Western bubblenomics & global business momentum

San Francisco & Silicon Valley are the epicenter of tech funding, with some VC's saying they will only finance companies located in the area because of the dense, rich local ecosphere of continuous innovation.

Like San Francisco's meteorological micro climates, the various sectors seem to blow hot and cold with amazing frequency, but for now the funding world seems to be hitting full bloom around cloud and social software plays. I've been paying close attention to the bay area's revitalized venture capital community which was becalmed until recently.

The cloud land grab (or perhaps 'sky grab'), is largely centered around platforms, with more and more offerings vying to become the center of business software, rather than being confined point solutions. Where the edges of all these platforms in the sky intersect inside businesses (or more to the point don't)  is a problem senior management is increasingly seeing, but that's not stopping those who sense now is time to ante up on the Initial Public Offering roulette table.

All sorts of companies are in line to debut on the public markets and like the last tech boom and crash there's some pretty silly products and prices out there.

James Temple wrote a good piece in the Sunday San Francisco Chronicle, "Internet firms' valuations reminiscent of bubbles" in which he recalls 'the misfortune of standing on the front lines while two Bay Area economic bubbles burst' ...tech and then housing produced gold and silver rush like booms and busts from earlier in California history.

As I've previously discussed here, we're back in a period of rapidly inflating financial bubbles but this time they are even more global, despite the local bay area roots of much of the funding. The maddest area of course is in social media and mobile, with Zynga, the sticky games company that pollutes your social network with inane posts from your connections about farming, fish and mafia stuff currently valued at ten billion dollars and rising. (A figure Twitter is also astonishingly valued at despite being still remarkably free of any coherent business model).

Those useless links that come up in Google when you search for things are often brought to you by Demand Media who have successfully IPO'd and are now worth more than the 'old media' New York Times. (Their 'content farm' model uses algorithms that find topics with high advertising potential, based on advertising auction bidding action and search engine query data. It then commissions freelance content creators to produce corresponding text or video content which is then posted on a variety of sites).

All these empty internet calories fatten up online content and social media quantity but add little to quality, and this is arguably having a negative impact on the business collaboration Enterprise 2.0 software market, where buyers continue to proceed cautiously as they struggle to differentiate and distinguish between online junk interactions and methods and technologies to improve their business performance.

Salesforce and their Force.com platform have been adding to the confusion with their awful US football SuperBowl TV spot for Chatter hitting a high point of incoherence (so far) with cartoon representations of mass market entertainment act the Black Eyed Peas saying 'so we all, like, on the same page and stuff' about 'the cloud'.

Anyone attempting to organize quality discourse in an online business environment and get people to share knowledge in defined areas probably felt a little ill when they saw their profession trivialized in this way. It can't have impressed any CFO's watching as they contemplated the business value of orchestrating employees to collaborate better with a well organized social software initiative, as opposed to the time filling amusements of Farmville and extended social networks.

The Bay Area is home to a terrific number of stellar collaboration technology companies whose people have worked extremely hard to innovate and provide high quality tools. Jive software moved their headquarters to Palo Alto from Oregon and Moxie Software moved from Austin Texas to Silicon Valley in order to be closer to the action. Many other companies in the space originated in the bay area.

Some of this is about being closer to the deals and and money, but the value of these new more efficient ways of working together can be overshadowed and obscured by the 'all about me' social web.

For generations corporations have been dominated by hierarchical management structure, with people in senior positions often making solo unilateral decisions that wreck the intricate collaborative neurostructure further down the org chart. Talking to Bill Kuchik last week he again commented 'everyone talks about collaboration in the HR world but few people are doing it'.

While we individually interact with our social networks on our own terms and timeframe in our personal lives, the new business tools empower those intricate business collaborative neurostructures. The challenge is principally in harnessing the possibilities and efficiencies from new ways of working with modern collaborative tools.

Vineet Nayar, CEO of HCL writes in his post 'Multinationals and the Shifting Equilibrium'

...Collaborative and exploratory by nature, these digital natives render command and control management methods ineffective. They seek empowerment and responsibility, working far better in communities of mutual interest rather than pyramid structures.

While digitally savvy people can indeed coalesce into collaborative clusters to work together very well - as typically happens in the creative professions - moribund management practices will quickly stifle group use of collaborative technologies. Unless you're a CEO with the vision to see the power and business value of engaging your workforce with new ways of working, like Vineet, empowerment and responsibility are the aspirational dreams of people struggling within the confines of document and email dominated cultures.

It would be a shame if the 2.0 and social stock market bubble bursts before US and European companies get a chance to realize the potential of the new ways we can more efficiently work together. As Nayar points out in his globally perceptive post

We all know that the world of business is tilting eastwards. With the growth rates in countries like India and China expected to be 9.7 and 10.5 per cent as against just 2.6 per cent in the US, companies from the Western world are looking eastward for market opportunities.

Unless Western companies start treating 2.0 technologies as more than personal social enabling tools and stock market gambles there is a very real danger of losing out to parts of the world that are moving more quickly to adapt to more competitive ways of working...

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image from Laputa: Castle in the Sky (???????? Tenk? no Shiro Rapyuta) (Or simply Laputa) (re-titled' Castle in the Sky' for release in the United States)  a 1986 film written and directed by Hayao Miyazaki.