Promoting innovation via social networks and open company culture
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1 Promoting innovation via social networks and open company culture Fellowship at AICGS, Washington D.C., December 5, 2010 Economist Think Tank of Deutsche Bank Group
2 Agenda 1 Social Media 2 Social Media in use 3 Open Innovation 4 Conclusion
3 1 Social Media A hype or a trend? to share to exchange to collaborate to participate to interact emotional attachment & social connections Page 3
4 1 Social Media Social Media: Functionalities Personal Profile Different privacy settings for community members or, in general, the public in the web Contact List, Address Book Maintanance of friends contact details Receiving and sending messages from/to other community members Differentiation between open and closed channels Receiving and sending of information about diverse events Edit profile, photos, comments, videos, web links, chronological logbook, poke, etc. Blogs Search A potential rival to search engines (Google, Bing) Page 4
5 1 Social Media Social Media: Socio-economic consequences Non-hierarchical communication in real time Prosumer creates/consumes digital content Personal social network increases Facebook-user has on average 150 friends viral distribution of information flows Publicness (open diaries) requires more responsability virtual world coincides with the real world, what happens in vegas stays on facebook, twitter etc. Contents (in part, high-quality) are posted without any financial incentives intrinsic motivation (reputation, passion, hobby, fun, idealism, art, etc.) Evaluation platforms contribute to an entreprise s success/failure powerful recommendations-entertainment reputation as a digital currency voluntary identification with a brand advertising: pull-, instead of push-strategy Increasing Relevance of Social Media for Politics: Obama s electoral campaign electorate s decentralised self-organisation Economy: collective intelligence increases innovation potential (crowdsourcing, new business models) Society: active role in shaping politics e.g. boycotts (e-petitions), fundraising Page 5
6 1 Social Media Social Media newsroom: Use in enterprises Company s own news, communication and media platforms Communication and support via a single digital platform Dialogue in real time open dialogue via blog (viral and non-hierarchical) Internal (Intranet) vs. external (Internet) Reduce the need to control Think about topics avoiding trivialities Positioning of undefined users/bloggers/interested parties, who follow their own goal with the information Information is power, but interpretation is more powerful React professionaly to praises and critics Networks s logic 1:n relations should be substituted by n:n relations Connexion/Publications to/in international social media networks(facebook, Twitter, Xing, Blogs ) via RSS-Feed, newsletter, , tweet, etc. Pull-strategy voluntary identification with a brand Social media should not be put aside Create a code of conduct (guide), in order to reduce uncertainty Page 6
7 1 Social Media Social Media risks (not only) in enterprises Unknowingness of comments about the enterprise/person Restricted control in the web Fusion of private and professional life Communicating without acting seems in the long run noncredible Boycott as empty promise (from the enterprise as well as from the user perspective) Lost of face-to-face communication Social communication skills worsen Content must be well-considered The internet does not forget Page 7
8 Agenda 1 Social Media 2 Social Media in use 3 Open Innovation 4 Conclusion
9 2 Social Media Statistics Statistics 1/3 Social Media rock! % of over-18s living in the US, n= Feb. 05 Sep. 05 Aug. 06 May 08 Nov. 08 Apr. 09 May 10 Source: Pew Research Center Which Social Media rock? % of over-18s living in the US, n=680 4% 9% 31% 1% 7% 48% Facebook My Space LinkedIn Twitter YouTube Other May 2010, multiple responses possible Source: Pew Research Center Page 9
10 2 Social Media Statistics Statistics 2/3 How many people use Twitter/microblogging services? % of over-18s living in the US, n= Aug. 08 Nov. 08 Dec. 08 Apr. 09 May 10 Source: Pew Research Center Page 10
11 2 Social Media Statistics Statistics 3/3 Who is "remixing" digital content*? % of over-18s living in the US, n= Jan. 05 Apr. 06 Feb. 07 Dec. 07 May 10 *Songs, words, images, other digital content. Who is distributing digital (remixes)? % of over-18s living in the US, n= Dec. 07 May 10 Source: Pew Research Center Source: Pew Research Center Page 11
12 2 Social Media Statistics How do Germany s biggest brands use social media? The use of Social Media % of 100 German largest brands, 2009 Services: YouTube, Facebook, Twitter, Corporate Blogs 5% 11% The use of Social Media, by platform % of 100 German largest brands, 2009 Twitter YouTube 40% 19% Facebook 25% all three two one none Sources: Uni Oldenburg, construktiv GmbH Corporate Blogs Sources: Uni Oldenburg, construktiv GmbH Sources: Empirische Studie der Universität Oldenburg, construktiv GmbH, Bremen/Berlin. Activity and resonance were measured. Page 12
