Categories: Media issues / PR issues

20 August 2009

10 comments

Debate: social media changes business basics?

I recently left a comment on Neville Hobson’s blog saying that so called social media do not change the rules of old world business. He responded by challenging me to a proper debate. Let’s begin.

I say the talk about long tails, wisdom of crowds, the end of old-fashioned business models (dead tree press is dead) or statements like the new world is bottom up – or flat – rather than top down are meaningless.

I see the world looking more or less as it always did, but busier with communication. In particular, I am struck how all this communication hasn’t altered some fundamentals about, as it were, the centre of gravity, of origination, of power.

Before you say, what about the Iranian popular resistance, let me say (sadly) that it looks like the same-old same-old to me.

But let’s take the Apple case. This firm highlights how the hippest firm – and their route to success – looks very old worldish, as does the success, say, of Amazon.com. I am amused that Virgin, achingly cool as it once was, got most of its real world work done by unhip companies. You can’t beat good old command and control when there’s command and control to be done. Running a firm is not the same as running a network of friends.

Indeed, alongside the groovy peer-to-peer liberations of the net, do we not also see that the net can be as easily used for tighter, more autocratic management? It is also good at old style propagation of messages – not to say of propaganda.

I added (on Neville’s blog) that the internet seems to favour monopolistic, or more precisely centralized, focused businesses that are geared toward making the most of a ruthless competitive market driven by meeting – shaping – customer needs in order to maximize profits (how old world is that?).

Or put another way, contrary to popular opinion, the crowd is a “marginal” factor on the internet when it comes to building and driving businesses – no more or less influential than it is anywhere else as a pool of customers, critics or potential stakeholders.

Nice cuddly anti-capitalist, well-being-friendly arty types love Apple and hate Microsoft. They think Apple’s products (like Saabs and Volvo’s and Citroens and Virgin flights) somehow represent “their” kind of consuming. And yet Apple’s culture – the way these icons get designed – seems less than attractive, as argued by Brian Appleyard here. In short, the culture Jobs has spawned seems much less than heroic, at least as we would expect it to be defined by the kind of people who admire him and his products and his firm. In this he and his firm seem a little like Virgin and Body Shop and Ben and Jerry’s: much less wonderful than their fans assume.

I also said, purely social networking sites have no future unless they become old-worldish. Meanwhile, Twitter and Facebook actually encourage passivity rather than activism because they are fan-based with followers and few leaders of quality (most of whom were already known from the off-line world).

Neville Hobson replied:

I’d have to state my entirely contrarian view to yours: my belief is that social media can change the rules of old-world business. But I’m not going to get into a discussion until we agree a consistent definition on what those rules are.

So, if you’re up for a debate, let’s start with those rules. What are you defining as “the rules of old-world business”?

It’s a fair starting place. Here’s what I mean by old-fashioned (which are the same as modern) business rules.

1. A business is not a business without customers and invoices – Facebook and Twitter are not businesses and YouTube barely qualifies.

2. Businesses are in the business of providing solutions. Or as Theordore Levitt would say, people don’t want a one inch drill bit, they want a one inch hole in the wall. People pay for solutions, but it seems that social media solves few problems people care enough about to pay for.

3.  The history of the internet has been a roller coaster of irrational exuberance followed by pessimism when the bubble bursts. In short, old-world rules – of profit and loss – have trumped online ones (remember when one didn’t need a business plan, customers or a product to get VC money?) again and again since the internet began.

4. Successful business are led by a small team of executives backed by a strong board. That is because the few were always deemed smarter than the many (the crowd). Nothing has changed to alter that model.

5. The more chaos and misinformation the internet introduces, the more value accrues to those institutions (businesses) that remain organised and focused. Contrary to what Clay Shirky argues, in the age of the internet, traditional organisational techniques – and keeping control – become more important, not less.

6. The failure of Dell’s exclusively internet-based business model highlights the limitations of thinking that the internet can or will replace old world practices (how the crowd used to laugh at HP’s old-fashioned mixed model – not any more). Amazon.com might have an internet customer interface, but behind the shop front there is a very old-fashioned wholesale distribution model (minus the middle man, but that idea is not new either) and fleets of trucks.

7. Blogs, Twitter, Facebook and amateur news-based websites will not make paid for newspaper content toast. Jeff Jarvis might have a point about newspapers (journalism) becoming curators, aggregators and facilitators of linked networks, but the old-fashioned media function of gatekeeper based on the generation of exclusive content for specific audiences will remain the cutting edge of the industry. That’s what makes it a real business possessing something people want to purchase.

8. The best blogs will become part of mainstream media (rather than the traditional media like social media), as arguably the likes of Iain Dale is right now.

