The Plug-N-Play Enterprise
A central concern of economics is the question of how do people work together within some form of enterprise and then redistribute the value created by that collective effort, in a way that is optimal for the entire organization. An enterprise is a structured project or organization designed to achieve valued ends. What defines a business, enterprise or company is a business model. For something to be considered a business there must be some coherent business model which defines how the organization creates value, exchanges it and generates revenue and thus achieve its objectives.
A business model can emerge wherever there is the opportunity to create, exchange and capture value. If we discover a new source of mineral under the ground that people need, then we can build a business model on top of it by extracting it, exchanging it and capturing some revenue from that value stream. This business model is realized through the construction of a business or enterprise. Enterprises then operate on top of some value stream, intercepting, transforming, exchanging and retaining value. These enterprises enable the specialization and division of labor within economy and thus the production of complex products and services.
Previously we found that we have to typically be inside of one of these formal structured organizations to be able to be productive in this way. But the proliferation of connectivity and reduction of transaction costs taking place bring about a deep structure transformational in the economy from closed organization defined by their boundaries to open networks defined by their protocols, and this offers new ways to really unlock and harness the assets and creative potential of people around the world within new larger and more complex networked organizations.
With the rise of the internet has come a new way for structuring the division of labor within the economy through on-demand, networks or what have come to be called platforms. Platforms are information networks that enable two-sided markets, for producers and consumer to connects and exchange value. These web platforms like Alibaba, Amazon, Google or Facebook have today already risen to the top of market capitalization within the space of just a decade or so to replace the corporations of industrial capitalism.
These platforms differ from the traditional organization as they are designed to be dynamic and event-driven; where providers and consumers can couple or decouple from the network on-demand instead of having fixed roles, like Uber drivers, or Airbnb hosts. They are modular, tasks and service provisioning are broken down into small modules that can be easily produced and consumed, like on-demand videos on YouTube or blog posts. They are scalable, a seller on Alibaba can easily and rapidly go from a few hundred dollars in sales to a few million. They are based around interactions and the exchange of value in real-time instead of fixed structures and procedures. Much of the platform’s operations are automated through software running on centralized servers. The advent of blockchain technology will overtime extent these previous trends into the world of fully automated and autonomous networked platforms. On a more technical level, this will create a new architecture for our enterprises and entire economies. This new design paradigm is best captured in the term service-oriented architecture.
Service Oriented Architecture (SOA) is an approach to distributed systems architecture that employs loosely coupled services, standard interfaces, and protocols to deliver seamless cross-platform integration. It is used to integrate widely divergent components by providing them with a common interface and set of protocols through which they can communicate within what is called a service bus. Over the past few decades, service-oriented architecture has arisen as a new systems architecture paradigm within I.T. as a response to having to build software systems adapted to distributed and heterogeneous environments that the Internet has made more prevalent. There are many definitions for SOA, but essentially it is an architectural approach to creating systems built from autonomous services that are aggregated through a network. SOA supports the integration of various services through defined protocols and procedures to enable the construction of composite functions that draw from many different components to achieve their goals. It requires the unbundling of monolithic systems and the conversion of the individual components into services that are then made available to be reconfigured for different applications.
Over the course of the latter half of the 20th-century enterprises consolidated their IT infrastructure within Enterprise Resource Planning systems(ERP) behind firewalls. Over the past decade or so those IT systems have started to migrate to the cloud, but now they will be moving increasingly to this distributed cloud of these next-generation blockchain networks. As today’s enterprises face new challenges of having to collaborate across large networks, foster innovation within their organizations and as information technology is greatly accelerating the pace of change, reducing the barriers to entry, shorter and shorter product life cycles are the norm. These enterprises have to respond to fast-changing environments by becoming more agile and the most advanced and forward-looking of these enterprises are already moving towards a platform model to achieve this.
The enterprise of tomorrow will unlikely be based on the static structures of today, but instead will be event-driven networks as we go from a push model of industrial production to the pull model of the services economy. Service-oriented blockchain based networks will use advanced analytics to pull together resources when and where needed on demand. The enterprise of tomorrow will be more like an ever-evolving swarm rather than a structured machine, with value being created in micro-interactions dynamically within networks of peers; some large, some small. Enabling this rapid coupling and decoupling from blockchain networks – of people, resources, and technology – when and where needed will require plug-n-play, API like interfaces. With the confluence of the services economy, blockchain, and analytics for the first time, we can actually identify what people are contributing to an enterprise, what economic value they are creating, and begin to reward people in real-time. The enterprise will need to be inherently designed to be able to plug in any capacity to the network as required. The most successful of these networks will be those that are able to harness the efforts of the many, along multiple dimensions, in a frictionless automated fashion. When we start to combine these capabilities we start to see a new and very different architecture to the enterprise and economies.