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Leading Your Company, Customers, and Partners

in the Hyper-Connected Economy

Table of Contents

Part 1: Evol ving Networks
Chapter 1 - The Networks Come Alive: What the Changing
Flow of Information and Ideas Means For Business 3

Chapter 2 - Emerging Technologies: How Standards and
Integration Are Driving Business Strategy 19

Part 2: Evolving Organizations
Chapter 3 - The New Organization:
Leadership Across Blurring Boundaries 39

Chapter 4 - Relationship Rules: Building Trust and
Attention in the Tangled Web 59

Chapter 5 - Distributed Innovation: Intellectual Property in a
Collaborative World 79

Chapter 6 - Network Presence: Harnessing the Flow of Marketing,
Customer Feedback, and Knowledge 101

Part 3: Evolving Strategy
Chapter 7 - The Flow Economy:
Opportunities and Risks in the New Convergence 123

Chapter 8 - Next Generation Content Distribution:
Creating Value When Digital Products Flow Freely 149

Chapter 9 - The Flow of Services: Reframing Digital
and Professional Services 167

Chapter 10 - Liberating Individuals: Network Strategy for Free Agents 191

Part 4: Future Networks
Chapter 11 - Future Networks: The Evolution of Business 207

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Chapter 6: ����� � �� �
� ��� 107

Paypal is trying to create the dominant network for Internet payments. It’s
a classic example of network effects: people will tend to use whichever
system is used by the most other people. Paypal has to make it easy and
worthwhile for users to sign up for its payment system and spread the word.
It got started with a straightforward proposition for potential users: sign up
for an account, and we’ll pay you $10. Initial subscriptions were healthy
but not earth-shattering. Then participants in online auction site eBay came
across Paypal, realized it was the easiest way to make payments online, and
by using it introduced it to others who were regularly sending money to
many people. In early 2000, Paypal’s user base grew by 7% to 10% every day.
Since then Paypal has reduced the payment for user registration to $5, and
introduced conditions that help ensure that the user will be profitable. It
also runs a user-referral scheme, whereby whoever introduces someone
who is eligible for the $5 bonus, also receives $5. Certainly one perspective
on Paypal’s initiatives is that it is implementing aggressive pricing models
to build the network, however the whole structure of its business model is
based on exploiting network effects to their fullest.

Any information-based product or service has potential network effects,
and marketers need to take full advantage of these. Companies need to
assess precisely how their customers may benefit as the network grows
larger. Out of this can emerge a multitude of potential strategies to engage
customers in promotion on your behalf… and their own. You must
communicate effectively the benefits to users of building the network, and
make it easy for them to do so. A simple example is how cell phone
providers offer extremely low rates for calls to subscribers on the same
network. Customers will actively want to get their friends to use the same
mobile provider, because it means they will have to pay less for their calls.
The users of Apple computers have always understood the importance of
spreading the word, and Apple has done what it can to help them. Guy
Kawasaki’s job as Chief Evangelist at Apple was largely to assist the
missionary efforts of its customers. One user designed a “Made With
Macintosh” logo to be placed on websites, clearly explaining to Mac users
why they should want to proactively promote the platform in this way.

3. Create interaction
If you watch MTV, how often do you wish you could put on your own
choice of music? If you live in Europe, you can. Viewers do the
programming on MTV’s VideoClash. The audience uses voice telephone,
mobile text messaging, or the MTV website to vote on what music video
should be played next, so even the producers don’t know which video will
be broadcast until 15 seconds before it goes on screen. The great success of
the initial program in the UK has resulted in VideoClash being rolled out
in local language versions across Europe.

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108 Living Networks

The new game is creating interaction. Increased interaction between you
and consumers results in a stronger brand presence, additional marketing
opportunities, and more information about your current and potential
customers. At the same time, the more interaction there is between your
customers, especially if it’s related to your offerings, the more likely positive
messages will spread. The more your target market is connected, the better
for you.

Instant messaging and text messaging are at the vanguard of how the flow
of messages is changing. In early 2002 there were already well over 75
million users of instant messaging in the US alone, and the number looks
set to soar as the technology becomes integrated into websites. Instant
messaging “buddy lists” that show people’s chat friends are now starting to
include automated conversationalists. Activebuddy is helping companies
like eBay and Ellegirl magazine to create instant messaging buddies that
interact with their customers by answering questions and chatting. Another
firm, Facetime, is helping companies like Dell and FAO Schwartz to use
instant messaging to communicate with their customers.

