Business networks are driving innovation and social interaction as new technologies and user expectations converge.

1. The Networked Economy Forges New Force for
Collaboration In Business and Commerce, Says Author Zach
Tumin
Business networks are driving innovation and social interaction as new technologies and user
expectations converge.
Listen to the podcast. Find it on iTunes. Sponsor: Ariba
Dana Gardner: Hi, this is Dana Gardner, Principal Analyst at Interarbor Solutions, and you're
listening to BriefingsDirect. Today, we present a sponsored podcast discussion
on how new levels of collaboration have emerged from an increasingly
networked world, and what that now means for business and society.
We'll hear from a Harvard Kennedy School researcher and author on how deeper
levels of collaboration, more than ever, can positively impact how organizations
operate. And we'll learn from a global business-commerce network provider how
these digital communities are redefining and extending new types of business and collaboration.
[Ariba is a sponsor of BriefingsDirect podcasts.]
To learn more about how new trends in collaboration and business networking are driving
innovation and social interaction, please join me now in welcoming Zach Tumin, the Senior
Researcher at the Science, Technology, and Public Policy Program at the Harvard Kennedy
School. Welcome, Zach.
Zach Tumin: Good morning, Dana.
Gardner: Zach, you're also the co-author with William Bratton of this year’s Collaborate or
Perish: Reaching Across Boundaries in a Networked World, published by Random House. We
welcome you to the show.
Tumin: Thank you.
Gardner: We're also joined today by Tim Minahan, the Senior Vice-President of Global
Network Strategy and Chief Marketing Officer at Ariba, an SAP company. Welcome back, Tim.
Tim Minahan: Thanks, Dana. Good to be here.
Gardner: Gentlemen, let's set the stage here, because we've got a really big topic. Zach, in your
book "Collaborate or Perish," you're exploring collaboration and you show what it can do when
it's fully leveraged. It's very interesting. And Tim, at Ariba you've been showing how a more
networked economy is producing efficiencies for business and even extending the balance of
what we would even consider commerce to be or redefining commerce.

2. I’d like to start with looking at how these come together. First, we have new types of
collaboration and then we have the means to execute on them through these new business
networks. What should we expect when these come together? Let's go to you first, Zach.
Tumin: Thanks, Dana. The opportunities for collaboration are expanding even as we speak. The
networks around the world are volatile. They're moving fast. The speed of change
is coming at managers and executives at a terrific pace. There is an incredible
variety of choice, and people are empowered with these great digital devices we
all have in our pockets.
That creates a new world, where the possibilities are tremendous for joining
forces, whether politically, economically, or socially. Yet it's also a difficult world,
where we don't have authority, if we have to go outside of our organizations, but
where we don't have all the power that we need, if we stay within the boundaries of our charters.
So, we're always reaching across boundaries to find people who we can partner with. The key is
how we do that. How do we move people to act with us, where we don't have the authority over
them? How do we make it pay for people to collaborate?
A lot of change
Gardner: Tim, we've seen lots of change in last 20 years, and a lot of times, we'll see
behavioral shifts. Then, at other times, we'll see technology shifts. Today, we seem to be having
both come together. Based on what Zach has described in this unprecedented level of change in
adaptation, where do you see the big payoffs for business in terms of leveraging collaboration in
the context of a vast network?
Minahan: Collaboration certainly is the new business imperative. Companies have leaned out
their operations over the past couple of years and they spent the previous 30
years focusing on their internal operations and efficiencies and driving greater
performance, and getting greater insights.
When they look outside their enterprise today, it's still a mess. Most of the
transactions still occur offline or through semi-automated processes. They lack
transparency into those processes and efficiency in executing them. As a result,
that means lots of paper and lots of people and lots of missed opportunities,
whether it's in capitalizing on getting a new product to market or achieving new
sales with new potential customers.
What business networks and this new level of collaboration bring is four things. It brings the
transparency that’s currently lacking into the process. So you know where your opportunities are.
You know where your orders are. You know where your invoices are and what your exposure to
payables are.

