The collaborative economy is not just a fad

“The company I started with is fundamentally different to the company I work for now,” said John Rice, the Vice Chairman of GE, at the B20 conference in Sydney last week.

Rice’s description of GE’s evolution since he started with the company in 1978 -- that today’s business is far more global and focused on sustainable development -- illustrates the changes happening in the world’s economy.

A few days earlier, consulting firm Deloitte released a study measuring the value of collaboration to Australian industry, which reinforces Rice’s description of how corporations like GE are adapting to a very changed world.

In an industry awash with buzzwords, ‘collaboration’ has been a firm favourite of the tech sector for the last five years. But is this current fad more than just another example of old concepts receiving new branding in the face of technological change? 

Deloitte presents substantial data: it found Australian business gains $46 billion a year through employees working together, with the opportunity to realise a further $10bn if companies were to embrace collaboration in the workplace further.

While substantial (and not surprising given Google commissioned the report to promote its suite of cloud-computing services), it’s hard not to notice the industry is stating the obvious. Collaboration, after all, is the foundation for every business.

From Henry Ford’s Model T Highland Park plant to the Venice Arsenale -- the most efficient manufacturing plant of the 16th century -- and the irrigators of ancient Mesopotamia, business has been about people working together to get products to market. Without collaboration, it’s hard to get wheat delivered, or ships built.

The difference between the various eras is how technology forces change in management. A prosperous Bronze Age grain merchant ran his business a world apart from how Galileo -- then a consulting engineer -- communicated with his Venetian employers at the Arsenale, which in turn was very different to how Henry Ford, who worked for Thomas Edison at General Electric, ran his manufacturing operations in the pneumatic tube and telegraph era.

The arrival of computers in the 1960s gave big businesses the opportunity to modernise their management practices by overlaying the new information tools onto Henry Ford’s manufacturing models. Most of today’s executives are the product of the rigid cultures that evolved from mixing mainframe technologies and mass-production business structures.

Eventually, the arrival of cheap telecommunications and computers in the 1990s disrupted those mid-century management methods and created today’s wave of disruption across industries once thought immune from global competition.

“All things digital are driving innovation through the economy," Deloitte Access Economics partner Ric Simes points out.

Frank Farrall, the national leader of Deloitte Digital, echoes Simes’ view: “Businesses that have been operating for 100 years, and now digital technologies, are allowing innovators to come in and disrupt that.”

An example of the new management methods of those disruptors is cloud accounting software company Xero. The company’s Australia general manager, Chris Ridd, describes how their management structure is kept flat by using modern tools.

“I’ve often said that the best ideas that come up in our organisation are not driven from the top -- it’s often someone from the field who will challenge us in the leadership team," he says.

Xero is typical of fast-growth businesses that are using online tools to keep their management structures flat, putting at risk the jobs of many middle-class professionals in mid-level management positions (Australia's middle class is about to get minced, July 2).

Measuring collaboration

Deloitte’s definition of collaboration is both broad and strangely limiting at the same time: “Collaboration is employees communicating and working together, building on each other’s ideas to produce something new or do something differently.”

While the report measures collaboration on the time workers spend talking with colleagues -- the education sector topped out with 17 per cent of time, while logistics was at the bottom at 12 per cent -- collaboration is more than just chatting with your workmates over better ways to machine and sell widgets.

It may not appear obvious to us, but the 1920s assembly-line workers at Highland Park or ship builders in 17th century Venice were just as much collaborating as today’s web designers or construction workers as they go about their jobs.

What is changing -- and this is where Google and Deloitte are on safe ground -- is the way we’re going about our jobs. The collaboration story is more around a fundamental shift in our economy and society.

Last week, we looked at how travel website Wotif stagnated for years in the face of under-investment (From Disruptor to Disrupted: How Wotif lost the plot, July 14). Deloitte’s research around collaboration shows how critical investment in these new technologies is for businesses.

“Australia is confronting very real issues around disruption, innovation and productivity, as productivity has fallen at an average 0.6 per cent a year since 2007-08," says Simes.

“Yet according to the Australian Bureau of Statistics, only 36.6 per cent of Australian businesses were innovative in 2012-13 and introduced new or significantly improved goods, services or processes. This was down from 41.3 per cent on the year before.

“When we add up all the potential across Australian business, collaboration can play a critical role in driving productivity.”

For managers and investors, the business structures of the 1980s are just as antiquated as those used in the 1920s motor industry -- which is the real message in Deloitte’s report.

John Rice’s story of how GE has evolved reinforces that message. The world is changing and its business leaders have to change with it.

Paul Wallbank has been contracted as a freelance writer and presenter by both Google and Xero at various times since 2010.