The Perils of Being a Social Media Holdout

Business (Photo credits: www.roadtrafficsigns.com)

Harvard Business Review:
by Clara Shih and Lisa Shalett  |  10:00 AM July 31, 2013

There are conversations taking place about your company or brand 24 hours a day, seven days a week in social media. Are you a part of these conversations? Or are you hoping that if you don't hear them, they don't exist?

English: Infographic on how Social Media are being used, and how everything is changed by them. (Photo credit: Wikipedia)

Social media offers a variety of opportunities for brands to understand and participate in those conversations. While participating in social media is not without risk, not participating might prove to be the greater risk — especially to reputations.

Here are three risks of not being in social media for big companies or major brands, small business owners, and service providers:

Having your reputation defined by others: People are talking about you, your company and your brand, and your stakeholders expect you to be paying attention in real time, especially when they have a customer service complaint or positive feedback to give. You decide whether to participate in this conversation or not, but at least you are aware of what is being said. This is the new frontier for reputation risk management. If you don't tell your story, others will tell it for you.

Being invisible and less credible: The social Web is changing how people communicate and access information. ... People are looking you up. Not having a presence means you are not easily "findable" and perhaps leads people to question whether yours is a credible business. ... On average, buyers progress nearly 60% of the way through their purchase decision-making process before engaging with a sales representative, according to Corporate Executive Board (link is PDF). If people are looking for information about you or your business, what are they finding? A social page or profile at its most basic level enables you to provide accurate and helpful information about what you or your company does to your intended audience. Additionally, social media pages typically appear with prominence in search results — without these online presences, relationship managers and organizations risk not being present in the search results when an interested prospect goes looking.

Being perceived as behind the curve: As consumers embrace new technologies, they expect businesses to do the same. Companies (and their representatives) that aren't using social networks will not be perceived as forward-thinking and, in the long term, will risk losing customers who want business partners who speak their language. Would you create a new personal checking account with a bank that doesn't have an online portal? Today, we depend upon online access to data, including our finances, so that seems unthinkable. Soon customers will feel this way about having a social connection with businesses.

Social media is perhaps best thought of as a set of new and innovative ways for businesses and customers to do what they have always done: build relationships, exchange information, read and write reviews, and leverage trusted networks of friends and experts.

As you contemplate the risks and rewards of social media, we would suggest that the key ingredient for evaluation is simply to experience it for yourself. There are many low risk ways to do this, even if you work in a regulated industry. One of the best suggestions we have is to take on a "reverse mentor," a more junior colleague who has grown up with social media, and have them share their knowledge with you.

Today's always on, social-mobile world is challenging all businesses, brands, and professionals to adapt — or at least make an informed decision not to. As you consider the full set of risks associated with being or not being in social media, it is important not to overlook the rewards and opportunities.

More blog posts by Clara Shih and Lisa Shalett

More on: Communication, Customers, Social media

CLARA SHIH AND LISA SHALETT

Clara Shih is the CEO & Founder, Hearsay Social. Lisa Shalett is the Managing Director and Head of Brand Marketing & Digital Strategy, Goldman Sachs

'via Blog this'

Related articles

• The perils of your law firm being a social media holdout
• Clara Shih rides social media savvy to Starbucks board
• Me as a brand
• How Safe is Social Media? 6 Social Media Security Risks for Businesses

Measuring the full impact of digital capital

Although largely uncounted, intangible digital assets may hold an important key to understanding competition and growth in the Internet era.

McKinsey & Company:

July 2013 | byJacques Bughin and James Manyika

Logo of the United States Bureau of Economic Analysis, a part of the Department of Commerce. (Photo credit: Wikipedia)

On July 31, 2013, the US Bureau of Economic Analysis released, for the first time, GDP figures categorizing research and development as fixed investment. It will join software in a new category called intellectual-property products.

In our knowledge-based economy, this is a sensible move that brings GDP accounting closer to economic reality. And while that may seem like an arcane shift relevant only to a small number of economists, the need for the change reflects a broader mismatch between our digital economy and the way we account for it. This problem has serious top-management implications.

