[http://metaphoricalweb.ning.com/profiles/blogs/future-proof-the]

91. Our allegiance is to ourselves—our friends, our new allies and
acquaintances, even our sparring partners. Companies that have no part
in this world, also have no future.


Cluetrain Manifesto



The following blog is written in support of Cluetrain Plus Ten, a
celebration of the 10th Anniversary of the Cluetrain Manifesto.

The news today in the papers was rather stunning - the United Auto
Workers union was buying part of GM and Chrysler. General Motors, once
the largest and most powerful car companies in the world, is being sold
to its workers because the company became too fixated upon the business
of making money and not fixated enough upon the business of making
cars. Presumably, those workers, who still are in the business of
making cars, may actually understand where their priorities really are.

This process is going on everywhere. The newspaper publishing industry
is disintegrating, not because there's not enough news, but because
there's too much of it - millions upon millions of "citizen
journalists" who are reshaping the fabric of news, armed with
inexpensive camcorders and laptops and iPods. Big box stores are being
replaced by hundreds of thousands of specialized retailers, operating
over the Internet or with minimal brick and mortar presences. Office
parks are emptying out, as the workers of the companies that used to be
in them work from homes and coffeeshops and conferences a thousand
miles away. The giant businesses loom over all of this like hulking
dinosaurs, scary until you realize that most are dying, and that what
you are seeing are the skeletal ribs of decaying corporate carcasses.

Recessions come and go (though most in the last eighty years have not
been quite so bad as the current one) and in most of them, older, less
efficient businesses often disappear along the wayside, beat out by
newer, flashier, more nimble opponents. Yet it is likely that this time
around, we're going to see a mass extinction event, because the very
nature of business itself is changing.

The large-is-better business model evolved through much of the late
19th and 20th centuries because it was the most efficient mode for
communication channels - a hierarchical business model is a network
with a bias towards centralized information dissemination and
execution. Direction was passed from a leader to his subleaders, who
would then break down the tasks pertinent to their domain and pass it
down to their respective subleaders, until eventually you had specific
tasks assigned to individuals at the leaf ends of the network. It also
had the advantage of working well in a geographically centralized
manner - each subtree usually represented a geographic aggregation of
some sort.

Additionally, such command and control structures had the additional
benefit of pushing information back up through a series of management
filters - if it was not perceived as being important enough to engage
the time of a given lieutenant, it wouldn't pass beyond that lieutenant
to his superiors. This meant that, in theory, only the most important
information would make it up to the top, and the role of the
centralized decision maker became at least somewhat rationale.

In practice, however, such filters also served to isolate these same
decision makers from interacting with the outside world. Hierarchies by
their very nature tend to promote privilege - the higher up the chain
you are, the more you are rewarded, and in practice the less you are
likely to interact with the people that actually use your business
products or services - instead, you interact with your counterparts at
other businesses or organizations. And as a consequence, hierarchies
can become forts, with the leaders of the hierarchy only vaguely aware
of (and usually far less mindful of) the actual work done collectively
by the others in the organization that in turn pay his paycheck and
bonuses - or of the people who pay for that work.

The hierarchical model is well suited for broadcast - information from
a centralized source gets disseminated through the hierarchy, while the
hierarchy in turn acts as a filter to analyze and consequently respond
to this data in aggregate. This has the side-effect, however, of
dehumanizing the response channel - you are less interested in whether
Jane Doe was motivated by your messaging (advertising or otherwise),
but far more interested in the fact that a 32 year old Caucasian single
woman who makes $64,000 a year, lives in a $550,000 house and is a
vegetarian purchased your product. Jane Doe is a person, the latter is
a demographic profile that can be used to see whether Product X is
successful in getting Jane Doe to fork over her hard-earned money.

The Internet establishes an alternative set of communication channels
that are very different from the hierarchical model. In effect, it
makes for ad hoc, collaborative, overlapping interest groups. It makes
aggregate collectivist behavior far easier to accomplish, and it means
that information can spread very quickly, as it passes from interest
group to interest group through common members.

