Winning by Sharing

Outsourcing relationships

Michael Wolff of ki work sent me a quick round up of 'news from the front' surrounding LinkedIn's recent valuation.  He says;

• Linkedin raises another $53m valuing the company at around $1 billion.
• About 23 million people in 150 countries have set up profiles on Linkedin so far, with another 1.2 million members signing up each month (growth rate 5.2% per month compared to facebook 12.5% per month)
• Ning currently valued at $500 million.
• On recent series C funding for oDesk of $15m, I suspect this would be on a valuation of $100m +

So, pretty hot area for investors.

It occurred to me a long time ago that companies are outsourcing their relationships to LinkedIn.  One area where this is having a profound impact is in recruitment, where the relationships recruiters form with prospective candidates are managed outside company boundaries and on other platforms.  Small, smart recruiters like Fred do all their candidate generation on Facebook, Twitter (the 140 charcater CV) and LinkedIn.

Large corporations who have not woken up to the demands of Generation Y, and the innate need for people to form groups and communities of practice, are missing an opportunity to create organisations as productive as the open source community.  Years ago there was an active community of Air India pilots on CommunityZero because the company just couldn't (and probably still doesn't) provide an online environment for its people to exchange professional experiences.  Large programmes of change taking place in big companies to this day do not even consider building collaborative, social architectures of participation on which they can execute change. 

Thnk about this for a moment.  LinkedIN and a number of other business networks could conduct an analysis on their data to derive a social graph of a large percentage of people from a single organisation.  The graph would show the frequency and strength of inter-relationships and identitfy Influencers and connectors, in real time. 

Maybe this unintentional transparency is a good thing? Maybe knowing what these inter-relationships are is worth much more than $1 billion?

Blog deflation

There's a meme emerging on the commoditisation of blog content.  The central thrust is that blogs now only have value when aggregated for search and discovery.  In the same way music downloads have cannibalised record label profits, bloggers' carefully nurtured content is being  devalued.   How can bloggers respond?

I agree with this trend suggest that blogs can only become destinations when functionality rather than content is syndicated.  So if I'm a travel writer with an audience I can embed Expedia's booking engine on my blog, such that the booking experience resides entirely within my blog pages.  I get a commission for sales (and I'm transparent about this).

Actually,  when you think about it anyone can be an intermediary (or agent, or broker). By combining services (or widgets, as they are called) from Cloud operators and web service brokers, they can build entirely new businesses, albeit with niche audiences.  Wine buffs with mass followings can sign up new members to Virgin Wine Club - take a a margin.  You get the point.  Incalculable number of permutations and combinations of services and intermediaries.

The academics were right several years ago when they said that far from the web dis-intermediating it will actually  create hypermediation giving rise to what they call cybermediaries.  In the social network space groups will be syndicated and embedded on the web sites and blogs of the members.  A 2,000 member group could be on 200 different web sites with a join button. Many brands don't get the point.  It isn't about creating destinations.  It's about 'being everywhere'.

"A word to the wise.  Decentralise".

The value of social networks

A friend of mine told me in 2006 that an executive he knows at an oil company was willing to pay 20p-50p for instant (over 24 hours) opinions from a demographically suitable population of people.  This is several orders of magnitude greater than the advertising model (with the exception of the usual suspects with billions of page impressions every month).  I've argued for many years that the source of value in social networks is behavioural/opinion data, particularly those arising from digital conversations. Selectricity (Voting machinery for the masses) appears to be a robust tool for implementing it.  SwarmTeams - has similar utility.

Key to creating a movement at scale is figuring out the model of trust (the exchange of value) and the feedback mechanisms back to the community.  Feedback is crucial because prizes and other material incentives won't work (You want me to pay? I want you to pay attention).  They are obviously entirely inappropriate for cause related communities.

The biggest challenge brands face in their attempts to create customer communities and engage/interact with social networks is actually changing some aspect of their product, service or policies as result of the feedback they receive.  They also must communicate and attribute the benefits of that change back to the community.

To do this well they must start from the inside.  That is, create, learn, and experiment with social software. The first step is to discard the company Intranet, a largely one way broadcast medium, and replace it with systems that enable conversations, connectivity and peer-to-peer sharing.  This is probably stating the obvious but to participate in a network, a company must itself be network centric.  Unfortunately this means taking a conscious decision to dismantle hierarchical organisation.  Democratising decision making (crowd sourcing), creating openness and transparency is a big step for large organisations in particular.  For most of them, this is still a step too far.

