It's the Trough of Disillusionment and So Much More

We're in for an interesting ride. The social software market is going through a bumpy patch. The 'trough of disillusionment' is the third phase of Gartner's Hype Cycle and I think we are in its valley in the social software market.  For those that aren't familiar with the model, it's below:

Why are we here? Well everyone got pretty excited about social tools ability to spread information and the adoption rate by individuals has been phenomenal. If you need a refresher on adoption rates, re-view What is Social Media (not for polite company but gets the point across). So all you have to do is listen to the conversation and jump in, right?  That works quite well as an individual or even a small company.... but it doesn't take much size before an organization gets wrapped up in their own operations and drama, used to the way things are, and pretty rigid when it comes to change.  And what I think many people have not gotten is the magnitude of the change we need in organizations to take advantage of the new information environment - this is not just about a software category - it's about the fundamental nature of information exchange and relationships. It comes luring us with a 140-character text box - what could be simpler? But it amounts to complex information arbitrage - something I wrote about back at the beginning of 2008.

Business structures have been set up and optimized for an environment where information was very unevenly distributed. They used that inequity to maintain their margins, keep their employees, distribute profits, etc. Most large organization can't change very quickly and are largely operating as if that environment still existed. The problem? Information barriers are crumbling quickly outside organizations and savvy customers can easily know more about their vendors than the vendor employees do - with a little research. Customers can easily find other customers to confirm experiences. Customers who use a product day-to-day often know more about it than their vendor account manager who doesn't actually use the product. The days of glossing over a problem or using a 'smoke and mirrors' approach are dying.

What is a large organization to do? Setting up a Twitter account should be the last of their worries. Not only do customers have better information, the cost of sales has dropped and companies still have a huge sales and marketing organization that can't just be lopped off. They've got customers demanding answers to which they may not know or have a great answer. Because of the prior information inequality, relationships were not the highest priority thing to attend to. Even recently, I've seen a lot of senior customer advocates being cut from marketing departments because they don't have direct ROI and in tough times, they are the first to go. But relationships are becoming the core competitive differentiator. If I as the customer can get somewhat equal products for the same price (and increasingly that is likely because the customer has access to information by which to negotiate), I am going to do business with the company I trust and like - not the one that professes to be perfect but seems highly disingenuous. Middle management is used to being the conduit for information and the hard truth is we just won't need as many layers of management as we used to. For the managers we do need, we need a very different style of leaderships - one that facilitates rather than directs, that promotes others, and that ensures cross-functional alignment and consistency. 

Structure drives behavior and today's organizational structures are not set up for today's information environment. Companies need to manage their communities of constituents like consenting, opt-in adults. Winning that trust from people is hard when starting from zero but many companies have created antagonistic relationships with customers and so have even more work to do. So they start down the path - by creating a blog or setting up a Twitter account... and it looks like a lot of effort without the direct reward in the scale or timeframe of more traditional initiatives. And it can look like that for a pretty long time, because customers' validly developed skepticism is a hard thing to turn. And that's where we are generally. Companies are looking at all of these social initiatives and re-assessing. Some community managers are being let go. Other companies don't even realize they need a community manager. Some are slogging through and doing the hard work of change management.

The rest of 2009 and 2010 will separate the pack - those organizations that see the changing information environment and realize that it links directly with how they engage customers, partners, and employees will start seeing results after months or years of investment. Others will leave social initiatives on the side and ignore the changing dynamic at their financial peril. The power has shifted. The organization needs to be shaken up. We are just at the beginning of where this shift gets really interesting. Who's along for the ride?

Note: just saw a note on Twitter about how the head of BMW's US Marketing group moved all of his people into new roles... great example of how the break some long held habits and 'think differently'

Comments

[Steve Ardire]

Hi Rachel - a very incisive post with sobering reality check on use and efficacy of social media to organizations today.

IMO complex information arbitrage (love than phrase) that you wrote about in Jan 2008 is getting more muddled with even shorter attention spans today.....YIKES !

> The days of glossing over a problem or using a 'smoke and mirrors' approach are dying.

Bingo and the shake out of pretenders and wannabes will be Darwinian ;)

> Who's along for the ride?

Me !

[Aurea Astro]

Great article! Considering the longtime information access imbalance between large and small businesses, it is encouraging to observe how social media creates more parity between firms of different sizes, as well as small businesses having a competitive advantage via their close customer relationships.