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Social Media
Sensing for the
Competitive
Advantage of Firms
Strategy, Competitive ...
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1
The rise in interest of social media has caus...
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2
fundamental changes in strategy and competiti...
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3
The ability to sense and seize new opportunit...
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4
Of the many factors playing a role in Dynamic...
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Figure 2. Adapted from Sensing from the Teece...
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First lets define Social media is an evolving set of new internet
websites, softwa...
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The penetration of high-speed (broadband) i...
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Figure 4. The chart shows the changing mixt...
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Figure 5. This Chart shows the time line of...
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Human Desires and Needs Drive Interest and...
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Figure 7. Consumer Influence Channels, Sou...
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Figure 8. Examples of Negative Sentiment, ...
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Another example is a summary map and stati...
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Figure 10. Social Media for Crime statisti...
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Today this crime awareness exists as tacit...
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“A firm that takes an action without the u...
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Figure 11. Study of market usage of social...
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As the number of uses and companies partic...
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Figure 13. Complexity is the challenge o...
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Figure 14. http://www.slideshare.net/pgill...
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Application Programming Interfaces (API) t...
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―programming‖ or ―strategic messsages‖ get...
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Social Media Sensing is an emerging busine...
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Therefore for the first time, media relati...
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Figure 17. Social Media Sensing can direct...
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Figure 18. Certan Topics (or Sources) allo...
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Facebook. Because of its origins as colleg...
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They extend their personal brands on Twitt...
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Figure 19. Social Media Adoption Curve, Mi...
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Here I extend the traditional Porter Model to integrate with a subset
of Teece‘s...
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Figure 20. The new Architecture of Competitive Advantage extends the notion of c...
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A more specialized business strategy frame...
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In that same paper, two of the reasons for...
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Today firms own and control their organiza...
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There is a fundamental tradeoff in that fi...
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Finally, because social media offers a new...
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Web 2.0 Effects of Technology Internal to Firms
Web 2.0 technologies such as wikis...
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Ecosystem of Social Media and related webse...
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Academic
1. Robert M. Grant, 2008, Contempora...
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Chris Rigatuso is a co-founder and partner at...
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Social media sensing analytics for competitive intelligence and market research Skyfollow

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2010 Publication on Social Media Sensing. Method is derived from my research on David Teece's Dynamic Capabilities for strategic planning and innovation. It is adapted to the realm of social media analytics.

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Transcript of "Social media sensing analytics for competitive intelligence and market research Skyfollow"

  1. 1. Reviewers preview personal copy only 00 Social Media Sensing for the Competitive Advantage of Firms Strategy, Competitive Intelligence and Media Chris Rigatuso June 9, 2010 $14.95 eBook SocialMediaSensing.com
  2. 2. Personal EBook Copy – Do Not Distribute Reviews preview personal copy only 1 The rise in interest of social media has caused a new wave of excitement and investment in startup firms in the last few years, especially in Silicon Valley, California. The growth rates of Myspace.com, then Youtube.com, then Facebook.com and now Twitter.com have fueled the public visibility of the phenomena. The large acquisition valuations for Youtube and Myspace, the investment by Microsoft in Facebook, and speculation of potential acquisitions of Twitter have contributed to mass media and online media coverage of their growth and success. Social Media is heralded as the next great wave in Web 2.0 technology transforming internet usage as well as becoming a media channel worthy of significant investment dollars as part of an organization‘s evolving communications and marketing strategy. Unlike most prior forms of advertising and communications strategy, social media offers structural features that make it a standout both as a divergent form of consumer interaction and as part of the new frontier of media influencing strategy for brands, especially consumer brands for now. Lastly, it is a challenge both to brands and digital agencies who serve these firms because of the rapid expansion of alternatives for using the right social media platforms, the right tools, and understanding various uses of the data to inform strategy and allow transformative execution within the firms that use these new media channels. In this paper, I first introduce David Teece‘s notion of ―Sensing Seizing Transforming‖ (SST) framework, part of the Dynamic Capabilities literature, in the context of using social media for the strategic imperatives of the firm. Then I introduce ―Social Media Sensing‖ as a new paradigm of analytics and strategic planning that allows innovative firms the opportunity to create and expand competitive advantage using the emerging social media platforms and channels. Finally, I extend the traditional Porter‘s Five Forces strategy framework by including two key intersection points with the dynamic capabilities framework: Complementary assets and Co- specialization of assets. This intersection at the boundary of the firm acts as a bridge into Teece‘s dynamic capabilities and by extension into social media sensing. I then show that the properties of social media provide a natural avenue of extension of Teece‘s framework, as well as an emerging growth area of technology, user generated content, and analytic tools in which to apply the frameworks in practice. Not only does this provide a platform for consulting service innovation, but it leads naturally to a new basis of competition and to a potential disruption in the way in which firms will invest in advertising, marketing and research. This will affect firms in a series of industries overtime, as the diffusion of this technology and the paradigm cross from early adopters to mature and ―stable‖ industries. While initially we thought of social media as just a new media channel; its growth rate, expanding platforms and tools, changes to business models, person- group-person interaction structure and bi-directionality will lead to Abstract Overview
