Are business owners who don’t invest in social media negligent?
Wednesday, June 4, 2014/
Are executives who don’t invest in digital and social media negligent (I don’t mean this in the legal sense)? This provocative question is directed at the governance obligations some executives have around social media (such as listed companies under Guidance Note 8) but more deeply – their duty to lead.
At a time in which digital growth continues at double-digit rates, the failure to adapt to or harness its opportunities is arguably one of leadership.
What leaders do (and don’t do) in this space matters. Senior executive buy-in is critical for digital transformation, yet awareness remains moderate and participation in technologies like social media remain worryingly low.
1. According to a McKinsey Global Survey conducted last year, only 31% of participants say CEOs sponsor digital.
3. Many companies still block access to social media and at least a third have no social media policy.
The arms-length was understandable when social first erupted and its importance was driven by enthusiasm and anecdote. But 12 years on, there’s a body of research that demonstrates its business value.
The IDC says the global online economy was worth $16 trillion last year and Boston Consulting Group (BCG) predicts that by 2016 online will contribute $4.2 trillion to the GDP of G20 nations, making it the equivalent of the fifth biggest economy worldwide.
When you take into account the powerful impact of the internet on behavior, the digital economy is higher than figures suggest.
For example, many people research products online but purchase offline, an effect that is called ROPO. Roughly two-thirds of people use the internet for price discovery (social media channels being one of the most important and trusted sources of recommendations).
However, while the purchasing decision is digital, the physical purchase is made in-store because people enjoy the experience of shopping. It’s likely this effect will grow, which is a good sign for retailers who are able to strike the right virtual/real-shopping model where, according to Deloitte, “competition is moving from products and services to experiences”.
BCG expects the digital economy will contribute around 5.5% to the GDP of G20 countries. In the UK the digital economy contributes 8% to GPD, while in Australia digital growth has been around 3.7%. Digital provides a competitive advantage, which means that in the future the digital divide could determine the winners and the losers economically.
Companies that have adapted to digital are ahead of the eight ball.
A 2013 two-year joint study by Capgemini and MIT Sloan shows digitally mature businesses outperform peers by as much as 26%.
The World Bank believes the adoption of digital technologies can be directly correlated with economic growth, claiming that for every 10 additional mobile phones per 100 people (in developing nations), GDP grows by 0.8%.
Businesses however are not up to speed; many lack the strategy, capability and sometimes even the mindset to deal with this change.
While there’s a growing intent to do something, as McKinsey says: “Management teams need to move beyond vague statements of intent and focus on “hard wiring” digital into their organisation’s structures, processes, systems, and incentives.”
It’s not just about the impact on research, sales or marketing. There are numerous cases where social has directly impacted the share price, mostly as a result of hoaxes.
In his paper entitled Digital Market Manipulation, Professor Ryan Calo suggests that a market mediated by technology creates a “sea change in the way companies use data to persuade”. He argues that some digital advertising could even constitute market manipulation. This may be an extreme view, but it highlights the legal and business significance of digital impacts. Digital governance is critical and must be managed at the board and senior executive levels.
So how can leaders move forward? It’s important to identify some of the barriers to digital adoption (both personal and professional) and put strategies in place to deal with them.
Barriers to digital adoption: personal
Author and chief science officer for SENS Research Foundation Aubrey DeGrey says the push back against cutting-edge technology is fear of the unknown and “of an irrationally conservative prioritisation of the risks of change over the benefits, with unequivocally deleterious consequences in terms of quality and quantity of life in the future”.
Anyone with a change background would be nodding furiously at the observation, change is challenging but as change managers know, the biggest barriers are in the head.
Many of today’s leaders were born in a pre-internet age and feel behind when it comes to technology. They believe tech-savvy young people have an advantage. This, however, confuses technology with its purpose – to establish trusted and mutually beneficial relationships – an age-old business skill at which executives are adept. Just because digital natives know how to use Facebook it doesn’t mean they know about business strategy (although they may) – an opportunity for reverse mentoring if ever there was one.
It’s also a fallacy that young workers are flexible and older workers rigid – adaptability has little to do with age – it’s a mindset.
Executives have many of the core skills (strategic thinking, communication, the ability to manage complex stakeholders) required for business success – it’s a simple matter of bringing them out from behind the barriers into an interconnected world.
Barriers to digital adoption: professional
But there are also serious structural and capability challenges in digital change that lie outside the business-as-usual experience.
For example, because digital requires specific skills it’s not always possible to groom internal talent, which can mean significant lateral hiring. When it comes to acquiring digital and social media talent – buyer beware. In the rush to ride the wave many people are refocusing their skills (a legitimate approach) but there’s huge variance in capability from so-called experts. Boards and executives need to do due diligence – in social media hire people with strong credentials who are active in the channels.
There’s also a question about where to house digital talent. McKinsey suggests digital talent has a different working pattern and should be ring-fenced from BAU, while a Capgemini report found numerous models can provide the adequate balance of freedom and governance.
But it’s not just about the downside of executives who fail to get digital, but the upside of what happens when they get involved.
“When Angela Ahrendts became CEO of Burberry in 2006, she took over a stalling business whose brand had become tarnished. But she saw what no one else could: that a high-end fashion retailer could remake itself as a digital brand. Taking personal control of the digital agenda, she oversaw a series of groundbreaking initiatives, including a website (ArtoftheTrench.com) that featured customers as models, a more robust e-commerce catalogue that matched the company’s in-store inventory, and the digitization of retail stores through features such as radio-frequency identification tags. During Ahrendts’ tenure, revenues tripled.” (McKinsey)
The Edelman Trust Barometer has shown the decline of CEO credibility over 10 years, leading to a gap in trust with consumers, yet the 2014 Global Social CEO Survey found that 82% of respondents believed a CEO’s active engagement on social media enhances their reputation as forward thinking, trend setting and trustworthy.
- 82% of buyers say they trust a company more when its CEO and senior leadership team are active in social media
- 77% of buyers are more likely to buy from a company if its CEO uses social media
Social literacy is clearly good for business – here’s how to drive it
1. Educate yourself and the leadership team. My new book the The Social Executive is available for pre-order and there are many great resources online.
2. Make someone at the board level accountable for digital.
3. Make someone on the executive team accountable for digital.
5. Create an inventory of those who are using your brand on social media channels. Brandle is one company that provides this service.
6. Do due diligence when hiring digital and social media advisors. Get a personal recommendation, check their credentials on Kred and ensure they are actively using social media channels.