To understand the mismatch, you need to understand what we call digital capital—the resources behind the processes key to developing new products and services for the digital economy. Digital capital takes two forms. The first is traditionally counted tangible assets, such as servers, routers, online-purchasing platforms, and basic Internet software. They appear as capital investment on company books. Yet a large and growing portion of what’s powering today’s digital economy consists of a second type of digital capital—intangible assets.

They are manifold: the unique designs that engage large numbers of users and improve their digital experiences; the digital capture of user behavior, contributions, and social profiles; the environments that encourage consumers to access products and services; and the intense big-data and analytics capabilities that can guide operations and business growth. They also include a growing range of new business models for monetizing digital activity, such as patents and processes that can be licensed for royalty income, and the brand equity that companies like Google or Amazon.com create through digital engagement.

Conventional accounting treats these capabilities not as company investments but as expenses, which means that their funding isn’t reflected as capital. Since the amounts spent aren’t amortized, they take a large bite out of reported income. Spending on those capabilities sometimes should be treated as capital, though, since they can be long-lived. Amazon.com’s development of an internal search process that promotes recurring sales or the efforts of Netflix to fine-tune personal recommendations to increase video viewing and retain customers are certainly more than expenses. Such capabilities, which are complex to build and replicate, can often help companies create enduring competitive strengths.

We’re acutely aware of misguided efforts to justify sky-high valuations during the late-1990s Internet bubble by claiming that finance and accounting fundamentals were no longer relevant. We also recognize that we’re far from the first to note the relationship among intangibles, company-level growth and productivity, and overall economic growth.¹ What we want to suggest here is that those relationships, which once represented a small minority of business activities, are becoming the rule in the digital economy. In fact, much of today’s digital spending could pay for long-lived intangible assets that will define the competitive landscape going forward.² The rising stakes are seen in the copyright battles between Internet and consumer-electronics companies and in major spending on patent portfolios.

Above all, we want to emphasize the importance, for many business leaders, of making the mind-set shift required to embrace the importance of digital capital fully. The disruptive nature of digital assets is intensifying in markets such as search, e-commerce, and social media (where attackers can build business models with near-limitless scale). Disruptive digital assets are also important in segments where behavioral data and user participation can be monetized, by defining entirely new business opportunities or fostering breakthroughs in collaborative innovation. As the mobile-payments start-up Square is demonstrating in the credit-card arena, increasingly, companies that deploy these assets have the potential to threaten large existing profit pools thanks to the challengers’ vastly different economics or radically new ways of doing things.

The big picture

There are parallels between what’s occurring today and during the period, 100 years ago, when electric motors gained widespread adoption. Early in that cycle, companies invested in physical motors, which like today’s servers and routers provided a new growth platform. But the more important kind of value appeared after companies began to understand how motors could change almost every process, improve productivity, and stimulate innovation. Companies that captured these benefits were more successful and more valuable than others.

Today, the market valuations of many Internet-based companies are higher than those of their counterparts in other sectors, including high tech. Many Internet leaders earn lower returns on equity than established technology companies do, yet there’s no reason to believe that markets are making irrational bets on the growth potential of digitally adept companies. As the sidebar “Valuation and intangibles: Viewing the numbers differently” illustrates, treating digital intangibles as assets rather than expenses clarifies the logic behind valuations. (We based these pro-forma valuation calculations on data compiled by academic researchers, as well as assumptions about rates of intangible and digital investment from our own and outside research.)

Sidebar

Valuation and intangibles: Viewing the numbers differently

Macroeconomic studies we have done suggest that digital capital is not only growing rapidly but has also become a major contributing factor in global economic growth.³ We examined the national-accounts data of 40 countries, assigning values to tangible and intangible assets. In 2005, digital-capital investment represented barely 0.8 percent of GDP for those countries. This year, it will exceed 3.1 percent of GDP. Likewise, the accumulating global value of digital-capital investments has reached more than $6 trillion, about 8.5 percent of nominal world GDP. Globally, levels of digital intangible investment are more than half those of digital tangible investment. In more highly digitized economies, such as Israel, Japan, Sweden, the United Kingdom, and the United States, spending on intangibles represents two-thirds of digital capital’s total value.