  3. 3. Personal EBook Copy – Do Not Distribute Reviews preview personal copy only 2 fundamental changes in strategy and competitive dynamics and these will trickle through several industries over the next decade. Firms continually look for, develop and execute new means of building competitive advantage. In recent years, more emphasis has been placed on tangible implementation or ―execution‖ by the organization to achieve strategic outcomes in practice. This was popularized by the recent book ―Execution‖, by Lawrence A. Bossidy. At a naïve level ―strategy can be represented and described and shared‖ and therefore is less protectable than organizational and physical capital, but execution requires specific tangible, physical and intangible assets to make it happen. In particular, employees partners, distribution channels, and access to operating processes and supporting software are very distinct to each firm; and their combinatorial combinations are therefore extremely unique. So by coupling of a specific strategy to leverage a set of specific assets gives the potential for a non-replicable advantage. In the big picture, assets include humans, with their myriad skills and talents. But humans are employees, partners, customers, and the driving force of social media as participants. Figure 1. Different forms of assets influence competitive advantage and strategy Grant, Contemporary Strategic Analysis, 2008 In your firm, what (and who) are your invisible assets? Those that do not occur on the balance sheet? How do you protect and manage those assets? What motivates them to ―self-manage‖? Background
  4. 4. Personal EBook Copy – Do Not Distribute Reviews preview personal copy only 3 The ability to sense and seize new opportunities, and to reconfigure and protect knowledge assets, competencies and complementary assets to achieve sustained competitive advantage. David Teece, 1997, 2009 The Dynamic capabilities framework emphasizes the key role of strategic leadership in appropriately adapting, integrating and reconfiguring organizational skills and resources to match changing environments (Eisenhardt & Martin, 2000; Helfat, 1999; Lavie, 2006; Teece, et al., 1997; Teece, 2006). The ability of senior managers to seize opportunities through the orchestration and integration of both new and existing assets to overcome inertia and path dependencies is at the core of dynamic capabilities. These capabilities, sometimes characterized as high level routines or processes (Winter, 2003; Zott, 2003) or routines to learn new routines (Eisenhardt & Martin, 2000), are now seen as a central underpinning of long-run competitive advantage. This perspective highlights the role of senior teams in taking substantive actions that shape competitive advantage over time. Teece, Pisano and Shuen (1997, p. 516) define dynamic capabilities as ―the firm‘s ability to integrate, build, and reconfigure internal and external competencies to address rapidly changing environments.‖ Ambidexterity as a Dynamic Capability: Resolving the Innovator‘s Dilemma O‘Reilly & Tushman 2007 Dynamic Capabilities become more attractive and more necessary due to the increasing speed of market evolution, the continuing pace of technology advance, and the increasing strategic change from the evolving the competitive landscape. Any strategy, however good, will be out dated by competitive action in the environment. Whereas prior models like Porters five forces model focused on external market actions as a description of the strategic framework; by contrast the Dynamic capabilities framework couples internal changes to external changes and proposes that the ability to continuously sense-seize- transform in accordance with environment changes is in fact the new locus of power in the arsenal of competitive of strategy. This property of achieving dynamic capabilities could be referred to as agility. Small entrepreneurial firms often have this by virtue of their need to innovate fast and to find willing customers whilst they are unencumbered by legacy assets, product support, policies or customer requirements. The larger the firm, the more difficult it is to maintain and grow agility. This phenomenon always gives small firms an advantage in rapidly changing markets, assuming adequate funding to innovate. Couple this with small firm‘s ability to focus on markets which are ―too small to be of interest‖ to large companies, regardless of their growth rate or strategic fit with large company capabilities. Dynamic Capabilities Defined
  5. 5. Personal EBook Copy – Do Not Distribute Reviews preview personal copy only 4 Of the many factors playing a role in Dynamic Capabilities framework, we single out the top four in bold to address in this paper as it pertains to Social Media strategy and opportunities. Section 1: Learning & Human Expression Section 2: Installed base effects Section 3: Network effects Section 4: Technological opportunities Other import aspects of Dynamic Capabilities framework are beyond the scope of this paper: Control over bottleneck assets Path dependencies Appropriability regimes Supporting institutions Switching costs Regulation . What are the criteria for new initiatives at your firm? Do you evaluate and filter them by size, return, risk and alignment with your core competencies? Does your firm analyze opportunities and threats in a systematic way? Is there a process for getting reliable outcomes? Which department leads those efforts?
  6. 6. Personal EBook Copy – Do Not Distribute Reviews preview personal copy only 5 Figure 2. Adapted from Sensing from the Teece Framework for Explicating Dynamic Capabilities 1997
  7. 7. Reviewers preview personal copy only 66 First lets define Social media is an evolving set of new internet websites, software components and associated content that allow user interaction., contribution of user-generated content (UGC), messaging, group formation and sharing. In some places, social media is defined as digital media (text, video, comments, links, photos, etc) provided by people for people. This ignores the subtly the many people work for corporations or are biased in either selling their own wares or promoting those of their friends and allies. So the intent of their posting is not always obvious. The reason why social media is growing in use and popularity is that many people assume it to be free of commercial interests. As Social Media becomes better understood, and as effectiveness drops of other forms of advertising, marketers will seek to take advantage of social media as outward bound messaging medium. There is risk in that approach. What we explore in the sections that follow are the role that Social Media can play as a input intelligence media, informing and guiding the strategy of the firm, including but not limited to marketing goals. In various literature and organizational presentations, other terms are used: social computing, social networking, social platforms and online communities. Blogging was an early form of social media. Blogs are going through rapid adoption and feature growth that contributes to collaboration, (person to group) communication, mobile access applications and sharing. These user interactions are stored, aggregated and segmented within the various social media sites leading to huge volumes of behavioral targeting data that may or may not be used someday to serve online advertising, generate targeted response lists, or size audiences for future marketing purposes. The social media platforms serve as giant content repositories that are indexed by search engines such as Yahoo and Google, to return results (and advertising) to explicit search queries to millions of internet users per day. Figure 3 from MarketingCharts.com What is Social Media?
  8. 8. Personal EBook Copy – Do Not Distribute Reviewers personal preview copy only 7 The penetration of high-speed (broadband) internet access drives usage and participation in new demographics and new geographic markets. Furthermore, innovative web service features (such as High Definition Video) are usable only when that broadband changeover is made for individual users and markets. YouTube‘s early success was in part due to its ability to upload many distinct video formats, automatically convert to a high performance Flash Video standard format, and later to build a technology delivery architecture that scaled to millions of simultaneous users, and pentabytes of digital video content. Other video sharing and distribution sites came before and after YouTube, with different content and market focuses. As HD video grows, some pundits speculate that it will eat away at TV and Cable as a broadcast and advertising medium. In theory it should allow more control via search, preference linking and storing bookmarks and channels of interest. But of course TV and Cable companies are evolving too, and they are using internet and social media technology now. How does Social Media influence your customers today? Do you see that changing? Do you rely on internet visibility and customer interaction? Why Social Media happening Now? Does video demonstration and education apply to your products and services? Do your competitors use online video? What aspects of your sales cycle might be influenced by online video?
  9. 9. Personal EBook Copy – Do Not Distribute Reviewers personal preview copy only 8 Figure 4. The chart shows the changing mixture of broadband (hi speed) vs. Dial-up (low speed) internet access for America adults.
