Online advertising is a viable business

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The head of Goldman Sachs‘ high-tech group has said that the IPO market is back for the right Internet companies. However the barriers are far higher, and we’re not likely to return to unprofitable or no-revenue companies getting piles of investors. Now that advertising is a viable business model, with further strong gains in online advertising dollars likely, many more online businesses can flourish, or at least fight for the advertising dollars available. On a related note, a group of prominent bloggers have united to create a blog aggregation site, which will compete with mainstream media and live on advertising revenue. They may not make a fortune, but just around now this has become a viable business model.

Internet everywhere

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I am currently flying on Lufthansa between Frankfurt and Hong Kong. Lufthansa is one of the first airlines to use Boeing’s Connexion service, which allows in-flight internet access. This post is going live while I am approximately 30,000 feet above Kazakhstan or thereabouts. So, airplanes no longer provide that personal space where you are far from responsibility, and can’t access email on what’s going wrong in the office, or find out the latest news. The other side of this story is the fact that we have to exert choice. If we are always accessible on our mobile devices, we are the only ones who can press the off switch. Many people tell me how they can’t resist checking their Blackberry’s, even at home or during the night when messages come in. So far we’ve been able to get out of mobile range or away from email. No longer. Strong will and managing others’ expectations are essential in choosing and creating pockets that are entirely your own, unbeholden to others. Are you up to it, or will you be always connected?

Why do we have no time?

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An issue which almost everyone finds personally relevant is why we seem to be getting busier and busier, and having less time. Last week BusinessWeek’s cover story addressed this issue squarely with the title The Real Reasons You’re Working So Hard… and what you can do about it.

Very interestingly, the angle they took was that business is increasingly based on collaborative networks, a theme dear to my heart. That we are connected to many people (which is why our email inboxes are so full) and must collaborate with others in our work (which requires meetings, building trust, and ongoing interaction) is both the source of the challenge, and at the heart of the potential solution. The answer is not in becoming disconnected, which is a dead-end path, but in plugging effectively into the networks so that we can play just the roles we choose and where we can create the most value. With the right strategy, it is indeed possible to transcend the downward spiral of busy-ness. In the article they referred to Rob Cross, author of The Hidden Power of Social Networks, and founder of the Network Roundtable, which I am research leader for on client connectivity. Many of the members of the Network Roundtable were also referenced on their work on collaborative networks in organizations. Yes, a world of pervasive information and knowledge networks is challenging, but if we understand how to deal with it effectively, we can create far more with far less… including the most precious commodity of all, time.

The rise of modular process networks

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John Hagel and I gave the two keynotes at the Silicon Valley KM Cluster last week. Hagel is a true thought leader in the intersection of technology and business strategy, with landmark books including Net Worth, that in 1999 described the currently still-emerging phenomenon of “infomediaries”, and Out of the Box, on how web services are transforming business. His new book, The Only Sustainable Edge, co-written with John Seely Brown, describes how value creation and innovation are increasingly happening at the edges of organizations, economies, and markets. At the event Hagel talked about “modular process networks”, in which business processes and activities become increasingly modular, and are brought together dynamically from throughout the network. In an excellent overview article (and in the book) the authors describe how the motorcycle industry in Chongqing, China, can now make a quality motorcycle for less than $200 by implementing standardized, modular design across an ecosystem of manufacturers and suppliers. China currently produces around 50% of motorcycles worldwide. While John and I use different language and frameworks, the messages in my book Living Networks and that I am currently preaching on modularization, integration, and global innovation networks are based on very similar premises. Executives should pay careful attention to Hagel’s vision of the future of business.

Is knowledge management dead?

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Optimize magazine recently published a Q &#38 A with me on the past and future of knowledge management. As I set out in my much-republished article last year on The Future of Knowledge Management, I believe that knowledge management is not a very useful term any more, as it encompasses too much and it describes an activity rather than a business outcome. No, knowledge management isn’t dead, but I believe it’s usually more useful to focus on specific disciplines such as workflow, collaboration, social network analysis, and knowledge-based relationships. These represent the way forward. “KM” will continue to be used as a term, however many of the lessons learned over the last 10 years are now embedded into business practices. The interview also goes into broader issues such as business intelligence, privacy, and one of my favorite themes: the role of “knowledge specialists” in the economy.

Back to monetizing eyeballs

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I just caught up with Tom Gruber, who I met when he was Chief Technology Officer at Intraspect, an innovative company providing collaboration spaces based on email, which was acquired last year by document management vendor Vignette. Tom’s new initiative is realtravel.com, a site that allows individuals to create personal word and photo journals of their travels, and to share them with their friends or the world. The intent is to build this into a community where travellers can get great recommendations and insights from other experienced travellers. Excellent features include creating maps showing travellers’ itineraries around the world. The business model is built on advertising and referrals. Back in the dot-com heyday, start-ups focused on getting “eyeballs” – that is people’s attention – and then “monetizing” the eyeballs. The problem was, there wasn’t much money in people’s online attention. Today, however, online advertising amounts to $10 billion, and referral payments for sending people to sites selling books, gadgets, travel and more add up to a similar amount. Travel is in fact one of the real commercial successes of the Internet, with a substantial proportion of travel bookings now made online. As such, if you can create a compelling place for travellers to visit and spend time, as Tom and his colleagues have done, there can be a very viable business.

