The other evening I went to a techmap event where Mark Schaefer talked about his new book Return On Influence and the key themes and trends it explores.
The book focuses on new online tools like Klout, PeerIndex and Kred that develop algorithms to measure an individual’s online social influence and explains why they are now so widely used and what this means for all of us. Although far from perfect and despite the fact that you may never be able to truly gage someone’s reputation and influence just from online data, these tools are becoming increasingly significant and brands, particularly in the US, are using them to build important relationships with key customers and reward these ‘citizen influencers’ accordingly.
The ability to use social software to easily build relationships and scale networks combined with the fact that everyone goes to the web to access and search for information, means that now what matters above all else is the ability to create and curate intelligent and valuable content and have built the necessary relationships online that enable that content to move through your network and beyond.
This phenomena, the elevation of the citizen influencer, and its critical importance to business is what has lead to tech companies like PeerIndex developing their software. Mark’s book contains the following quote from PeerIndex’s founder Azeem Azhar that nicely summarises his initial motivation and also explains why social media is now so important for an individual’s success:
“The old channels of creating influence were quite clear...and dysfunctional. In order to have impact, you needed to go to the right university...check that box...get a job with the right newspaper or investment bank...check that box...and guess what? Now you have influence.
“But actually, it’s not influence; it’s hurdle jumping. You’re jumping the hurdles of your SAT, your GRE or GMAT, or other entrance exams. You’re jumping the hurdle of the late night drink with the city editor of the local paper or investment banker who you’re hoping is going to recruit you. That was the old way to get ahead and get noticed.
“But we found some really smart people hanging around in the social space with no clear metric to distinguish who you should trust and on what subject. So that’s what PeerIndex became. That was the vision.
“We knew that within the data on the social web there were some really clear indications of people’s tendencies and behaviors, there were patterns that would indicate the topics that they really cared about and maybe even some indicators of influence on certain topics.
The impact of social media is wide ranging and will eventually go to the heart of our financial system. The concepts that Mark explores in his book tie in with the messages of Simon Dixon, a TED speaker on banking reform, who talks a lot about how online influence will eventually be key to the future of banking. Simon is passionate about ending the current financial mess and moving away from traditional banks to a more sustainable person to person financial system where an individual’s social capital and network will be key. With equity crowdfunding platforms like Crowdcube and lending marketplaces like Funding Circle becoming increasingly popular, we are already starting to see the rise of such a new system.
Equity based crowdfunding web platforms such as Crowdcube give people a new way to invest in companies through online portals and micro-payment systems which lower the barriers to investing and allow anyone to easily log in and back businesses, even if its just with £10. Not only does crowdfunding simplify and open up the financing process, but it taps into the viral nature of the internet by allowing start-ups to amass an army of brand evangelists who can rapidly raise the profile of the company and build its community.
Crowdfunding was recently used by Scottish beer brand Brewdog to successfully raise over £2 million from around 700 individual investors, principally to finance the roll out of their branded bars and the construction of an eco brewery. Brewdog’s 'Equity for Punks' crowdfunding was especially remarkable in that they financed themselves through their own website with no intermediaries or brokers involved at all.
I recently read this discussion thread on Chris Dixon’s blog. Chris is an early stage investor based in New York who writes some thought provoking and insightful stuff about tech startups and how the internet changes business.
Chris’s post sums up the difficulty that politicians and many commentators have when they talk about new businesses creating lots of ‘jobs’, i.e. more employees so government can get their hands on people’s income more easily through PAYE and National Insurance (in the UK). However, the vast majority of new companies in the West are web-based platforms that work very differently from traditional corporate hierarchies which web-orientated businesses are rapidly replacing due to their more open and collaborative approach, efficiency, superior access to information, closer proximity to customers and better network connectivity.
Other than a core team, digital organisations have no need to scale by employing people and instead look to work with the best contractors at the optimum value proposition anywhere in the world should they need any specialist assistance. Instead, the web portals built by internet entrepreneurs are designed to create opportunities and income streams for other people wanting to buy and sell products and services. They are essentially P2P platforms that make it easier for individuals to do business with other sentient and like minded people, rather than have to deal with inefficient, faceless corporate brands. They thus reshape our economy from one of huge corporations with lots of jobs to huge online hubs which offer lots of income streams and opportunities for those working on a self-employed basis.
As small teams creating and managing large online communities and platforms continue to disrupt old-model corporations with thousands of retained employees, huge seas of people will need to adapt, shake off the shackles of employeedom and become far more independent and entrepreneurial in order to find their place in the new digital economy.
A photo of me last weekend enjoying the sunshine and blue skies in Madrid.
Last week I attended an Entrepreneur Country event hosted by Julie Meyer, following which Julie emailed the participants with her overview of the current state of the economy, the reasons why entrepreneurialism is so necessary now and some general advice. Most of the contents of this email can be found in a recent post on her blog, but I set out below a summary of some of the main points she makes:
• The world is going through significant structural change whereby we are moving to a new age where all business is driven by networks and the increased connectivity we now experience is in the process of producing new ways of working which obviate the need for hierarchical organisations employing lots of people.