  10. 10. Personal EBook Copy – Do Not Distribute Reviewers personal preview copy only 9 Figure 5. This Chart shows the time line of early (top) to later (bottom) internet technology successful companies. http://socialcapitalvalueadd.com/share-the-scva-ebook/
  11. 11. Personal EBook Copy – Do Not Distribute Reviewers personal preview copy only 10 Human Desires and Needs Drive Interest and Adoption There are the innate human needs from cognitive and psychological point of view that are causing engagement with social media. Expression, creation, sharing, and recognition are some of the most powerful. Former generations of web content were centered on directories and brochure-like pretty web interfaces that accepted little in the way of user generated content, and provided no means of sharing, other than sending URLs via Email. Because of ubiquitous email overload, people are hoping for communication that is outside of email. Driving interest, behavior, interaction and new group formation, we have for the first time, production and absorption driving interaction and media channel penetration. This interest and participation is done directly now on the internet, without traditional barriers of sales process, payment, consideration and authorization or approval within companies. This is a B2C phenomenon today, but is likely to spill over into B2B markets over time. The interest in expression, sharing, trust and socializing creates new demand for services with differentiated features, target audiences and technical interfaces. Furthermore the need for expression and creation is a subset of all interest in social media, and therefore many companies are beginning to segment both individuals and their behaviors into levels of participation from observation, to sharing, to creation and to higher levels of influence. There are no standard labels or measurements for this today, but further publication and promotion in research and in tool-vendor communities will seek to standardize labels and meanings and link them into some sort of economic valuation or target segment identification. The fact that most social media platforms have different demographics, psychographics, different degrees of diversity of users, as well as functional and structural properties, makes this a role classification of influence an evolutionary process. Figure 6. This diagram illustrates that different levels of participation in information and knowledge sharing form an abstract hierarchy with more economic creation value at the top, and more economic cost is occurring at the bottom. The costs could be considered as forms of distraction, information overload, and inability to find the right information (search costs). Elevation up the pyramid is behind the creation of intellectual capital, intangible assets, and economic value creation. Which needs of expression, participation and socialization are part of your product and service? Do you know the psychographics of your market segments? If you did, what might you do differently? SECTION 1: Learning & Human Expression
  12. 12. Personal EBook Copy – Do Not Distribute Reviewers personal preview copy only 11 Figure 7. Consumer Influence Channels, Source: Universal McCann http://www.slideshare.net/pgillin/secrets-of-social-media-marketing Paul Gillin PRSA teleseminar
  13. 13. Personal EBook Copy – Do Not Distribute Reviewers personal preview copy only 12 Figure 8. Examples of Negative Sentiment, or bad outcomes to firms from the power of users armed with social media using their own content and messaging for ―backlash‖ Because power is in the User Generated Content, influence inversion can take place. Bad outcomes are exposed, especially when consumers can easily blame companies. Source: Digitas
  14. 14. Personal EBook Copy – Do Not Distribute Reviewers personal preview copy only 13 Another example is a summary map and statistics from users that aggregate data on crimes and with dashboard reporting by time and by neighborhood. This is shown in Figure 10 below. In this way more ―trusted‖ sources of community information become gradually apparent to community members, without waiting for government processing, control and endorsement. Like trust in advertising and corporations which is diminishing, trust in governments has been diminishing in part due to their technology limitations and in part due to historical record, lack of incentives or oversight, and lack of competition which drives efficiency in market economies. Governments typical have ―free access‖ the media which provides tremendous PR advantages over the private sector, and allows all forms of misuse, in addition to the necessary and important aspects of informing the public. Figure 9, this metadata from slideshare tells how frequently it was viewed, shared, embedded (into other sites). These metrics are ―actions‖ taken by consumers on this particular social media platform Slideshare http://www.slideshare.net Example Slideshare Data for this social media content presentation referenced in Figures 7 and 8 above. Go to text version Total Views 3629 3146 on SlideShare 483 from embeds Comments 3 Favorites 50 Downloads 0 Most viewed embeds 381 views on http://www.marketingfacts.nl 46 views on http://lj-toys.com 33 views on http://www.verplichtekost.nl 9 views on http://roi- marketing.blogspot.com 6 views on http://new.verplichtekost.nl Uploaded via SlideShare What data do your customers have that you would like them to submit to your firm? What if they shared it with each other? What incentives might cause them to share it? Specific Examples in Social Media Experiments
  15. 15. Personal EBook Copy – Do Not Distribute Reviewers personal preview copy only 14 Figure 10. Social Media for Crime statistics reporting. A form of ―Citizen Journalism‖ http://chicago.everyblock.com/crime/
  16. 16. Personal EBook Copy – Do Not Distribute Reviewers personal preview copy only 15 Today this crime awareness exists as tacit, localized, and personal information. Anybody who knows a town has some sense of, "Don't go there. That street corner is dangerous. Don't go in this neighborhood. Be careful there after dark." This is accumulated observation, interaction and experience. Usually there is no public source where you can take advantage of it. Often police departments – if they have that information, have no incentive to share it. Because social media in general are created by people for people, today there is an aggregated assumption of trust. People have learned to recognize advertising and marketing messages, and tend to discount them or avoid them. ―Ad Blindness‖ is an industry term to discuss this issue. Social media by contrast is usually centered on the reputation of specific users whom you know, or you have heard of, or have been referred to. LinkedIn.com a professional social network has focus of people. It‘ a place that people can build reputations and share connections in a publicly navigable user interface. This may have societal advantages (reputation building incentives), in addition to individual user value, and aggregate data and audience value to LinkedIn as a publisher of media. They have the ability to sell highly targeted advertising with very detailed user profiles to a growing community of users and members. It is social media, because the content is created by the members, furthermore because the system‘s functional depth has evolved over the years, users actually pay monthly, in addition to providing the content (personal data) and also endure advertising. This is great for LinkedIn, and they are a leader in their social (professional) media category. Because of the foregoing incentives, people spend more time on social media, and therefore it drives increasing amounts of Internet traffic has value to search engines, publishers, and other internet properties that benefit from large audiences and potential for traffic being converted to membership, online purchases or subscriptions. 85% or consumers say that word of mouth from people they know is the most convincing reason to buy a product or service. 83% say online evaluations and reviews influence their purchasing decisions 84% trust user reviews more than critic‘s reviews 78% say consumer recommendations are most credible form of advertising 69% of those who read online reviews share them with friends, family or colleagues 93% of adults research products online before purchasing in a store 19% of online adults write an online review at least monthly Trust in ―person like me‖ tripped to 68% from 2004-2006—biggest influencer to consumers. http://www.slideshare.net/MolecularInc/your-users-trust-each-other-not-you-why-and- how-to-implement-ratings-and-reviews-presentation Do you notice when you ask friends for product and service recommendations? In which cases do you want to keep this offline? Why Social Media Works Now? Purchase Influence Survey Results
  17. 17. Personal EBook Copy – Do Not Distribute Reviewers personal preview copy only 16 “A firm that takes an action without the understanding of the impact on the ecosystem as a whole is ignoring the reality of the networked environment in which it operates.” Strategy as Ecology, Marco Iansiti, Roy Levien, HBR press. “The search activities that are relevant to „sensing‟ include information about what‟s going on the ecosystem” Explicating Dynamic Capabilities, David Teece, 1997 One of the distinguishing features of social media has been that it enables communications of one-to-one, as well as one-to-group and one-to-large-many. Twitter now reports that it is faster than broadcast media in covering the latest news. The latest earthquake in Southern California apparently broke into Twitter chatter 4 minutes sooner than first broadcast media. It also says that 'By then, "Earthquake" was trending on Twitter Search with thousands of updates and more on the way.' Which issues cause your customers to share, overcoming their natural tendencies to privacy? At different levels of urgency and importance, which events cause people to share information? Social Media Looks across Ecosystem Boundaries SECTION 2. Installed Base Usage Works Now?