Some more commentary here in an interview with MyCustomer.com.

Free is easy. The rise and fall of networked societies

Update on 7th April 2008.  Two contrasting views on free social software;

Free is killing us - blame the VCs & Chris Anderson's Free. Why $0.00 is the future of business (complete 'noise' IMHO).

There’s been a lot of chatter recently about Facebook’s drop in growth marking some kind of turning point in the world of social networks.  Opinions vary from ‘people are all networked out’ to it’s a ‘cycle of life’ thing.

In 2006, I read a paper called ‘The Rise and fall of a networked society: A formal model.  Very academic, mathematical and difficult to decipher.  I meant to write about it then but got busy and filed it under ‘material for blog’.  A friend reminded me of the article in a recent email conversation thread on The Influencers are Influenced (more on this later). Then this week, Thomas Power told me that Ecademy had seen a surge in registrations (apparently so has LinkedIn) and he couldn’t understand why. 

In the early days of social software (when I worked with Ecademy) the academic literature was mostly theoretical. In the last few years a lot of (anonymous) social software data has been made available to academics.  Actually, it’s possible to gather data without the explicit cooperation of the provider. So this paper and others supporting its findings are based on real data.

In this study the scientists seek to understand the statistical properties of social networks so they are able to predict their behaviour.  The findings can be summarised thus;

• Networks in a steady state are easily excited by external forces (they call this meta-stable), just like ice molecules can be melted by an external force called heat. 
• External events trigger the growth or decay of a network. Sometimes these can be very slight changes in the environment
• Sometimes the timing of this trigger can be predicted (using the science of wave and phase transition theory)
• Dense networks (like Facebook) become increasingly excitable and frequently ‘break up’ into smaller clusters, although dense networks are far more effective for (personal) search

It was recently reported that 37% of Facebook’s traffic is derived from third party applications.  So it should come as no surprise that behaviour change is taking place as people discover each other in smaller, more diverse clusters.  This helps to explain why other networks are experiencing growth at Facebook’s apparent expense.  It’s sheer size and presence has educated individuals, in the same way Youtube has forced TV companies to re-examine their business models.

One final point.  Free is easy. Paid for is hard. 

The reason there may increased interest in Ecademy from UK media companies is because it actually makes money, and not from advertising.  It doesn’t have Orkut, FriendsReunited or Facebook’s scale, but it has achieved something few (if any) social networks have achieved:  Creating something of sufficient value that people are actually prepared to pay for.  This is different, and it is difficult to achieve beyond most people’s imagination.  Let's hope potential suitors don't destroy that value with  their frequently oppressive command and control mentality.

Survival of the nicest?

This is not a post title I thought of, although I wish I had!  My brilliant friend and occasional mentor Frank Dunn coined the phrase as a chapter description of a book he's writing to explain life, the universe and everything - mathematically.  It describes cogently and succinctly why "Winning by Sharing" is fundamental to human survival and opens with;

One of the key discoveries so far of Complexity Theory is that co-operative processes in general seem far more likely to survive than isolated, rampantly selfish entities.  This moves successful evolution away from the original 'principle of natural selection'; which was rather reductionist in that it placed the key stress on individual survival; to a more holistic, symbiotic view of adaptability, wherein survival is a group or team effort.

The examples most often quoted to illustrate this are typically a biochemical feature: an autocatalytic process.  There are many groups of proteins within our bodies and those of many other organisms that depend on each other for synthesis and production from their simpler component parts.  In other words, they simply cannot survive in isolation; but need to co-exist with each other.

In fact, with hindsight our social history is almost embarrassingly about collective effort, rather than individual triumph: all primates form tribes and engage in degrees of communication; the family 'unit' in primates invariably involves the male as much as the female; ancient civilisations worshipped their ancestors as symbols of the 'collective wisdom' of their culture.

I so hope this book is published.  It will rank amongst the most disruptive and thought provoking discoveries in recent times, not unlike Stephen Wolfram's A New Kind of Science.

Recent ground breaking research at the Max Planck Institute used the Ultimatum Game with chimpanzees, the result, reported in Science, is a telling outcome.  "A number of researchers in the field of human evolution think that a sense of fairness—and a willingness to punish the unfair even at some cost to oneself—is humanity's “killer app”.

