By students, for students.

Plugged in: Why business is turning social

In Informatics, Management, Marketing on October 4, 2012 at 11:35 am

You have to be totally connected to anyone who touches your brand, if you don’t do that, I don’t know what your business model is in five years.

– Angela Ahren, Burberry CEO

McKinsey has predicted that social media is capable of unlocking $0.9-1.3 Trillion in value, and businesses are waking up to this fact.

Booz Allen and Buddy Media found that 57% of businesses plan to increase social media spending and 38% of CEOs label social as high priority. Celebrated examples of online engagement include Burberry’s website-as-social-network and Intuit’s use of crowdsourcing techniques to make their TurboTax service unbeatable.

Social media is even encroaching on the “real world”. Coca-Cola set up a theme park to check visitors into rides on their Facebook pages and Domino’s Pizza relayed comments they received online onto a billboard in Times Square. However, new technologies have worked to empower the customer and employee as much as the company.


In 2006, Time Magazine chose “You” as the Person of the Year to reflect the growing power of social media. Last year, the magazine celebrated “The Protestor” – another subversive choice connected with the potential of social networks. In the 21st century, citizens have become empowered through technology: able to topple regimes, protest economic structures and target businesses that mismanage public relations.

When Netflix announced changes to its pricing structure, 82,000 negative comments flooded Twitter and Facebook. Within months, the company lost two thirds of its market share. Social media provides a highly visible platform for opinion – good or ill. In reaction, some business leaders approach marketing as, essentially, the continual management of online reputation. The embarrassing and damaging consequences of getting online interaction with customers wrong is writ large in Toyota’s handling of high-profile recalls in August and BP’s response to the 2010 Gulf oil spill.

With public disasters dominating news coverage of businesses’ forays into social media, it is unsurprising that Havard Business Review found that half of managers have a negative or uncertain attitude towards social media. Organisations are still liable to view social media as a threat to productivity, intellectual capital and privacy, rather than the future foundation of business.

This must change. Conversational channels, such as digital networks and social media, are making instant connectivity a norm of business life and early adopters have enjoyed the benefits of enhanced communication with internal and external stakeholders. The shift from broadcasting models of employee and market communication to more discursive modes has been prompted by long term trends, beyond the technological.

  • Economic change: Service industries have become more significant that manufacturing in developed economies, and knowledge work has supplanted other forms of labour. This has added importance to processing and sharing information.
  • Organisational change: Frontline employees are more pivotal in value-creating work. This has determined that lateral and bottom-up communication is as highly prized as top-down decrees.
  • Globalisation: Navigating cultural and geographic lines has necessitated fluid and complex interactions.
  • Generational change: Younger workers expect peers and authority figures to communicate with them in a dynamic, two-way fashion.

The relationship between digital networks and knowledge is crucial in explaining the power of social media. In 1999, Richard Varey observed, “A knowledge-based global order is growing. Yet the bulk of useful knowledge lies unused among employees at the bottom and scattered outside office walls among customers, suppliers, communities and other stakeholder groups.” Today, we may say this order has come to pass. A 2010 study by McKinsey & Co found that 85% of new jobs created since the turn of the century required complex knowledge skills. Further, intellectual property, brand value, process knowledge and other manifestations of brainpower were responsible for 70% of all US market value created between 2008 and 2010.

Technologies – such as computers, internet, email, intranet and digital networks – have made accessing the knowledge spread within organisations progressively easier. Crucially, however, valuable information also exists beyond the businesses four walls. Customers hold the invaluable knowledge of their wants, needs, desires with regards to product design, customer service, delivery, ect. Social media has been transformative in connecting businesses and their customers to an unoprecidented degree, allowing savvy organisations to monitor, amplify, respond to and lead customer opinion.

The benefits are apparent. Companies that adopt social technologies can see a 50% increase in customer satisfaction, 48% increase in business leads and 24% increase in revenue. However, companies have found that they cannot harness the collective knowledge and influence of online communities while preserving traditional silos and business philosophies.

Twitter may be able to be latched on as a channel for voting in the X Factor final, but incorporating social media into a business’s product development, marketing and customer relations requires a change in mind-set and organisation.


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