What a real Network looks like – Thanks Valdis Krebs

What does a real network look like? If we know then we can see if the networks we seek to design and grow are real. Here is how Valdis Krebs sees them and he is for me the Gold Standard.

I think when the history books are written that one of  the Galileo’s of our time – a person who used scientific tools to see a new reality that changes our paradigm – will be Valdis Krebs. While commentators such as myself speculate, Valdis proves the theory with evidence.

This is what the new organization looks like:

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Here Valdis uses a real community – (OCL) – on the outside a loose group of “lurkers”. In the Green group – groups of loosely connected sub groups – In the Centre – the Core – a densely connected group that acts like a Sun. It has both mass that acts as a social gravity attracting inwards. It also acts as the sun in that this group also shines energy out that reaches to the far edges of the outer group.

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Here is Valdis’ view of the core or as I call it the “Sun”.

Here is another view of what the “Sun” can do – it is an adoption force. Once the Sun is powerful enough, it can shift the paradigm. This may be how people get a disease like flu, adopt a new fashion. Or adopt social media and then a new view of how the world really works – that we are not part of a machine but part of an interconnected universe!

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So the implications are clear for me anyway.

Adopting Social Media has nothing to do with the tools. After all the tools are cheap and easy to use. It is all about rewiring the habits and the mindset of people.

If you wish to have your organization adopt this new mindset and hence also its tool kit of social media. You are going to have to create a “Sun” – a densely connected but small group that are committed to the bigger idea that is the energy behind the Sun.

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The numbers required for the core are modest. A core of 8 will get you an inner ring of 4,000. A core of 34 will get you an inner ring of 1,300,000. 89 will get you 62,000,000.

The leverage that is possible is incredible when compared to the traditional organization. This is where the costs fall away and the impact goes up.

I will talk more about this and offer you a number of real examples.

But here is the key insight. The Big idea cannot be about the internal needs of the organization. It can’t be about your sales, your profits etc. It cannot be about YOU. For the Sun to access the full energy of people and to spread out to the edge, it must be about US. It must be about the larger group that includes everyone who will be in the community.

More later.

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Why Corporations will fail before Networks – They canot innovate or adapt

There is an underlying math part of the model that forces a traditional organization to fail – here it is

Are corporations more like animals or more like cities? They want to be like cities, with ever increasing productivity as they grow and potentially unbounded lifespans. Unfortunately, West et al.’s research on 22,000 companies shows that as they increase in size from 100 to 1,000,000 employees, their net income and assets (and 23 other metrics) per person increase only at a 4/5 ratio. Like animals and cities they do grow more efficient with size, but unlike cities, their innovation cannot keep pace as their systems gradually decay, requiring ever more costly repair until a fluctuation sinks them. Like animals, companies are sublinear and doomed to die.

The issue is that using a machine model – is that friction builds as well as cost as the corporation scales. The costs rise with revenue. So in the mature part of the cycle, you cannot innovate – you can only manage the numbers/ratios. For example, 10 years ago, Shell set up Shell Renewables. Shell was going to become a leader in non oil energy. Makes sense right? The top people know about Peak Oil better than most and wanted to find a place in the next energy sector. What ruined this experiment was its success. Being a very large organization, Shell did new projects at scale. With two of the largest new Wind Farms online – the CFO and the CEO saw the trap – saw why they had to retreat back into OIL ONLY. Shell had to make the numbers even if by doing so meant that Shell could not position itself to be a leader in New Energy.

Wind farms that do well have an ROI of about 8% they are a utility – like owning a bond. But the Oil business has embedded costs that are linked to the returns on OIL that are much higher than wind. So if Shell did a lot more of these mega wind projects, the ROI of Shell would be reduced and Shell would have an earnings problem. The more wind farms they installed, the more their earnings would drop but their costs could not. They were trapped!

This dooms Shell and all mature companies. We saw that is Big Steel when smaller local mini mills ate into the lower ROI parts of the business until there was nothing left? We see this now with media.

The costs of a press or a studio – are so great that all the majors can do is to defend their existing platform. The New York Times can only hide behind the paywall for a period of time. The studios can only hold off web distribution of video for so long. But their battle to keep the status quo is not stupid – they are stuck with the costs. It is the model of how we do business that is the problem. For in the mature phase, the CEO has to make the ratios and the costs are embedded. In the final phase all the CEO can do is to milk the system.

For all true innovation HAS to start with a modest revenue line. So if you have a large enterprise with high revenues you have also high costs. So a web based news alternative CANNOT earn the revenue that you need to run the Times. So you cannot go there. But of course a new competitor – Huffington? Can and will and in the end will take enough revenue off your top line to kill you.

