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+ B O O K E X C E R P T: ‘ S O C I A L B U S I N E S S B Y D E S I G N ’                                            THE SOCIAL BUSINESS JOURNAL       ISSUE 01 Q2 2012                                                                                                                              31




              ‘Social Business By Design’ DROPS May 1, 2012 by Jossey-Bass.
                                                                                                                                                      SOCIAL ENTERPRIsE                                                                                    THE SOCIAL ENTERPRISE
           This excerpt is chapter 5: How will business make the transition?
                     You can learn more about the book and pre-order it here: dach.is/sbdbook.
                         by DION HINCHCLIFFE & PETER KIM · XPLANATiON by chris roettger




          S
                ocial, cultural, and technological trends are transforming every business
                environment. Executives must understand how to create and capture val-
                ue from current changes in the market to foster competitive advantage and
          solidify customer relationships. Getting started requires an understanding of the
          elements of social business and how they differ from legacy market approaches.
          The shift in control from institutions to communities is underway, driven by the
          availability of data, affordable technology, and more efficient operating models.
          Harnessing these trends and pivoting an enterprise is easier said than done, but                                                              HARNESSING BIG         PEER PRODUCTION        SOCIAL STRUCTURES           SELF-SERVICING       OPEN SUPPLY CHAINS DYNAMICALLY ADAPT
                                                                                                                                                        COMMUNITY DATA         DRIVES CREATION        HELP SELF ORGANIZE          MARKET NICHES        ARE BASE OF GROWTH & RAPIDLY RESPOND
          examples of next-generation business have emerged to learn from.                                                                            Successful businesses    Peer feedback is the       Social internal         Consumers that           Cloud- and        Rapid, unpredictable
                                                                                                                                                        will be those that      most efficient and      structures are the          interact with       ecosystem-based      communities require
                                                                                                                                                      have the richest, most   valuable source for        best means of          their own product     open supply chains         the ability to
                                                                                                                                                         up-to-date data         driving business         governing and         achieve the highest      are the basis of     dynamically adapt
                                                                        Reprinted by permission of the publisher, John Wiley
            FACTORS DRIVING THE                                               & Sons, Inc., from Social Business By Design:
                                                                                                                                                        sources & market
                                                                                                                                                           dominance.
                                                                                                                                                                                    decisions.        building community-
                                                                                                                                                                                                       based relationships.
                                                                                                                                                                                                                                  economic scale.      growth and agility.   and quickly respond
                                                                                                                                                                                                                                                                               to current needs.

         GLOBAL MARKETPLACE CHANGE                                           Transformative Social Media Strategies for the
                                                                     Connected Company by Dion Hinchcliffe and Peter Kim.

                                                                      ©2012 by Dion Hinchcliffe and Peter Kim. All rights reserved.                                                                   Conversation is no longer in the past; it’s in
                                                                                                                                                                                                      the present and even the future. Companies
                                                                                                                                                                                                       can not only track what people have done,
                                                                                                                                                                                                          but can ascertain what they will do.

       INFORMATION          GLOBAL              MARKET
        NETWORKS         INFORMATION
                            FLOWS
                                             DISCONTINUITY
                                                                                                                                                                   CUSTOMER & PARTNER COMMUNITY

                                                             20TH CENTURY         21ST CENTURY
                                                     Resource abundance           Resource constraints
                            SOCIAL                    Value in transactions       Value in relationships
                          COMPUTING
     MOVING the                                          Business stability       Business flux

      MARKETPLACE                                   Well-defined industries
                                                         One-way markets
                                                                                  Industry transformation
                                                                                  Two-way markets
                                                       Limited information        Information abundance

                                                                                                                                                         TRADITIONAL BUSINESS MODEL POTHOLES
                                                              the GLOBAL MARKETPLACE
                              INSTITUTIONS                                                                                            the COMMUNITY            POOR GRASP                   RIGID            DISCONNECTED            UNRESPONSIVE          STORED DATA IS         SYSTEM IS SLOW
                                                                                                                                                               OF BIG DATA           SUPPLY CHAIN       INTERNAL STRUCTURE       PRODUCT OFFERING        PRIVATE & CLOSED     OR UNABLE TO ADAPT
32                                                                                               THE SOCIAL BUSINESS JOURNAL   ISSUE 01 Q2 2012                                                                                                           33




                                          organizations are willing to accept.      some certainly more than others,           software industry has been dra-         resource: human brain cycles.” 3 In        tory barriers and rethinking how
                                          The shifts of control required by         particularly marketing, customer           matically affected by open source       response, they pivoted the reCAPT-         business gets done.
SOCIAL ENTERPRIsE                         social business are challenging: how
                                          we communicate (from point-to-
                                                                                    care, and HR. One response that
                                                                                    occurs frequently is serious discus-
                                                                                                                               (software peer produced by global
                                                                                                                               communities). Other industries are
                                                                                                                                                                       CHA service to tap into a huge
                                                                                                                                                                       reservoir of highly cost-effective         Traditional businesses
                                          point to social), how we organize         sion about “putting the genie back         lining up for similar disruptions,      labor to tackle enormous problems.         must face off new social

