Gilbey, Rodrigues and Marshall

I was interested to read this article in the Chicago Tribune about the sentiment of the American public.

What particularly was interesting was that now economists are able to tell us what the emotions are that drive the sentiment of the public.

“There’s a great misunderstanding of what’s happened,” says economist Allan Meltzer. The main trouble, in his view, is not that Americans are suffering from weak or negative economic growth. It’s that they have suffered a loss of wealth, a very different ailment.”

The comment is right on…. but I think it goes beyond this. I think it is all about the fracturing of trust in the system. This is a major issue not just for the US but for the world. Fortunately there is still trust in the system in a lot of the world…. but for how long?

From time to time I visit Seth Godin’s blog. He has some insightful gems about the way that brands, products, people… are perceived, interact…. etc.

This is one of them.

Its all about how we make decisions in the blink of an eye without very much information. Nevertheless it is very much an informed decision. And more and more where that decision is taking place in an online interaction, the decision is being made by lots of people all at once. In a situation like that, you want to be making sure that the decision that the crowd is making is one that is accretive to your brand/enterprise’s goals….

Here is a quote from Seth’s blog post:

Quick decisions based on the smallest scraps of data.

It’s not fair but it’s true. Your blog, your outfit, the typeface you choose, the tone of your voice, the expression on your face, the location of your office, the way you rank on a Google search, the look of your Facebook page…

Who knows what will happen next in the world of social networks?

One thing is for sure, Google has taken a step that will make their own leadership online that much stronger, with the opening up of OpenSocial.

“OpenSocial defines a common API for social applications across multiple websites” is what the blurb on the holding page says. Apparently Yahoo has signed on as have hi5, LinkedIn and MySpace. What this means is that developers will be able to build once and offer to many. Facebook hasn’t agreed to sign on yet, but they can’t be far behind in doing so.

This kind of activity is going to make the whole social network enterprise field tremendously powerful. (I don’t know if it is really a business as yet).

Our intention at GRM Partners is to help organizations define the way that they use social networks. Through a rigorous approach to researching and mapping the way that organizations fit into business ecosystems and ensuring that their stated objectives are congruent with market demands we feel that we can help organizations more efficiently set policy and build communities of interest.

Its amazing how much one can see the waves of public opinion forming with social media.

I think it must have been about two years ago that I first started reading about the risk of a sub prime meltdown in the US. There are a lot of people who have built significant businesses from promoting FUD. What is interesting now is that the cracks are appearing more regularly in what I would call the ’social fabric’ of the US. And since the US is in many respects the key influencer of thought on line - purely because of the sheer volume of people who blog, who spruik, etc - there is a significant amount of US thought influencing other English language cultures.

Globalization of ideas is very real. So the subprime crisis in the US has impacted Australian companies too. Look what has happened in the last few weeks to Centro and to Allco and most recently to ABC Learning. All of them have found sources of debt financing hard to get, and all have had their share prices savaged as a result.

In the press that globalization of thought has started to see the letters section of the Sydney Morning Herald featuring comments by readers about the State Government’s handling of transport referencing the concept of Peak Oil.

We are all starting to understand that we are part of a global system.

Another interesting thing that I noticed this week was on the Insight program on SBS. A representative of A.V. Jennings, the house building company, called for the Federal Government to regulate the specifications of houses so as to make them more sustainable!

I read recently that it is not the tipping point that is important - it is what caused the tipping point to take place, and what happens immediately after the tipping point has been reached that is important.  We are in the process of reaching such a tipping point right now.

Imagine for a moment that trends and fashions and public opinion is like a pendulum. Like the pendulum they reach a peak point in the swing and then change direction. With a pendulum there is a change in energy at that peak. The kinetic energy of motion turns into potential energy at the moment that the pendulum reaches its peak. I believe that society is not dissimilar. When CEO’s have margin calls that cause them to sell shares in the companies that they have built, investors change their level of confidence in the CEO and the company. Confidence energy changes to potential and then to negative. This kind of thought ripples through society causing surprising results - much of which we should be able to predict if we are looking in the right places.

We had a partner meeting yesterday to brainstorm about how to address the needs of one of our clients…

Somewhere along the way Bruce started talking about the roots of the word “sharing” and since so much of the online experience is about sharing, I found it fascinating. If you want to check out the etymology of the word you can do so at the online etymology dictionary.

