From my previous work, I believe the following propositions to be true:

Proposition 1: The Internet disrupts subjective-stage business models by breaking down the information walls and blurring the lines between companies, departmental functions (such as sales and marketing) customers, competitors, and suppliers as a consequence of the informational medium of products and services.

Proposition 2: ‘Communities’ are an organizational structure an order more complex than traditional companies, designed to accommodate individual and inter-organizational cooperation and collaboration.

It suddenly struck me this morning that I had failed to put two and two together: #1 causes a shift to #2. In the face of the disruption of subjective-stage business models by Internet technologies, businesses are finding that their subjective-stage organizational structures are failing to keep up.

The organizational and managerial sciences will rightly you tell you that traditional businesses require structures that have a high degree of clarity about the difference between of inside-vs.-outside the company, employee vs. employer, competitor vs. customer, customer vs. company, customer vs. supplier, company vs. supplier, and so on. These are precisely the fixed distinctions that are becoming fluid, more a matter of perspective than structure. This makes such organizational systems orders more complex. In order to rise above this complexity to regain mastery of their domains, businesses must adopt not only more sophisticated business models, but as corollary and counterpart of that, a more sophisticated and inclusive organizational structure — that of Community. As a community, these businesses play the role of facilitator of a community of members who perform one or more of the functions of customer, supplier, production, marketing, sales, support, and R&D, depending on the situation. For example, from job boards to online communities of work (Recruiting industry); from hiking and camping to community of national parks staff, volunteers, and visitors (Travel), from publishing to an online content community of creators, publishers, distributors, and consumers.

We are the handmaidens of this shift; first, in the information industries, but second in the hard industries. It goes to the heart of the modern theory of the firm.

Social media is both a facilitator and a symptom of this shift. Communities place inherently more value on the social dimension of relationship and interaction than companies do, and it is on the coat tails of these new social technologies that we are bringing into being a new form of community organizational structure to many markets.

This all came together for me while reading John Hagel’s  The Power of Pull, which focuses the mind on many of the differences between pre-Internet and post-Internet businesses. Combined with the rest of the ideas I have been pursuing most of my career, I believe it all boils down to the idea of community structures as a co-evolutionary response to Internet disruption as the basis of the new theory of the firm.

There is something that puzzles me about AOL’s business model but that I can’t quite put my finger on. I’m not an expert, but a lot of you are, so perhaps you could help clarify the issue. I’m sure I make a lot of assumptions, gloss over a lot of issues. Here goes anyway.

I believe the future of media is in unleashing what we might call the “the social currency of the free content economy”. The idea here is that top-down economics for content production are both socially (because the content is now also a community activity by the people for the people) and technically (because of the inability to enforce property rights and the proliferation of variety and information transparency) infeasible models – hence the decline of traditional newspapers online.

At the same time, information empires tend to follow a cyclical pattern of creative destruction leading to an open period, followed by a period of consolidation and control by large corporations in a closed period, until the next wave of creative destruction hits. This has happened in to the telephone (which pitched itself against the telegraph monopolies), the radio (which flourished as a two-way local cauldron of enthusiasts before throttling and consolidation by AT&T/RCAs monopoly), cable (before the Comcast and re-assertion of telco monopolies), and the Internet (current period of open disruptive innovation).

So, I believe we are in an Open period – possibly the end of an Open period – and the question is whether the Internet – at least as far as content production and consumption is concerned – is something very new that bucks the trend, or something that will fall in line with history.

Personally, I want to think that it is something that bucks the trend, because I believe the “modes of production” – cognitive surplus and social currency (content created as part of social reputation, influence, community activity, etc.) has shifted sufficiently towards a non-economic model (as the HuffPo I believe proves, even if this is not yet widely recognized) that consolidation by large media companies cannot work, unless we intend to throttle the social content production movement and institute paid content. This would be in line with history, but it was also the kind of reasoning that lead to the original Time Warner merger (TW had the content and the broadband lines, AOL had the online audience that TW saw as a threat to its hold on content, but was about to get disintermediated out of the dialup business – although TW didn’t realize that well enough, perhaps).

