Social Production

There's a debate among business leaders about the impact of social networks on social enterprises and innovation. At the World Economic Forum in Davos last week, Don Tapscott, a strategy consultant and an author of books on the so-called Net Generation and corporate transparency in the Digital Age, predicted sweeping changes in the way companies operate. What follows are excerpts of his remarks during a hot-ticket workshop co-led by the top executives of Twitter, Facebook, LinkedIn, MySpace, and Ning, among others.

How do you think social networks will impact businesses and social innovation?

I think we're at an inflection point where social networking is changing and becoming a new mode of production. It's becoming what I call "social production." And social networks within the enterprise are becoming the new operating system of a business. Best Buy, for example, has a social network (Blue Shirt Nation) that involves tens of thousands of people, and this changes the way Best Buy operates its business. It has a link to its social network, as part of broader collaborative platform, to an electronic water cooler of 70,000 people that come up with all kinds of fantastic new ideas. It uses prediction markets to better understand what's really happening within the company. This is changing the way you run a business. It's no longer about hooking up online or creating a garden community for your products.

The more important opportunity for business is using these new collaborative platforms that are built around social networks to change the deep structure and architecture of the company; to orchestrate their capability to innovate and create value. I used Ning to run a contest for a book I'd written recently [Grown Up Digital], where I asked kids around the world to give me a two-minute video that says what's wrong with the education system and how they'd fix it. I had a person working on this for two weeks. I got hundreds of videos from dozens of countries and it changed the way that I, as a company, relate to the rest of the world.

What other examples can you share?

InnoCentive is basically built on a social network. I'm Procter & Gamble and I'm trying to find a molecule that will take red wine out of a shirt. I've got 9,000 people inside the company but there are 200,000 outside on the InnoCentive network, and sure enough, there's a retired chemist in Taipei or a grad student in London that comes up with a molecule. I pay them $200,000 for the fix and I have a product that ends up being a billion-dollar product.

Or take Goldcorp Inc., a gold mining company. The CEO there was very frustrated that his geologists couldn't tell him where to go into production -- where the gold was. So he ran a contest on a social network and collaborative platform. He offered $500,000 in prizes for anyone who could tell him whether he had any gold in his company, and if so, where it was. He got 77 submissions from all over the world. They used techniques that he'd never heard of. And for his $500,000 of prize money, he found $3.4 billion worth of gold. The market value of his company went from $90 million to $10 billion. He's my neighbor, and I can tell you he's a happy camper. Social networks are changing the way we innovate and the way we get capability.

What are the risks?

One big problem has to do with moving to this new paradigm. There's a crisis of leadership in companies and enterprises typified by this popular habit that some companies have of banning social networks like Facebook within the enterprise. I was talking to the CIO of a state where the governor had banned Facebook and I asked, 'Why do you do that?' And he said the governor felt the people were wasting their time on the job -- to which I replied, 'Well, if young people are wasting time, is that a technology problem? Do you fix that by banning the technology? Maybe it has something to do with work flow, or job design, or performance evaluations.' I asked what the effect was of banning Facebook, and he said that everybody went to MySpace. Another youngster, 27 years old, had a different answer. He said it was the single most demoralizing thing management has ever done. It said to him that management doesn't get collaboration, doesn't get his generation's tools, doesn't understand his generation, and doesn't trust him. So there is a crisis of leadership emerging.

...The whole theme of Davos this year is that the world is bust and we need to rethink, redesign, and rebuild our institutions. The current model of nation-states coming together to fix things isn't working very well. The model we are exploring now at Davos is to create new multi-stakeholder networks to solve problems, so that while world leaders get stalled at Copenhagen coming up with a climate change deal, for example, there are something like 10 million people organizing on the Web around this issue. This is the first time in human history where we're all pretty much on the same side as citizens on an issue like this. To me, this presents a new opportunity to change the way we collaborate in the world and in the way we solve problems.