The Economist article goes on to say; "It is what allows large social groups to form. Without it, free-riders would ruin such groups, because playing fair would cease to have any value. Dr Jensen's previous experiments have shown that chimpanzees are willing to punish actual thieves. But his new data add weight to the theory that the more sophisticated idea of fair shares, which underpins collaborative behaviour, appeared in the hominid line only after the ancestors of the two species split from one another."

In other words an individual's sense of fairness is genetic.  Of course this is dangerous ground to tread but reading this reminded me of the experiments carried out by Bob Altemeyer described in his book The Authoritarians.  This is a fascinating account of the analysis and results of a game he devised for small teams to represent a country or region.  The teams choose leaders and negotiate deals for their people.  It's a sort of offline version of Microsoft's Age of Empires where 100 years is played out in less than a day. The experiment, carried out hundreds of times in US universities and colleges pitches two distinct types of group against each other; Right Wing Authoritarians (think politicians, leaders, businessmen, petty tyrants) and Liberals (everyone else).  With few exceptions, RWAs always end up completely destroying the world.  In many cases, the game was stopped early to advise RWAs their course of action would lead to global destruction, and given the chance to restart the game.  Guess what?  Yep, they destroyed the world again.

So perhaps the future is about Survival of the nicest?

It's the network stupid

The world’s foremost authority on collective intelligence, Jean Francois Noubel says that; “A company’s future is less about the nature of its issues and more about its capacity to invent social structures able to solve them”.  Perhaps he should have just said “it’s the network, stupid”.

Do you wanna be starting something?

In early 2001, British Telecom (BT), announced a software deal with a web services software vendor called Bowstreet, who were recently acquired by IBM.  The purchase was made to create a European wide portal for the publication and distribution of web services.  Incredibly insightful but the initiative eventually faded.  Not long after I wrote a paper for BT on the 'anatomy' of a what is basically a web services broker.  It's based on some earlier work I did with Anna Pollock, when we devised what a web services provider could look like in  travel, by first creating a more generic model based on this diagram.

It's key features are;

• A directory of web services, community maintained by applying Wiki or ODP style usage protocols
• A supply side (institutions and independent developers) and demand side (end users and applications) presence
• An ontology (an explicit representation of shared knowledge) to make it easy to search and discover web services
• Core services that enable a provider to publish and/or host a web service and consumers to aggregate, syndicate and pay for services, together with a range of trusted services (encryption, billing, reputation metrics, etc)
• Facilities to enable fine grained services (e.g. post code lookup, price a bond) to be consumed by systems and applications, and coarse grained services (e.g. calendar widget, search widget) to be consumed by end users (web site, blog)
• Payment and revenue share services for providers and consumers (pre-pay & post-pay) that enable transactions between parties that are previously unknown to each other
• Community services that enable conversations between parties that are previously unknown to each other

Some friends at BT have been telling me about the resurgence of interest in this business model, the best example of which is StrikeIron, evidenced by BT's collaboration with Microsoft & TopCoder.  They've been running software development competitions for independent providers where winners are provided with access to BT & Microsoft's customer base.  Competitions are managed on behalf of companies such as Google and AOL (not unlike the Innocentive model in the pharma space).  Interestingly, 45% of the individuals who enter are from India and 96%-98% of the winners are from China or Eastern Europe!  There's an excellent article at Business Week covering the BT/Microsoft collaboration.

So what next? Getting the community dimension right cannot be overstated and continues to be a weakness for BT, although less so now for Microsoft.   It's latest offering BT Workspace is too little, too late and misses the point completely, which is to put customers in touch with each other (enable conversations between parties that are previously unknown to each other).  Without this BT will be unable to create liquidity in their fledgling marketplace where they already face stiff competition from Sourceforge (who have announced the imminent delivery of a marketplace) and others with existing critical mass (e.g. Xmethods).

BT, if you really wanna be starting something you need to see yourself as a market maker in the web services publishing business, bring some of your own assets 'out to play' and understand how to operate an online network, or face being just a tin and wires platform player.

Markets are conversations

The desire to communicate in groups is fundamental to human nature.  The development of co-operative communities was a critical contributor to the survival and evolution of civilisation.  This desire to relate to other people continues to drive society today, and it is natural that this is now reflected in the online environment.   

People are speaking to each other in a powerful new way.  ‘Smart mobs’ of activists with mobile phones are coordinating and orchestrating sophisticated demonstrations ‘on the fly’. Pressure groups with millions of registered members are being formed overnight, and the business models of entire industries are being disrupted by the spectre of peer-to-peer networks, some of which are mounting serious competitive challenges to the present incumbents.  Blogs and Podcasts have established themselves in the mainstream news gathering industry where they "democratize the creation and flow of news in a world where giant companies control so much of what most people see, hear and read". 
   
