By Gianfranco Cuzziol
By Gianfranco Cuzziol

More often than not, brands thinking about Social Business actually fail to go beyond the concept of Social Media. Even then, the more well-known platforms such as Facebook, Twitter, and Pinterest, etc. actually only get used as an extension of a brand’s advertising department rather than with true social connotations.

Creating a Social Business involves 3 fundamentals:

  1. Being Social
  2. Using Technology to enhance being Social
  3. Building an economic model that derives value for both the brand and the customer on the foundation of technology and being Social

Being Social is not a new phenomenon. If you agree with me that being social actually only means reflecting and harnessing human behaviours and attributes, then we can go back thousands of years to see this. Aristotle espoused the virtues of Trust, Credibility and Logic when trying to win in the art of persuasion, these 3 traits being fundamental to being Social as well.

If we take word of mouth or story telling as Social activities then obviously these go back thousands of years – let’s not forget that for much of human history all we had was word of mouth and gestures. You could argue that the gestures of the Roman crowds in the Colosseum were an early form of crowd sourcing for decisions. More recently, product recommendations or customer service examples used to be at the heart of every local grocer visit until the supermarkets began to take over.

Co-creation is nothing new either. Even my hometown brewery allowed its customers to help choose the name of its new premium beer back in 1952.

Obviously, what has changed fundamentally in Social is the impact of technology, allowing us to be Social not only locally, but globally and at the speed of light. And by technology, I guess fundamentally I mean the web, computing power, mobiles.

And of course, we are all in business to make money – honest – so the idea of applying an economic perspective to Social makes perfect sense.

[blockquote author=”Eric Schmidt, Executive Chairman, Google.”]Peer production is about more than sitting down and having a nice conversation… It’s about harnessing a new mode of production to take innovation and wealth creation to new levels[/blockquote]

The idea of ensuring a positive return for both brand and consumer, again, is nothing new. It’s just simple business common sense.

One area of Social not always top of mind is Crowdsourcing

Defined ‘as a process that involves outsourcing tasks to a distributed group of people, this process can occur both online and offline, and the difference between Crowdsourcing and ordinary outsourcing is that a task or problem is outsourced to an undefined public rather than a specific body, such as paid employees’.

When we think Crowdsourcing, the favourite examples pop up such as mystarbucksidea, Wikipedia and so on. The industry website crowdsourcing .org gives access to literally hundreds of Crowdsourcing initiatives. The different business models tend to cluster around big buckets such as Crowd Labour, Creativity, Distributed Knowledge, Open Innovation, Tools and Crowd Funding.

I’ve left Crowd Funding to last as there is one particular form of this I would like to spend some time on. Crowd-funding tends to be associated with raising capital for businesses, film production and even rock groups ( eg ArtistShare, RocketHub) and in fact can be defined as ‘Crowd funding (alternately crowd financing, equity Crowd-funding, or hyper funding) describes the collective cooperation, attention and trust by people who network and pool their money and other resources together, usually via the Internet, to support efforts initiated by other people or organizations.

Crowd funding occurs for any variety of purposes, from disaster relief to citizen journalism to artists seeking support from fans, to political campaigns, to funding a startup company, book, movie or small business or creating free software’. Of course one of the more famous recent example of Crowd Funding was Barack Obama’s very successful campaign to raise funds for the assault on the American Presidency.

“Never lend money to friends or family,” the saying goes. But what about to complete strangers?

That’s the theory behind Peer to Peer ( P2P) Funding. In an age where there is a severe lack of trust in the traditional banking system and indeed, an even more severe lack of funds coming from Banks to the consumer ( because they don’t trust us to pay it back), this form of borrowing and lending money is gaining some attention.

Personal money lending is nothing new. Banking itself started off with merchants in the ancient world making grain loans to traders taking goods between cities. This dates back to 2000BC. Indeed there are references in the Bible ( Matthew 21:12) to money lenders in the Temple and of course in Shakespeare’s texts when he refers to Shylock in The Merchant of Venice.

It seems commonplace to talk about sharing our experiences ( Facebook, Twitter), our homes (AirBnB), our cars ( GetAround), our travel experiences (TripAdvisor). So why not our money? The idea of sharing our own money fits in with the previously mentioned tensions in the banking system, the slowing global economy and the rise and rise of social sharing.

P2P lending essentially works with lenders deciding how much they want to lend to certain types of borrowers at certain rates for fixed period of times, and borrowers try to tap into that pool of funds. Isn’t that what banks do?

Well yes and no. Yes but with the obvious hurdles of trying to run a business with overheads perhaps resulting in higher lending rates than might be expected. In fact, the rates agreed between these Social Lenders and Borrowers is as low as 6%, undercutting the majority of banks.