Nike has just launched something called the GreenXchange, where companies are going to contribute their intellectual property and put it in the commons and use social networking to do this. Nike is giving away 440 environmental patents and placing them in the commons. It's not just on the idea that a rising tide lifts all boats but we have big environmental problems in the world and need to move toward more open innovation and competitive strategies. Social networks give us a platform that radically drops innovation costs. This is a big change.

...Transparency is a new force that's causing companies to be more open, truthful and honest. Now, it's true. You don't always see it. But that's the general trend. Companies that are honest can use transparency as a friend.

—Marcia Stepanek

(Illustration by Saul Herrera for istock.com)

Blockage

Change, Obama-style—the social media/open White House stuff—hit a bit of a brick wall this week, but it was mostly silly stuff. [See Jeff Zeleny's piece in The New York Times about Obama's hard-won fight to keep his Blackberry and see Tom Watson's grumbling over the sluggish postings and flat content he found on the Whitehouse.gov site that debuted Tuesday.]

The irony wasn't lost on anyone: Obama's tech team pretty much wrote the book on how to use social media to drum up and engage supporters, build a movement, and raise a lot of money online to challenge the Establishment. That this same team—now itself the Establishment—would diss the computers, networks, and software it inherited at 1600 Pennsylvania Avenue was mostly to be expected. [Obama spokesman Bill Burton told Washington Post reporter Anne Kornblut Thursday that going from the working conditions of the campaign to the working conditions of the White House has been "kind of like going from Xbox to Atari."] How cool is that, right? [We got it.]

Ultimately, of course, it's not about the equipment. The much harder bit will be figuring out how to manage [and effectively lead] the crowds that Obama's social media brought to the party—namely, millions of cause-wired constituents impatient for 24/7 information-sharing and input on everything from the economy to the names of the inevitable First Dogs. How best to keep feeding these newly cause-wired constituents ever-newer things to share-hear-diss-do? How best for anyone to lead in an era of ever-higher demands for participation spawned by wider use of social media? Nonprofits are being pressed to do no less than reinvent their role as charity middlemen, thanks to social networks that can [and are] creating new causes, with or without established nonprofits to support or guide them. What follows is an edited transcript of a conversation I had recently with new media expert and Here Comes Everybody author Clay Shirky on the need for new forms of leadership to manage in this new climate. [Watch this space: a podcast version will air here next month as part of Cause Global's new Cause Radio series.]

Do social media require us to invent new ways to manage organizations?

They absolutely do. I don’t think traditional management is something that can control this. Organizations everywhere are essentially wrestling with how do we hybridize with these newly capable, self-organized groups that use social media to come together around a cause—or, in Obama's case, around a candidate. It's really that kind of Vatican II sensibility—Vatican II being the 1960s doctrine from the Catholic Church that said the people are the church, a fairly radical move; and yet, compared to what's happening in the organizational world and in politics—the idea that the government is the people—the Vatican was actually 40 years ahead of its time.

There's a temptation among most managers to view social media tools and crowdsourcing as simply a sort of novel set of instruments, kind of like, "Oh, here are some new tools for us to get our job done." But this isn't just about laying our hands on some new tools. These crowds are people. It’s really an organizational shift. People managing these newly interactive organizations need to start explaining why it is that what they're doing and asking is important. They need to start articulating how, say, your input is helping the organization and its cause. It really does involve a degree of openness on the part of existing organizations that we haven't seen before. In fact, if you're a manager of a traditional organization looking for control, you will have trouble in this Web 2.0 environment. There's an analogy here. It's the relationship between the structure an organization can provide and what eventually grows up among the people who come there. It's a little bit like the relationship between a trellis and a vine. You can shape it, but the organic growth and the ultimate structure is really going to be produced by the people who come there.

Is there someone or some new organization doing this well?

Boing Boing, one of the well-trafficked Web blogs, has a brilliant community manager named Theresa Nielsen Hayden, whose principal MO is to sit back and watch. She is in charge of one of the Internet’s real hot spots, an incredible amount of conversational energy forming around the various things that Boing Boing posts on its Web log; and yet, she doesn't go in and try and set the tone. She simply tries to set outer boundaries for the conversation, like, this is name-calling and it's off the rails, or, this is a person riding their hobbyhorse. And so she's not trying to guide the community so much as keep it from going into a rat hole where the conversation will collapse. It’s the opposite of the traditional managerial style. When she got to Boing Boing, she did almost nothing for three months except watch. And everybody was like, "What are you doing? Aren't you supposed to be going in and managing the comments?" She was like, "Hang on a minute. Let's just see what happens."

