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Facebook’s initial public offering has all the hallmarks of becoming a milestone in financial history. Depending on current estimates, it could well become the technology IPO of the decade.
In its eight years of existence, the company founded in a Harvard dormitory room by Mark Zuckerberg has managed to connect people virtually in a way no one had thought was possible. Facebook has been associated with revolutions: the events that led to Hosni Mubarak’s fall started in Egypt with a Facebook page by Wael Ghonim. And it was used successfully by US President Barack Obama’s campaign to get him elected in 2008. Four years later, both President Obama and his opponent Mitt Romney now run important parts of their campaigns on Facebook.
Estimates say that Americans spend, on average, up to 20 per cent of their online time on Facebook. Some 300m photos and videos are uploaded onto it daily. With such a wealth of data waiting to be mined, advertisers and marketers have become some of the most ardent fans of Facebook, for it allows them to reach audiences, understand trends and changing customer needs. It also allows them to customise offerings on an unprecedented scale.
Imagine the power of social networks once they will be part of daily business and not mainly being used by consumers only. In spite of Facebook’s remarkable success so far, the truth is that we have thus far witnessed just the earliest beginnings of social networking’s power to fuel the real economy. Social networking will revolutionise business interactions, just as the Internet revolutionised retailing more than a decade ago. And the result will be a game-changing surge in innovation and productivity and a big leap forward in job creation and new growth opportunities.
Consider for a moment what social networks do: they bring together the traditional features of a person’s personal life – friends, family, events, memories, conversations, fun and games – and centralises them in a convenient dashboard that enables us to interact with anyone we know, at any time, from almost anywhere on the planet. The efficiency of these tools allows people to maintain broader networks of friends with less time and effort than was ever before possible.
Today, many of us have adjusted our social lives to make the best use of the online networking tools that have been made available to us. Businesses will soon undergo that same process. And the inevitable result will be more business.
A fully networked business environment means better access to customer profiles and preferences, resulting in a stronger ability to deliver individualised products that consumers want. Broader knowledge of health data and energy consumption patterns will lead directly to more efficient use of scarce resources. Direct access to all of the suppliers in a product category will lead to stronger supply chain and supplier relationship management. That in turn will result in more competitive pricing, greater flexibility and less capital tied up in inventory.
When data generated at the level of an individual – whether they are shopping preferences, energy consumption patterns, social relationships or health data – can be captured and analysed along with other relevant datasets in real-time, existing value chains are turned on their head. It benefits the consumer, because the consumer gets more directed, more personal, more economical offerings.
On an everyday basis, we envision an intelligent network of businesses – what I like to call the ‘Intelligent Business Web’. The Intelligent Business Web will be most important to small and medium sized businesses because it allows them to tap into the collective knowledge of their cohorts. These businesses are very important to the health of economies, particularly in challenging economic times. Studies have shown that time and again, they are the ones that are responsible for creating jobs coming out of recessions.
Like Facebook’s social networking the key value of the business web will be the network effect for all businesses. It will allow them to increase the speed of innovation and productivity like never before. With the Intelligent Business Web boundaries between individual businesses and even entire industries as we know them today will blur.
Telecom providers could offer banking products on SIM-cards and automotive companies could offer financing and insurance or even rental cars. But the telecom provider does not have to become a bank – they can consume the service from a bank through the business web. Manufacturing companies can manufacture products for many different companies – like we see in high tech and automotive already today. They do this by forming networks that combine various services and capabilities from different companies.
Secondly the business web will offer real-time intelligence like never before. We have been working with a large distribution company in China to help them optimise their ocean transportation. In a world of increasing oil prices and new objectives like reduction of carbon dioxide emission, this company wanted to connect the demand, the ships, the oil prices and the CO2 emissions to optimise their logistics business. Today we can optimise entire value chains for minimum cost and consumption of scarce resources and in the future this will be common.
The latest generation of sales tools for businesses, such as SAP’s Sales OnDemand, and new environments for collaborative decision making, such as SAP StreamWork already make use of social networking. Our customer relationship management software offerings already monitor online sentiment. Similar business applications will soon be everywhere, changing the way business is conducted on every continent and in every industry.
The business networks of the future will be not just comprehensive, but mobile, reaching out to all of the world’s six billion mobile devices. Mobile has become an integral part of our lives, and is rapidly transforming the way we work. The marriage of mobile technology and social networking will only hasten further change in business.
The world will not get more productive because we can watch videos on Facebook, chat with friends and family or upload personal content – but if we leverage social networking for business processes and real-time information flow, we can change the world.
The Arab Spring was an example of the latter. I believe that the excitement over Facebook is a harbinger of the evolution we will see in business becoming social and traditional value chains becoming social value networks. The impact of these changes will extend well beyond Facebook’s remarkable achievements. And in the very near future they will generate innovation, growth and jobs on an unprecedented scale.