On September 16, I will join the IBM Lotus team in an event in New York City - Reinventing Relationships. The event will explore how the Web, collaboration and social software "will transform - actually reinvent - how organizations relate to their customers, partners, employees and citizens through more compelling experiences.”
Once upon a time, new technologies were first deployed in large institutions - enterprises, universities and research labs, the military and civilian government agencies, - from which they eventually trickled down to the rest of the economy as their prices and complexity dropped. Forty years ago, for example, the computer industry consisted primarily of expensive mainframes and supercomputers that only larger institutions could afford to buy and operate.
But, this trickle-down approach to technology diffusion dramatically reversed itself with the advent of inexpensive technologies, especially digital technologies. As a result of the incredible advances in digital components and personal computing over the past thirty years, many new innovations are first emerging in consumer markets and among communities of experimental users, from which they eventually trickle-up into the worlds of business and government applications. Besides personal computing, we have seen such consumer and user-driven innovations in cellular and smartphones, game players, Linux, and perhaps most prominently, with all kinds of innovations around the Internet and World Wide Web.
When we started IBM’s Internet Division in December of 1995, many exciting new applications were already being developed for the then nascent Web, but it was not clear at all what the implications would be to companies other than new dot com ventures. A big part of our job was to figure out how our large customer base could leverage the Internet for business value. Quite a few people were claiming that in the new economy of the Internet, born-to-the-Web startups had an inherent advantage over existing companies, which would have a hard time competing and were therefore headed for extinction.
After carefully analyzing what was going on in the marketplace and working closely with many customers around the world, we came up with our e-business strategy. Every business, we were convinced, would benefit from embracing the universal reach and connectivity of the Internet, not just startups. We strongly believed that the brand reputation, customer base and IT infrastructure that businesses had built over the years were even greater assets when properly combined with the new capabilities offered by the Internet.
Social networking is among today’s hottest new technologies and applications. Facebook, which was only started in 2004, already has over 500 million active users. The number and variety of social networking sites keeps growing by the day. Like the dot com applications of the late 1990s, some are very innovative and will likely be successful and others are harder to appreciate and seem built on dubious business models. The vast majority are in the consumer space.
Once more, we need to figure out how to best bring these innovations from the consumer to the business world. This time around, few are suggesting that social networking is ushering a new economy that only applies to new ventures and will inexorably leave existing companies behind. Most everyone agrees that all companies can benefit from embracing social networking innovations, even though we may not have yet figured out how to properly do so.
Social networking applications are not new to business. Most such applications fall into three main categories: external relationships with customers and brand influences; internal relationships with employees and partners; and societal relationships with citizens and communities. Many companies and government agencies already have a variety of applications in each of these categories, but much remains to be done.
We are still in the early days of learning how to best translate our new collaborative technologies and applications into more effective business and societal relationships. The issue is not technology, even though social technologies are still relatively new. The key issue is organizational capital, that is, the management practices and cultural adjustments needed to enable the organization to deploy and take advantage of these new capabilities.
Until the mid-1990s, the rapid growth in the use of computers in business was not reflected in increased labor productivity. This gave rise to the Solow productivity paradox in reference to Nobel prize winning economist Robert Solow’s 1987 quip: “You can see the computer age everywhere but in the productivity statistics.”
But, in the last fifteen years, there has been a surge in productivity, which economists generally attribute to the continuing advances and wide use of information technologies. As MIT’s Erik Brynjolfsson explained in a recent book he co-authored:
“The companies with the highest returns on their technology investments did more than just buy technology; they invested in organizational capital to become digital organizations. Productivity studies at both the firm level and the establishment (or plant) level during the period 1995-2008 reveal that the firms that saw high returns on their technology investments were the same firms that adopted certain productivity-enhancing business practices.”
Companies had to learn that it was not enough to deploy IT to automate existing processes. Organizations had to fundamentally rethink their operations and redesign the flow of work in their companies, which finally started to happen in the early 1990s with the adoption of business process reengineering and similar initiatives. Over the last fifteen years, many organizations have effectively rewired their process and information flows.
Social networking is now giving us the capabilities to leverage digital technologies to help us address the people intensive, services oriented tasks of the organization, that is, its relationships with clients, employees, partners and citizens. Such front-end relationships are not nearly as well understood as the back-end processes where we have made significant progress over the past twenty years.
In addition, the design objectives are quite different. Quality and efficiency are the key measurements we generally use for back-end tasks, but they are not sufficient when people are involved. In addition to efficiency and quality, a major design objective for relationship-based applications must be to achieve positive outcomes and experiences for customers, employees and everyone involved.
Many challenges lie ahead. For example, in a study conducted last year by Forrester Research, Ted Schadler found that in spite of all the advanced social networking technologies we now have, they still have not been widely adopted within companies. This is a problem, particularly for younger workers who are using social media technologies outside of work. The Forrester study found that sixty percent of workers younger than 43 use social networking at home, but less than one quarter of them - 13% - also use such technologies at work.
Ted is co-author of a book being published this month, - Empowered: Unleash your Employees, Energize your Customers and Transform your Business, - which includes many of the findings from the Forrester study. He will participate in the September 16 event.
As is generally the case with early stage disruptive technologies, many institutions don’t know what to make of them. They are suspicious that these social media technologies might be fine for consumers, but not for business and serious applications. They are in the process of learning and developing the needed organizational capital. Leveraging social networking to restructure, rewire and reinvent business and societal relationships is likely to be one of the most promising innovation areas over the next decade.