3. It brings new levels of efficiencies executing against those processes, much faster than you ever
could before through mostly automated process. It brings new types of collaboration which I am
sure we will get into later in this segment.
The last part, which I think is most intriguing, is that it brings new levels of insights. We're no
longer making decisions blindly. We no longer need to double order, because we don’t know if
that shipment is coming in and we need to stockpile, because we can't let the refinery go down.
So it brings new levels of insight to make more informed decisions in real time.
Gardner: One of the things I sense, as people grapple with these issues, is a difficulty in
deciding where to let creative chaos rein and where to exercise control and where to lockdown
and exercise traditional IT imperatives around governance, command and control, and systems of
records.
Zach, in your book with William Bratton, are there any examples that you can point to that show
how some organizations have allowed that creativity of people to extend their habits and
behaviors in new ways unfettered and then at the same time retain that all-important IT control?
Tumin: It's a critical question that you’ve raised. We've got young people coming into the
workforce who are newly empowered. They understand how to do all the things that they need
do without waiting online and without waiting for authority. Yet, they're coming into
organizations that have strong cultures that have strong command-and-control hierarchies.
There's a clash that’s happening here, and the strong companies are the ones that find the path to
embracing the creativity of networked folks within the organization and across their boundaries,
while maintaining focus on set of core deliverables that everyone needs to do.
Wells Fargo
There are plenty of terrific examples. I will give you one. At Wells Fargo, for the development
of the online capability for the wholesale shop, Steve Ellis was Executive Vice President. He had
to take his group offline to develop the capability, but he had two responsibilities. One was to the
bank, which had a history of security and trust. That was its brand. That was its reputation. But
he was also looking to the online world, to variability, to choice, and to developing exactly the
things that customers want.
Steve Ellis found a way of working with his core group of developers to engage customers in the
code design of Wells Fargo's online presence for the wholesale side. As a result, they were able
to develop systems that were so integrated into the customers over time that they can move very,
very quickly, adapt as new developments required, and yet they gave full head to the creativity of
the designers, as well as to the customers in coming to these new ways of doing business.

4. So here's an example of a pretty staid organization, 150 years old with a reputation for trust and
security, making its way into the roiling water of the networked world and finding a path through
engagement that helped to prevail in the marketplace over a decade.
Gardner: Tim Minahan, for the benefit of our audience, help us better understand how Ariba is
helping to fuel this issue of allowing creativity and new types of collaboration, but at the same
time maintaining that the important principles of good business.
Minahan: Absolutely, Dana. The problem we solve at Ariba is quite basic, yet one of the biggest
impediments to business productivity and performance that still exists. That's around inter-
enterprise collaboration or collaboration between businesses.
We talked about the deficits there earlier. Through our cloud-based applications and business
network, we eliminate all of the hassles, the papers, the phone calls, and other manual or
disjointed activities that companies do each day to do things like find new suppliers, find new
business opportunities as a seller, to place or manage orders, to collaborate with customers
suppliers and other partners, or to just get paid.
Nearly a million business today are digitally connected through the Ariba Network. They're
empowered to discover one another in new ways, getting qualifying information from the
community, so that they know who that party is even if they haven’t met them before. It's similar
to what you see on eBay. When you want to sell your golf clubs, you know that that buyer has a
performance history of doing business with other buyers.
They can connect with known trading partners much more efficiently and then automate the
processes and the information flows between each other. Then, they can collaborate in new ways,
not only to find one another, but also to get access to preferred financing or new insights into
market trends that are going on around particular commodities.
That’s the power of bringing a business network to bear in today’s world. It's this convergence of
cloud applications, the ability to access and automate a process. Those that share that process
share the underlying infrastructure and a digitally connected community of relevant parties,
whether that’s customers, suppliers, potential trading partners, banking partners, or other
participants involved in the commerce process.
Gardner: Zach, in your book and in your earlier comments, you're basically describing almost a
new workforce and some companies and organizations are recognizing that and embracing it.
What’s driving this? What has happened that is basically redefining a workforce and how it
relates to itself and to the customer or, in many cases, for businesses across the ecosystem of the
suppliers and then the channels and distribution? What’s behind this fairly massive shift in what
workforces are?

