How LinkedIn Changes the Economics of Cross-border Relationships

While it is a truism that Web 2.0 is inherently global, most business leaders do not yet appreciate the degree to which global business will be transformed. LinkedIn can significantly change the economics of cross-border relationships because it is primarily focused on business relationships, and its members are globally minded executives. Here I will present a brief executive summary of LinkedIn’s impact on international business development as well as opportunities and threats for professionals.

Transforming International Business Development

Online social networks make it possible to search for executives (prospects, experts, partners) with very specific characteristics and interests right now and to communicate with them directly.  The networks by no means replace the need to get across the table of prospective clients and business partners, but they can shift this requirement to later in the relationship building process.  In considering an international business deal that requires partners or clients, a team typically progresses through several stages:

Discovery is the first step, when the team is seeking prospective clients or partners.  In the 20th century, discovery necessitated extensive communications with existing business partners, counsular and trade offices, consultation with professionals with useful contacts and country visits.  These represented significant investment of time and money.  Online social networks can be revolutionary in reducing discovery by an order of magnitude, to the extent that the sector under consideration is represented sufficiently in the network.

Due diligence traditionally requires extensive research, work with experts, conferences and country visits to surface potential problems and resolve them before significant commitments are made.  Social networks have a significant impact on this step as well because they make people with the right information quickly accessible.

Social networks don’t replace the need to get across the table, but they can shift this requirement to later in the relationship building process.

Engagement members of online digital networks are a self-selected group that is interested in being more accessible; therefore, they are often more willing to respond to business invitations from other members; the communities themselves vet members.  All the networks offer members features that optimize privacy and accessibility, but members as a whole are more approachable than business executives in general.  Exchanges in forums and via messaging can be effective precursors to conference calls and eventual face-to-face visits.

Relationship development is a multiple-phase proposition, but beginning it online and via phone and video can change the numbers in terms of time and financial investment.

Opportunities and Threats for Professionals

Web 2.0 is pressuring all professions to decouple information gathering from expertise. Traditionally, professions like law, medicine, engineering, management consulting, executive search, M&A advisors, business brokers and international trade experts bundled information gathering with expertise. Information was difficult to find, so professions added value by assembling information for clients to support decision making.

Web 2.0 enables everybody to provide highly relevant social information which serves as meta-information and aids decision making. For example, LinkedIn enables you to see who knows whom and how they know each other. This supports trust and helps to determine risk. Increasingly it is possible to see how an executive thinks about a relevant subject, based on her blog posts or interactions in LinkedIn Answers. Consequently, clients can inform themselves.

Analyzing information is where most professionals shine, and those who collaborate with self-informing clients will raise their game and billings.

Although most professions will initially perceive this development as a threat to their business, by considering the situation more closely, most see opportunity. Information gathering is at the low end of the value chain. Research is an input that is required to use their high value expertise. To optimize value delivered, professionals should focus on their unique, highest value judgment, experience and all the implicit elements of dealmaking. Professionals that can engage and collaborate with clients’ emerging ability to self-inform will add to their competitive advantage. They will help the client to understand the information that s/he has learned.

International business professionals can use LinkedIn to change the economics of their businesses. They can use LinkedIn to reduce the time and financial investments they need to make to build, execute and manage deals. Deals are all about people: increasing trust, communicating and, yes, gathering information. Since these all involve interaction with people, social networks will change the business because they change transaction costs.

Parting Shots

• Information gathering is necessary but low value. Analyzing and determining the meaning from information is where most professionals shine; it enables them to apply their perspective, experience and specialized training. This is less of a threat than it may seem.
• However, Web 2.0 will force professionals to become more collaborative. Those who do not appreciate questions or harbor authoritarian attitudes will be threatened because clients armed with information will develop their own ideas.
• This will serve to increase the value of the professionals that understand it. Those who collaborate will raise their game and billings. I’m in for that!
• What are your thoughts and experiences?