11: Collective Intelligence, Social Networking and Web 2.0
The introduction to the chapter marvels at the emergence and popularity of social networking online. The way that people are able to network with one another (EN: which has been true since before the Internet, just recently had a surge in popularity) has the potential to significantly change the very nature of social interaction: many existing social behaviors have been transported to the online medium and new methods of interacting with one another have been facilitated by technology. An example: it was once a newsworthy oddity when people met online and later got married. In 2009, it is estimated that one in eight couples who married met online.
(EN: I'm very skeptical of that figure, a source for which is not provided. I did some legwork, and a similar figure is reported as a poll result on a dating site, which is a terribly skewed sample. This does not bode well for the material that follows.)
The Prosumer--Why Web 2.0 Works
Web 2.0 is driven by the activities of "prosumers" - individuals who produce as well as consume information, which represents a shift in the Internet, which was largely a large body of information consumers with few information producers.
(EN: A lot of the "2.0" fanatics seem to take this perspective, overlooking the fact that the internet began as a method for people to publish and share information with one another ... it wasn't until around 1995 that a large number of people showed up to consume without producing. So while it's worth remarking that easy-to-use publishing software such as Blogger enabled some of these individuals to participate in the conversation, it's incorrect to suggest this is a new phenomenon.)
Back to the phenomenon in general, the author refers to Metcalfe's law of networks, which suggests that the power of a network derives from the number of "nodes" it connects. For example, buying a telephone is not worthwhile if no-one you know has one either - whom would you call? - but once a sufficient number of people have one, it's worth getting. There's also the notion of network utility - that in order to be useful, people must actually use the network. To the same example, the telephone network is not useful because people have phones, but because they will answer them when you call.
The author points out that social networking predates the internet: meeting people, having conversations, and exchanging business cards are all activities that took place in real life. Also, networking groups have long existed: from medieval guilds to the local country club, to industry-wide associations that held conventions, these are all instances of social networks. There is a natural proclivity to seek to establish connections to people with similar ideals and goals. The Internet has provided a medium for this to be done much more quickly, across greater distances, and with less effort.
Social media is an increasingly important way to enter into a conversation with customers - but ironically, banks and financial institutions remain hostile toward the medium, often blocking employees from using social media sites in the workplace for fear of leaking confidential information. Even off-the-clock, many senior executives do not participate in social networks (LinkedIn, Twitter, Facebook, etc.) - the general excuse being that they don't want to be bothered. As a result, neither the bank nor its employees seem to "get" social media - and are cut off from the potential of the medium.
(EN: The reluctance of senior management to participate in social networking is a phenomenon I've seen explored elsewhere, and there are better answers than "they are old fashioned" or "they just don't get it." Primarily, people in "senior" positions today have established traditional networks - they are members of boards, country clubs, industry groups, etc. and need no help in connecting to others on their level. Also, there are many people who want to connect with senior executives whom the executives want to avoid - salesmen, for example - and social networks provide a back-door that bypasses all the buffers they have in place to keep nuisance contacts at a distance. That's not to say that culture isn't an issue, and that future generations of executive might be les reluctant - just that it shouldn't be dismissed as only cultural.)
The author then does a bit of a sales job about social networking being valuable - but in a vague and general way. Participating puts you in touch with your customers, helps you learn important things, etc.
Aside of the appeal of leveraging social networks for vaguely-defined benefits, there is also the necessity to monitor social networks. Simply stated, people talk about your company, and you should monitor and be in a position to respond to what is being said - to squelch disinformation that is being sensationalized and provide "good" information for others to pass along.
Banks certainly could have leveraged this facility during the financial crisis to minimize the PR impact ... but failed to do so.
How Will Web 2.0 and Social Networks Transform Banking?
The author mentions some of the emerging trends that have a direct impact on online banking: sits that enable customers to "shop" for the best rates on credit cards, loans, and other bank products; sites where customers brag or complain about their banks; and peer-to-peer lending sites where people loan money to one another. The number of independent sites, online groups, and discussion forums related to investments is staggering.
It's noted that customers who are just now entering the banking market are well-versed in the Internet and use it as a tool to conduct product research, get advice, shop for products, and share their experiences for a wide array of products, including banking and financial services. They will expect companies to serve them through this medium now, and in future as they gain wealth.
As to using social networking effectively, the author defines six jey benefits that banks should seek to leverage:
- Collaboration. Social networks enable professionals in the banking industry to network with one another.
- SCM. Banking professionals can also connect with suppliers and partners that enable them to leverage specialized or local knowledge
- Recruiting. Connecting with individuals online enables banks to be more proactive in finding talent - rather than soliciting resumes and sifting through whatever comes in, the bank can seek out talent and form relationships they can leverage to obtain quality workers.
- Viral marketing. A bank that connects with its customers empowers them to speak to one another, and to prosepects, creating a level of "buzz" taht has credibility in an age where advertising has lost its value
- Community. By establishing relationships with customers and empowering customers to connect with one another, the bank becomes a social hub that offers greater value than merely selling commoditized products - a customer is a member of a community
- Research. Online connections can be leveraged to get ideas for product improvements or new products, and to solicit early feedback to products under development, directly from the customers.
- The author notes that social networking is evolving, and providing new opportunities that haven't been considered. Given the rapid growth and constant discovery, social media will continue to provide people with new ways to connect with one another - which banks may leverage to connect to customers and prospects.