Promoting Innovation via Social Networks

December 2, 2010

On December 2, 2010, AGI hosted a seminar on “Promoting Innovation via Social Networks and Open Company Culture,” generously supported by Deutsche Bank Research. During the seminar, Mr. Thomas Dapp, a Deutsche Bank/AGI Fellow, outlined possible benefits of companies using social media for engaging people in their research processes. Starting with a short overview about the actual social media market and its functions, Mr. Dapp presented socioeconomic consequences of social media on all three dimensions: the political, economic, and social.

Some of the distinctive socioeconomic characteristics that resulted from social media include non-hierarchical communication, quality content without monetary interests, and channels of direct feedback. Moreover, Mr. Dapp argued that reputation is becoming the new currency on the web.

However, private corporations’ commitment to using social media is still limited by fears and risks. The assumed loss of control is of critical importance. Once a message has been posted on the Internet it cannot be removed entirely. Therefore, companies have to come up with a code of conduct that both secures the consistency of communication and clearly draws a line between private and professional communicators.

Mr. Dapp went on to present some figures on the current use of social media in the U.S. and Germany. Surprisingly, the majority of the companies surveyed used Twitter, if they used social media at all. Yet adults over eighteen preferred Facebook by far; Twitter ranked last. Between 2006 and 2010, the number of private companies that formulate and implement codes of conduct for social media has just risen slightly (from 20 to 26 percent). Hence, many firms still have to catch up with the actual trends. Consequently, Mr. Dapp concluded that social media is not just hype, but a consequence of technological progress.

During the second part of his presentation Mr. Dapp linked the new windows of opportunity created by social media to the emerging trend of open innovation. The internet, social software, and, thus, direct and non-hierarchical interaction enable a large undefined network of actors to contribute to a business innovation process. But the underlying motives cover a broad variety of reasons and they are most likely proprietary.

Companies are well advised to integrate external stakeholders as an additional instrument to increase their own innovation potential. When asked why, Mr. Dapp elaborated that pressing factors pushing for open innovation are increasing global competition, demographic challenges, shorter product lifecycles, and the increasing complexity of research problems.

After concluding that there is a need for open innovation, Mr. Dapp outlined the advantages and risks of the process: Advantages include direct participation with clients and customers, improved marketing efforts, a reduction of failure, and increased competencies. However, open innovation has some risks to it. The fear of disclosing intellectual property externally, the challenges associated with having outside problem-solvers not fully understand the research problem, and the difficulty of keeping participants motivated all have to be taken into account.

After giving some examples of best practices, Mr. Dapp drew several conclusions: Corporations should use the new interaction between their customers and employees through social media to implement an open company culture leading to open innovation. However, such a model entails the need for a new understanding of copyrights, effective evaluation tools for Web 2.0, and the implementation of a broad digital agenda. It also has to be kept in mind that open innovation is not suited for all sectors of business. By applying these lessons, businesses could overcome their fear of losing control and start engaging with their stakeholders.