The IT Flower
The movement from PCs to web based productivity tools is going to radically
change how we get things done.
It's also going open up massive new markets with huge opportunities for profit.
The IT Flower is a framework for understanding this growth.
Rod Boothby San Francisco, CA 415-846-9959
Copyright 2007
DRAFT
If you could go back in time, how wealthy would you be today?
It's 1909 and Henry Ford's company has just started to produce the Model T, with only
18,000 cars rolling off the line. Within 4 years it'll be 250,000 cars per year. Within 11
years, it'll be over a million a year. Do you rush out and start a dealership? Do you think
about setting up a series of service stations? Maybe you get into the tire making business.
It's 1980 and IBM comes looking for an operating system for their PC. Are you going to be
like Gary and Dorothy Kildall at Digital Research Inc and refuse to sign IBM's non-disclosure
agreement? Or you do follow the path of IBM's second choice provider, and agree to
license IBM an operating system you don't yet own, just as Bill Gates did.
Looking back on it now, it is easy to figure out what to do.
In both cases, the advent of new technology created enormous ancillary markets. The
advent of mass produced automobile, no matter what the brand, created demand for things
like dealerships, gasoline, and tires. IBM easily cloned PC created demand for operating
systems and software.
There are common tricks to taking advantage of these new market opportunities. For
example, according to Wikipedia,
When the IBM PC was introduced, IBM sold the operating system as an unbundled
(but necessary) option. One of the operating system options was [Microsoft's] PC-
DOS, priced at US$40. [Gary and Dorothy Kildall's] CP/M-86 shipped a few months
later at $240, but sold poorly against DOS.
Obviously, you have to be smart about how you approach markets that are created by new
technology. But even before that, you have to identify the market in the first place.
The Next Big Technology Thing: Web Based Productivity Tools
A new group of software tools are quickly starting to spread across the web and into large
organizations. In the harsh heat of sometimes angry end user demand, the old dry fields
of enterprise IT have finally cracked. In the crevices, hearty new approaches have simply
emerged. The result is wonderful. Like a field of wild flowers, innovation is blooming.
The web and corporate Intranets have become readable, writable and executable.
Rod Boothby
Rod Boothby San Francisco, CA 415-846-9959
Copyright Sept. 2007
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Understanding the scope of this growth, however, isn't trivial. What is the connection
between new technology such as:
�
"social software" and "emergence software",
�
tools such as blogs and wikis,
�
web based versions of word processors and spreadsheets,
�
team organization and process map tools,
�
mashup platforms and a new class of DYI web application development tools
How is this technology going to help us work faster, stay organized and keep our teams
coordinated?
And, perhaps most importantly, where are the blue ocean strategic opportunities?
The answer comes from looking not at the technology, but instead at what work people do
and how they do that work.
A Framework for Understanding This New Phase
First, let's begin by taking a look at the work we do and the way that work gets done:
Types of Work: In a 4th Quarter, 2005 article entitled "The next revolution in
interactions", Bradford C. Johnson, James M. Manyika, and Lareina A. Yee defined three
types of work: Transformative, Transactional and Tacit. Transformative is manufacturing.
Here's how they described the other two types of interactions:
Complex interactions typically require people to deal with ambiguity--there are no
rule books to follow--and to exercise high levels of judgment. These men and women
(such as managers, salespeople, nurses, lawyers, judges, and mediators) must often
draw on deep experience, which economists call "tacit knowledge." For the sake of
clarity, we will therefore refer to the more complex interactions as tacit and to the
more routine ones as transactional. Transactional interactions include not just clerical
and accounting work, which companies have long been automating or eliminating, but
also most of what IT specialists, auditors, biochemists, and many others do.
If it can be automated, if it follows a process that can be easily repeated, then it is
transactional.
To make it easier, I'll refer to the types of work as
1.
Manufacturing
2.
Transactional
3.
Knowledge Work
Rod Boothby
Rod Boothby San Francisco, CA 415-846-9959
Copyright Sept. 2007
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How Work Gets Done: At the extreme, there are two ways that people get work done.
They either follow a rigid structured pre-defined process. Or, they make it up as they go
along. Both cases involve a process of getting work done.
Putting these notions of "how work gets done" and "types of work" together gives a simple
framework that can be used to map types of IT solutions.