I
     t’s far easier for small and         (hierarchies to communities), how         into the bottle” and reverting to          including most industries involved      Turning individual work into collec-
     medium-sized companies to            we create (central output to peer         old models for working, collabo-           in services and knowledge work          tive productivity, the system started      businesses
     change the way that they work.       output), and where value comes from       rating, and producing work. One            that can be recast in social busi-      using images from failed optical               Emerging new institutions —
The methods through which they            (hierarchies to networks).                of the most famous examples of             ness terms. In the near term, these     character recognition jobs in its          social businesses — will look very
interact and stay connected to the           The old question about the in-         this was when newspaper magnate            include financial services, educa-      human verification tests (the text         different from the organizations we
marketplace and their customers           novator’s dilemma has become more         Rupert Murdoch decided to ignore           tion, information services, consult-    displayed is actually scanned from a       have today. They will derive power
are easier to change when there are       urgent as the new business landscape      new Internet business models and           ing, and most administration and        printed source).                           and value from deep integration into
fewer constraints. In contrast, large     looks increasingly unfamiliar: we         require that many of his news outlets      government. Longer term, social            reCAPTCHA subsequently went             the lives of both the people and busi-
companies are challenged when             now live in an age where historically     charge for access to their websites,       business will transform most hu-        on to digitize over a century of           nesses that they touch upon, not from
making the transition to social busi-     scarce resources are now abundantly       despite the fact that companies like       man activity. Ultimately, everything    newspaper and print archives from          a large centralized market presence.
ness, having to deal with change on       available — at least on the network       Google were much more successful           that can be social will be social.      the New York Times and plans to            Think of reCAPTCHA as the 21st
a larger scale. People are the primary    — in seemingly unlimited quantities       in monetizing in entirely new ways                                                 accomplish far more going for-             century organization: Deeply net-
element of any successful business        (e.g. new ideas, existing knowledge,      with advertising and other indirect        Next-generation business:               ward.4 Businesses that employ OCR          worked to millions of partners, highly
                                                                                                                                                                                                                  participative by enlisting millions of
transformation and changing people        and productive capacity, and access       fees.1 Those industry directly in the      Open, social, self-service              correction staff and compete with
is notoriously difficult. Thus the        to an organization’s customers and        firing line of social media, including                                             this service are at primary risk for       participants, and both delivering and
                                                                                                                                  How then do businesses cross the
larger the business, the greater the      competitors). Conversely, what was        Hollywood and virtually all media                                                  disruption if they don’t change their      providing value in a very integrated
                                                                                                                               divide between the traditional busi-
difficulty encountered.                   formerly abundant is now scarce (e.g.     are exposed to profound disruption,                                                methods. This seemingly limit-             and profoundly connected way.
                                                                                                                               ness era and the social business era?
    The ongoing and seemingly inexo-      broad demand for big ticket, high         such as when Amazon decided in             An example of how foreign yet novel     less and free source of mental and
rable decline of a traditional industry   margin, low volume products and           2011 to directly connect authors with      these new ways of doing business        physical effort (both recognition          What does Social Business
                                                                                                                                                                       and keying) has been harnessed by          consist of ?
                                                                                                                                                                       reCAPTCHA at virtually no cost.                A social business consists of three
                                                                                                                                                                       The service taps into community            unique and critical aspects: 1) It creates


A vast legacy landscape of existing
                                                                                                                                                                       output — the community of all              and delivers most of its value over the
                                                                                                                                                                       Web users. ReCAPTCHA doesn’t               network, usually indirectly (i.e. not
                                                                                                                                                                       actually control its own product;          centralized production, but via peer


business models, customer needs,
                                                                                                                                                                       their partners that use their badge        production), 2) it consists of a loosely
                                                                                                                                                                       do, thereby contributing their users       coupled entity of partners comprised
                                                                                                                                                                                                                  of — usually very large number of —
                                                                                                                                                                                                                  customers and suppliers who have as

learned behaviors, and instilled                                                                                                                                                      You can pre-order
                                                                                                                                                                                      Social Business
                                                                                                                                                                                                                  much control over outcomes as any
                                                                                                                                                                                                                  other part of the business, and 3) it has
                                                                                                                                                                                                                  effective strategies to take advantage