• Government is a cost-center to society and the more people that are employed by the state the heavier the weight is around the country’s neck and the harder it is to generate market driven private sector jobs.
• As the pace of technological change leads to more globalisation, your employer, or person you contract with, is increasingly likely to be based on the opposite side of the world.
• Government and public money can do nothing to help the UK adjust to these new realities, particularly as the country has run out of money. If you want to progress you need to take responsibility for your own life, learn where the world is going and look to work with the brightest businesspeople and entrepreneurs.
• The tools now exist to grow powerful personal brands that make people more attractive to employers, enable you to create your own job and to connect and communicate with people who have the same interests and passions as you. The web enables individual empowerment as never before and allows people to become experts more easily through online education and free information, while the growing number of people working on a self-employed basis is a trend that is not going to go away.
Yesterday I appeared on the Voice of Russia radio station for half an hour as one of a panel of four to talk about social media and political movements - you can listen to the programme here (I think I first speak at 7mins 30secs).
On Wednesday next week I have been invited ‘on air’ at the London studio of the Russian state international radio broadcaster Voice of Russia to talk about social media and its impact on politics. I’ve been told that one of the areas we’ll cover will be the crazy London riots that happened back in August 2011. Not having really analysed how the riots came about I thought I’d jot down some of my thoughts and do a little bit of research in preparation so hopefully I have one or two interesting things to say. So, here in no particular order are my main reasons for why and how the 2011 London Riots happened:
1. Communications technology
Amongst the vast majority of London’s ‘gangsta’ culture influenced urban youth, the communication tool of choice is the Blackberry Messenger system which allows secure and encrypted messaging, one to many and many to many, across networks. While Facebook and Twitter had a more limited role in helping organise the riots it was the closed and more private Blackberry Messenger service that gave the participants the confidence and ability to arrange and lead the looting on a wide scale and allowed the rioting to spread like wildfire.
2. Response from the authorities
The original Tottenham outburst was precipitated by the shooting by police of Mark Duggan without the police giving an adequate explanation for their apparent over-zealous approach. A peaceful gathering to protest against Mark Duggan's killing outside the police station was then ignored by the police for several hours. The already poor relationship with the communities they police was exacerbated by the police’s alleged illegal shooting and as the riots spread the Metropolitan police force continued to show a lack of communication and decision making ability. Combined with the fact that David Cameron and the whole of Westminster were on their overly long annual summer break meant that a kind of institutional paralysis took hold which made it very difficult for the authorities to adequately respond to the contagious spread of the rioting.
3. State dependant ‘communities’
I think it is too simplistic to talk about disenfranchisement, the growing gap between rich and poor, social exclusion and deprivation. Instead we should look at the contributory factors that fuel the lack of hope, ambition and responsibility and analyse the reasons why these communities don’t function, why they breed poverty and waste resources rather than generate wealth.
Gang culture, criminal opportunism, family breakdown and unemployment, I believe all mostly emanate from the pernicious effect the welfare state has on communities. It can’t be a coincidence that the areas of London where the rioting took place are Labour controlled and receive high levels of welfare spending. This means that the state replaces the social bonds between people, creates dependency on handouts, encourages and rewards anti-social behaviour and makes it uneconomic for people to co-operate with each other, in short bringing about a sense of alienation where there is an absence of a sense of being in a productive relationship with their physical and social environment.
4. Moral decay at the top
I remember soon after the riots a piece by Daily Telegraph commentator Peter Oborne linking the riots to corrupt corporatism, unjustified bankers’ bonuses, the MP’s expenses scandal and the phone hacking scandal picked up a lot of support across the political spectrum in the blogosphere. Amongst the urban youths rioting and stealing from shops there seemed to be a feeling that the widely reported moral decay at the top of society could somehow excuse their behaviour and that this was their opportunity to both demonstrate their displeasure with the elite, as well as to thieve other’s property themselves.
The UK government recently announced a new piece of legislation called the Seed Enterprise Investment Scheme (SEIS) that will shortly come into effect on 6th April 2012. For further information about the SEIS, please see this post I wrote earlier on my firm Bargate Murray’s site.
The SEIS offers great tax incentives to investors willing to back startup companies and should hopefully help increase the culture of entrepreneurialism in the UK.
Today’s newspapers and TV political programmes have been covering the government’s announcement that they intend to tackle ‘fat cat’ rewards for under-performing directors of failing companies by legislating that in certain circumstances director packages are approved by a company’s owners.
As a corporate lawyer who often puts together equity investments in smaller private companies for both investors and entrepreneurs, the governing documentation of the deal, including the investment agreement and any director service contracts, will always contain thoughtfully negotiated provisions relating to director remuneration. The investor will not want to see his hard earned money unnecessarily wasted. This contrasts sharply with what seems to happen at public companies.
