In the near future, every company will need to come to terms with the phenomenon of social media. Employees, customers and other stakeholders will expect and demand it. Against this backdrop, it is important today to understand the capabilities of a social organisation and analyse the importance of mass transparency, according to this extract from the book The Social Organization.
After only eighteen months, Facebook gained and managed five million active users, their “customers,” with a staff of only forty. After those eighteen months, Facebook had an estimated market value—based on investments in the site by Microsoft—of over $15 billion, more than GM or Ford. Facebook’s value as we write this is an estimated $50 billion. Even if this number is inflated, the value is still significant, to say the least.
Craigslist, with its online classified ads, is a poster child for the kind of leverage building that's possible now. A site with usergenerated content and five million visitors per month, Craigslist has significantly disrupted the business model of most U.S. newspapers, which depend heavily on classified ads, and it did this with a total staff of fewer than twenty-five people.
A new leverage champion is a business called PlentyOfFish—a free dating site, as in, “There’s plenty of fish in the sea.” This service started in British Columbia and has spread into the United States. By 2008, it attracted over 1.4 million unique visitors per month and was making over $10 million dollars per year. Guess how many employees it took to do this? One and a half. The founder worked half-time and had one full-time employee.
How do these social organizations manage to create such value-to-staff leverage? They get the community to do the work for them. The community provides and manages the profiles, content, and interactions. The company facilitates that work, which is what social organizations do. It extends its capabilities through communities. Can your business compete against this increasingly common model? Not if you don’t engage the community and get them to do some work for you.
It’s easy to dismiss these examples as superficial. Many business leaders discount them by saying, “Well, that’s just the Web” or “Our business is different.” But dismiss them at your peril — because, as we’ve shown, more and more traditional brick-and mortar organizations are already finding innovative ways to apply this leverage-the-community model to extend their business and achieve results otherwise impossible.
It’s already happening, and it’s just the beginning. What happens when your competitor successfully turns its customer base into an extension of its sales staff? It could, in effect, turn your potential customers into your competitors.
Social media has revived and energized the co-creation movement in which firms engage their customers actively in the design and delivery of products and services. The logic is compelling: people are more likely to buy themselves and recommend to their friends something they had a hand in creating.
What might a competitor that’s mastered the skills of cocreation do to your business? If you follow social media, you’ve certainly heard of Threadless.com, the online T-shirt retailer. It’s a much-cited community collaboration-based business where the community it’s created designs, chooses, and buys T-shirts before Threadless.com makes and delivers them. Their disruptive goal is that every single T-shirt manufactured makes money. Type “Threadless” into Google and you’ll get well over a million hits.
Threadless is also a good example of what we call a clean-slate competitor. Such a firm avoids the baggage of a legacy business that, though successful in the past, can inhibit change needed to keep pace with the socialization of business. Clean-slate competitors are not saddled with legacy thinking, inflexible processes, or costly out-of-date technologies. They can capitalize on such new technologies and approaches as community collaboration and cloud computing to compete in new ways. Are you looking out for cleanslate competitors? How will you compete against them?
Are you looking for new ways the community can extend your organization’s capabilities? The U.S. Environmental Protection Agency (EPA) has developed a vision for a next-generation system that will help them monitor the health of the earth. Its view is that, if Nike can outfit a running shoe with sensors that analyze a runner’s stride, why can't the EPA put a GPS aware sensor on that shoe to measure the levels of lead in the soil? For that matter, why can't it outfit cell phones with sensors that measure air quality and fly-fishing boots to report on the water in our rivers and streams?
By adding social collaboration to this sensing capability—by letting people add local context and even some analysis to their environmental data—the EPA can increase enormously the amount of information available for spotting trends, root causes, and potential solutions. In this vision, every willing outdoor enthusiast would become an EPA researcher, part of a human sensor and analyst network that spans the entire country. Or perhaps an outdoor outfitter like REI or L.L. Bean might participate and expand its business by becoming an environmental force in the world. And, if existing businesses don’t do it, a new competitor might arise that does it to gain competitive differentiation.
In short, social organizations are able to do more with less. By capitalizing on communities, they can enjoy greater market impact with fewer resources and investment, and that will produce higher profitability and open up new opportunities.
The Age of Mass Transparency
People now expect to find out everything about everything with the click of a mouse or the touch of a fingertip. This is the age of mass transparency.
Social product reviews on the Web certainly aren't new, but they're still rudimentary. Services such as Yelp, SocialYell, and Yahoo! Local are trying to become the preferred information source for rating companies and products. But what if almost everything-people, places, organizations, products, services, events-became a focal point for easy mass collaboration? What if each of those entities had an online profile built and maintained by the masses?
Right now this social information is spotty, disjointed, and difficult to use. But over time that will change. In the United States, we’re all familiar with the leading consumer credit rating agencies—FICO, Experian, Equifax, and TransUnion-that create our individual credit scores. Financial institutions use these scores to determine if they will lend money to us and at what interest rate. Imagine similar highly organized and comprehensive services that use information from the masses to give organizations some sort of overall “worthiness score” that helps prospects determine if they’re worthy of their business. That overall score might consist of subcategory scores, such as a product-quality score, a customer service score, an environmental friendliness score, a legal score, a regulatory compliance score, and an ethics score. What if the masses help accumulate and organize information on your products and services, your employees and officers, your legal and lobbying activities, your social responsibility record, and even you personally and the business decisions you make?
And imagine these scores are ubiquitous on the Web, mobile devices, and the store shelves, so that people can readily vote with their wallets and change the world one purchase at a time. How would you and your company fare in this scoring? How would you respond to this transparency? Would you issue a press release, or would you mobilize a community? A social organization could do the latter. A social organization will have not only a community collaboration mind-set and culture but an actual portfolio of communities that can be tremendous assets in shaping how the organization is perceived by the world. And how you are perceived by the world is becoming more and more important as people can more readily find and contribute to your reputation.
The world is always changing, but this is a major inflection point. Remember mass production, mass distribution, and mass marketing? Mass collaboration is the next big evolution in business operations. Social organizations that think and operate in terms of community collaboration will thrive in this environment. Will you be a social organization? Or will you be competing against social organizations? In the next ten years, your ability to evolve into a social organization may determine if you thrive, survive, or disappear.
THE SOCIAL ORGANIZATION
AUTHORS: Anthony J. Bradley and Mark P. McDonald
PUBLISHER: Harvard Business Review Press
PRICE: Rs 995
Reprinted by permission of Harvard Business Review Press. Copyright 2011. All rights reserved.