In Europe, text messaging is now part of everyday life for many people. A
few marketers are trying to send advertising messages to consumers’ mobile
phones, but this is more likely to turn people off than attract them.
However it creates a new medium for interaction. A UK campaign for
Cadbury’s chocolates put a code number on the wrapper of 65 million
chocolate bars. Customers sent a text message of the code for a chance of
winning major prizes, bringing a wide-ranging response of people who not
only provided their mobile phone number, but yield extremely detailed
information on distribution and consumption previously unavailable to

4. Choose fertile territory
Research in Motion (RIM) was a relatively unknown Canadian company
in early 1999, when it launched what it believed had the potential to be a hot
product—a mobile pager and e-mail device called the BlackBerry. It didn’t
have the budget for a massive advertising campaign, as many of its peers
were undertaking at the time, so it sought to tap the opinion-makers in its
target community. RIM recruited around 50 “wireless e-mail evangelists”,
whose job was to visit Fortune 500 companies, and set up BlackBerry pilot
programs that offered free trial pagers. These evangelists focused on
accessing mobile professionals such as salespeople and consultants, and staff
in the companies’ IT departments, because they knew that these were the
ones likely both to take to the device, and spread the word to their peers.4

Since messages increasingly spread by word of mouth, marketing
campaigns need to be designed to tap those groups that are most likely to
spread the word, and be influential in the target market. Sometimes the

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The differences between the workers at each end of this spectrum will be
those we discovered in Chapter 10. A precisely chosen specialization, the
inclination and skills to collaborate with others, and a diverse network of
trusting relationships will be the foundation to spectacular rewards. This
polarization of workers could have significant social impact, both within
nations, and across the globe. We need to ensure not only the broadest
possible access to connectivity, but also that people have the skills and
attitudes to work effectively in a networked world.

10. People and networks will merge
In the 1957 film The Invisible Boy, a supercomputer plots to take over the
world and destroy all organic life—an early contribution to what is now a
long tradition in the theme. Since computers were conceived, mankind has
feared being enslaved by machines with superior intelligence. Despite the
very disappointing progress in artificial intelligence over the last two
decades, the trend is clear: computers are getting smarter. The debate rages
over whether computers will ever become more intelligent than people,
with esteemed scientists ranged against each other. No one argues over the
inevitable continuing improvement of computers’ capabilities. Ray
Kurzweil estimates that computers will exceed the ability of the human
mind sometime between 2020 and 2050. Others suggest that there is
something ineffable about the human mind that can never be replicated by
a machine.

However the real issue is not whether humans will be replaced by
machines, because at the same time as computing technology is progressing,
people are merging with machines. If machines take over the world, we
will be those machines. As you saw in Chapter 2, the interfaces between
systems and people are still very limited, primarily based on clunky
technology like keyboards, but things are swiftly changing.

Scientists at Duke University in Durham, NC, implanted electrodes in a
monkey’s brain, and were able to program a robot arm to replicate and even
anticipate its movements as the monkey reached for food. They then
hooked the signals up to the Internet so that the monkey’s thoughts
controlled a robot arm at MIT in Boston, almost 1000 kilometers away.10 In
a similar experiment, monkeys were able to control the movement of a
cursor on a computer screen, earning orange juice as a reward.11

Others are working on ways to integrate computers into our brains. It will
certainly be useful if I can get a massive database plugged directly into my
brain—no more forgetting people’s names! But it doesn’t need to go that
far. David Mann envisions that his intelligent spectacles will use face
recognition software to attach nametags only we can see to the people we

Living Networks218

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The key issue is that as the interfaces between people and digital technology
improve, people can be better connected. We can share our experiences,
our ideas, and our thoughts with whoever we choose. The micro-messages
that are currently conveyed by brief text messages will be as broad in scope
as we wish. The boundaries between the individual and the networks will
have dissolved.

Connected to the future
Whatever the future holds for business and humanity, there is one thing
we know for sure. The networks that link us, that make us one, will be at
the heart of our destiny. We are living at a critical juncture in the history of
our species. While we will all continue as individuals, in control of our own
destinies, at the same time we are participating in the birth of a higher-
order lifeform. Just as a living human brain is ultimately a set of neural
impulses, the living networks consist of the flow of information and ideas.
Together, human minds and technology form the substrate for that flow.

The implications of the networks’ birth encompass every aspect of society,
politics, and business. This book has examined how business is changing,
focusing on the present, and what actions businesspeople need to take today
in order to be successful in this emerging world. Business is in fact central
to the vast majority of these flows. Those who are actively engaged in the
issues covered in this book will play a fundamental role in how the
networks develop, impacting our entire future as a society. As you finish
reading this book, consider your personal role in our shared evolution. It
is an important one. You have the choice of leadership, of helping to bring
the living networks to reality, and in the process achieving success for
yourself and those around you. Please grasp that opportunity fully—your
energy and vision will help to accelerate us into the most exciting time in
human history.

Thank you for accompanying me on this journey into the living networks.
I wish you every success as you participate in the growth and evolution of
this exhilarating new world.

219Chapter 11: Future Networks

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