Social Media Sensing for the Competitive Advantage of Firms

Strategy, Competitive Intelligence and Media (Excerpt)

www.Skyfollow.com

Abstract

Overview

The rise in interest of social media has caused a new wave of excitement and investment in startup firms in the last few years, especially in Silicon Valley, California. The growth rates of Myspace.com, then Youtube.com, then Facebook.com and now Twitter.com have fueled the public visibility of the phenomena. The large acquisition valuations for Youtube and Myspace, the investment by Microsoft in Facebook, and speculation of potential acquisitions of Twitter have contributed to mass media and online media coverage of their growth and success. Social Media is heralded as the next great wave in Web 2.0 technology transforming internet usage as well as becoming a media channel worthy of significant investment dollars as part of an organizations evolving communications and marketing strategy. Unlike most prior forms of advertising and communications strategy, social media offers structural features that make it a standout both as a divergent form of consumer interaction and as part of the new frontier of media influencing strategy for brands, especially consumer brands for now. Lastly, it is a challenge both to brands and digital agencies who serve these firms because of the rapid expansion of alternatives for using the right social media platforms, the right tools, and understanding various uses of the data to inform strategy and allow transformative execution within the firms that use these new media channels.

In this paper, I first introduce David Teeces notion of Sensing Seizing Transforming (SST) framework, part of the Dynamic Capabilities literature, in the context of using social media for the strategic imperatives of the firm. Then I introduce Social Media Sensing as a new paradigm of analytics and strategic planning that allows innovative firms the opportunity to create and expand competitive advantage using the emerging social media platforms and channels. Finally, I extend the traditional Porters Five Forces strategy framework by including two key intersection points with the dynamic capabilities framework: Complementary assets and Cospecialization of assets. This intersection at the boundary of the firm acts as a bridge into Teeces dynamic capabilities and by extension into social media sensing. I then show that the properties of social media provide a natural avenue of extension of Teeces framework, as well as an emerging growth area of technology, user generated content, and analytic tools in which to apply the frameworks in practice. Not only does this provide a platform for consulting service innovation, but it leads naturally to a new basis of competition and to a potential disruption in the way in which firms will invest in advertising, marketing and research. This will affect firms in a series of industries overtime, as the diffusion of this technology and the paradigm cross from early adopters to mature and stable industries. While initially we thought of social media as just a new media channel; its growth rate, expanding platforms and tools, changes to business models, persongroup-person interaction structure and bi-directionality will lead to fundamental changes in strategy and competitive dynamics and these will trickle through several industries over the next decade.

Table of Contents
1. 2. 3. 4. 5. 6. 7. 8. 9. 10. 11. 12. 13. 14. 15. 16. 17. 18. 19. 20. 21. 22. 23. 24. 25. 26. 27. 28. 29. 30. 31. Backround Dynamic Cababilities Defined Figure 2 Analytical Systems Process What is Social Media? Figure 3 Top 10 Social Networking sites Key questions for your firm Why is Social Media Happening Now? Key questions for your firm Figure 4. Information Flow with Bandwidth changes Figure 5 Launch Dates of Major Social Networks Learning and Human Expression Figure 6. Rigatuso Absorption Synthesis Extension Diagram Key questions for your firm Figure 7 Many Ways to Influence Framework Figure 8 Influence Inversion in Social Media Figure 9 Slideshare Usage Data example Specefic Examples in Social Media Experiments Figure 10 Chicago Crime Scene update Social Data experiment Why Social Media Works Purchase Influence Survey Results Key Questions for your firm Social Media Looks across Ecosystem Boundaries Installed Base Usage Key questions for your firm Figure 11 Commonly used social media tools Network Effects Technology Opportunites and the Platform Effect Figure 12. 2 Sided Markets examples Figure 13 SCG Social Media Complexity from Four Expanding Universes diagram Figure 14 Strategy Drives Technology Social Media Platforms

32. 33. 34. 35. 36. 37. 38. 39. 40. 41. 42. 43. 44. 45. 46. 47. 48.

Platforms: Developers, Users, and Brands Key questions for your firm Figure 15 Web 2.0 API timeline Why is Social Media Strategic? Figure 16 Predicted impact of social media survey Key questions for your firm Sensing in the Dynamic Capabilities Framework What is Social Media Sensing? Key questions for your firm Figure 17 Social Media Sensing Cycle of Agility Figure 18 Social Media Sensing links departmental objectives Top Social Media platforms descriptions Key questions for your firm Figure 19 Social Media Adoption Curve The Transition from Michael Porters Five Forces model to Dynamic Capabilities Model Key questions for your firm Figure 20 The Architecture of Competitive Advantage 5 forces + 6 processes + 3 strategic goals

49. Structural Holes in Social Networks and Intelligence Process Deficiencies 50. Figure 21: Structural Advantage: rate of return vs investment amount 51. How to construct an innovation advantage with nonreplicable assets 52. Key questions for your firm 53. Conclusion 54. Appendix A 55. Ecosystem Diagram 56. References

Background
Firms continually look for, develop and execute new means of building competitive advantage. In recent years, more emphasis has been placed on tangible implementation or execution by the organization to achieve strategic outcomes in practice. This was popularized by the recent book Execution, by Lawrence A. Bossidy. At a nave level strategy can be represented and described and shared and therefore is less protectable than organizational and physical capital, but execution requires specific tangible, physical and intangible assets to make it happen. In particular, employees partners, distribution channels, and access to operating processes and supporting software are very distinct to each firm; and their combinatorial combinations are therefore extremely unique. So by coupling of a specific strategy to leverage a set of specific assets gives the potential for a non-replicable advantage. In the big picture, assets include humans, with their myriad skills and talents. But humans are employees, partners, customers, and the driving force of social media as participants.

Figure 1. Different forms of assets influence competitive advantage and strategy Grant, Contemporary Strategic Analysis, 2008

In your firm, what (and who) are your invisible assets? Those that do not occur on the balance sheet? How do you protect and manage those assets? What motivates them to self-manage?

The Architecture of Competitive Advantage

Internal Dynamic Capabilities

Porters Five Forces

Substitutes Listen * (Sensing)

Goals
Adapt (Transforming) Increase Rate of Adoption

Industry Rivalry

New Entrants Objectives Alignment Awareness Observe ability Share ability Visibility Trial ability

Communication Channels * Buyers

Increase Revenue Growth

Evaluation Channels * Suppliers Complimentary Whole Solution

Cospecialization Increasing fit & value

Increase Differentiated Value Propositions

* = Social Media Role

Methods Alliances Partners Distribution Support Licensing

Outcomes Integration Differentiation Performance Relative Advantage Compatibility Services Process Fit

Figure 20. The new Architecture of Competitive Advantage extends the notion of competitive forces from the Porter view, dominated by external industry analysis, to one of dynamic capabilities and linkage to corporate strategic goals.

Chris Rigatuso is co-founder and partner at Skyfollow Consulting Group (SCG). Chris was one of the first artists on the internet in 1994, while he was Director of Marketing at Synergy Computer Graphics. Today he is an analyst, consultant and CEO at SCG focusing on Strategic Social Media Analytics. Skyfollow uses advanced tools and data collection methods to link corporate strategic objectives to social media campaigns and social media sensing imperatives for competitive intelligence, market research, media planning and increasing innovation for product planning and brand postioning. Chriss background includes investment banking, product management, marketing strategy, business development, training design, competitive strategy and entrepreneurial roles. [email protected] 1/27/2010 Skyfollow Consulting Group (SCG) Chris Rigatuso [email protected] Mobile +1 (650) 274-1045

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