Will Businesses Leverage the Social Web?

by Jay Deragon on 11/09/2007

Will Businesses Migrate to the Social Web?With every new technological advancement what follows is creative ways to use said advancements for personal and professional gains. The social web is being fueled by advances which individuals have discovered as beneficial to satisfying the human need for expression and “connectivity”.

The next wave of discovery will come from the business sector and it will be explosive. While much of the adaptation of the social web has initially been by the employment services industry many others are now awakening to explosive opportunities to leverage the medium for business strategies and operational advantages.

Xeni Jardin, writer for MSNBC.com, provides the following comments related to the use of social networks for business purposes. “LinkedIn and ZeroDegrees are two of the more popular services that facilitate business-oriented connections, and some argue these and similar sites are now doing a better job at connectivity than ever before. Remember Metcalfe’s Law — coined by the inventor of Ethernet — which states that the power of a network grows in proportion to the square of the number of its nodes? That’s a geeky way of saying that networking technologies nobody uses are of limited value. As the popularity of SNS sites grows, so does their value, because a larger number of users mean better odds for productive connections.”

David Drach is Director, US VC and Emerging BusinessTeam, Line of Business Applications, Microsoft Corporation, provides his outline of the tenets that drive the evolution of business adaptation to advanced web technologies. He writes:
The Composite Business

“Today, you can assemble your business, online, with minimal capital. Some services are outstanding and some are getting better. In the first generation businesses leveraged their economies of scale to build out their own logistics and operations infrastructures, think Sears, Roebuck and Company or US Steel. In the second generation large businesses outsource providers evolved such as Fed Ex and ADP. Today, businesses of any size can outsource portions of their operations, or skip the high capitalization of infrastructure and rent their operations from new companies like ShipWire, Authoria, Perquest, Rearden Commerce and the incumbents like Amazon, eBay, and Yahoo!.”

Scalable & Nimble

“You have to be both. Our first generation huge enterprises had to invent and build out their own infrastructure because the capabilities did not exist. But the weight of their highly capitalized infrastructure also became a burden as new businesses emerged worldwide with less constraints and a new generation of capabilities. So, just as your fixed costs drop through the floor and your margins become oh, so tasty, a new competitor appears and changes the business model. Now, those tasty margins cause a bad case of cognitive dissonance and you dispel those new business models as being short lived fads. Your great margins are eaten away by the new business model and you now don’t have the cash flow to leverage up and build new infrastructure. Incumbent dies and new model wins. But what if you pay for what you need and rent as you go. Big AND agile. It wins in any sport, and wins in any business too. The offerings are neither affordable nor complete, but they will be”

Human Fabric

“Now for the Web 2.0 / Enterprise 2.0 spin. Humans are just plain useful. They learn quick, are tremendously adaptive and given the proper incentive structure, are economical as well. I spent 10 years of my life building workflow systems, neuronets and AI solutions to mechanize things that humans were actually pretty good at. Result was, humans are better and cheaper, especially in business environments that are changing rapidly (which is about all of them today). But, machine assisted humans are even better. Allow humans to share knowledge, interact, collaborate, and persist their thoughts and shazaam, humans can scale, globally. Search, Wikis, RSS feeds, RSS catchers, IMing, VOIP, Collaboration, OnlineMeetings, Review sites, Rankings, rent-a-resource, etc. Let the business social begin.”

Perfect Trust

“Trust is the basis of business and relationship is the basis of trust. But relationship does not scale. It does not scale regionally, nationally or globally. It is restricted by time for relationship building and is challenged by cultural divides. Our current compliance crisis has resulted in us attempting to litigate trust back into business. As a result CEO’s and CFO’s are going to jail and systems like Approva are being implemented to make sure jail is not on the horizon. In many corporations, large vendor management organizations are essential to ensure vendors deliver and can be trusted. Auditors verify financial reporting practices so that markets can trust the information pertaining to the businesses that they own. But, today, we can be much more transparent. We can collaborate regarding the quality of our vendors, shine a light on our financials, publish investment roll-ups and rank our competencies. The history of business has been based on circles of trust that were tightly held in small relationship groups. Trust is essential to allowing businesses to share services. This is a greenfield for the next generation of business.”