5. It's the demographics
Tumin: It’s in the demographics, Dana. Young people are accustomed to doing things today
that were not possible 10 years ago. The digital power in everyone’s pocket or pocket book, the
digital wallet in markets, are ready, willing, and able to deal with them and to welcome them.
That means that there’s pressure on organizations to integrate and take advantage of the power
that individuals have in the marketplace and that come in to their workforce.
Everyone can see what's going on around the world. We're moving to a situation where young
people are feeling pretty powerful. They're able to search, find, discover, and become experts all
on their own through the use of technologies that 10 years ago weren’t available.
So a lot of the traditional ways of thinking about power, status, and prestige in the workforce are
changing as a result, and the organizations that can adapt and adopt these kinds of technologies
and turn them to their advantage are the ones that are going to prevail.
Gardner: Tim, with that said, there's this demographic shift, the shift in the mentality of self-
started discovery of recognizing that the information you want is out there, and it’s simply a
matter of applying your need to the right data and then executing on some action as a result. Your
network seems ready-made for that. I know that you guys have been at this for some time. It
seems like the events, these trends, have coalesced in a way that that really suits your strength.
Tell me why you think that’s the case that this vision you had at Ariba a decade or more ago has
come about. Is there something fundamental about the Internet or were you guys just in the right
place at the right time?
Minahan: The reality of the community is that it is organic. It takes time to grow. At Ariba we
have more than 15 years of transactional history, relationship history, and community generated
content that we've amassed. In fact, over the past 12 months those, nearly a million connected
companies have executed more than $400 billion in purchase, sales, invoice, and payment
transactions over the Ariba network.
Aggregate that over 15 years, and you have some great insights beyond just trading efficiencies
for those companies participating there. You can deliver insights to them so that they can make
more informed decisions, whether that’s in selecting a new trading partner or determining when
or how to pay.
Should I take an early-payment discount in order to accelerate or reduce my cost basis? From a
sales standpoint, or seller’s standpoint, should I offer an early payment discount in order to
accelerate my cash flow? There are actually a host of examples where companies are taking
advantage of this today and it’s not just for the large companies. Let me give you two examples.
From the buyer side, there was a company called Plaid Enterprises. Plaid is a company that, if
you have daughters like I do who are interested in hobbies and creating crafts, you are very

6. familiar with. They're one of the leading providers for the do-it-yourself crafts that you would get
at your craft store.
Like many other manufacturers, they were a mid sized company, but they decided a couple of
years ago to offshore their supplies. So they went to the low cost region of China. A few years
into it, they realized that labor wages were rising, their quality was declining, and worse than
that, it was sometimes taking them five months to get their shipment.
New sources of supply
So they went to the Ariba Network to find new sources of supply. Like many other
manufacturers, they thought, "Let’s look in other low cost regions like Vietnam." They certainly
found suppliers there, but what they also found were suppliers here in North America.
They went through a bidding process with the suppliers they found there, with the qualifying
information on who was doing business with whom and how they performed in the past, and
they wound up selecting a supplier that was 30 miles down the road. They wound up getting a 40
percent cost reduction from what they had previously paid in China and their lead times were cut
from more than 120 days down to 30.
That’s from the buy side. From the sell side, the inverse is true. I'll use an example of a company
called Mediafly. It's a fast growing company that provides mobile marketing services to some of
the largest companies in the world, large entertainment companies, large consumer products
companies.
They were asked to join the Ariba Network to automate their invoicing and they have gotten
some great efficiencies from that. They've gotten transparencies to know when their invoice is
paid, but one other thing was really interesting.
Once they were in the networked environment and once they had automated those processes,
they were now able to do what we call dynamic discounting. That meant when they want their
cash, they can make offers to their customers that they're connected to on the Ariba Network and
be able to accelerate their cash.
So they were able not only to shrink their quote-to-settle cycle by 84 percent, but they gained
access to new financing and capital through the Ariba network. So they could go out and hire that
new developer to take on that new project and they were even able to defer a next round of
funding, because they have greater control over their cash flow.
Gardner: Zach, in listening to Tim, particularly that discovery process, we're really going back
to some principles that define being human -- collaboration, word of mouth, sharing information
about what you know. It just seems that we have a much greater scale that we can deploy this. As
Tim was saying, you can look to supply chains in China, Vietnam, or in your own neighborhood
that you might not have known, but you will discover.