Markets have become conversations.  New social forms have emerged from providers of community services.  These services enable conversations between parties that are previously unknown to each other to the extent where over 50 million people are able to interact in a single online space, generating billions of web site page impressions every month.  Social software and the communities it hosts has indisputably become an industry in its own right.  A Social web is being spun - one that can no longer be ignored by any brand. 

Moreover, the online community phenomenon signals the end of the broadcast paradigm as an effective marketing strategy, as consumers spend more and more of their time interacting with each other. While brands still broadcast (or preach), consumers connect.   

Never before has a company had the opportunity to harness the collective knowledge and energy of its stakeholders to achieve such spectacular revenue, marketing and PR success, for comparatively speaking, so little effort.  Many are already doing so, and some have been successful at it for several years.

Fractional Work. The next small thing?

Models of Fractional Work continue to emerge.

The video blogging web site Revver opens with the statement "What if creativity could pay the rent?". And JyvePro announces "Live access to people and what they know".  Ether launched a while back with the strap line "Earn money, selling what you say".  More recently, BitWine in similar vein, proposes that people can "Get straightforward Advice, Instructional Guidance or a Second Opinion, and talk to real people in real time". 

Emerging behind the scenes is ki work (my favourite, and in which I have a personal interest) which if it receives funding, will adopt a profoundly more subtle approach to fractional work and should eclipse its nearest competitors, Elance, Guru, PajamaNation, Odesk and others.  As always we lag behind in the UK, although ExpertSources is getting there.  If its management team can be persuaded to embrace Web 2.0 technology it could quite easily become a de facto cybermediary for sourcing expert opinion in the UK by connecting media researchers to experts. At this time, none of these appear to have embraced or indeed undertstood the importance of reputation management and the dimension of trust it adds to user confidence.  Several new entrants can provide the 'plug 'n' play' services they need, for example RapLeaf, Venyo (just launched) and iKarma.

Ki Work's Michael Wolff has collected just about every statistic on the future of work one could ever need, has also been crunching numbers and comparing the performance of some of these players.

Guru

Projects posted by employers: 70,200
Employers received an average of 15 quotes per project they posted
80% of invoices created by Guru or Guru VENDOR members, i.e. members that pay some level of subscription and therefore, more likely to get work if a paying subscriber. 

Elance

800,000+ registered users.
100,000+ projects annually.

"So if we take Guru, Elance and others,  the number of projects posted per year ranges from 200,000 - 400,000, mainly from US customers."  This still only represents a small fraction of what's possible.

I'm convinced as stated in a previous post - Fractional Work Debuts, one of these intermediaries will become the new Manpower or Adecco except using a model that anticipates the maxim, "the unit of work is no longer a whole job". 

In the UK Richard Tyrie, founder of JobsGoPublic, has developed a Ruby on Rails based platform that is perhaps the most functionally rich web application for matching supply with sources of demand, I've seen to date. Richard worked with the highly respected  economic forecasting group, Oxford Economics.  They calculated that if just 1% of the 2.6 million people in the UK on incapacity benefit (points to a PDF file) carried out work on this platform, many millions of pounds would be returned to the Treasury in taxes.

Equally impressive is TorchBox's Slivers of Time (funded no less than by Her Majesty's Government, The Office of The Deputy Prime Minister) that supports their proposition for employers;

"Employers input their needs, for example "3 people for 2 hours at lunchtime today", they see everyone who wants to do that specific booking ranked by reliability (reputation) and hourly rate. They can buy instantly."

With continuing support from the government and professional grade funding, there's no reason why this could not become the eBay for work.

In fact a significant percentage of the 80,000-130,000 government employees (depending on who you ask) at the Department of Work and Pensions who provide a service back to incapacity benefits claimants could work this way, that is, on demand.  Many functions that provide 'soft services' within the NHS (for example, psychiatry, radiography) consist of people who work this way anyway.  So why not contract on the basis of demand?  Why wouldn't you want to reduce the massive salary bill created by 1.3 million NHS employees?

Research from the UK Work Foundation found that the main cause of the 2.6 million people on long term sickness and incapacity benefit is workplace stress, costing the tax payer billions of pounds every year.  Our current command and control organisational model is literally killing people.  Recent research by McKinsey & Company indicates that “half or more of a company’s spending on labour may be devoted to basic interaction activities, many of them internal to the organisation".  Again corroborated by other UK Work Foundation research finding that non-productive interactions in many organisations exceed 60%.

