Wednesday, February 18, 2009

Credit Crunch key to future of Social Networks

A variety of newsfeeds on different topics was poured onto me today, through various media. Snippets I picked up on the radio, television, conference calls at work, twitter feeds etcetera. The mashup my brain made led to an interesting thought (I think) on how the credit crunch and recession will affect social networking, for better or worse.

Primarily old media are pouring out negative news on the crisis, credit crunch effects and recession worldwide. I bet you can't get away from the news either. Most of my social networks barely mention it, except for the occasional twitter / friendfeed / blog rant of Scobleizer. Why don't they? Is it because they are all new start ups, dependant on Venture Capital and VC might be the first thing to save money on?

I think not. I'm beginning to think the credit crunch and social networks are totally incompatible entities. They just don't mix.

Business is going Social ?

Let's start with social networking. Throughout the day I've been working on collaboration platforms and how to implement social software inside companies. When you're working at a company which is 'considering' to go social, you know the hassle. It often fails as corporate structures are incompatible with the social networking way of life; not bound by corporate hyrarchy but organic. Corporations still have the idea to implement communities through a top-down decree.

One of the articles I read today which touches this subject is a report by McKinsey, titled "Six ways to make Web 2.0 work for companies" (Thanks to @AlexKaris). Another quote that triggered me was from the presentation by Cisco's CEO John Chambers at the MIT World. I found his speech at OpenZine in an article called "Business is Social"

John Chambers held this speech at the MIT World back in october last year.

At about 3.00 minutes into the video John says:

"And when you look at the future of companies, I think you are about to see the most fundamental change in businesses and governement on a global basis that you have ever seen, moving from command and control to collaboration and team work"

Will we see this change, or won't we see this change? Everybody is talking about it, but will it happen? In reflection today, the credit crunch will play a crucial role in this process.

The Anglo Saxon business Model

Switching to old school media, one of the stories I heard on the radio was a Dutchmen who lived in Japan talking about business models. The Asian businessmodel looked very similar to our Dutch "Rhineland" model, or negatively connotated "the polder model". He gave a few examples.

The example from Japan was the CEO of Japan Airlines who had to take drastic steps in his company. As a result, he himself took a huge payment cut and came to work by bus to give a good example to his employees. This relates to the attitude we have had for many years inside the Netherlands, where you expected your CEO to come to work by bycicle and have lunch with all his employees in the canteen, bringing the same ham and cheese sandwhiches from home as his employees did. In both these models, the company is the center of the attention. It is about stability, security. It is about the role the company has in a social environment, limited to its employees, or in a broader sense to the city or other communities.

This is very unlike the Anglo Saxon model in which the shareholder has become the center of attention, the model which originated in the United States and the UK. This model is about short term satisfaction and profits. During the 90's we, in the Netherlands, have adopted this model too, and CEO's get filthy rich. This model results in corporate leaders who take enormous risks to gain short term profits and shareholder approval.

Crunch to make or break Social Networks

Don't get me wrong, John Chambers is saying a lot of sensible things on how corporations should act during a recession, and how innovation is important during these troubled times. However, if we "are to see the most fundamental change in businesses and government" it will be the challenge to do so on a business model scale. Yes, there are companies out there -even in the United States - who are able to adapt to web 2.0, but the majority will fail due to the business models described above.

Worldwide, companies sense the need to go social again. They feel the need to do something with social networking in order to leverage the latent potential inside their companies, to gain a stronger commitment from their employees, to facilitate knowledge exchange or simply to boast about their tech-savvyness.

The Anglo Saxon business model focus on shareholders and short term profits might just be the key issue to the future of social networks. It blocks long term commitment to a community and it causes corporate leaders to cling to their position. Managers and CEO's are protecting their little kingdoms, their expertise, their budget and their staff to remain in control. This is corporate politics on the balance of power, fueled by hunger for a big bonus and shareholder approval. This is where the fundamental change has to start to really empower Business 2.0, to facilitate corporations going social and capitalize on the billions of dollars of VC funding which have been invested into social networking sites. This is where the fundamental change has to start to temper the recession and this is where the fundamental change has to start to create long lasting communities and receive employee commitment.

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Anonymous Zwelgje said...

