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It was in the 1970s that the “Japanese invasion” … of automobiles like Toyota, Honda, and Datsun (now Nissan) and consumer electronics like Panasonic and Mitsubishi … pounded lots of nails into the coffins of America’s complacent manufacturing practices. Depending on the product it took somewhere between a decade and not quite yet for American products to achieve anything like parity in the global marketplace.

As American industry scrambled to regain lost ground, it changed the unwritten employment contract, from cradle-to-grave employment, complete with gold watches given for 50 years of service, to today’s at-will employment and layoffs whose sole purpose is to “send a message to Wall Street” that the company is serious about cost-containment.

A roughly the same time, businesses decided they had to protect their intellectual property.

“Intellectual property” is a phrase with a nice ring to it. It sounds official and important. Businesses invest an inordinate amount of time in mostly fruitless attempts to protect it. It’s property — it’s mine and you can’t touch it.

Also, it’s a concept that’s mostly outlived its usefulness.

The U.S. Constitution in no way recognizes such a thing. What it says is, The Congress shall have Power To … promote the Progress of Science and useful Arts, by securing for limited Times to Authors and Inventors the exclusive Right to their respective Writings and Discoveries.

The term “property” makes no appearance. Having an exclusive right to something for a limited time a lease more than a title, and unlike real property rights, copyrights and patents are explained as means to an end: promoting scientific and artistic progress.

Sure, this is academic nitpicking that’s so academic even academics have no interest in it.

Here’s what isn’t academic: The whole idea of patent protection now subverts its original purpose. Rather than promoting scientific progress, patents in their modern form actively impede it. But that isn’t this week’s point. It was the point of “How to fix the software patent system: Get rid of it” (KJR, 7/29/2013). Read it and weep.

This week’s point, taken from what’s probably the most controversial chapter of The Cognitive Enterprise, the new book I co-authored with my colleague Scott Lee, is that protecting your company’s intellectual property is, more often than not, both impossible and a bad idea.

It’s impossible because corporate permeability is a fact. Corporations act as though it was a problem, but it isn’t: Problems can be solved. Facts must be dealt with.

Large-scale corporate permeability probably got its start with the aforementioned change in employment security that resulted in large numbers of employees being pushed out the door. They took all the knowledge they’d acquired with them. It remained intact inside their heads where it was now available to any competitor that had the wit to hire them.

Thus was born the non-compete agreement.

In the era of the cognitive enterprise, corporate permeability has increased by orders of magnitude.

Remember the new formula for success — the one that’s supplanting the old “people, process, technology”? It’s customers, communities, capabilities. This is one reason permeability is a fact.

Back in the era of job security as an expectation, a person’s place of employment defined one of his (or, occasionally, her) most important communities. For some professionals, local associations held monthly meetings and constituted a community as well, but with few exceptions these ranked much lower in a person’s sense of affinity than even the local watering hole where people congregated after work.

Now? Between Facebook, LinkedIn discussion forums, and specialty sites on the social web, the sense of community connecting people with shared interests outstrips any sense of loyalty to an employer. Of course they do: They belonged to these communities before being hired for their current position, and expect to belong to them long after they’ve taken different positions in different companies.

They share what they know with their communities and become more adept at their trades as other members of their communities share right back at them.

Heck, with GitHub they share actual working code, too.

Is some of this valuable intellectual property? Yes it is, and the more it’s shared, amplified, tested, and adjusted the more valuable it becomes.

Community members help each other learn, solve problems, and figure things out. Which is why community is one of the driving forces behind capabilities.

Which is, in turn, why we firmly believe businesses that embrace and take advantage of this evolving permeability will, in the long run, out-compete businesses that distract themselves trying to seal their borders.

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|In: Cognitive Enterprise|Last Updated:

It’s time for businesses to think.

The Cognitive Enterprise (Bob Lewis and Scott Lee, Meghan-Kiffer Press) has been released into the wild. The questions of the hour: (1) What makes an enterprise cognitive? (2) Why does it matter?

There seems to be a strong negative correlation between the size of an organization and its ability to respond in sensible ways to changing circumstances. And this lack of good organizational sense seems to be independent of how smart the organization’s leaders and staff are.

It’s as if there’s an impenetrable barrier that prevents the considerable intelligence available in a business from influencing the behavior of that business.

Superimposed on this is the industrial model of business management — the notion that businesses should be “designed by geniuses to be run by idiots.”

This is the driving philosophy of most business process design: Simplify, simplify, simplify. Which, depending on the process and its goals, often is the best answer. In truly industrial situations — manufacturing and its analogs, where the goal is to create large numbers of identical work products — simplification and standardization make all kinds of sense.

But (you know “but” was just floating in the air, waiting to be uttered …)

With a few exceptions, business is first and foremost a game. It’s about winning and losing. In the short term, it’s pretty close to a zero-sum game, where one company selling more products to more customers means some other business will find itself selling fewer products to fewer customers.

There just aren’t that many games where success comes from streamlining, simplifying, and standardizing. In football, the winning teams aren’t the ones with the skinniest playbooks. In baseball, pitchers don’t throw every pitch exactly the same. If they did, they’d get shelled.

If you don’t like athletic metaphors, consider chess. Think a grandmaster is going to win by always playing the same opening?

* * *

Business designers follow a well-worn formula: People, process, technology.

Except it’s really PROCESS, Technology, people. No, it’s worse. People are an actual impediment. Carefully designed processes, written standard operating procedures, and automation are all established to overcome the limitations of we pesky human beings.

This worked just fine in the past because of a key and rarely explored metric — the stay-the-same to change ratio.

That business cycles are compressing isn’t a new insight. What’s often missed: Establishing well-defined and (more important) well-practiced business processes, supported by optimized automation, takes an investment of time, effort, and money. Having invested, businesses need a long enough period of stability to recoup that investment.

Business cycles are compressing — the stay-the-same piece of the ratio is shorter — but the change side of the ratio hasn’t compressed anywhere near as much.

Same investment, less time to get a return from it.

Which is why Scott and I are proposing a new framework. Instead of people, process, technology, cognitive enterprises will emphasize customers, communities, and capabilities.

Start at the end: A capability is anything an organization can do, independent of whether it’s doing it right now. Capabilities are what let an organization adapt to changing circumstances.

Communities next. More and more, the men and women who contribute their efforts to an organization’s success have less loyalty to their employer. (Employers, of course, jettisoned the quaint idea that they owe their employees any loyalty long ago.)

Supplanting, or perhaps augmenting employees’ relationship with their employer is their relationship with their profession and their peers in that profession. Developers, for example, constitute a thriving community, whose members are better at their trade in proportion to their community participation.

And their employers benefit from this by getting better programmers with a smaller investment in training.

Communities build capabilities.

And then there are customers. It might seem strange that customers need mentioning, but they do. Industrial businesses have a strong internal focus — so much so that most of the business considers other parts of the business to be their customers. This internal-customer focus is the source of untold mischief.

In a cognitive enterprise, everyone has the same customer — the real, paying customer who makes buying decisions about the company’s products and services.

And, understanding what these customers want, cognitive enterprises are able to marshal their capabilities to deliver it, whether or not they have a well-define process in place to do so.

Is this all there is to it? Of course not. If it was, Scott and I wouldn’t have had to write an entire book.

And we wouldn’t be asking you to read it.

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