As an aside, it is important to recognize that the term "process" as it is used here, is taken
to mean a sequence of actions. Thus, you can have ad-hoc processes and structured
processes. Some people use the word "process" to mean what here is being called a
"structured process", or a pre-planned sequence of actions.
Wikipedia points out that the "Identification of a process is also a subjective task, because
the whole universe demonstrates one continuous universal "process", and every arbitrarily
selected human behavior can be conceptualized as a process".
The Range of Enterprise 1.0
Applying this framework to the existing range of Enterprise 1.0 solutions, it is easy to see
that large sections of the potential solution space remain empty. First, let's look at the
areas where there are existing IT solutions:
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Rod Boothby San Francisco, CA 415-846-9959
Copyright Sept. 2007
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Structured Process + Manufacturing Work On the bottom left, there are factory
automation and ERP systems used to assist with the structured processes used in mass
production.
Structured Process + Transactional Work In the bottom center section, there are many
tools out there today that support highly structured transactional interactions. Think for
example of systems used to power a bank teller's terminal, a fast food restaurant's register,
ATMs, General Ledgers, accounting systems, travel booking tools and expense tracking
systems. In each case, large expensive, highly customized solutions were built to address
the need. Big CRM and HR systems exist in this space.
Microsoft's Dominance of Enterprise 1.0
Ad Hoc Process + Knowledge Work Until very recently, Microsoft was the only major
provider of enterprise solutions that helped knowledge workers complete their work (aka
tacit interactions) in an ad hoc way.
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Copyright Sept. 2007
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The Microsoft solutions included Word, Excel, Powerpoint, Outlook and lots of manual effort
by knowledge workers as they strove to coordinate information. There were multiple
problems with using these tools including:
�
The tools required way too much manual effort to stay organized, keep teams
coordinated and re-use information.
�
There was no single source of the truth (e.g. who has the latest copy of the
spreadsheet?)
�
Information was not stored in an easily searchable and leveragable format. A
collection of Word docs buried on a shared drive, stuck in an e-room, or pasted into a
Lotus Notes "Database" is not easy to search, cross link or re-use.
�
Poor access control. It is hard to the access control of 3 word docs, 4 excel files
and 32 emails to defined group on a directory server. If you add someone to your
team, or if someone is taken off the team, how do you change the access control on
emails that have already been sent?
Rod Boothby
Rod Boothby San Francisco, CA 415-846-9959
Copyright Sept. 2007
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The Blue Ocean Opportunities
This frame work shows that there are at least 3 blue ocean (or virtually uncontested)
strategic opportunities for whole classes of IT solutions aimed at helping people work in new
and powerful ways.
Opportunity #1: Ad Hoc Process + Transactional Work
In the top center section,
there are basically no Enterprise 1.0 solutions that combine the power of an enterprise
grade transactional systems with the ability to build those solutions on an Ad Hoc basis. An
enterprise grade transactional system must have things like storage of history, access
control, backup and include all the specific business logic of a purpose specific application.
Ad Hoc only means that systems are quickly built for a specific purpose, or a specific
Another way to think of the Ad Hoc + Transactional applications is that this represents the
long tail of enterprise IT solutions.
Opportunity #2: Structured Process + Knowledge Work There is a very small class
of Enterprise 1.0 tools that support structured processes associated with tacit interactions.
For example, one might able to argue that a Bloomberg or Reuters terminal delivers
information in a highly structured way. Traders use expertise to act upon that information,
and thus there is some combination of structured process and tacit work. Another example
might be the use of project management tools, such as MS Project. However, when a
project gets managed, the connection between the information in MS Project and the
completion of the various tasks is Ad Hoc. People might email back and forth, etc.
Opportunity #3: Fix the Problems with MS Office
Actually, to be perfectly
clear, the opportunity is to fix the problems with how people work with MS Office. Office
itself isn't broken, but the larger businesses processes are broken. Seen at a distance, it
becomes obvious that too many companies are not using IT to make their people more
productive and integrate their business processes. Instead, they are using their people and
their business processes to integrate information in their systems.
Aside:
Just to be completely forth coming, I must point out that I work as head of Product Management
at a small start-up called Teqlo Inc. Teqlo is focused on both opportunities 1 and 2.
Just in time, an new class of tools; Based on the web, of course.
A new set of tools can be used to take advantage of these opportunities. The tools are all
web based and have been labeled with terms such as "Web 2.0", "Enterprise 2.0" and
Software as a Service or SaaS.
