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The Official Baldrige Blog

Will Social Technologies Drive Business Model Innovation?


I recently read a McKinsey article on the evolution of social technology use by companies. The article was based on surveys of 2700 global executives spanning the years 2005 to 2015. The results indicated that leading companies have passed through three distinct phases of social technology use:

  1. Tryouts — Companies testing social media as a way to communicate information, such as marketing messages
  2. Collaboration and knowledge work — Companies establishing internal knowledge sharing and collaboration platforms to connect employees and ideas
  3.  Strategic insights — Companies establishing internal and external networks for encouraging stakeholders broadly to contribute to idea development; on a strategic and operational level, the extreme use of this technology is crowdsourcing.

Going forward, the use of social media could have numerous implications for not only how strategy is developed, but also for organizational business models . Different organizations will choose different paths, but change (as always) will be inevitable. Here are some scenarios to ponder:

  1. Organizational flattening — With direct communication via social media from the top of the organization to the front-line employee and beyond, will new informal networks replace or subvert more formalized structures for communication and lead to a reduction in managerial levels? Will decision-making processes become more distributed and less formal? Will formal processes for decision-making at the strategic level rely on networks and councils for input?
  2. Death or failure of hierarchical organizations — Will the existence of informal networks and the needed speed of information flow lead to the inability of strictly hierarchical organizations to keep pace? Will such organizations need to rethink their organizational structure and decision-making processes? Will those that do not change voluntarily die because of a lack of competitiveness in a rapidly changing landscape?
  3. Increase in risk-averse organizations — Will the ability to crowdsource and survey large groups of customers lead to a lack of investment in bold ideas, because the ideas are ahead of the customers' ability to imagine or sense a future need? Will breakthrough products and technologies become even more the domain of start-ups? Will the business model for large organizations become largely focused on acquisitions of small entrepreneurial firms and less on internal R&D?
  4. Strategic alliances — Will the use of external networks in strategy development lead to more partnerships that share risk in strategy execution, new product development, or new market entry? Will the ability to create private networks encourage the seeking of partnerships and alliances before detailed strategy development begins?
  5. Rethinking the role of intellectual property — Will the more open nature of strategy input and development change our thinking about protecting intellectual property? Will there be less focus on proprietary information? Will true competitive advantage no longer come from the protection of intellectual property but from the ability to execute and make use of intellectual property?

These are just some of the potential impacts of social media on business models. The real question today is whether your organization is considering the role of social media strategically, as a source of not only information but as a disrupter of your current business model? Where is your organization headed?

About the author

Harry Hertz “The Baldrige Cheermudgeon”

I am Harry Hertz, the Baldrige Cheermudgeon, and Director Emeritus of the Baldrige Program. I joined the Program in 1992 after a decade in management in the analytical chemistry and chemical sciences laboratories at the National Institute of Standards and Technology (NIST), the home of the Baldrige Program. I started my career at NIST (NBS) as a bench analytical chemist.

My favorite aspects of the Baldrige Program are: (1) the opportunity to interact with leading thinkers from all sectors of the U.S. economy who serve as volunteers in the Baldrige Program, who participate in the Baldrige Executive Fellows Program, and who represent Award applicants at the forefront of the continuous journey to performance excellence, and (2) the intellectual challenge of synthesizing ideas from leading thinkers and from personal research into Insights on the Road to Performance Excellence and other blogs that tackle challenges at the “leading edge of validated leadership and performance practice,” and contribute to the continuous revision of the Baldrige Performance Excellence Framework.

Outside of work I spend my time with family (including three beautiful granddaughters), exercising, baking bread, traveling, educating tomorrow’s leaders, and participating on various boards and board committees.

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Well put - I only hope many others will quickly listen and take action while social media can still be used as a competitive advantage.

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