For myself, I do not believe the two can co-exist very well. For them to co-exist requires a kind of authorial “class society” of professional writers and amateur enthusiasts who are willing to write often better and more expert commentary and prose than the professional writers, and who on aggregate contribute more content than their professional counterparts. I do not know if they will put up with “social currency” when their fully employed counterparts are getting paid professionally for their work.

If I am right, then AOL’s rolling up the blogosphere is at risk of destroying the social currency that is the new basis of content production; in which case its traditional advertising-driven business model has got to work within a traditional model of authorial production and property rights. But is that feasible? And is that really where the Internet is headed?

If I were AOL, I’d put my money on supporting professional content by shifting from content to content applications (apropos my previous screed last week), and on amping up social production of content by creating a new economic model that social currency can get translated into – something that is true to the social model of content production while accelerating it by making it an engine of economic growth for all contributors, professional or not. I believe this can be done by the judicious application of communities of interest and social game mechanics whose output can be cached in like chips. But that is a task too enormous to contemplate here.

Some philosophical thoughts on the problem of “content”, and why “content applications” might be the future, and if they are, what are you doing about it, and if you are not doing anything about it, are you toast?

Here’s a story that illustrates the difference between content applications vs. content websites.

R.R. Donnelley & Sons (MapQuest’s predecessor parent company before it was bought by AOL) was a company that published physical and digital maps. In 1994, they decided to publish maps online, and in so doing ushered in a new industry that helped to destroy the road atlas industry. The question is… why did R.R.Donnelley not just stop at publishing maps online? Why did it also add an online driving directions service? It bears consideration for its relevance to online media and publishing in general.

By analogy, asking this question is like asking why a newspaper or magazine that decides to shift from offline print to online media need go beyond that into software-based services.

R.R.Donnelley could have stopped at online maps—it would still have been more convenient in many ways than physical road atlases—but it realized that software-based media is service-based media, and that meant that there was an opportunity for a shift upstream in the chain of the users’ means-and-ends (e.g., consider this chain: a. user decides to go on a road trip -> b. uses a travel agent to decide where to go -> c. plans the journey -> d. gets directions -> e. prints maps).

This created an opportunity to differentiate themselves from traditional road atlases while serving users better.

What does this example teach us?

You can take any fairly commoditized category of published media – travel, news, financial, sport, etc. – and ask, wouldn’t that be more useful, more relevant, and more likely to generate revenue (either from users or other sources), if it were really a service?

So, in the case of the fashion category, it’s a service to help you learn fashion, become fashionable, shop, and hang out in fashion communities, along with all the traditional entertainment and information stuff you’d be used to. In the case of entertainment, it’s a service to help you stay entertained, to predict your tastes, help you discover what you will love, record, gather it, and open up the right communities for you to participate in so that you can “live” your entertainment life with more opportunity and community.

Every time we talk about “content”, we are closing our minds off to thinking in this way – to quote Wittgenstein, “it’s a bewitchment of our intelligence by means of language”. I admit this is a rather subtle point. The problem is that “content” highlights the “thing” aspect of the product rather than the “service” aspect of the information. Rather than see an article or video as serving a “means to an end” (e.g., to learn, solve a problem, satisfy interest, be entertained, achieve a goal, or whatever general class of ‘end’ we have in mind) — such that there could be many chains of means to that end, and many alternative means to that end — instead, we think of it as this stuff that we must produce and distribute, like widgets. This is a reification and keeps publishing companies from thinking about the opportunities of shifting into the online services that they should rightly own.

The reason we should rightly own these markets is because we have the audience, and that audience is yearning for it too (did anyone question the utility of online directions over printed maps?) , although it is not the kind of thing that will show up in a market research study of what user’s want. It is the fundamental limitation of market research that it tends to think only in terms of the problem/solution categories of the current market, whereas this line of thinking restructures that terrain.