  18. 18. Personal EBook Copy – Do Not Distribute Reviewers personal preview copy only 17 Figure 11. Study of market usage of social media tools (platforms).
  19. 19. Personal EBook Copy – Do Not Distribute Reviewers personal preview copy only 18 As the number of uses and companies participate in bi-directional conversations on social media, the value of the media (channel of interaction) goes up. Because diversity and depth are represented, and in fact can grow at much higher rate than traditional publishing can, due to automation, technology, and citizen publications (UCG) and sharing. Therefore hyper growth should continue for a while as new markets and new segments are penetrated. Two sided markets allow different forces to attract different participants, and provide an economy of scale to marketing and publicity that is shared across the originator, eg game platform like Nintendo, and the game developers such as Electronic Arts. Customers are among the first to perceive the potential in applying new technologies David C. Mowery, Haas School of Business, UC Berkeley Figure 12. Examples of 2-Sided Markets that require different incentives for each side Wikipedia definition of Game developers as participants http://en.wikipedia.org/wiki/Video_game_developer SECTION 3: Network Effects Usage Works Now? SECTION 4: Technology Opportunities and the Platform Effect
  20. 20. Personal EBook Copy – Do Not Distribute Reviewers personal preview copy only 19 . Figure 13. Complexity is the challenge of determining the right strategy, tools, and tactics for the goals of a particular firm. Tools are evolving but not nearly as fast as the growth in usage, penetration, and new platforms and social media networks. The equation suggests ways to measure industry evolution.
  21. 21. Personal EBook Copy – Do Not Distribute Reviewers personal preview copy only 20 Figure 14. http://www.slideshare.net/pgillin/secrets-of-social-media-marketing
  22. 22. Personal EBook Copy – Do Not Distribute Reviewers personal preview copy only 21 Application Programming Interfaces (API) turn portal websites into Platforms The success of the Apple‘s IPod as music content platform, followed by the wild success of the Iphone as a smart phone with API for small mobile applications, has ignited a firestorm of investment activity and strategic plans that impact both Social media and software infrastructure firms. So what is the ROI of this? The biggest appeal of using API‘s as a marketing platform is that brands have a mountain of data at their disposal. Instead of knowing that a customer came to a sales page, brands can know what type of information customers are interested in, how they like to communicate with their friends, keywords that cause them to take action, and countless other data points that would render the best market research obsolete. Data is just the beginning. The long-term brand awareness that is driven from positive user experience can build stronger brand advocates. The economics of investing, encouraging and growing platform strategy with APIs, developer relations and marketing and ecosystem support is beyond the scope of this paper. Adapted from http://digitalcapitalism.com/2009/04/api-marketing/ Application developers benefit by support for achieving product release in a new market and access to data, user profiles, and potentially expanding user population and APIs that simplify the application itself, built on a foundation of other services from the platform vendor (e.g. Facebook, Twitter etc). Users get a unique app on a new platform, possibly for free, that potentially solves a specific need. This encourages their further loyalty, usage and viral spreading of the platform. Each user finds applications they like, and thus they are worthy to talk about (WOM) that allows them to spread. Ratings plus a good search interface plus blogging comparison articles (evaluation content on social media sites and Blogs) allow users to pick things quickly that solve specific interests or needs. The rapid fulfillment of online desires adds to the rapidity of the viral spreading. If the platform is Social Media, then the applications are often trusted and used by consumers today. Brands who develop content or If you have different markets benefiting from your platform, how do you take into account their incentives, education, time horizon, and benefit expectations? Social Media Platforms Platforms are often a 3-sided market: Developers, Users & Brands
  23. 23. Personal EBook Copy – Do Not Distribute Reviewers personal preview copy only 22 ―programming‖ or ―strategic messsages‖ get a new channel without the detriment of Ad Avoidance (the learned behavior of filtering or ignoring advertising as it appears). Brands do get reach and frequency of their message or access to their name and content and potential website for conversion potential. A great example here is the Zippo Lighter Iphone application. This does nothing but looks and behaves like a real lighter, with flickering flame that looks astonishingly real. The interesting thing, is that genius of Zippo releasing a simulation ―game‖ that allows children to play with lighters, without violating any laws or safety concerns (in the short run). It creates fascination, user experience, and teaches kids how to operate a lighter, without creating a real flame. Its brand awareness to a new audience previously untargeted by Zippo. It‘s also providing word-of-mouth (WOM) marketing because it‘s cool. It‘s free, which maximizes viral spreading. Article on Zippo lighter surpassing 5 million free downloads http://www.mobilemarketer.com/cms/news/content/3908.html When starting such a 3-sided (or 2 or N- sided value proposition, it is necessary to encourage all parties simultaneously with specific early adopter status benefits. This is because there is mutual dependency and ―externalities‖. This means each party hopes the other is already there and willing, so the incentive to start must be an investment from one of the parties in time and resources to get the ball rolling. Typically this is a business development function from the platform vendor, but many executives may assume that role depending on individuals and firm culture. Figure 15 Evolution of key entrants with Web 2.0 APIs http://www.programmableweb.com/docs/ProgrammableWeb_Web20Expo2007.pdf What visibility and awareness from market segments which are not customers today would influence future awareness and interest in your products in the future? Is that ethical as you cross age group boundaries?
