Blabberings on technology, the web, mobile world, India, books, events, communities and everything else (Chautauqua: An old-time series of popular talks intended to edify and entertain, improve the mind and bring culture and enlightenment to the ears and thoughts of the participants)

Location: United States

Monday, August 07, 2006

The influence economy

n. A power affecting a person, thing, or course of events, especially one that operates without any direct or apparent effort: relaxed under the influence of the music; the influence of television on modern life.
Stories, case studies and articles abound; tales come and go; and debates keep getting sparked about how 'social media', 'citizien journalism', 'web 2.0', 'network journalism' etc. etc. etc. is changing the way we do business. And it is...I contend that this is the age of influence, where competetive advantage in businesses will come from being able to influence consumers, where the barrier to entry will be influence (not knowledge, not technology but influence). So, what we're seeing is the movement from a knowledge economy to an influence economy.

Jamie Oliver sparked a reform in the school-meal-industry in UK (Read this post on Communities dominate Brands), the Indian government had to act quickly to remove censorship from blogs after the blasts (read here); Cluetrain, Naked Conversations, Communities Dominate Brands, books on blogging, are big hits. Youtube is growing at breakneck speed. The blogosphere continues to double every five months. There are more hits on myspace than google. There are people who read blogs on their phones and blog from their mobile phones. What on earth is going on?

So, the first question is 'Why are more and more people blogging/Youtubing/Myspacing'? Why are people like Jamie Oliver standing up? Why are we seeing more and more participation from the people?

The World Values Survey may provide some answers or at least a basis for a reasonable hypothesis. If you take a look at this figure (click on Introduction to World Values Survey on the lower left hand corner) from the survey, you'll see some interesting trends.

The report says (I believe that this data is from year 2001):

A central component of this emerging dimension involves the polarization between Materialist and Postmaterialist values, reflecting a cultural shift that is emerging among generations who have grown up taking survival for granted. Self-expression values give high priority to environmental protection, tolerance of diversity and rising demands for participation in decision making in economic and political life. These values also reflect mass polarization over tolerance of outgroups, including foreigners, gays and lesbians and gender equality. The shift from survival values to self-expression values also includes a shift in child-rearing values, from emphasis on hard work toward emphasis on imagination and tolerance as important values to teach a child. And it goes with a rising sense of subjective well-being that is conducive to an atmosphere of tolerance, trust and political moderation. Finally, societies that rank high on self-expression values also tend to rank high on interpersonal trust.

I believe that we are indeed finding evidence that all those observations are true. For instance, take the number of non-profit startups in the last couple of years and the attention they are drawing, or consider all the people talking about meditation and yoga (the number of people has gone up 10 times in the last few years). We are indeed moving into a world (especially in the developed countries) where self-expression, trust and a meaningful existence seems to be gathering more value everyday. So, falling back on my education, the utility (don't you love that term) of self-expression and interpersonal trust is much higher today than it has ever been and is continuing to grow.

The second question then is, given that the societal values seem to be changing, what are people and businesses doing about it?

Easy enough to answer. We saw the advent of technology that would support self-expression (static websites to blogs). We saw this technology move from mere text (blogging) to multimedia. We saw ways of distribution of this user-generated content differ from conventional ways (syndicated content - RSS and atom.; list sharing - OPML). We saw podcasting, we are seeing Youtube. We saw content being bookmarked and ranked socially by those who consume it (social bookmarking). On the other side, we saw the facebooks, friendsters, myspaces, Cyworlds flourish. And I'm sure each one of us can name plenty of companies in all the areas I named above (and we all have our darlings that we'll put our money on!). However, the social revolution began even before these things happened. It began with pagerank (see Ajit Jaokar's post on pagerank as web 2.0 here).

People on the edge who created these things or understand them and write about them started becoming more and more known (aka influential) and then (as expected) we had ways of ranking them (See Technorati's top 100 for example). Alan Moore recently wrote about how many CEOs are beginning to blog. Stowe Boyd had an interesting observation here. Robert Scoble and Shel Israel's book is full of anecdotes of how blogging helped. Why? Because blogging is about self-expression and inter-personal trust (things with high utility in this day and age).

It's not just blogging or user-generated content. We have started seeing the emergence of "community" as a buzzword. People have started forming Communities of practice and started engaging in debates about how communities differ from teams and how to build communities. Business academics have begun studying "Social Network Analysis". Engineers have started looking for opportunities for Operations Research and Management Sciences in this social network world (did I ever tell you that my MS research was on stochastic network algorithms? I would say buy my book, but its probably useless to you!). :-)

And it's not over yet. We are seeing more and more non-profit startups (look at the world values survey paragraph above). Anywhere we look, I see a bright young person starting something developmental for the society (take the increasing numbers at TED). See my last post about TED. We are seeing Jamie Olivers and Bombay helplines.

So, my last question is what does all of this mean? What does it mean to see more CEOs blog? What does it mean to see that TV selling power is falling? Why are people studying communities? And if things will work this way...what does it mean for the future?

Well, I think it means we're moving into an influence economy. Think about it, if organizations are going to start functioning as communities of practice, the formerly used ways of authority to get work done are not going to work. What will work is a leader's ability to influence members in the community to get work done. That's internal management. Customers are already basing their buying decisions on influence (I'm sure engadget is responsible for more gadget sales than any TV ad campaign. If it isn't, it will be). People trust engadget and reviews from fellow customers more than they trust salespeople (is it a surprise?). And trust leads to the ability to influence. And I'm sure all of you (especially, Alan, Tomi and Shel) will agree that more and more companies will have to blog because it creates trust between the company and its customers. TV's ability to sell is falling because TV commercials provide for less trust (among other things) than blogs.

So, we are seeing that internally in your professional career your ability to influence will take you places. Externally as an organization, you have to rely on building trust (to be able to influence) to be able to sell to consumers. If we extend this a little further it is easy to see that the commodity that businesses will be fighting for will a be a consumer's trust (aka the ability to influence a consumer) influence will become the barrier to entry for other businesses.

Why did we call our economy a knowledge economy so far? Because if you had more knowledge you succeeded personally in your career. If the company had more knowledge/technology the company succeeded. The barrier to entry was and to extent still is intellectual property.

Do I need to say any more that we're seeing the end of the knowledge economy and the advent of an influence economy? If you any examples that support my contention, or invalidate it, I would really like to hear them.


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