13 2 Social Media Statistics Which sectors use Social Media? The use of Social Media, by branches % of 100 German largest brands, 2009 Telecommunications Electrical industry/ entertainment electronics Print-, media-, film-, music- Insurance Electronic Equipment Automobile industry Retail Food and beverage Credit institutions Chemical products Sources: Uni Oldenburg, construktiv GmbH Page 13
14 2 Social Media Statistics Social Media need communication guidelines (code of conduct) Does your enterprise have a Social Media Policy? 2006 % of over-18s living in the US, n= % 10% 20%...and in 2010? n= % 25% 69% 67% Yes No Do not know Abstention Source: Pew Research Center Yes No Do not know Abstention Source: Pew Research Center Page 14
15 2 Social Media Statistics The new currency in the web is reputation! 57% search for information about themselves (2006: 47%) 46% have their own online profile (2006: 20%) 47% (in the age cohort) delete comments about their person in their profiles 65% alter their privacy settings (restricting information) Who is using real name? % of over-18s living in the US, n=840 Real name User name Anonymous Do not know Abstention Source: Pew Research Center Source: Survey results for over-18s living in the US, N=1.698 Pew Research Center, Mai 2010 Page 15
16 2 Social Media Statistics Again: A hype or a trend? Social Media are not a hype, but a consequence of technological progress Page 16
17 Agenda 1 Social Media 2 Social Media in use 3 Open Innovation 4 Conclusion
18 3 From Web 2.0 to Enterprise 2.0 If the interactive and collaborating (non-hierarchical) nature of Social Media can be used for an open value creation in a company, the collective intelligence can increase the innovation potential in that company. Page 18
19 3 Interactive Value Creation Open Innovation Interactive Value Creation The term describes a strategy in innovation management, [ ] will be the guiding concept in many enterprises. Instead of relying on internal skills of researches and developers, external problem solver are integrated in the innovation proccess. This happens [ ] through an open appeal to a large, undefined network of actors, for collaborating in the development task. Ralf Reichwald, Frank Piller Seite 19
20 3 Interactive Value Creation Open Innovation: Drivers Globalisation/Internationality Innovation and competition pressure Demography (aging and shrinking population) Lack of skilled workers, MINT-graduates Progresses in ICT Decreasing product lifecycle (saturation level is reached quicker) Increasing products, services and processes complexity Economic dynamics and interdisciplinarity increase global innovation platforms R&D-ressources are raised/more international Expenditures, employees, cooperations Differentiation between producers and consumers disappears Increasing need to voluntarily participate (self-selection) share and exchange (self-organisation) collaborate and interact (self-motivation) Page 20
21 3 Interactive Value Creation Open Innovation: Chances 1/2 Voluntary interaction btw. enterprises and external actors increases problem solving room Implementation of open value creation is possible in many business activities R&D/Innovation (knowledge generation) Operative activities (marketing, media, design, sales, etc.) Enterprises require information concerning needs and solutions The more information, the higher is the combination and innovation potential Using OI at the beginning of the development process reduces Floprate OI offers new types of work division (new organisation and coordination mechanims) through Granularity (microspecialisation) Self-selection (Collaborator search his field of action according to his skills) Introduction of an open company culture Page 21
22 3 Interactive Value Creation Open Innovation: Chances 2/2 Dynamics and flexibility increase because the cooperation exists only as long as needed Risks diversification Mutual transfer of local knowledge Synergy effects Cost savings potential (e.g. in the market research) Multidisciplinarity rises (knowledge from different disciplines) Fusion of different competences Interactive value creation via network offers enhanced solution space through each collaborative contributor fast and more efficient workflows Collective networks increase diversity, creativity, number of lateral thinkers Page 22
23 3 Interactive Value Creation Open Innovation: Instruments Opening Innovation Competition Collaboration Crowdsourcing Toolkit Internet Participation Interaction Lead User Social Software Seite 23
24 3 Interactive Value Creation Open Innovation: Limits Fear of losing intellectual property rights OI works also within classical property rights laws, but becomes more efficient with open property rights law and free licensing models (Creative Commons) Detailed work divison(granularity) The higher the specialisation, the higher the benefit of value creation Digital illustration of the work sections is required (3D, virtuell room) Partcipants motivation Development of incentives and remuneration systems is necessary Euphoria phase (enterprise pays attention to my idea) Disillusion phase (they are just using me) Page 24