This activity is starting to power growth. We estimate that digital capital is the source of more than one percentage point of global GDP growth (roughly one-third of total growth). Intangible capital already accounts for two-thirds of that slice, tangible investment for the rest. This growth flows from not only capital deepening but also increased labor productivity—a remarkable thing, since the digital economy has emerged in the relatively brief space of 15 years. By contrast, it took 80 years for steam engines to increase labor productivity to the same extent, about 40 for electricity, and more than 20 for conventional information and communications technologies.⁴ (For more on the relationship between capital formation and productivity, see sidebar “Innovation, capital, and productivity growth.”)

Sidebar

Innovation, capital, and productivity growth

Navigating the new terrain

Intangible digital capital’s role in economic growth gives policy makers one more reason to favor investments in broadband and other forms of Internet infrastructure. Such investments correlate strongly with overall digital-capital levels. In our experience, though, the implications are even greater for executives, who often are not tuned into their organizations’ digital strengths or weakness. Few companies have gone through the internal exercise of reclassifying expenditures or segregating benefits from spending on intangibles. And of course, companies can boast a high ROE thanks to strong legacy-product margins but may nonetheless have muted growth prospects as a result of underinvesting in digital capital. To set a more effective digital course, leaders should consider the following ideas.

Take stock of your assets

Since identifying intangible assets is difficult, companies may be missing growth opportunities. Many have realized only recently that they can use social-media interactions with their best customers to leverage innovation efforts or that they may have unused data they could restructure into valuable big-data assets to sharpen business strategy. Similarly, companies should take stock of how digital capital they don’t own may be relevant to the business. A retailer that doesn’t have access to digital behavioral data on consumers, for example, may be at a disadvantage. So could a bank whose customers access products through a third-party platform that limits the bank’s ability to capture information.

Conversely, companies may wrongly assume that their growth results from conventional capital spending and therefore compromise growth by underinvesting in digital competencies. One online company, for example, stuck to a subscriber pay model in hopes of boosting returns on tangible investments such as server farms. It wound up missing a massive social-networking opportunity that would have yielded far greater returns on advertising revenues.

Our global research shows that the stock of intangible assets varies considerably by region. Some markets have larger numbers of strong digital contenders, others fewer. Companies could make those differences a factor in deciding which markets to enter and where to place digital bets.

Face up to looming threats

Assume that digital leaders in your competitive zone are relentlessly expanding their intangible assets both to attack existing markets and to create new ones. Amazon.com, for instance, won share from brick-and-mortar retailers with its ease-of-purchase model and its ability to reach long-tail customers. Now it’s launching new business models (such as Amazon Prime) to further leverage its user base and logistics capabilities. It’s also using tangible server assets to offer cloud-based labor services (Mechanical Turk) that match freelance workers with demand for their labor.

A good first step is to identify which areas of your value chain are most vulnerable—for example, service delivery or weak digital brands. Competitors can slide vertically or horizontally into large gaps, so you’ll need to build digital assets quickly as a counterweight. Even companies that have a considerable stock of digital assets should understand that capturing value from them isn’t a given. Instead, such companies must define (and relentlessly innovate with) business models that can be scaled up to match those assets.

One clue suggesting that a company might face emerging digital challenges is the existence of businesses that have unusually high levels of revenue per employee in adjacent market spaces. Amazon.com’s employee productivity, for example, is double that of traditional retailers. Netflix, similarly, generates more revenue per employee than traditional cable operators do, by leveraging intangibles such as its highly evolved recommendation algorithms. Unusual financial profiles are another warning sign. Since digital funding is counted as operating expenditure, digital leaders often have small capital-investment levels relative to their size and growth potential. They also borrow less, both because they may not need to (some reap sizable market rents from, for example, search licensing fees or patent income) and because banks may be less likely to lend against intangible assets.

Partner with care

Most companies rely on digital agencies for things like optimizing search marketing. In such cases, they may be ceding digital capital, since they never develop a full understanding of consumer segments or what inspires a customer who searches for their products. Seeing such capability building as an investment may change the logic of using third parties. Similarly, when companies look to established tech players for partnerships shoring up weaknesses, they should be cautious: some seemingly high performers may be on the wrong path and could burden you with outmoded standards and platforms. Alternatively, if you deal with strong players, you may be leaving yourself vulnerable by letting them lead.

