28th Jun 2010
Professor Moira Clark and Andrew Bryan highlight the transformation firms must make not only to protect themselves but to encourage and benefit from social media.
Among the major findings of a recent Cisco study into the impact of social networking in organisations was the need to change business mindsets. The research – conducted by three leading business schools, Henley Business School in UK, IESE Business School in Spain and Rochester Institute of Technology in the USA – found that competitive advantage will not merely emerge from applying social networking tools and collaborative technologies, but from adopting a completely different mindset. This mindset is characterised by higher levels of trust and looser control as well as a systematic approach to leveraging the benefits of social media technologies.
The most successful examples of social media initiatives are in organisations that wholeheartedly believe in the benefits they offer. 'Transparency' and 'authenticity' are regularly quoted as key values if companies are to use social media successfully. Zappos.com, the highly regarded US online retailer that prides itself on "providing the best online shopping experience possible," has openness and honesty as core values and, according to COO Alfred Lin, it is the norm to be open and transparent with customers. The traditional business mindset that brands and brand values can be controlled through marketing strategies is no longer appropriate in the social media world.
Customers want to know more about brands, the companies who own them and even the suppliers behind the company. Customers do not want advertising 'pushed' at them, but want to be able to research products in their own time and in their own way, trusting the opinions of fellow consumers over the promises of the company.
This shifting of control to customers is seen as a significant risk by some company executives who are concerned they will fall victim to the bad publicity associated with social media disasters such as those recently experienced by Nestlé and United Airlines. Nestlé was under fire for threatening to delete negative posts from its Facebook page, while United Airlines’ share price dropped after a disgruntled customer posted a song on YouTube called 'United Breaks Guitars' in response to their instruments being damaged in flight.
However, the findings of the Cisco study reveal the extent to which an overly cautious approach is short-sighted and stuck in the 'control' paradigm. Social media and social networking are here to stay, and the tools and complexity will continue to evolve and influence the way business is conducted.
The study highlights an underestimation of the power and influence of social networks on business and the transformation companies must make not only to protect themselves but to encourage and benefit from these social networks and tools. Ignoring the influence of social networking leaves organisations at risk of misuse, potentially damaging disclosure of information and misrepresentation of the company. The message here is if you are worried about exposing the company to greater public scrutiny, the answer is to clean up your act rather than try to hide it.
If a company publishes its values, or makes claims about its products, customers will quickly find out if they are genuine. Any gap between words and actions will soon be exposed as customers look for authenticity. This can be viewed as a threat or an opportunity. Control is moving to the customers irrespective of company executives’ concerns, so the best response is to prepare to cede control in a way that gains consumers’ trust and, in turn, their loyalty.
Changing from the 'control' paradigm is not the same as advocating a free for all with social media. The companies who are leading users of social media recognise the need for internal governance, although this is often somewhat ad hoc. The main governance issues to be considered are:
- Deciding what social media initiatives to launch – who, when and how? Is there a single point of ownership, are there any established processes?
- Managing the use of social media by employees – what can and cannot be done? Trust-based transparency enables self-regulation amongst employees. Information workshops can be run to share examples of best practice and agree how workload can be managed during peak periods.
- Managing third-party providers – As with other areas, existing communication policies offer a poor reference point. Who can speak on behalf of the company and on what subject?
- Enabling technology – IT integration is often overlooked even though it is inevitable that social media tools and platforms will need to be integrated with existing business applications and infrastructure.
Another opportunity arising from the use of social media is to re-evaluate the way an organisation interfaces with its customers and the role technology can play. In most companies to date, the social media drive has been led by and largely kept within the marketing or communications function. In this context, social media tends to be standalone and not integrated with existing business applications or hosted on the IT infrastructure. The majority of CIOs do not have any responsibility for social media solutions, and as long as these remain "outside the firewall" CIOs are happy. This view has obvious limitations as social media solutions become integral parts of the business application architecture and organisations consider social CRM solutions that integrate information from either side of the firewall.
This is another example of where governance can help to realise the benefits of social media, and this thinking should be extended to how the introduction of social media is managed across the organisation. Multi-channel integration and single view of the customer initiatives have made headway in many companies. It therefore makes sense not to create social media information silos that have to be retrospectively integrated with existing customer information.
Proving the return on investment for social media is a hot topic and the results of research currently underway at The Henley Centre for Customer Management will be available later this year. However, The Cisco research identified examples of direct cost saving through the use of social media, such as call centres shifting CRM responsibilities to Twitter and small businesses able to utilise advertising opportunities they could not afford using traditional media. But in the view of those experienced in using social media it makes more sense to consider how these initiatives can inspire fundamental business improvements rather than try to analyse direct financial impacts.
The opportunities interviewees mentioned include:
- Emergence of new social media-enabled business models.
- Ability to increase the "stickiness" of relationships by improving loyalty through customer engagement.
- Use of communities to improve innovation by providing quick feedback on products and services.
The approach of engaging customers to help define the way a company operates is not new, but the ability to do this with a wider audience and to establish ongoing dialogue with customers has been transformed through the utilisation of social media.
Professor Moira Clark is director of the Henley Centre for Customer Management at Henley Business School. Andrew Bryan is director of eExperience at S&C Ltd.