Fairfield: I’m a law professor, which means I’m interested in how laws shape communities. Virtual worlds give us a wonderful place to ask questions like that. So I have consulted with SWI on the creation of Arden – a Center of study of Synthetic Worlds –, and also work to raise awareness of the value that virtual worlds represent. My research ranges from questions of virtual property and analysis of the contracts that govern virtual worlds, to the question of whether assets in virtual worlds are subject to taxation.
Why are virtual worlds so fascinating for SWI, and what benefits do you hope your findings will have for the real world?
Fairfield: Communities are what is “new” about the internet. We had instant communication – the telephone – a long time ago. So social software is what makes the new internet revolution tick. Virtual worlds give us the chance to examine new communities in their purest form.
For example, we used to wonder whether groups of people could enforce rules by means of exclusion from the group. Through study of group behavior online, we find that groups have sophisticated ways of organizing themselves, of maintaining order in online communities, and even of creating private money supplies in the form of points systems traded among members.
Fairfield: First, Second Life is largely user-created. If we are interested in studying what people do online, as opposed to the less interesting question of what games companies do online, then Second Life is a great place to start.
Second, it permits parties to keep the intellectual property interest in what they create. So if you create a virtual shirt, you own the design of that shirt even though the shirt appears in Second Life. That creates a foundation for innovation and investment.
Fairfield: I’ve spent a good deal of time in Second Life – mostly looking at the currency and economy – but I also spend a lot of time analyzing economies in World of Warcraft.
What’s most interesting is the amount of regular, everyday economics people engage in. We trade money for time every day in the real world. Many people do the same in virtual worlds. It’s strange, because in the real world nobody argues that I am lazy because I bought my house instead of paying someone else to build it. But in virtual worlds there is a big discussion about whether or not it is acceptable to trade your money for someone else’s time.
Second Life has its own economy in which enterprises from the real world also trade. Why is Second Life such an interesting prospect for enterprises?
Fairfield: On the one hand, Second Life seems new, and that draws a lot of businesses. On the other hand, I think it will take some time before we see real world businesses doing profitable trade in virtual worlds. It’s a question of business models – what do people in a virtual world want to buy, and what are they willing to pay for it?
I think that branding is a big opportunity. If Nike wants to enhance its brand recognition, then creating attractive shoes for avatars to wear is going to help. But there are needs people have in virtual worlds that are unique to those worlds. Finding out what those demands are – and meeting them – is the real challenge for businesses seeking to make money in virtual worlds.
Conversely, there are now also virtual companies with branches in the real world. Will this interconnection continue in the future?
Fairfield: I think the real and the virtual worlds are the same. So it is not so much that there is interconnection – like a business having a foreign office in another country – as there is integration. Businesses will integrate a social software strategy into their business plans, just as they currently use other media.
Fairfield: I like the language of “merger.” What we’re seeing is that people treat the virtual and real worlds as if they’re just part of the same larger reality. For example, people do make new friends in virtual worlds, but they also spend a lot of time in virtual worlds with people they know from the real world. One really important effect this might have: technology has broken up communities, and spread families across continents. Virtual worlds might be able to bring those communities back together.
Fairfield: Game companies are obviously benefiting from the current interest in virtual worlds, on one end of the spectrum. And real-world social units – like families or groups of friends, who can get together and feel close online – are benefiting as well.
I think one group that resents the merger of the real and the virtual are people who want to maintain the fantasy. Some players came to virtual worlds because they want a break from reality. So when reality intrudes, they dislike it.
Fairfield: One of the most important things virtual worlds do is to provide a space for real-world communities to meet. I think they can strengthen families and friendships. And, I think that virtual worlds are changing what it means to interact with an artistic medium. We no longer watch stories, we live them.
A virtual world doesn’t have a set outcome. Players, or residents, set the story. What they do is what happens in the world. That’s incredibly attractive when you compare it to passive forms of entertainment – movies, or even scripted videogames, where you have no control over how things turn out.
Fairfield: The first and most important thing to do is to avoid political hysteria. In the United States, we are seeing a lot of attempts to blame video games for things that have nothing to do with them. Virtual worlds are frontier towns. It is important to give them the space to grow, before regulating them heavily.
Second Life has taken a very capitalistic direction. What other promising models for virtual worlds are there?
Fairfield: I think there are a lot of people who are primarily interested in the artistic and play aspects of virtual worlds. They desire a place for fantasy, a place to make new and compelling stories. Thus, those play-oriented communities place a lot of constraints on capitalist principles, such as banning the trade of inworld currency for real money, in order to preserve the stories.