The need for growth and competitiveness will force companies to build strong digital capabilities. Viewing them as assets rather than additional areas of spending requires a new set of management and financial lenses. Embracing them is a major shift—but one worth making for companies striving to master a still-evolving landscape.

About the authors

Jacques Bughin is a director in McKinsey’s Brussels office. James Manyika is a director of the McKinsey Global Institute and a director in the San Francisco office.

'via Blog this'

Related articles

• A Mind-Set Shift Is Required to Capture The Gains
• Impact of Digital Capital
• Digital economy far bigger than first thought
• Digital economy 'neglected by official statistics'

The Dollar Payoff from Social Media

Social Media Outposts (Photo credit: the tartanpodcast)

Consumers who engage with company sites visit stores more often and spend more.

strategy-business.com:

Title: The Effect of Customers’ Social Media Participation on Customer Visit Frequency and Profitability: An Empirical Investigation  (Fee or subscription required)

Authors: Rishika Rishika (Texas A&M University), Ashish Kumar (Aalto University), Ramkumar Janakiraman (Texas A&M University), and Ram Bezawada (State University of New York, Buffalo)

Publisher: Information Systems Research; vol. 24, no. 1

Date Published: March 2013

Customers who engage with a company’s social media efforts spend more on its products, according to this paper, which confirms that online platforms not only strengthen the bond between consumers and firms, but can also help boost the bottom line. And the payoff is significant: In this study, customers who interacted with a wine retailer’s social media network visited stores 5.2 percent more often and contributed 5.6 percent more revenue than customers who had a similar shopping history at that retailer but no online involvement.

Recent studies suggest that 75 percent of Internet users engage with social media, and companies are increasingly developing a presence on Facebook, Twitter, and similar platforms in an effort to broaden and improve their interactions with customers. Indeed, studies have shown that social technology allows firms to have dialogues with customers that go far beyond traditional types of promotion or advertising.

Image via CrunchBase

For companies, however, the right strategies have proven elusive. On the one hand, an article in 2011 reported that 69 percent of small business owners used social media in some way and about 78 percent planned to increase their social media budget. On the other hand, an IBM report from the same year declared that “social media is no longer the adorable baby everyone wants to hold, but the angst-filled adolescent—still immature yet no longer cute—who inspires mixed feelings.”

The question is whether firms can realize a return on their investment in social media. As the authors of this paper write, no study had produced data relating the participation of individual consumers in a firm-hosted site to their purchasing behavior. This study aimed to do just that by examining the impact of social media involvement on the frequency of a customer’s store visits and amount spent.

The authors obtained data from a large specialty firm in the northeastern U.S. that sold wine at its retail locations. In August 2009, the firm created its first webpage on a major social networking platform; it has since invested in the project by regularly updating the site and inviting customers to join and comment. The content is a mix of promotional material, information about community and store events, and advice on wine selection.

The authors began by surveying a large segment of the firm’s customer base in early 2011 to identify who was participating in the firm’s social media initiative—by “following” or becoming a “fan” of the firm, for example. They also gathered data on customers’ demographics and spending habits, including what they bought from other wine shops. Working with the firm, which was tracking its participants on the site, the authors obtained monthly data for a period of more than three years on the social media use and purchases of 394 customers.

English: Infographic on how Social Media are being used, and how everything is changed by them. (Photo credit: Wikipedia)

Because customers who engage with a firm through social media may be predisposed to buy its products, the authors’ challenge was to create a control group of customers who were very similar to the participants but did not have online interactions. Accordingly, the authors used 82 weeks of data on spending habits and demographics for both types of customers prior to the launch of the social media site to construct a control sample, in line with widely used matching methods. (To be sure, wine is a product that attracts passionate followers who might be expected to engage more actively in communities, online or off. But in using a control group that had similar buying histories yet chose not to be involved in the retailer’s social media efforts, the researchers essentially removed passion as a variable from the equation, making wine a viable surrogate for other products in this type of study. And because wine is something people are indeed particular about, is purchased regularly throughout the year, and comes with a range of prices and options, its sales are easier to study in this context, the authors say, than a car purchase, for example, or generic grocery shopping.)

