I've got a theory that this can all be explained by cost of communication.
For a long time, word of mouth was what determined what people thought of businesses. Plus, high cost of communication kept most businesses small.
Newer communication technologies made very large companies practical, but the tech was expensive enough that it was most effectively used by those large companies both internally and externally). This a) meant a large company could override word of mouth with enough advertising, and b) encouraged the rise of professional managers, who spent very little time in contact with customers and mainly knew what their underlings told them.
But now, with the Internet, the pendulum swings back. Things like email, Facebook, and Twitter have brought low-cost one-to-one and one-to-many communication to the masses. Advertising doesn't work as well, and one person with a good or bad experience can tell hundreds, thousands, millions. If a CEO wants to know what people are saying, a simple Twitter search will tell them, with no underlings to soften or filter.
So smarter companies are recognizing that they can get a competitive advantage by acting like a small-town business has all along: the person in charge opens themselves up for unfiltered feedback, using that to fix their organization and get great word of mouth in the process.
What I really wonder is where the new equilibrium point is. Advertising has less manipulative power, but it's not gone. And large companies will try to control new media just like they tried to control what turns up in the press.
For a long time, word of mouth was what determined what people thought of businesses. Plus, high cost of communication kept most businesses small.
Newer communication technologies made very large companies practical, but the tech was expensive enough that it was most effectively used by those large companies both internally and externally). This a) meant a large company could override word of mouth with enough advertising, and b) encouraged the rise of professional managers, who spent very little time in contact with customers and mainly knew what their underlings told them.
But now, with the Internet, the pendulum swings back. Things like email, Facebook, and Twitter have brought low-cost one-to-one and one-to-many communication to the masses. Advertising doesn't work as well, and one person with a good or bad experience can tell hundreds, thousands, millions. If a CEO wants to know what people are saying, a simple Twitter search will tell them, with no underlings to soften or filter.
So smarter companies are recognizing that they can get a competitive advantage by acting like a small-town business has all along: the person in charge opens themselves up for unfiltered feedback, using that to fix their organization and get great word of mouth in the process.
What I really wonder is where the new equilibrium point is. Advertising has less manipulative power, but it's not gone. And large companies will try to control new media just like they tried to control what turns up in the press.