So are corporations doomed? Well with a sample of 22,000 West makes a good case that the current model does doom you, if you are traditionally organized. So what then is the way out?

West makes the case that Cities live much much much longer. The core of why is the core idea for corporations to study and apply.

“It’s hard to kill a city,” West began, “but easy to kill a company.” The mean life of companies is 10 years. Cities routinely survive even nuclear bombs. And “cities are the crucible of civilization.” They are the major source of innovation and wealth creation. Currently they are growing exponentially. “Every week from now until 2050, one million new people are being added to our cities.”

Cities are much more open as systems and networks. They are much closer to being alive than corporations that rely too much on command and control.

As I write this I am thinking of how WordPress works. At the core of WordPress is a for profit organization – but also one of the tasks of Automattic is to ensure the health of an ecosystem that is the larger WordPress ecology in which thousands of independent developers who do not work for Automattic make a living. I think of Wikipedia. At the core of Wikipedia is a set of rules about how Wikpedia has to work and how people in Wikipedia have to behave. Surrounding this core is a cadre of “White Blood Cells” AKA editors – that ensure that this DNA is kept healthy. I see no way now that Wikipedia will not be here in 50 years.

Why my confidence?

If you look at WordPress and Wikipedia you will see the key. In a network that really is a network – like WordPress and Wikipedia – the costs go up in a shallow linear curve while the outcomes rise exponentially. The margin grows so that any bump in revenue along the way – which is of course natural for nothing in Nature runs on any form of straight line – does not take down the organization. But in a traditional organization, the costs rise in direct concert with the revenue and outcomes. This means that once the business approaches maturity, the leadership have to force the numbers, meaning that in the mature phase, the only real focus are the numbers themselves. Not the underlying purpose of the business. The focus becomes defence and self referential. The organization is now doomed. Doomed to suffer a bump in the market or to a new competitor. Look at the case of RIM.  Can RIM come back?

This site has been a place where many of us have tried to see the future for business. We could all agree that more Command and Control would not help. We could all agree that more Social Media used to open up the organization would help.  But what we are seeing now is that for an enterprise to thrive over time – it must become alive! Only a true network can enable this to take place. The few true networks that we can see now, give us a working model of the new enterprise.

Stuart Baker and I are working on what this might be and in the fall we will be posting our ideas.

Our proposition is this. In the 1800’s most business was small, local and unique. The great shift in the 20th century was to consolidate into the enterprise as we know it. This was how to create wealth then. All who stayed back in the small, local and unique died. The efficient machine had to be the model you used. Now we enter a new phase. For the limits of the efficient machine have been reached. The new winners will be those that can adopt the model of the real network.

We all know about how to organize the machine. How to organize the network is all new and mainly unknown. That then is the challenge and the opportunity. Good luck to all of us.

Riots – Social Media the problem or a help?

Part of the reaction of politicians to SM and the riots is of course that they don’t get it all! Interesting that the police do

Joe mentioned this week that the use of Social Media still have not taken off in small business.

But we also learned this week that the use of social media and texting is at the core of how the riots in the UK are being organized. The best rioter’s tool – The Blackberry which is encrypted.

Since then, the BBMs regarding Duggan’s death and the ensuring riots have gone viral. The Guardian was shown one message by a recipient which read, “Everyone in Edmonton, Enfield, Wood Green, everyone in north London, link up at Enfield train station at 4pm.” It detailed what items to being–including hammers–for the demonstrations.

The advantage users have with BBM is that the news continues to circulate, but is covert enough that it is difficult to trace. BBMs are encrypted and hacking this network would be incredibly difficult, so protestors are able to stay a step ahead of authorities.

RIM UK has stated that it will help Scotland Yard in any way it can, so the BBM may only have so long to live as a tool for rioters. But most of them are of the young, mobile-minded, tech-savvy generation, and there are a variety of tools at their disposal.

The Police and the community are learning also in real time how to help each other – by also using social media. Citizens are using Twitter and Facebook to help the police have better intelligence and the police are learning this week how best to respond and to monitor.

Here is a Google map that is being run to track incidents

The Police are setting up a Flickr site to help citizens help the police identify rioters

The Guardian has a map that shows incidents all over the UK

The only chance that citizens and the police have to get ahead of this to to get ahead of it – they have to use the same tools better and faster.