The broad public success of consumer internet tools such as blogs, wikis and web based
email, such as Gmail or Yahoo! Mail have proven that knowledge workers are willing to use
web based productivity tools.
Rod Boothby
Rod Boothby San Francisco, CA 415-846-9959
Copyright Sept. 2007
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The success of SaaS solutions such as Salesforce.com, LucidEra, and Workday have proven
that mission critical business systems dedicated to transactional work can be delivered
through the web.
The move to open up 3rd party vendor access to SaaS solutions, and the advent of Mashups
has proven that it is possible to create stable and useful ad hoc applications. Up until very
recently, the tools to create ad hoc applications and especially ad hoc composite applications
are still generally limited to highly technical end users or dedicated software engineers.
Enterprise 2.0 = Emergence Software
Harvard's Dr. Andrew McAfee coined the term "Enterprise 2.0". He has also recently
updated it:
Enterprise 2.0 is the use of emergent social software platforms within companies, or
between companies and their partners or customers.
A key feature of his definition is that the software supports emergent behavior - in other
words, that it is end user driven. Just as a brief aside, let me quote an earlier paper of
mine with my definition of an emergent organization:
Emergent Organizations are self-organizing systems of independent, self-motivated
individuals that, collectively, produce predictable, and usually optimum results.
Examples include:
1. Self Interested Individuals working in a free market economy to create efficient
resource and labor allocations.
2. Ants, which contrary to popular belief, make up their own minds about what work
they do, but still, somehow, manage to feed the colony, raise the offspring and
keep the group functioning well.
3. Google, which traces every html link to each page and uses the number of links to
determine rankings in search results.
It is important to realize that, today, many of the business solutions that combine people
doing knowledge work, manual processes and Enterprise 1.0 technology are actually
emergent.
For example, I have examined the business solutions of one of the Big 4 Audit/Consulting
firms. Rather than dictating a pre-planned approach to selling and delivering consulting
services, the partners of the firm let engagement managers develop solutions that
combined some structured processes, such as engagement pricing approval and post
engagement archiving, with ad hoc processes, such as customized project plans and unique
Rod Boothby
Rod Boothby San Francisco, CA 415-846-9959
Copyright Sept. 2007
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report formats. The firm's Partners used oblique management techniques to guide the final
solution. The final business solution, which combined client interviews with analysis and
report writing, simply emerged from the complex interactions between all the people
involved with the project.
Successful Emergence Requires Network Effects
The term "Web 2.0" refers to a collection of technologies that made it as easy for people to
contribute content to websites as it was to read those web sites. The general public is most
familiar with consumer applications of these technologies, including sites such as Facebook,
MySpace, youTube, Wikipedia and many instances of one person writing a blog that is read
by a large audience. Tim O'Reilly, CEO of O'Reilly Media and famed for coining the term Web
2.0 defines it this way:
Web 2.0 is the business revolution in the computer industry caused by the move to
the internet as platform, and an attempt to understand the rules for success on that
new platform. Chief among those rules is this: Build applications that harness network
effects to get better the more people use them. (This is what I've elsewhere called
"harnessing collective intelligence.")
I think the most important part of the definition above boils down to this:
Build applications that harness network effects
If you put O'Reilly and McAfee's ideas together you get these guidelines for successful web
applications:
Build applications that get more valuable as more people use them (network effects)
and work out ways to let end users contribute to your application, customize your
application and extend your application, thus encouraging even more value to emerge
over time.
The framework described above does not illustrate whether the processes are emergent and
it does not indicate whether or not the technology solutions for each area of the Work Vs
Process space necessarily have network effects. Instead, that happens on another axis.
Rod Boothby
Rod Boothby San Francisco, CA 415-846-9959
Copyright Sept. 2007
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Fixing MS Office: Part I - Web based copies of MS Office
On the open internet, a series of vendors have focused on trying to fix some of the
problems with Microsoft Office 2003. These solutions aim:
�
Develop a single source of the truth (e.g. who has the latest copy of the
spreadsheet?)
�
Store information in a format that can be easily searched and leveraged.
�
Improve access control
�
Gain users by giving a basic version of the product away for free.
Specific examples included Writely, the web based word processor that has now become
Google Docs, Zoho Sheet, Edit Grid and empressr's web based answer to PowerPoint.