What is the legal situation with regard to virtual worlds? Are there recognized standards and laws governing coexistence?
Fairfield: The laws of the real world already govern virtual worlds: if a user engages in bad acts, the law will not shrink back just because the acts were committed online. Linden Lab (Red: The San Fransisco based company is the provider of Second Life) does not have a police force, and virtual worlds will never have a separate “jurisdiction,” but virtual world creators do have the contractual ability to terminate users who violate their terms of service. Their ability to ban users is a limited power – but a very useful one, since they can use it without having to go to court.
Fairfield: The internet is reaching a crossroads. It may be that it continues to evolve as a decentralized network, where information is shared and censorship is limited. However, it is very possible that the internet will increasingly be subject to censorship, regulation, and surveillance of users’ activities. We will choose which way we want to go. The decision is all the more important as we move more of our lives online.
Richard Branson says there is no such thing as an accidental entrepreneur – it’s deliberate, conscious and very hard work. I would say the same for innovation.
While the ideas that form the catalyst for innovation might come from a place of wild creativity, chaos or even anarchy, in order to execute and scale innovation, we need to be deliberate, conscious and steady. An idea that is never adopted is not an innovation.
While many believe that processes are an obstacle to progress, in my role as SAP Chief Process Officer and CIO, I see that good process management can be a key to innovation. On the one hand, it offers us a clear methodology for scaling innovation and, on the other, well-managed processes free up capacity to harness the creativity that new ideas require.
In the digital age, it is essential that companies are agile and fast enough to adapt to change. SAP is no exception. The solutions that we develop – based on standardized business processes – are innovating, accelerating and improving the way we work. This is absolutely game-changing. Our solutions enable focus and scaling.
Here are a couple of examples. Right now, we are leveraging the Ariba Network to manage more and more of our resources. When we turned to Ariba, SAP was growing faster than its procurement team, and we needed to innovate our procure-to-pay processes. Now, with simpler, more standardized sourcing and procure-to-pay processes, we are operating much more efficiently: we’re seeing a 50% increase in invoice automation, 20% increase in procurement productivity and a 42% reduction in procurement cost. And, with the implementation of SAP Simple Finance, our finance teams are able to deliver quarter-end closing five days faster than any other DAX company.
We are weeding out complexity and finding ways to be simple and innovative. And our business processes are absolutely key.
Organizational excellence is about driving business impact and creating value. Since we have no manufacturing line, we have to find ways to simplify and optimize our processes so that we can free our employees to focus on the work in their job descriptions. In other words, no paper and more impact.
As a cloud company, we have to make sure that our employees are as productive as possible and do not waste time on non-essential activities. By renovating our IT development process using Agile, we ensure that our developers spend their time on their area of expertise: coding. We improve processes in the finance function to ensure that our controllers are freed up to work on business simulation planning. And we have put HR in the cloud so that employees can access their key data simply, quickly and efficiently. By implementing strong business processes, we have scaled innovation, harnessed creativity and driven business value.
We all want to see return on investment, and to do this we have put measures in place that define clear business benefits for our IT investment. Called the business benefit framework, this is an easy-to-use methodology to create a standardized overview of any large planned IT investments. It is based on common value propositions and related business benefit drivers with a three year net present value. The framework contains a short series of clearly defined steps, and the result of these steps is a business benefit profile for each proposed investment, which provides operational process intelligence on which decisions can be made. By doing so, we put business value in the center of everything we do.
In the digital economy IT must drive innovation. IT leads the way in removing complexity to power the digital transformation. So, at SAP, we are seeing how SAP S/4HANA is removing complexity from our core systems, and helping us return to standard. We have simplified the data model so that there are no aggregates, no indices, no redundancies or discrepancies between systems. With one ERP system and one HR system for the whole of SAP, we are talking about little to no latency. This single instance strategy is a model for simplicity and excellence that we recommend.
By getting rid of long upgrade cycles, we ensure that businesses will be able to consume new innovation frequently. Our solutions enable focus and scale, which we have demonstrated in our move to the cloud. This frees up leaders, such as CIOs, to become trusted innovation partners to their organizations to keep their systems future-ready in order to keep pace with change.
In the end, it is about driving business value. If we streamline our processes so that employees can focus on strategic work, if we innovate our business by implementing our own solutions or finding ways to drive out complexity in IT, we create business value for SAP. And in so doing, we also create an atmosphere where creativity is valued, ideas can thrive and we innovate for excellence.