7. Help me understand why the scale here is important? We can scale up and scale down. How is
that fundamentally changing how people are relating in business and society?
Tumin: The scaling means that things can get big in a hurry and they can get fast in a hurry. So
you get a lot of volume, things go viral, and you have a velocity of change here. New
technologies are introducing themselves to the market. You have extraordinary volatility on your
network and that can rumble all the way through, so that you feel it seconds after something
halfway around the world has put a glitch in your supply chain. You have enormous variability.
You're dealing with many different languages, both computer languages and human languages.
That means that the potential for collaboration really requires coming together in ways that helps
people see very quickly why it is that they should work together, rather than go it alone. They
may not have a choice, but people are still status quo animals. We're comfortable in the way that
we have always done business, and it takes a lot to move us out.
It comes down to people
When crisis hits, it’s not exactly a great time to build those relationships. Speaker of the House
Tip O'Neill here in United States once said "Make friends before you need them." That’s a good
advice. We have great technology and we have great networks, but at the end of day, it’s people
that make them work.
People rely on trust, and trust relies on relationships. Technology here is a great enabler but it’s
no super bullet. It takes leadership to get people together across these networks and to then be
able to scale and take advantage of what all these networks have to offer.
Gardner: Tim, another big trend today of course, is the ability to use all of this data that Zach
has been describing, and you are alluding to, about what’s going on within these networks. Now,
of course, with this explosive scale, the amount of that data has likewise exploded.
As we bring more of these coalescent trends together, we have the ability to deal with that scale
at a lower cost than ever, and therefore start to create this dynamic of viral or virtual benefit type
of effect. What I'm alluding to is more data, the more insight into what’s going on in the network,
the more the people then avail themselves of that network, the more data they create, and
therefore the better the analysis and the more pertinent their efforts are to their goals.
So, am I off in la-la land here or is there really something that we can point to about a virtuous
adoption pattern, vis-a-vis, the ability to manage this data even as we explode the scale of
commerce?
Minahan: Absolutely, Dana. We've only begun to scratch surface on this. When you look at the
data that goes on in a business commerce network, it’s really three levels. One is the
transactional data, the actual transactions that are going on, knowing what commodities are being

8. purchased and so on. Then, there's relationship data, knowing the relationship between a given
buyer and seller.
Finally, there's what I would call community data, or community generated data, and that can
take the form of performance ratings, so buyers rating suppliers and suppliers rating buyers.
Others in the community can use that to help determine who to do business with or to help to
detect some risk in their supply chain.
There are also community generated content, like request for proposal (RFP) templates. A lot of
our communities members use a "give a template, take a template" type approach in which they
are offering RFP templates to other members of the community that work well for them. These
can be templates on how to source temp labor or how to source corrugated packaging.
We have dozens and dozens of those. When you aggregate all of this, the last part of the
community data is the benchmarking data. It's understanding not just process benchmarking but
also spend benchmarking.
One of the reasons we're so excited about getting access to SAP HANA is the ability to offer this
information up in real time, at the point of either purchase or sale decision, so that folks can
make more informed decisions about who to engage with or what terms to take or how to
approach a particular category. That is particularly powerful and something you can’t get in a
non-networked model.
Sharing data
Gardner: To that same point, Zach, are there some instances in your book, where you can
point to this ability to share the data across community, whether it’s through some sort of a cloud
apparatus or even a regulatory environment, where people are compelled to open up and share
that is creating a new or very substantial benefits?
I am just trying to get at the network effect here, when it comes to exposing the data. I think that
we're at a period now where that can happen in ways that just weren’t possible even five years
ago.
Tumin: One of the things that we're seeing around the world is that innovation is taking place at
the level of individual apps and individual developers. There's a great example in London.
London Transport had a data set and a website that people would use to find out where their
trains were, what the schedule was, and what was happening on a day-to-day basis.
As we all know, passengers on mass transit like to know what's happening on a minute-to-minute
basis. London Transport decided they would open up their data, and the open data movement is
very, very important in that respect. They opened the data and let developers develop some apps
for folks. A number of apps developers did and put these things out on the system. The demand
was so high that they crashed London Transport, initially.

9. London Transport took their data and put it into the cloud, where they could handle the scale
much more effectively. Within a few days, they had gone from those thousand hits on the website
per day to 2.3 million in the cloud.
The ability to scale is terribly important. The ability to innovate and turn these open datasets over
to communities of developers, to make this data available to people the way they want use it, is
terribly important. And these kinds of industry-government relations that makes this possible are
critical as well.
So across all those dimensions, technology, people, politics, and the platform, the data has to line
up. You need governance and support people, and people to make it work and to trust each other
and share information. These are the keys to collaboration today.
Gardner: We're coming up on our time limit, but I wanted to put myself in the place of a
listener, who might be really jazzed by the potential here, but is still concerned about losing
control. How do you take advantage of the mobile extended networks of social media and
networks, but without losing your basic principles of good business practice and governance?
Is there something that you're seeing Tim, through your network and the way you're approaching
this, that is a balancing act? How can you give some advice to someone who can start to enter
these waters, but not drown or get lost?
Minahan: First, I want to talk about the dynamics going on that are fueling B2B collaboration.
There is certainly the need for more productivity. So that's a constant in business, particularly as
we're in tight environments. Many times companies are finding they are tapped out within the
enterprise.
Becoming more dependent
The second is the leaning out of the enterprise itself with outsourcing more processes, more
supply, and more activities to third parties. Companies are becoming more and more dependent
on getting insights and collaborating with folks outside their enterprise.
The third is what Zach mentioned before, the changing demographics in the workforce, the
millennials. They're collapsing the hierarchal command and control. They don't stand for
sequestering of information with only a given few. They believe in sharing and in the knowledge
of crowds. They want more collaboration with their peers, their bosses, and their business
partners.
When you take that within a business context and how you put controls on it, obviously there
needs to be some change. There is some change going on. There is change going on towards this
wave of collaboration. Zach said before that it needs a good leader. There is change management
involved. Let's not fool ourselves that technology is the only answer.

