Business, the Web, and the Balance of Power

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Business has changed significantly over the last twenty years, particularly with the advent of the Internet and the World Wide Web, resulting in fundamental changes to the way business is conducted, as disruptive new business models replace industry norms.  The Internet and the Web have connected people and businesses in ways never before imaginable, creating significant new opportunities to create value and disrupt existing markets, as Google did to advertising, Amazon did to retail, and Netflix did to Blockbuster and the home DVD market.  It appears that many U.S. corporations exist in the space between the traditional business models of the 20^th century and emergent business models characterized by fundamentally different consumer behaviors, and are likely to experience significant business disruption by both competitors and consumers alike that take advantage of a new balance of power inherent on the Web.

The Relationship between the Web and Power

         The Web has made revolutionary changes to people’s relationship with each other and with information, as the Web has become the de facto standard for communication and information access in our time (Smith, 2010).   Allowing people to communicate in ways never before imagined, the Web has also changed people’s relationship with media from largely a consumption culture to more of a participatory culture, where individuals are both consumers and producers of media (Shirky, 2009).  The change to a participatory culture has had profound implications on the way consumers interact with each other and with government and corporate institutions, as mainstream media institutions are no longer the sole gatekeepers of information, rather individuals and institutions are free to organize, collaborate, share, and develop media according to their own wants and needs (Shirky, 2009).  The result is that millions upon millions of people, or the crowd, are using the combined power of access to information and the ability to organize to gain power over government and corporate institutions.  Hanley (2010), describes the transformational nature of the web as a constant power struggle “in a constant ebb and flow of winners and losers” between individuals and governments, between consumers and corporations, and even between corporations, or between governments.

However, it is not enough to note the power struggles without understanding the unique, power-sharing, nature of the web.

Power to Change Dominant Hierarchies

              The Web has demonstrated a significant range of capability to shift power balances or completely upend existing dominant hierarchies, and Social Dominance Theory is a useful lens to evaluate the power of the Web to create change.  Social Dominance Theory (SDT) is a general theory that explains the stability of social inequality in societies with an economic surplus, arguing that three systems, age, gender, and an arbitrary set, oriented on religion, race, nationality, class, ethnicity, or otherwise, combine to maintain dominant hierarchies (Sidanius & Pratto, 1999).  SDT argues the maintenance of inequality occurs not only with the application of force, intimidation, or discrimination practiced by dominants against subordinates, but rather, “the decisions and behaviours of individuals, the formation of new social practices, and the operations of institutions are shaped by legitimising myths…consensually held values, attitudes, beliefs, stereotypes, and cultural ideologies” (Pratto, Sidanius, & Levin, 2006, p. 275).   Legitimizing myths provide a means of justifying, either morally or intellectually, dominating behavior (Pratto, et al., 2006).  For example, a legitimizing myth about Mexican illegal aliens is that they are do not pay taxes, use an unequal share of social services, have higher rates of criminal activity, and take American jobs; a myth that was used to gain passage of the controversial Arizona law, SB1070 (Rock, 2011d).  How then, given the complex interplay between individual behaviors, institutional and societal practices, and cohesive power of legitimizing myths, are the power of dominant hierarchies changed by people using the Internet and the Web?

What is Different about the Web

            Dominant hierarchies are maintained with myths that focus on the trimorphic systems of differences, age, gender, and arbitrary differences like race, class, or ethnicity (Pratto, et al., 2006).  However, on the Web, identities are amorphous, sometimes anonymous, and crafted by individuals (Baym, 2010), eroding the power of the arbitrary-set system to dominate, by allowing individuals to choose which acculturation to accept or shed on a moment’s notice.  Simply put, individuals can shape their personas and this is a key difference from the physical world, that expects behaviors aligned with age, gender, and arbitrary-set systems.

