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The Connected Company: Book review

Traditional hierarchically organised businesses are ill suited to the modern reality of social media and connected customers. According to this book, companies need to become more flexible — like an adaptive biological system.
Written by Mary Branscombe, Contributor

The business world is no longer predictable, with blindly loyal, isolated customers. Nowadays, customers can see what other people think, and drop a product for the competition long before a traditional, hierarchical business can respond. The only way to compete, according to Dave Gray's view of the new business world, is to be a connected company organised in fractal, semi-autonomous "pods" networked into a platform (a style of organisation known as a holarchy rather than the usual top-down hierarchy) that's flexible enough to adapt quickly.

The Connected Company starts with something that no one in business can have missed: The way the balance of power is shifting from the businesses that offer products to their customers to those that have the advantage of networking and the ability to see far more information about their suppliers and the competitive options. From leaked internal memos to social media, bad news about a company is hard to keep private. So far, so familiar — but what can businesses do about it?

Image: O'Reilly Media

Don't try to put the genie back in the bottle, says Gray; build on the trends of connection, communication, and customer comments to switch fundamental things like what your business does and how it works. He gathered examples from a range of industries and alternates them with business and organisation theory in a very readable way. It can sometimes feel overly simplistic, but also does a good job of covering a large topic without getting bogged down in the details, or assuming that readers are experts.

A look at changing economics points out that, thanks to technology and mass manufacturing, you don't have to be affluent to enjoy healthcare and travel beyond what the wealthiest could command in earlier eras. Ironically for businesses, those improvements in technology and manufacturing lead to saturated markets and lower margins — usage of "material resources" started falling in the UK five years before the credit crunch, apparently. The result, Gray argues, is that businesses can only survive by switching to services and building relationships with those connected, complaining customers. For example, more people are moving into cities, which drives new services like OnStar, Ford Sync, Zipcar, and Uber's on-demand, user-rated limo service.

The jury is still out on whether the business model for all these new services is as strong as the free publicity from the most vocal enthusiasts: Sync and OnStar sell more cars, but while Zipcar is doing well on Wall Street, membership is lower than you might think, at 770,000, and Uber has faced regulatory hurdles in every city where it has launched. That doesn't undermine Gray's thesis, but it underlines that the transition to a service economy isn't going to be a completely smooth ride.

What with demanding customers and unpredictable, fragmented markets, businesses have to cope with a lot more variety — which is at odds with the usual drive to formalise and automate processes for efficiency.

How do you make a successful service for connected customers? As Gray points out, most customer service hardly deserves the name — although he optimistically sees this as room for improvement. Where, when, and how you deliver a service matters, in Gray's view, more than the product itself. What we really want, he believes, are the services that are the end result — the messages rather than the smartphone you send them from, for example. To avoid making customers feel exploited, having to shell out for both the product and the service, those services need to be convenient — for the customer rather than the business.

What with demanding customers and unpredictable, fragmented markets, businesses have to cope with a lot more variety — which is at odds with the usual drive to formalise and automate processes for efficiency. In truth, most of what employees at the average business have to deal with are the exceptions — the pesky customers disrupting the perfect one-way stream of smoothly optimised processes. Having the customer service representative stay on the line while you are transferred to the person who can solve your problem might sound like an expensive solution — but it's probably cheaper than negative publicity and lost customers.

The Connected Company isn't a traditional book, so much as a set of linked essays or lectures. The table of contents is actually a thorough overview that sums up each chapter — at a pinch, you could read that and dip into the most interesting areas. Each chapter opens with another summary, and closes with a list of sources and further reading. In between, information is packed into images, lists and bite-sized chunks of facts and analysis that keep the thesis moving swiftly, but also feel too short and leave you wanting analysis (and some nuggets of information strike the author so forcibly that he repeats them in later chapters).

Where this book works best is when it gets the balance of examples from businesses and analysis of trends and issues right. "Your most unhappy customers are your greatest source of learning," says the quote from Bill Gates that opens the chapter on how companies lose touch (although Microsoft isn't covered in the mini-biographies of the fall and occasional rise of former greats). The stories of Xerox and Starbucks are well known. More interesting are the lesser-known details of how IBM reinvented itself by changing company culture to actually listen to customers, and how Kodak threw away the opportunity to get a 20-year head-start on the digital camera market after an engineer created a prototype using a Super-8 lens to record onto cassette tape that you could play back on TV.

Gray gives a swift but thorough overview of modern business theory on alternative ways to structure a business as networked units — less like a machine, more like an adaptive biological system.

Some examples explain things that seem puzzling, but make perfect sense when explained. Amazon bought Zappos despite utterly different approaches — Amazon views customer contact as a sign that it has failed to build its system correctly, while Zappos views it as an opportunity to discover more about the customer and puts a free phone number on every page of its website. But because behind the scenes they both rely on extremely efficient logistics, they can get economies of scale by combining their warehouses and delivery systems.

Sometimes the examples are just too short and shallow to really tell you anything; they're also unflaggingly and uncritically positive, and feel more like marketing (see the description of Google's 20 percent time). The explanations of using customer feedback, through techniques like net promoter scores, are more useful — connecting systems so your customers don't have to care how you run your business (which allowed Wells Fargo to launch the first online US banking system in just 60 days) and organising your company like the interdependent but unplanned services available in a city.

Gray gives a swift but thorough overview of modern business theory on alternative ways to structure a business as networked units — less like a machine, more like an adaptive biological system. If that feels a little futuristic for the average business, it's worth remembering that the transformation to the fractal, holarchic, podular connected company is a hard one — and the single chapter analysing problems and failures doesn't cover nearly enough ground.

The final chapter on how to put the book's lessons into action is also too short, and perhaps the most depressingly realistic: If you're not in charge of the company and you can't get into a project that runs outside the stifling hierarchy and bureaucracy that's dragging the business down, try to start grassroots networking that will at least reveal the limitations of the current setup. But it's a sign of a good book on an interesting topic that it leaves you wanting more.

The Connected Company
By Dave Gray (with Thomas Vander Wal)
O'Reilly Media
304 pages
ISBN: 1-4493-1905-X

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