culture must be overcome.
                                                                                                                                                                                      by Design here:             of the new balance of abundance and
                                                                                                                                                                                      dach.is/sbdbook.            scarcity, along with greatly reduced
                                                                                                                                                                                                                  dependencies on the old balance.
                                                                                                                                                                                                                      Social business models and operat-
                                                                                                                                                                                                                  ing structures are tuned to operate
such as old media continues to be         services in the form of large adver-      its global online publishing network,      will be is the story of reCAPTCHA.      and delivering shared benefit to all       smoothly using the post-Great Reces-
a canonical example of what hap-          tisers, big corporate customers, and      cutting out publishers and editors         This service puts brief, hard-to-read   involved. This loosely shared coop-        sion resource-and-demand landscape.
pens when the ground rules change         anything else.) Business has become       altogether.2 Responses like these are      text snippets on forms in Web sites     erative partnering via the network is          Self-organizing peer production
in an industry fundamentally unable       increasingly fine-grained, scaled, and    near-desperate attempts from fading        so that users can prove that they are   a simple yet powerful example of the       is the motive force, network effects
to adapt to new market conditions.        oriented around mass customization        industries deeply impacted by chang-       really humans and not spammers or       enormous scale and value possible          are the new market share, and social
In this chapter we’ll explore some        as opposed to traditional scaling of      es in wrought by the digital revolu-       bots. The service was designed to       with social business models.               power structures are what drive busi-
of the more traditional limitations       one-size-fits-all.                        tion. They are usually misguided and       process the several hundred million        In the social business era, suc-        nesses forward ,becoming perpetuat-
that virtually all organizations face,       Businesses frequently remain           short-sighted while also insufficiently    online verification forms that are      cessful organizations will be open to      ing communities of self-interested,
as they realize they have to literally    very uncomfortable about explor-          imaginative. These periodic debates        filled out each day around the Web.     participation, tapping into far-flung      like-minded individuals.
“blow up” what are often hallowed         ing the future in such an uncertain       also show us the future of social busi-    The creators of the product soon        communities and social networks                Putting aside for now the le-
processes, traditions, and internal       and rapidly changing landscape. The       ness and the need for effective vision     realized they had unintentionally       to accomplish work in larger scales        gal, societal, and cultural impacts
institutions. The resulting so-called     feedback cycles of social media are       and transformation.                        “created a system that was fritter-     than they ever imagined before. This       and challenges of all this (barriers
“new normal” has begun to seem            relentlessly real-time, affecting every       Old media has been deeply              ing away, in ten-second increments,     requires overcoming organizational,        explaining why the transformation to
more and more foreign than most           major business function, though           impacted by social media, and the          millions of hours of a most precious    cultural, structural, legal, and regula-   social business has taken so long, de-
34                                                                                               THE SOCIAL BUSINESS JOURNAL   ISSUE 01 Q2 2012                                                                                                                    35




spite the Internet having existed for
decades), let’s focus on the business
side. The new business landscape will
                                          Ultimately, everything                                                               workforces or centralized business
                                                                                                                               infrastructure, are constrained.
                                                                                                                               On the output side, abundance is
                                                                                                                                                                                or transformed into new ones (for
                                                                                                                                                                                example, traditional software compa-
                                                                                                                                                                                nies moving to SaaS and cloud com-
                                                                                                                                                                                                                             business operates organizationally
                                                                                                                                                                                                                             and is the hallmark of social business.
                                                                                                                                                                                                                             This new addition changes the dy-


                                          that can be social will
still take a half decade or more to                                                                                            increasingly produced in such great              puting, or the rise of crowdsourcing         namics of where useful information
arrive and these drivers explain how                                                                                           quantities that it would overshadow              competing with outsourcing at the            comes from, how decisions are made
markets will get there:                                                                                                        shortcomings in the business side.               low end.) Today’s dynamic Web-driv-          in an organization, and how more


