Aaron Strout:     

Hi, my name is Aaron Strout. Welcome to the We Show. 

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Aaron Strout:    

Thank you for joining us on the We Show today. My name is Aaron Strout, and I’m the VP of marketing for Mzinga, a leading provider of workplace and customer community solutions.  This podcast is one in a series and can be found on the WeAreSmarter.org site, Mzinga.com, and iTunes under "We Are Smarter."

Ross Mayfield:
Glad to be here, Aaron.

Aaron Strout:  We’re going to jump right in. As we were talking about earlier and we talked a little bit about at the Office 2.0 Conference, I’m doing these podcasts with a lens for the We Are Smarter project, and that’s really looking at companies and how they’re using community to sort of further things like better marketing, better product innovation, self-service, customer service, things like that. So why don’t we start with your background, and then maybe we can talk about some companies that are doing a good job in this space?

Ross Mayfield:
Sure. I’m originally from Palo Alto. I actually was trained more as a political scientist, and just in my career have been trying to go off and change the world in various directions, and maybe I’ve found a way to make that actually work this time. I started off my career in the nonprofit sector, then moved on to the public sector; worked as an advisor to the president of Estonia. Started a number of little companies, like RateXchange, during the boom, and co-founded Socialtext. It was over five years now, and basically starting with this insight that a lot of the innovation that we were seeing in lightweight web-native tools, both on the Web for consumers and then also in open-source communities, could be adapted for use by enterprises, by organizations. We’ve kind of seen a lot of this change and adapt over the last five years. The most interesting part of my background is the stuff that’s happened most lately.

Aaron Strout: 
See, I would actually say that probably is true, but I’m fascinated by this whole concept of you being the chief guy for the president of Estonia. Can you talk just a little bit about that, because that’s fascinating to me, that you would have done that? How did you stumble across that opportunity?

Ross Mayfield:
Well it was kind of a random social connection that created the opportunity for me to go there. Basically, the one bit of career advice I’ve given myself is always take jobs that you’re under-qualified for. That’s the best way to train yourself to be an entrepreneur, by the way. So I just suddenly found myself writing the president’s English language speeches, creating an internal newsletter that was more of a blog, and creating the president’s website. That was back around 1995, 1996. Also, as an expat living in Estonia, that was the thing that really clinched it for me, where I needed the Web to stay kind of not just up-to-date on news back home, but as a way of socially connecting with other people.

Aaron Strout: 
That was pre-Twitter days, and things like that, where you could have real-time updates. Certainly e-mail felt pretty good, and as you updated your HTML pages was good –

Ross Mayfield:
Exactly.

Aaron Strout: 
– but it’s amazing how far we’ve come in just 10 or 12 years. So let’s talk a little bit about one of your recent posts on your blog, which is a great blog, by the way, for anyone listening in. You talked about Radiohead, who is one of my favorite bands, and this is a band that’s always been – you know, they’ve always pushed the envelope, I think. You look at people like David Bowie and you look at Radiohead, and they’ve always sort of wanted to stay one step ahead of everyone. So the cool thing about them, if I’m getting this right, is they are putting out an album and they’re letting the community – so the Internet community – name the price that they want to pay for the album, and then they’re also not relying on conventional marketing tactics. They’re really just marketing over the Web and, to a great degree, using word-of-mouth marketing. Any thoughts on that, and then maybe other companies that you’ve seen recently that are doing cool and innovative things like this, using the community to do better product innovation or marketing? Things like that?

Ross Mayfield:
Yeah. I think it’s interesting in that if you look at a lot of the innovation that’s been happening around business models and all those things people call Web 2.0, there’s one overall pattern, which is “share control to create value.” Kind of the ultimate gesture of sharing control is sharing control over price. I really do think what Radiohead is doing – partially because of the position that they have in the industry already. Every time they release an album, it’s in the Top 10 of Billboard almost immediately. There’s already a developed brand, and that’s partially what makes them so threatening for the music industry as a whole. But what they’ve done is it’s kind of – for a while, of course, you’ve been able to – a band could distribute their music and engage in e-commerce directly, without the intervention or intermediation by a label, where a good portion of the margin ends up going.