I make no ethical comments – this is what it is and there is no going back

This is the reality of our world today – it is rushing to a network state. So if you don’t know how to use this well – you are at extreme risk. You just don’t know what is going on and the pace of your interaction with the world will be too slow. It does not matter how small you are – you will be too slow to know.

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Arab Spring – the networks over throwing the hierarchs who have failed their people – Business next?

Ah the irony of western politicians supporting the Arab spring and social media and THEN not seeing the link to their own problems? Oh the irony of big business still keeping a firm hand on their communist central planning systems! It will change…

Don’t you feel something big in the air? The Wirearchy amplified events in the Arab world this spring and many regimes have fallen. Do you think the rest of the rulers feel safer now or more vulnerable?

In the last 2 weeks, the establishment in the UK has been rocked. Again the amplification and openness of the Wirearchy has prevented the old system from being able to contain the firestorm. It is also early days, but it is not just the Murdochs who have been shaken but the entire establishment. Do you think that this will blow over and all in the UK will go back to normal?

In the US our political system is log-jammed at a time when it has to cope with all sorts of real problems – do you think that we will avoid a crisis here at home?

Are you ready as a individual or a CEO to cope with what is unfolding?

This global meltdown and systemic failure of our system is I think the real context for social media and its tools and your adoption of them. The Wirearchy is the only way to survive. The Hierarchy is the sure way to die.

Many have thought that they could adjust slowly to the Wirearchy.

It was great to see how they are slowly being adopted in the enterprise. It is now common knowledge that we have to be more human in our work and how our work must do something that offers real value to all not just to a few owners.

Many know that we should go here. But maybe not just yet – so much risk in changing right?

Bu now all the risk is in not being there. The system has tipped and total turbulence is here.

Chaos is our new normal. Will the Euro continue and what will happen if there is a default? How will America get though its own financial and fiscal crisis? What will this mean to the election. What new weather event will affect us and the global system? Will the millions of underemployed, unemployed sit quiet?

And in this context a new kind of competitor that has been forced into being by the evolutionary pressures of this time.

An entirely new economy, based on the small tribal networks, will emerge very quickly out of the desperation of the people who have no alternative. They need no capital. They don’t need what you needed. They can get the best people. They can go from an idea on napkin to your doom in 5 years.

All organizations who rely on concentration will be too slow to keep up as the pace of change accelerates.

If you as a person cannot find your way through this and if you the CEO of a large organization cannot be agile enough, these waves will take you down.

So it is now “Change or Die”.

Boingo – Using the Network to aid Sales and Marketing

So how do you apply the network to a conventional business? Here is how Boingo has done this.

What would it be like if your business had a sales, marketing and support force that was 1.3 million strong that you did not have to pay for? What if you could source this leverage with a tiny central force? Sounds impossible? Do you have any idea of how this could work?

Now that everyone is using Social Media – what I am seeing mainly are people who using the new tool in the old way – trying to shout above the noise – “Look at ME!” “Aren’t I cool!” “Aren’t we good!”. I am seeing a Dilbert approach – “Let’s have a Facebook site” “Let’s get on Twitter”.

Most do what most do when a new technology arrives – they apply it in the old way and so get nothing in response.

So what then is the power and leverage that you can harness by using social media well?

Boingo are on their way to finding out how to do this. Oh yes and I am one of the people that are part of this and oh yes I am not being paid and nor do I in any way work for them. I am living the theory.

So how might this work and so how might you do this too?

Boingo have a class of people that are deeply committed to the enterprise that Baochicalls her “Super fans”. They and why they are connected to Boingo and each other is the core of the leverage potential. We will meet 4 of them in this post who agreed enthusiastically to be interviewed by me. As you will see, these Super Fans are attracted first of all to Boingo by the obvious:

  • The service – easy one stop access to Wifi in Airports and Hotels – is now no longer a nice to have for travellers but an essential
  • The support for the service is outstanding – got a problem – you get instant personal help

But a great product is not enough. Nor is good service. What is the differentiator for Boingo is the human nature of the relationship that Boingo has with its customers. Most organizations do not allow their people to be human. Service people are often ciphers working from a script. Boingo have set up an environment where their key point of contact is a real person who is allowed to be herself.

She has a name and a face and we are all in awe and a bit in love with her. We all feel her presence watching over us. It is way more than getting her help when we can’t sign on. She watches out for us. Have a problem – A quick tweet. In minutes she is there. She is like the guy who runs the old corner store who holds your keys when you go away, keeps an eye on your kids in the street, helps you find a new roommate.

As Nuno Montegro, a customer in Portugal says – It is not what she says but how she says things that is the difference.

Nuno is like me, a customer who actively refers others to the service.