The story is as follows:

“Sharing” is derived from the old English word scear. As a noun scear is an iron blade of a plough, and as a verb it means to cut. So the whole concept of ’sharing’ is literally about dividing. Since we tend to think about this word conceptually as an act of ‘uniting’ which is the opposite, I think this is a tremendous example of the active need to examine the counterintuitive when addressing the way that things are versus the way that things seem. Language plays a huge part in how we can so easily misunderstand the position we occupy in a business ecosystem.

Fascinating and extremely insightful essay by Kevin Kelly here about new business models.

This is the general thrust of it:

 From my study of the network economy I see roughly eight categories of intangible value that we buy when we pay for something that could be free.

In a real sense, these are eight things that are better than free. Eight uncopyable values.  I call them “generatives.” A generative value is a quality or attribute that must be generated, grown, cultivated, nurtured. A generative thing can not be copied, cloned, faked, replicated, counterfeited, or reproduced. It is generated uniquely, in place, over time. In the digital arena, generative qualities add value to free copies, and therefore are something that can be sold.

Social networks are a tsunami. They’re about to engulf everyone on the planet, in the same way that globalization has impacted consumers and companies alike.

They’re part of a new language of business and life.

Web 2.0. Wikis. Social Networks: What are they? What do they mean? And why are they relevant to you?

Whether or not you’ve heard any of these terms doesn’t matter.

If you haven’t experienced them directly you can’t imagine and you can’t understand why they should be incorporated into your business.

Today’s the day to start finding out though. You are going to need to know about these concepts for your business to survive the rapidly changing marketplace.

“Web 2.0 is the business revolution in the computer industry caused by the move to the internet as a platform” says Tom O’Reilly who coined the term

It’s about conversations.

Direct conversations between you and your customers, your shareholders, the media. They are going to be telling you what they want from your product, what your brand promise really means, and it’s going to evolve into a valuable relationship for them. Web 2.0 enables that conversation

Stephen Fry, the actor, says ”It’s actually an idea that the reciprocity between the user and the provider is what’s emphasized. In other words, genuine interactivity if you like, simply because people can upload as well as download”.

One more aspect is really fundamental and important in the whole concept of the new digital conversation. The conversation is not just happening one to one. It is happening in a crowd, where everyone in the crowd is listening in. For the first time ever, the smallest voice in the crowd has as much weight in the conversation as the loudest.

Globalisation was made possible by the development of networked information technology. It enabled supply chains to function so precisely that capital has been able to be deployed with hyper-efficiency, resulting in less requirement for holding product inventory and greater ability to serve demand in real time.

Everyone in business is aware of this and to some extent uses that knowledge to increase profitability of business. Reality is what you believe, and belief is being shaped by the network itself.
Consumer to consumer, rumour to reality, information flow at the speed of light about products, brands, political policy, corporate valuations… Command and control is no longer a viable strategy.

What is amazing is that armed with that knowledge and having real world experience, so few people I meet in business are paying attention to the impact on society of the next wave, social networks, and what it will mean to them.

Information technology is now providing consumers with the means to flatten intrapersonal communication in the same way that trade was flattened.

Australia’s federal election; the presidential race in the US - both are being reshaped by parties and candidates using YouTube. They’re making it a platform for announcing policy.

Mainstream media examines context as much as content and makes the platform part of the story. This alone should ensure that social networks move out of your peripheral vision and into the mainstream.

When Presidential candidates are having one on one conversation with potential voters the game has changed for all time.

And this is just the warm up before the main event. The tectonic plates of change are about to start grinding. Massive social change is coming and it will impact your ability to do business.

Remember how long – or short – a time it is since Google floated in the US and became a verb. Think about the following new brands: MySpace, Facebook, Linked-In. It’s been hard to avoid coming across at least one of these names in the media over the last year. Yet some people have.

Maybe some people have missed the coverage in either the business or mainstream media about the explosion of these social networks.

Valuations that these businesses are attracting should very definitely put them on your radar. Rupert Murdoch paid $580 million to purchase MySpace no more two years ago. Within weeks of the announcement he’d cut a deal with Google that more than guaranteed that News Corp would recoup the entire purchase price from ad sales guarantees.

