Innovation isn’t just a ‘thing’ that can be manufactured, rather, to quote Verna Allee, it is an emergent property of networks.
Therefore it makes perfect sense for any individual or organization that wants ‘more innovation’ to seek to engage or build a productive and profitable external network. Some people refer to this ‘open innovation’.
The problem is, whilst productive networks can indeed be very powerful, they are generally invisible, have a limited lifespan, and are and are easy to destroy. As the rate of connectivity continues to increase exponentially, we need to come up with new sustainable networked business models. So what can we do?
Following a recent discussion with Cassie Robinson, Ellie Ford and Simone Jaeger, we concocted the bare bones of an idea (I hesitate to call it a business model, but that is indeed what we would like it to become), which we think could just work. It’s not fully formed but we’d like to share it here so that others can help make it better.
We call it, Give to Get.
Visualising and Sustaining Networks
There are two big issues with networks that must be addressed head on if we can make any progress in this space. Firstly, networks still tend to be largely invisible. Both formal hierarchies and informal networks play equally important roles in how anything happens, from a company merger to playground politics. And yet hierarchies are visible all around us, either through the organization charts that loom large over any company, or through the symbols or power and status that visibly indicate our place in society.
“Over time, hierarchies trump networks, however at any point in time, networks trump hierarchies.” Karen Stephenson
Our informal networks are much harder to see. Who do we go to for advice or information or with a secret? Not necessarily our boss or those ostensibly more powerful than ourselves, rather to those whom we like, respect and trust.
We are now starting to see a whole bunch of interesting tools and apps emerging that help us to visual social networks e.g. how our LinkedIn connections are connected for instance. Companies like Trampoline Systems and Cytoscape will visualize your social networks which is definitely an important first stage in the process, but not sufficient.
Secondly, networks cannot be propped up in perpetuity. And yet many are, but that typically kills their value. Rather, people have to want to come together to meet likeminded people, to learn, or to build something together. In our experience none of these things can be dictated by any kind of formal structure, rather must be (largely) voluntary for the participants and the organisers. However this makes it very hard for any network hosts to justify the time and effort in running and managing them properly.
Existing Models Don’t Work
Most networks essentially work based on the premise that everybody benefits through participation. However, when it comes to trying to monetize this, you can easily kill what makes the network function in the first place. So one of the challenges is coming up with a sustainable business model. The two standard approaches are subscriptions or transaction fees, both of which are fundamentally flawed for the following reasons:
Subscriptions – By charging a subscription you automatically force people to think about what they are getting out of it the moment they start paying/join the network. However any network is by definition a ‘numbers game’ – in other words ‘you have to kiss a lot of frogs to find your prince’. Therefore if you charge subscriptions for people to participate in a network, some people will consider it good or even great value, but at least as many people (and probably the majority) will consider it poor value depending on what they get out of it directly. The cliché is or course, that you get out what you put in, in terms of effort, however if you’ve already paid a subscription you are normally less likely to try as hard.
Transaction fees – Other networks tend to defer payment but request some kind of transaction fee for an introduction or as a percentage of business generated. However it is undeniably true that, regardless how good your network is, you will always make more introductions than the number of direct pieces of business occurring, and so you are bound to have more unhappy customers than happy ones which is also not very sustainable.
A ‘Good’ Pyramid Scheme?
Pyramid schemes get a bad name, but here’s a potential networked business model that essentially operates as an inverted pyramid scheme, that we call it Give to Get.
The basic principal for members of the network is you have to offer to help to two (or more) people with something they couldn’t do without you. It could be help, support, advice, resources, introductions, or possibly even commissioning a piece of business. Each time you do this you get a credit – this could be formalized with some kind of currency or points based system, however are first this is always reputational and informal.
Only once you have built up some credit are you in a position to ask for help from any other member of the group i.e. 2 x Give’s = 1 Get. The only way that this unequal exchange rate can function is if a) people pro-actively try to help each other and b) the network expands over time. Bother of which ought to be a good thing for everyone.
Any network must be underpinned by trust but how are people who don’t follow the spirit of the participation policed or punished. In terms of what to do about ‘freeloaders’ or ‘the tragedy of the commons’, the idealist in me thinks that this ought not to be a big issue as people won’t get the reputational credit (or actual credit) for being helpful unless they deserve it, and so any abuse get’s weeded out very quickly.
However without some kind of social connection it would fall apart, so the network ought not to grow above about 150 people, the Dunbar Number, above which the network should split in two separate networks. This model therefore has the opportunity to grow sustainably, creating a network of networks. I’m not sure whether there is a lower size limit below which this won’t work.
“The value of a network is proportional to the square of the number of connected users of the system.” Metcalfe’s law
This system ought to be better than any kind of transactional or barter system is because you pay forward the benefit to people who need it. If members of the network adopt this as a principal of the network then everybody will prosper. In sociology, this concept is called “generalized reciprocity” or “generalized exchange” and the idea was popularised with the concept (and film) Pay it Forward.
Eating Our Own Dog-Food
Google use the phrase Dog-fooding, by which they mean they ‘eating their own dog-food’ and trying their own innovations before unleashing them on the world.