  24. 24. Personal EBook Copy – Do Not Distribute Reviewers personal preview copy only 23 Social Media Sensing is an emerging business model opportunity because it‘s a consumer usage phenomenon firstly with rapid growth and expansion. Secondly it encourages content creation and drives enormous amounts of internet traffic (often to search engines like Google, and shopping comparison sites like shopping.com) and sometimes to product and service home pages for individual corporations. Last but not least, new tools are emerging to measure the dispersion, scope, and content of conversations and sharing, and thus give a new view as to the market preferences and trends; more or less in real time. This allows insight from analytics to drive planning. Furthermore it allows information to be more rapidly selected from market sources and audiences into product planning, sales targeting, and R&D for innovations, as well as competitive intelligence gathering. With tools available now, the data that is extracted from social media platforms lives outside your firewalls in the cloud. And if you are smart, the tools that collect this data will often store it on the external internet. So the data is collected on the cloud, then aggregated and reported from the cloud also. So staying within well defined metrics allows you to perform most of the analysis process without internal IT resources. This is the promise of cloud computing in general; and hosted analytics in particular. Because the potential is being written about by vendors, consultants, and some scholars, the ability to integrate into strategy and measure results will grow and leak into the competitive strategy of firms over time. High profile case studies, with both positive and negative effects are being broadly published and shared. Because user communities have ability to rise in popularity based on events, interpretations and news; corporate communications are not in full control. Figure 16. TNS survey of perceived potential impact of social media Do you trust the data outside the firewall more or less than you trust the data from inside your firewall? What role do people and processes play in increasing its reliability and accuracy? Why is this Social Media Strategic?
  25. 25. Personal EBook Copy – Do Not Distribute Reviewers personal preview copy only 24 Therefore for the first time, media relations and strategy must take into account reputation management and damage control on a continuing basis using monitoring, which we call Social Media Sensing. In the past, control over media channels and messages allowed firms to respond to a one time crisis as an isolated occurrence, as made famous by the successful Tylenol response in 1986 (Cyanide poisoning) case. Sensing opportunities and threats, particularly in rapidly shifting markets, requires scanning, searching, and exploration. In organizational terms this involves a set of resources and routines such as a strategy-making process associated with variation, resources devoted to competitive intelligence and tracking technological change, and forums for discussions of new opportunities. More subtly and beyond the requisite resources, this capability also requires a balance in centralization and decentralization of control to encourage feedback from market-facing units, a culture of openness that encourages debate, the commitment of resources by senior leaders (financial and time) to encourage long-term thinking, and a senior management team that fosters a long-term O‘Reilly & Tushman 02/19/07 Social Media Sensing I define as using Social Media data sources, many of which can be extracted automatically using state of the art applications, and selecting and targeting concepts, words, and media types to monitor market behavior and interaction. This data can summarized, analyzed, segmented, and put through various algorithms to find patterns and trends most useful to fulfill certain strategic objectives of the firm. The ability to monitor on a daily basis this global ―cacophony‖ of noise, and filter the most valuable nuggets and determine what is worthy to act upon, I call Social Media Sensing. Furthermore, using independent tools, and an overarching process, we bring together management consulting imperatives of proper goal selection, strategic advisory services and organizational alignment to further leverage analytic decisions and outcomes of social media sensing. Because the user generated content and interactions are not necessarily purchase related we easily extend outside the bounds of the marketing department. Which departments beyond marketing today receive data or intelligence from outside the company? What forms does it arrive in? Is it formalized into specific reports, analysis and decisions? Sensing in the SST Framework What is Social Media Sensing?
  26. 26. Personal EBook Copy – Do Not Distribute Reviewers personal preview copy only 25 Figure 17. Social Media Sensing can directly influence Agility because of the rapid accumulation of market interaction and experience.
  27. 27. Personal EBook Copy – Do Not Distribute Reviewers personal preview copy only 26 Figure 18. Certan Topics (or Sources) allow different KPIs (Key Performance Indicators) for measuring and evaluating outcomes. Different departments will have different goals and different reports and benchmarks for analyzing outcomes.
  28. 28. Personal EBook Copy – Do Not Distribute Reviewers personal preview copy only 27 Facebook. Because of its origins as college student friend network, it uses implied social pressure and verification and trust to incentivize users to put in accurate demographic profile information. This is usable from the targeting perspective of the built in ad platform. This allows very local advertising at attractive CPM rates, and penetration of friend networks. Friends invite friends and share messages, events, and comments on posting, and use the Facebook search engine to find friends by affiliation such schools and universities. Facebook began as a way to see more information about people you were going to school with. Now it's become a way for friends to share interests by becoming fans of brands and lifestyles and posting articles, opinions and information. Twitter.com, introduced in 2006, is a free service designed to help its users keep friends and family up-to-date "about moments in their lives" by answering (hopefully frequently) a simple question: "What are you doing?" Sophisticated users, reinterpret that question to be ―What should I broadcast now?‖Posts can be made by text message from a mobile phone, by typing in a message at the Twitter website, or by sending an instant message (IM). This lets users send updates no matter where they are or what they're doing. There is a 140- character limit (spaces count) to the posts, referred to as "tweets." These properties and others encourage stream of consciousness flow of ideas, questions, references, and brand experiences to be broadcast by individuals (sometimes acting on behalf of corporations) to their followers. Another way to look at Twitter is: ―People-Centric Collaborative Filtering‖ for dealing with the plethora of information sources, and avoiding Google search results overload effects. Technically Twitter is the current category leader for micro blogging. Their open API and simplistic design, and series of fortunate publicity events have left them the early leader with a fastest growth rate in that category. Twitter started as a way to issue personal status updates to your friends, but is morphing into a search engine that allows you to tap into the "now" -- what's going on now? What's the groundswell of sentiment around a topic? By knowing people‘s reputations, these broadcasting individuals ―subject matter experts (SMEs)‖ provide value to communities and grow their own audiences (followers). As consumers of information and inspiration, we can more quickly digest, search, and reference information in our pursuit of knowledge, interest and solutions. People in general want solutions and ―right information‖; not products and sales pitches. Therefore, the never ending search for trust, experience and credibility provides the emotional and cognitive underpinning that drives social media growth today. Firms that exploit that directly, run the risk of being ―discovered and dissed‖ by audiences. Firms that gently exploit that with indirectness, observation, listening, learning, planning and adapting can avoid the perils of ―pushing messages‖ when they benefit strategically instead by ―pulling insights‖ and adapting their products, services, ecosystems and messages without direct exposure via the media. Additionally, certain tech-savvy musicians, such as MC Hammer, popular music personality and pioneering Hip-Hop artist, and Trent Reznor, the leader of rock band Nine Inch Nails (NIN), have taken high profile roles on Twitter with huge sets of followers. Does your firm have a policy about using Facebook or Twitter? Does it apply to company use or personal use or both? Does it help or hinder employee loyalty? Top Social Media Platforms