Most of Social media is all about Weak Ties – They are very useful but Weak Ties don’t get people to do much – or risk much – or commit much – that is why they are Weak – they are easy.

If you want to do something – Civil Rights in the US – you need Strong Ties. (Nice new piece by Malcolm Gladwell that explores Weak and Strong Ties in depth)

The key to attracting Strong Ties is being human. It is NOT PIMPING your product. It is instead to show that you really do care about ME. It is instead to show that you can indeed be trusted.

How do you show this? Nuno makes the point that every service and product fails at times. The key is to offer the best possible response to the inevitability of a problem. The best possible response is to know from experience that if there is a problem, you can reach a real person quickly and that they will go the distance to help you get it fixed. “I felt as if I was the only customer in the entire world when she was helping me” Nuno told me. I had the same experience.

Attracting Strong Ties is all about “Giving”.

Aaron Strout is the CMO at social media agency, Powered Inc. and is also Super Fan. “Boingo is proactive and they don’t expect a direct return – they are not selling all day – so if they want an inch, I go the mile back. It’s Karmic! I know if I have a problem that they will look after me. If people are good and do good, then good comes back. Not necessarily directly but good gets attracted back. We talk about a wide range of things that affect me not just the product – which is great too – have to have that – they listen.”

What Aaron is talking about here is a very old model for an economy that was the centre of all tribal economies – the Gift Economy. In the Gift Economy, the Big Guy is not the man who has the most stuff but the person who gives the most.

This is the power in networks – this is how Open Source Works too.

Cliff Bremmer is a programmer who works for a company called Carley Corporation that bids on government contracts to develop instructional CD base/computer based training for the US military.  ”In my spare time I help companies understand and navigate the social media spectrum in a professional yet interactive way.  The company I’m currently helping is the one my father works for called the Jamaica Pegasus Hotel“.

The Gift?

Not only is he a fan but in interacting with Boingo he has learned a lot about how to use SM media well. “If there is anything I’m proud of lately it’s that I helped the Pegasus Hotel promote their brand with the help and support of @Boingo and other companies to become one of the most popular brands in Jamaica.” Boingo is  not only helping him with his travel and Wifi but is talking with him and helping him help his dad in his business with advice and Tweet Up prizes such as free access and bag tags. The Gift in action!

He can see the flaws of how most use SM – “They are stuck in self promotion versus communication. I can see through it all – it’s all about them.”

In the Gift Economy that drives Trust and so Strong Ties, the starting point is YOU. In the non network economy the starting point is ME. No small difference!

Shelby Rogers is a flight attendant, a serving soldier (in the active reserve) and the wife of a serving soldier. Travel is her life. When she is not working, she travels. Access to Wifi has made her travel better – “I now know more than the Gate Agent does about my flights!” and it has taken away much of the loneliness that travel brings with it. Who has not been alone eating room service and watching TV in our room? “I can stay in touch with my husband on Skype and every city seems to have a friend in it.”

For Shelby, Boingo is a service that truly meets her needs. But it is how Boingo is connected to her that has transformed a pleased customer into a Super fan.

How often has your service provider taken you out to dinner? “We have even had dinner recently. I am now a walking billboard for Boingo with winking bag tags!”

So what does this mean? What are the lesson for both Boingo and for you?

  • Baochi is no accident – the Boingo senior leadership have created the role and given it the space to enable someone who is naturally humane to be herself inside it. This new way of using Strong Ties to be the centre of a network is all about culture. In most cases senior leadership is too scared to let go. But if you do let go and create this safe place then the power of the network effect can be yours
  • A really powerful network has to have an inner core bound by Strong Ties. This is where the leverage is. One staff person like Baochi can without too much trouble have close ties with 34 people. That gives her an outer network of 1.3 million. If she can handle the Dunbar limit of 144 that creates an opportunity of 400 million! You can see that with the right person, you can have a vast reach – provided you realize that your goal is not to have thousands of relationships but a few Strong Ones
  • The secret is the math of social leverage. Many of you know about the “Dunbar Number”. Some of you know about “Magic numbers – the hierarchy of trust in human groups. If you don’t here is a quick primer.

So what now?

I think that the next stage would be this:

  • At the moment all the Super Fans have a strong relationship with Baochi – I think that the best next step might be to find a way to connect them to each other
  • At the  moment most of the dialogue is still about the obvious and excellent service that Boingo provides – I think that some of the work that the Super Fans could do might be to deepen the conversation – Shelby touched on this in her interview with me – What is it that being easily connected while travelling does? In her case it helped her deal with isolation and loneliness – it helped her do her job better – it kept her in touch with her husband – these are deep issues that I think connect all of us who travel a lot

As I think about networks, I think about the laws of physics. All systems have order and attractors. Some force is needed to keep systems coherent.