The analysis showed that there was no significant difference in the frequency of store visits by the two types of wine customers before the retailer started its site, but the picture changed after the launch. Customers who engaged with the site began to shop at the firm’s stores with greater frequency, and when they did shop, they spent more.

These effects were amplified for certain types of customers: Those who posted more messages tended to buy in larger volumes, preferred special or premium products, and were more loyal to the company. On the other hand, the effects of social media were muted on customers who were more likely to buy products when they were on sale, suggesting that these shoppers might be using social media strictly as a way to find deals and that they were less committed to any one firm. The shopping and purchasing behavior of customers with a narrower focus—in this case, those who typically preferred a particular variety of wine (red, white, or rosé)—was also less affected by their social media use.

The authors point out several implications for managers who may be under pressure, especially in times of economic uncertainty, to defend their promotional budget and prove that their social media spending makes sense. The first recommendation is to nurture customer relationships through social media, to help ensure that the online bond actually translates to a more robust bottom line. In other words, it’s not enough to merely create a Facebook page. Companies should make sure the interface is user-friendly, offer regular updates, send personal messages to specific customers, and encourage users to provide feedback.

But not all customers are the same, the authors warn; nor do they have similar responses to social media networking. The study’s results show the importance of segmenting and targeting customers on the basis of their shopping background, demographics, and history with the firm. “It is vital that managers integrate their knowledge about customers from both offline transactions and online social media sources in order to better serve them,” the authors write.

Finally, companies should create product-specific social media platforms. The findings imply that managers could increase the response to social media efforts by tailoring them to specialized discussion forums or online communities—for example, customers looking to buy premium or unique items.

Bottom Line:
Customers who interact with a firm’s social media site visit its stores more often and spend more when they do, on average, than those with a similar shopping profile but no online relationship with the company. The evidence supports the business value of investing in social media, so long as companies tailor their efforts to specific types of customers and nurture their online presence by providing regular updates and messages.

'via Blog this'

Related articles

• How to make your business social
• 21 Tips to Enhance Your Social Media Presence
• Find out what they want, what they really really want - Hiscox
• The Top Benefits Achieved in Social Media in 2013 by 3,000+ Leading Marketers

Social Business: Valuable Inside as Well as Out

Improved internal communications and collaboration may be as important as engaging your customers.

CFO.com:
Taylor Provost

When’s the last time you approached an employee, ...  and asked, simply, “What do you think of this?” If you can’t recall, says Vala Afshar, chief marketing and customer officer for network security firm Enterasys, your business is probably missing out on innovations and ideas fostered by a culture of collaboration.

Afshar participated in a panel discussion on realizing the potential of social business at Wednesday’s MIT Sloan CIO Symposium in Cambridge, Mass. While the panel spent some time on the often-discussed benefits of a strong customer-facing social media strategy, the most compelling aspects of the session centered on the effects of improved internal communication and collaboration made possible by social business tools embedded within CRM and ERP systems.

English: Avaya's logo. This SVG version, created by me (User:Crotalus horridus) is designed to replace the old PNG logo on the Avaya article. (Photo credit: Wikipedia)

Laura Bassett, director of customer experience management and emerging technologies at business collaboration software company Avaya, told the audience that higher employee engagement helps companies outperform their peers in the industry, and had the facts to back it up: A 2012 Gallup survey found that companies with highly engaged employees have 3.9 times the earnings per share growth rate compared to organizations with low engagement scores. ...

To Kim Stevenson, corporate vice president and CIO of Intel, social business is about “achieving the most efficient processes you can have inside your company.” Intel is an enormous organization of 100,000 employees in 200 global facilities, she said, and the biggest problem it faces is finding the people and information that will help an employee get the job done as quickly as possible. They’ve implemented an enterprise social platform to address that problem. And since Enterasys began using Chatter, added Afshar, he has a seen a direct causal link between employee collaboration and company growth. “We’ve seen growth for the last four years and we’ve been a social business for the last four years,” he said.

