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?

The business impact of social networks

I wrote the first version of this diagram in 2005.  It describes the role of a new function that should be created by HR.  I've been talking recently to Jonathan Winter of Career Innovation.  He's been conducting ground breaking research on behalf of large corporates in the field of talent acquisition, social networks  and their impact on a wide range of strategic issues.  It's just as relevant to small companies (or networks?) as it to large ones.  It needs some explanatory text which I've not had a chance to write, but when CEOs and their boards ask questions about the value of social networks;  What's the point, where does all of this take us, what's the business value? 

Download network_ops.jpg

Some of the answers to these questions can be found in this diagram.  There are two key outcomes;

Creating and measuring the value of intangible assets, so called good will - a significant proportion of a company's market capitalisation is based on good will, except no one knows how to measure it (at least accurately).

Creating a capability to source and manage people on demand.  A CEO I worked with at BT a few years ago said "I could manage this company with 5,000 people (rather than the 90,000 on the payroll), if I could derive resources on demand in the same way as I can supply bandwidth on demand".  BT will see 25% of its intellectual capital retire in the next five years.  This talent is irreplaceable - apparently.  But why not create a platform for these people to continue to work for BT except on their own terms, in a fractional way?

The key message in this diagram is a call for a 'function' that is responsible for delivering these two outcomes on a continuous basis.  It doesn't matter what you call the role of the leader of that function - Communities Director, Network Leader, Chief Social Officer, if HR doesn't take responsibility for it, they will become irrelevant.

And just to remind you what some of the benefits are, here's a table we devised at Ecademy in 2003 for various companies curious about the impact of social networks to their "bottom line".

Download biz_benefits.JPG

Generation Y

There's been a lot of debate about the way enterprises are preparing for Generation Y employees.  These people were born between 1982-1997 having enjoyed the luxuries of digital technology their entire lives, so called digital residents or digital natives. 

Two years ago when web 2.0 was entering mainstream media and culture I remember reading an article arguing for an overhaul of the user experience provided by enterprise applications.  It predicted that companies will only be able to attract the best people by providing devices and applications that are as well designed as iPods and Facebook.

The Journal of Quebec has a different view, as it were!

Talent? What talent?

Image via Wikipedia

"Community building talent is the most precious resource in the modern world". Peter Drucker, RIP.

Social hardware for the masses

  Postmachina connect device 
  Originally uploaded by ixtlan

Postmachina; Fascinating exhibitor at the NextWeb 2008 conference last week, is planning to manufacture a solid state device that stores your network and personal profile. Instead of exchanging business cards or contact details via Bluetooth and SMS, users 'touch in' by briefly making contact with each other's device. Postmachina is a Dutch design studio and describes this new venture, called Project E;

"Project E is a set of integrated products consisting of wearable/mobile brandable devices. They have the ability to connect users to each other, as well as new or existing services, like social networks. The products create a bridge between the virtual and physical world, and are designed for natural, gesture-based operation."  Not sure why it's called Project E, but the product does remind one of that well known party drug, Ecstasy!

Renato Valdes Olmos, Postmachina director, told me that after experimenting with some early prototypes that used Bluetooth, they've had to design their own set of protocols to make the devices more robust.  It can be connected to a PC and its contents managed and synchronised with multiple networks (LinkedIn, Plaxo, Twitter, and hopefully Ecademy & Xing)

It's too early to tell, but this device has great potential because it solves a lot of real world problems for networkers of all types.  Speed dating and speed networking users (night clubbers, event organisers, etc) would readily adopt this device particularly if it is cheap and preposterously easy to use.

Can you imagine how desirable these devices could be if someone like Apple got behind this venture?  Apple is probably the only company in the world that can make social hardware for the masses a consumer success story.

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.

Social networks. What's the point?

The role of social software? What's the end game?  What's the point?

Arguably the most significant impact social networks will have on society is to raise humans' general levels of *awareness* - politically, spiritually and environmentally on a scale hitherto unknown to man.  Importantly, these networks can act collectively to change the way we evolve and with it, reverse humanity's current trajectory towards oblivion.

Recruitment 2.0: HR stands for Hardly Relevant

Given that the key operating principle of Web 2.0 is one of ‘creating architectures of participation’, how does this relate to recruitment, and how can it leverage social software?

I sense there is a lot happening in this space. Traditional job boards are providing their vacancies as RSS feeds, eMurse is becoming the de facto destination for the creation, storage and distribution of CVs (US only), and SkillsMarket, the inventors of iProfile, have just announced £3m in funding to create a Web 2.0 proposition around the iProfile.  Simply Hired in the US provides functionality for candidates to upload their CV once and push it to multiple job boards.  They also aggregate (badly) vacancies of those boards and make them searchable to end users but provide a provide a useful feature that allows users to look up people they know in the hiring organisation via LinkedIn.

In the UK many recruiters tell me they use LinkedIn for candidate generation more than their (very expensive) internal systems.  If agents can build such portable networks from external social networks, what exactly is the point of working for a big recruitment firm if you have a decent set of client relationships?

