If you’re an executive who’s still uncertain about using social media for business, here’s a compelling reason to consider it: almost two billion consumers already do. And that trend shows no sign of abating, with social media having grown by around 18% in 2013 with predictions it will reach 2.55 billion by 2017.
Still not convinced? Reflect on the fact that the billions of new consumers who are about to emerge globally will have never lived in a world without it.
They will expect to find you on their platform of choice, not because you’re a cutting-edge, socially savvy brand, but by default – much as shops once required floor space and a front door.
Here’s another reason why having a social media presence matters: the people using social media are shopping. And there’s hard data that the research they do in social networks influences what they buy.
Although social networks influence decision-making on and offline (for example, who people vote for or what accountant they’ll use) consider that this year e-commerce alone was worth $1.3 trillion with expectations it will continue growing at a staggering 20% per year.
According to a recent Sensis Social Media Report, of the 65% of Australians who use social media, one in five research products using social media – nearly 70% of which convert to a sale. Yet, as Frost & Sullivan shows, of the $18.3 billion spent online by Australians, 79% is on overseas sites. (Notwithstanding this social commerce, or shopping by social media, is still sizeable, bringing in $300 million this year.)
While many factors contribute to this statistic, the gap between consumer expectation and business behavior is telling; only 30% of small businesses and around half of medium-sized businesses currently having a social media presence.
Of those that do, many whack up a Facebook page or start a Twitter feed because they believe they ‘should’ instead of asking the deeper, age-old questions about who they are as a business, why they are there and what their customers want. In other words, having a strategy.
A disconnect is that many leaders continue to think about social media as a channel, specifically for communications or sales. But its reach is far greater.
What social media, like technology, delivers is an expectation that cannot necessarily be delivered under legacy business structures: immediacy.
This can in part be addressed at a channel level. For example, in Australia 70% of social media users shop by smartphone and businesses that have successfully adapted to mobile can generate sales by suggesting additional options at the point of sale. (Not surprisingly, those customers want issues resolved just as fast and in an online space that suits them.)
But there’s increasing evidence that this is not enough and that it’s the companies that ‘get’ digital as a ‘way of being’ rather than a ‘handball-to-marketing’ which outperform their peers.
A recent two-year joint study by Capgemini and MIT Sloan of almost 400 firms found that businesses who are more digitally mature, or ‘digirati’ as the report calls them, have a clear digital advantage over their less mature peers. Social media is a part of the digital cycle. This trend applies to every industry.
The report found that digirati were:
- 26% more profitable than their less mature peers;
- Generate 9% more revenue through their employees and physical assets;
- Generate 12% higher market valuation ratios.
Capgemini Australia’s Digital Transformation lead Ben Gilchriest says that what distinguishes digirati is that they make strategic decisions on where to excel in digital. That results in technology-enabled initiatives that change engagement with customers and internal operations, and even transform business models. However, they never lose sight of the leadership elements: vision, governance, the IT-business relationship and engagement with employees.
In his excellent article ‘The Operating Model That Is Eating The World’, CEO of Undercurrent Aaron Dignan goes further, arguing that those businesses that are structured to respond quickly to changing needs are the ones that will thrive.
He cites numerous examples of businesses built on little capital but big ideas that grow into multimillion dollar markets (Medium, Hipchat, Circa, Outbox and Quirky) through to giants (Amazon, Google, Twitter, Facebook and Paypal) that are dominating the online sphere.
And although these are software companies, the same intensely customer-focused model with its bias to action is increasingly (and successfully) being adopted by businesses that sell physical products and services ‘in real life’.
What differentiates them is that, like their forbearers in the software industry, they are nimble, can tap into (or create) customer demand and collaborate with future users to give the product wings.
Dignan says categories like real estate or car services (compare Uber with taxis) look increasingly like technology platforms where product is the equivalent of inventory and the core business value is “in the data, the tools, and the optimisation of markets”.
The Capgemini study supports this observation with evidence that the real business benefits emerge as a result of this deep structural transformation and not fashion-driven tinkering at the edges.
And how is this achieved? According to Gilchriest, a key factor is a digitally driven board and executive prepared to propel change through every layer of the business.
This leaves us with something of a problem right now. There are many smart executives leading companies around the world, but not an enormous number that are aware of the power of digital or social media.
Last year only 16% of CEOs used social media. In 2013 up to 30% of CEOs have a presence in one form or another, but many are not actively using it.
In the past a succession plan would have ensured social and digital capabilities were identified and emerging leaders trained before they took over the helm. Instead, the accelerated speed of change and rapid adoption of new technologies means delay could have a serious, even fatal, effect.
Ironically, many executives are aware that something major is happening as a result of social media, but have not yet translated this into action.
One reason may be fear, according to a study of nearly 1800 CEOs and senior executives by IBM, which found that with respect to technology, many leaders feel out of their depth. There’s no reason for this given that most executives have constantly adapted to change by acquiring new skills throughout their careers, and digital and social technologies are no different.
Moreover, as Gilchriest says, businesses that are flourishing are doing so because the leadership has instilled digital as a part of the business way of thinking, not just a technical skill.
Leaders can act to ensure their business models do not put them at a competitive disadvantage in the future by understanding that social media is not about a ‘like’ on Facebook or a 140-character tweet, but the future of how we do business.
Social media is not about social media. It’s about leadership.
Dionne Kasian-Lew is the author of The Social Executive – how to master social media and why it’s good for business (Wiley). Connect with her on LinkedIn, Twitter @dionnelew, email email@example.com.