Social Power and the Coming Corporate Revolution David Kirkpatrick
http://www.forbes.com/sites/techonomy/2011/09/07/social-power-and-the-coming-corporate-revolution
Social Power and the Coming Corporate Revolution David KirkpatrickCivilizations have clashed in an unexpected way this year, as ordinary people using Facebook and Twitter knocked down dictators in Tunisia, Egypt and Libya-and are threatening absolute rule in Syria. A so-called Arab spring brought waves of liberation to a long-oppressed region. Something similar is happening in more democratic countries. In Spain throngs of young people, known as "the indignant ones," occupied public plazas nationwide, protesting unemployment and exclusionary politics. In Israel ordinary citizens from both right and left united in massive demonstrations against high housing prices. And in India one man's campaign against corruption went viral, bringing thousands to the streets in support.
This social might is now moving toward your company. We have entered the age of empowered individuals, who use potent new technologies and harness social media to organize themselves. A few have joined cause with WikiLeaks and its terrifying stepchildren, upending the once secure corridors of the U.S. State Department and Pentagon. But most are ordinary people with new tools to force you to listen to what they care about and to demand respect. Both your customers and your employees have started marching in this burgeoning social media multitude, and you'd better get out of their way-or learn to embrace them.
The institutions of modern developed societies, whether governments or companies, are not prepared for this new social power. People are changing faster than companies. "I don't think it's crazy to ask if your CEO is the next Mubarak," says Gary Hamel, one of business' most eminent theoreticians of management. "The elites-or managers in companies-no longer control the conversation. This is how insurrections start." Says Marc Benioff, CEO of Salesforce.com: "This isn't just about Arab spring. This is about corporate spring."
In this new world of business, companies and leaders will have to show authenticity, fairness, transparency and good faith. If they don't, customers and employees may come to distrust them, to potentially disastrous effect. Customers who don't like a product can quickly broadcast their disapproval. Prospective employees don't have to take your word for what life is like at your company-they can find out from people who already work there. And long time loyal employees now have more options to launch their own, more fleet-footed start ups, which could become your fiercest competitors in the future. "Companies that have been around more than five years are having a hard time because this is so different from what they know" is the jarring observation of Doreen Lorenzo, president of design and consulting firm Frog.
But overall these changes suggest a bright future for business and society globally. The world is becoming more democratic and reflective of the will of ordinary people. And pragmatically, social power can help keep your company vital. Newly armed customer and employee activists can become the source of creativity, innovation and new ideas to take your company forward. A growing number of executives and companies are converts to this point of view.
It calls for humility of a sort most business leaders aren't used to. "Trust is built by sharing vulnerability," says John Hagel, a long time author and consultant who co-chairs Deloitte's Center for the Edge. "The more you expose and share your problems, the more successful you become. It's not about the top executive dictating what needs to be done and when, it's about providing individuals with the power to connect."
Benioff recounts his own epiphany about humility and transparency at Salesforce, which sells online software for salespeople. "In 2005 we had reliability problems with one of our servers. We weren't talking about it, and customers were upset. It turned into a p.r. problem. And my marketing leader Bruce Francis came in and said, 'Marc,you need to expose everything. You need to have a website that is directly connected to the computers. If they are running, the website should be green, and when they're not it should be red.' I had to open up." Such a system has been in place ever since. "Social success is really based on trust," Benioff opines. "If you don't have transparency you will be eliminated by the system around you." He is now writing a book arguing that every company must become what he calls a "social enterprise."
The headlines abound with examples of the precariously shifting dynamic. Companies that show greed or insensitivity to workers or customers quickly find themselves on the defensive. Hershey looked Scrooge-like and clueless in August when 400 college students hired through a State Department-sponsored foreign-exchange program revolted, walking off their jobs. They didn't like their stressful work in a candy-packing factory, sometimes on all-night shifts. These kids from China, Nigeria, Turkey and Ukraine are facile digital communicators and used YouTube, Facebook and other tools to bring attention to their plight.
Adidas recently found itself under attack in New Zealand when fans of the hugely popular national rugby team were outraged to learn that Adidas team jerseys were being sold for significantly more there than elsewhere in the world. Fans went online to research comparative product prices in New Zealand and the U.S. and then to organize fellow fans in protest. Soon national news programs were focusing on the protest and Adidas' flat-footed response. People started returning Adidas clothing to stores in disgust, and employees felt so threatened they removed logos from company vehicles, reported the New York Times.