Ubiquitous Identity

“If we are to share services, span systems from local devices to mobile devices, to global data centers, to local data centers, our machines must know who we are. One of the essential elements of an ERP system is user authentication and then role definition. Every feature, every piece of data and every action is controlled based on a user’s role. Every security system for every business system is unique. The scale integration of SaaS and business services will not occur until the integration barrier of identity is broken down. One identity with a business role definition is essential. Solutions like InfoCard and SXIP are essential, with business role context ( and multi-tenant corporate understanding as well)”.

Money is Data

“I have my friends at IP Commerce to thank for this one. Money is data that is inventoried by our respective governments. Those inventory systems are under revision. I am not a banking expert, so I will leave it at that for now. Payment is changing, in big ways, and banks, as we know them, may or may not be included.”

Predictive Analytics

“I could not resist. This one has always been a dream of mine and perhaps I have spent just a little too much resource to achieve it. As CTO of FRx Software for a while, I had the privilege of managing the construction of applications for financial reporting and budgeting. But Budgeting always fascinated me. Most organizations budget by taking last year’s budget and increasing it or decreasing it by X%, which may or may not have much to do with how you are going to spend the money next year. But we have massive amounts of data in our ERP systems and when you consider the shared data of all the SaaS systems out there, holy cow, we have tons of data to look at. The tools and technology exist to look at all that data, so let’s put some good design behind it and put it to good use. It is about time that we moved past histograms and line charts. When I watch my son play Halo I can’t help but think how he could use that same interactive skill to plow through piles of data and make decisions at a rate that is orders of magnitude beyond our current speed of business.”

Optimal Perfection

“Quality used to be the driver behind productivity. But now quality is not enough. Design matters, as I chatted about before, and matters even more today. From software services to steering wheels, many of the things we use today and will use tomorrow have been around for a long, long time. With technology reducing the constraints of both the design process and manufacturing, creating tools that are easy to use is just as important as creating tools that are useable. Everything from soup to SaaS is being designed to be easier to consume. Thus, assuming existing quality practices and evolution, the premium is on design. This is one of the most exciting and beneficial aspect of the current business revolution.”

Mr. Drach’s comments were written in May of 2007. Five months later we can already see some of the above tenets forming through the new developments emerging from the social web. OpenSocial aims to connect people and businesses across all networks. Facebook’s SocialAd changes the dynamics and models for the advertising industry., IBM has launched a social-software platform called Lotus Connections and the list goes on.

The “noise of the system of the social web” combined with the doers, the builders, the engineers, the creative’s and the entrepreneurs who are building this new world of Business are fulfilling the very framework provided by Mr Drach. However most of this framework is being built by the small rather than the BIG.

What say you?

{ 1 comment }

Carter Smith November 9, 2007 at 11:06 am

I’m wondering if Drach was personally predicting or professional leaking news . . .

Your perspective is directly related to where you are standing, and in which direction you are facing. None of the three main players in the recent public relations joust were running anything but their mouths in the months before they emerged to take their respective positions.

Where was Microsoft, and who was listening to anything they were saying in the 70s?

Where was Google, and who was listening to anything they were saying in the 80s and much of the 90s?

Where was Facebook (or MySpace), and who was listening to anything they were saying in the 90s and early 2000s?

I want to hear from a real visionary . . . someone who isn’t afraid to tell the emperor about his wardrobe faux pas . . . someone who can’t stand the simplicity of the wheel and can take the ribbing from those who suggest he not try to re-invent it . . . someone who has been using a better mousetrap for years and didn’t see the benefit of monetizing it . . . someone without an agenda 🙂


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