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Social Media and Virtual Communities

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Course Topics: 6 New Business Models Emerge

This is a course for the students with a strong interest in new technologies and how they may be used to create new business opportunities, particularly new social networking media.  Topics covered will include social networking and how the business world leverages them, virtual worlds and technologies, skills in designing and implementing social media for business value using sharepoint and iTunes U (hands on projects). 
Questions:
 
Initial Thoughts:

As we witness the transformation of common interaction and information accessibility enabled by social media, what new business opportunities do we see?  The most basic business models of centuries ago were based on common conceptions of how the world worked.  For example, an individual might invent a new device or get lucky and discover some new resource.  Alternately, he might be trained to make a commonly demanded product, such as horse shoes, barrels, houses, etc.  S/he would then make the product almost entirely at their location for most products and proceed offer it for sale.  A few products would get bought and traded to stores in other locations, especially large cities like London or Paris.   By the mid 1800s we saw an evolution toward mail order and reliable postal systems.  New business models emerged.  By the late 1800s and early 1900s Sears grew dramatically using this model.  The industrial revolution brought disaggregation of production so that you could buy components from multiple factories and assemble them in a final location from which they would be sent to distributors.  The area of marketing and distribution flowered.  By WWII, mass production and the ability to inventory products, including food, made huge leaps. Technologies such as the reliability of the phone enabled the coordination required for these efforts.  What new models are social media enabling?  What will be possible? 

“From Wikinomics to Government 2.0” asks us to think about the implications of an “open source” approach.  This is anew way of doing things.  The open source movement catalyzes dramatic new potential in marketing and R&D.  The basic idea springs from the software industry, where the earliest open source software project, the Apache server, was created by a group of programmers fed up with the existing products and determined that they wanted to have the source code of the program available to manipulate and control for anyone interested, therefore “open source.”  Approximately 70% of the traffic on the Web runs on open source Apache servers.  The free availability of Apache and the quick updates to its security built trust and enabled the Web to proliferate.  As a result, businesses can now rely on rich Internet interactions.  In some cases, tools like Second Life are now used to replace formerly in-person events, such as job interviews [“A Job Interview You Don’t Have to Show Up For”].  Great.  What is the business model?  How does Second Life make money on this sort of service it provides?

For home workers, self-enterprise can now be started and run more readily from home [“Nice Work if You Can Get it: Web Sites for In-Home Jobs” or “My Virtual Summer Job”].  Thus, businesses are also more able to flexibly tap temporary labor pools too.  Look at Apple’s core of iPhone software developers [“iPhone Calls on Software Developers”] Releasing a portion of the source code, the Application Programming Interface, Apple can create and community to create and share code to heighten interest in their products and to learn new ways of making useful features for the phones.  What else can they get out of such a community?  In the case of JBoss, the company terms this usage of Open Source as Professional Open Source.  They see it as a business model. They tap top developers and hire them.  The community becomes a recruiting ground, and they can maintain rich, social virtual space for their meetings so that new hires can telecommute while also becoming internal employees [“Virtual World Gets Another Life”]. 

For more traditional brick and mortar businesses social media may hold the key to innovating toward hyper-differentiated market spaces.  We see efforts by retailers to ‘go local” [“Reversing Field, Macy’s Goes Local”],  using social media to collect, understand, and interact with micro markets.  This can backfire [“Big Daily’s ‘Hyperlocal’ Flop”].  So, what are the keys to taking this local approach?  Incentives appear to be one piece.  Microsoft pays people to share their purchasing decision click streams [“Microsoft Offers Reward”], but other firms simply offer access to the source code and shared data to impel sharing and interest.  This interest appears to be a function in part of the ability to simplify and focus one’s product offerings as in Barbie’s strategy [“As Barbie’s Sales Slow, Mattel Looks to Simplify Its Iconic Line”]. 

Individual services like Monster.com have to redesign to meet their more focused market needs.  They have to understand what additional capabilities they can offer participants in their tools due to the social media they have.  We see this refocusing at Monster [“CEO Reorganizes Job-Search Pioneer”] as they begin to offer hiring and seeking participants in their network much stronger tools.  They see this as a key differentiation over a network like LinkedIn, as Monster can then see the retention stream for employees and get into provided outsourced HR services to firms. 