Executives can't hide from the outrage. In the Netherlands earlier this year a social media campaign against bankers' bonuses focused on Amsterdam-based ING. People began threatening en masse to withdraw deposits. CEO Jan Hommen voluntarily waived his upcoming $1.8 million bonus and ordered all company directors to do the same. British Prime Minister David Cameron recently proposed shutting down social media during riots like those that brought chaos to the U.K. recently. But Google Chairman Eric Schmidt replied to that idea in an interview in the Guardian with advice that applies equally to CEOs: "It is a mistake to look into the mirror and try to break the mirror. Whatever the problem was [that caused the riots] the Internet is a reflection of that problem. If you have a problem, use the Internet to understand what the problem is."
If there's a primary culprit for this changed landscape, it's Facebook. The social network's astonishing success in less than eight years has brought it more than 750 million active users in every country on earth, made it the world's busiest website-and the most popular tool for fomenting insurrection around the world. Why? Because Facebook gives all its users a personal broadcast platform. In the past only a select few had such power-Walter Cronkite, for example, or those at the BBC. People on Facebook, by contrast, usually just broadcast to friends, which seems only modestly impactful, at first. However, a peculiar new dynamic-call it a viral consensus-may develop. Say you post a status update, photo or video that expresses a view that your friends agree with or respond to; that message can spread like influenza. Friends click "like," or comment on the update, saying, for example, "Yeah, I think Mubarak has got to go, too!" or "I'm throwing out all my Adidas stuff!" That rebroadcasts it to their friends. The "meme," or idea, can go viral and spread almost instantly to vast numbers, if it happens to strike a chord with the zeitgeist.
LinkedIn is another central tool for empowerment all executives ought to ponder-and not only because they already maintain a profile there (along with more than 115 million others). At its heart LinkedIn is a way to maintain a permanent public work résumé. Many of your company's most valued employees now have CVs out on the street full time-searchable by millions, including your competitor's recruiters. Do you want to take a chance mistreating or ignoring such people?
Plenty of other social software tools are now in the hands of ordinary people as well. They live on mobile phones that are really powerful computers-broadcast terminals able to spew opinion or information at will, as well as receive it. YouTube, for example, provides endless hours of light entertainment-or can be used by anyone anytime to broadcast video. In 2009 one appeared showing a Domino's Pizza worker putting cheese in his nose while making a sandwich, among other abominations. Its stock dropped 10% in short order. One employee's bad judgment damaged an entire company's reputation. Twitter is a potent broadcast tool for anyone with a following; FourSquare, a way to coordinate in the physical world; GroupMe, just sold to Skype, enables you to send a single text or make one telephone call to a group of up to 25. All these services are basically free.
New incarnations of social power emerge almost daily from legions of entrepreneurs worldwide who see how rapidly success can come in a densely networked world. That ease of company creation is yet another example of individual empowerment. GroupMe's two founders-ages 24 and 29-sold their company in August for around $50 million just one year after it debuted.
Bo Fishback created his tool of social power with stunning speed. He's CEO of Zaarly, a location-based market place for buyers and sellers of both products and services; buyers post what they want, and people looking to earn money make offers to provide it. The company was born in February, when Fishback-a perpetual entrepreneur-attended "Startup Weekend" in Los Angeles. He pitched his idea Friday, had a working prototype by Sunday and says that Tuesday he closed $1 million in financing. (He already knew veteran investors, granted.) Two weeks later Zaarly launched in beta at South By Southwest Interactive in Austin, Tex. and did $10,000 worth of transactions. The service debuted in late May in several cities and by late August $3.4 million in transactions had been requested and 50,000 people had registered.
Fishback's whole life as a Net-centric businessman presumes social power. "Empowered individuals are what drives Zaarly on both sides of our marketplace," he says. "On the buyer side it transcends typical marketplace dynamics where you can only buy what someone else is already selling. On the fulfiller[or seller] side this demand-driven market gives people a new way to work for themselves."
