At the beginning of February I participated in a Social Business Industries Symposium sponsored by IBM in Orlando. Social business is an initiative that IBM launched last November, along with new products and services that combine social networking with advanced analytics capabilities to help organizations build trusted relationships and make better and faster decisions.
What is a social business? In the past few years, the term has been used to mean “a non-loss, non-dividend company designed to address a social objective,” - a new kind of capitalism to serve humanities most pressing needs, pioneered by Nobel Peace Prize winner Muhammed Yunus and others.
But with the rise of social media, another major use of social business has emerged. IBM’s basic definition is short and simple: A Social Business embraces networks of people to create business value.
To me, this feels like déjà vu all over again. It reminds me of the early days of IBM's Internet initiative. A lot of exciting stuff was already happening around the Internet, but it was not clear where things were heading, and in particular what the implications would be for the world of business. Our job was to figure out the business value around the Internet, what we should advise our clients to do and what products and services were needed to build this new Internet-based business infrastructure. Equally important, we needed to come up with a financially sound Internet business model that made sense for IBM and its clients.
Toward the end of 1996 we figured it out, primarily by watching what leading-edge customers were starting to do in the marketplace. It became clear that the Internet was going to have a profound impact on business, although at the time we had no idea how profound it would turn out to be. The universal reach and connectivity of the Internet were enabling access to information and transactions of all sorts for anyone with a browser and an Internet connection. Any business, by integrating its existing databases and applications with a web front end, could now provide information and process transactions for its customers, employees, suppliers and partners at any time of the day or night, no matter where they were. Businesses were thus able to perform many of their core functions in a much more efficient way, as well as provide better customer service to all the people with whom they dealt. And they could start very simply by web-enabling their key applications and databases.
Thus was born our e-business strategy. IBM put considerable marketing punch behind it, including an award-winning, highly creative advertising campaign to get the word out that we wanted every business, large and small, to become an e-business. And, as with social business, the basic definition of e-business was very short and simple: Leverage the Internet for business value.
So, where is social networking heading and how will it impact business? Why should a company reach out to networks of people, both within and outside its boundaries? What business value will it bring them? These are very important questions that companies have been asking themselves, given the notoriety of social networks in the past few years. Let’s explore some of the answers.
While social networking and Web 2.0 platforms are very important, they are just technology enablers, but what they enable is something primal and central to how business and society work.
People are inherently social. We like to communicate, share ideas and learn from each other. We get together, establish communities and work and play as a team. We organize into a wide variety of institutions to get things done more effectively, including small neighborhood stores and large, global enterprises; local, regional and national governments; schools, universities, hospitals and many more.
Thus, having technologies and platforms that help us significantly improve the productivity of our social institutions is a very big deal. This is particularly important given the transformational changes all these institutions are going through. Ever since the Internet and World Wide Web emerged in the mid 1990s, they have been transforming the way every organization works. Continuing technological advances, combined with the heightened competitive pressures brought about by globalization, are causing fundamental changes in the very nature of business.
With the rise of globalization, employees, customers and business partners are now distributed all over the world. Moreover, as enterprises increasingly rely on ecosystem partners for many of the functions once done in-house, major parts of their operations may be shaped by other companies. In the 20th century hierarchic organization, the boundaries of the company were clear. Not so in the 21st century, giving rise to the virtual enterprise, that is, highly distributed companies with porous, flexible boundaries. It is no longer so clear what it means to be inside or outside the organization.
Technologies are making it easier to share information and processes across the virtual enterprise, but there is little question that technology, no matter how sophisticated, will not by itself be enough. You must focus on people. As we discussed in the MIT Distributed Leadership Forum that took place in November of 2009, just having great technology is not enough to effectively manage virtual, distributed organizations. You must complement the technology with the leadership needed to get all those people working toward the same objectives and moving in the same general direction.
Companies are thus embracing social networking to help them better orchestrate their largely distributed operations. They are looking to become effective social businesses to build better working relationships with everyone in their business ecosystem, including employees, clients, partners, consultants, analysts and investors, as well as governments, communities, non-governmental organizations and the general public.
Beyond focusing on managing their global, distributed operations, companies need to foster the innovation and creativity needed to compete in our fast changing world. The key finding in the IBM 2010 Global CEO study was that the primary challenge facing CEOs and other senior executives is complexity - the fact that their companies now operate in a world that is substantially more volatile and uncertain. They feel that incremental changes are no longer sufficient, because the world is operating in fundamentally different ways. The study found that standout organizations – such as those that have been able to deliver good business results despite the recent economic downturn - feel much more prepared to capitalize on complexity by focusing on three key areas: embodying creative leadership, reinventing customer relationships and focusing on operational dexterity.
Technology is absolutely necessary to unleash the disruptive innovations needed to cope with our highly complex environment, but it is not sufficient. Innovation - especially in its more creative and disruptive forms - is all about people. This point was highlighted in an excellent study, - The Shift Index: Measuring the forces of long term change - conducted at Deloitte’s Center for the Edge. I particularly like the concept of knowledge flows defined in the study:
“ . . . intensifying competition and the increasing rate of change precipitated by the [advances in the digital infrastructure] shifts the sources of economic value from “stocks” of knowledge to “flows” of new knowledge. In this rapidly changing world, our stocks of knowledge (what we know) obsolesce more quickly and success depends increasingly on our ability to tap into expanding and diverse flows of knowledge to more rapidly refresh our depleting stocks of knowledge. . . In this rapidly changing world, there is far more value in a tightly knit team bringing together different experiences and views of the problem to solve a new performance challenge than in reading a training manual.”
The hierarchically organized firms of the Industrial Age were optimized to achieve economies of scale. Companies must now embrace knowledge-age organizational structures designed to help them reach out, absorb and integrate all the expertise and talent out there, both inside and outside the firm. As the The Shift Index study points out, “companies must move from scalable efficiency to scalable learning and performance. Only then will they make the most of our new era's fast-moving digital infrastructure.”
Scalable learning may well be one of the most daunting challenges facing an organization given how fast everything is moving. A particularly novel approach to scalable learning is IBM’s Corporate Service Corps. The Service Corps aims to help turn IBM employees into global professionals and citizens. Being modeled on the Peace Corps, it represents a dramatic departure in corporate education.
Overseas assignments are very expensive and classroom training has inherent limitations. So instead, IBM selects several hundred high potential employees and sends them to emerging markets such as Ghana, the Philippines, Turkey and Vietnam for a month in groups of 8 to 10. They work in communities with NGOs and local leaders to assist them in solving economic and social problems. When they return, they spread what they have learned to their colleagues through social media capabilities.
The goal of the program is to help future leaders “understand how the world works, show them how to network, and show them how to work collaboratively with people who are far away. In addition, it helps IBM gather invaluable experience about the reality on the ground in these emerging markets, strengthens its societal relationships, and surfaces profitable new business opportunities.”
In the early days of e-business, we had to convince our customers that they needed to embrace the Internet, even if they did not aspire to become one of the new dot-com companies being born all around them. But after a few years, we no longer had to do so, as institutions all over the world realized that embracing the Internet was no different from embracing electricity and telephones in previous generations. It was something they had to do to survive.
Something similar is now happening with social business. Mass production was one of the major achievements of the 20th century, bringing us a plethora of goods and services at affordable prices and helping to raise the standard of living around the world. But in our emerging 21st century economy, more and more companies are realizing that mass production is being complemented by the mass collaboration which brings together the talented people and innovative ideas needed to address the very complex challenges, as well as the extraordinary opportunities all around us. And, once they do so, they are well on their way to becoming a social business.