Occasionally, she would step in when she had to. And what she was waiting for is to identify who in the community would come forward and start essentially taking on the community as a whole, shepherding it, the natural leaders emerging from in the community base. And then once she identified them, she hired them to keep doing it. That kind of managerial style is not the 30,000-foot visionary and it's not the micro-manager. It's in this middle zone where there's a high degree of facilitation, but there's also just a high degree of observation—What is going to happen next?—because in these kind of new open environments, there's a good chance that what happens next organically will be more interesting, more effective, and more important than something you could decide in a morning meeting.

So it's a kind of natural selection: if left alone, the group will choose its own leaders?

Yes. There's a lot of rhetoric around about self-organized and bottom-up and so forth. And it is very possible to overstate the case, to take the illusion that if you just dump a million people together, somehow Wikipedia emerges as a side effect. But I think, critically, for these large-scale, long-term management efforts [of newly interactive organizations and institutions], there is a profound need for [a new type of] leadership. It's not that, you know, somehow social media and crowdsourcing lead to mob rule. Rather, those most interested and able in a crowd tend to identify themselves and emerge to step up to the plate.

When you look at, say, Wikipedia—2 million articles in the English language contributed by over 3 million users—you see that there's a core group of people who care much more than the average person in that crowd about the success of the project as a whole. The kinds of leadership that make those core groups work is very different than, "Well, I'm the CEO, and you're the CFO, and you're the COO, and we have this org chart." It's much subtler and more flexible than that. But just because the structure doesn't look like what we're used to doesn't mean there's no structure. This isn't a choice between structure and no structure. It's more of a choice between a more rigid and a more flexible structure.

We've all seen those orchestra conductors who walk off stage and, of course, the orchestra keeps playing brilliantly. Is the type of leadership required here more comparable to that of an orchestra conductor, or is there a need for a new kind of leadership that we've not yet invented?

There is an Israeli conductor, Itay Talgam, who gives a talk on leadership styles using orchestra conductors as the example. And the critical thing that a conductor does is synchronize the orchestra because the complexity of self-synchronization is hard at that scale. Critically, string quartets have no conductor. The first violin is essentially providing the synchronization. But the need for the kind of management that the conductor provides really only comes with scale.

So if you've got a small-scale group, you can actually get away with much lighter management styles than if you have a large-scale group. It's when you grow that you need a heavier style. The other question about the new type of leadership is how to get a group of people to all agree that a shared vision is something they'll pursue even if they don't agree with every particular. Some of this is ancient stuff—you can go back to Plato and Aristotle and the argument about how to form an ideal republic. Today, what we're dealing with is essentially a new mix, precisely because of the new technology capabilities. Every political norm is really a bargain with the current environment. When the environment changes, the political norms can change, as well.

One of the political norms has been that it takes a large institution to accomplish large-scale, long-term tasks. But that's no longer true anymore. You can write a complicated piece of software or create an encyclopedia without needing the kind of institutional and managerial frame you needed before. What I think is coming is a new type of leadership style that will expand into other kinds of collective action—in particular, real-world collective action. And so, for a traditional institution, this is really a moment where, if the organizational structure doesn't change, then the institution is essentially going to find itself working at cross-purposes with many of its members. This is a challenge that people in the Obama administration are facing; that people in nonprofits are facing; that people in many institutions are facing: how to change the organizational structure enough to accommodate Web-enabled, ground-up, collective action—self-organized groups of members or supporters or constituents that, because they're using new technology tools, are demanding interaction at far higher levels than before. This is something that really is unprecedented. Those organizations which fail to exert new leadership will risk losing support.

(Illustration by Miroslaw Pieprzyk)