RESEARCH & IDEAS

Social Media Leads the Future

of Technology
Published: November 10, 2008
Author: Martha Lagace
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
environmentvery valuable info on
customersand 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
capitalanywhere from $10,000 to
$50,000yet 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
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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.
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