25 3 Interactive Value Creation Open Innovation: Practical Examples BMW Ideas competition Customer Innovation Lab & Virtuelle Innovationsagentur Technische Universität München TUM Ideas competition Academicus (kontinuierliches Feedback-Management) Dell Ideas competition Idea Storm (Where your ideas reign) Lego Ideas competition, Toolkit Lego Digital Designer SAP Ideas competition, Toolkit Sapiens Threadless (T-shirts) I love it, I`d buy it Ideas competition, Community decides, whether the T-shirt goes into production (incentive for designer: US$ 2.000) Innocentive (intermediary for OI) Ideas competition, financial incentive: US$ to Page 25
26 Agenda 1 Social Media 2 Social Media in use 3 Open Innovation 4 Conclusion
27 4 Summary Value creation networks are complex and intransparent There is no silver bullet to increase innovative strength Complexity management works only suboptimally Social Media as complementary sales and marketing channels Read & learn & participate The internet strengthens the user sovereignity Process openning, open company culture and open innovation offer Collective intelligence as additional instrument to increase innovation potential intelligent networks as external source of knowledge Talents and skills pool (recruiting) Increasing network culture Seite 27
28 4 Discussion What do we need in a digital world? New understanding/handling of property rights is required We will see more value creation (in communities) without the exclusive enforcement of property rights. (e.g. open source software, ogov.) Reduction of need to control non-hierarichal conversation More tranparency, more participation New instruments to measure/evaluate Social Media required Digital agenda required (national, Europe-wide, global) Page 28
29 Literature Page 29
30 More DB Research
31 Thank you very much! Visit us at: Copyright Deutsche Bank AG, DB Research, D Frankfurt am Main, Deutschland. Alle Rechte vorbehalten. Bei Zitaten wird um Quellenangabe Deutsche Bank Research gebeten. Die vorstehenden Angaben stellen keine Anlage-, Rechts- oder Steuerberatung dar. Alle Meinungsaussagen geben die aktuelle Einschätzung des Verfassers wieder, die nicht notwendigerweise der Meinung der Deutsche Bank AG oder ihrer assoziierten Unternehmen entspricht. Alle Meinungen können ohne vorherige Ankündigung geändert werden. Die Meinungen können von Einschätzungen abweichen, die in anderen von der Deutsche Bank veröffentlichten Dokumenten, einschließlich Research-Veröffentlichungen, vertreten werden. Die vorstehenden Angaben werden nur zu Informationszwecken und ohne vertragliche oder sonstige Verpflichtung zur Verfügung gestellt. Für die Richtigkeit, Vollständigkeit oder Angemessenheit der vorstehenden Angaben oder Einschätzungen wird keine Gewähr übernommen. In Deutschland wird dieser Bericht von Deutsche Bank AG Frankfurt genehmigt und/oder verbreitet, die über eine Erlaubnis der Bundesanstalt für Finanzdienstleistungsaufsicht verfügt. Im Vereinigten Königreich wird dieser Bericht durch Deutsche Bank AG London, Mitglied der London Stock Exchange, genehmigt und/oder verbreitet, die in Bezug auf Anlagegeschäfte im Vereinigten Königreich der Aufsicht der Financial Services Authority unterliegt. In Hongkong wird dieser Bericht durch Deutsche Bank AG, Hong Kong Branch, in Korea durch Deutsche Securities Korea Co. und in Singapur durch Deutsche Bank AG, Singapore Branch, verbreitet. In Japan wird dieser Bericht durch Deutsche Securities Limited, Tokyo Branch, genehmigt und/oder verbreitet. In Australien sollten Privatkunden eine Kopie der betreffenden Produktinformation (Product Disclosure Statement oder PDS) zu jeglichem in diesem Bericht erwähnten Finanzinstrument beziehen und dieses PDS berücksichtigen, bevor sie eine Anlageentscheidung treffen. Seite 31
32 Appendix Seite 32
33 Creative Commons a free licence model Page 33
34 Creative Commons Conditions Page 34
35 IBM Guideline Page 35
36 3 Interactive Value Creation Open Innovation: Use in corporates Internal (Intranet) vs. External (Internet) Set (communication) guidelines Define focus, amplitude and target group Offering modular and granular value creation tasks Define an adaquate time frame Development of interaction competences through Interaction-friendly organisation, communication and incentive structures Evaluation of the ideas, evaluation methods, evaluation committees Lead user: identification of the most innovative client Self-selection vs. performance-selection Performance incentives/award Clarification of rights on the resulted knowledge Cultivate contacts (community) Page 36
37 3 Interactive Value Creation Open Innovation: Recommendations Reduce the need to control Informational processes, not quality-assured production Spontaneous networks cannot be either designed or managed Stipulate the basic conditions and let the network culture develop From hierarchical innovation tower to bazaar of decentralised ideas Achieve maximum transparency Maximize the access to relevant and reliable information, open access Information restriction means the end of a network Creation of a common value horizon Basic orientation (muss auch vorgelebt werden) Aditional benefit of the networking must be visible Communicate Achievements message: collective intelligence offers added value Employ an ebroker Link the right people with each other Page 37
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