So they kind of recognized that they could cut out the middle man, have lots of margin in which they could unleash this kind of experiment. My guess is actually the returns are going to be a lot greater than what you would expect, right? Part of it is recognizing the way that NetGens – the people who grew up with the Web natively, the latest generation and biggest demographic bubble that’s also coming into the workforce right about now. They grew up with sharing and using these kinds of – well, sharing is something that was a given. Remixing is something that’s part of their value-add of learning and marketing through social networks. Part of it is also recognizing that despite the music industry’s best attempts to try to curb piracy, the fact is that music is social and it is being shared, and I think it’s something like, what, one out of every nine or 10 CDs ends up getting ripped and burned?

So what they’re doing is, in effect, recognizing that anybody’s going to remix and share their music anyway, and really that it’s almost as though what they’re doing is turning around and trying to take something that was otherwise structured, that the music industry wants to structure as a traditional market economy, but recognizing the fact that there is a gift economy within a good segment, the majority of what the market actually is, and then turning around and offering a gift mechanism. What I think they’re going to get back is not just people variably choosing really good prices, then end up giving them a decent return, and also being able to get a greater margin by letting the network market for them. But what they’re going to end up getting is a better kind of brand loyalty than what they would have gotten before. What’ll be interesting is kind of the second-order effects of when they provide this in kind of a gifting “you choose your own price” method, what kind of gifts they end up getting back from the community, what do members of the community then go and do to promote the gift that they’ve been given?

Aaron Strout: 
You’ve touched on a lot of fundamental benefits, I think, of community, but you started with a very interesting thought up fron,t and the same thought crossed my mind. So Radiohead has been around long enough, I think maybe 12 or 15 years. They’ve established a presence; they’ve had Top 10 albums, so they can afford to do this. They certainly could afford to not do this and make even more money but I think, for all the reasons you stated, they’ll come out on top and will continue to position themselves as innovators.

But looking at this from a sort of big business/small business … In our We Are Smarter book, we talked about some big companies, like Procter & Gamble, Eli Lilly, Amazon, that have successfully launched community plans.

We also talk about a lot of smaller companies that are experimenting with them, companies like Threadless and Brewtopia and ChaCha. Are smaller companies at a disadvantage? Obviously they don’t have the same brand name recognition; they don’t have the same reach; they don’t have the same marketing power, or do they use that as an advantage because they say, “Now it’s a level playing field, and we can go out and compete with the bigger brands, because if we’ve got a good product and we do it right …” And I think, to your point, the NetGens have grown up with these folks and if they embrace them, can that work and can it work for smaller companies? Have you seen any of that in action?

Ross Mayfield:
I actually think it’s more to the advantage of being small, partially because you have a lot less to lose and you can change a lot faster. Even better, you look at a lot of the – well, in particular, look at the startups that are coming up today, and how they natively bake into their business model patterns where they are sharing control to create value. It’s interesting in that – I’ll give you a small example: MSNBC acquired Newsvine this week, which is more of a social media-driven site, something where users are creating the community or creating the content – [the] value. Now, what’s interesting is that it’s a lot harder for a larger brand to – there’s a reason why MSNBC, and also the many, many other big media, mainstream media companies, haven’t rushed and embraced into this change in the same way that a pure-play startup like Newsvine would. They can, of course, buy it, but then what’s interesting is this kind of question of what happens when the value was co-created with the community, and then it’s sold? How much does the community stay with it? How are they going to manage and moderate the community’s sense of shared ownership, particularly as it transitions to new ownership?

So I’d say actually when you start small, one of the better advantages that you have is actually being open. I’d also say that because things are networked these days, if you have something that is a meme of the right fitness, that is more inclusive and participatory, you have the opportunity to scale, both in breadth and depth, a lot quicker. So actually I just simply look at this as it’s a disruptive kind of business model; it’s something where the large companies will be faced with a little bit of an innovator’s dilemma about what they’re going to embrace and what they’re not, and smaller companies are a lot better at taking big risks.

