Technology has long redefined notions of distance. For past generations, the telephone, the radio and the television set were tools that bridged vast geographic spaces. Today the Internet is taking this phenomenon further–and dramatically so. As more people join e-mail lists, hobnob in chat rooms and participate in online events, virtual communities have emerged–both within companies and on the Internet–that let people communicate in ways and at speeds that were unimaginable in the past.

What implications do virtual communities have for companies? Can they help global organizations share knowledge and best practices? What special challenges do they face in issues like establishing trust and maintaining control?

Knowledge at Wharton discussed these questions and more with Bruce Kogut, co-director of the Reginald H. Jones Center for Management Policy, Strategy and Organization, and Laurence Prusak, executive director of the IBM Institute for Knowledge Management.

The IBM Institute of Knowledge Management, the Reginald H. Jones Center of the Wharton School and the Xerox Palo Alto Research Center (PARC) will discuss these issues in greater detail at a conference about Virtual Communities and the Internet on April 7 in Philadelphia. For more information about the conference, click here.

Knowledge at Wharton: What makes for a strong virtual community?

Prusak: I’m not sure that there is such a thing as a virtual community. The jury is out that you can actually have a virtual community without some over-riding, compelling reason for people to act in a “community” way with one another. What do I mean by that? Obviously parents of ill children get together very often virtually on websites. They exchange information, tips for help, and so forth. Is that a community? I suppose so–in the widest definition of the word. But those people have an absolute, compelling need to share information.

But the word community is now being applied to almost everything. The British social scientist Raymond Williams once said that community is the only word in English that has no negative connotations. Everyone likes to use the word community to mean all sorts of things. So I’m not sure about virtual communities. I’m curious to see what we learn in five years.

In the business world, if people have come together because they have been given a task or they have been driven by a hard manager–for example, because they have to get a new product out by a certain day–they might come together to exchange information over the Internet. They may be motivated either by fear or the desire to bring about some sort of collective outcome. Is that a community? I’m not so sure. In my perspective, communities are driven by some sort of altruism, in which people are acting without evident self-interest. I don’t see that happening too much in business. Maybe it does happen, but you see it a lot less.

Kogut: A community is first of all a place where there is value in the members and in the membership. This is a radical challenge to the sales concept that a firm sells to a consumer. Now, in part, the customers as members provide a service to each other in serving themselves. A firm owns and invests in the franchise for this community. At the same time, the franchise is a gift from members that has to be always renewed.

Knowledge at Wharton: In the online world, where people don’t see one another, how can communities resolve issues of trust, identity and anonymity?

Kogut: Often, these issues are not resolved and there is no reason to resolve them! The very attraction of some communities is that members can play with their identities. An interesting issue is when should a virtual identity be pierced? Of course, this happens somewhere in the interface at the point of sale. But it also comes up when members want to have reliable information and this means reputations must be established and known. Here such sites as Amazon and E-bay have been very innovative in permitting reputations to be established despite anonymous identities.

Prusak: I don’t think virtual communities can resolve these issues. People have to get together in the real world. Three organizations I know are studying this: AT&T, Procter & Gamble and the U.S. army. At different levels, they have all studied how much so-called face time you need for a community to have coherence. They all felt that people have to actually meet, either once a month or every other month or some such number. Without that, you get entropy. You lose your edge, and passion cannot be transmitted. Things also get ragged; it’s like an orchestra being conducted without a conductor. I have yet to hear about a “community” that has never met and still has coherence. Maybe some religious communities might exist, which, like the parents of sick children, may be highly motivated. I can imagine that. But in business, I don’t think that’s possible. People have to meet to transmit passion.

Knowledge at Wharton: Virtual communities also face issues of netiquette and what is called virtual self government. How can control be exercised in virtual communities?

Kogut: This is a very tough issue. Lauwrence Lessig’s book Code is very helpful in showing that the software code of any community establishes a certain constitution. I think he is right in dispelling us of the notion that the virtual community is the wild west of no government and no rules. There are strong incentives for a firm to intervene because it understands that its franchise is valuable. But often the tendency is for the firm to try to help members self-govern rather than strong-arm a solution. It does this by working with the community and also putting in technology that allows members to establish “filters” and to be able to organize in sub-communities.

Prusak: This is very interesting. I’m in IBM, and I get a lot of messages. Norms seem to get established in terms of answering e-mail, for example, of who answers whom in what way. These norms are different if you are all in the same building. I have a nice suite of offices in Lotus, but there are only 15 of us and of course I answer e-mail from the 14 people who work with me here. If I were in a large facility, I would be talking to a lot more people. As it is, some of them send me long e-mails that I can barely understand, and I just ignore them. One of the norms that gets established is that you don’t have to respond, which you would if you were co-located.

Whether that is good or bad for business is an interesting issue. It may make people more efficient, or they may miss opportunities. Maybe I help people less than I could. But this question is worth looking at and doing research on.

Exercising control in a virtual community would be very difficult. I haven’t encountered a situation that requires control in the virtual world, but I can easily imagine that. I don’t think there is much that one could do, except perhaps isolate, exile or ostracize the person.

Knowledge at Wharton: What is the relationship between virtual communities and the real world? What implications does this have for business?

Prusak: The word community is being bandied about now for the reason that Raymond Williams said: It’s a warm, happy, fuzzy word. From my perspective, any organization that has small, tightly integrated networks could be called communities. Usually these are focused on a practice. These practices have their own language, vocabulary, repertoire, and artifacts–and these are all real things. Organizations can make these networks more efficient by giving them resources, money, technology, time and space.