While these initial tools do offer some solutions to the problems listed above, they do not
radically alter the way that people work. Moving information between documents still
requires manual cut & paste. And even though these online versions of MS Office do
support hyperlinks within the files, and they allow multiple users to edit the documents, the
Rod Boothby
Rod Boothby San Francisco, CA 415-846-9959
Copyright Sept. 2007
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whole work flow associated with an online clone of MS Word does not treat the Internet as a
first class citizen. Next to no one is going to subscribe to an RSS feed of the latest changes
to a Word doc, but millions upon millions have subscribed to RSS feeds of the latest posts to
a blog.
Thus, while these online clones of MS Office do provide some network effects, the impact is
not nearly as powerful as the network effects achieved by blogs and wikis.
Fixing MS Office: Part II - A new class of Productivity Tools
�
As of April 2007, Technorati was tracking over 70 million blogs.
�
In August 2006, MySpace registered the creation of their 100 millionth account,
though the actual number of users who have logged in within the last month has
been estimated to be around 43 million.
�
As of August 2007, Facebook had 34 million users who had logged in within the last
month.
These statics prove at least one thing: there is a growing acceptance of and experience with
online content creation tools.
Rod Boothby
Rod Boothby San Francisco, CA 415-846-9959
Copyright Sept. 2007
10
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Is this consumer based adoption of blogs and wikis enough to motivate businesses to
change the way they work? Are businesses going to dump MS Office for blogs, wikis and
other Web 2.0 style tools?
Any change won't be fast: According to the Wall Street Journal
Microsoft's sales of Office products total around $15 billion a year, placing it alongside
Windows as a company cash cow. Some half-billion users create Office-formatted
documents; countless billions of Office documents reside in the hard disks, networks
and archives of the world's computers
The inertia from a market this size is so significant that it is unlikely that people (and
businesses) will switch overnight. This white paper, for example, was written using Apple's
first rate word processor Pages. However, it is unlikely that you will read this as the first
published PDF. To gain a wider audience, I always try to copy my white papers over into
my blog as a normal blog post. If my past experience with published white papers is any
guide, the ratio of people who read this paper as blog post to people who read it as a pdf
will be 10:1.
The move away from PowerPoint will take much longer.
Spreadsheets are a different matter entirely. People who work in corporate treasury
departments, comptrollers, accounts and anyone who works as trader is unlikely to ever
give up desktop based spreadsheets. However, Excel may never happen for certain types
of business users such as p Others will cease to use spreadsheets altogether as they
handle list keeping, project management and even budgeting using purpose specific niche
SaaS tools.
The move away from Word Processors How can I be so confident of that businesses
will switch from word processors to online article creation and sharing tools such as blogs
and wikis?
To begin with, its important to realize that such a move is possible. The general public has
gone through a similar process of moving from one fundamental technology to another as
they switched from vinyl records to 8-tracks tapes to cassette tapes to CDs to MP3s. The
pace of change is only controlled by how valuable "old" data is. You are less likely to move
only listening CDs is you have a large and expensive collection of vinyl records.
In business, however, old documents loose their value very quickly. An old record can be
enjoyed for decades. An old memo; well, not so much. The only exception are old legal
contracts for on going deals. Other than legal contracts, old doc files are fairly useless.
An accounting department's MS Word doc from 1999 on payment policies and procedures
may still be sitting on one of your company's hard drives, but it is worth next to nothing
today. Policies and procedures have changed.
Rod Boothby
Rod Boothby San Francisco, CA 415-846-9959
Copyright Sept. 2007
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Most businesses focus all their effort on the next sale. History is only useful if can
help you close that sale. By the way, here in lies the failure of "knowledge management".
It's very name indicated a failed assumption. Businesses do not need "knowledge
management", they need tools that facilitate on going communication. Business is a dialog
and blogs are particularly well suited to facilitating an on going dialog.
Lots of Wikis, Not Many Blogs... Yet The case for business use of Wikis is already well
understood. Atlassian claims to have 3,200 organizations who have bought their enterprise
class Wiki: Confluence. SocialText claims to have over 2,000 organizations who have
bought their enterprise class Wiki. Blogs, on the other hand, have not taken off behind the
firewall. Many companies are using one or two public Internet blogs for PR and marketing
purposes. But, only a few companies are making extensive use of blogs behind the firewall
as a tool to mission critical business communication.
Business Activity Centric Blogging The idea behind Activity Centric Worksites (aka blogs)
is to use blogging tools to facilitate focused business communication. Instead of using a blog
as a tool for one person to broadcast their thoughts on "whatever", you can use blogs as a
platform to help people within your company communicate about what they are doing for
work. To make it easy to frame the conversation, provide structure around simple concepts
that make sense for your company.