9. Intellectual property and copyright still matter. They are at the heart of business value. The internet challenges both, but old-fashioned laws and more effective enforcement look set to preserve the status quo, even if there will be compromises in some areas such as music and news distribution.

10. PR, rather than dying out, as Jeff Jarvis predicts, will boom on an unprecedented scale. Social media enthusiasts miss the point that the internet – with its user generated content and mass nonsense – will put a premium on quality, trust and reliability, which are embodied in reputations and brands promoted by PR.

That’s my opening shot, now it is Neville’s turn.

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10 responses to “Debate: social media changes business basics?”

  1. Neville Hobson says:

    A great start, Paul, thanks!

    I want to consider what you have to say so I’ll be back with you in a few days with some thoughts on my blog.

  2. Scott Karambis says:

    Nice start to a well-needed debate. I’d add or emphasize two points: 1) a business is not a business until you can get someone to pay more for your product than what it costs to produce. People still want newspapers. They have never had more readers; they just can’t support their work with a business model. Right now, much of the activity of the social media sphere is fueling itself on the debt generated by the professional news organizations. It’s like the housing boom with all of us taking home equity loans out to pay off our credit cards and hoping it will all just work out. But lots of commentary isn’t that interesting when there is no one producing the content to comment on. 2) As they promote new social media tools, many marketing companies are essentially trading down from more profitable modes of communication to cheaper ones. Rushing into an easily commodifiable business has never been a great recipe for survival. I wouldn’t be so eager to declare that one of my most profitable products is “dead.” I do, however, agree that we are in the midst of a major transformation of how information is created, valued and paid for, the like of which we haven’t seen for a long time. (Maybe since Defoe managed to do without patrons and sell his books on an open market). A new model will eventually emerge, but it will likely take a long time. In the meantime, I’m inclined to agree with you on the old fashioned business basics.

  3. […] Debate: social media changes business basics? | 21st-century PR issues › Paul Seaman's online revi… paulseaman.eu/2009/08/debate-social-media-changes-business-basics – view page – cached I recently left a comment on Neville Hobson's blog saying that so called social media do not change the rules of old world business. He responded by challenging — From the page […]

  4. Jo Jordan says:

    @Scott responds to my initial reaction. Implicit – unstated- in your approach is the presumption that business=finding a return for financial capital.

    If you re-titled this piece – finding a return for financial capital in a networked world, you will have a good product to sell!

    Now turn that presumption around, what are the opportunities for financial capital in a networked world – investing in Facebook for a long term return? But I get the impression you are interested in short term returns.

    You are asking – where is the platform where I can take my wares and flog them. Definitely not social media. They will hound you out.

    Let me explain it like this. 50 years ago, if you mentioned “trade” in a “drawing room” in UK, you would be ostracized. Mention “trade” in a social setting today in Australia, you are ostracized. Social media is our “drawing room”. Tawdry hawking is taboo.

    Still hawking needs to be done and is done. In the physical and social spaces reserved for hawking. The question is not whether it will be done.

    The question is how the presence of this new “drawing room” changes the hawking game. Where we sell, who we sell to, how we sell, etc.

    People looking to give their financial exercise may or may not need to be aware of what is happening. But this is not a matter of generalities – it is a matter of specifics? Like all business, the case is more important than the general rule.

    PS as you are flouting a social media rule and not acttvating back links for us, I blog at http://flowingmotion.wordpress.com

  5. Cody Brown says:

    Lots is off here.

    My reply is on Twitter:

    http://twitter.com/codybrown

  6. […] on both sides of the fence. So I was pleasantly surprised today to see Neville Hobson and Paul Seaman engage in an online debate about social media, its use, and the impact on “old world” […]

  7. […] Paul Seaman says social media can’t change the rules of old-world business. Moreover – I’m summarizing rather loosely the various arguments he makes in a rather good post some ten days ago – he says that social media is an irrelevance to business. […]

  8. Lisa Lomas says:

    I am not inclined to agree but see how you could think this way. I agree that business are about businesses providing solutions, some solutions (not all) can be delivered via the internet. I believe there are some businesses that will not be online in the sense of selling, but merely a point of reference. As the New Age is bringing instant gratification with youngsters this is creating a internet environment, so searching for something would be on the internet first choice. Would a company wish to be seen? Would that company wish to be recognised as keeping with the times? Would that company like to see increased revenue?

  9. […] Aug 20 / Paul Seaman: Debate: social media changes business basics? […]

  10. Richard Stacy says:

    I think you are confusing the internet with social media. They are very different things.

    A good debate though – as my starting contribution i would point you to http://richardstacy.com/what-is-social-media/