The
New Model for Innovation Is Social -- and Mobile:
But Are Companies Ready?
Most business leaders are by now
aware that the growing use of mobile phones is changing the competitive
landscape for all companies, no matter what the industry. The extent of those
changes is greater than most appreciate, however. They include entirely new
methods of designing products and completely revamped methods for selling them.
They also involve a fundamentally reinvented relationship with customers: To be
precise, the customers are now the boss.
Those
were some of the key ideas that emerged from a recent conference -- "How
Mobile and Social Are Transforming Innovation Models: Flipping the
Paradigm?" -- hosted by Wharton's Mack
Institute for Innovation Management at the school's San Francisco campus. The
question mark at the end of the conference's title probably wasn't necessary, judging by one of the slides shown by Scott
Snyder, a senior fellow at the Mack Institute and president of Mobiquity, one
the country's largest mobile app developers. The slide was jammed with text and
listed dozens of activities including shining a flashlight, using a tape
measure and turning an air conditioner on and off. What the tasks had in
common, Snyder said, was that all are among the constantly expanding list of things
people are now doing with their mobile phones.
"The war is over," Snyder
noted. "Mobile is the new platform. And it is changing our behavior. We
are using it for everything, because we like doing things in the easiest way
possible."
There are many implications of this
shift to mobile. One, Snyder added, is that the concerns about privacy and
"masked identity" that were so dominant in the early days of the
Internet are being changed by social networks like Facebook. The "new
normal" is what Snyder called "exposed identity" and constant
sharing. Because a smartphone always knows its holder's location, one of
mobile's biggest impacts will involve providing "point of
inspiration" messages to consumers that attempt to persuade them into a
purchase at exactly the moment they're able to make it.
Snyder predicted that several
industries and professions were on the verge of being disrupted by mobile.
Medicine is a prime example. There are now apps that serve as an
"OpenTable for doctors," allowing patients to search for
participating local physicians with an opening that same day rather than having
to wait a week for a session with their regular doctor.
New Possibilities for a New
Economy
Another conference speaker, Todd
Hewlin, said the new ground rules in the social and mobile economy were
"the perfect storm for disruption," requiring companies to learn an
entirely new way of selling their products. Hewlin is a managing director of
TCG Advisors, a consulting group best known for its association with Geoffrey Moore,
author of the book Crossing the Chasm. Hewlin is a co-author of Consumption
Economics: The New Rules of Tech.
The new way of selling products,
Hewlin noted, involves a move from what he called the "CapEx"
business model to one dubbed "OpEx." Traditionally, Hewlin explained,
companies assumed that customers made purchases with a "capital
expenditures" mentality -- i.e., making a big, one-time purchase and then
using the product for many years. Hewlin said there was an "asymmetry of
risk" in that arrangement, as customers were often stuck with obsolete
products before they were able to amortize the purchase price.
Another downside to CapEx is that
companies get into a vicious cycle of convincing customers to upgrade to a new
product by "improving" the old one with the addition of new features.
The results are often bloated products full of features most customers never
use.
In the OpEx model, customers, in
effect, lease rather than buy products. A number of "software as a
service" companies, such as Salesforce.com, have pioneered this approach
in the enterprise software market, and Hewlin predicted that the practice will
spread to other industries. One of the main causes of this change, Hewlin said,
is the growing power of customers. "Simplicity is going to be the
key," he noted. "We have to make products that are so simple that
anyone can use them."
Hewlin added that companies often
have no idea which features of a particular product consumers are actually
using. New, low-cost sensor technologies are making this sort of feedback
possible, and Hewlin said firms should take advantage of them to better
understand what customers want. That will help them to avoid crashing into the
"margin wall," which he said is an inevitable part of the OpEx model,
with constantly declining prices and commoditized products.
The Psychology of Social Media
With companies turning more and more
to marketing via social media, there is increased interest in figuring out what
types of outreach will prompt consumers to engage with their favorite brands.
Wharton operations and information management professor Kartik Hosanagar
and fellow researchers are trying to come up with an answer, studying the
psychology of these networks; specifically, what prompts people to
"like" or comment on a Facebook post.
Hosanagar, who delivered his
presentation via TelePresence technology from Cisco Systems that allowed the
talk to be streamed live from the East coast to San Francisco, built a computer
file of 106,000 Facebook messages posted by 782 companies over the course of
nearly a year, starting in September 2011. Then he used Amazon's Mechanical
Turk service, which parcels out massive, repetitive tasks to stay-at-home
workers, to ask people to categorize a subset of the messages based on criteria
developed by the researchers.
Participants in the study were
asked: Did a particular message make some sort of emotional appeal? Did it
mention a specific deal on a specific day? Did it urge readers to contribute to
a charity? Did it mention a holiday, like Christmas or Thanksgiving? After the
subset of messages had been scored by humans, the results were turned over to a
computer, which, using the latest in "machine learning" technology,
used that data to quickly process the remainder of the sample.
The results contained a number of
surprises. Unfortunately for retailers trying to drive customers to specific
sales events, messages that promoted a particular item didn't do a very good
job of generating "likes" or comments. Neither did those involving
holidays. What did? Posts written to appear as if they were coming from a
friend or that urged readers to donate to a certain charity consistently got
high scores. The lesson for retailers, according to Hosanagar, is that firms
need to mix up their social communications rather than just blasting out
endless messages about deals and products.
During the Q&A segment, several
members of the audience asked Hosanagar whether the social media efforts now
underway by big companies have any measurable return on investment. Hosanagar
responded that the medium is still too young to know the answer, although
researchers like him are actively pursuing it.
Feeding the Ecosystem
The new mobile and social business
models bring myriad challenges and contradictions, according to Wharton
management professor and Mack Institute co-director Harbir Singh.
Most businesses today understand
that they need to exist in an "ecosystem" that includes other
companies, some of them competitors. However, Singh said, there is a
"constant tension" at firms about the issue. On the one hand,
managers need to take steps that will nurture and sustain the ecosystem they find
themselves in, but on the other hand, in doing so they often find that someone
else, perhaps even a rival, is gaining most of the benefits from their
contributions.
The right approach, Singh said, is
one of "joint value creation," wherein companies take great care to
monitor what each is getting out of its business environment compared to what
the firm is putting into it. Singh added that one tactic many companies use is
to open up their products to create a platform that others can contribute to.
For example, many small Internet companies have opted to build their services
around Facebook's infrastructure, or access Google analytics data to use in
their products.
The conference also featured a panel
of representatives from some of the country's biggest companies who discussed
the challenges they have faced in determining how to maneuver as social and
mobile applications continue to grow in popularity.
In keeping with one of the big
themes of the day -- involving the growing role of customers -- attendees at
the conference were also asked to make their own contributions. During lunch,
the audience was divided into three groups: "disrupters," who are
bringing about change; "incumbents," who must adapt to change, and
"enablers," who are providing the tools to make those changes
possible. Participants were asked to discuss the world from their assigned
perspectives. After lunch, each table reported back on what had been said.
Many of the lunchtime sessions
echoed themes that had been presented by speakers, notably Singh's dissection
of the challenges and opportunities involved in working inside a business
ecosystem.
"You have to feed the
ecosystem," Singh noted. "It will die if all you do is extract value
from it. But you also have to get your fair share of the benefits."
http://knowledge.wharton.upenn.edu/article.cfm?articleid=3286
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