Social Media and the SME: Bubble or sine qua non?

The core fact on Social Media in their various flavors and incarnations are that they plot participants and practitioners on a graph whose information flow displays amazing speeds which we could not have imagined before. What exponentiates the reach of SM is the fact that technological progress has put a huge amount of technology in our palm. To paraphrase one of the speakers of the event, “radio needed you to be near enough to listen, TV needed you to be near enough to watch and the computer brought you to reading distance”. The onslaught of sexy gadgets with their unprecedented ratio of technology per unit of volume obliterated any sense of divide between humans and technology: the iphone is on your nightstand, on your desk, in the bar, in your pocket, in your ears (and in your heart) and brings you business and private equally well.

In economies with high connectivity information is vital and its spread mimics that of epidemics (Christakis’ research is a good inspiration in this context). This is the space where positive feedback creates powerful non-linearities. In order to explain this imagine a Polya Urn with one black and one white ball. Randomly pick a ball from the Urn and put it back together with an extra ball of the same color so that after each round we have one ball more than before. The interesting question is: What can be said about the percentage of say black balls in the urn? Polya’s theorem tells us that:

  • The percentage x of black balls will in the long run converge to a number acolon 0le a le 100
  • Each such a is equally likely.

This fits well with such phenomena as market shares of two competitors (black and white) where a user chooses between one or the other. At the beginning subtleties and luck may stir their market shares in some direction. Once the phenomenon has gained enough momentum we will see a convergence to a stable market share ratio. This ratio is then hard to change. Examples are Google vs Yahoo, Google’s search market share of about 67%,  Microsoft vs Apple (even now with Apple having a larger market capitalization than Microsoft the latter keeps almost 90% of the world wide PC market). This explains the difficulties Google+ is facing in its quest to upset Facebook (if all your friends are on Facebook why would you go to Google+?) or the insurmountable odds Bing has working against it in its attempt to put up a fight against Google. This shows that in such economies leadership has to be alert to maintain their SME’s chances to jump on the right bandwagon early.

A SME may be affected voluntarily or involuntarily by SM. In the former case it uses them deliberately for PR, Promotion, customer acquisition/binding  etc and in the latter it is affected because Social Media is a massive phenomenon in which both its customers and its employees actively participate. A SME which uses SM may use them in an extrovert way or in an introvert way. The former includes PR campaigns, promotions and all that and the latter includes all sorts of participatory intranet web applications used to allow employees to quickly exchange information thus creating a kind of collective knowledge in the Enterprise. This latter type of application makes spatial aspects of the Enterprise irrelevant and in fact has effects similar to collocation. It used to be that firms brought employees out to open shared spaces in order to create efficient information flow.  Participatory intranets  do the same on a virtual level taking physical geometry out of the equation. I have taken a look at a participatory intranet in a German technology SME spread in several cities and was surprised to find that adoption of the participatory intranet was higher among the tooth of the firm than among the tail: contrary to what perhaps we might have expected the money making departments of the firm (tooth) used the tool much more than the non-money making ones (tail)!

Addressing some misconceptions I have heard at the meeting:

  • If you you are an SME and you do SM your should not be afraid of making mistakes. Success without mistakes has a name: beginner’s luck. Mistakes will not be irreparable: MacDonald’s hijacked twitter campaign was a huge mistake but overall if a cheeseburger were to stand for MacDonalds as a firm the mishap chipped away a cucumber slice from it for an instant. The overall benefit is still wide open.
  • The concept that an SME is too small to benefit or need to experiment with SM is wrong. Apple, Microsoft, Facebook and the rest of today’s tech giants were no more than a couple of kids in a home garage. You cannot be smaller than that.

Finally Social Media may be a bubble but the Social and technological trends around it are not. A SME needs to actively maintain its own take on SM and stay in striking distance.

March 27 2012 – Fraunhofer FIT, the IDSC of IZA, Synergie and T-Systems put together a workshop on Social Media and the Small and Medium Enterprise. It was hosted by Fraunhofer FIT in the beautiful Schloss Brirlinghoven. The workshop was the first of 5 such workshops. The particular focus of this one was Leadership. The IDSC of IZA is a partner of this project whose aim is to shed some light on the subject and create a body of evidence which will provide support to SMEs confronted with Social Media in Germany. The project is sponsored by the German Federal Ministry of Economics and Technology. This post contains residual thoughts of my short contribution to the event titled “Social Media: Bubble 2.0 oder sine qua non?”.

Here is some quick stata code to play with Polya processes:

local black = 1
local white = 1
local total = `black’+`white’
local iterate = 500
local ratio = `black’/`white’
local incr = 1
local obs = `iterate’+1
set obs `obs’
gen collect = .
replace collect = 1 in 1

forvalues i=1(1)`iterate'{
local random = ceil(`total’*runiform())
if (`random’ > `black’){
local white = `white’+1
}
else{
local black = `black’+`incr’
}
local total = `total’+`incr’
local ratio = `black’/`white’
local pctblack = 100*`black’/`total’
replace collect = `pctblack’ in `i’
}

sum collect
gen index =_n
line collect index

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