"Innovation is a two-way street," said Chris Laping, Red Robin's senior vice president for business transformation. "When people see things, they feel things. And when they feel things, they change."
Using social networks to foster connections lets companies match the skills of people working all over the world who wouldn't easily find each other, said Eric Lesser, a research director at IBM's Institute for Business Value. It's especially valuable for companies built by acquisition, whose managers in different divisions often don't know each other, he said.
Take SuperValu, a collection of supermarket chains ranging from Shaw's in Boston to Albertsons in California. SuperValu last year used Yammer to build a network to connect 11,000 executives and store managers, chief information officer Wayne Shurts said. They've organized themselves into more than 1,000 groups to talk about specific challenges.
For example, 182 managers from different chains joined a group to mull common problems of running markets in college towns. Another 153 banded together to talk about running stores in beach communities, where business is seasonal. Those didn't replace any other process, because there was no way to do it before: The managers couldn't all be pulled from their stores for retreats or meetings, and the cost of getting them together would have been prohibitive, Shurts said.
One result: A promotion at college-oriented stores that sold 8,000 $99 mini-refrigerators last fall, each stuffed with $99 worth of coupons to bring the customers back for food. Another discussion led to college-town "beer pong" displays packaging Ping-Pong balls, red Solo cups and brewskis to fill them up. Both ideas were floated last spring and ready by August, he said.
"You've got to let the conversations happen, even if you might not like all of that conversation," Shurts said. "It's going to happen around the water cooler anyway."
Listening to customers
Companies can also use blogs and social sites to bring customers into their product-design process, said Barton George, director of the Dell computer division that sells to Internet-based companies. Through its IdeaStorm site, Dell has taken in more than 17,000 ideas for new or improved products, and has adopted nearly 500, including backlit keyboards that are better for working on airplanes.
Other times, Dell puts its own ideas on IdeaStorm, in what it calls a Storm Session, to get feedback before going ahead. On May 6, Dell posted a plan on IdeaStorm describing a proposed specialty laptop, upgrading an existing machine to target people who write wireless apps and other Web-based software using a variation of the Linux operating system called Ubuntu, George said.
By Monday, customers had posted 83 ideas for refinements to the machine on IdeaStorm, covering specific software bugs to broader issues such as whether the screen should be shiny or not. In addition, 35,000 people visited George's Web posting about the new laptop -- 10 times more than any other posting he's ever made, he said. The laptop is due on the market by year's end. Dell says the process produces more detailed feedback than traditional focus groups, and builds links to an important group of customers.
So far, the social Web hasn't boosted U.S. productivity growth the way the first-generation Internet did in the late 1990s. But economists such as MIT's Erik Brynjolfsson say it takes about five years for a new technology to show its full impact on companies that deploy it. Social networking is about two or three years in at most companies, McAfee said.
Companies are tinkering with the technology and their own business processes, trying to find ways to match them up to get the most impact and learn how to interpret all the unorganized data users disclose about themselves on the sites, Lesser said.
In the meantime, the trend has already generated one IPO for a smaller company, Jive Software, that sells social-networking tools to companies. Jive went public at $12 a share in December and now trades around $19.50, achieving a $1.2 billion market value, though it's not yet profitable.
Facebook hasn't actively pursued the social-business market. It let companies such as Yammer and Jive mimic its look and feel, because making Facebook-like features an industry standard helped cement Facebook's leadership in consumer social networks, Yammer's Sacks said.
Social media has the potential to be as important to the broader economy as more obviously business-related information technologies such as mobile phones and cloud computing, said Stacey Bishop, a venture capitalist at Scale Venture Partners, in Foster City, Calif.
"I'd put the cloud first, but they're all important and they're all related," Bishop said. "Mobile is an extension of the cloud, because it lets you get your data wherever you are. And social is the layer on top of that, making it easier to cross-communicate."
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