Most Western economies face a wide range of issues related to ageing populations and the retirement costs of baby boombers.   Many blue chip companies cannot replace the talent that will exit their companies in the next 5-10 years, and have not considered the possibility of retaining them on demand, deploying them in a  fractional way that allows the 'ex-employee' to choose their unique work/retirement balance.  How much more pain does everyone have to be in before these new organisational approaches are adopted by organisations of every kind?  Why aren't they doing it now?  One of the perceived 'challenges' is the transparency and openness required to make this mode of work feasible.  Inside the corporation, it would be possible for everyone to see and know what everyone else is working on (or not, as the case may be).  This is difficult to achieve operationally because of rigid command structures and culturally, because the nature of the employer-employee contract does not reward or incentivise in anyway, behaviours that allow people to openly share. 

Perhaps an employment law expert can re-work the ethos of the Open Source General Public Licence and Creative Commons into a new type of employment contract?  In any case, with India, China, Russia and Eastern Europe's low wage economies and highly educated populations providing services of every kind and on every scale (India's Infosys received 1.4 million job applications for employment last year alone), the only way to compete will be to adopt alternative organisational models.  Interestingly, Small & Medium sized Enterprises (SMEs) and micro-businesses which are collectively the biggest employers in Western economies are increasingly turning to these models of work to take cost out of their businesses, but also to work more productively.  When the very clear cut case histories start to roll in, companies will find it hard to ignore these new ways of working.

There must now surely be a case for corporations and  government institutions to completely re-think the way they source, manage and contract with their 'human resources'.  Everyone needs to realise that fractional work is not only economically viable for all parties, and that traditional models of employment are not only unproductive, but inhumane and in some cases, barbaric. Update 13 April 2008. See Stow Boyd's new venture, Workstreamr - work made social.

Football seeks new revenue streams

With David Beckham announcing his departure from Real Madrid to join LA Galaxy with a promise to take football to new heights, and Tottenham Hotspur's hiring of Keith Mills who brought the 2012 Olympics to London, the expansion of the fan bases of top Premiership Clubs is set to go global. 

After talking to several London digital agencies, several brands and a couple of newspapers, The Comedy Hub was unable to convince anyone to take its concept any further.

Concept – The Comedy Hub & Pod The Premiership

• Create a platform that enables the user generation of sketches, fan songs, and football related humour
• Platform functionality designed to create any number of other comedy themes (future).
• Users submit in text and/or audio format
• A blend of studio and live audience recordings are professionally acted, directed and produced as RSS compliant podcasts
• The platform enables rating of content.  This increases the probability of consumption and file sharing behaviours – the wisdom of crowds.
• Platform editors select most popular/relevant submissions to professional produce official weekly Podcasts (2 per week)
• Brand/sponsor advertising inserts are placed at start/end of each Podcast

User Acquisition

• A media partner leverages its audience (readers or viewers) to participate in The Comedy Hub’s Pod The Premiership initiative through competitions and other promotional activities
• Media partner receives rights to distribute free content through all its media channels
• Media partner attracts new audience demographic worldwide

Distribution

• iTunes
• Media partner(s)
• Web - partners, reciprocal linking, RSS
• Mobile networks
• Fan sites & premiership club

Business Model

• Assume potential worldwide fan base of 100m-150m people, and growing
• One or more brands pay for platform development and operation in return for ad placement within Podcasts
• Two 5-7 minute Podcast shows are distributed every week over the 9 month Premiership season
• The Comedy Hub can likely achieve 10% penetration or 10m Podcast listeners by the end of the premiership season.  This translates into 20m opportunities per week to transmit brand’s message/ad

From a standing start in early May, zero spend on marketing, and near-zero on production. The Comedy Hub World Cup Podcast has;

• Produced 12 episodes - around 1.5 hours of audio – intra world cup
• Reached number 1 on ITunes under "world cup comedy" - ahead of Adidas, The Mirror, The Times (Not Baddiel & Skinner) and Telegraph. 
• It featured in the first 4 podcasts under "world cup" along side The Beautiful Game, Baddiel & Skinner, Sky Sports 
• In week 4 we broke through the 100 barrier and we are now listed at number 85 across ALL iTunes podcasts

I wonder what LA Galaxy would do with this concept given that it would only take a fraction of their spend on Beckham to make this reality?