Online social networking is a technological revolution
that has changed the way companies relate to their shareholders. This essay
demonstrates how this form of social networking is changing the way open
innovation is being used by companies.
This is the fourth technological insurgency to
strongly impact how firms do businesses. These revolutions were made possible
by the invention of the transistor, the basic element of electronics; the
introduction of mainframe computing in the 70s which led to the invention of
the personal computer in the 80s and then the internet in the 90s, and finally
to the present technological revolution of online social media networking.
Online social networking also called Web 2.0 or social
media is made possible through the creation of web-based applications used in
creating and transmitting content in various forms (such as audio, words,
pictures and videos). These applications are known as social network services,
focuses on communicating content or building online groups of people who share
There are various types of social networking services,
blogs for example provides individuals with a way of expressing their voice by
publishing quickly and easily under their name. Online communities are created
around different categories such as friends, colleagues, and also people with
common interest. Popular online services such as (Twitter, Facebook, Myspace).
Innovative companies are looking for ways to make use
of online social networks, to look for ideas to improve products and services
that already exist and to come up with new ones. This paper describes how this
is done and how the process can be improved to cover the entire innovation
process of organizations. It is also important to know the reasons that open
innovation has become so important for companies.
The introduction of new product and services or improved
product and services, processes and methods keeps the business functioning. Companies
that fail to keep up with this process are simply moved over by the more efficient
companies or companies that don’t innovate die.
‘Creative destruction’ more expensive or less performing products or services
are superseded by more efficiently performing ones or less expensive. Entrepreneurs
are agents of ‘creative destruction’ in a market, and suggests that
entrepreneurs were the reason for the success of western capitalism over the
socialist planned economies of the Communist block where entrepreneurship was
not never encouraged, Schumpeter (1942).
The idea that organizations need to innovate to
survive was reinforced by the observation that during the 20th
century companies who invested more in research and development (R&D) were
the most successful. However, by the end of the last century this changed and
many leading organizations failed to obtain the expected return in innovation
from their R&D investments.
Chesbrough (2006, XVIII) showed this using example of
the innovation clash between Lucent and Cisco in telecommunication equipment
market. Lucent (a very big telecommunication equipment company created in the
breakup of AT&T) inherited majorities of Bell laboratories, based on
research and technology Lucent launched successful new products. Cisco consistently
managed to keep up with Lucent in term of developing new product, despite their
inferior. This was made possible because Cisco checked around for start-up companies
with innovative technologies to invest in or partner with. Some of these were
started by technical entrepreneurs who left competitors like Lucent, AT&T
to start up their businesses and if they became successful Cisco would acquire
them. Cisco was able to successfully compete with Lucent’s Bell Laboratory with
this strategy despite getting involved in little research.
The term open innovation
is used to characterize a system whereby innovation is not solely performed
internally within a firm, but in a cooperative mode with other external key
actors (Reichwald/Piller 2009). ‘Open innovation is opposite to closed
innovation in which organizations make use of only ideas generated within their
limits, characterized by big corporate research labs and closely manage
networks of combined partners’ (Chesbrough, 2003). ‘Open innovation is the use
of purposive inflow and outflow of knowledge to accelerate internal innovation and
expand markets for external use of innovation, companies should make use of
external ideas and internal ideas as they look to advance their technology’
A dilemma was drawn by Chesbrough
(2006), that innovation is serious for the survival and existence of the
organization because Research and Development within the organization are very slow to sustain the innovation in the
marketplace. Previously, Research and Development was a tactical benefit and for many other industries it was a barrier to entry and large organizations could manage
to pay for appropriate Research and Development and continue competition. Organizations
usually do less or some basic research for innovation in their own organization and discover new things by
using research of other organization. Companies make use internal ideas as well
as external ideas, and external and internal routes to market innovations.
A good example of the use
of external ideas to promote innovation is the approach of Starbucks (2009),
who asked its consumers online for innovations ‘My Starbucks Idea’ shown in
Fig1). Social network community managers for Starbucks don’t ask for ideas from
customers; they have organised categories to classify client ideas and encourage
other people to vote and comment on the ideas. They also ask their customers to
only post unique idea. Starbucks and P&G track these networks and provide
incentives to people posting on their websites, creating specific virtual communities
to suit their purpose, (Shih 2009, p.112).