Technology no doubt makes internal communication easier, the panel argued, but a company must make the conscious effort to adopt a “culture of connectedness,” a philosophy whereby employees are free to share their ideas and know that their colleagues and superiors are really listening, before they can make social business tools worth their while. “You have to think in transformation mode and really help employees understand their role in the value creation process,” said Stevenson. Without active participants, she said, all the collaboration tools in the world are useless to you. ...

The overarching lesson for businesses offered by the panel is that social business goes beyond an outward-facing social media policy. Instead, CIOs, CFOs and other company leaders should look inward to figure out how social and collaborative tools can further connectedness within the organization, and thus boost creativity, innovation and, ultimately, profitability.

'via Blog this'

Related articles

• The Emergence of Chief Data Officers
• Vala Afshar: Does Your Company Need a Chief Social Officer?
• 5 Great Branded Social Business Communities
• Rise of the Social Business
• Is enterprise social media the new UC? Social Business Summit live now

Six social-media skills every leader needs

Image via CrunchBase

McKinsey Quarterly:
FEBRUARY 2013 • Roland Deiser and Sylvain Newton

Organizational social-media literacy is fast becoming a source of competitive advantage. Learn, through the lens of executives at General Electric, how you and your leaders can keep up.

Image via CrunchBase

Few domains in business and society have been untouched by the emerging social-media revolution—one that is not even a decade old. Many organizations have been responding to that new reality, realizing the power and the potential of this technology for corporate life: wikis enable more efficient virtual collaboration in cross-functional projects; internal blogs, discussion boards, and YouTube channels encourage global conversations and knowledge sharing; sophisticated viral media campaigns engage customers and create brand loyalty; next-generation products are codeveloped in open-innovation processes; and corporate leaders work on shaping their enterprise 2.0 strategy.

English: Data from April 2011 Editor Survey that lists Social Media activities (Photo credit: Wikipedia)

This radical change has created a dilemma for senior executives: while the potential of social media seems immense, the inherent risks create uncertainty and unease. ... Social media encourages horizontal collaboration and unscripted conversations that travel in random paths across management hierarchies. It thereby short-circuits established power dynamics and traditional lines of communication.

We believe that capitalizing on the transformational power of social media while mitigating its risks calls for a new type of leader. The dynamics of social media amplify the need for qualities that have long been a staple of effective leadership, such as strategic creativity, authentic communication, and the ability to deal with a corporation’s social and political dynamics and to design an agile and responsive organization. ...

Equally important, there’s an organizational dimension: leaders must cultivate a new, technologically linked social infrastructure that by design promotes constant interaction across physical and geographical boundaries, as well as self-organized discourse and exchange.

Image via CrunchBase

We call this interplay of leadership skills and related organizational-design principles organizational media literacy, which we define along six dimensions that are interdependent and feed on one another (exhibit).

Our clearest window on the development of these new forms of literacy is General Electric, ... Witnessing GE through this lens is particularly interesting; unlike Google or Amazon, GE isn’t a digital native, and its 130-year tradition of reinventing businesses and itself makes it worth watching. So does GE’s status as a “leadership factory.”

GE’s commitment to social media is perhaps most visible through its digital platform GE Colab,

Image via CrunchBase

designed by GE employees for GE employees to facilitate global teamwork and collaboration. GE Colab combines the capabilities of Facebook, Twitter, and other social applications, allowing easy networking, information sharing, instant communication, advanced search, blogging, videoblogs, and more. Launched in 2012, the platform has already attracted more than 115,000 users.¹

To get a sense of how executives deal with these new realities, we interviewed GE officers of various businesses and regions. ...We drew on those experiences to illustrate the six-dimensional set of skills and organizational capabilities leaders must build to create an enterprise level of media literacy—capabilities that will soon be a critical source of competitive advantage.

1. The leader as producer: Creating compelling content

With video cameras achieving near ubiquity and film clips uploading in the blink of an eye to YouTube or other platforms, the tools for producing and sharing rich media are in everyone’s hands. ...  To engage in real time on a personal level, executives will also need the technical skills to master the basics of digital-multimedia production, including how to shoot and, if necessary, edit videos.

Tools for producing and sharing videos are now in the hands of many executives, who can upload recordings of
meetings (such as this one) to an internal server that employees can access.