The future and theories of everything

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Earlier this week I was fortunate to go along to an invitation-only FutureCommons meeting at The Institute for the Future (IFTF) in Palo Alto. IFTF is one of the earliest futures think-tanks, being founded in 1968, and having produced 10-year forecasts every year since 1978. Their blog provides some insight into their work. The FutureCommons group endeavors to take the IFTF more into an “open source” thinking space. At the meeting Rudy Rucker spoke about his new book The Lifebox, the Seashell, and the Soul, which examines the idea that the universe consists of cellular automata, in other words that it is a computation. His work is related to that of Stephen Wolfram, who wrote on similar themes in his highly influential book A New Kind of Science. It was a delight to meet Rudy. Back in my late teens I read two of his early books, Infinity and the Mind, and White Light, a fictional account of passing through the different levels of infinity, which were well-aligned with my state of mind at the time. The omnivorous Jerry Michalski then facilitated a discussion on theories of everything, ranging across thinkers including David Bohm, Edward O. Wilson, Ken Wilbur, The Dalai Lama, and far more. Unquestionably, there is much to learn in the pragmatic, specific present from thinking about everything.

The cycle of media

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While blogs link to each other extensively, one of their primary functions is referring to and adding commentary to articles in the mainstream media. One of the most valuable services of the blog search engines is that they show which media articles are of most interest and attract the most commentary from a universe of readers (see for example Technorati Popular News and Daypop Top News Stories). Pick up a dead-tree newspaper, and you have no inkling of what others have found interesting and what they have thought about it. The good folks at The Washington Post have recognized this gap, and so they now show inward blog links on their online articles. Take a look at this recent Washington Post article on FBI recruiting for their “porn squad”, which has attracted a lot of commentary. In the right hand column, half way down, you can see that (at last count) 614 blogs have linked to this article, and you can click through to see what each one has said about it. This is no longer just an interlinked world commenting on traditional press. The link back has been made, and a complete cycle of news and community commentary has been formed. Thus the boundaries between the traditional and participatory media begin to dissolve.

Social networks, intelligence, and homeland security

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Some of the more discreet applications of social network analysis that have greatly intensified over the last years are in government intelligence, law enforcement, and homeland security. On one-level “network-centric warfare” (see for example the US Department Defence report to Congress on this) has grown to prominence – or even predominance – in military strategic thinking over the last four years. Leading network analyst Valdis Krebs published an interesting analysis of the terrorist networks involved in the tragedy of September 11, 2001. However social network analysis has been applied by intelligence agencies and law enforcement for decades. If you can uncover and analyze the relationships between people, places, organisations, transactions, and more, rather than just data on each of them individually, anomalies and intriguing connections rapidly come to the surface.

Interestingly, two Australian software companies are world leaders in applying social network analysis in these domains. Netmap Analytics emerged from work done in the 1980s by Dr John Galloway, who received his PhD in 1974 from Michigan State University for some of the early ground-breaking work on social networks, cybernetics, and systems theory. Netmap is used extensively by intelligence and law enforcement agencies around the world, in applications such as tracking money laundering and insider trading, as well as more covert applications. The software excels at processing extremely large data sets of relationships, and picking out the anomalous or interesting relationships. Insurance and retail fraud are other important applications. The Distillery has provided software primarily to the intelligence, defence, and law enforcement communities for around seven years, and now has around 70 employees. Its new Interquest Analytics front-end can be used by intelligence analysts to extract “entities” and “relationships” from the vast array of public (so-called “open source intelligence”) and non-public information, providing a deep and rich pool for analysis. The Interquest platform itself helps integrate disparate data sources to enable effective network analysis. Lockheed Martin has an extremely sophisticated tool for extracting relationships from text, called Aerotext. Netmap has the Australian and Asian distribution rights for this product, as it provides fantastic input for its high-powered network analytics engines. As companies with highly complementary offerings, Netmap Analytics and The Distillery often collaborate in showcasing and implementing their products.

In a world increasingly based on networks, social, technological, and otherwise, intelligence – government or commercial – must be based on understanding the relationships and connections in the world around us. This is a field set for massive growth.

The future of public relations

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A few days ago I gave a keynote speech at the Public Relations Institute of Australia’s premier national conference for the owners of PR agencies – a very interesting crowd who are well in tune with the flow of messages through media and society. I covered three key themes:

&#149 Client relationships. Despite many PR agencies presenting themselves as doing “outsourced PR”, that’s not what clients today want. The future is in collaborative relationships, working closely with clients to combine your expertise.

&#149 Social networks. Today, everything is a network. PR agencies need to move closer their clients to the center of the network, by creating richer and more diverse connections. They also need to apply social network thinking to how they bring together their own expertise and link that to that of their clients.

&#149 Memes and blogging. The concept of memes – information and ideas that replicate and propagate from mind to mind – is a powerful and useful way of thinking about how messages flow through society. Blogging has provided us with a world in which memes can flow fluidly and freely. Media – the traditional domain of PR – is blurring into a far more complex and variegated world in which messages can flow across many dimensions.

The resulting challenges for PR agencies are to lead their clients into collaborative relationships; to connect to help their clients move to the center of the networks; and to make their clients into media participants. Media today is a participatory sport, and PR agencies can no longer act as interfaces and gatekeepers for their clients. This means they must develop and apply new skills, especially in the new participatory media. Blogging is a invaluable tool for many organizations, yet they do need help to do it effectively.

Apart from frightening a few PR agencies who recognize that they need to quickly get on top of the rapid changes in their world, it was encouraging to see the degree of energy that is going into exploiting these shifts. The only thing that remains is renaming the industry. I was asked what it should be called if public relations wasn’t appropriate. Off the top of my head I suggested “The Meme Industry”. Any better ideas?