In the same spirit, we already operate this Give to Get principal informally in many of the things we do. For instance we tend to make much of our Union network, Innovation Service Provider Network, and Lead User Network free to access on this basis. We do charge for other stuff (advice, training, project management etc) as a by-product but I’d really like to try monetizing the networks more directly if we can.
One really interesting example, that I think we could emulate comes from the social currency Flattr, with is a social micropayment system that works as follows:
This becomes a way that writers can start to build up revenues over time for doing what they do, without charging a fee up front that will put most people off from engaging in the first place. In essence your monthly fee becomes your network fee but rather than it becoming an administrative overhead, it actually goes to the people you value, which acts as a further incentive to them to keep on doing what they do.
We intend to try this with one of our existing networks and will see what happens and will report back in due course. In the meantime, we’d really appreciate your builds and comments as ever, or links to other experiments or examples where this Give to Get principal already works.
The top image is a map of the frequency with which people in different places @reply to each other on Twitter. Credit to Eric Fischer under Creative Commons: http://www.flickr.com/photos/walkingsf/
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If Flattr were virginmedia, or BT this would work, but no consumer is going to willingly elect for a tax that has a minimal chance of benefiting them. Why? the majority of people on the internet are not content providers, they are still users. Where they are providers they rarely expect a return for being able to vent. This is not a model to generate revenue for the music, publishing or software sectors. Should I expect to generate twenty pence from having vented my spleen on this, will I spend my evenings generating further guff in the hope of generating ‘likes’? No – I did it because it feels better.
This is an interesting idea.
One concern I would have is that it is possible to game. If a single node in the network is willing to award reputation points in return for minimal help, the network can easily be breached. So this system depends on the trust of its members. Perhaps it should only be limited to the most trusted, or to the network’s gatekeepers.
Hi David – thanks for the comment and for venting your spleen on our blog. Glad you feel better and please accept one 100%Open credit for your efforts! 😉 I take the point that nobody will willingly willingly elect for a tax before it benefits them but that’s exactly what I mean by the failure of existing subscription based models. Some people perceive these to be good value but most don’t. I also take the point that most people are not content providers but they are all looking to do something even if it is only retrieve some information – but slowly the web is becoming about other stuff too – about interaction, engagement, conversation, collaboration etc. The whole point of Give to Get is you pay after the fact, once you feel you have received some value, and importantly it’s discretionary. Wildly optimistic for sure but I genuinely think this could work as we essentially operate some small networks already along these lines and it has proven to work for us and others (I was hazy about the details in the blog not for our own sake but as I didn’t want to talk about other people’s business without their approval first). I do however totally disagree that this would work with the likes of a big media or telco behind it like Virgin or BT. This approach needs to start small – be human – which few big brands can do well. Scale comes later if required, but bigger isn’t necessarily better.
Webisteme – yes I totally agree this is based on trust and therefore easy to game at scale which is why I’m in favour of starting small and keeping group sizes to no more than 150 (the Dunbar number). Below this scale (and we run various networks sub 150 members), it is possible to have some kind of relationship with everybody, and if any gaming is taking place it’s possible to have a ‘quiet word’ and sort things out simply and discretely. Beyond 150 I suggest creating a new network – I’m not entirely sure how that would operate or how members would (or should) transfer from the first network to any subsequent ones, which is one of the things I was hoping to get input on via this blog.
Thanks again for your comments. Much appreciated. R
A really interesting post, Roland. I will think about it over the next few days and see if I can come up with some more reflections, but a couple of initial reactions:
– I wonder if adding the credits, even in this ‘inverted pyramid’ scheme, will skew behaviour, and change the motivation for connecting. It might lead people to spend time on things they perceive as helpful or ‘credit-worthy’, but remove some serendipity and interesting conversations without purpose, which is one of the great benefits of networks
– I would be cautious about the 150 person limit. Although it’s very beneficial to know the people in your network, your view of who is useful might be different to someone else’s. So while 150 might be a sensible limit from the point of view of an individual member, it may be better to have overlapping 150 person networks.
Just some quick thoughts. Look forward to hearing more on this.
Thanks Louise. Take your point about credits and as we currently operate, it’s purely reputational and not some kind of points system. I agree, anything that involves collecting points/credits leads to gamification which isn’t necessarily a bad thing but so long as the behaviour it encourages aren’t at odds with what you are trying to do. This links to your second point about size limit. Whilst, bigger may be better, we all police each other in a smaller group, which simply isn’t possible when it gets larger. I really like the idea of overlapping networks though and am curious how this could be implemented. Anyway, I appreciate you taking the time to comment and I look forward to hearing any further reflections over the next few days. Roland
Yes, great post Roland, lots of food for thought. I loved the idea of overlapping networks too, Louise. When reading, my mind’s eye was struck with a huge 3D network visual full of quantum possibilities. Anyway, back to earth…!
