Tuesday, 31 March 2015

The culture that lead to lean startup, agile, Uber and the digital economy 2/2

The first part (The culture that lead to lean startup) was about how the early culture evolved. This discusses the softening of the command culture and its effect.

Of peers and the sharing economy

The role of individuals was getting recognition in this culture.  Interestingly, the very architecture of the internet may have pushed this along.

The network design brief by the US government was that there should be no single point of failure for fear of a nuclear attack.  The result is the internet designed with a mesh architecture.

But let’s take a step back.  In the 1960’s, the prevalent culture was top down, strongly command-and-control with pyramid-shaped organisations.  Orders came from the top.  Work was within.  Trust was within, less so without. 

Interestingly, networks then (telephone, computer) mirrored such a culture.  They were designed as a central master with cables radiating out to slave devices (telephones, terminals) like a star.  This central node controlled all, the devices were simply talked to.  A device wanting to send a message to another does so via the central node.  Sounds authoritarian?

A mesh is like a fishing net, each knot a node. To withstand nuclear outage, the nodes are peers.  While they operate independently of each other, they cooperate with each other in order for the overall network to work.  There is no central node.  Surrounding nodes ‘discuss’ among themselves to decide where best to route data. If a node wants to send a message to another, it does so directly, peer to peer.  Sounds democratic?

Command-control vs peering

Imagine if the US government asked IBM (then the beacon and dominant player of the IT industry and perhaps an obvious choice) instead to design the internet.  Its staid culture, strongly top-down, would have meant no Facebook today.  How many would pay to use it?  Internet access would be expensive, slow, onerous to use.  We won’t be able to learn as much because content is hoarded to be sold.  No Uber with its peer-to-peer model.  No viral videos, who’s going to pay?

There’s also a culture of free because free has value in the internet economy but I won’t dwell.

But instead academics and researchers were called.  Their being less formal, more open must have had an influence.  And the 1960’s (internet was created in 1969) was a period of counterculture.

All these meant the command culture softening towards a peering one, in an increasingly open environment.  This softening had an impact on our sense of freedom.

And when central powers subside, the environment becomes more participative.

In fact this peer culture and the role of individuals allowed a new form of business model.

Uber et al

The world first heard of peer-to-peer with the arrival of Napster (1999).  Through our internet-connected PC, we download music stored in another, somewhere in the world.  It mirrors the mesh design of the internet ‘If a node wants to send a message to another, it does so directly, peer-to-peer’.

The conventional way would be for the PC to download songs from a centralised music server but in the Napster model, the central server is neutered into a phone directory role.  Songs are instead stored in users’ PCs across the internet.  After getting addresses from the directory, a PC (s) sends the file to the user’s PC directly.  In effect, the PCs cooperate with each other in order for the overall music distribution system to work. 

Napster turns consumers’ spare PC resources (disk, computing power) en masse into a music store.  To download a song, his PC ‘talks’ to other napsterised PCs nearby to identify a suitable one which then delivers the song directly.  Uber works in a similar way.  It parlays consumers’ idling cars into a taxi service.  When a consumer requests a ride, the app locates the nearest car.  The ride is delivered from one consumer to another.

This consumer-to-consumer resource sharing model, taking advantage of a new working culture, lowers prices and in the process created a new sector - the sharing economy. 

Like Uber or Facebook, understanding this culture could be helpful for those embarking on digital efforts.  For it to work, management must have an open mind.

Openness is at the heart of the new business culture

Openness allows a firm, traditionally looking only within, to alternative resources without, like individuals.  They are also open to newer ways to carry out business.  This lead to crowdsourcing, open source and peer-to-peer models that in turn evolved the modern management techniques lean startup and agile.  And the sharing economy.

Tech startups are leading this change today, others will follow.

©Chen Thet Ngian, internetbusinessmodelasia.blogspot.com (2013).  Unauthorized use and/or duplication of this material without express and written permission from this blog’s author and/or owner is strictly prohibited. Excerpts and links may be used, provided that full and clear credit is given to Chen Thet Ngian and internetbusinessmodelasia.blogspot.com with appropriate and specific direction to the original content.