If you want your company to tap into social power, a range of emerging software products can help you do so. Some aim to make it easier to conduct an ongoing dialogue with customers. But a thriving industry is also building tools to harness employee power inside a company. Four prominent businesses offer their version of a hybrid Twitter/Facebook for employees: Salesforce.com with its product Chatter, IBM with its Connections software, as well as startups Yammer and Jive, which just announced it intends to go public. The aim is to tap a company's internal social energy to speed collaboration and innovation. Craig Herkert, CEO of SuperValu, which owns or supplies over 4,000 U.S. grocery stores, is a convert to Yammer. "With the old way, all information flowed via e-mail. Now store managers and support staff all over the country can post on Yammer what they're doing, what they're proud of, or say, 'Hey, I've got a problem. Does anyone know how to fix it?' I have Yammer on my desktop, my laptop, my cellphone and my iPad. I can see what everyone is doing-that's radical transparency."
A little Toronto start up called Rypple applies social thinking in a different way-for internal employee management. Its social evaluation tool lets everyone in a company rate everyone else and gives people continuous real time feedback. It taps social and peer pressure to make job evaluation more effective at driving future performance. The product was largely developed in a beta installation at Facebook itself, whose internal organization strives to be flat and unbureaucratic. (At Facebook newly hired product engineers get a few weeks of technical training and then pick a team to work on.) Anne Benedict is senior vice president of Global Talent at MediaBrands, which has started rolling out Rypple to its 6,500 people. "The highest-value employees are introspective enough to want feedback on themselves," she explains. "MediaBrands is a media agency, so the technology is perfect for us, because it promotes the use of social networking we preach to our clients."
The humility and authenticity that social power demands of you can yield numerous benefits with customers and employees. Nadira Hira, 30, is writing a book to be published next year about attitudes toward work in her generation, those who are roughly 16 to 32 years old today. "What many companies get wrong when they think of 'social' is they think of it as a marketing ploy, rather than as just a way of extending what you already really are as a company or a brand," she says. "If you do care about your employees and your customers, it allows you to show it and extend your reach." Tony Hsieh, CEO of Zappos, used Twitter and his personal blog in late 2008 to announce and manage unexpected layoffs. He talked extensively about what was happening and how painful the process was for himself and others in the company. The layoffs went surprisingly smoothly, especially after he responded to feedback by, for example, extending an employee discount until after the holidays.
When confronting social power, you might as well jump in with both feet, because you just can't hide. "One common mistake of old-school companies is to ban social media across the company," says Clara Shih, CEO of HearsaySocial, whose software helps businesses, mostly consumer brands, manage their social media. "But at least in America our job is such an important part of our identity that most people want to talk about it. Passionate employees are going to talk about the brand and the company on Facebook and Twitter and LinkedIn." When her clients defend lock-down policies against social media, claiming they've successfully kept employees offline, Shih unleashes Hearsay's "rogue page finder." For one big company it recently turned up 60,000 different social media pages where employees mentioned or discussed company matters. (Not to mention the thousands of employee profiles on LinkedIn.) Hearsay's tools presume something elemental in a world of social power: that the empowerment of employees is directly tied to the empowerment of customers-because they will inevitably end up working, maybe even conspiring, together.
Ordinary people often seem better at managing and accessing information than the giant corporations they work for or buy from. "Companies literally don't know what's being said about them," says millennial maven Hira ."They don't even Google themselves!"
But that's the first thing somebody will do if they're thinking about going to work at that company." This is a critical shift in power. "In the old days the managers were on phone calls and in briefings. They had information," says Chris Cox, who oversees product at Facebook. "The underlings were just working away. But with technology that makes it easy to share and organize stuff, that imbalance goes away." Adds David Sacks, CEO of Yammer: "'Information is power' used to mean that hoarding information gave you power. Now we're seeing that sharing information is power. The more you can share, the more you can help other people-and the more it becomes apparent you're an expert and a valuable employee."
Long before most of us saw it coming, Ray Ozzie, one of the software industry's most celebrated communications toolmakers, focused his product-development career on a shift toward social power. But he still doesn't think companies get it. Ozzie replaced Bill Gates as Microsoft's chief software architect after the company bought Groove Networks, which he founded. He left Microsoft last year. "Individuals are elated with these new capabilities, yet corporations are as risk-averse as they always were. Many companies are hesitant to create a culture that permits self-empowerment because they are afraid of what might happen if people did things by themselves." Ozzie's creation of Lotus Notes back in the late 1980s aimed to arm employees with better information and allow them to collaborate in teams.