The Web also serves to erode the power of legitimizing myths because the more than a quarter of the world’s population (Hanly, 2010) has access to the what amounts to the sum of human knowledge (Wesch, 2010).   Wesch describes the new media landscape as “ubiquitous computing, ubiquitous communication, ubiquitous information, about unlimited speed about everything, everywhere, from anywhere on all kinds of devices and this makes it ridiculously easy to connect, organize, share, collect, collaborate and publish” (Wesch, 2010).  Ubiquitous access to information makes it very difficult for myth to exist as anything but a myth, because facts and reality and the impact of legitimizing myths are spread across the web at blazing speeds in the form of images and videos that cannot hide fundamental truth, while the diffusion of the net resists attempts to suppress information.  Gilmore (2011) described the nature of the networks treatment of information as “the net interprets censorship as damage and routes around it”.   In the virtual environment, information flows freely and individuals and groups are able to challenge the assumptions of legitimizing myths will information, while circumventing the information control efforts of dominant hierarchy institutions, acting as gatekeepers, that may attempt to control information flow.   Examples of people using the Web to challenge dominant hierarchies are everywhere, including the Chinese people’s challenge to the government during the Sichaun earthquake (Shirky, 2009), the Iranian people’s challenge to the government following the 2009 Iranian Presidential Election (Hanly, 2010), and the recent Arab Spring in the Middle East that has overturned many existing regimes (Rock, 2011b).  The Web is a great equalizer that erodes the power of dominant hierarchies and changes the power dynamics between individuals and institutions, moderating the impact of dominant institutions, or in extreme examples, seizing control of dominant institutions.  While recent events have highlighted the effects of the Web on the balance of power between citizens and governments, what is the impact on business world?

The Web and Corporate Power

             It will come as no surprise to anyone that the business world is about profit.  To the extent that a corporation can dominate a market or industry, a corporation can expect to grow and pass along profits to its shareholders and the greater the profit, the greater the earnings of shareholders and corporate officers.   As noted in the introduction, the Web is having a disruptive affect on the corporate world, where some corporations are seeing their business models and practices challenged, and others are attempting to harness the Web to reach new customers and commoditize existing marketplace leaders.  What differentiates the businesses that take advantage of the new medium versus those that diminish?  What business characteristics allowed Amazon to disrupt first Borders and now Best Buy?  How did Netflix destroy Blockbuster so quickly?  What prevented Blockbuster and Borders, both companies with dominant market positions, significant capital, and great brand recognition, from capitalizing on the opportunity the Web provides?  Perhaps most importantly, what can companies with dominant market positions learn about the changing balance of power?

Corporations that dominate their respective markets are targets for disruption, because marketplace leaders have the highest expectations on their performance.  Well-run companies deliver consistent earnings by using technology to “transform labor, capital, materials, and information into products and services of greater value” (Christensen, 2000, p. xiii).  In the book, The Innovator’s Dilemma, Christensen (2000) argues that well-run companies avoid disruptive technology because disruptive technologies tend to have lower profit, smaller initial markets, and address customer’s future, rather than current, needs, and therefore, good business leaders are reluctant to invest.  Put another way, the investment is fraught with risk.  Were Blockbuster and Borders simply risk-averse organizations in a traditional innovator’s dilemma, or did Amazon, for example, have other advantages besides technical innovation?  To answer this question, we need to look to the equalizing power of the Web.

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As we examined earlier, ubiquitous access to information has an empowering quality and in the business world, the crowd of consumers can not only access more product and service information than ever before, but can also produce product and service information, creating far more consumer power than existed in previous generations.  Amazon is a great example of a company that harnesses the power of the crowd to provide product information in a metaphor that now dominates the retail industry as companies like Walmart, Best Buy, and others attempt to replicate the transparency and engagement Amazon provides.  In addition, Amazon recognized that the Web offered greater customer reach and the ability to commoditize brick and mortar stores that required expensive storefronts and the labor to operate them.  The result was compelling, as Amazon consumers were offered more information and cheaper products, but more importantly because consumers were offered product insights from other consumers.  Amazon understood that the Web could change the relationship between consumers and products and built a platform that enabled the consumers to engage in a direct relationship with product manufacturers in a show of both altruism and activism; altruistic when sharing positive product experiences, and active when sharing negative experiences.  In short, Amazon built its business on an understanding of changing consumer behavior enabled by the Web.

Risk and Opportunity: A Progressive Example

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In order to understand the changing power dynamics of the Web, I conducted an experiment that simply pitted a consumer and customer, namely me, against a dominant corporation, in this case Progressive Insurance Company.  The opportunity presented quite naturally as it simply required a corporation to behave in its own interests, rather than the interests of a single customer, a situation not terribly difficult to find.  I recently had a family outing on our boat and found that it was losing power and taking on water.  We quickly got the boat out of the water and found that the engine ruined because a mechanical malfunction allowed salt water into the engine.  After filing a claim with Progressive, the claims investigator took the claim information and determined that they would likely deny the claim.  I saw the opportunity to explore the power of social media and to observe what affect it might have.  I put up a blog on WordPress and registered the domain name of Progressivefail.org, putting the story of Progressive’s impending denial on the Web.  Next, I began posting links to existing customer stories of claim problems and consumer satisfaction surveys on Progressive’s track record of paying claims and published the posts via Facebook and Twitter (Rock, 2011c).  I also posted links to Progressives Facebook and Twitter sites and received an immediate response from Progressive’s Twitter account indicating they would look into it.  Within a day, the blog had 87 views and was the first hit on Google when searching for the term “progressive fail; within four days I had received 242 views and the check was in my hands.