The World Bank has taken this as far as any group in the world. It has 122 communities or networks–they call them thematic groups–of people who are globally dispersed, but share a passion around rural road building, or indigenous peoples, or rural portfolio improvement, forestry, or issues like that. The groups are diverse and are spread around the world, but they share information and help each other. The World Bank has really been rebuilt around these groups, which have leaders, people, technology and money. They even publish documents. [Wharton economist] Sid Winter asked a question in one of his articles: Where is the knowledge in an organization? Well, the knowledge of the World Bank is in these groups.

Kogut: As an academic, I never believed that strongly in this difference in any event. You know, a good educational environment is one that not only teaches about the actual world, but also about possible worlds. The virtual is a real world, but there are many realities from which to choose. This is the fundamental starting point or else we will never understand the importance of fantasy, of interaction, of the thrill of anonymous behavior. At the same time, the value of many virtual communities is their reality. They improve the delivery of medical services, for example, by allowing patients to converse. If reality is improved information and understanding, the virtual communities provide a preferred reality over what was possible before.

Knowledge at Wharton: Is a company’s Internet strategy related to the building of virtual communities? What are the principal challenges in this regard?

Kogut: What we know about successful Internet strategies is that the fundamental concept has to be customer satisfaction. It is not the portal, not the auction, it is the customer. How this satisfaction will be provided, of course, differs by community.

Prusak: The Internet provides an infrastructure for communication. It’s better than a phone line, and easier than a fax in some ways. I use the Internet as a more interesting and richer form of communication than is possible over telephone lines. But the Internet does not create altruism or a feeling that people should help one another. A researcher at MIT has written a very interesting book about predictions made after the telephone was invented. As commercial telephony grew, all sorts of predictions were made about how it would change society and human behavior. Not one of them came true. Not one. The biggest prediction, and the most common, was that there wouldn’t be wars any more if people could talk directly to one another. Now there’s a lot of that kind of stuff about the Internet too. The web certainly creates new distribution channels and new ways of selling stuff, but frankly, if we live in a materialist and individualistic culture, it is still going to be materialist and individualistic.

As for the relation between a company’s Internet strategy and virtual communities, I believe that the richer the tools that are available to people, the more likely it is that they will self-organize in networks. If you give people good tools, they will find each other. The World Bank did not create its thematic groups; they were there. The bank gave them money, time and technology–but those people were there. If you love rural road building, and other people do, you will get together. Karl Marx wrote about classes being “in themselves” and “for themselves.” This is like that. These people existed, just not in each other’s consciousness. The Internet can help them connect and find one another.

Knowledge at Wharton: How can virtual communities facilitate the sharing of knowledge and best practices?

Prusak: I tend to think, as do many others, that knowledge is sticky, local and contextual. Very little can be codified and put in a form that a machine can transmit. Some knowledge can be codified and transmitted, but a lot cannot. Try learning to hit a baseball just by reading words. It’s almost impossible. Certainly a better thing would be to see a movie of someone hitting a baseball.

There’s a lot you cannot transmit with just words. You may be able to do recipes or certain types of prototypes, but real knowledge–how to be a blacksmith, how to hang a door on a car on an assembly line, how a chemist at a big R&D site makes big intuitive leaps–I don’t think technology plays a big role in developing such knowledge.

At IBM we constantly try to build and rebuild best-practice databases, and I know all the consulting firms try to do that, but these are worth very little. People learn by going out with people who know how to do things and watching how they do it.

Some companies have a purely technological approach to knowledge sharing. They create document repositories and they believe that that equals knowledge transfer. I know how to do something; I write it up, and it goes into a Lotus database; then someone can read it. Such an approach is almost worthless–not totally so, but almost. If I want to read an article you wrote, I may be able to read it in a database. But if I want to know how to become a chemist, or to think like a chemist or act in a lab, I cannot do that by searching a database.

Some companies are getting interested in the apprenticeship model, which is a much better way of transferring knowledge. This involves insisting that projects be staffed in a way that younger people have a chance to work with older people. The Big Five firms try to do this, but they are often so driven by greed that the older partner sells the work but then passes it on to a lot of junior people. I think some consulting firms are trying the apprenticeship model, and more companies should. The Germans and the Japanese built the No. 2 and No. 3 economies in the world using this model of sharing knowledge through moving people around as apprentices. It’s a very complex issue.

Kogut: I am glad you asked this question, because it allows me to correct the impression that communities only serve final customers. Communities are rapidly developing in the area of business-to-business markets. This is obvious for the auctions used for material products. Intra-net communities offer another promising area of development. Certainly we as educators are thinking a lot about virtual learning communities among our students, how to develop them, how to support them. In business, firms such as BP-Amoco have been taking an active role in supporting the sharing of practices by IT-enabled infrastructures that are yet sensitive to the human dimension.

Knowledge at Wharton: How do you see the future of virtual communities?

Kogut: The idea of loyal customers has always been there. The French have an expression that is hard to translate and that is a strategy to ’loyalize’ the customer. A virtual community does this by improving the perceived value of products and services and also providing a satisfaction in the act of buying.

Prusak: I am a great believer in the technology not of words and numbers, but of sight, smell and sound. As the PC evolves, and you get real-time communication and face-to-face discussions over long distances, things will get better. The closer you get to two people sitting down and having a chat, the closer you get to knowledge transmission and community building.