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Social media is still new enough that many executives wonder what, if any, long-lasting impact it will have on how business is conducted. Is it worth jumping on the bandwagon? Or conversely, is it wiser not to jump, but to wait until there’s greater clarity on whether social is here to stay?
Both these questions have a one-word answer.
This is not simply my opinion. It is shared by many executives who have jumped. Our recent social business report suggested that 67% of executives thought that social media had the opportunity to fundamentally change their businesses. The number was higher for companies that were deriving greater business value from these technologies. Compelling reasons, rooted in fundamental concepts of economics and business strategy, support this belief that social media will fundamentally reshape not only individual organizations, but also the business environment as a whole.
It should come as no surprise that social media technologies could have such a transformative impact on business, because information technology has been transforming the shape of modern business for decades. Its impact was first felt in the finance industry with the introduction of ATMs in the 1960s and 1970s and the dawn of high-speed trading algorithms in the 1980s. In the 1990s, enterprise resource planning (ERP) systems began to change the internal operations of companies across multiple industries.
More recently, Internet technologies have allowed companies to integrate their information sharing more tightly with other organizations, creating opportunities for greater specialization, increased outsourcing and globalization. Social media is simply the next step in this trend of technology influencing the shape of business.
Social media technologies may be particularly disruptive for business, because they undermine some of the key reasons why companies survive or thrive. One of the key competitive resources for modern organizations is knowledge, and knowledge integration — the ability to combine, exchange and integrate the diverse knowledge of its employees — is a key function in any firm. Getting people to coordinate knowledge and cooperate on a common task is inherently difficult, and the firm has been the best mechanism for enabling the type of collaboration essential to create, store and apply valuable knowledge.
Yet social media is now replete with examples of companies enabling knowledge integration outside the confines of traditional organizations.