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Relationship Economics (A shiny, busy graphic! Eat it for breakfast or for lunch!)

Some of you might be familiar with the notion of relationship economics. Or not.

Paul Jaminet describes it as “a form of Ronald Coase’s transaction cost economics which hypothesizes that the costs of forming and maintaining personal relationships, and the benefits of those relationships, dominate decision-making in many contexts.”

David Nour wrote a how-to book on the subject that basically covers off on ways to actually invest in business relationships for a maximized return.

A host of other influential thinkers (like Umair Haque and John Hagel) have mentioned or incorporated the concept with respect to how social dynamics quantitatively and qualitatively affect cost dynamics in emerging markets.

All of these ideas seem highly relevant and supremely interesting (we’re talking about relationships, people!), and so I thought I’d explore another version with y’all right here on the WWTID. Why? Well, because relationships are the foundation of the social web, and the basis for the flat, seemingly infinite distribution plane that is the Internet. And the Internet, ala the social web, seems to operate in direct conflict with normative economics, or that singular, hegemonic thing called capitalism.

For the record, I really like capitalism. But as oxymoronic as it might seem, I like social capitalism even more, because it implies that we can compete and profit over human values, not consumption, or hyper-inflated demand, or a slew of “brand values” that frankly don’t mean much at a time when people are struggling to survive.

And speaking of survival, there’s this brilliant guy named Thomas Kuhn who came up with a pretty amazing theory about how humans deal with it through the lens of science; in short, he posits that science plateaus, then gathers itself around a new set of ideas (almost always anomalies), and then leaps upward, a process later termed “paradigm shift.” This happens in steps, or increments, and then moves to the next plateau, at which point the previous stasis (or crisis) generates a new result that becomes an innovation of one sort or another.

So, as an example in Internet terms, think of an evolution such as this: An Alta Vista crawler indexing web pages and Netscape’s browser as state-of-the-art, hitting a stasis point and moving next to Google’s mastery of page-rank search and targeted ad analytics, then hitting stasis and moving next to real-time mobile social search and location-based services, then hitting stasis and moving to, most recently, biomimicry, biometrics and the Internet of Things.

I’d give an example of a stair-step evolution in

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economic terms, but there really isn’t one (well, none as cool as the Internet example). Basically, we produce and we consume and we have bubbles, and history repeats itself, over and over again (BOOOORRRR-rrrring!). It’s kind of exhausting, actually, and really, really unfair. Anyway…

Still with me?! (Hang in there!)

Okay, so despite my disdain for economic bubbles, I do believe, as many behavioral economists have posited, that there is a profound association between them and how we innovate collectively. In other words, part of our own evolution is the routine experience of economic collapse which forces us to generate newly aligned values that actually create sustainable markets.

Now think of this in terms of a relationship: What stair-step evolution happens in the phases of a relationship, say, between a corporation and a consumer? What comes of a “brand” that has truly invested in this relationship?

Alright, so here’s what this hot mess might look like. It ain’t perfect (far from it), but my hope is to kickstart a discussion. Yes, you can throw darts if you like… Just print it out on your 3-D unit and aim at the pretty neon circles…

Okay, so being a graphic by all accounts very busy (um, sorry), this bears a bit of explanation.

If you’ll recall – or rather, if you’d read – the last post, I mentioned phases of a relationship (interest, connection, relatedness, interaction, action) as expressed in the way we develop currencies and ultimately build trust. These phases move us from a state of scarcity (managing limited supply, hyper-inflated demand) to a state of abundance (controlled amounts of the stuff we need, when we need it).

Along the same parallel, in purely economic terms, we go from a state of wants (‘desirability’), then we transition to a state of compromises (‘accountability’), then to a state of needs (‘actionability’). What this means is that as our relationships strengthen, our wealth actually becomes more abundant, either because we learn how to consume better, and/or, because we have created new forms of wealth altogether. In this process, we merge hard values (attributes tied to how we transact), with soft values (attributes tied to how we transform), such that we learn how to build, consume and cultivate markets for scale in carefully measured and monitored steps.

Note that this whole matrix is transitional. While we can accelerate the mechanisms for them, we don’t build values, trust and markets overnight. (duh…)

Now here’s where things can get interesting.

IF corporations can learn how to actually engage in real relationships with consumers, and IF consumers are actually switched on enough to engage with corporations amid all that is slung at them in the form of shitty ads, subpar content and relentless messaging, then we get to a place where applied learning happens. This means that we can move further and further away from bubbles, and closer to situations where we are empowered by our mistakes or failures as a part of human evolution, rather than being embittered and encumbered by them (Is that even possible? Wait, don’t answer just yet!).