Even though UK public companies are so much larger and much better equipped to deal with regulatory overload in other areas that affect their business, the prevalence of non-owning directors of PLCs, their success at lobbying governments and the separation of inadequately incentivised funds as the legal owners of public companies while the beneficial owners are ultimately individuals who trust pension funds with their money, have all combined to mean that regulation concerning director remuneration is weak, as a result of which for years increasingly absurd stories have surfaced in the press about inept directors being well rewarded for abject failure. In my mind the situation seems like a form of institutional and legalised fraud that has become commonplace.
I do not believe that additional regulation is often the solution to any problem and people will argue that there are already laws that shareholders can use to protect their position, while shares in public markets are easily transferable should shareholders be really dissatisfied. However, shareholders still seem to suffer unnecessarily from directors benefiting from mismanaging their companies. Given the advances in electronic communication and digital technologies, having a mass of shareholders vote on a particular issue shouldn’t be an administrative issue, particularly if votes are restricted by de minimis limits to material contracts, especially those containing substantial payoffs should a director leave for whatever reason.
While the current debate is about protecting company shareholders from self-interested directors, the same arguments can be made in relation to government officials and civil servants vis-a-vis the taxpayer, as well as trade union leaders deciding what to pay themselves out of membership funds and, scandalously, also being entitled to additional payments from the taxpayer. Unlike shareholders, who are already protected to a degree from a large body of company law, taxpayers do not have the benefit of any such protection other than being able to vote at election time every few years.
With the ever faster development of communication and information technologies, especially cloud computing, the outsourcing of legal services to lower cost providers, whether ‘onshore’ in the UK or ‘offshore’ in India and other jurisdictions, looks to be a growing trend that will one day soon become commonplace.
 SKJ Legal
Thanks to my LinkedIn and Twitter activity one of the opportunities that came my way recently was a meeting in London with Pankaj Jain and Saby Ghosh of SKJ Legal, a law firm based in Pune, India which has a successful arm providing outsourced legal services to UK and US law firms, as well as directly to Western based companies. Pankaj and Saby have subsequently appointed me as a London based sales representative with the fancy title ‘Vice President, UK Operations’.
Although my involvement will be limited by my full time role with Bargate Murray, I am still keen to match SKJ Legal with any UK based law firms looking to establish a relationship with an Indian partner in order to provide their clients with more cost and time efficient services and win more work as a result. SKJ Legal operate fully secure systems and are experienced in assisting with document intensive disclosure and review exercises, legal research, property searches and standard contract drafting. It would be great to hear from anyone looking to explore these options further.
Enough of the sales pitch, I thought I’d also use this post to include some other points of note when considering outsourcing...
Outsourcing considerations
On the face of it outsourcing is a simple concept, but you need to exercise due care and attention to get the delivery right and make the relationship work.
As liability for delivering the services to the end client will be borne by the firm outsourcing the work you still need to ruthlessly check the quality and accuracy of the work before presenting the end product. You should check that your outsourcing partner is covered by professional indemnity insurance, but even if they are the practicalities of exercising such a policy in a jurisdiction such as India mean that you should ensure at the outset you are working with diligent and trustworthy people.
You should ensure that the tasks you outsource are very clearly defined and that your instructions are sufficiently detailed, especially where any work relies on an intricate knowledge of the client and the particular matter. In addition, those carrying out the work should have a good knowledge of the English legal system and language.
Other options
Magic Circle firm Allen & Overy recently took advantage of a government grant to set up its own outsourced services centre in Belfast. This option will be too expensive and inflexible for most smaller firms, but there is nothing to stop firms collaborating with those firms based in lower cost regions of the UK to deliver well managed outsourced services ‘onshore’. Cornwall is one such area I know well where there are a number of quality lawyers based at several law firms who could easily work with larger London practices.
South Africa is another jurisdiction that thanks to its common law background, time zone and language has several outsourcing outfits operating there. I even know from friends at large Johannesburg law firms that lawyers who have recently returned from working in the UK have taken their clients with them and are able to continue providing UK legal services but at a greatly reduced cost thanks to lower South African overheads. In fact, as long as you find the right business partner, UK law firms could establish a successful outsourcing arrangement with firms and lawyers in any commonwealth country who have a sufficient degree of familiarity with the English language and common law legal system.
Advantages of outsourcing
There are numerous benefits to outsourcing, not least the cost and efficiency savings. Other advantages are the ability to free up time for you to focus on more lucrative areas of work, the reduction in expensive overheads such as retained employees and office space, greater flexibility, being able to delegate tasks to those more capable and experienced, enlarging your workforce but without the risks and liability of employing people and being able to accommodate large workloads and minimise fluctuations in headcount that could result from peaks and troughs in demand.
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