“We are not in an epoch of change, but in a change of epochs.” – Chris Anderson *

(* This is a free retranslation from Portuguese of Anderson’s quote. Unfortunately, we could not locate the original sentence in English on the Internet. If you find it, please send it to us.)

There is a lot of curiosity about the impact of Social Networks (also known as Web 2.0) and everything they may come to represent for corporate management. On this issue, the Wall Street Journal published last year (August 23) an important article which signaled in this direction: “The End of Management.”

In brief, the article warned:

a) “Modern” management is approaching an existential crisis.

b) On one hand, the world is increasingly complex, flexible, agile, adaptable, and innovative; on the other hand, organizations have become bureaucratized and managers resist change.

c) Companies were not created for change, but rather for opposing it.

In the article, a group of chief executives from US companies said that for them the most influential business book had been Clayton Christensen’s “The Innovator’s Dilemma,” which is out of print in Brazil but available in English at http://migre.me/46EAQ.

The book addresses the crisis in the computer hard disk and mechanical excavator industries, among others.

Christensen seeks to demonstrate that most companies forget to manage innovation in their business, and that their future is heavily dependent on their capacity to abandon traditional business practices and adopt innovative ones, whenever they are needed.

He also demonstrates the failure of many organizations to keep at the top of their business sectors when confronted with certain types of marketing and technological changes.

The WSJ article also warns that in the face of technological disruptions firms fail not because of “bad” management but for adhering to the guidelines for “good” management: they had listened to their customers, studied trends, and allocated capital to innovations that promised the highest returns.

However, they missed disruptive innovations that opened up new customers and markets for lower-margin, hugely appealing products.

Clearly, there is a scenario of doubts and uncertainties in many Brazilian companies.

Some of them even witness their employees creating parallel communities for the company on Facebook, and are still reflecting on a future policy for something increasingly real in the present.

The Web, whose 20th anniversary is in 2011, has gone through two well-defined stages: emergence and expansion (1990-2004) and massification (2004-?). This latter stage was dubbed Web 2.0, when broadband burst forth decreasing costs and shifting user charges from hourly rates to monthly flat rates.

Thus, it became possible, especially for domestic users, to put into practice in intense and global fashion the main potential of the network since its beginning: distance dialogue and collective production. This was a form of interaction that previous information means had not allowed, basically due to technical limitations, but also in some cases because of political constraints.

In this way, the phenomenon of social networks, from Wikipedia to YouTube emerged, in which the user is the only content provider.

This change can be called an information revolution. This is a rare and atypical fact because it alters the form of something fundamental for human constitution: the daily, key, routine act of consuming and producing information.

The only recent similar informational phenomenon of such scope took place 500 years ago with the invention of the printing press by Gutenberg in 1450 (Germany). This founded and strongly influenced modern society through radical changes in politics (monarchy, republic, democracy) and in the economy (feudalism, capitalism, corporations).

As we have seen, the sudden, rapid widespread circulation of new ideas throughout society decontrols information, the established foundations, and ends up deeply conditioning all society, exercising a decentralizing and democratizing force.

However, our way of acting and thinking is not ready to deal with such broad disruptions. In addition, because they are so rare, macro changes in information environments are not yet included as a threat or opportunity in any book on strategic planning.

It’s something so new that science calls it a paradigmatic fact – without knowledge or written or developed theory. This requires a radical revision of how we think about the present and how we project the future, especially the future of management in organizations.

To design mid- and long-term strategies it is necessary to have a clear historical view of the causes and consequences of an information revolution for society, and how each organization will adapt to it.

In terms of causes, in my recently completed PhD dissertation in Information Science at the Rio de Janeiro Federal University (Niterói), I put forward the hypothesis that there is a likely relation between population growth and the emergence of the information revolution. We jumped from 1 billion inhabitants in 1800 to 7 billion in 2010.

Large-scale demographic growth, as Thomas Malthus predicted in 1798, generates production crises in society; overcoming them makes innovation methods more sophisticated, as Joseph Schumpeter diagnosed a century later.

However, nobody innovates without freedom of information!