                                          be social.
                                                                                                                               8.	 Sustainable value moving from                en global knowledge flows and agile          autonomy and self-determination
The value drivers                                                                                                              business transactions to relation-               online models for computing and col-         will be needed — and tolerated — in
                                                                                                                               ships. This represents the growing re-           laboration — as well as economic and         modern organizations to meet more
of social businesses                                                                                                                                                            intellectual production — are now a          dynamic and changing global work-
                                                                                                                               alization that the traditional rote busi-
1.	 Strategic control over peer-                                                                                                                                                significant change agent.                    places comprised of communities
                                                                                                                               ness transaction as the core source of
produced community data drives                                                                                                                                                                                               instead of traditional employees.
                                          drive forward business activities and     aspect of social media, change will be     organizational value is diminishing.             10.	 Moving from change as the
market dominance. The real, irre-
                                          objectives. The commercial and com-       more rapid and unpredictable since         Value now comes from relationship                exception to change as the norm.                Putting all of the concepts that
placeable value of the social business
                                          munity motivations that have made         it will often be led on the community      dynamics. As such, it’s more impor-              The world is already seeing faster           have been presented here so far to-
economy is high-value information.
                                          open source software so successful as     side. People in social business ecosys-    tant to have community capacity to               consumer behavior shifts, quicker            gether into a strategic plan to redesign
It is the currency of the realm on the
                                          a productive model based on social        tems will make decisions and change        create on-demand that it is to actually          pricing changes, more rapid product          an organization can seem a daunting
network, which will always route to
                                          power structures serve as a powerful      course, affecting businesses and cus-      have stocks of inventory or knowl-               cycles, and faster media feedback            task. There are multiple competing
the best source. Only the richest and
                                          examples of how this is taking place.     tomers much faster than traditional        edge, which quickly age and become               loops. While this can also lead to more      forces for change today and a vast
most up-to-date data sources will
                                          Many others are presented here in         business models. Success requires          irrelevant. It’s the relationships and           extreme market conditions, it also           legacy landscape of existing business
have market dominance and they
                                          this book. With the adoption of           designing for low levels of central        their ability to produce what’s needed           enables opportunities to be turned           models, customer needs, learned
will have inordinate market power as
                                          social business, a full range of social   control and enabling highly fluid          in the moment that matter more in a              into bottom-line impact for organiza-        behaviors, and instilled culture that
well. 20th century companies greatly
                                          business models will be involved,         evolution and development based on         fast-moving, real-time marketplace.              tions that can adapt to market realities     must be overcome. Fortunately, a
undervalue and under-exploit their
                                          from internal social collaboration to     near real-time market feedback.            This has many implications including             quickly enough. The network is the           large amount of the early transition to
vast data assets today. Social busi-
                                          customer care communities.                                                           using new management methods (ex-                culprit (and solution) for much of this.     social business is not only incremental
nesses can’t and don’t. They relent-                                                6.	 This paints a high-level picture       ample: from top down command-and-                We now have pervasive social media           but naturally complements what most
lessly use it to their advantage, as a    4.	 Mass self-servicing of market         of how the business landscape is           control to community curator and fa-             instantly transmitting and shaping cul-      organizations are already doing today
high-value revenue stream, monetiz-       niches achieves the highest eco-          transforming in a generational             cilitator), tapping into new reservoirs          tural phenomenon and faster financial        with their early forays into social
ing it in ways their communities and      nomic scale. Social businesses will       way over the next decade or so.            of innovation, adopting new ways of              cause-and-effect in the markets, real-       media. Whether it’s social marketing,
their own organizations benefit from.     enable self-service as their primary      However, for some protected and            interacting with customers, or driving           time online markets, and so on. In the       social CRM, social collaboration, or
2.	 Peer production as the most           means of interaction with the market,     highly regulated industries, it may        better tacit interactions. The tenets of         21st century, following a plan is increas-   social product development, getting
efficient and richest source of           whether integrating with open data        take longer than expected. There are       social business will ultimately enable           ingly less important than responding         started is not the big challenge. The
value creation. Centralized produc-       or letting customers and partners dis-    macro trends that also affect how          organizations to accumulate deep                 actively and effectively to change.          real challenge is acting strategically
tion is inefficient and less optimal      tribute their functionality to the far    social businesses will either emerge       reservoirs of relationship capital.                                                           enough to matter.
                                          corners of the world. Google’s indus-     from the successful transformations                                                         11.	 A shift of control to the edge
compared to social business meth-                                                                                                                                                                                               Section 1 of the book presents a
                                          try leading AdWords service is a great    of existing organizations, or grow         9.	 Industries in flux with new                  of organizations. This has been
ods. When you can tap into the vast                                                                                                                                                                                          number of successful social business
                                          example of this, offering incredibly      as successful startups. These macro        ones emerging. Previously stable                 accurately predicted at least as far
capabilities of the global populace for                                                                                                                                                                                      case studies that illuminate key strat-
                                          detailed control of to a wide spectrum    trends will have direct impact on          industries, such as finance and media,           back as the Cluetrain Manifesto, which
mutual benefit, delivering it through                                                                                                                                                                                        egies, as well as the proposition that
                                          of customer types, all without human      how successful an existing organiza-       are feeling the pinch the strongest,             said that because of a direct result of
a central production route is just                                                                                                                                                                                           organizations will ultimately have to
                                          intervention on the customer-side.        tion will be as it tries to become a       but most others will be disrupted                the user-shaped Internet, “markets
non-competitive for most purposes.                                                                                                                                                                                           change in order to transform in very
                                                                                    social business by design:                 as well. The Great Recession has                 are getting smarter — and getting
Networked resources on the network        5.	 Cloud and ecosystem-based                                                                                                                                                      meaningful ways how they engage
                                                                                                                               created a bigger gap between healthy             smarter faster than companies”. 5 It’s
will almost always greatly outnumber      open supply chains as the basis           7.	 New resource constraints.                                                                                                            the marketplace, produce output,
                                                                                                                               and unhealthy businesses, while                  not even really a shift, it’s more of an
whatever classical business processes     of growth and agility. The social         Today’s economic baselines (e.g.                                                                                                         generate revenue, and even define
                                                                                                                               many industries are being unbundled              addition of a new dimension to how
can bring to bear. The traditional        business will literally be distributed    the Great Recession, green business                                                                                                      their very existence. In other chap-
means of enlisting contribution           along the edge of the network, be-        models, peer production) require                                                                                                         ters, we take a much more detailed
(employment) won’t work, something        coming both a volume supplier and         organizations to find new ways of                                                                                                        look at the specific techniques of
new will be required.                     a consumer of others best-of-breed        accomplishing goals using fewer            Footnotes                                                                                     social business, how they are effec-
3.	 Social power structures as            services. Social business will build      resources. This includes identifying       1 Jarvis, J. “Rupert Murdoch’s pathetic paywall”. The Guardian. [http://www.guardian.co.uk/
                                                                                                                                                                                                                             tively used, and how to be successful
the means of self-organizing and          upon other best-of-class and trust-       the means to capture opportunity           commentisfree/2010/mar/26/rupert-murdoch-pathetic-paywall] March 26, 2010.                    at applying them with in a large orga-
governing. Organizational hierarchy       worthy social companies and non-          and transform “in process” business        2 Gunn. A. “Amazon Cuts Publishers Out of the Mix, Makes Deals With Writers.”                 nization as part of a strategic change
remains in place to set business goals    commercial communities, building          activities using newer, more efficient     PCWorld. [http://www.pcworld.com/businesscenter/article/242095/amazon_cuts_publishers_        management process. 		                 n