Most companies originally thought that such interest groups were a good
thing - after all, most of marketing involves targeting your message
toward a given interest group while trying to reduce the exposure of
the message outside of that interest group (as the non-interested
groups produces far fewer responses - it's not as cost effective to
advertise to people who either lack the means or the desire to purchase
your goods or services). Company X could market its new organic power
bar to such interest groups, and expect a much higher conversion ...
which in fact did happen.

What these companies were not expecting was that the members of this
interest group would also pass negative information about the products
(and the company) to one another ... and that they would talk back.
This wasn't supposed to happen. If the power bar didn't taste very
good, this was information that would spread just as quickly, and it
was beyond the control of the company to fix. If the organic components
really weren't, if the green message on the wrapper was at odds with
the fact that bar was produced in a factory in China under less than
ideal conditions, if the CFO was involved in an affair with the CEO's
wife, all of this information would get passed on ... and the company
had no way of controlling this back-channel communication.

Corporate communication is very impersonal - its intent is not
necessarily to inform, but rather to protect the hierarchy - to promote
the successes, to spin damaging news, to obfuscate the communication
access to the primary decision makers and in general to reduce
potentially embarrassing contacts between the decision makers and the
outside world. The problem of course is that as the dialog channels
between people improved, the cold, mechanistic nature of corporate
speak also became far more obvious - and more sinister. People react
negatively when they realize that communications are one-sided - that
while there may be a semblance of human communication going on, there's
actually no one on the other side that is in a position to actually do
anything about it ... it's a waste of time.

Beyond this, corporations are made up of people, and when those people
feel that they have been abused by the company, they now have at their
tools powerful ways of disrupting those corporations. When people are
laid off in a poor and demeaning way, when they are customers who have
been "shafted", they will lose whatever loyalty they may have had to
the company in question - and will become increasingly shy about giving
loyalty to any corporation. They will develop ideas and tools outside
of the context of companies - something especially significant because
it is often those very ideas and tools that the company would otherwise
turn into products and sell themselves. They will encourage others to
boycott companies and suggest alternatives that will reduce sales for
the company in question.

In one scenario I saw recently, a disgruntled former customer of a
cable company established a website and devoted himself to convincing
others to take their business elsewhere. In the end that one customer
probably cost the company $1.5 million dollars in revenue, all over a
cap on services that might have cost the company perhaps $30. Such
anti-customers really didn't make much of a difference pre-Internet -
the company could have acted with impunity because the real ability of
that customer to affect the company was limited. Today, a single
Twitter from the right person (who might either be the anti-customer or
sympathetic to the anti-customer) could have hugely negative
consequences for a company.

The real difference between a company and an interest group (a social
community) is surprisingly small - usually an agreement for revenue
sharing. This means that whereas fifty years ago it may have taken
several thousand people to establish and run a business of any
complexity, today you can get by with perhaps fifteen or twenty - which
in turn mean that such companies need a much lower threshold of net
revenue to be viable concerns. This is increasingly as true in capital
intensive sectors as it is in information services. Componentization
and modularization of parts in various sectors mean that you can
construct and customize even durable goods at only a slightly higher
margin than a much larger factory, and because you don't have the
significant overhead associated with the larger factory, the marginal
costs even out.

This means that, even as dinosaurs like GM thrash about in their death
throes, there are dozens of smaller companies making specialty cars
that are far more responsive to new technology and market demands, at a
small fraction of the overall costs that GM needs to develop a given
car line.

The upshot of this is that we are in for a long period of business
disaggregation - where huge conglomerates spin off companies to sink
and swim, where small, ephemeral companies navigate more effectively
than large ones, where the distinction between consumer and producer
becomes blurred to irrelevance. People won't be any less loyal, but
they'll be loyal to those "projects" that they themselves have a
controlling interest in. Brand names are only significant as ways of
identifying those prosumers who are most adept at navigating this
world, and are increasingly tied into the "personal brand" - "I trust
Jane Doe because I can communicate with her, her ventures generally
succeed, and she knows how to involve others in her ideas."

It should be an interesting decade.

--
Posted By Kurt Cagle to Metaphorical Web at 5/07/2009 10:04:00 AM

[Non-text portions of this message have been removed]