January 01, 2013

Adoption of social media by enterprises: A double-edged sword

Innovation adoption has long been associated as a signal of market leadership and thought leadership. In almost all sectors, this is borne by firms wanting to maintain their market position, reduce risk, and to offset any competitive advantage to a prospecting challenger. Even an innovation unlikely to be used could be a deterrent to an alternate business model. Examples include blocking of automobiles using renewable fuel energy  by firms deeply entrenched in conventional oil and gas energy; or squashing a patents to block use of innovation. It is in such light that one is intrigued by social media’s role, and firms sometimes having mixed feelings on adopting it. In this article, we attempt to unravel the intricacies of social media adoption by enterprises. While the study can be generalized to any firm, it is more relevant to companies with direct business-to-consumer dealing.

Should your company have its own blog? Is a Facebook page connecting stakeholders needed? Is it a good idea to take on consumer complaints on twitter? How about a Google hangout for your employees? Companies often end up incorrectly estimating the usefulness and risks of their decisions when it comes to social media usage. To leverage social media correctly and fully, there is a level of internal preparation required. This is especially so if senior management is not as familiar with social media. There is generally a need to balance contradictory views, knowledge levels, and risk appetites of all involved.

Decisions to be Made

A firm may need to decide firstly whether it is worth being on social media. One could have any of the possible reasons- to provide a platform to employees to connect, to allow customers to provide feedback, to have R&D teams obtain user inputs on beta models, to connect stakeholders, acquire customers or establish position as thought-leader or merely match up to competition’s presence. Many companies choose not to be there and this may be acceptable as strategy if consumer expectations from the industry and competitor’s actions permit it. Often this may mean also an opportunity for new challengers to alter status quo using social media effectively. In summary, surviving not being on social media platforms may be shortsighted and a strategy relevant and good for the short-term only.

Once a decision to be on social media is taken, company needs to decide whether to moderate content or allow laissez faire.  A company also has to decide on activity levels. We discuss these options and company strategies regarding social media activities in a follow-up article in the upcoming edition of DCR TrendLine.

ROI of Social Media

Many enterprises rushed to embrace social media like any other innovation only to discover that it was an animal different from any innovation they had seen before. All social media is not good social media. Nor is more of social media always better. A firm opens itself up for scrutiny and may not be rightly positioned or equipped to handle the impact of social media. How does your firm assess it? We recommend a balanced assessment of both a long-term strategic view and operational returns in ROI.

Another perspective on the question of to be or not to be on social media is that can you control customers, industry veterans and public in general from generating content, positive or negative about your firm. Also, can you ignore such content even if you choose to leave it without response? As possibly BP had to learn after a Deepwater Horizon, enterprises need to be ready for catastrophic events that may come unannounced. Such risk calculations may not be modeled into standard ROI templates.

Yet another key decision variable not fully captured in ROI is the signaling importance of being avant garde in innovation adoption. A market leader or a customer-focused firm cannot ignore social media if competitors are prominent on those platforms. It is a prisoners’ dilemma as no firm can afford to be perceived as being left behind in adopting an innovation that is causing a paradigm shift in market dynamics as much as personal space of its customers. Perception is reality and the medium of communicating such perception, social media in this instance, cannot be ignored.

In the March 2013 edition of DCR TrendLine, look out for our follow-up article on Social Media Strategy Options for Enterprises and a feature on Social Media Metrics and Measures.