Think of the Sun in our own local system. It has mass that provides a gravity that holds all the planets and asteroids and stuff in a pattern. It has energy that creates life in the system. I think that any healthy human social system has to have gravity and light.

At the very centre is the “Right Space” a Trusted Space created by the leadership. In this Space, the Right Person – Right being a person who as part of her natural persona truly cares about others. Connected to her is the fuel and the mass that makes up the Sun – the Super Fans. The closer they are to the centre and the closer they are to each other – the more mass and the more energy. The more mass and energy, the larger and more healthy the network of Weak Ties that form up around the Sun.

What gets in the way is our fear about losing control.

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At Disney the surface of the Brand Icon never changes but inside the mask is a person who changes all the time and so is never allowed to speak.

But in the new world we have to take off the costume and let the person inside have conversations with the public – HARD to do.

So then how did Boingo organize to do this internally?

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So what is the new organization – the network!

The Ford model is the machine – but we are humans – we are not identical parts but diverse aware living beings. So how can we best organize – as all living beings organize in a network. Many of my posts show parts of this new reality that is here already!

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Picture from Delta7.com

Did you laugh when you saw this? I did. I laughed because the picture tells the truth that we dare not speak about. That the only thing that keeps the formal organization going are the informal, unseen, human, social networks that both inhabit it and cross its boundaries.

What really lives and works today are social networks. But all the rules that are used in the traditional organization are based on the central metaphor that it is a machine and that people are merely components.

This is the disconnect that Jon and I wish to talk about in this new series on HR and IT.

There are many reasons why the old model is not a good one any more. The disconnect between the machine model and our humanity makes us ill.

CHD Whitehall

This slide is taken for Marmot’s historic study of the UK Civil Service. (The Whitehall Study) What it shows is that our hierarchies kill us. The issue is control. Those in the lowest levels are 5 times more likely to die of Heart Disease than those on the far left, the Senior Leadership. High demands and low control cause our immune system to be compromised. The traditional organization is all about control. CHD is not the only outcome. At my old employer, a major bank, more than 60% of the women staff used anti depressants. We were typical.

We are miserable inside these kinds of organizations – if a better alternative arrives we will go there. Many of my kids age group, about 30, will not work in such places. They just can’t cope with the control.

These organizations cannot cope with change. And Change is all there is right now. We also know how unresponsive these organizations are to change. I was stunned to know this week that most governments in North America still use Word Perfect! This of course is tiny when compared to facing the challenges that confront us all.

There are new organizations based on natural models that are now at scale and making a difference in the world. They are now ready as a model, to be applied everywhere. You think I exaggerate? Let’s look at these numbers.

Skype has 500 million customers/users and only 600 staff. How many people work for your Telco?

Mozilla has about 350 million and so does Wikipedia. Mozilla has 375 staff and Wikipedia 30.

Back in 2007, Craigslist had the 7th highest number of page views of any web company. It had 23 on the payroll. Yahoo, the # 1 had 10,000. Time Warner #2 had 90,000. No wonder the newspapers lost the personals and the locals and could never get them back.

Here is one I bet you never thought of. It is the grandfather of the natural model – the first Chaord or as Jon might the first Wirearchic Organization.

Back in the 1990’s Visa International had 355 million users, 23,000 partners and operated in more than 200 countries but had only 3,000 employees. The NatWest at that time had 81,000 and B of A 91,000 and a fraction of the scale. Here is more current information

All these organizations are designed as natural networks. They use Group Forming as their value proposition.

In the next few weeks, we will talk about what is it about these natural network models that make them so effective? What are the new rules? Why does social media make so much sense in the network model? Why is it so hard to install any of this in the traditional model?

How can a traditional organization stand up to this? After all an artisan weaver could not stand up to the big mill. So once again, a better model will trump the lesser. The industrialization of the world took less than 50 years to be dominant. How long will it take for the natural model to supplant the mechanical?

Is this something that you should know about?

There will be a lot of pain along the way. Especially for those that get caught by the transition. But there is good news. I think that we are about to return to a world where mankind is no longer separated by his tools and processes from nature but is in fact ironically taken home by his new tool set. The plow took us to a cold inhuman and unnatural machine world – the internet and the metaphor that it embodies will return us home. Home to a world where we live again inside the metaphor and rules  of nature herself.