If you are running a consulting company, you might have following Worksite types:
�
Project Worksites - used to exchange information about a specific project
�
Client Worksites - used to talk about a specific client
�
People Worksites - like internal resumes that show who is working on what
�
Practice or Product Worksites - used to communicate amongst a whole team
A end user could visit a Project Worksite and not only get the latest on the project, but also
quickly see links to information on the project client, the people working on the project and
even the specific consulting practice that is delivering the solution.
Ad hoc process + knowledge work +
network effects
The central benefit of using blogs and wikis behind the firewall to facilitate enterprise
communication, instead of using MS Office tools is simple; blogs and wikis have network
effects. So do other Enterprise 2.0 tools such as shared bookmarking services.
Vendors with focused solutions in this space include Blogtronix, iUpload, SixApart,
WordPress, KnowNow, Altassian and SocialText. IBM's new product Lotus Connections
looks like a promising entrant to the market but lacks an out of the box infrastructure to
support activity centric blogs. On the positive side, Lotus Connections indicates that IBM
might be finally moving away from Lotus Notes. Despite the similarity in names,
Connections is built on WebSphere and does not require Notes. In fact, you need to install
Rod Boothby
Rod Boothby San Francisco, CA 415-846-9959
Copyright Sept. 2007
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and extra plug in to connect it with a Notes Client.
The diagram above highlights the third opportunity: "Fix the Problems with MS Office".
The problem with this opportunity is that there are already many entrants to the market.
Google and Zoho both have an entire suite of web based MS Office clones. EditGrid has a
first spreadsheet. On the other side, there are plenty of entrants contesting the enterprise
class blog and wiki space.
However, so far, there certainly are no clear winners in either market space. Perhaps the
addition of a social network in tandem with features that facilitate an Ad hoc process +
knowledge work would be enough to allow a new entrant to succeed in this space.
Web based tools to support Structured Processes + Transactional Work
Two critical developments complete list of existing types of solutions within the framework
of Types of Work and How Work Gets Done.
The first is the advent of Software as a Service, or SaaS, solutions such as Salesforce.com
or Workday.com. SaaS applications are designed to be accessed through the browser and
are hosted by the external vendor, rather than internal corporate IT. Originally viewed as
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Rod Boothby San Francisco, CA 415-846-9959
Copyright Sept. 2007
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poor cousins of the massive "behind the firewall" CRM, HRM or complete ERP systems sold
by SAP, PeopleSoft, Microsoft and Oracle, SaaS vendors are quickly gaining market share.
Opening up to make more:
For a small fee, you can sell your goods at my store
The SaaS vendors have one significant competitive advantage over traditional Enterprise 1.0
vendors. The SaaS vendors can turn themselves into market places for add on software.
Thus, they become hub like platforms that support quick integration of 3rd party vendor
solutions. For example, a company that uses Saleforce.com for sale force automation can
also quickly add LucidEra's business intelligence solution through Saleforce's Appexchange.
Salesforce.com describes Appexchange this way:
These applications (or apps, as we call them) are pre-integrated into Salesforce and
deliver the same benefits -- dependability, reliability, and ease of use -- as our
flagship on-demand customer relationship (CRM) solutions.
At Fortune magazine's first iMeme: Thinkers of Tech conference in July 2006, Marc Benioff,
CEO of Salesforce.com described the importance of Appexchange to their business. He
said:
We replaced (business-software provider) Siebel (Systems); they never made the
leap from killer app to platform. If you don't make that leap, you don't become a
major player like an SAP or an Oracle."
The key to opening up: SOA, APIs... REST
In 2005, Paul Rademacher combined houses listed for sale and for rent on Craigslist with
Google maps. He called the new application housingmaps.com. At the time, Google did
not provide open access for third party programmers to Google maps.
Rademacher radically changed the landscape. Google helped propel the process by
granting public access to Google maps through an application programming interface, or
API. Non-Google programmers can now easily integrate Google maps into their
applications. These composite applications are now generally called mashups. Since
Rademacher first released housingmaps, the growth has been tremendous. Programmable-
Web.com now tracks 2,288 dedicated mashup websites, with an average of 3.91 new web
sites being added on a daily basis. As of Sept. 2008. there were 1,135 sites that took
advantage of the Google maps api.
