeks with E2.0 and Cloudforce suggests an early stage market with some good ideas that has yet to catch fire. There’s a core group of vendors and influencers who get it, some of whom might be a bit too enthusiastic but that goes with the times. To me it’s a no-brainer to keep at it, we’re mostly on the right track but we need to find new ways to attract large companies to this new approach to business.
Enterprise 2.0 key findings
Kudos to all those who participated in, organized or even attended the Enterprise 2.0 conference in drizzly Boston last week. There is a lot to write about and it doesn’t easily fit into a single blog post. So I have decided to write a few posts that address different themes running through the event and eventually tie them together into an update of this post with links (in my not so copious free time).
The big ideas that I took away include disruption and evolution, ROI and a need to sharpen our focus. Here are a few thoughts on a very good show.
Disruption and evolution
The Tuesday keynotes generated needless confusion by asking a simple question, is Enterprise 2.0 a revolution or an evolution? Such a question is often resolved in a cowardly compromise to split the difference. As they used to say on SNL, “It’s a floor wax and a dessert topping!”
But not so fast. In this case, splitting the difference by saying it’s both is not far off the mark. It is both revolution and evolution but only because some people prefer to see a difference between the two. In fact, evolution experts might tell you that the two are part of the same continuum. They even have a name for it: Punctuated Equilibrium. Enterprise 2.0 is a revolution (punctuation) made possible by years of stealthy evolution (equilibrium) — small changes with incremental effects that, with critical mass, result in the revolution we see.
Many of the sessions I attended struck that tone. One of the best was “Networked: How the 2.0 Enterprise Makes Itself Transparent, Participatory and Collaborative,” by the husband and wife team of Jessica Lipnack and Jeff Stamps from Netage (www.netage.com).
The thought that sticks with me though is how hard it is to achieve punctuation as time goes on. Entrenched interests from the last revolution draw a lesson from their own success and work to prevent the same disruption from happening to them. Look at Iran, for example. No more street protests, thank you very much.
A good point made at a keynote by Matthew Fraser co-author of “Throwing Sheep in the Boardroom” is that the enterprise phase of Enterprise 2.0 failed to ignite because entrenched, hierarchical interests in corporations successfully thwarted it. The social networking revolution, which started at the grass roots is the result. The question to be answered is now less whether but how social networking and social media will scale corporate walls.
ROI is not important
I just love this one because I am a disruptive thinker and showing the ROI analysis for me is like having to be constantly reminded to say please and thank you and to put my toys away. Your pants are on fire. Do I really need to say, “Pardon the interruption,” before I get the extinguisher? Sheesh!
I am back.
Stowe Boyd, CEO, Edglings, said it best. It’s not that ROI is unimportant, many people in enterprises around the world would violently agree with that. But there are certain times when ROI may be irrelevant or at least an irrelevant barrier. That time is during a paradigm shift or revolution cited above — we are in an ROI is not important era all of a sudden.
A real paradigm shift happens quickly and when it does it wipes out what stood for business as usual and replaces it with something new. For example, an asteroid hit this planet about 65 million years ago and wiped out most of the dinosaurs. (I say most because there are scientists who think that birds are their direct descendants and who am I to dicker?) The asteroid was not the paradigm shift but it caused one and the shift took many millions of years to fully roll out. But it was the primary cause that made dinosaurs irrelevant and mammals ascendant.
In business change is more rapid and usually less violent but paradigms nonetheless shift dramatically. We are the mammals of earlier shifts. Boyd gave the example that after World War Two, the major shift was to place a telephone on each employee’s desk. No one at the time could produce an ROI analysis that would provide the justification and many people worried that the phones would be abused for personal use (sound familiar?) but the shift proceeded. It was unstoppable and today we couldn’t imagine a time when a phone was optional or reserved for a chosen few.
Boyd’s point was that placing the phones on desks was so important, such a game changer, that few people waited for the ROI analysis before beginning deployments. Of course there were laggards but history does not record their names. We could trace the same trajectory through such radical deployments as typewriters, mimeo machines, copiers, faxes and, in our time, PCs. It took about a decade before the full productivity of having a PC on nearly everyone’s desk produced the significant change (Punctuated Equilibrium again) that seemingly overnight produced one of the greatest productivity bursts in history.
Let’s sharpen our focus
It’s fine to tout the importance of the social revolution taking place right now whose end-point is Enterprise 2.0 but there’s still a lot of work to do. The greatest challenge is to accept the paradigm shift for what it is and not some kind of extension of an earlier paradigm. We see paradigm extension all the time in the cut-over from one paradigm to another. The old paradigm adopts some aspects of the new in an effort to forestall change. We see it right now in the silly argument about software as a service (SaaS) and multi-tenancy’s centrality to it all.
At the recent Sales 2.0 conference, also held in Boston, I got a whiff of paradigm extension from most vendors still confused about social media’s centrality and purpose. Social media is not a way to turbo charge your spamming efforts or to round up more low-grade suspects for your pipeline. Sales and a lot else needs to look at social media with open eyes and a minimum of pre-judgment if we are to be successful in bringing Enterprise 2.0 to life.
So there, in a large nutshell, is my first cut at what happened in Boston last week. Despite the rain, Boston was — and remains — a good place to start a revolution.