The Progressive example highlights how the Web can shift the balance of power between a corporation and their customers.  By simply sharing customer stories on Progressive’s social network, a nearly immediate change took place.  The surprising element of the example is not the immediate payment, but the implication that a single consumer was able to use the Web and Progressive’s own social network to potentially inflict brand damage far beyond the monetary scope of the initial claim.  While Progressive likely intended their use of Facebook and Twitter to open a positive two-way asymmetrical dialogue with their customers, they opened themselves up to significant risk by simultaneously providing consumers with the ability to damage their brand and reputation.  In this example, Progressive is the dominant hierarchy and the legitimizing myth is that of capitalism; it is more necessary for Progressive to profit than to address the specific need of a single customer.

The implication is that a corporation that opens a two-way dialogue with customers on the Web has both risk and opportunity.  If the corporation treats its customers fairly, the Web will work in its favor, while the reverse holds true; should a corporation be perceived as unfair, customers have the power to negatively affect a corporation’s brand and either way, the Web has given consumers far more power over corporations than ever before.

Conclusion

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Individuals, corporations, and governments are all part of a major transformation afforded by the Internet and the World Wide Web, characterized by ubiquitous access to all the information of human society.  Serious implications exist that have yet to be fully understood, or explored; notions of privacy, intellectual property, ownership, relationship, consumer, and producer are all being challenged and reinvented on the Web.  Corporations and governments both have a significant opportunity to take advantage of the Web to build better versions of their selves as they engage the power of the crowd; but they need to beware, because 20^th century intentions and behaviors are transparent to the crowd.  Corporations that use the Web to engage customers, need to recognize that social networks are not simply another channel to reach additional customers, rather that use of social networks require ethical business models, because the crowd is vocal. Corporations can no longer exist in the space between the traditional business models of the 20^th century and emergent business models, and are likely to experience significant business disruption by both competitors and consumers alike that take advantage of the new balance of power inherent on the Web.

References

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Christensen, C. M. (2000). The innovator’s dilemma : when new technologies cause great firms to fail (1st HarperBusiness ed.). New York: HarperBusiness.

Gilmore, J. (2011). John Gilmore’s Home Page  Retrieved September 3, 2011, from http://www.toad.com/gnu/

Hanly, F. (Writer). (2010). Programme 2: Enemy of the State? [Internet]. In R. Barnes (Producer), The Virtual Revolution. U.K.

Ingram, M. (2011, September 2, 2011). Is journalism as we know it becoming obsolete?  Retrieved September 4, 2011, 2011, from http://gigaom.com/2011/09/02/is-journalism-as-we-know-it-becoming-obsolete/

Pratto, F., Sidanius, J., & Levin, S. (2006). Social Dominance Theory and the Dynamics of Intergroup Relations: Taking Stock and Looking Forward. European Review of Social Psychology, 17, 271-320. doi: 10.1080/10463280601055772

Rock, R. (2011a, September 4, 2011). journey24pointoh. journey24pointoh  Retrieved September 4, 2011, 2011, from https://journey24pointoh.com/

Rock, R. (2011b, August 30, 2011). New Media, New Perspectives. journey24pointoh  Retrieved September 3, 2011, 2011, from https://journey24pointoh.com/2011/08/30/new-media-new-perspectives/

Rock, R. (2011c, August 30, 2011). Progressive Fail. progressivefail  Retrieved September 3, 2011, 2011, from http://www.progressivefail.org

Rock, R. (2011d, September 1, 2011). Social Dominance Theory: The U.S. Minority Experience. journey24pointoh  Retrieved September 3, 2011, 2011, from https://journey24pointoh.com/2011/09/04/social-dominance-theory-the-u-s-minority-experience/

Shirky, C. (Producer). (2009, July 23, 2011). How Social Media Can Make History. Talks. Retrieved from http://www.ted.com/talks/clay_shirky_how_cellphones_twitter_facebook_can_make_history.html

Sidanius, J., & Pratto, F. (1999). Social dominance : an intergroup theory of social hierarchy and oppression (Vol. x, 403 p.). Cambridge, UK ; New York: Cambridge University Press.

Smith, P. (Writer). (2010). Programme 1: The Great Leveling? [Internet]. In R. Barnes (Producer), The Virtual Revolution. U.K.

Wesch, M. (2010). From knowledeable to knowledge-able. Kansas City: TEDxKC.