Summary: Venture capitalist, Fred Wilson, presents important business model innovations in enterprise technology. Corporate leadership should listen and learn.
Venture capital investor, Fred Wilson, is a keen and deep-thinking observer of enterprise software trends. During a talk at the LeWeb conference, in Paris, Wilson presented his framework for evaluating startup investments.
His ideas offer an interesting view for CIOs and CMOs who want to drive beneficial organizational change by innovating with technology.
Hierarchies vs. networks. Wilson presents the idea that “technology-driven networks of individuals” can replace bureaucratic hierarchies in some situations. Management in traditional organizations use a pyramid style, command and control communication structure to execute directives and receive feedback. However, when communication and transaction costs are sufficiently low, technology can enable information to flow without hierarchical intermediaries, creating a more rapid and efficient exchange of information than would otherwise be possible. This shift, from command-oriented to peer-oriented information flows, is having a profound impact in certain industries.
For example, Twitter has replaced the newspaper as source of news for many people. Instead of editors specifying stories and dispatching armies of reporters and photographers into the field, Twitter users gather and share news spontaneously, creating a broader network of sources than would be possible for any newspaper. In a refinement of this concept, Timeline Labs, founded by entrepreneur Malcolm CasSelle, analyzes social media data to surface real-time stories for television news; Timeline relies on peer sharing and data analytics to disrupt the traditional news room. Other examples can be found in industries as diverse as hotels (Airbnb) and music distribution (SoundCloud).
By replacing centralized hierarchies with distributed networks of individuals, technology can lower costs and dramatically increase operational efficiencies, compared to what is possible with top-down information flows.