In the last two months Microsoft purchased a stake in the new kid on the block, Facebook, at a $15 Billion valuation pre-money. Facebook has only half the subscribers of MySpace but is growing subscribers faster.

Analysts use the subscriber base as a simple metric to extract comparative valuations. Facebook, by this measure, has a $357 per subscriber valuation. This would then value MySpace at $65 Billion! Let’s assume that this is not the core benchmark for valuation since that would mean that MySpace represents over 90% of the value of NewsCorp.

But all hypothesising aside, what is happening here should be of interest to everyone in business. These valuations are not trivial. They are the market telling us what the value is going to be of being able to talk to one another.

More importantly though, social networks themselves are now also an ideas marketplace. They are not an amorphous concept that exists on another plane separate to your reality. Social networks are where your customers and your customers’ customers are gathering to talk to each other about their experiences.

Where they share stories about you, your brand, your service offering. In effect they are the new frontier of brand, reputation, risk and opportunity.

Many participants in this new conversation marketplace place more credence on the conversations that they have in this venue than in the information that they consume in the mainstream media.

Their perception is that spin and counterspin leads to a zero rating of the value of the filtered information to cynical consumers. The new conversationalists would rather do their own bullshit filtering and draw their own conclusions, but get that information at the source.

This has very big corporations very, very worried. It’s just beginning.

Eric Jackson, a Yahoo shareholder-activist, posted several videos on YouTube which he then incorporated into his blog. It attracted the attention of business journalists. The maximum number of views per video was in the low thousands, but the result was that the share price dropped and Terry Semel, the CEO of one of the largest new media companies in the US had to step down.

Here is a current scenario: A global Fortune 500 company realises that literally tens of thousands of its employees are members of Facebook. The company realizes that if a competitor were to use Facebook as a resource locator for future employees the company would be gutted. It is a very real problem that is just starting to emerge.

It’s not just about activism. It is about a very real set of brand and product reputational risks emerging.

Some executives talk about being obsessed with being market facing, but in reality are simply paying lip service to what is happening right in front of them.

There are logical reasons for this: most of them have been taught to keep their risk profile low. They see anything new and unproven as being inherently risky.

Some of them look at what’s happening and when faced with the problems of this new media model, respond in exactly the wrong way.

Look at music.

As digital delivery evolved back in the 1990’s music company executives built the walls of the citadel higher, and sued the bejeezus out of transgressors.

What has that led to?

Simple: declining sales, declining profits, declining share prices. (Warner Music’s share price has declined from USD 27.50 to USD 7.50 during the last year). Music companies missed the opportunity to truly socialize music consumption and have ceded it to Apple.

Worse still, they absolutely destroyed the relationship they had with their customers by suing them, instead turning those same people into Apple fans and customers. It’s the law of unintended consequences on steroids.

Here’s the challenge:

First: you need to start using social networks (or wikis or Web 2.0) if you are going to understand, viscerally, what your customers/shareholders feel.

Unless you understand the way they transmit thought as much as the thought itself you’ll be a couch potato watching instant replay on TV. You need to participate if you are going to understand. You need to understand if you are going to be able to build value.

Second: you need to monitor conversations within social networks if you are going to respond to them. There is no shortage of companies that are standing by ready to do that for you!

Third: If you demonstrate to your customers/shareholders/the media that they are part of a conversation that is as important to you as it is to them, and that you are going to change your brand, your product, your service to meet their needs, your organization will grow stronger both in terms of its relationships with its customers and consumers and financially as well. This also means that you have to be prepared to modify your business model in ways that you may not begin to understand yet.

Think about this as Management 2.0. Don’t make the obvious and natural response. Think about the value of the counter-intuitive response.

You may say that your business won’t be impacted by the change wrought by the socialization of information technology. It will. If anyone in your customer ecosystem has access to network communication, you are at risk.

When you bought into the IT revolution you may not have read the fine print. You purchased your ticket and got on board a roller coaster. Society – along with your business – is just cresting the top of the first slope. Hang on to your hat. It’s going to be a wild ride.

Chris Gilbey is a partner in Gilbey, Rodrigues and Marshall, a partnership that focuses on network dynamics, and is a director of One Minute Media and Vquence.