Hi VeeJay,

Your thoughts make sense.

Check out this video by Umair Haque as well.

or read his story about Smart Growth.

Thursday, February 19, 2009 9:09:00 AM  
Anonymous Evert Jan van Hasselt said...

Hi VeeJay,

I'm sorry. I don't agree at all. The credit crunch is part of a pattern that has been developing over decades. What we are facing right now has more impact than most of us (dare to) see. It is not merely a hick-up in the system, we are facing a true revolution in capitalism.

Anglo-american, Polder-model, all are different variations on the same theme: Managerial Capitalism, where the company is in the center of the universe and the individual is in the periphery. That system, which was initially developed by Henry Ford in 1913, worked for the past 100 years, but is facing the end of its lifecycle right now.

We are about to face a "copernican inversion" where the individual becomes the center of the universe and companies move into the periphery. In this new "Distributed Capitalism" companies opt into networks and federate around the individual to jointly fullfill his/her individual needs.

In my view Social Strategies are a fundamental means to make this new capitalism work. People who are not able to make the switch from "Command/Control" to Collaboration/Teamwork" will loose connection with business models of the future and will go into decline.

These ideas are posed by Shoshana Zuboff in her book "The Support Economy" (2003). I attended a presentation by Shoshana in 2005. At first it sounded too revolutionary to be true to me, but what we see happening now is very much in line with her story.

The Smart Growth story refered to by Zwelgje fits in this new paradigm.

So lets move into the future by using Social Strategies in developing new business models that place the individual in the center of the universe!

Thursday, February 19, 2009 3:50:00 PM  
Blogger VeeJay Burns said...

Thanks Evert Jan. In reading your response I don't see how we don't agree at all.

@Zwelgje, thanks for the input, it is a very interesting presentation.

Thursday, February 19, 2009 4:18:00 PM  
Anonymous Menno van Doorn said...

Agree that we don't disagree that much ;-)

I think that the theory of communicative self steering of Arnold Cornelisse fits in this story very well.

"According to Cornelis humanity nowadays lives in a ´culture gone astray´. We live in a state of transition from the logic of the social ruling system to a logic of communicative deep self-steering. In the social ruling system people were being directed and managed from outside, by accepting orders and following rules. Individuals were silent; they obeyed and adapted themselves to what was required from them. Also knowledge systems were, and many still are, ´autistic´. There is no communication between systems and no recognition of the fact that every system is just a part of the whole reality, and not the whole reality itself. Facts and materialistic and scientific aspects of reality are highly overstressed, while neglecting many meaningful but intangible aspects. To unleash all the untapped potential of human beings and to be able to cope with the intangible aspects of reality like the human experience, we need a new logic, in which we don’t give orders but enter into a dialogue, in which we don’t just look for facts but also take into account possibilities, in which we don’t just follow the rules to find the truth, the answer, the solution, but use our creativity to reflect on what truth and the goals of human activity really are. Today’s questions and problems can not always be solved by using the old logic of the social ruling system, often this even makes matters worse; we need a higher logic of communicative deep self-steering"’s-logic/

Friday, February 20, 2009 9:23:00 AM  
Anonymous Christian said...


Good post as usual.

I am in partial agreement with Evert, and think that we are going to have some friction in the coming years as the employees assert their personal skills and brand more to their individual benefit and less to the benefit of companies. Think 'Hollywood style of work' from Malone's 'The Future of Work'.

The friction will come from the fact that the people funding the company paying the employee still has financial responsibility to return value to the shareholders/vc/friends that loaned them money. This wont go away. So the company will do what they can with a rowdy group of individual employees asserting themselves, hoping they can derive value back to their investors.

It's going to be a tricky transition. I think where the financial crisis plays a role is all of the smart people who are suddenly unemployed and are creating new methods of providing value. This will be a great creative time for business models, collaboration, etc.

Keep up the excellent blogging! C

Friday, February 20, 2009 5:13:00 PM  
Blogger Mike said...

You are certainly right with that but not all social networks are working. The business networks will benefit by far greater as specially the once wish integrated Multimedia like and keep in mind social is called social for a reason.


Saturday, March 28, 2009 8:32:00 PM  

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