The Social Web

Posts Tagged ‘Strategy’

Why Social Networking ?

In Uncategorized on April 25, 2009 at 7:34 am

Till now all our posts here have focused on the “how” of social networking in the context of enabling business performance. I would like us to take a step back and as business leaders think about the – Why? Without having to divulge my age ๐Ÿ™‚ I would like us to go back to our first reaction to – Twitter or even a blog. Why in the world would anyone want to tell the world that he is going out for a run?ย  Why in the world do I care about the latest soap opera in your life? Why, why, why?

The reason is that people are inherently social and we like to connect (yes you the introvert too) we want to be recognized and be counted!!ย  The internet with the help of all the associated social tools allows us to communicate. This ability to communicate across vast distances is critical.ย  One critical change is economic. Mobilizing a large group of people used to be expensive. Organizing them took huge amounts of work, which led to โ€œthe institutional dilemma,โ€ the axiom that formal institutions are necessary for getting things done ( The theory of firms- why do firms exist?) , even though they absorb resources and get in the way. Now, because e-mail and instant messaging are fast and cheap, time costs are evaporating. Since you can send an electronic message to many people as easily as to one, everybody has access to groups that, once, only their leaders could reach. This fundamental change needs to be understood by each business leader and they should invest in social tools by answering this question- Am I lowering my transactional cost? When Transactional costs lower you can add more people to the organization.

Social networking tools lower the transactional cost to almost – zero – and that makes them so powerful in cases where organizations need to stay connected with their customers – which is most – I am yet to see any organization that says- customers are not important ๐Ÿ™‚ .ย 

Once this simple message is understood we will see every organization at every level embrace these tools for all the scenarios that have been mentioned in the previous post.

Most people are part of a โ€œSmall World network,โ€ which is connected to a medium-sized group of people, many of whom are connected to one another โ€“ often through several shared attributes. A few of the people in your small and medium worlds are highly connected to more outsiders, and they link your group with farther-flung communities. In a setting such as a professional association, these people wield considerable influence. People who associate primarily with others like themselves โ€“ no matter how many โ€“ generate fewer, safer ideas through a kind of diffused groupthink. By contrast, those who link up with many different kinds of people generate a greater number of better, more innovative ideas.

Social media tools provide professional advantages by lowering the cost of failure. For example, many proposed Meetup groups fail. Most older businesses would find this daunting: they try to manage the cost of failure by making it less likely. Those who associate with repeated failures might even be stigmatized. However, trial and error, a great way to learn, is far less expensive, daunting or damning online. Just consider the world of open source software. Most open source projects go nowhere and have no users. Yet, because open source people get involved in projects voluntarily and abandon them with no penalty, talent flows to interesting projects, letting communities sort projects cheaply and try them risk free. From a traditional business point of view, this is chaos and, indeed, early in the process, no one can predict which projects will fly. However, if a project reaches a critical mass of involvement, and if it sets community norms of reciprocity and high performance, and if those involved care about each other and act respectfully, community-based projects can be cheaper and even better than professional projects.