and objectives, but social models are     a vibrant and deeply meshed supply        models. Social businesses will need        out_of_the_mix_makes_deals_with_writers.html] October 18th, 2011.

leveraged therein as effective and        chain while carefully exposing and        to effectively link IT and operations      3 Hutchinson, A. “Human Resources: The job you didn’t even know you had”.                     Dion Hinchcliffe is based in Washington
                                          protecting strategic data. Ability        much more so than in the past to           The Walrus. March 2009. p. 15-16.
efficient ways to run organizations.                                                                                                                                                                                         D.C. and is Executive Vice President of
Work itself, however, takes place via     to dynamically adapt and rapidly          accomplish the movement to this            4 von Ahn, L. NOVA ScienceNow s04e01 (Television program). 2009. Quote occurs at 46:58.       Strategy at Dachis Group. Peter Kim is
community-based relationships that        respond to the current needs of the       new baseline. Note that only certain       5 Levine R, Locke C., Searls D., & Weinberger D. The Cluetrain Manifesto.                     Chief Strategy Officer in Austin.
                                          cloud. Because of the self-organizing     inputs, such as access to traditional      Perseus Books, 2000.

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Social Business By Design - Chapter 5

  • 1. 30 + B O O K E X C E R P T: ‘ S O C I A L B U S I N E S S B Y D E S I G N ’ THE SOCIAL BUSINESS JOURNAL ISSUE 01 Q2 2012 31 ‘Social Business By Design’ DROPS May 1, 2012 by Jossey-Bass. SOCIAL ENTERPRIsE THE SOCIAL ENTERPRISE This excerpt is chapter 5: How will business make the transition? You can learn more about the book and pre-order it here: dach.is/sbdbook. by DION HINCHCLIFFE & PETER KIM · XPLANATiON by chris roettger S ocial, cultural, and technological trends are transforming every business environment. Executives must understand how to create and capture val- ue from current changes in the market to foster competitive advantage and solidify customer relationships. Getting started requires an understanding of the elements of social business and how they differ from legacy market approaches. The shift in control from institutions to communities is underway, driven by the availability of data, affordable technology, and more efficient operating models. Harnessing these trends and pivoting an enterprise is easier said than done, but HARNESSING BIG PEER PRODUCTION SOCIAL STRUCTURES SELF-SERVICING OPEN SUPPLY CHAINS DYNAMICALLY ADAPT COMMUNITY DATA DRIVES CREATION HELP SELF ORGANIZE MARKET NICHES ARE BASE OF GROWTH & RAPIDLY RESPOND examples of next-generation business have emerged to learn from. Successful businesses Peer feedback is the Social internal Consumers that Cloud- and Rapid, unpredictable will be those that most efficient and structures are the interact with ecosystem-based communities require have the richest, most valuable source for best means of their own product open supply chains the ability to up-to-date data driving business governing and achieve the highest are the basis of dynamically adapt Reprinted by permission of the publisher, John Wiley FACTORS DRIVING THE & Sons, Inc., from Social Business By Design: sources & market dominance. decisions. building community- based relationships. economic scale. growth and agility. and quickly respond to current needs. GLOBAL MARKETPLACE CHANGE Transformative Social Media Strategies for the Connected Company by Dion Hinchcliffe and Peter Kim. ©2012 by Dion Hinchcliffe and Peter Kim. All rights reserved. Conversation is no longer in the past; it’s in the present and even the future. Companies can not only track what people have done, but can ascertain what they will do. INFORMATION GLOBAL MARKET NETWORKS INFORMATION FLOWS DISCONTINUITY CUSTOMER & PARTNER COMMUNITY 20TH CENTURY 21ST CENTURY Resource abundance Resource constraints SOCIAL Value in transactions Value in relationships COMPUTING MOVING the Business stability Business flux MARKETPLACE Well-defined industries One-way markets Industry transformation Two-way markets Limited information Information abundance TRADITIONAL BUSINESS MODEL POTHOLES the GLOBAL MARKETPLACE INSTITUTIONS the COMMUNITY POOR GRASP RIGID DISCONNECTED UNRESPONSIVE STORED DATA IS SYSTEM IS SLOW OF BIG DATA SUPPLY CHAIN INTERNAL STRUCTURE PRODUCT OFFERING PRIVATE & CLOSED OR UNABLE TO ADAPT
  • 2. 32 THE SOCIAL BUSINESS JOURNAL ISSUE 01 Q2 2012 33 organizations are willing to accept. some certainly more than others, software industry has been dra- resource: human brain cycles.” 3 In tory barriers and rethinking how The shifts of control required by particularly marketing, customer matically affected by open source response, they pivoted the reCAPT- business gets done. SOCIAL ENTERPRIsE social business are challenging: how we communicate (from point-to- care, and HR. One response that occurs frequently is serious discus- (software peer produced by global communities). Other industries are CHA service to tap into a huge reservoir of highly cost-effective Traditional businesses point to social), how we organize sion about “putting the genie back lining up for similar disruptions, labor to tackle enormous problems. must face off new social I t’s far easier for small and (hierarchies to communities), how into the bottle” and reverting to including most industries involved Turning individual work into collec- medium-sized companies to we create (central output to peer old models for working, collabo- in services and knowledge work tive productivity, the system started businesses change the way that they work. output), and where value comes from rating, and producing work. One that can be recast in social busi- using images