No More Social EnterpriseWhen asked about illustrating the evolution of organizations, I often come up with the famous scene from Steven Spielberg's Raiders of the Lost Ark, in which Indiana Jones casually shoots a swordsman with a single bullet. This, according to me, perfectly shows the inefficient and dysfunctional nature of our traditional assumptions about how business should be done in today's world.

Then, because a quick sketch, and a good laugh, are worth many words, I show this parodical version of the same scene.

A technological fallacy

"Social," as we hear about it more and more and begin to see it on executives' agenda, has more to do today with skillful technology-enhanced swordsmen than with the change of paradigm embodied by Harrison Ford. The "Zero Email" (trademarked) initiative loudly heralded by Atos, for example, might for a long time have no further side-effect than untying employees from the computer screen where they consult their inbox to tie them back to another screen to follow an activity stream.

"If I had asked people what they wanted, they would have said faster horses."

Quite ironically, one of the most iconic quotes from the industrial age, attributed to Henry Ford, while embodying the failure of applying push-to-market methodologies in an era dominated by customer versatility, is the trap in which many social business initiatives are falling with gusto.

What do you think businesses want? Faster, more efficient employees. Faster, leaner horses … Don't they want to transform themselves? Assuredly they want this, but we all know changing behaviors is difficult, and so we rely on the fact that technology will enable the change. This is such a common belief that I won't link here to any blog or paper, you know where these are.

But this is a fallacy. Technology has nothing to do with enablement, technology is about affordance. In the hands of autonomous and voluntary employees (provided they feel entitled to act in such a way, which is a different story), it affords new opportunities for knowledge sharing, ad hoc relationships building and network weaving. In the hands of result-driven managers, in the midst of our hierarchical structures, it affords new levers to enforce a command-and-control mindset.

An economic nonsense

Transforming organizations will neither come from the evolution of technology, nor from the new behaviors we are adopting in our private life. We live in a co-evolutionary world, as Sir Winston Churchill once stated: "We shape our buildings, and afterwards our buildings shape us." To survive, our organizations have to take care of their own evolution to be able to take advantage of the deep changes at work in our lives and in technology.

Let us, for today, step away from the crowdy discussion about leadership, and consider a deep, often overlooked in the "social business" context -- reality. Organizations are economic entities, and thus their “purpose” is to make money. In his seminal 1937 paper, The Nature of the Firm, Ronald Coase analyzed why entrepreneurs created and grew business by hiring individuals to work together under the aegis of a single entity. His theory, which earned him the Nobel Prize in Economics in 1991, was that by doing so, organizations minimized the transaction costs related to accessing and organizing resources, and thus were a more efficient and cost-effective alternative to markets.

Today's organizations have lost the play against markets, whether they trade tangible or intangible assets. At the bottom, work has been commoditized, short-term contracts, freelance work and outsourcing have become much more cost-efficient and knowledge-intensive than the closed organization of resources that prevailed during the Industrial Revolution. At the top, firms are now transactional and tractable goods in the hands of shareholders, and have evolved into objects of Recreative Destruction (may Schumpeter forgive me the pun) on financial markets. By becoming, internally and externally, enslaved to the markets’ mechanisms, organizations have not only lost their leeway, but their purpose: making money for money’s sake is no more relevant, as they are no more in line with their “raison d’être,” i.e. a credible production alternative to markets. Organizations, as economic entities, are turning into economic nonsense.

Confronted with this void, can we seriously consider the Social Enterprise as a cure for our now purposeless organizations, a fortiori if blindfolded by the false premises of technology, and no matter how collaborative, networked, distributed or emergent it could be?

Organizations as platforms

The transformation organizations need to undergo is neither technological (let's get rid of the Social Enterprise for the sake of this) nor structural (which scope could leadership have, whilst trapped in feudality to markets?), but rather teleological. Financial goals, as described by Coase, as well as business goals based on serving the customer, no longer exist, only the need to perform to analyst targets. Organizations have lost their credibility and potential as economic alternatives to markets, and need to find and enact a new finality to survive. Rather than focusing on doomed to failure "social" transformation, they now have to be brave enough to shift from an economic paradigm they cannot sustain anymore.

"If you can't beat them, join them," says the old adage. If organizations cannot build their identity from competing with markets, why don't they support them? Rather than a closed system, they might aim at becoming platforms for smaller units or markets to operate. In The Connected Company, Dave Gray writes:

A podular organization requires support structures that network the pods together so they can coordinate their activities, share learning, and increase the company's overall effectiveness. Platforms are support structures that increase the effectiveness of a community. […] What city-like organizations like Facebook and Amazon have done is create platforms that provide a common backbone that provides consistency and order, without squelching innovation."

By transforming into platforms, organizations will be able to experiment with different structures and models, like the crowd business models analyzed by Ross Dawson and Steve Bynghall, and to enable new modes of production, such as "commons-based peer production," which Yochai Benkler described as a third mode of production, parallel to firms and markets.

Organizations as social systems

In our hyper-connected world, organizations have to weave new relationships to the society, as a whole, as well as with the individuals who compose them. While transforming themselves into platforms might satisfy the necessity for organizations to find a new economic and collective purpose, this doesn't really answer the need to gather, and bind, individuals around this purpose. Organizations aren't people, but they are made of people, and they need a way to formalize this reciprocal binding, namely, a contractual framework.

Let's get back to Ronald Coase:

All that is stated in the contract is the limits to what the persons supplying the commodity or service is expected to do. The details of what the supplier is expected to do is not stated in the contract but is decided later by the purchaser. When the direction of resources (within the limits of the contract) becomes dependent on the buyer in this way, that relationship which I term a 'firm' may be obtained."

Wow … In the same way businesses have externally lost their economic purpose, they have restrained their internal flexibility and adaptiveness. Specialization of work, job descriptions, have constrained both workers' freedom and creativity, and managers' capability to effectively orchestrate resources. Jon Husband has recently written a great article on the need to rethink our competency models in a networked era, in which he highlighted how much present thinking prevents the change we are seeing happening to diffuse inside organizations.

Furthermore, the notions of personal and professional life, of privacy, of intellectual property, are changing. Consumers are also makers, trusted networks have replaced other media in the way we discover, access and memorize information, relegating the Gutenberg civilization to an episode in history. In this context, the traditional contract of employment has lost most of its relevance, and has now to encompass all these non-directly-work-related extensions of our self, becoming a sort of social contract.

In the civil society, power has shifted to finance and markets. Businesses won't recover their identity from them. To become credible economic agents again, business organizations will have to take a step forward into the civil society, along with unions, political and other civil organizations, and will have to reclaim their identity and reason for being from the roots of pre-industrial production structures.

It might be time to get past the fallacies of the Social Enterprise, to focus on what really matters: the transformation of artifacts from the past into sustainable, and accountable, alternatives to markets, as economic production agents. There is a long way to go …

Title image courtesy of Keith Bell (Shutterstock)

Editor's Note: Hungry for more thoughts on the future of the social enterprise? Find more here