But though it was a commercial success, Notes' potential to promote employee empowerment went mostly unrealized. Since then, however, powerful collaborative software-notably Facebook but also Skype, LinkedIn and other tools-has crept into corporations over the Net and in handbags and pockets, carried by employees bringing superior consumer software into the workplace.
Companies are still scrambling to catch up, and most of them probably never will. Consumer technology will remain better and cheaper than what's made for business. The larger size of the consumer market attracts more investment and innovation, and economies of scale drive down prices-a formula at the heart of the relative empowerment of the individual over the company. David Stein, Co-CEO of Rypple, says that for ordinary employees "the expectation now is that the tools people use at work are as easy and fun as the ones they use in their personal life. If you use 1950s-based management systems, employees are going to revolt. They don't want to feel like 'the man' is just telling them to do things." And at Skype, CEO Tony Bates isn't bothering to target the business market, because, as he says, "individuals are bringing it into business themselves. In many companies Skype is the number one form of communications."
Shoshana Zuboff has been describing this fundamental shift toward individuals and social power since 2002. That's when the longtime Harvard Business School professor and historian co-wrote The Support Economy: Why Corporations are Failing Individuals and the Next Episode of Capitalism. She says the clash between empowered people and hierarchical institutions was set in motion in the 1950s. "The mass-production economy provided existential security for many, many people," she says. "That, in turn, produced a new human mentality-of a self-determining individual. This mentality was once the unique precinct of the elite: the wealthy, artists, poets, philosophers. And it became the mentality of everyone."
She now argues for an urgent rethinking of how all business is conducted. "We're talking about a fundamental shift away from a mass production model," she says. "Value has been understood as something companies create: How do I take what I have and sell it to you? But in this new world value is not created inside the organization. It rests in the unfulfilled needs and desires of the individual. Now I have to come to you and say, 'Who are you? Tell me about yourself. How do you want to live?'" She says the music industry notoriously failed at this in the past decade. "It brought forward the value it had created-the CD. And if you didn't want it, how did they respond? Well, how about if they hunt you down and put you in jail?"
An increasing number of enlightened companies aim to turn social power to their own advantage by putting customers not in jail but on a pedestal. They become healthily obsessed with what's said about them online. Gatorade now operates a full-time social media command center where it not only monitors what's said about it on Facebook, Twitter, blogs and elsewhere,but also intervenes when appropriate to clarify or offer assistance. And Domino's Pizza responded somewhat brilliantly to that egregious employee video in 2009 with a self-effacing social media and advertising campaign that did not pretend the incident hadn't happened. By mid-2010 it had regained market share and dramatically boosted online reputation and e-commerce sales. Farmers Insurance uses Hearsay Social's software to help 15,000 agents nationwide maintain their own Facebook pages. It has even begun marketing itself, aptly enough, in the Farmville game people play inside Facebook.
Ford takes cues from young people immersed in social media in how it designs cars and how it communicates. "Digital suffrage is upon us," proclaims Venkatash Prasad, Ford's high-wattage leader of product social networking efforts, in an e-mail. "Everyone has a right to a byte of the action, and we have embraced this might of the byte within Ford, through the use of internal and external social networks." Prasad brags that Ford recently sent a car across America, tweeting: "Not a human in a car, a car." Adds Sheryl Connelly, Ford's manager of consumer trends, in another e-mail: "If you want to reach a millennial, you have to go where they live, and that means online. Millennials want more than engagement. They want their contributions to be meaningful."
Accepting social power as inevitable can significantly change the kind of products you design. Coca-Cola is installing machines in fast-food restaurants that allow customers to formulate their own beverages. No longer choose just a Coke or Sprite. Now you can come up with new flavor combinations and other customizations that your newly empowered heart desires.
If you ignore these forces, you will probably fail. Says consultant and author Gary Hamel: "The underlying principles on the Web of natural hierarchy, transparency, collaboration and all the rest-those characteristics are going to have to invade management. The idea of a hierarchy that fundamentally empowers the few and disempowers the many is more or less dead." To demonstrate what's possible in this new world, Hamel helped spearhead an online forum for Web-influenced management ideas at www.managementexchange.com .
Don't think that the trends in technology, and resulting social power, will ever give you a respite from the tides of change. Says Microsoft and Lotus veteran Ozzie: "All this was unstoppable from the moment somebody installed the first network-this steady march toward reducing friction and reducing transaction costs faced by individuals. And you ain't seen nothin' yet."
Additional reporting by Adam Ludwig.
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