© Image courtesy of GE

Mark Begor, who runs GE Capital’s real-estate business, was nervous when he shot his first “unplugged” video message. ... That unease soon vanished with practice. He now routinely produces a weekly five- to ten-minute video for his division. ... Begor says that this routine forces him to crystallize his thinking and that creating short stories people can relate to makes him more aware of his strategy and communication.

... To thrive in the world of social media, leaders need to acquire a mind-set of openness and imperfection, and they must have the courage to appear “raw” and unpolished—traits that may be as challenging for them as developing the creative and technical-production skills.

2. The leader as distributor: Leveraging dissemination dynamics

...While traditional distribution pathways won’t disappear, social media revolutionizes the standard information process by reversing it. Social communication makes distribution the starting point and then invites company audiences to cocreate and contextualize content to create new meaning. Messages are rebroadcast and repurposed at will by recipients who repost videos, retweet and comment on blogs, and use fragments of other people’s content to create their own mash-ups.

... Since executives won’t be able to govern or control a message once it enters the system, they must understand what might cause it to go viral and how it may be changed and annotated while spreading through the network. Distribution competence—the ability to influence the way messages move through complex organizations—becomes as important as the ability to create compelling content.

Equally important is the skill of creating and sustaining a body of social followers who help to spread and reinforce the message. It becomes critical to know who an organization’s key—and often informal—influencers are and to leverage their authority to push content through the right channels. ...

Lorraine Bolsinger, vice president and general manager of GE Aviation Systems, acquired these skills through experimentation. She began blogging a few years ago but initially didn’t get much response. ... To increase the allure and sustainability of the dialogue, she eventually created a “360 blog,” where all her direct reports blog with her on the same platform. This networked blog, with 12 regular contributors, provides additional points of view on issues, promotes more frequent communication, and attracts broader participation. Bolsinger says that the quality of her group’s dialogue about strategy and operations has improved thanks to these efforts.

3. The leader as recipient: Managing communication overflow

Social media has created an ocean of information. ...“There is too much noise out there,” says Stuart Dean, CEO of GE ASEAN,² who is an active blogger and tweets regularly about issues in his market space. “I’d use Twitter much more as a source of information if I could get exactly what I need.”

Dean’s sentiment is echoed by most executives we know—many of them barely find time to catch up with their daily e-mail load. What to do? As a first step, leaders must become proficient at using the software tools and settings that help users filter the important stuff from the unimportant. But playing in today’s turbulent environment requires more than just filtering skills.

... In the social-media realm, information gets shared and commented on within seconds, and executives must decide when (and when not) to reply, what messages should be linked to their blogs, when to copy material and mash it up with their own, and what to share with their various communities. The creation of meaning becomes a collaborative process in which leaders have to play a thoughtful part, as this is the very place where acceptance of or resistance to messages will be built. ...

4. The leader as adviser and orchestrator: Driving strategic social-media utilization

English: Infographic on how Social Media are being used, and how everything is changed by them. (Photo credit: Wikipedia)

In most companies, social-media literacy is in its infancy. ... But without guidance and coordination, and without the capabilities we discuss here, social-media enthusiasm can backfire and cause severe damage.

To harvest the potential of social media, leaders must play a proactive role in raising the media literacy of their immediate reports and stakeholders. Within this 360-degree span, executives should become trusted advisers, enabling and supporting their environment in the use of social tools, while ensuring that a culture of learning and reflection takes hold. ...

Steve Sargent, president and CEO of GE Australia and New Zealand, believes that social media is reshaping the leadership culture by pushing executives to span geographic boundaries, engage more closely with stakeholders, and amplify the impact of employees at the periphery. ... GE employees in Brazil, for instance, now work with colleagues in Australia to develop products and services for customers doing business in both countries. ...

To achieve this goal, leaders must become tutors and strategic orchestrators of all social-media activities within their control, including the establishment of new roles that support the logic of networked communication—for instance, community mentors, content curators, network analysts, and social entrepreneurs. Organizational units that leverage the new technologies in a coordinated and strategically aligned way will become more visible and gain influence in a corporation’s overall power dynamics.

