10 Nov 2008  HBS Business Summit

Social Media Leads the Future of Technology

From Facebook to smartphones, advances in technology are changing the way we work and communicate. Professor David Yoffie led three experts in a recent panel discussion on "The Technology Revolution and its Implications for the Future" at the HBS Centennial Business Summit. Key concepts include:

  • A lot of growth potential remains worldwide.
  • The sticking point for business is spanning the gap between the physical and digital worlds. For example, it remains difficult to figure out consumers' specific intent on the Web.
  • What people want most of all is technology that is simple to use, said one panelist.

 

Internet-connected televisions, social media, and the power of simplicity were all cited as launch pads for future innovation in technology, according to a panel of experts that convened at Harvard Business School as part of the HBS Centennial Business Summit in October.

And though advertisers love the Internet, to what extent they can capitalize on these transformations remains an open question.

HBS professor David Yoffie moderated the session on "The Technology Revolution and its Implications for the Future," with panelists James Breyer (HBS MBA '87), partner of the venture capital firm Accel Partners; Susan L. Decker (HBS MBA '86), president of Yahoo! Inc.; and Eric Kim (HBS MBA '81), senior vice president and general manager of Intel Corporation's Digital Home Group.

The first computer, the ENIAC, cleared the path for future innovation in the late 1940s, said Yoffie, who set the context for the ensuing discussion. Today, millions of Web users generate free content, and we are witnessing an "explosion" in video and cell phone use, he continued, with more than 100 million smartphones already in use. In addition, there is the phenomenon of virtual worlds, where approximately 217 million online players interact.

This is an evolving landscape, with much growth remaining, Yoffie said. Of 6.5 billion people in the world, about 1.5 billion have Internet access, more than 300 million have broadband access to the home, and 3 billion have cell phones, a growing number of which offer Internet access.

What these statistics suggest is that "the most precious currency today is information," said panelist Jim Breyer, an early investor in Facebook and a director of Wal-Mart Stores. "Each year there is more information created on the Web than in all the previous years combined. Investment initiatives are around participating in the information flow. We [at Accel] are interested in companies that help us understand how to structure information, communicate, categorize some of that self-generated information, and then act on it."

A sticking point currently for businesses is spanning the gap between the physical and the digital world, he continued.

"Right now there are significant problems understanding how to take what we are getting at point of sale in the physical world environment—very valuable info on customers—and how to integrate it with all the information that is being generated on the Web. To date, there is no company that allows one to take quickly all this information 'in the cloud' and integrate it with the vast arrays of information in the physical world."

Difficulties aside, Breyer said the promise of technology meant that innovation to solve a problem could arrive from any quarter: prominent companies, nonprofit enterprises, "two students in a dorm room, or mothers or fathers after they have done their school pickups." He continues to be impressed by businesses that start with little capital—anywhere from $10,000 to $50,000—yet get to scale quickly and build new applications on the Web.

Sleeping by the cell phone

Just as technology is influencing society, society is increasingly making demands on technology, said Sue Decker of Yahoo!

"The way we live, love, communicate, and work will influence technology, and the greater population will be exercising an increasing amount of control," she said. Decker cited statistics suggesting that in 2007, 12 percent of newlyweds met online. In addition, of the users in the United States, half sleep with a cell phone or other electronic device nearby, and married couples usually do not share cell phones.

Innovation will serve people who want simplicity of technology usage. As the network gets larger it becomes less relevant to individuals, she said, so people want to organize their experience according to their own interests. "Companies that will do pretty well will create a dashboard of simplicity that is very open to the whole Internet, not just to the company it may be associated with, and will elevate social connections in a way that drives dollars."

How exactly social connections will drive dollars remains to be seen, she added. Although some sites such as Yahoo! include premium services that require fees or subscriptions, the largest business model by far is advertising: a $45 billion industry globally that has been growing about 20 percent per year, said Decker. Advertising on the Web is very effective in the sense that advertisers can reach great scale and do precision targeting. The challenge is to discern consumers' intent.

"Search is unbelievably efficient because you look at a little query box. You can tell exactly what people care about, and you can serve an ad that is relevant at scale. In social media, that is very difficult to do. It's very hard to know what people care about with respect to buying things, because you are inferring intent, you're not taking intent directly from the consumer," said Decker.

"Advertisers really want to be there: They love the demographics, they are increasingly comfortable with some of the brand risks of what that might mean. But Internet advertising still doesn't perform very well, and that's a challenge. How do you serve the right ads to the right user and understand what it is that that individual would be interested in buying?"

TV and the Internet

Pressure has been building for a merging of television and the Internet, said Intel's Eric Kim. Consumers now expect Internet service everywhere, with implications for entertainment and advertising.

For almost 90 years, the television has been a one-way device, and it should be a two-way device. "This is not a new idea," Kim clarified. "Many attempts have failed. It primes us for success." Prices of televisions are going down, and the industry as a whole is mature, leaving an opportunity for the Internet to disrupt both the value chain and the content industry. Advertisers, for their part, continue to feel comfortable placing ads on TV, gauging that their dollars will not be wasted. Emerging markets further propel the growth potential for innovations combining the Internet and television, which is a natural, low-cost, and ubiquitous way for people in emerging markets to engage with the Internet, he said.

"We think there's a lot of room for innovation here and a lot of room for richness and choices," Kim concluded.

"There is no silver bullet in a lot of these economic models," added Breyer. "It's almost always the case that the business models shift in every successful company. I think it's our job as board members, CEOs, and investors to find breathtakingly brilliant entrepreneurs who then try to find breathtakingly brilliant operating executives who also understand the products, and try to spend a great deal of time finding pockets of monetization. There will be a great deal of experimentation. Some of it will work and a lot won't. Five years from now, many of them will have found highly successful business models," but it is tricky at the beginning of a new venture to predict what those models might be.

A dashboard concept is very important as the key to innovation, said Decker.

"Increasingly, companies will find ways to leverage whatever social networks you're in, find ways to service those in ways easy for you to access, and try to go for more simplicity," she said. "Simplicity is the single thing people really want. It's going to get faster in terms of technology. There's going to be more opportunities and interconnections.

"But fundamentally, removing the complexity and adding simplicity so you can easily access in an open way everything you want, and leverage a lot of social connections rather than going to multiple ones, is how the user experience will evolve."

About the author

Martha Lagace is the senior editor of HBS Working Knowledge.