So, one basic new model we do see involves involving potential hires or consumers in more interaction prior to hire or purchase.  It involves them having access to much more information and recommendation about products that matter to them -> thus, hyper-differentiation.  It also involves the super low cost of interaction and involvement in distributed groups, thus open source becomes possible.  The US Army has even begun sing these new capabilities, in virtual and real space.  They link soldiers in interactive, immersive games online to try them out and profile them as potential recruits.  They also use games to train them once recruited and test them for potential job roles in ways that would never be possible due to the high cost of simulating real combat without virtual environment technologies. 

In the area of health, we see companies dipping their toes into the increased digitization of health information to figure out what they can now do [“Microsoft, Kaiser Try Sharing Patient Data”].  Could a new business service here involve individuals having better access and control of their information, even on cell phones? Who will pay for the service? How? [“Insurer Offering Health Records on Cell Phones”]  Access to information and the control of the interaction interface remains critical to social media interaction while social media companies themselves try to figure out how they are going to make money.  Facebook realized their old interface was uncontrollable as it got extended by third party applications.  They knew their brand had to be reestablished.  They changed their interface to contain third-party applications and give users renewed control over their interactions in Facebook.  Did it work for you? [“New Face of Facebook Hopes to Map Out a Road to Growth”] In part they did this because they see themselves as an identity management service that will provide organizations and individuals with portable digital selves that may cross platforms and transport avatars and preferences securely. 

Such shifts are risky.  Researchers have found that media become ‘sticky.’  Media Stickiness is the characteristic of inertia when people become attached to the way a medium looks and works.  They become attached even to free resources and may react adversely when a service gets discontinued [“Fans Resist End of Virtual Disneyland”].  The average person does not seem to expect nor accept that there are large costs involved with running a virtual Disneyland.  It is hard to sell access to social media!  It irritates people to imagine “Craigslist Goes Capitalist?”  But, on this darker side of social media there are also opportunities.  Cyber crime has found a home. [“The Cybercrime Service Economy”] 

The low cost of distributed information sharing and joint analysis available through social media can also enable massive, parallel discussion and problem solving [“Sick Transit Gloria”].  Can we sell individual a service to meet and share photos?  [“An Appointment for Sharing Online Videos”]  One recurring theme that emerges for businesses in such a space today is offering a basic service for free and additional services at premium rates.  Within organizations, we might assume that a corporation can task its IT department to enable sharing.  Will this enable tapping untapped knowledge resources?  If so how?  Will businesses need to pay employees to share?  [“Getting Workers to Share Their Know-How With Peers”]  Will we see faster training and therefore more flexible workforce management as know-how gets digitized and built into virtual training environments?  What businesses or systems will enable these new training tools? [“Chip Maker Trains in the Virtual World”]  Will there be a good business case for running business in virtual community spaces enabled by social media?  If so, what is it?  How will it enable higher productivity, creativity, or efficiency?  [“Why You Should Have Your Next Business Meeting in Second Life” and “Maybe I’m Just Getting Too Old”]

Discussion:
 
Readings:
1 *WSJ “From Wikinomics to Government 2.0”
2 *WSJ “A Job Interview You Don’t Have to Show Up For”
3 WSJ  “Nice Work if You Can Get It: Web Sites for At-Home Jobs”
4 WSJ “IPhone Calls on Software Developers”
5 *WSJ “My Virtual Summer Job”
6 WSJ “Virtual World Gets Another Life”
7 WSJ “Reversing Field, Macy’s Goes Local”
8 WSJ “Big Daily’s ‘Hyperlocal’ Flop”
9 WSJ “Microsoft Offers Reward”
10 WSJ “As Barbie Sales Slow, Mattel Looks to Simplify Its Iconic Line”
11 WSJ “CEO Reorganizes Job Search Pioneer”
12 WSJ “War Games: Army Lures Civilians By Letting Them Play Soldier” (Topic 4 overlap)
13 WSJ “Microsoft Kaiser Try Sharing Patient Data”
14 WSJ “Insurer Offering Health Records on Cell Phones”
15 *WSJ “New Face of Facebook Hopes to Map Out a Road to Growth”
16 WSJ “Fans Resist End of Virtual Disneyland”
17 *WSJ “Craigslist Goes Capitalist?”
18 HBR “The Cybercrime Service Economy”
19 HBR “Sick Transit Gloria”
20 WSJ “An Appointment for Sharing Online Videos”
21 *WSJ “Getting Workers to Share Their Know-how with Peers”
22 WSJ “Chip Maker Trains in the Virtual World”
23 *FastCompany “Why You Should Have Your Next Business Meeting in Second Life”
24 *BrandStory blog “Maybe I’m Just Getting Too Old”
Pfizer CASE
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