Consider this day in the life of a typical Web 2.0er. (Let's call him Mark, a twentysomething male.) Mark has 120 "friends" on Facebook, one who just helped him find his new job after he'd been fired from his previous job for being on his Facebook page during work hours. He follows seven people on Twitter, including his new boss who "tweets" daily about what's going on at (let's call it) CyberAcme, a company that makes a variety of products for Internet Age consumers. Mark is the company's corporate blogger. In today's post, he had to reassure worried customers that, rumors aside, CyberAcme would not be discontinuing a popular product. In a more stress-free post, he unveiled the company's new logo.
Most of us can relate to at least parts of this fictional scenario. Yet only a decade ago we wouldn't have even been able to decipher some of the terminology. And that, say authors Matthew Fraser and Soumitra Dutta, reveals just how much social media have changed our lives in just a few years.
"These are exciting, but for some, daunting changes," he adds. "And they only scratch the surface of how social media will change the way we live, work, and play."
In their new book, the authors explore the powerful forces driving this seismic shift, reaching surprising and often unexpected conclusions about its long-term consequences. Throwing Sheep in the Boardroom studies the impact of social networks on individuals, organizations, and societies via their potential to revitalize social capital, redefine social status, transform market dynamics, and reinvigorate civic participation.
"The underlying argument of our book is that the 'Web 2.0' revolution represents what we call an e-ruption in established forms of social organization," says Dutta. "We are entering an era of liberating self-awareness and self-reliance. We have learned the value of cooperating with others. And we have, above all, felt the liberating power of consumer sovereignty and citizenship engagement."
Social networking puts the "social" in socialize. The introduction of social networking has changed the meaning of the word "friend." Not only can it now be a verb, as in "He 'friended' me on Facebook," but the noun form of the word has changed too. In the Web 2.0 world, you have your real-world friends and you have your "friends," the people you keep in touch with through social networks like Facebook, MySpace, and LinkedIn.
"It's never been easier to keep in touch with the huge number of people you've encountered in your life," says Fraser. "The irony is that your e-quaintances can be just as beneficial as your real-world friends, even if you rarely speak to them or see them in person. For example, if you're looking for a job, your immediate family and close friends probably won't be much help. But you can greatly improve your odds by activating your online network of 'friends' in order to benefit from their connections. Though it's surprising to some, collecting online 'friends' has a function. It is not merely a hollow ritual for the vain, insecure, and narcissistic."
It lets organizations enhance customer loyalty by forging more open relationships. Social networking has given consumers a platform on which they can voice their concerns about a company's product or service. And more and more companies are realizing that when they address these concerns, customers feel like they are truly being heard and are more likely to stay loyal.
Facebook is a great example of this. The social networking site experienced complaints because of two issues. One was the fact that it was very difficult for users to permanently delete their accounts. The second was an advertising program called Beacon, which monetized Facebook members by feeding their online commercial activities through a stream of stories to other members. The first issue saw users voice their concerns by creating a group on the site called "How to Permanently Delete Your Facebook Account," which counted more than 4,000 members. To protest Beacon, upset Facebook members went to MoveOn.org, which gathered 70,000 signatures supporting the claim that Beacon lacked an adequate opt-out function.
Though it took him some time, Facebook CEO Mark Zuckerberg eventually came clean on both issues on his blog. He apologized for the way both situations were handled and made some changes. From that point on, both problems were solved: It got easier for Facebook members to delete their accounts and Beacon switched from "opt-out" to "opt-in."
"By dealing honestly with Facebook users' protests, Zuckerberg was rewarded with customer loyalty, not punished by mass exit," says Dutta. "These events proved that when executed correctly, social networking tools can be invaluable for organizations. They make it easier for organizations to build a dialogue with customers, capture information for sharing, facilitate collaboration, promote knowledge management, test new ideas, manage media relations, and attract new employees."
It facilitates open communication. In organizational settings, people tend to provide information to, and share knowledge with, those they know and like—especially if those people have helped them with favors in the past. While this instinct is understandable, countless studies have demonstrated that it's also counterproductive. When employees work in an "echo chamber" where colleagues invited to meetings mouth the same attitudes and viewpoints, the only winner is the status quo. And the really big losers are shareholders. Web 2.0 software tools knock down corporate silos, moats, and walls by encouraging open communication and information sharing, says Fraser.
"Expertise and solutions to problems no longer remain 'hidden'—they are actively sought out and exploited. Since Web 2.0 tools foster transparent communication visible to all, the collaborative input of any employee, even far down the formal hierarchy, will be known, recognized, and perhaps rewarded. Status and prestige incentives are thus built into the collaborative process. When collaboration is a win-win for everybody, buy-in is universal."