For example, taken to its logical conclusion, I think local newspapers become online virtual communities – but I wonder if anyone is thinking of local newspapers that way?

Incidentally, one of MapQuest’s current foci is to continue going up that chain (which I call the “problem/solution ladder”), now that the current rung of that ladder – “directions” – has become a commodity. You can keep going up that ladder and you will always create differentiation and a higher value user experience; you are only limited by the imagination of user desires and the means to achieve them, the complexity of the problems (they get harder the further up the ladder you go) and the capabilities of the technology you have to hand. Computer programming languages evolve by the same logic of innovation – from machine code to use-specific languages such as SQL or Processing. As you ascend the ladder, you tend to destroy the industries in the rungs below you. This is the essential insight of the User Experience movement as it relates to product strategy.  This is the heart of what sometimes gets called “blue ocean strategy.” (after the book by Kim & Mauborgne), or my take on it anyway.

You have to think of your product in terms of a “product stack” that reaches up into the intangible world of ultimate human happiness: where is your product in that stack? And how can you create a new layer that abstracts the fragmented, tooling, and toiling that users have to put up with, to more perfectly express the satisfaction of their desires, and commodify and subsume your present competition in the process?

The Internet is like a melting glacier, finding its way through the weaknesses in our historical business terrain, changing the landscape in its wake as it reaches equilibrium in the ocean of satisfying human desires.

One of the enduring anachronisms of our era is the persistence of advertising as the primary means for funding quality content creation and distribution. Advertising will thus in its essence always be conflict of interest between our mission to satisfy users and our need to make money. And if you ask yourself, do users really want it? Do they really need it? Do they think it is credible? The answer is usually and increasingly No. It has some value as light entertainment, or as a reminder, or as brand awareness, but is that really a fundamental on which to build a very profitable business, or are we just clinging to the last model of an age that is fast ending?

Advertising’s value will continue to decline as the Internet searches for information freedom and answers the call of human desire more and more relevantly. And while it may always be a substantial source of revenue, it is already unable to support, on a wide scale, quality-content creation on its own, and if nothing else is done, most of the Internet will end up like all ad-driven media channels: a recycling bin of old content that was paid for in other ways, a clearing house for ad-driven lowest-common denominator content with only mass popular appeal, a web of advertisements masquerading as content, and a repository of amateur content of dubious quality.

Even the volunteers of good-quality content, whose good will and engagement can sometimes make us wonder if there is after all such a thing as free lunch at scale, can only contribute so much in return for exposure and reputation, because they too have to eat. Only the large ad networks will make money, who can leverage vast scale. The idea that you can create your own content garden with its own internal ad network that is capable of sustaining above-Internet prices that will make it very profitable for an essentially dying business model seems like voodoo content economics. At the very least, it fundamentally changes the business we’re in from consumer apps, media & publishing (which uses advertising to help content that is in the service of its consumers), to advertising (which pursues marketing as the ultimate service to its users, the advertisers).

Why is the rise of online communities a good thing for customers and businesses? Is social networking and marketing an essential or accidental component of this shift? And what are the actionable principles behind the emergence of communities, that we may evaluate the quality of our online communities and understand what causal factors we should adjust to improve them? Here are some working thoughts about these questions.

Definition of Community

A community is a System Level 5, or societal, level of human organization. System Levels 1-5 are defined as follows:

• Level 1: Individuals, Personal, or Intrapersonal
• Level 2: Dyadic, or Interpersonal
• Level 3: Small group, or Intragroup
• Level 4: Organizational (Group of groups), or inter-group
• Level 5: Societal (which can be multi-level), or inter-organization

Communities can contain all other System Levels as members, but are normally made up primarily of Individuals.

The defining characteristics of community are 1) mutually altruistic relationships among members, 2) common and complementary goals of the group, and 3) the “facilitator” function performed by some designated sub-organization or individual within the community. Without mutual altruism and the facilitator functions, communities break down into masked attempts to control people, private interest groups, or a loose assembly of individuals without much relationship or common purpose. Without common or complementary goals, there is nothing for the community to work towards.