It would certainly be an interesting challenge to balance the trust and sustainability of the Dunbar ideal, with the ability to move into an overlapping network when new opportunities to ‘give or get’ were identified. Members may not wish to leave their original network either, wanting to reserve the right to have feet in two or more networks in order to keep multiple ideas and conversations going.
The anthropologist in me liked the cooperative reciprocity at the heart of ‘give to get’. Setting the tone for an ongoing commitment of contribution for the benefit of the community would be vital, as you pointed out, if members adopt this as a principal then everybody would prosper.
Just a final thought on monitoring credits – many of the give to get exchanges may happen in an adhoc, undocumented context such as informal conversation or phone calls. Its a setting the tone thing again, but maybe there would need to be some sort of explicit honour system where if someone had received help offline, they would pledge to remember to assign the credit to the person who had helped, when back in the online space.
“Most networks essentially work based on the premise that everybody benefits through participation. However, when it comes to trying to monetize this, you can easily kill what makes the network function in the first place. So one of the challenges is coming up with a sustainable business model. ”
I think we are solving this problem
see more here http://www.sensorica.co/home/building-a-community
Great post Roland. Either it’s a profoundly good idea or you are simply forcing networks as markets. This will keep me up all night… The economist in me says that this is precisely how ALL human networks function, with shadow (implicit) prices describing the terms at which self-interested individuals engage with each other. I can see the benefits of making these terms explicit but a key challenge will be getting the price right. Hayek worked out a long time ago that decentralised systems (markets) do this job rather well. In which case are you simply advocating that networks should be structured as peer to peer consultancy markets where people ‘pay’ and are paid for the privilege of networking with each other??
Great to see this coming to life Roland after the conversations, reading, thinking etc that we’ve been doing. It really does feel like an experiment and I think this kind of experiment wouldn’t have a good testing ground without the levels of trust that 100% Open have fostered throughout their networks.
I’m interested in thinking further about the framing, tone, comms of this from a service design perspective.
But I’m particularly interested in the overlapping networks idea that Louise touches on and that we also talked a bit about in our conversations. What the Give To Get model looks like when it is working across networks, rather than just with one network. With the various networks Ellie, Simone and I are currently working with, and with 100% Open’s networks, I really think we could widen the experiment to network networks.
On an aside, we link to the Sensorica site on http://www.thepointpeople.com – I think there is some great stuff in there… I just don’t quite understand some of it/ it is a specific language that would be very hard work for people not familiar with Open Source etc. Would be good to talk further with Tiberius though!
Tiberius – many thanks for the link. I did have a look and didn’t quite get the model either (like cassie). Would be worth a chat thought ot better understand what you are doing though.
Hasan – nice to hear from you and sorry to keep you up all night 😉 Yes I agree this is how human networks operate, so all I guess I’m suggesting is to formalise it. I agree that getting the price right is key but here is where I suggest that prices are set retrospectively once you understand the value that has been created. This requires a strong degree of trust of course. I guess I am saying that networks create great deal of value (and that value creation is shifting from knowledge creation to network creation) and so we need a better way of monetising them.
Cassie – thanks for your comment and agree that framing this correctly is key to it’s success or failure and it would be great if you could help with that. And I love the idea of networking networks, but am hesitant to a) run before we can walk and b) becoming ‘too meta’. Having said that, refining some principals that different networks adopt could be a good place to start.
Thanks for this, it is a really interesting post! Some quick thoughts before I rush out for Halloween celebrations.
The asynchronous element in the network (I accrue credit ‘from the network’ by helping someone whose help I don’t necessarily need) helps match needs and resources better than barter, while the lack of $$$$ reduces incentives to game the network & splash the returns outside – you have to find value in the network to want to game the network.
There are three intriguing issues which your post does not address, though:
The first one are the informational requirements to make this work – participants would need to be fairly well informed about what others can bring to the table to make good decisions. Or is this information generated in an emergent way as some central players make introductions or refer ‘seekers’ to ‘solvers’ thus cashing in? Or is it just that these people already know each other, and have accumulated the trust which help make the model work?
The second one is pricing – the ‘network services’ provided by participants aren’t symmetrical, which may encourage strategic behaviours. What are my incentives to provide very resource-intensive help when I don’t have similarly resource intensive needs? Doesn’t rejecting a payment impact on trust/goodwill? This is along the lines of what Louise said.
The third one is business models: you excelently summarised the challenges faced by network marshalls. However, you haven’t outlined a way in which they could generate revenue through this model – in fact, this network could run itself without marshalls. Is it through the convening itself (e.g. selecting a good enough group to make this work, which is what I assume 100% Open is doing?), or through participation as peers in the network?
Anyway, yummy food for thought. It’d be great to hear more about it over a coffee/pint,
Thanks for a good post, Roland.
I think you’re solving a problem that doesn’t really exist. Existing networks are fragile and have to be maintained but overall they are performing their function: people who give back to the community are known, well-connected and don’t have much of a problem getting introductions. I really doubt that we can much improve their efficiency by trying to apply some business model to them.
In other words, who are the people who really want changes to our networking practices to the point of paying money for it? People who have great personal networks usually can’t monetize them directly but they benefit greatly by tapping into their connections when necessary.