A few months ago, Facebook bought Instagram for $1 billion.  Instagram had 13 employees at that point in time.  How is it possible for 13 people to create a company worth $1 billion?

On the face of it, this might seem impossible.  But if you read 11 Rules for Creating Value in the #SocialEra by Nilofer Merchant, it starts to make a bit more sense.  It turns out that Instagram was doing nearly all of the things that she recommends in this terrific book.

Here is how Nilofer defines the Social Era:

Here’s the simplest way to define the Social Era: the industrial era primarily honored the institution as a construct of creating value. And the information age (inclusive of Web 1.0 and Web 2.0 phases) primarily honored the value that data could provide to institutional value creation. It allowed for greater efficiency to do the same things that were done in the industrial era. The Social Era honors the value creation starting with the single unit of a connected human. That shift in focus has profound implications for business, and those implications are the subject of this book.

There are several important issues that Nilofer raises in the book:

•  Social is not just “Social Media.” If your employees are disinterested, and you run a top-down hierarchy, and the only real purpose that customers serve you is to give you a bunch of money, then adding a Facebook page doesn’t make you social.  Nilofer describes the impact that social can have on every aspect of an organisation – the social era of business changes HR, service, finance, products, distribution, supply chain management, sales, marketing and innovation. The implications of this are significant, and Nilofer does a great job of drawing them out.  If you’re going to take this seriously, then you need to think about how to use social tools across all of these functions.
• It’s not just about the tools.  This is not a book that answers questions like “should we be on Pinterest?”  I was re-reading the book today, and realised that it addresses some of the same issues that I am trying to get at with The Innovation Matrix.  Here is how I pictured it in #SocialEra:If you want to make your organisation more social, it requires tools and culture to work together. Tools by themselves will never fix your problem. This is a point that Terri Griffith also makes very well in The Plugged Manager – that successful management these days requires strong interaction and interdependencies between people, technology, and processes (and if you want to read a good, more traditional review of #SocialEra, Terri’s is excellent).  To really become social, it’s not enough to pick the right tools – you have to change your culture as well.  This is huge.  It means that:
• Changing the culture means changing the business model. When you take social seriously, you end up needing to change nearly everything about how you operate. Here’s Nilofer again:
  

  These 800-pound gorillas are feeling the Social Era all around them, but are failing to notice how significant a change it has produced. Perhaps that is because it has shown up in bits and pieces, sometimes wrapped up in technology whiz-bang-ness. You might have seen it arrive via freemium models, crowdsourcing, online communities, virtual workforces, social networks, co-working locations, and so on. Each of these on its own is interesting but not the central idea; each on its own is only an example of how value is created with others, allowing seemingly disparate individuals to create value in a way that once only centralized organizations could.

  When we look at all the parts together, we can see how it affects everything.

  So for your Facebook page to work, you need to change the way you distribute decision-making to push accountability down the hierarchy, and you need to hire differently to have people sufficiently skilled to handle this. Your relationship with customers changes, and so on. Your business model needs to be internally consistent. Business models based on social are going to be significantly different than those based on economies of scale, or big data.

The big question here is “what do you do if you’re already big?” It’s relatively easy to build nimbleness in to a small startup. It’s another question entirely if you’ve been around for a while and have been reasonably successful. Chuck Eesley talks about #SocialEra does this:

My favorite analogy in the book is between 800-pound gorillas and quick, nimble gazelles. While many of us who teach and study entrepreneurship have given up on making the 800-pound gorillas more nimble and accepted a world where startups continually disrupt old industries while creating new ones, Nilofer’s book outlines how even larger organizations can become more nimble and quick moving by breaking down walls and barriers, pursuing social purpose, leaving traditional strategy behind and changing the way they approach strategy in the #SocialEra.

One of the tricks here is to think about what you would do if you were building your business from the ground up, starting now. Dave Gray said in a tweet today:

You can’t turn the New York Times into Instagram. I’m not even sure you’d want to. But the NYT is competing against companies like that – ones that were born in the Social Era, and which embody it.

If you’re an 800 pound gorilla, that’s something you’ll need to think about.  More importantly, it’s something you’re probably going to need to act upon.

Welcome to the #SocialEra.

Disclaimer: I know and like Nilofer, and I received a free copy of the book. I also bought my own copy. I’m writing about the book because of its quality, not because of who wrote it or how I got it.