The other System Levels exhibit different defining characteristics, listed below:

• From personal (1) to dyadic (2): communication
• From dyadic (2) to small group (3): management
• From small group (3) to organization (4): organizational structure
• From organization (4) to societal (5): altruism & facilitation

How Businesses Can Function as Communities

When a business forms a community, it does this by shifting over from the Service Provider-orientation, which is traditional to business, to performing the community facilitator (or “community organizer”) function within its market:

• Formulates, expresses, communicates, and upholds the common goals of the community
• Organizes the community (an ongoing process)
• Facilitates a good fit among members
• Contributes its expertise to the community
• It is also a member of the community
• Somewhat like a combination of matchmaker & marriage counselor

Members of the community include:

• Customers
• Suppliers
• Employees
• Traditional Competitors

Benefits of Businesses Becoming Online Communities

• Switch from an adversarial relationship among stakeholders to a cooperative relationship. Literally, a coming together as one body.
• Shift of command-and-control style of running a business, where R&D, Marketing, Sales, and Support are managed as line departments with the aim of conquering the company’s market, to a network of members performing a wide variety of roles: a member may be a customer in the morning, market your services to other potential members in the afternoon, offer tech support in the evening, and offer product-improvement recommendations and beta testing at night, all for free.
• The community model is a much more developed form of organization than even traditional business models, capable of generating more wealth, more benefits, faster, cheaper, more scalably, more durably, reliably, and much higher levels of stakeholder satisfaction
• The community orientation is able to support much more variety, because it is based on much more specific purposes (compare recruiting purposes with communication purposes)
• Communities foster interactions that deepen and broaden over time, whose mutual benefits increase over time, creating a positive feedback-loop, creating more and more incentives for its members to stay related and contribute to each other.
• Their optimal size may be much larger than that of other forms
• Community forms are capable of organizing more members with more variety
• This means that it is also more capable at scaling than other forms
• Communities may get more valuable as they increase in size, up to a sweet spot

Challenges Companies Face In Becoming Communities

• Lack of a strategic vision that is capable of reconciling the unmet desires of all potential types of members of the community into a common purpose. A community common-purpose is a prerequisite for being a functioning organization at all. Many companies will find that they are out to get one or more group of stakeholders who would otherwise have to be included in the community.
• Fundamental shift in developmental stage of their organization
• Turns many departmental functions and established relationships inside-out
• Looks like a radical loss of control
• Requires really trusting your customers and your staff
• Less developed managers will always be tempted to rig the game by offering one-sided incentives to some members at the expense of others, such as by paying people to advocate the company’s products. Except for the exchange of actual products and services, no money should change hands.

Some Conclusions

One of the things I wanted to be clear from this is how woefully inadequate social-networking functionality is to forming and maintaining communities. A “network” is just one piece of the puzzle. Social networks provide (or should provide) infrastructure for the community to communicate and collaborate as a whole, and be an enabling platform for the services offered by its members.

Another thing that should be clear is that the shift from a traditional command-and-control, broadcast-oriented business to a community is not principally a marketing issue. It has everything to do with the fundamentals of your business model, your company culture, management style, and organizational structure.

These are just some early thoughts that I will expand on and revise over time. I’m compiling numerous case studies to illustrate the special properties of communities, how to evaluate them, improve them, and set them up.

Note on the Concept of Altruism for Communities

Pure altruism is probably self-contradictory because a minima of agency is always required to effect voluntary action which means a minima of self-interest is always present. However, there are degrees of self-interest, from purpose at the expense of others (selfishness), to purpose for others’ benefit where the benefits for the agent are indirect, or accrue towards something that both agent and beneficiary commonly strive toward, such as the flourishing of the community as a whole. That is not purely altruism, nor is it purely selfish.