Aaron Strout: 
Good advice, and I would say, just from what we’ve seen, if you are going to do that you really have to sort of – you can’t be half pregnant, as the saying goes. You really either have to embrace it and say, “I’m willing to live with a disruptive business model, and I’m going to cede a lot of control,” for the benefits that you talked about earlier, I think that you’d get with Radiohead. But you can’t do it both ways. You can’t sort of pretend that you’re going to be a community-oriented company or that you’re going to embrace your customers in an open way and then not actually deliver on that. I think it has a negative effect.

Ross Mayfield:
If you’re a large company, the approach to take is [to] think of it as, “I have this community portfolio, and I’m going to have some parts of the portfolio where I’m going to take greater risks than others.” As an example, with Socialtext customers, the community that we try to encourage people to focus on first when using the social software, learning it, trying to figure out how to adapt their business model as a result, is go from the inside out. You have a community called your employees. There’s enormous potential for you to be able to tap into them, to empower them, and to make them more productive. As a byproduct, what you get is this different kind of literacy about using these kinds of tools, that then you could turn towards more of a public-facing use.

When you’re doing something that would be customer-facing or public-facing, you can kind of dial down the control to take different kinds of risks to be able to generate a larger, different community-driven reward. You do have this kind of spectrum of opportunities. The least risky thing that you could do would be to simply take the content that you’re already generating and offer it up in an RSS feed format. A more risky thing that you could do would be to truly hand over control over certain content areas, where through a wiki you could let people edit and generate content. Because oftentimes, kind of the ecosystem that surrounds a firm is going to know a lot more about the firm’s actual products, actual levels of service, of ways to work best with that company, than the people who are actually on the payroll.

Aaron Strout: 
That’s a great way to think about it, and I think that is helpful, especially if you’re looking at it from a big-company perspective. One final thought, which I think sort of goes part and parcel with what we’ve been talking about – and I think we’ve mentioned some already – but as a final question, best practices for companies that are thinking about getting started with an external-facing community? You know, what would be the one thing that you’d tell them that they need to do – it could be one of the things that we’ve already talked about – to get started?

Ross Mayfield:
Let me give you two generic resources and one case example.

Aaron Strout:
Okay.

Ross Mayfield:
One place for people to take a look is at Socialtext.net/cases. And the No. 2:  It’s the Cases 2.0 wiki we did with Andrew McAfee from the Harvard Business School. Anybody can go there and not just read different kinds of case studies, but write them as well.

The other is Wikinomics.com as an example of not just using a wiki to augment a book, but the last chapter of Don Tapscott’s Wikinomics book says, “Go and edit this chapter to create the playbook for mass collaboration.” That went so well that they ended up writing an entire book, very similar to We Are Smarter, which I think is being published soon.

Beyond this is two kind of generic examples.

Thinking about kind of the inside/out approach, I’ll give you an example of maybe a mid-sized company, with MicroStrategy. There, with one division called Angel.com, they were using a wiki for their internal product management and as a knowledge base for their call center. As they were developing, they started to ask the right questions: “Why should this information just be, let’s say, accessible to the product management team, or the call center team? Why not make it inclusive for the rest of the company? Why not even make this public?” which they ended up doing with creating a knowledge base that was public-facing in a wiki, where their community could end up contributing solutions to other people’s problems. If not just simply, query the knowledge base in an unstructured fashion, define and answer instead of calling into the call center in the first place.

What’s interesting is that’s a nice kind of case pattern where starting on the inside and evolving it over time to be increasingly public, and gradually taking the right risks, is something that ends up generating pretty decent returns with some level of moderation.

Aaron Strout: 
Great examples. I am personally interested in checking out your case studies, and I love the fact that you let people add them. On the Wikinomics note, we’re actually collaborating with Don on the Wikinomics and We Are Smarter projects, and he was the foreword author for We Are Smarter. I think the version of the book that I gave to you, the galley, did not have that in there, but we like Don a lot and he has some great examples of companies that have used wikis and community in their businesses.

Ross, I want to thank you for your time today. This is great. We really appreciate it, and great insights.

Ross Mayfield:
Great talking with you, Aaron. Take care.

Aaron Strout:     

We appreciate you listening in to this series of the We Show podcasts. To find other podcasts like this, you can check out WeAreSmarter.org, Mzinga.com, and also iTunes under "We Are Smarter."

Thanks so much for joining us. We look forward to seeing you next week.

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