from failed optical Emerging new institutions — The methods through which they (hierarchies to networks). of the most famous examples of ness terms. In the near term, these character recognition jobs in its social businesses — will look very interact and stay connected to the The old question about the in- this was when newspaper magnate include financial services, educa- human verification tests (the text different from the organizations we marketplace and their customers novator’s dilemma has become more Rupert Murdoch decided to ignore tion, information services, consult- displayed is actually scanned from a have today. They will derive power are easier to change when there are urgent as the new business landscape new Internet business models and ing, and most administration and printed source). and value from deep integration into fewer constraints. In contrast, large looks increasingly unfamiliar: we require that many of his news outlets government. Longer term, social reCAPTCHA subsequently went the lives of both the people and busi- companies are challenged when now live in an age where historically charge for access to their websites, business will transform most hu- on to digitize over a century of nesses that they touch upon, not from making the transition to social busi- scarce resources are now abundantly despite the fact that companies like man activity. Ultimately, everything newspaper and print archives from a large centralized market presence. ness, having to deal with change on available — at least on the network Google were much more successful that can be social will be social. the New York Times and plans to Think of reCAPTCHA as the 21st a larger scale. People are the primary — in seemingly unlimited quantities in monetizing in entirely new ways accomplish far more going for- century organization: Deeply net- element of any successful business (e.g. new ideas, existing knowledge, with advertising and other indirect Next-generation business: ward.4 Businesses that employ OCR worked to millions of partners, highly participative by enlisting millions of transformation and changing people and productive capacity, and access fees.1 Those industry directly in the Open, social, self-service correction staff and compete with is notoriously difficult. Thus the to an organization’s customers and firing line of social media, including this service are at primary risk for participants, and both delivering and How then do businesses cross the larger the business, the greater the competitors). Conversely, what was Hollywood and virtually all media disruption if they don’t change their providing value in a very integrated divide between the traditional busi- difficulty encountered. formerly abundant is now scarce (e.g. are exposed to profound disruption, methods. This seemingly limit- and profoundly connected way. ness era and the social business era? The ongoing and seemingly inexo- broad demand for big ticket, high such as when Amazon decided in An example of how foreign yet novel less and free source of mental and rable decline of a traditional industry margin, low volume products and 2011 to directly connect authors with these new ways of doing business physical effort (both recognition What does Social Business and keying) has been harnessed by consist of ? reCAPTCHA at virtually no cost. A social business consists of three The service taps into community unique and critical aspects: 1) It creates A vast legacy landscape of existing output — the community of all and delivers most of its value over the Web users. ReCAPTCHA doesn’t network, usually indirectly (i.e. not actually control its own product; centralized production, but via peer business models, customer needs, their partners that use their badge production), 2) it consists of a loosely do, thereby contributing their users coupled entity of partners comprised of — usually very large number of — customers and suppliers who have as learned behaviors, and instilled You can pre-order Social Business much control over outcomes as any other part of the business, and 3) it has effective strategies to take advantage culture must be overcome. by Design here: of the new balance of abundance and dach.is/sbdbook. scarcity, along with greatly reduced dependencies on the old balance. Social business models and operat- ing structures are tuned to operate such as old media continues to be services in the form of large adver- its global online publishing network, will be is the story of reCAPTCHA. and delivering shared benefit to all smoothly using the post-Great Reces- a canonical example of what hap- tisers, big corporate customers, and cutting out publishers and editors This service puts brief, hard-to-read involved. This loosely shared coop- sion resource-and-demand landscape. pens when the ground rules change anything else.) Business has become altogether.2 Responses like these are text snippets on forms in Web sites erative partnering via the network is Self-organizing peer production in an industry fundamentally unable increasingly fine-grained, scaled, and near-desperate attempts from fading so that users can prove that they are a simple yet powerful example of the is the motive force, network effects to adapt to new market conditions. oriented around mass customization industries deeply impacted by chang- really humans and not spammers or enormous scale and value possible are the new market share, and social In this chapter we’ll explore some as opposed to traditional scaling of es in wrought by the digital revolu- bots. The service was designed to with social business models. power structures are what drive busi- of the more traditional limitations one-size-fits-all. tion. They are usually misguided and process the several hundred million In the social business era, suc- nesses forward ,becoming perpetuat- that virtually all organizations face, Businesses frequently remain short-sighted while also insufficiently online verification forms that are