To the degree that companies are capable of facilitating this in their own environments, they can be said to evolve into communities, with many evolutionary advantages. This does not contradict the profit motive, although it transforms the what the profit is for the sake of and who it is for.

I’ve performed project-management functions for ad agencies and government departments; software-development houses and web start ups; for high capex engineering projects and make-it-up-as-you-go-along fly-by-the-seat-of-your-pants web sweat shops. I’ve worked with and tried to master nearly a dozen methodologies, from PRINCE, SSADM, to RUP/UML, XP, Agile, and many of my own concoction. I have used a wide variety of PM tools, and designed PM systems and software of my own, and had them implemented. I have frequently worked under PM’s of all stripes, been a PM myself, and run PM departments.

What have I learned?

As long as you have adequately-skilled team mates for the technical challenge and adequate resources, I believe all project management is pretty much for the sake just three things. These three things are universal. They cut across every conceivable methodology, and always will, because they are deep in the very cybernetic and general-systemic nature of human collaboration. The varieties and flavors among different methodologies are just different ways to attain or substitute for these three things, to varying degrees. But I believe a really skilled PM just focuses on them like a dog with an old bone, and by sizing up the magnitude of the project challenge, the organizational structure of the team, the knowledge, skills, and resources available, and inter-personal and political dynamics among them, just does what it takes to keep all three crystal clear and in alignment as the project progresses:

1. Who: clarity about who the right stakeholders are (internal and external),
2. Why: clarity about and coherence among their prioritized purposes and unmet desires (from customer, to CEO, to visual designer, to programmer) and what it will take to satisfy them
3. How: clarity about the right relationships (structure) and effectiveness of communication among them to help them collaborate to meet their purposes (includes quality of the work-breakdown structure as a mapping of people on to goals, subgoals, and action steps, and the inputs and outputs among those people).

If you focus on these three fundamentals, I think you can see that there are some situations where no process or methodology is really needed at all, and others where a lot is needed. It all depends. The greater the score on each of these three factors, the less management is needed; the lower the score, the more management is needed. A good PM works on improving the scores, and supplementing with organizational processes and methodologies as needed, or clearing them away when they are not.

Yesterday, I read this article in Fast Company, on Usability vs. Experience with regards to the design philosophies of Google and Apple. The article seemed to perpetuate a seemingly ubiquitous confusion about usability and experience, which I thought I would try to put my finger on here:

Usability vs. Experience is the wrong distinction for explaining the difference between Google and Apple’s design approaches, and a common misunderstanding, even by those who use it to explain their work. The right distinction is about what “rung” on the problem/solution ladder a particular product design is intended to address. To explain:

For any human desire, there is a hypothetical “problem-solution ladder” that can be constructed, of ends and means, that gets you from the expressed desire to its satisfaction. Products can be said to exist as means to satisfy those desires as ends.

However, companies, esp. engineering-oriented companies, generally focus too low-down on the ladder, and produce and market products that focus on the means, and forget about, or are unclear about, the ends for which those products are really used. Other companies, like Apple, have a clear eye on the ends – they have been making products to address the same ends over and over again for years, trying to perfect the achievement of the ends (that is Jobs’ vision), ends which have to do with productivity, lifestyle, personal identity, entertainment, enjoyment, connecting with people. They eschew means in two ways: 1) by making the interaction as much a direct expression of the ends as possible (e.g., surface interfaces vs. keyboard and mouse; mobile vs. at your desk), and 2) by making the means, where it must show itself, as invisible as possible, or if they must be visible, as beautiful and appealing as possible so we may love them as things in themselves and forgive them their less than human intelligence and empathy.