Let’s take an example that has been in the news recently in the UK, Zopa.

Zopa P2P lending
Zopa P2P lending

Zopa is a term apparently taken from business theory. It stands for Zone of Possible Agreement and is the overlap between one person’s bottom line (the lowest they’re prepared to get for something) and another person’s top line (the most they’re prepared to give for something). If there’s no Zopa, there’s no deal. Sounds like an Economic Model to me. In fact, a seemingly attractive model as it is now close to having lent £250 million with the majority of that coming from Zopa in the UK. Except that its not lending between a Financial Institution, but between individuals.

Zopa, founded in 2005, has survived despite other’s attempts to create a Social Business. In fact, Quackle, was an another business that actually tried to base credit worthiness on social scores. Some P2P lending organisations actually rely on existing relationships between friends and relatives, acting just as the formal mechanism in between to organise amounts, rates, etc.

[blockquote author=”James Alexander, COO at Zopa, Press Release, 7 July 2006″]Zopa offers a smarter, fairer way to do money – and just the kind of refreshing alternative that the UK public deserves after years of ill-treatment by the banks. The ironic thing is that although Zopa is the first online lending and borrowing community, it is, in fact, no different to what’s been happening in families and communities for centuries all around the world. Zopa has simply successfully harnessed the power of those types of relationships [/blockquote]

P2P lendingIt differs from mainstream banking because the relationship is Horizontal, Peer to Peer, rather than Vertical, Institution to Individual. In Zopa’s case, around half a million peers now it operates within the United Kingdom, Italy and a service is being developed for Japan.

It defines itself as a ‘person-to-person to person lending and borrowing community’. You could say it is almost trying to humanize money lending. It even tries to protect it’s lenders whose money is lent out in £10 packets, each to a different borrower, so anybody lending at least £500 has their money spread across 50 borrowers to achieve an ideal level of diversification and protection.

Zopa – how lending works
Zopa – how lending works

It looks after its own as a true community should.

But the Lenders collaborate not purely out of a sense of community, but also because they benefit from a better return than if they had their money tied up in low interest bearing savings with mainstream financial bodies.

This is the most obvious reward when we are being ‘Social’. Of course other benefits are often associated with social – recognition being an important one.

And remember Trust? Well, for two years running, Zopa was named the Most Trusted Loan Provider by Moneywise.

And that trust comes from being a very transparent about how it all works, no early redemption penalties, and an opportunity to talk with other members via discussion forums.

The Rise of the ‘Minipreneur’

But before we think this too is a modern phenomenon, let’s not forget that actually this was all the rage in Mesopotamia back in 1900BC when traders offered each other loans with maximum interest rates caps of 33% were put in place on grain loans, and 20% on silver.

The locally based ‘Friendly Societies’ that originated in Britain in the 17th century had two main purposes – that of mutual support and financial assistance.

Of course, these days we have the Internet, almost instant access to credit ratings and technology that allows this type of Social Business to work, in reality. At the CNet Technology Awards, Zopa won the Technology Project of 2007 and Internet Innovation of 2006.

Social Lending thrives on the idea of individuals wanting to be small entrepreneurs, or minipreneurs as commented on by Trendwatching in 2006.

[blockquote author=”, 2006.”]At the core of all consumer trends is the new consumer, who creates his or her own playground, own comfort zone, own universe. It’s the empowered and better informed and switched on consumer combined into something profound, something we’ve dubbed Master of the Youniverse [/blockquote]

Key for me is the notion that we have always been Social. It’s just that technology is making it relevant again after it took the social out of business and tried to automate everything…including our customers.

About the author

Gianfranco Cuzziol - right - at one of i-SCOOP's events
Gianfranco Cuzziol – right – at one of i-SCOOP’s events

The author, Gianfranco Cuzziol is an eCRM and multi- touchpoint expert who has worked on the client, agency and vendor side. Gianfranco iparticipated at various Fusion Marketing Experience events and projects.

Gianfranco has over 20 years direct, CRM and eCRM experience. He has helped brands large and small, from the Ivory Towers of Barclays Bank to the portakabin on a vineyard with English Wines to create multi-touchpoint connections with and between consumers by

  • sharing best practices.
  • developing strategic global partnerships with technology providers.
  • providing thought leadership across the organization and beyond.
  • delivering training internally and externally.
  • providing strategic and practical consulting

A past presenter and moderator at previous Fusion Marketing Experience‘s he is an independent consultant at everywhere CRM. He is a regular blogger and has presented at events such as Webtrends Engage, The European Email Marketing Conference as well as for the Dutch DDMA.

Check out Gianfranco’s blog and connect with him via Twitter.