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)

Privacy, Revisited

Today is Data Privacy Day; Congress voted quietly last year to have the United States join Europe in designating January 28 as an annual, international holiday to raise awareness about the importance of data privacy protection.

Make no mistake: the privacy debate is hotter (and louder) than ever. The recent uproar over Facebook's new Terms of Service—and then, even more recently, Twitter's new service terms—"is all about privacy," says Georgetown University law professor Marc Rotenberg. "It's not the old-fashioned parchment scroll, carried by courier on horseback from the castle to the king's army notion of privacy," says Rotenberg, the director of the Electronic Privacy Information Center, a nonprofit he founded in 1994 to address the Internet's impact on society's traditional notions of privacy. "This is "modern-day privacy, about digital identity, the control of personal information, and the brewing battle between what we post and its commercial value." [For more on Rotenberg's views, see his essay that ran recently in The Huffington Post, suggesting that "we give up personal information all the time but that doesn't (nor should) end the discussion over privacy." That, says Rotenberg, is where the discussion begins.]

Just don't tell the social media executives meeting in Davos this week. There, halfway 'round the world from Rotenberg's Washington, D.C., office—and while Rotenberg was commemorating Data Privacy Day in press briefings and other talks elsewhere—the chiefs of Twitter, Facebook, MySpace, Ning and LinkedIn squeezed into a small, packed anteroom at the World Economic Forum to share their predictions for social networks, discuss their impact on society (for better or worse) and ponder why their companies hadn't yet figured out a way to make big money off their subscriber's digital social connections.

Tim Berners-Lee, the British physicist who invented the World Wide Web, told the Davos gathering that "little changes in how your treat privacy can dramatically affect the way a social network works." He said that in eBay's case, for example, the site has increased privacy in some areas as the online auction site has matured. The site now hides the identity of people bidding against each other. Younger users, though, seem far more open to revealing personal details about themselves.

Then it was Reid Hoffman's turn. The executive chairman and founder of LinkedIn told the group: "All these concerns about privacy tend to be old people's issues." Transparency and accessibility are two reasons, he said, that so many younger users—teenagers and young adults—put their mobile phones on Facebook or MySpace. "The value of being connected and transparent is so great," Hoffman said, that privacy is not a concern but a hindrance.

Rotenberg wasn't present. But Don Tapscott, author of books on the so-called Net Generation and the need for corporate transparency in the Digital Age, took Hoffman on. Social networking, Tapscott said, would become what "we want it to be" over time, meaning that if we wish to build civic values into social network sites, we will—and should. "[The Internet] has an awesome neutrality and we need to build into it basic human values," Tapscott said. "...And one of those values is the right to informational privacy and the right to be left alone. I completely reject this view that privacy is dead. It's in deep trouble, it needs to be saved and everyone needs to get involved to protect their own information."

Indeed. [Says Rotenberg: "I smile every time someone says privacy is dead or the Facebook generation doesn't care about privacy. If there is one issue that people feel passioantely about today, that literally unites everyone who goes on line, it is the interest in privacy. And the battle is just beginning."]

What do you think? Is privacy an "old people's issue" or more about civil liberties in the 21st century? Let us hear from you.

—Marcia Stepanek

(Illustration: istock.com)