For Google, the MAPs API is velcro like lock-in. Each integration represents a minor
commitment by a group of end users to continue using Google. Collectively, however, the
web's commitment to continue using Google Maps has been dramatically increased by the
release of the Google Maps API. And, as more programmers use the Google Maps API,
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Rod Boothby San Francisco, CA 415-846-9959
Copyright Sept. 2007
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Google ultimately provides more value to end users. This goes to the heart of the advice
pulled from O'Reilly and McAfee's ideas above:
Build applications that get more valuable as more people use them (network effects)
and work out ways to let end users contribute to your application, customize your
application and extend your application, thus encouraging even more value to emerge
over time.
Since Google's success with the release of their Google Maps API, hundreds of companies
have followed suit. Salesforce has opened up an API. As has WebEx, Plaxo, Yahoo,
Amazon and EBay. ProgrammableWeb.com has over 250 API listed.
It is also happening behind the firewall This move to opening up access to previously
siloed systems is also happening behind the firewall and more companies adopt and deploy
a Service Orientated Architectures (SOA)
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Rod Boothby San Francisco, CA 415-846-9959
Copyright Sept. 2007
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Necessary Preconditions
Together, the combined advent of
�
web based productivity tools, such as blogs and wikis,
�
SaaS transactional systems that have open APIs and business models that encourage
co-operation with 3rd party vendors,
�
behind the firewall move to systems that are designed to provide services rather
than exist in an isolated silo,
have fulfilled the necessary predictions for companies to take advantage of the first two
opportunities listed at the beginning of this paper.
Adding Process to Knowledge Work
Many organizations desperately need to add structured process to knowledge work. People
do analysis, who have advanced degrees, and have the capacity to create tremendous new
value spend too much of their time trying to follow structured processes built on detailed
policy and procedure manuals. This is particularly true of anyone of the millions who work
in financial reporting functions. It is also true for project managers of any type who have
to coordinate complex work efforts.
A direct symptom of this is the avalanche of email that people regularly have to deal with.
The impact of this can be seen in the popularity of approaches to handle the chaos of
knowledge work. According to Technorati, 3 of the top 100 blogs are dedicated to the
issue. Specifically, those blogs are Lifehacker.com, lifehack.org and 43 folders.
While there have been many attempts to address these issues, there is no common,
generally accepted too currently available for coordinating a structured work flow across
many team members and partners. In order to deliver network effects, any solution must
be group orientated. In today's highly decentralized and often outsourced work place, a
successful system for add structured process to knowledge work will also need to work
across organizational boundaries.
There are some early niche products that are attempting to solve this problem. 37 signals'
basecamp addresses some of the issues. With 1,000,000 million accounts currently open,
a likely not all of them being active users, basecamp only addresses the needs of 1/500th of
the half billion current users of MS Office.
Thus, Opportunity #2: "Structured Process + Knowledge Work" is still wide open.
Rod Boothby
Rod Boothby San Francisco, CA 415-846-9959
Copyright Sept. 2007
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A More Agile Way to Get Work Done - Ad Hoc Apps for Transactional Work
Today, ad hoc transactional work is usually handled by knowledge workers who leverage
manual effort and MS Office. High value employees spend their time filling out forms and
cutting and pasting information between systems.
The first platforms for this space are just starting to appear. Some focus on generating
more network effects than others. Some provide tools to integrate multiple services.
Some don't. Only a few of the platforms have been broadly release. They include
Microsoft Popfly, Yahoo Pipes, IBM QEDWiki, Google Mashup Editor, BEA AquaLogic,
DabbleDb. The company I work for, Teqlo Inc is also partially focused on delivering a
solution in this area, although our initial offering will be focused on assisting knowledge
workers with light weight structured processes and workflow.
The IT Flower
Rod Boothby
Rod Boothby San Francisco, CA 415-846-9959
Copyright Sept. 2007
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Diagramming The Network Effects
The two dimensional diagram above does not clearly highlight where network effects can or
should come into play.
Google's Vision
How do all these solutions for the way people work and the kind of work they do fit
together? Google's CEO, Eric Schmidt, recently described his vision for the next phase in
the Internet:
"applications that are pieced together" - with the characteristics that the apps are
�
relatively small,
�
the data is in the cloud,
�
the apps can run on any device (PC or mobile),
�
the apps are very fast and very customizable,
�
and are distributed virally (social networks, email, etc).
