Trend Research & Insights

by Jeffrey Bussgang and Jono BaconJanuary 21, 2020 We’ve seen a precipitous decline in participation in civic organizations in recent years; membership numbers are down for religious groups, labor organizations and non-profits. A cynic could interpret these trends as a sign that we have all become digital hermits, with our noses buried in our highly personalized screens. The reality is that powerful communities are not just alive and well but also booming. They just look different than they did 50—even 20—years ago. They are organized around businesses and brands and providing profound opportunities for companies around the world.

Take Salesforce for example. While you might think its $140 billion valuation is due purely to its innovation of software delivered on demand through the cloud, it has also created a community of nearly 2 million members who support each other, organize events, produce content, and are a critical part of its global operations. This community is an international network of minds, talent, and time, all supporting the success of Salesforce. The company’s annual “Dreamforce” conference, which attracts nearly 200,000 acolytes to San Francisco each year, represents a mecca for its ecosystem to convene, build relationships, and advance its corporate agenda.

Other examples include Harley Davidson, which has created more than 1,400 local chapters around the world for enthusiasts to get together in person and discuss their bikes; Fitbit, which has a community of more than 25 million members, who share and refine their exercise regimes; and HITRECORD, which has brought more than 750,000 artists, writers, and filmmakers together to collaborate on productions, many of which have shown at Sundance. The list goes on.

While communities generate tangible value for businesses — such as content, events, online advocacy and marketing, technology production, customer support, and education — it is the intangible value that members derive from the experience that makes these environments truly “sticky.” Human beings are fundamentally social animals. Behavioral economics and psychological research have taught us that we fundamentally crave a sense of connectedness, belonging, mission, and meaning, particularly when performing our work. Theresa Amabile’s The Progress Principle and Daniel Pink’s Drive both demonstrated that making progress towards a shared mission is the most motivating force a professional can feel. Communities deliver these benefits, creating a sense of shared accountability and a set of values while preserving individual autonomy.

A Superior Business Model

If a company can transition from simply delivering a product to building a community, it can unlock extraordinary competitive advantages and both create and support a superior business model. Specifically:

Enthusiastic members help acquire new members, resulting in lower customer acquisition costs and a tight viral loop. Members are loath to abandon the community, resulting in increased retention and therefore improved lifetime value. Members support one another, resulting in high gross margins due to a lower cost of service. The result of this are very real network effects: as engagement grows, the community gets smarter, faster to respond, more globally available, and generates more value.

Codecademy is another example of a company that has figured out how to use community to support its business model. Since the company was founded nine years ago, more than 50 million people have taken one of its courses. Beyond its rich catalog of interactive educational content, the secret to Codecademy’s success has been its ability to link learners who contribute to the catalog and collaborate to improve their skills. Users of Codecademy Pro (the company’s paid offering) have access to a Slack group so they can meet, mingle and share best practices with others and gain access to events with industry professionals and peers. More advanced learners mentor the novices. This rich learning environment generates a network effect in the business model for a company that might not inherently have one.

A Sea Change Is Happening

Why is this happening now? One key reason is that technology-based communication platforms are more commoditized and accessible than ever before, building a rapidly growing addressable audience. We now have multiple generations of people who have grown up with technology and especially mobile phones and social media as part of their day-to-day lives. Global smartphone penetration is estimated to reach 45% in 2020, thus nearly one out of every two humans on the planet has the capacity to engage socially with others online.

With the ground seeded, many cheap, scalable tools for building communities both digitally and locally have been developed. These include Discourse, Slack, GitHub, Meetup.com, and WordPress, all of which make it practically effortless to convene and engage like-minded individuals and, as a result, are increasingly popular.

Consumers today also expect different relationships with brands. They don’t just want a customer support email address and a newsletter; they want deeper interaction with the company and fellow buyers of the product or service. It should be no surprise that in a recent survey, nearly 80% of startup founders reported that building a community of users was important to their business, with 28% describing it as their competitive moat and critical to their success. The top five brands in 2019 — Apple, Google, Microsoft, Amazon, and Facebook — have all invested significantly in digital and in-person community engagement across their various product portfolios.