This explains another element of Apple’s strategy: vertically integrated innovation, from hardware, to  devices, to software, to marketing. I have not worked out the details yet, but it seems to me that the market forces that drive traditional tech companies towards modular product architectures (usually reduces costs, allow companies to focus more on core areas, get performance boosts from specialization of components, opens up new markets of innovation led by third parties that ultimately serve to enhance the value of your product) may involve making trade-offs whose severity worsens the closer you get to the specific human ends to which we put such modularized products. With every modularization comes a generalization, standardization, a loss of control, a making rigid of piece of the ‘means’ outside its purposeful context in the whole. As these trade-offs roll up the problem-solution ladder to the ultimate ends of the products for their users, they end up becoming an increasingly limiting factor on the quality of the result. This may be a version of Christensen’s modularity vs. inter-dependence hypothesis.

The services of 10 usability firms that I have experienced and surveyed over the past 13 years, as well as my own past practice as a usability expert, and the three standard treatises on the subject by Jacob Nielsen, Donald Norman, and Alan Dix et al., are all heavily influenced by two root metaphors (to borrow this concept from Lakoff and Johnson), whose effect—in terms of metaphorical consistency—helps to explain why the services take the approach that they do, and why it is inadequate for most non-trivial websites or software.

Metaphoric Families that Influence Usability Services

A Website is a Machine. This family of metaphors includes

■ User-Interface is a Control Panel.
■ Buttons, Links, Fields, etc., are Controls (levers, gears, switches, & dials)
■ Interacting with a Website is Using a Machine
■ Usability is Efficiency of Operation.

A Website is a Place. This family of metaphors includes

■ A collection of hyperlinked information is a Site
■ A User is a Visitor
■ Users are Traffic
■ Finding information on the website is Navigation
■ Efficiency is Ease of Getting Around
■ Displaying a web page is Going Somewhere (to the page)

In the general case, the use of metaphors has great influence over the experience of someone who uses them. Perceptually, it is very influential in determining what you notice—the differences the make a difference to you, and therefore what you pay attention to and what you ignore. Cognitively, they have a great influence over how you construe the things that you do notice.

Usability firms and experts employ these two metaphorical families widely in their services without realizing they’re using them. As explicit metaphors, they serve to influence the perspective that these people take when they analyze and assess a website. Metaphoric consistency serves to keep them in these families, so that the use of some of these metaphors leads to more and more use of it within these two families, thereby coloring the way they think about and talk about websites.

Simple vs Complex Purposes

If we go deeper under these root metaphors, we can see what is really going on, and it comes down to this word “Use.” In talking about our purposes and the means we employ to pursue them, it is important to make a distinction between “simple” versus “complex” purposes.

A simple purpose is one where you can directly achieve the purpose by action or using a tool : for example, using the toilet, or using a door, or using a hammer to hang a picture frame.

Complex purposes are those where this 1:1 correspondence is lacking, where there is a 1-to-many relationship between the purpose and the activities that roll up to it. For example, if I ask, “What are you doing?” and you reply, “Well, I’m using Excel,” that would be an appropriate answer if my question was about a simple purpose, such as, “what application are you using?” If I want to know for the sake of what are you are using Excel, then I am in the realm of complex purposes. Are you creating report, calculating payments, analyzing stock prices, or what? Here the purpose is complex. Using the tool (Excel) does not directly accomplish the purpose.

To connect this with the ideas we began with, metaphoric families based on the word “use” are suitable only for contexts where the purposes are simple. This is because “use” suggests “simple effectuation,” not employment for a purpose. The problem is one of a blinding emphasis—making “use” central, as opposed to what end.

When usability practitioners think in terms of “use,” they are assuming that what they are assessing is used only for simple purposes. For a website, this means that what a visitor is doing is “using the website.” Well, that will only be appropriate for analyzing and assessing the website, if what the user is trying to do is simple. If not, it will be very misleading. That’s how you get to the bottom of what’s wrong with the field of usability, and with a lot of UX in general.

Both metaphorical families, Website as Machine and Website as Place, are only consistent with simple purposes, which is why they are inappropriate ways of thinking about most websites. In the case of Website as Machine, the website is construed as something like a power plant, whose ultimate purpose is taken for granted. The only issue the operators have is how easy it is to control. In the case of Website as Place, the website is conceived of as a road system laid out with junctions and signs, where the drivers’ purpose is merely to get to their destination, but what they’ll do when they get there is taken for granted.