  29. 29. Personal EBook Copy – Do Not Distribute Reviewers personal preview copy only 28 They extend their personal brands on Twitter and by making daily short messages and creating or using Iphone applications that provide social reach allowing them to engage their current audiences and grow more broadly. With Twitter, these stars own their audiences directly. For firms choosing the timing of their insights, the timelines of their strategic changes, and timing of their communications and announcements, and you can gain the upper hand in the new media mix. Social media as a newcomer to the media landscape provides real-time monitoring with its potential impact on cycle time reduction and better planning accuracy and strategy. Both the law of large numbers for statistically relevant insights, plus the fast cycle time and access to large diverse data sets from separate communities provides a new basis for competing on analytics. Mapping and evaluating intentions could be the next frontier of Social Media Sensing. The following two quotes illustrate the power of sensing user communities directly, and the importance of doing so rapidly and repeatedly: “The intention of the users has more impact than the intention of the design of the tool.” Clay Shirky “The intentions and goals of users will change in the time it takes your firm to bring the product to market” If you don’t have a feedback loop; you’re dead from the start. Chris Rigatuso YouTube started as a service that allows people to post videos but has since become the leading place people turn when they want to find video content on any subject imaginable from product education, to student education, to controversial documentaries and music videos. In many instances, these social media platforms have started to surpass Google for specific information searches. When you look for video, do you go to Google first or do you go to YouTube? (Demand for video content has made YouTube the No. 2 search engine, ahead of Yahoo.) When you want to learn about someone you've met or are interviewing for a job, do you go to Google first or do you find out if the person has a Linked In or Facebook profile? So what does this shift mean for brands, marketers and advertisers? If Internet Search 1.0 was about making sure the information within individual pages of your site could be found, and Internet Search 2.0 was about making sure your site was optimized within a network of related sites, then Internet Search 3.0 is going to be about finding ways to reach individuals by using their social graphs. That means reaching people where they're already sharing, linking, publishing and tagging, and becoming another node on their social networks by interacting with them and adding value to their experiences online. Social media rapidly increases the link structure which affects page rank algorithms which determine visibility on Google searches. In addition the dynamic content created now by swarms of users can overwhelm content created by corporations; both in timeliness, rate of expansion, and degree of depth. This is another reason why social media represents a paradigm shift in media structure, competitive strategy, communications policy and risk management. Generic search engines aren't going to go away any time soon; they still serve a very important centralizing role. Ultimately social-media properties such as Facebook and Twitter will be indexed by the major search engines on a more regular basis, filling the need for "real-time" search and offering more-relevant content. But as traditional search begins to converge with social media, a robust presence in and understanding of social media will be a requirement of marketing in the Search 3.0 universe. Has your firm linked your internet marketing and social media strategies? What are the critical events or thresholds during which this becomes imperative? What is the status of your competitors?
  30. 30. Personal EBook Copy – Do Not Distribute Reviewers personal preview copy only 29 Figure 19. Social Media Adoption Curve, MixtMedia http://mixtmedia.files.wordpress.com/2008/11/social-media-adoption-curve2.png
  31. 31. Reviewers preview personal copy only 3030 Here I extend the traditional Porter Model to integrate with a subset of Teece‘s concept of Dynamic Capabilities, and the SST framework. Recently, the three part process of Listen-Learn-Adapt has caught on describing use of social media. I first heard about this on David Armano‘s blog: http://darmano.typepad.com. But, the concept of sensing and its role in strategy and competition is much larger than the current discussions about a simple process in social media and marketing would reveal. It is somewhat analogous to Sensing-Seizing-Transforming, so the concepts are overlaid on the diagram below. Starting with the Porter model on the left, we see that an ecosystem view with dynamic capabilities can now be integrated. This means that we can extend the notion of competitive advantage by using established frameworks of the past, with eye toward the future. This follows naturally from my ―Social Media Sensing‖ paradigm and process to attack current challenges with the evolving set of tools and access to social media interactions as a key data source for strategic decisions. In the diagram below the ―*‖ inside 3 blue ovals illustrates a role that social media can play either in Listening, or Communication, or provide evaluation process or content to customers (buyers) or monitoring new entrants and substitute products and services. One can imagine that Listening does apply to Buyers, Suppliers despite the lack of arrows in the diagram. This (and other) limitations are just to keep the diagram simple enough to comprehend. Which processes inside your firm are linked to strategic goals today? Which ones should be? Is the metric agreed upon that measures progress? Does your staff believe and support that metric? The Transition from Michael Porter’s Five Forces to Dynamic Capabilities
  32. 32. Reviewers preview personal copy only 3131 Figure 20. The new Architecture of Competitive Advantage extends the notion of competitive forces from the Porter view, dominated by external industry analysis, to one of dynamic capabilities and linkage to corporate strategic goals.
  33. 33. Personal EBook Copy – Do Not Distribute Reviewers personal preview copy only 32 A more specialized business strategy framework below from ―Structural Holes‖ by Ronald S. Burt allows representation of the additional dimensions of control vs. information, and making use of the social structure represented by social interactions of content and messages. To put this into practice, we can see (and sometimes traverse) the social graph of friends and followers, now represented inside platforms such as Twitter and Facebook. This framework predates the rise of the internet and social media, but quite interestingly addresses social structure, control vs. information tradeoffs, and holes as ―opportunities‖ which currently associated with sensing in the Teece framework. Today this has relevance precisely because tools can accumulate data and therefore strategic challenges, goals, actions and outcomes can be measured and reports can verify progress. In the research paper, ―How to transfer discontinuous technology into radical innovation‖, Several process deficiencies were shown to thwart efforts of three corporations dealt with as case studies, a chemical firm, fragrance firm, and injection molding firm. “Poor insight into the strategic management of discontinuous technology and radical innovation increasingly represents a strong threat to companies. However most of the research in this field focuses on the industry level rather than concentrating on a company level investigating directly radical innovation projects. Company level research on radical innovation seems to be less popular than that at the industry level. There is no overall strategy formulation process addressing the various managerial issues concerning discontinuous technologies and radical innovation within an integrated context of radical innovation and incremental innovation.‖ Fig 21. Adapted from ―Structural Holes‖ by Ronald S Burt, 1995. Rate of Return is the opportunity question whereas the amount of investment is a production question Structural Holes in Social Networks and Intelligence Process Deficiencies Does your firm separate production and opportunity evaluation decisions? Are they split across roles, titles, departments? Is there a process that crosses those boundaries?