Social media opens the door to more innovation. Web 2.0 tools can offer competitive advantages to firms in sectors where innovation produces winners and losers. Senior executives in large-scale corporations are increasingly aware that innovation is not restricted to R&D departments, but is a dynamic social process. Steve Jobs has mentioned the importance of social interaction for innovation at Apple. And in fact, the list of major corporations using Web 2.0 software tools to promote productivity and foster innovation is growing: FedEx, Shell Oil, Motorola, General Electric, Kodak, British Telecom, Kraft Foods, McDonald's, and Lockheed Martin.
"Multinational corporations like Procter & Gamble are outsourcing R&D websites to invite customer input, thus blurring the line between producer and consumer," says Dutta. "If customers are already helping P&G to produce new brands of toothpaste and shampoo, they may soon be designing cars for the nation's carmakers."
It helps governments be more transparent. The Obama Administration is a good example of what having more transparent governments could look like in the future. He was the first presidential candidate to truly embrace Web 2.0 tools, so it makes sense that he would be leading one of the first Administrations to use social media to be more transparent. His methods of getting information out to American citizens—weekly video addresses, the blog on the www.WhiteHouse.gov site, the live blogs of events such as the vice president and his team's first Middle Class Task Force meeting and the White House Forum on Health Reform, and his e-mail updates—all play a role.
"Of course, President Obama isn't the only one in government using these tools," says Fraser. "We saw during his first address to Congress that many members of Congress were 'tweeting' their thoughts throughout his speech. And Newt Gingrich has become the Right's most prolific twitterer."
It empowers governments to more easily mobilize their constituents. On his visit nearly two centuries ago, Alexis de Tocqueville witnessed an America that was a robust civil society with an egalitarian spirit that motivated citizens to engage in all manner of voluntary associations. The prospect, nearly two hundred years later, of harnessing these vigorous public-spirited energies not only in America but throughout the world, is surely a vision that should be encouraged.
"Again, President Obama, his campaign, and his Administration offer a nice glimpse into what is possible when governments use social media to call people to action," says Dutta. "During his campaign, Obama used an iPhone app, Twitter, a direct e-mail campaign, and many other ways to harness the energies of his supporters. As a result, they felt like they were part of the campaign and transferred that feeling of inclusion into action.
"Now there's www.USAService.org, a site originally created to encourage people to give back on Martin Luther King Jr. Day," he adds. "It allows people to create and find community service events and also provides links to other service sites that might interest them. People can post pictures to the site showing what they've done in their communities and can also sign up for the site's direct e-mail list."
It gives political and business leaders more control over their brand. An organization's brand or a politician's reputation can be damaged instantly, and irreparably, by the viral reactivity of social media. Smart politicians and business leaders know this. That's why so many of them are fighting fire with fire by using social media to protect their brands.
"Let's start with Obama," says Fraser. "During the campaign, he had a few million fans on Facebook, 112,000 followers on Twitter, attracted 18 million visits to his YouTube channel, and had 13 million supporters on his direct e-mail list of supporters plus 3 million on an SMS list. Social media helped him reach people in a way that he would never have been able to achieve solely through media coverage.
"Business leaders are also becoming wise to how social media can help them protect their good name and in turn create a stronger brand," he adds. "Some CEOs are even taking up blogging to manage their status, reputation, and brand. These blogs can help leaders position their company as a 'thought leader,' build a dialogue with customers, capture information for sharing, test new ideas, manage media relations, and attract new employees. There's nothing more powerful than being able to speak directly to those people who control their brands, constituents and consumers."
Online social networking is not merely a method of communication. Nor is it simply a by-product of a changing society. It's actually an instrument of that change. If used correctly and judiciously, it can bring out the best in our society's people, governments, and businesses.
"We, indeed, are living at a time of great change," says Dutta. "The Internet has empowered us as individuals, consumers, and citizens to take more control of our lives and organize ourselves spontaneously. With the Web 2.0 revolution, we are seeing, and will continue to see, these changes take root in every level of our lives."
Matthew Fraser, PhD, is a Senior Research Fellow at INSEAD. He completed graduate studies at the London School of Economics, Oxford University (Nuffield College), Université de Paris I (Panthéon-Sorbonne) and Institut d'Etudes Politiques de Paris, where he earned a doctorate in political science. He is the author of several books, including Weapons of Mass Distraction: Soft Power and American Empire (2005). A recognized media industries expert with long experience as an academic and journalist, he was Editor-in-Chief of Canada's national daily newspaper, National Post, and co-hosted a primetime national television show, Inside Media, on Canada's public all-news network, CBC Newsworld.
Soumitra Dutta, PhD, is Roland Berger Chaired Professor of Business and Technology at INSEAD. He obtained his doctorate in computer science and his M.Sc. in business administration from the University of California at Berkeley. At INSEAD, he is the faculty director of elab@INSEAD, a center of excellence in the digital economy. His research focus is on technology and innovation strategy at both corporate and national policy levels. His books include seven editions of The Global Information Technology Reporters (2002-2008), Innovating at the Top (2008), The Bright Stuff (2002), and Embracing the Net (2001). A popular speaker and a fellow of the World Economic Forum, he has presented numerous high level conferences around the world.