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Monday, 7 September 2009

New Firms Best At Leveraging Social Media?

A hat tip to Mark Nepstad for pointing out Chris Perry's article on the challenge for any established business trying to leverage the social media. Just as the military potential of the aeroplane was not fully realised until the challenge was eventually handed over by the Army to a newly created Air Force, Chris suggests that marketing teams need to be re-engineered in order for businesses to realise the potential afforded by a phenomenon as 'revolutinary' as the social media.

But this misses the wood for the trees.

The rise of the Air Force and the success of Google, eBay, Amazon etc. illustrate that leveraging horizontal technological innovations is not achieved by shuffling the deckchairs in the marketing department of established organisations, but by forging new and separate businesses.

That leaves the challenge for the old guard to engage with the upstarts in order to leverage their greater success with the new technology. Time Warner (AOL), NewsCorp (MySpace) and even eBay (Skype) have famously demonstrated that acquiring one of these new firms doesn't necessarily result in successful engagement. So it seems that established businesses should both encourage new businesses to flourish around significant new horizontal innovations, and focus on co-operating with them to serve their customers, rather than outright ownership. Some, including the Wharton Business School, have called this 'coopetition'.

Figuring out how to compete by co-operating shouldn't necessarily entail wholesale reorganisation, especially when deep knowledge of the capabilities and shortcomings of your own business is key to knowing what's needed from the other party. Indeed it might be more beneficial to give managers and staff 'permission' to admit their organisation's shortcomings and figure out where they need help to adequately serve their customers, rather than to drive the organisation through complex wholesale change programmes.

At any rate, the scale of the challenge posed by horizontal technological shifts may at least partly explain why the average lifespan of a major western corporation is 40-50 years...


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