Seven Success Patterns in Community Building

Motivated by the allure of a superior business model, accessible tools, and an eager and available audience, any company can build a tribe. But this is both a technological and cultural challenge. It’s not enough to set up a platform. You also need to create an environment that incentivizes the behavior you want to see, exposes the value generated, and highlights and rewards great participation.

Successful communities have seven key elements:

A shared purpose and values. As former Instagram executive Bailey Richardson puts it, the community must be able to answer the question “Why are we coming together?”

Simple, easily accessible value consumption. Prospective and existing members can easily see what they’re getting: support, events, documentation, the ability to download and use technology, etc. This value is not hidden or buried, it is clearly organized and available.

Simple, easily navigable value creation. Members can easily create new value for others in the group to consume. This contribution process is (a) crisply defined, (b) simple and intuitive, and (c) provides almost-immediate gratification.

Clearly defined incentives and rewards. Quality contributions (e.g. content, support, technology, etc.) and community-centric behavior (e.g. mentoring, leadership, and growth) are acknowledged and applauded to build a sense of belonging, unity, and satisfaction.

Carefully crafted accountability. There is a clearly defined, objective peer review and workflow — for example, reviewing content, code, and events. This doesn’t just produce better, more diverse results, it also increases collaboration and skills development.

Healthy, diverse participation driven by good leadership. When you are intentional about diversity and good conduct and have leaders who embody and empower these important principles, you reduce toxicity and increase value.

Open, objective, governance and evolution. There is clear, objective governance, and community members can play an active role in reshaping its structure and operational dynamics together, giving them “skin in the game” and, thus, a sense of ownership and responsibility.

Chief is an interesting case study of an emerging community seeking to embody these patterns of success. The company is a private network designed to support exceptional professional women with a core set of services such as coaching, peer learning and network building. Since its launch in January 2019, the company has grown rapidly and has more than 5,000 names on its wait-list. Value consumption (advice to advance your career) and value creation (peer-to-peer coaching) are obvious and clear, as is the healthy, diverse participation of community members that feel a sense of mutual accountability for their individual and collective success. As the company scales to cities throughout the United States, its community presents a formidable competitive moat, organized around the mission of professional advancement and support for female executives who are members.

Measuring Success

While there is no silver bullet for building a community, success is delivered by tracking a crisp, focused set of metrics and regularly evaluating and making adjustments based on those evaluations. This process is an evolutionary one, where your cross-functional team should repeatedly ask questions about the results they see and hypothesize changes to drive improvements. These changes are then delivered as a series of small experiments that will both move the needle and build internal experience.

For companies building a community initiative, the areas you track should be:

Community Consumption and Creation. This means tracking active participation and the value that members consume and produce. For example, measuring community traffic, sign-ups, individual contributions (e.g. answering questions, running events, improving content), and other areas.

Delivery and Execution. This means looking at how well your company is building community strategy, estimating work, and executing effectively. This is important to ensure planning and execution are aligned and avoid spinning your wheels.

Organizational Experience. This involves following the incubation and evolution of community skills and expertise in your business (e.g. reading and reacting to data, mentoring, moderation, conflict resolution, building and delivering incentives, etc.). This is important to ensure the company is what it needs to foster and grow the community, especially as it scales up.

We are in the early stages of truly harnessing the potential of carefully crafted, productive communities. Done well, and when intentionally woven into the fabric of the business, communities can offer a sustainable competitive advantage and drive brand awareness, value production, and therefore overall commercial valuation (oh, and delivering a world-class, personal, gratifying member experience.)

The future of business is a more open, connected, engaging one, and communities are going to change the nature of how we interact with brands, products, and other people.

Jeffrey Bussgang is a senior lecturer in the Entrepreneurial Management Unit at Harvard Business School and a general partner at Flybridge Capital Partners. He is the author of Entering StartUpLand: An Essential Guide to Finding the Right Job (Harvard Business Review Press, 2017). Jono Bacon is a community and collaboration strategy consultant, a former community director at GitHub, and author of People Powered: How Communities Can Supercharge Your Business, Brand, and Teams (HarperCollins, 2019).