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.