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The Connected Company Summary
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Summary of the book The Connected Company
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The Connected Company SummaryThe divided company The connected company
Hierarchy Holarchy
Division of labor Fractal work units
Specialization Autonomy
Stable Flexible
Predictable in stable Adaptive in uncertain
environments environments
PART I: Why change? Customers are adopting disruptive
technologies faster than companies can adapt
Chapter 1 – The Connected Customer
‘’Customers are connecting, forming networked communities that allow
them to rapidly share information and self-organize into powerful interest
groups. Companies will have to be more responsive to customer needs
and demands if they want to survive’’
The balance of power is shifting (p. 4)
It is shifting from companies to the networks that surround them.
The network (customers, partners, employees) will increasingly set
the agenda, determine the parameters, and make the decisions
about how they interact with companies.
A wake-up call at Starbucks (EXAMPLE) (p. 4)
In 2006, sales at Starbucks began to slip. Starbucks chairman
Howard Schultz visited some of his stores and diagnosed several
flaws in his company’s customer experience. (For example, overly
tall espresso machines blocked customers from communicating and
connecting with barista.)
Customers found the stores’ streamlined, efficient designs antiseptic
and repetitive.
Schultz sent an urgent memo to his senior executives, outlining
possible fixes.
He wrote, “We desperately need to look into the mirror and realize
it’s time to get back to the core.” Schultz intended the memo to be
confidential, but someone leaked it. The memo appeared on the
Starbucks Gossip blog. The mainstream media widely reported its
contents. Their stories about Starbucks depicted a company in
, trouble. Reporters barraged Schultz with calls. He refused to speak
with them.
This shows what impact the global conversation, as well as, the
employees and customers can have on a single brand. Especially, if
the brand does not have a voice in this global conversation and all
the things (that they build up) are getting lost. The network was the
one that have a strong voice in this global conversation.
Something’s happening here (p. 6)
Schultz worried that apparently everyone – “customers, partners,
analysts, reporters, industry insiders and business ‘experts’” – held
strong opinions about his memo and were sounding off about it.
Everyone except Starbucks. Schultz realized that his company “did
not have a voice in” the global conversation.
Without an “interactive presence online,” said Schultz, Starbucks
could not state its position or explain the memo. It could not “talk
directly to customers, investors, as well as partners, or let them talk
directly to us.” Starbucks lacked immediate connections with its
customers or other important audiences.
Its experience offers the following valuable lesson: Companies
absolutely need to be active on today’s social media
networks and must directly connect with their customers.
Cascading (=vallende) effects can be initiated by customers,
employees, enemies, competitors, or senior executives that are not
satisfied.
Power in the network (p. 8)
By changing the way, we create, access and share information,
social networks are changing the power structure in society.
Social networks have tremendous power and customers leverage
this power to communicate with their peers
Social media – Facebook, Twitter, Instagram, blogs, and so on – are
powerful megaphones. Projected by these platforms, consumers can
do unlimited damage or supply boundless positive PR. As social
networks continue to grow, “every customer will be a connected
customer.”
To engage your employees, business stakeholders and customers,
your company can change how your employees interact with your
consumers, how you evaluate success and how you recognize
performance.
The ideal organizational arrangement for a “connected company is a
network of loosely coupled, semi-autonomous units”; these units
work like businesses within your business.
Customers are connecting and sharing information at a far faster
rate than the companies that serve them. There’s no question that
when it comes to social networking, companies lag behind their
markets.
Peer-to-peer conversations subvert traditional marketing channels.
Customers trust each other more than they trust companies, who
have a vested interest in making themselves look good.
, Customers don’t need to revolt in an active way. All that is required
is for a new company to come along and offer a better service.
Connected customers will become aware of such services far more
easily than they have in the past and share the information more
quickly too.
Every customer will be a connected customer. And if you want to win
over connected customers, you will need to become a connected
company. For example, understand that connected customers value
a company that will help make better buying decisions.
Chapter 2 – The service economy
‘’Industrialization is a phase, and in developed nations that phase is
ending. Growth in developed economies will increasingly come from
services.’’
The great reset (p. 14)
Richard Florida points in this book to a shift from an economy based
on making things to one that is increasingly powered by knowledge,
creativity and ideas.
Resets are initiated by (catastrophic) failures, but they also lead to
new periods of growth and innovation, built on new systems and
infrastructure.
An age of abundance (p. 14)
The material abundance (=overvloed) we all enjoy, was made
possible by an industrial economy that focused primarily on mass-
producing material goods. The philosophy of mass production was: If
you could produce great volumes of a product at a low cost, the
market for that product would be virtually unlimited.
Nowadays markets get saturated (=verzadigd). As markets became
saturated with material goods, producers found a new way to apply
the principle of mass production in mass marketing. With a TV in
nearly every house, producers had a direct line to customers.
Customers become known as consumers, because their role in the
economy was to consume everything that producers could make.
The producer-driven economy is giving way to a new, customer-
centered world in which companies will prosper by developing
relationships with customer – by listening to them, adapting, and
responding to their wants and needs. (It is no longer possible for
mass marketers to reach out and touch all of their customers at
once, because every customer now has its own voice)
o A problem is that the organizations that generated all the
wealth are not designed to listen, adapt and respond. They
were designed to create a ceaseless one-way flow of material
goods and information. Everything about them was been
optimized for this one-directional arrow, and product-oriented
habits are so deeply applied in our organizational systems that
it will be difficult to root them out.
, We no longer live in an industrial economy. We live in a service
economy. And to succeed in a service economy, we will need to
develop new habits and behaviors. We will also need new
organizational structures. (For example, the schools are educating
people for operational tasks but not for creativity, problem-solving
and innovation that we will need in the future, like Google needs
technological education)
An emerging service economy
What are the three things that drive the move to services?
1. Product saturations: When people already have most of the
material goods they need, they will tend to spend more of
their disposable income on services. Increasingly, the products
that companies want to sell us are optional: they offer not
functionality, but intangible things like status, pride of
ownership, novelty etc.
2. Information technology: A post-industrial revolution is
delivering a new kind of abundance: an abundance of
information, along with networks and mobile devices for
moving that information around, and much faster processing,
which allows us to do more interesting kinds of things with the
information we have. The digital revolution is ushering in new
way to deliver, combine, and mix up services, resulting in all
kinds of enticing combinations, like streaming music, following
people, renting cars, booking hotel rooms etc. (WEB)
3. Urbanization: Throughout the world, city populations are
growing much faster than rural populations, which means that
we are becoming an urban society and living more urban
lifestyles.
There are several reasons why people are moving to the cities: (p. 17)
There is (more) action
There are more (different kind of) jobs
The same jobs pay more in the cities pay more
The more highly skilled you are as a worker, the more you stand to
gain financially by moving to a large city
If you get laid off or if your company goes out of business, it’s much
easier to find a new job in a city without having to pick up and move
More attractive for companies, because most skilled workers live in
cities
Cities pack a lot of people and firms into relatively small space, which is
good for services companies in several ways: (p.18)
Space People living in small city apartments just don’t have a lot
of room for products, and because they are making more money
than their rural counterparts, they tend to spend more on services.
Density Urban density makes it more attractive for companies to
provide a wide variety of services. (For example, taxis find their
customers quickly in densely packed urban centers and more need
for it, because having a car is expensive in city and not really useful
leads to the creation of carpool and Uber)
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