Thursday, May 21, 2009

Check out The Buzz!

It's been some time, as I've been settling into a new position. But a recent mail exchange with friend Tim Tyler made my eyes boggle, and set my envy gene rattling. Which makes the fingers itchy ...

Tim was behind a recent initiative that actually asked customers what they wanted via a community site, and then went on to build a new brand based on what he heard. See this blog post for a summary.

It simply amazes me that an insurance company had the courage to do this research, let alone move onto building a new brand based on the results. And while we need to wait to see whether they will be successful, it's a stunning example of what active listening via community sites can do for a - let's face it - fairly commoditized service offering.

What can we learn from this? Three things come to mind - firstly, the wisdom of crowds is a real and powerful tool if companies are prepared to listen. Secondly, people do really want to tell companies what they want from them provided the company doesn't come across all high-handed.

Thirdly, monetizing the feedback from communities is as simple as being prepared to act on what they tell you. The initiative by IAG may or may not be successful, but as a potential customer I can tell you that they get my attention immediately. They want to deliver what I want in my service package.

Thought for the Day: Maybe listening to people is not enough - you've got to have the balls to act on what they tell you.

Monday, January 19, 2009

Of course it's social!

Last week I talked about how the Internet Economy is fundamentally different to the traditional economy. When some people thanked me, the light went on - there are people who really don't "get it", and who need simple explanations. This time, I'd like to explain why social media are both a natural and inevitable development, and a "must-do". I'm using what I call my "Brian" approach, out of deep respect for an old friend of mine who taught me that simple is better than smart(arse).

Step 1: First, you have to accept that the Internet is real. It's not made up, and man really did land on the moon. But the freaky thing is that everyone is connected to everyone else.
Step 2: Next, you have to understand the size of this thing and how connected people are already . See the paragraphs after the Thought for the Day for the math, but trust me ... it's pretty big. Like 500,000,000,000 big!
Step 3: I'll wait while you try to imagine that number of possible conversations in your head ... you can't, can you? Oh, and no, you're not paranoid. They really are talking about you.
Step 4: Accept that you can not manage, let alone control, something this big. You need space in your togetherness with those billions of others.
Step 5: But how do you stay in touch? Only social media solutions make sense. The old one-way mass media models for marketing are like spears compared to lasers.

I like to think of messages in social networks as a bit like a nuclear chain reaction (the maths is very similar). If you get it right, you get a lot of cheap energy over a long period. But when it goes out of control, the damage can be thermonuclear. Assume that each node (person) could re-transmit each message to 1 other - this monster gets pretty wild, pretty quick. It only needs one person to re-transmit one message, and suddenly it's an epidemic (... or is it a pandemic? That means it's infectious...).

Social networks emerge naturally from a heterarchical network like the Internet. And sure enough, once they do people will invent a better mousetrap. So, from the time some-one sent some-one else the first e-mail back in 1965 this whole thing has been inevitable. Social media like FaceBook and Twitter are just more efficient and more multifunctional ways of doing the same thing that ARPANET did 50 years ago.

Thought for the Day: Faced with the fact of the Internet and the looming reality that soon every human could be connected to each other, old-school business models look more like atom bombs than power stations. You need to think about what changes you are going to make before the whole thing goes critical!
One way to measure the speed of the growth of the Internet is to track the number of devices connected to the network. In 1984, there were 1,000 such devices. We hit 1,000,000 in 1992, blew through 600 million in 2006, and reached 1 BILLION last year. After more than twenty years, growth is still nearly exponential.

Now, Metcalfe’s Law about the value of networks says that the number of possible connections between devices is proportional to the square of the number of connected users. For the really geekie types: The number of nodes n = n(n − 1)/2.

Let me do the math for you - for 1 billion devices the result is about 4.9 x 10^17 – or a little greater than the life of the Universe in seconds. That's a pretty big number. Actually it's a seriously large number ... think of the number of stars in 10 million Milky Ways. And don't sweat the numbers - I don't mind being out by a couple hundred million when we talking these orders of magnitude.

Tuesday, January 13, 2009

Why is the Internet so diffferent?

Well, I'm finally back from a month's vacation - visiting home (Australia) for Christmas with the family and friends. Someone has got to offer me a job down there soon so I can get home for good!

But it wasn't all beer and skittles, as I've been asked to contribute some chapters to the forthcoming American Chamber of Commerce in Japan (ACCJ) White Paper on the Internet Economy. It's targeted at Japanese regulators, a notoriously difficult group of stakeholders. I've spent a lot of time trying to develop an easy-to-understand view of the current state of play and future challenges for that audience.

But the biggest challenge has been trying to get people to understand that the Internet is fundamentally a different environment to anything we've experienced before. Here are 10 reasons why:

1. The physical economy is governed by supply and demand, or the economics of scarcity. The Internet works on abundance - the value of content grows with use.
2. In the digital economy, value (price) depends on the amount of embedded information (knowledge) rather than the value of the components (and brand premium).
3. Online, context determines value so identical knowledge can have different value to different people.
4. Because pricing is transparent on the Internet, competitiveness comes from relationship rather than price.
5. The barriers of time and location are essentially removed. The Internet offers global reach, instant response, flexibility, and 24/7 access.
6. Access to information and human capital drives value in the Internet Economy. Access to resources and financial capital drive the physical economy.
7. Success comes from resource aggregation and hierarchy in the physical economy, while knowledge distribution and heterarchy[1] feature in the Internet Economy.
[1] Heterarchy: (math, linguistics) a formal structure, usually represented by a diagram of connected nodes, without any single, permanent, uppermost node. [Collins English Dictionary]
8. Open access to information is fundamental to knowledge flows in the Internet Economy. Restricted access to information often increases value in the physical economy.
9. Physical economy processes are optimized for simplicity, but value-added knowledge transfer and interaction (success) leads to complexity in the Internet Economy.
10. Distribution costs rise with distance and number of nodes in the physical economy, but essentially fall in the Internet Economy.

Thought for the Day: The Internet is fundamentally different to the physical economy. If you're trying to adapt an existing business model to the Internet - or worse, adapt the Internet to your old business model - you're going to fail.