5. The leader as architect: Creating an enabling organizational infrastructure

Leaders who have steeped themselves in new media will testify that it requires them to navigate between potentially conflicting goals: they must strive to establish an organizational and technical infrastructure that encourages free exchange but also enforce controls that mitigate the risks of irresponsible use. ...

... The leader’s task is to marry vertical accountability with networked horizontal collaboration in a way that is not mutually destructive.

This challenge is reflected in GE’s policies, which embrace the value of sharing expertise and perspectives with family, friends, colleagues, customers, and other stakeholders around the world. With this openness comes a shared responsibility: employees must observe GE standards of transparency and integrity, refrain from speaking on behalf of the company without authorization, and be clear in their social messaging that their views are personal. ...

6. The leader as analyst: Staying ahead of the curve

As companies start to digest the consequences of the Web 2.0 revolution, the next paradigm shift is already knocking on the door. The next generation of connectivity—the Internet of Things—will link together appliances, cars, and all kinds of objects. As a result, there will be about 50 billion connected devices by the year 2020.³ This transformation will open new opportunities, spawn new business models, and herald yet another major inflection point that leaders must manage.

It’s imperative to keep abreast of such emerging trends and innovations—not just their competitive and marketplace implications, but also what they mean for communications technologies, which are fundamental for creating an agile, responsive organization. Executives who monitor weak signals and experiment with new technologies and devices will be able to act more quickly and capture the advantages of early adoption.

GE’s leadership university, Crotonville, is leading a number of initiatives to help top executives stay ahead of those changes. ... In Silicon Valley, leaders are immersed in a range of cutting-edge technologies. Part of the program there involves “reverse mentoring,” which connects media-savvy millennials with senior GE leaders to discuss the latest tech buzz and practice. ... Exposing seasoned leaders to the millennial mind-set encourages them to experiment with new technologies—which, in turn, helps them better engage with up and comers.

Clearly, these are early days. Most companies recognize social media as a disruptive force that will gather strength rather than attenuate. But social-media literacy as we define it here is not yet an element of leadership-competency models or of performance reviews and reward systems. Equally, it has not yet found its way into the curricula of business schools and leadership-development programs.
...We are convinced that organizations that develop a critical mass of leaders who master the six dimensions of organizational media literacy will have a brighter future. They will be more creative, innovative, and agile. They will attract and retain better talent, as well as tap deeper into the capabilities and ideas of their employees and stakeholders. They will be more effective in collaborating across internal and external boundaries and enjoy a higher degree of global integration. They will benefit from tighter and more loyal customer relationships and from the brand equity that comes with them. ... And they will be more likely to create new business models that capitalize on the potential of evolving communications technologies.

It takes guts to innovate radically in leadership and organization, for legacy systems, cultures, and attitudes are powerful forces of inertia. ... Social-media engagement will confront leaders with the shortcomings of traditional organizational designs. Leaders who address these shortcomings will learn how to develop the enabling infrastructure that fosters the truly strategic use of social technologies. When organizations and their leaders embrace the call to social-media literacy, they will initiate a positive loop allowing them to capitalize on the opportunities and disruptions that come with the new connectivity of a networked society. And they will be rewarded with a new type of competitive advantage.

About the Authors

Roland Deiser is a senior fellow at the Peter F. Drucker and Masatoshi Ito Graduate School of Management at Claremont Graduate University and author of Designing the Smart Organization: How Breakthrough Corporate Learning Initiatives Drive Strategic Change and Innovation (John Wiley & Sons, October 2009). Sylvain Newton is the GE Crotonville Leadership Senior Leader for Business and Regions.

Notes

¹ See Ron Utterbeck, interview by Robert Berkman, “GE’s Colab brings good things to the company,” MIT Sloan Management Review, sloanreview.mit.edu, November 7, 2012.

² Association of Southeast Asian Nations.

³ See Michael Chui, Markus Löffler, and Roger Roberts, “The Internet of Things,” mckinseyquarterly.com, March 2010.

Related articles

• GE's six dimensions of leadership
• Social-media Literacy is Fast Becoming a Source of Competitive Advantage.
• Social Media Has Changed What It Means To Be A Leader
• Applying the 80/20 rule to Social Media