Whilst there are a number of existing players exploring the opportunities, much of the innovation will come from start ups.  They take a more open approach and focus on reliably matching supply and demand and recognise that the key function to get right is to make search preposterously easy for every user.  People pay for search.  Google is the best example but there are other classes of service providers that indirectly charge consumers for search; all travel sites essentially provide search (and then make the travel experience bookable) and dating networks (which charge at the point of use) are good examples of people search companies with successful business models. 

Ki-work after four years of investment in cash and intellectual capital has developed a platform far superior to its immediate rivals, PajamaNation and eLance, that enables its members to create portable profiles, search, sell and ‘bid’ for projects and form highly effective teams that can satisfy the skills criteria of a client project (declaration of interest; author is a shareholder of ki-work).  The revenue model is fee based and although it's still early days, it’s gaining modest and steady growth. For the recruitment firm, search constitutes the largest cost of candidate placement.  So why not offload it to the client?  There is strong evidence to suggest this not only works well but that it is also desirable for the hiring firm in the long term.

This diagram plots major social software providers into one of four categories.  It is not intended to be exhaustive but illustrates the particular focus of each player, even though some of them like Facebook provide several ‘tools’.  The most successful (in general) are those that do one thing extraordinarily well. 

The success of YouTube and MySpace is well documented where they have both excelled in the self-publishing, UGC space.  Dating networks (and porn) have proven the revenue opportunity in people search for several years (IAC in the US bought Udate, Match and ZeroDegrees very early on.  It also owns Expedia, Ask and Excite).   Even Ecademy is a seven figure turnover company and LinkedIn has established itself as the de facto network for people working in corporates.

It is obvious that recruitment is in the ‘search & connect’ space.  There are many other places for people to hang out and creatively express themselves and so any new venture should avoid providing any of the other services, except where it is absolutely necessary.  The current crop of IT job boards have a limited lifespan in their current form because they don’t enable conversations, and it’s conversations that enable transactions.  They also don’t enable  candidates to expose other dimensions of their personality, their peer reputation and soft skills that clients desperately need to improve their talent acquisition capabilities, that is; to massively reduce the risk of getting it wrong.  There is a trend in the US now where people get hired on the basis of their blog’s page rank, visitors, and regular reader figures – perhaps over the top, but underlines the value of ‘who knows you’ rather than ‘who you know’.

The success of YouTube and MySpace is well documented where they have both excelled in the self-publishing, UGC space.  Dating networks (and porn) have proven the revenue opportunity in people search for several years (IAC in the US bought Udate, Match and ZeroDegrees very early on.  It also owns Expedia, Ask and Excite).   Even Ecademy is a seven figure turnover company and LinkedIn has established itself as the de facto network for people working in corporates.

Obviously recruitment is in the ‘search & connect’ space.  There are many other places for people to hang out and creatively express themselves and so any new venture should avoid providing any of the other services, instead allowing users to embed them in their profiles as widgets.

In the UK, recruitment's 'governing body' ATSCO declared recently in their research that social networking sites are now more important than print adverts for finding IT staff. The current crop of IT job boards have a limited lifespan in their current form because they don't allow candidates to expose other dimensions of their personality, peer reputation and soft skills that clients desperately seek to improve their talent acquisition capabilities, that is; to massively reduce the risk of getting it wrong.  There is a trend among US startups now where people get hired on the basis of their blog’s page rank, Google search positioning, number of citations and reader statistics.

The key success criteria for creating any new Web 2.0 platform is that it must have utility.  It must be useful to its members beyond what is already provided by the major social software brands.  For candidates it should provide;

• A CV upload facility that converts it to a wide variety of profile formats compatible with other major networks (e.g. auto-populate my iProfile with this Word document)
• The ability to securely transmit my CV to anyone in a secure, non-repudiated fashion
• Make it easy to update my profile in one place and transmit the changes to LinkedIn, Facebook, et al
• The ability to showcase my reputation, content and interests
• Multiple profiles with selective anonymity
• Invite my (relevant) co-wokers
• Search agents – the ability to programme a ‘virtual agent’ that returns highly relevant (matched) results triggered by some event (cf Google news alerts).  This is what a Recruitment 2.0 social network should do extraordinarily well.

For clients it should provide;

• An ‘intelligent’ job requirements up load facility that translates requirements for automatic candidate matching
• Search agents that return highly relevant (matched) candidates. 
• Multiple profiles with selective anonymity (i.e. pseudonymity)
• The facility to book interviews (online and to via Outlook)
• The ability to authorise hire and generate contract paperwork for signature
• The ability to search people for their skills, content and interests – proxy profiling (books I read, football team I support, etc)
• The ability to search for whole teams of available people with specific skill types

But what’s the revenue model?  The trend seems to be referral fees and  SpotAJob H3 and FaceContact have launched with this model.  Personally, I would prefer to see a network that provides a set of tools that  helps me achieve my goals that are actually good enough for me to pay for (subscriptions).  Call me old fashioned.