10. So policies need to be put down. Just like many businesses put policies down on their social
media, there needs to be policies put down on how we share information and with whom, but the
great thing about technology is that it can enforce those controls. It can help to put in checks and
balances and give you a full transparency and audit trail, so you know that these policies are
being enforced. You know that there are certain parameters around security of data.
You don't have those controls in the offline world. When paper leaves the building, you don't
know. But when a transaction is shared or when information is shared over a network, you, as a
company, have greater control. You have a greater insight, and the ability to track and trace.
So there is this balancing act going on between opening the kimono, as we talked about in '80s,
being able to share more information with your trading partners, but now being able to do it in a
controlled environment that is digitized and process-oriented. You have the controls you need to
ensure you're protecting your business, while also growing your business.
Gardner: Zach, last word to you. What do we get? What's the payoff, if we can balance this
correctly? If we can allow these new wheels of innovation to spin, to scale up, but also apply the
right balance, as Tim was describing, for audit trails and access and privilege controls? If we do
this right, what's in the offing? Even though it's early in the game as you pointed out, what's the
potential here? When can we expect this payoff?
Tumin: I think you can expect four things, Dana. First is that you can expect innovations faster
with ideas that work right away for partners. The partners who collaborate deeply and right from
the start get their products right without too much error built-in and they can get them to market
faster.
Second is that you're going to rinse out the cost of rework, whether it's from carrying needless
inventory or handling paper that you don’t have to touch where there is cost involved. You're
going to be able to rinse that out.
Third is that you're going to be able to build revenues by dealing with risk. You're going to take
advantage of customer insight. You're going to make life better and that's going to be good news
for you and the marketplace.
Constant learning
The fourth is that you have an opportunity for constant learning, so that insight moves to
practice faster. That’s really important, because the world is changing so fast, you have the
volatility, a velocity, a volume, variability, being able to learn and adapt is critical. That means
embracing change, setting out the values that you want to lead by, helping people understand
them.

11. Great leaders are great teachers. The opportunity of the networked world is to share that insight
and loop it across the network, so that people understand how to improve every day and every
way the core business processes that they're responsible for.
Gardner: Well, great. I am afraid we'll have to leave it there. I'd like to thank our audience for
joining us. We've been discussing new levels of collaboration and how they have emerged within
an increasingly networked world and how that's all coming together to impact both business and
society.
I’d also like to thank our guests for joining us. Zach Tumin, Senior Researcher at the Science,
Technology, and Public Policy Program at Harvard Kennedy School. He is also the co-author
with William Bratton of this year's Collaborate or Perish.: Reaching Across Boundaries in a
Networked World, and that’s published by Random House. Thanks so much Zach.
Tumin: Thank you, Dana.
Gardner: And, of course, Tim Minahan, the Senior Vice-President of Global Network Strategy
and Chief Marketing Officer at Ariba, an SAP company. Thanks so much, Tim.
Minahan: Thanks, Dana.
Gardner: This is Dana Gardner, Principal Analyst at Interarbor Solutions and you’ve been
listening to a sponsored BriefingsDirect broadcast. Thanks again for listening and come back
next time.
Listen to the podcast. Find it on iTunes. Sponsor: Ariba
Business networking is driving innovation and social interaction as new technologies and user
expectations converge. Copyright Interarbor Solutions, LLC, 2005-2013. All rights reserved.
You may also be interested in:
• Collboration-Enhanced Procurement and AP Automation Maximize Productivity and
Profit Gains in Networked Economy, Says Ariba's Drew Hofler
• Ariba Network Helps Cox Enterprises Manage Procurement Across Six Different ERP
Systems
• Ariba CMO Tim Minahan on how networked economy benefits spring from improved
business commerce and cloud processes
• Ariba Dynamic Discounting Gives Companies New Visibility into Cash Flow to Improve
the Buying Process
• Ariba, IBM Deal Shows Emerging Prominence of Cloud Ecosystem-Based Collaboration
and Commerce
• Ariba Steps Up Cloud Efforts with StartContracts, On-Demand Contract Management for
SMBs