cessful organizations will be open to ing communities of self-interested, as they realize they have to literally very uncomfortable about explor- imaginative. These periodic debates filled out each day around the Web. participation, tapping into far-flung like-minded individuals. “blow up” what are often hallowed ing the future in such an uncertain also show us the future of social busi- The creators of the product soon communities and social networks Putting aside for now the le- processes, traditions, and internal and rapidly changing landscape. The ness and the need for effective vision realized they had unintentionally to accomplish work in larger scales gal, societal, and cultural impacts institutions. The resulting so-called feedback cycles of social media are and transformation. “created a system that was fritter- than they ever imagined before. This and challenges of all this (barriers “new normal” has begun to seem relentlessly real-time, affecting every Old media has been deeply ing away, in ten-second increments, requires overcoming organizational, explaining why the transformation to more and more foreign than most major business function, though impacted by social media, and the millions of hours of a most precious cultural, structural, legal, and regula- social business has taken so long, de-
  • 3. 34 THE SOCIAL BUSINESS JOURNAL ISSUE 01 Q2 2012 35 spite the Internet having existed for decades), let’s focus on the business side. The new business landscape will Ultimately, everything workforces or centralized business infrastructure, are constrained. On the output side, abundance is or transformed into new ones (for example, traditional software compa- nies moving to SaaS and cloud com- business operates organizationally and is the hallmark of social business. This new addition changes the dy- that can be social will still take a half decade or more to increasingly produced in such great puting, or the rise of crowdsourcing namics of where useful information arrive and these drivers explain how quantities that it would overshadow competing with outsourcing at the comes from, how decisions are made markets will get there: shortcomings in the business side. low end.) Today’s dynamic Web-driv- in an organization, and how more be social. 8. Sustainable value moving from en global knowledge flows and agile autonomy and self-determination The value drivers business transactions to relation- online models for computing and col- will be needed — and tolerated — in ships. This represents the growing re- laboration — as well as economic and modern organizations to meet more of social businesses intellectual production — are now a dynamic and changing global work- alization that the traditional rote busi- 1. Strategic control over peer- significant change agent. places comprised of communities ness transaction as the core source of produced community data drives instead of traditional employees. drive forward business activities and aspect of social media, change will be organizational value is diminishing. 10. Moving from change as the market dominance. The real, irre- objectives. The commercial and com- more rapid and unpredictable since Value now comes from relationship exception to change as the norm. Putting all of the concepts that placeable value of the social business munity motivations that have made it will often be led on the community dynamics. As such, it’s more impor- The world is already seeing faster have been presented here so far to- economy is high-value information. open source software so successful as side. People in social business ecosys- tant to have community capacity to consumer behavior shifts, quicker gether into a strategic plan to redesign It is the currency of the realm on the a productive model based on social tems will make decisions and change create on-demand that it is to actually pricing changes, more rapid product an organization can seem a daunting network, which will always route to power structures serve as a powerful course, affecting businesses and cus- have stocks of inventory or knowl- cycles, and faster media feedback task. There are multiple competing the best source. Only the richest and examples of how this is taking place. tomers much faster than traditional edge, which quickly age and become loops. While this can also lead to more forces for change today and a vast most up-to-date data sources will Many others are presented here in business models. Success requires irrelevant. It’s the relationships and extreme market conditions, it also legacy landscape of existing business have market dominance and they this book. With the adoption of designing for low levels of central their ability to produce what’s needed enables opportunities to be turned models, customer needs, learned will have inordinate market power as social business, a full range of social control and enabling highly fluid in the moment that matter more in a into bottom-line impact for organiza- behaviors, and instilled culture that well. 20th century companies greatly business models will be involved, evolution and development based on fast-moving, real-time marketplace. tions that can adapt to market realities must be overcome. Fortunately, a undervalue and under-exploit their from internal social collaboration to near real-time market feedback. This has many implications including quickly enough. The network is the large amount of the early transition to vast data assets today. Social busi- customer care communities. using new management methods (ex- culprit (and solution) for much of this. social business is not only incremental nesses can’t and don’t. They relent- 6. This paints a high-level picture ample: from top down command-and- We now have pervasive social media but naturally complements what most lessly use it to their advantage, as a 4. Mass self-servicing of market of how the business landscape is control to community curator and fa- instantly transmitting and shaping cul- organizations