Thus, the Internet has created this favorable information environment, less controlled, with ideas circulating more freely to ensure innovation in the quality and rapidity required by the increasingly customized consumption pattern of 7 billion consumers worldwide.

In terms of consequences, the massive use of the Internet has basically created a lack of information control in society. Citizens not only began to have more access to information as new talented people have gained a wider audience through new and increasingly more inexpensive channels: blogs, Twitter, Facebook, LinkedIn, etc. This has “oxygenated” society.

In addition to the obvious cognitive impact – with changes in the ways our brains organize themselves – this fact leads to a deeper transformation of our own subjectivity, which evolves to emotional maturity.

The ongoing exchanges through the network lead to a radical and permanent questioning of established powers. Citizens acquire information skills, grow wings, and begin to demand from society, government, and companies, in the short, mid, and long term, a more mature, less infantilized relationship, as there is a clear relation between information control and the ability to think.

A typical example of this logic is the earth-shaking change in the life of an illiterate person, when he or she learns how to read and starts to wish for a new life. In my opinion, this definitive emotional and cognitive change brought about by the network is the deep-seated basis of the cultural change we are witnessing, in which technology is only an inducing factor.

Consumers and organizations’ staff no longer accept the lack of dialogue inherent to the old controls and the established conditions for consumption, in which power weighed much more on the side of organizations, with rules not always favoring the weaker side.

The recent events in Egypt and neighboring countries are an example of this, (now in Spain, too) when authorities who maintained power through a given information control become incapable of convincing their citizenry of the power of their authority when that control is lost. From then on, there is disequilibrium and the search for a new order, a more representative authority. The new information environment did not promote the change, but provided the road for it.

Thus, we can assume that the Internet is an information environment that favors a systemic regulation by flesh-and-blood actors with their own interests in search of more authenticity and representativeness of established powers.

In general, organizations view the emergence of this new phase of collaborative Internet, in which consumers have become active information agents, as a “communication or marketing problem.” They address it as a minor technological issue, and not as a cultural one. They never see it as something that might define the very survival of their organization. It is dealt with as a media problem, not a managerial one. At best, as a management issue, but never as innovation.

They try to solve this “problem” by developing “digital marketing” strategies, introducing new tools for dialogue and exchange (Facebook, Twitter, blogs) in organizations that are far from ready to talk, produce, and innovate dealing with their collaborators and consumers as friends and not enemies in this new “decontrolled” environment, in search for legitimate authorities.

The inconsistency between what is said and what is done becomes clear in the social networks. The new proposed dialogue is not meant to correct communication failures. They try to maintain the current corporate communication model in the new conversational environment.

For increasing numbers of consumers, what the vertical media used to manage to hide has become clear: the shareholder always was and is right!

Thus, to migrate to company 2.0 is above all to follow some trends:

a) Have a clear notion that this current change is a cultural shift of civilization toward a more decentralized, horizontal world, more based on dialogue and logical reasoning than on imposition and repetition of ideas through traditional media.

b) Include such risks and opportunities in the strategic planning.

c) Have a coherent line of action for all the organization to implement projects to change rapidly but consistently to more horizontal forms of management. Adequate investments should be allocated and projects implemented in a participatory way, including also tools for collaborative documents.

d) Finally, they should expect as results not only communication and marketing improvements, but also the enhancement of the capacity for more innovation with less costs. In sum, to be more competitive, incorporating the consumer/collaborator as allies, co-creators, with contributions via many different new channels.

Dialogue to change, not to postpone!

Unfortunately (or fortunately) this issue is no longer a matter of wishing or not to adhere. The reality is here. Social networks are not a distant place where “companies will arrive,” but a global systemic adjustment toward a society with need for more innovation and, consequently, information freedom. Actually, companies are already there, but they don’t know yet!

Thus, all that is left to find out is the number each organization will get on the line to change toward this future. On this long line will be defined which organizations will lead and which ones will merely follow the market, in a century that advances in a big rush, with many more people needing to consume in ways completely different from what we have so far been used to.

What do you say?

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Translated by Jones de Freitas. Edited by Phil Stuart Cournoyer.

(This article in Portuguese.)