Implications for Usability Testing

Usability Testing is typically only adequate for applications whose entire reason for being is a simple purpose or set of simple purposes. This is because the simple task-level is all that is ever tested, and only applications with simple purposes have a high correlation between ease of functional control (“use”) and their true purpose. For example, a calculator can be evaluated this way, but not accounting software. This is why so much usability work is really just putting lipstick on the pig. A test can result in great scores, and yet the application still doesn’t do what its users actually need, or what the business who produced it wants. Or, conversely, a usability test will identify myriad usability problems, all of which would be terrible if what the user was trying to accomplish was a simple purpose, but which are much less important, or irrelevant, when their complex purpose is correctly understood.

Let’s see an example of the difference in the predictability of ‘using’ a thing vs. its true fitness for purpose for a machine with a simple purpose, such as a car, vs. an application with a complex purpose, such as accounting software.

The Four Levels of Application Quality & Testing

In conclusion, we can summarize all this by proposing four levels of application quality, all of which have to be tested differently, against different criteria that are defined by critically important work that takes place at different steps in the software planning, design, and implementation process. Note that #4 is usually omitted, or taken for granted, or done badly.

1. Execution: no bugs, executes without errors, based on code-level test procedures. Testing often automated.
2. Functional: everything works as per the design, faithful to the design. Requires human inspection – this is where “acceptance testing” usually lives, and where contractual responsibility ends for any third-parties developing the application.
3. Usability: easy to understand, easy to control, quick to use , based on interacting with the UI to accomplish the tasks that the application is designed to accomplish (defined in the conceptual design or ‘requirements’)
4. Fitness for Purpose: enables users to accomplish each of their relevant aims easily and effectively while generating the benefits the business wants from it. These criteria are usually defined as part of the strategic plan for the application. This includes branding criteria and other non-functional characteristics that should be included as important components in the experience of the application.

New Metaphors for Usability

If we ask the question, why does the usability field suffer from this blindness about complex purposes? One partial answer is that the discipline of usability emerged historically from industrial-design testing, and industrial design is the design of machines and  tools, most of which are instruments with simple purposes. We see the same blindness at work when software developers are referred to as “engineers”. Website design is, by comparison, the design of systems of informing and communicating. The right metaphors are ones based on communication between sentient beings, albeit one side is much stupider than the other. Some initial suggestions below:

• “A website is a form of communication.”
• “Usability is communication quality.”
• “A user is a participant in a dialog.”
• “A website is a virtualized person, group, or company.”

What is it about the rise of the Internet that naturally inclines companies toward more developed business models? We can use the idea of challenge vs. skill to describe how the rise of the Internet has raised the challenge organizations face to level that cannot be coped with using Subjective-stage business models.

Balance of power shifts toward customers; companies lose control over customers

1. More accurate information is easily available about products, benefits, alternatives, so customers aren’t dependent on company advertising for info
2. Customers are now going beyond the traditional customer role (the concept of “customer” itself is rooted in the Authoritative and Subjective stage), acting as reviewers, suppliers, regulators, sales, marketing, support, & R&D
3. Customers have more choice in virtual marketplace without barriers of time & place
4. Customers are now free agents, with much more control
5. With less control over customers, companies must try to satisfy free agents
6. This requires a more developed business-model

Effects on companies of changes in communication

1. Speed of communication accelerates rise and fall of products & services
2. Can communicate at much lower cost with fewer barriers & higher quality
3. Easier to learn what customers want and what it will take to satisfy them
4. More opportunities for tight feedback loops allow products/services to improve faster