Rod Boothby
Rod Boothby San Francisco, CA 415-846-9959
Copyright Sept. 2007
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Schmidt's vision sounds a lot like the Ad Hoc Apps for Transactional Work described above.
However, it is useful to highlight two of his key additional requirements, specifically that
applications are pieced together and that they are customizable, presumably by end users.
What Schmidt sees is a vast array of niche applications that draw on resources from across
the Internet much as niche blogs and personal pages around the world link back and forth
to major sites and to each other.
Where are these applications going to run?
Marissa Mayer, Google's Vice President, Search Products & User Experience put it another
way when she was speaking at Fortune magazine's first iMeme: Thinkers of Tech conference
in July 2006. Accroding to News.com's Ellinor Mills, Mayer said:
"We just have so many ideas that we can't implement...so it makes sense to open it
up. The coup de grace would be letting people build on our platform, on our servers,"
That idea is complicated and thus "something we're interested in, but we haven't
made many advances on" it.
A Final Thought: The Assumption of Open APIs
For Eric Schmidt's vision to be realized, it is important to recognize that the rest of the world
will have to cooperate. Specifically, it is assumed that companies will also open up their
APIs. It that case, the service of hosting composite applications is not that much different
from other services, such as storing data, hosting social network information or providing
core business functionality, such as an email marketing service, a sales force automation
service or a business intelligence service.
However it is not just enough to hope that services open up their APIs. Services must do
so with a certain amount of enlighten self-interest. For example a SaaS vendor might think
of themselves as something like a airport. Airports rent space to 3rd party vendors who
then have the opportunity to sell to all the travelers who pass through the airport. There is
a limit to what a store in an airport can do to leverage that traffic of people.
On the other hand a SaaS vendor might think of themselves as something like a chain of
gas stations. There is a certain range of products they sell (fuel, junk food, booze, car
washes) but they do not care who buys them or where in the chain of value those products
are being consumed. Fuel could for a tractor to plow fields, or for a truck to take goods to
market or for family going to the local store. As farmers, truckers and grocers do well, the
demand for the gas stations fuel goes up.
Rod Boothby
Rod Boothby San Francisco, CA 415-846-9959
Copyright Sept. 2007
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Eric Schmidt's vision for the next stage in the Internet counts on SaaS vendors realizing
that they need to offer (and be able to monetize) network effects for their users, for 3rd
party vendors selling directly to their users and for still other 3rd vendors who want to use
the SaaS service as part of an extended value chain. Vendors that can figure this out will
see true network effects. Their product will gain more value as more people use it and as
more partners participate in their ecosystem.
Rod Boothby
Rod Boothby San Francisco, CA 415-846-9959
Copyright Sept. 2007
20
DRAFT
About the Author
My name Rod Boothby. You can reach me at rod.boothby@gmail.com. Or call me on my
cell - 415-846-9959.
I run the blog Innovation Creators. I also head up Product Management at Teqlo. Teqlo is
a start-up company. We are currently building a new class of productivity tools designed to
help users work faster and stay organized.
My job includes designing the product, working with business partners, and most
importantly, working with potential clients to make sure we deliver something that
addresses their needs. I have also been deeply involved in discussions with our VCs about
funding the company.
Previously, I have worked as a Manager in Ernst & Young's Financial Services Advisory
practice. There, my client included many of the top 5 US banks and some of the top 10 US
Hedge Funds. I helped them deal with derivatives, credit, correlation and capital allocation
issues. I also helped firms select and/or design, build and then deploy trading systems
based on web services, XML, C++, C# or Java.
My experience also includes 10+ years as a fixed income derivatives trader, a quant, a
systems development manager and a consultant. I have devised profitable trading
strategies, started 2 businesses, helped generate $1.5MM in sales of consulting services,
and helped raise over $26MM in funding and commitments for 2 technology start-ups.
As a trader, I was part of a four person team that generated $15M+ annual profits and over
100% return on capital from 1997 until 1999.
My educational background includes a Masters in Economics from Simon Fraser University,
specializing in derivatives pricing. I also have a BA (Hons) from Queen's University at
Kingston.
My other white papers
The next phase in productivity tools: Web Office
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February 8, 2006
Turning Knowledge Managers into Innovation Creators
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October 15, 2005
Rod Boothby
Rod Boothby San Francisco, CA 415-846-9959
Copyright Sept. 2007
21
DRAFT