are already doing today high-value revenue stream, monetiz- niches achieves the highest eco- transforming in a generational cilitator), tapping into new reservoirs tural phenomenon and faster financial with their early forays into social ing it in ways their communities and nomic scale. Social businesses will way over the next decade or so. of innovation, adopting new ways of cause-and-effect in the markets, real- media. Whether it’s social marketing, their own organizations benefit from. enable self-service as their primary However, for some protected and interacting with customers, or driving time online markets, and so on. In the social CRM, social collaboration, or 2. Peer production as the most means of interaction with the market, highly regulated industries, it may better tacit interactions. The tenets of 21st century, following a plan is increas- social product development, getting efficient and richest source of whether integrating with open data take longer than expected. There are social business will ultimately enable ingly less important than responding started is not the big challenge. The value creation. Centralized produc- or letting customers and partners dis- macro trends that also affect how organizations to accumulate deep actively and effectively to change. real challenge is acting strategically tion is inefficient and less optimal tribute their functionality to the far social businesses will either emerge reservoirs of relationship capital. enough to matter. corners of the world. Google’s indus- from the successful transformations 11. A shift of control to the edge compared to social business meth- Section 1 of the book presents a try leading AdWords service is a great of existing organizations, or grow 9. Industries in flux with new of organizations. This has been ods. When you can tap into the vast number of successful social business example of this, offering incredibly as successful startups. These macro ones emerging. Previously stable accurately predicted at least as far capabilities of the global populace for case studies that illuminate key strat- detailed control of to a wide spectrum trends will have direct impact on industries, such as finance and media, back as the Cluetrain Manifesto, which mutual benefit, delivering it through egies, as well as the proposition that of customer types, all without human how successful an existing organiza- are feeling the pinch the strongest, said that because of a direct result of a central production route is just organizations will ultimately have to intervention on the customer-side. tion will be as it tries to become a but most others will be disrupted the user-shaped Internet, “markets non-competitive for most purposes. change in order to transform in very social business by design: as well. The Great Recession has are getting smarter — and getting Networked resources on the network 5. Cloud and ecosystem-based meaningful ways how they engage created a bigger gap between healthy smarter faster than companies”. 5 It’s will almost always greatly outnumber open supply chains as the basis 7. New resource constraints. the marketplace, produce output, and unhealthy businesses, while not even really a shift, it’s more of an whatever classical business processes of growth and agility. The social Today’s economic baselines (e.g. generate revenue, and even define many industries are being unbundled addition of a new dimension to how can bring to bear. The traditional business will literally be distributed the Great Recession, green business their very existence. In other chap- means of enlisting contribution along the edge of the network, be- models, peer production) require ters, we take a much more detailed (employment) won’t work, something coming both a volume supplier and organizations to find new ways of look at the specific techniques of new will be required. a consumer of others best-of-breed accomplishing goals using fewer Footnotes social business, how they are effec- 3. Social power structures as services. Social business will build resources. This includes identifying 1 Jarvis, J. “Rupert Murdoch’s pathetic paywall”. The Guardian. [http://www.guardian.co.uk/ tively used, and how to be successful the means of self-organizing and upon other best-of-class and trust- the means to capture opportunity commentisfree/2010/mar/26/rupert-murdoch-pathetic-paywall] March 26, 2010. at applying them with in a large orga- governing. Organizational hierarchy worthy social companies and non- and transform “in process” business 2 Gunn. A. “Amazon Cuts Publishers Out of the Mix, Makes Deals With Writers.” nization as part of a strategic change remains in place to set business goals commercial communities, building activities using newer, more efficient PCWorld. [http://www.pcworld.com/businesscenter/article/242095/amazon_cuts_publishers_ management process. n and objectives, but social models are a vibrant and deeply meshed supply models. Social businesses will need out_of_the_mix_makes_deals_with_writers.html] October 18th, 2011. leveraged therein as effective and chain while carefully exposing and to effectively link IT and operations 3 Hutchinson, A. “Human Resources: The job you didn’t even know you had”. Dion Hinchcliffe is based in Washington protecting strategic data. Ability much more so than in the past to The Walrus. March 2009. p. 15-16. efficient ways to run organizations. D.C. and is Executive Vice President of Work itself, however, takes place via to dynamically adapt and rapidly accomplish the movement to this 4 von Ahn, L. NOVA ScienceNow s04e01 (Television program). 2009. Quote occurs at 46:58. Strategy at Dachis Group. Peter Kim is community-based relationships that respond to the current needs of the new baseline. Note that only certain 5 Levine R, Locke C., Searls D., & Weinberger D. The Cluetrain Manifesto. Chief Strategy Officer in Austin. cloud. Because of the self-organizing inputs, such as access to traditional Perseus Books, 2000.