New opportunities for companies

1. Easier to offer highly specialized products/services
2. Lower cost of operating

Negative consequences for companies

1. Worsening consequences for bad behavior by companies

Developmental stage

1. Subjective stage used to be adequate to companies’ challenges, given the control they had over customers (& lack of control customers had)
2. In the Objective Stage, marketing becomes informing & sales becomes consulting & problem solving.
3. In the Abductive Stage business-model (Communities), many of the functions of standard line-departments in organizations can be accomplished by members of the community. You just have to facilitate that happening.
   • Market research
   • R&D
   • Marketing
   • Support

What it will take to get companies to shift to a more developed business-model

1. Start ups
2. Small companies
3. Small groups or departments in big companies

(Compare the effect of Consumer Reports when it was founded in 1932. The bare fact that companies for decades have tried to put CR out of business by suing it (unsuccessfully) shows you what the real business models of most companies were at that time)

An Alternative Perspective

My friend and colleague, Peter Kassan, responded to this post with a counter-perspective to mine that is also highly worth considering:

If it were true that customers were more empowered and had greater influence on companies, one would expect that there would be less domination of industries by single companies (or only a few), less consolidation (as companies specialized to serve narrower customer niches), and more competition. Instead, we see a number of tendencies in the opposite direction:

• In areas like personal computers and their operating systems, search engines, shopping sites, business and social networking sites, and so on, we’ve seen more and more winner-takes-all effects. Although companies still rise and fall (perhaps quicklier than before), Microsoft and its major products (both operating system and office applications) has totally dominated the business market and to a large degree  the home and home-office market for something like twenty-five years (although Apple does have a small but significant share). Google has an overwhelming majority of the search-engine market, and it’s not because consumers have tried all the other search engines and found Google to be superior. Linkedin, Facebook, Meetup, and Twitter all dominate their respective networking spaces precisely because of the networking effect. Also, people are lazy and tend to gravitate to the name (whether website or physical store) that’s most familiar–such as Amazon and Best Buy.
• In areas like banking and finance, there are fewer, larger players than ever before. Again, this isn’t because consumers have found them to be overwhelmingly superior, but for other, far more complicated reasons.
• Capital-intensive industries such as automobiles, oil and gas, cable, telephone, and manufacturing have also experienced increased consolidation.
• The “big box” stores (especially Wal-Mart) have never been bigger.
• There may indeed be more communication between companies and their customers and prospects, but that doesn’t mean that companies have necessarily become more responsive to their customers (except in the most superficial sense) or more responsible to anyone, even including their shareholders (as executives enrich themselves: the agent-principal problem). Even though it’s become easier (even trivial) to put up a website and declare oneself in business, it’s no longer true (if it ever was) that if you build it, they will come. The Internet has made the fight for market share and audience attention more difficult–and before you can have a conversation with your customers and prospects, you have to have customers and prospects.
• The fact that a few companies (out of literally millions of start-ups) have risen to become multibillion dollar enterprises very quickly doesn’t mean that the rest of the world has changed.
• Also, as the rise of business analytics indicates, companies are drowning in data as much as we as individuals are. With the overwhelming quantity of data about customer habits, companies are struggling to make sense of it so that they can make sense of it and exploit it. This is not the same as a conversation between equals.

1. Authoritative stage: based on establishing a relationship with customers based on need: create a monopoly, create addiction, be the authority, obligate customers. (Dependency)
2. Subjective stage: home of the buy/sell, mercantile orientation. Win/lose, zero sum game. Flow of benefits is from the customer to the company only. Purpose of sales and marketing is to do whatever it takes to get the customer to part with their money. Counter-dependent, in that the things such companies try to do show that they are always reacting to customers, boasting about their services, trying to be different. Customers construed as stakeholders who must be won over, persuaded, convinced, and who will do what you want if you can kind the right trick to convince them.
3. Objective stage: purpose is to satisfy customers and thereby gain. Complimentary relationship between customers and companies. Customers construed as free agents who make decisions based on their own judgement and information-gathering. Instead of marketing and sales, there is informing, communicating, and a problem-solving orientation. (Independence)
4. Abductive stage: mutual ongoing relationship of complementary and common aims. The marketing and sales functions dissolve. Communities arise.