  34. 34. Personal EBook Copy – Do Not Distribute Reviewers personal preview copy only 33 In that same paper, two of the reasons for trouble, are particular relevant to Social Media as source for new competitive and market intelligence: 1. Slow process lead times - missing coordination and interrelation between strategic and operational level: This observation was generally made in all three cases and concerned most activities we analyzed. Within the ad hoc process the various activities from initiation of the process through evaluation, decision and implementation, lacked a coordination or interrelation between operational and strategic level for the various project activities. Findings that had worked could not be benchmarked with prior set exceptions. An iterative and determined course of actions that narrowed the scope of analysis step by step with clear strategic goals was not explicitly visible in any of the cases. As a result the analyses conducted in operational level projects were executed with a lacking focus. Thus all activities related to radical innovation idea analysis turned out to be time consuming and slow. 2. Ineffective information processing - missing market and technology intelligence tools: To gain a first mover advantage, which is highly beneficial with radical innovation, it is critical to identify an innovation opportunity early. None of the companies systematically gathered information in order to catch weak technological and market signals leading to radical innovation. Only one company conducted some kind of monitoring activities; however these were explicitly designed to follow the continuously evolving trends and therefore designed toward incremental innovation. Once the reception and identification of such signals has succeeded, a company has to filter which ideas to analyze in more detail and which ones to eliminate. A first evaluation needs to be quick in order to process as many ideas and related information as possible. Furthermore, such a process should guarantee an acceptable degree of accuracy. In the analyzed cases none of the companies applied such a quick assessment tool. It is my belief that Social Media Sensing will allow measurable impact on these types of strategic challenges for the following reasons 1. Access to new sources of data generated by market participants (UGC) 2. Ability to automate the collection process 3. Ability to do so outside the firm, using publicly available, but widely scattered data on websites and blogs and other forms of social media. 4. Ability to monitor continuously with existing defined collection, data quality, filtration and reporting strategy in place Because much of this publicly available data is in the form of text, as part of UGC, one huge hurdle is overcoming the variations in language usage and the nomenclature specific to market segments, demographics, and industries that are participating in the online discussions. The tools and techniques exist today, but are not focused in a single cohesive product, tool or process that is available to firms in general. Hence the need for consultative efforts and internal dedication to harnessing this huge potential is the responsibility of the firms seeking those competitive advantages. Do you have intelligence process for competitors, markets, customers? Who decides its rate of evolution, your staff, executives, or the market itself?
  35. 35. Personal EBook Copy – Do Not Distribute Reviewers personal preview copy only 34 Today firms own and control their organizational structure, staff, products and but not their markets or customers. In general they do not control the reactions, interpretation and communication among its market participants, suppliers and ecosystem participants. It has control generally only over the target audiences reception of company broadcast information (customers receiving messages) and later, when listening, what to do with information received from the market. (Sensing + seizing + transforming process)  (Unique content + metrics + linkage to strategic goals) Once these combinatorial factors are in place, the asset (as an organizational unit or a technology system) becomes firm specific, and non-tradable. The symbol here  means selection and orchestration in firm specific ways. This means there is no market for the advantage, and hence it is capable of being a competitive advantage, although not necessarily sustainable. Assets which have the property of non-tradable (thin markets) are capable of producing competitive advantage, but of course there are no guarantees. By contrast any subscription service, external data or vendor provided tools cannot provide a competitive advantage precisely because there is a market for them. The accumulation of firm-specific data does add potential value. This provides a basis for unique and potentially scalable process. Furthermore, because the data accumulations, tool experience accumulates, and processes that allow collaboration, workflow and sharing are available, the firm has the chance to combine internal and external expertise, internal and external software and tools components, and construct an evolving process at the dawn of the social media age that has transformative potential. Does the architecture of a ―space‖ influence the emotion, and navigation of people and actions within it? What is the shape of the space your firm navigates? Have you seen it? How to construct an innovation advantage with non-replicable assets
  36. 36. Personal EBook Copy – Do Not Distribute Reviewers personal preview copy only 35 There is a fundamental tradeoff in that firms should be careful not to ―over invest‖ too much now, because of the rapid rate of evolution of social media and tools to manage and analyze the phenomenon. On the other hand, serious experience curve effects will provide advantages to firms who start early and morph their process and goals to adapt their strategy and media planning efforts now. So don‘t pretend to buy into ―best practices‖ now, but absolutely experiment and listen, learn and adapt. Adapt not only the strategy and tactics of your firm, but the Social Media Sensing process itself. Because of the structure and rapid evolution of social media, social networks, and the technology driven changes to automate content distribution, message propagation, and use of friends and fans networks, the media game is again undergoing sea change. The ―searchability‖ and instantaneous nature of these social media platforms allow for collection of a variety of data that applies broadly to corporate strategy, when and if there is knowledge to do so. The potential value and insight transcends the usual marketing and branding departments and touches other functions and other strategic goals of the firm. Because the communications are horizontal between users, (for the present time) lots of segmentation, clustering and analytics are needed to extract, summarize and link findings to influence future actions of the firm. Furthermore, the network of friends of users is now become part of the infrastructure on the internet. The contacts are flowing out of your Email inbox and unfolding into the data models of platform vendors and destination web publishers as ―social media providers‖. They capture value incrementally, and willingly from millions of present and future users, in forms of user generated content, interaction and sharing, and networks of fans and friends, where each new link adds value to the whole. In Summary, there are several large impacts Social Media will have on strategy and intangible assets are as follows: Social Media as a new communications and media