In short, we develop both context and perspective, from which we can make smarter, better, faster, more economically sound decisions. We create real social impact. And those respective actions are what comprise the real “brands” of today. The brands of right now.

Oh, and a quick aside on the numbers you see by the big “Cs” and the big “B”: Corporations comprise a single organism, hence the 1. Consumers comprise individuals who represent the relationship as equal parts, hence the 2. “Brands” comprise the symbiosis of the brand-consumer and consumer-consumer relationship, but always remain at zero point, hence the 0. Why? Because brands are as only as good and relevant as the relationships they maintain and the actions they carry out. The zero also represents a constant level of balance, or zero stasis, between the relationship and the action.

Alright, phew. What are your thoughts? What’s missing? What’s “out of order”? Shoot away!

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RELATED POSTS:

Reaching the Breakpoint

The Emotional Cycle of Digital Interactivity

The Hero’s Journey of Open Design

Soft Values, Hard Work & Building Companies That Matter in Markets That Don’t

 

 

 

 

  • Gregory Esau

    Gunther, I really love what you’re exploring here, and what you’ve managed to accomplish.
    First, let me say how much I appreciate the difficulty in trying to map, chart, and make some kind of sense of what are messy complex relationships. While some may say it is too complex, my impressions are that you’ve made it as simple as possible!

    That said, there is a lot of meat to your last three paragraphs, that strongly suggests where the real value lies for the truly social business, with the caveats of the two emphasized “IFs”.
    There is very much a symbiotic relationship between the consumer and the business enterprise that, even for those with above average customer relations are morely likely than not to miss. (a sidenote here on the growing business of Customer Relations Management (CRM). While likely valuable in many contexts, my sense is that it is obscuring the real value of these relations. My impression, not fully formed, is that it is taking the old school of customer relations (not a bad thing, necessarily) and strapping on social technologies of today. It’s an improvement, but it isn’t innovation. )

    This is a money line for me: “This means that we can move further and further away from bubbles, and closer to situations where we are empowered by our mistakes or failures as a part of human evolution, rather than being embittered and encumbered by them “.

    I couldn’t agree more, and this lies at the foundational basis for my own thrusts and pulls in transforming the organization towards the full and massive potential that lies not only in the relationships of customer and business, but with employee and employer. As a triad, organizations that can bring out the full engagement, build the trust and cooperative interactions, will be the ones that outcompete those miss out on the opportunities of the ‘social business’.

    To close out, I would like to know more about your last paragraph. If zero is the starting or default point of stasis, do you have in mind a system that measures a movement away from that point based on quality and quantity of brand-consumer relations?

    • http://twitter.com/goonth Gunther Sonnenfeld

      Hi Greg, many thanks for this thoughtful comment; to address your last question — yes, I do have a system in mind that moves away from zero point based on qual/quant relationships, and it is what we will be covering off in the book. In short, this system uses emerging human insight combined with precise methodologies (to your point on the mish-mash of social technologies and staid methods). Our belief is that shared story — a form of collective intelligence — trumps the empirical evidences we tend to lean on, and allows us to apply real business cases to a relationship that must naturally run through its own iterations. Further, when we do this as businesses, we are forced to constantly improve our position in the marketplace as a function of deepening the relationship and holding ourselves accountable. And I think you are spot on to say that the companies who do this can out compete those who are merely invested in this idea of ‘social business’, which to me, feels like a lot of vaporware.

      • Gregory Esau

        I am very excited and interested to see where you continue to take this, Gunther!
        In very short, I agree with you on our shared story/collective being/intelligence, and it is going to be finding the right sorts of data inputs, metrics, measurements, matrix and frameworks to find the patterns. What I think will give us entirely different ways if literally ‘seeing’ our world, how we will then interact with it, with a broader, deeper sense of collective connectivity.

  • http://cocreatr.typepad.com CoCreatr

    Thank you, Gunther, this helps. What Greg terms the money line I see in the overall approach to customer relations in Japan. Bowing deep in case of mistakes or defects and trying to fix it. Not always successful but generally respectful and believable.

    I like the stairstep observation. Just came to view again as stagnation in another area: Patent Law. http://m.techradar.com/news/phone-and-communications/mobile-phones/amazon-ceo-calls-on-governments-to-end-tech-patent-warfare-1105027

    Synapsing with http://www.hasslberger.com/pat/pate_1.htm

    • http://twitter.com/goonth Gunther Sonnenfeld

      Hi Bernd, interesting parallel to patent law and protecting societal interests. I’ll dig deeper into this — thanks for the share…

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