channel offers bidirectional interaction, one-to-many, and many-to-many sharing and information spreading, without needing to look up peoples‘ names The structure evolves slowly but continuously Some social media networks (platforms) are more ―open‖ than others Some social media networks have APIs, and others are considering adding APIs, with the plan to make their destination web sites more sticky, more fun, and more valuable to wider variety of participants Building and maintaining social capital, there are new ways to measure the impact (flow) and asset values (stock). There are applications within the firm, between firms and ecosystem, and from firms into their target markets and potential new markets Social Media Sensing ia an analytics paradigm feeding competitive advantage for aggressive firms that experiement now Social Media Sensing is a way to automate large scale research projects feeding market analysis, brand / sentiment analysis, reputation management, and innovation for products and services Social Media as a basis for new business models and opportunities, in the form of content and idea sharing and mobilizing people outside the boundaries of your firm. Conclusion
  37. 37. Personal EBook Copy – Do Not Distribute Reviewers personal preview copy only 36 Finally, because social media offers a new sensing paradigm, it will influence the interdependent notion of co-evolution of firms with their environments, and perhaps further increase the rate of competitive evolution. These are represented by allowing influence to be represented in both directions between firms and their competitive market environments. Because social media sensing can extend the boundary of observation of the firm, it can play a strategic role in monitoring, competitive analysis, and market research. By careful evaluation of the role of listening (inbound) and communication channels (outbound) in the market environment, the classic Porter Five Forces model is augmented to include touch points to listening (sensing), communication channels, evaluation channels (which include comparison shopping and review / rating sites), and complimentary asset relationships between a firm and its suppliers. In this way, we show a pragmatic bridge between the external environmental forces (Porter‘s Model) and the relationship to Dynamic Capabilities of David Teece, gracefully crossing the fluid boundaries of the firm. Figure 22 David Teece, 2009 Dynamic Capabilities
  38. 38. Reviewers preview personal copy only 11 Web 2.0 Effects of Technology Internal to Firms Web 2.0 technologies such as wikis, social networks, Blogs and microblogging sites like Twitter, have the potential to drive higher productivity gains by enabling employees to communicate with one another more quickly and frequently, and share their knowledge throughout the organization more easily. They also have the potential to create distractions. This will become a more visible policy decision for corporations in 2010. In the enterprise, Web 2.0 technologies like wikis, Blogs and social networks can be used for information and knowledge sharing, while RSS feeds, tags and folksonomies assist in the process of retrieving information from the increasingly large amounts of digital content organizations have created, not to mention the collective ‗wisdom of crowds‘ inside the enterprise The benefits of Web 2.0 collaboration include tapping into the ‗wisdom of crowds‘, bypassing email as a communications method, flexibility in creating Web 2.0 applications on an ad hoc basis and genuine knowledge sharing. [Bypassing the email inbox may be huge driver for new internet technologies…] Holding Web 2.0 collaboration back, however, are organizations‘ fears of losing control, the idea that majority rule doesn‘t always produce the best results, scalability issues, and concerns for intellectual property and security. Adapted from Victoria Furness for 2008 Business Insights Ltd Appendix A
  39. 39. Personal EBook Copy – Do Not Distribute Reviewers personal preview copy only 2 Ecosystem of Social Media and related webservices (subset of all available) http://lgnewmedia.net/blog/wp-content/uploads/2007/05/bubblus-social-media.jpg
  40. 40. Personal EBook Copy – Do Not Distribute Reviewers preview personal copy only Academic 1. Robert M. Grant, 2008, Contemporary Strategy Analysis 2. David J Teece, 2009, Dynamic Capabilities & Strategic management, Oxford University Press 3. Charles A. O’Reilly III and Michael L. Tushman, 2007 Ambidexterity as a Dynamic Capability: Resolving the Innovator’s Dilemma 4. Micheal E Gorman, 2002, Types of knowledge and their roles in technology transfer 5. Rebecca M Henderson; Kim B. Clark, Architectural Innovation: the Reconfiguration of Existing Product Technologies and Failure of Established Firms 6. Gary P Pisano, David J Teece, 2007, How to Capture Value from Innovation: 7. Gaston Trauffler, Cornelius Herstatt, Technology Hugo Tschirky, 2004, How to transfer discontinuous technology into radical innovation 8. Joseph L Bower, Clayton M Christensen, 1995 Disruptive Technology Catching the Wave, HBR 9. Chesbrough, Henry and Rosenbloom, Richard S. (2002). “The role of the business model in capturing value…” 10. in capturing value from innovation: Evidence from Xerox Corporation’s technology spinoff 11. Marco Iansiti and Roy Levien, 2004, Strategy as Ecology, HBR 12. John Freeman and Jerome S. Engel, 2007 Models of Innovation, California Management Review 13. David J Teece, Managing Intellectual Capital, 2000, Oxford University Press Business and Popular Media Lawrence A. Bossidy, 2002, Execution the Discipline of getting things done http://darmano.typepad.com http://lgnewmedia.net http://changethis.com/50.05.SocialCapital http://digitalcapitalism.com/2009/04/api-marketing/ REFERENCES
  41. 41. Personal EBook Copy – Do Not Distribute Reviewers preview personal copy only
  42. 42. Personal EBook Copy – Do Not Distribute Reviewers preview personal copy only Chris Rigatuso is a co-founder and partner at Skyfollow Consulting Group (SCG). Today he is an analyst and consultant at SCG focusing on Strategic Social Media Analytics. SCG uses advanced tools and data collection methods to link corporate strategic objectives to social media campaigns and social media sensing imperatives for competitive intelligence, market research, media planning and increasing innovation in product planning and brand postioning. Chris’s background includes investment banking, product management, business development, training design, competitive strategy and entrepreneurial roles, human factors experiments and user interface design. Chris was one of the first artists on the internet in 1994, while he was Director of Marketing at Synergy Computer Graphics. Chris {at} SocialMediaSensing.com Mobile +1 (650) 274-1045 www.linkedin.com/in/Rigatuso
  43. 43. Personal EBook Copy – Do Not Distribute Reviewers preview personal copy only Copyright info © 2010 The copyright of this work belongs to the author, Chris Rigatuso a co-founder and partner at Skyfollow Consulting Group who is solely responsible for the content. SocialMediaSensing.com is the website that supports the book and followon conversations and downloads and online e-commerce related to the concepts and theories of this book. All rights reserved. Electronic copies are for individual use only and do not permit electronic distribution. Please refer interested readers to the permalink posting: http://blog.skyfollow.com/2010/02/12/social-media-sensing-ebook- on-competitive-strategy-and-advantage-for-corporations/ www.Skyfollow.com
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