The Business Value of Social Networks

The January 30 issue of The Economist included a special report on social networking.  Overall, the special report concludes: “that social networks are more robust than their critics think, though not every site will prosper, and that social-networking technologies are creating considerable benefits for the businesses that embrace them, whatever their size.”

But, while “fans claim that new social-networking offerings now being developed for the corporate world will create huge benefits for businesses,”  many companies remain skeptical.  “There is plenty of doubt about the benefits of online social networking in the office.  A survey of 1,400 chief information officers conducted last year by Robert Half Technology, a recruitment firm, found that only one-tenth of them gave employees full access to such networks during the day, and that many were blocking Facebook and Twitter altogether.”

Other studies have reached similar conclusions, such as this recent State of Workforce Technology Adoption conducted by Forrester Research.  It found that while most enterprises agree that collaboration tools are important for members of a team, - especially if that team is distributed across many locations, - such tools are not widely adopted.  e-mail, with 87% adoption, is the default collaboration tool for most people in business.

This is a particular problem for younger workers, who are widely using social media technologies outside of work.  The Forrester study found that sixty percent of workers under thirty use social networking at home, but less than one quarter of them - 13% -  also use such technologies at work.

Why are so many companies reluctant to embrace social networking?  One of the articles in The Economist special report focused on this question - Yammering away at the office: a distraction or a bonus?  “An astonishing amount of time is being wasted on investigating the amount of time being wasted on social networks,” it provocatively starts out saying, and then adds:  “Studies regularly claim that the use of Twitter, Facebook and other such services poses a threat to corporate wealth.”

The article goes on to to list several hurdles that social networks must clear before they can enter the corporate mainstream.  First is the question whether social networking is all hype.  Do they deliver real, measurable value to the business?  While we can argue that social networks increase collaboration within and outside the company, their value propositions are soft, that is, more supported by anecdotal evidence than extensive research and quantitative results.  This is good enough for believers, but not for skeptics.

Those worried about the use of social networks in business often mention their fear that staff might use them to broadcast politically incorrect comments.  This fear seems groundless.  Employees already have access to social networks through their personal PCs and mobile devices, so they need not wait for corporate sanctioned channels should they wish to post inappropriate comments.  Better to deal with the issue directly, by providing guidance to employees on the proper use of social networks.

For example, a few years ago IBM invited employees to help create a set of guidelines and practical advice on how to best use social media.  The resulting IBM Social Computing Guidelines offer helpful, common sense advice.  It both encourages employees to explore the potential of social media, but also reminds them of their responsibilities and obligations.

Perhaps the real reason why so many managers are uncomfortable with social networks is the fear of losing control over their employees, who now have tools that enable them to easily collaborate with colleagues and friends inside and outside the company.  Of course, such individual and community empowerment is precisely the key value of social networks.  Rather than relying on rigid hierarchic structures and formal meetings, social networks encourage employees throughout the organization to work together, innovate by self-organizing into communities of interest, and collaborate with each other in tackling the toughest, most complex problems facing the business.

The Economist article points out: “To veterans of the technology industry, the fuss over social networking sounds all too familiar.  Whenever a new and disruptive technology appears, there is initially a backlash against it before it becomes broadly accepted.”

This is particularly true for applications that were not designed for businesses, but enter companies through the consumer world.  Whereas in the past, people got access to leading edge technologies through their companies, ever since the advent of the Internet and World Wide Web in the late 1990s that has no longer been true. 

“Thanks to companies such as Apple, Google and Facebook, people now have access to communications devices and web applications that are often far superior to those offered by their employers.  And thanks to cloud computing, which allows all sorts of computing services to be delivered via the internet, they can use these devices and applications pretty much wherever they like, including in offices and factories. This trend is accelerating as more digitally savvy youngsters enter the workforce with their iPhones at the ready.”

One of the most interesting efforts to measure the value of collaboration to a business is a project being conducted at the Deloitte Center for the Edge.  The project has been studying the impact of digital technologies on the long-term transformation of the global business environment.  They are rendering explicit and measuring the major drivers behind this historical transformation, and have come up with a set of measures which they call The Shift Index.  Their ideas and methodologies are described in this report: Measuring the forces of long-term change: The 2009 Shift Index.

The Shift Index includes the intriguing concept of knowledge flows.  In the past, our stocks of knowledge, - what we know, - was a great source of economic value.  That is no longer the case, because the increasing rate of change all around us is rapidly obsolescing knowledge.  Therefore, the real economic value has now moved from the stocks of knowledge to the flows of new knowledge that we are now able to quickly acquire, and thus refresh and expand our rapidly depleting stocks of knowledge.

Value creation has thus been shifting from protecting proprietary knowledge, to fostering collaboration, both within the company and beyond its boundaries, in order to help the firm participate in as broad and diverse a range of knowledge flows and thus improve its competitive position.  It is within this context that one has to consider the business value of social networks, and their impact in helping people better connect with each other, and build sustaining relationships that enhance knowledge flows and innovation.  

The traditional, industrial age hierarchic organization must evolve.  Firms must embrace more flexible organizational structures, better suited to help them reach out, absorb and integrate all the knowledge flows, expertise and talent out there.  The Internet, social networks and related communication technologies are helping create such flexible organizations, as well as having a huge impact on the way people collaborate and generally relate to each other.  That, in the end, is their real value to the business. 
 

Comments

[Dscofield]

Companies view the tools (e.g., facebook, twitter, etc.) as 'the problem' without understanding the root causes driving this technology and its adoption - how that can be used to make the company more innovative, more attractive for new talent, and all the other positive intangible benefits that drive market value. But this is symptomatic of those companies' inability to recognize and embrace trends, change, etc....they don't think critically or 'paradoxically' to understand what is really happening - instead of just the obvious or superficial.

[acecard]

I would agree here that there is "work" being done on social networking platforms on the Internet. A lot of companies are successfully marketing via MySpace or Facebook; MySpace, in particular, has enabled a lot of independent musicians to get exposure and sell CDs downloadable content and I think all things are at shopping online.

[mike]

I work for a small family run Business and im also the webmasters for the company web site. When i started with this venture the last thing i wanted to do was start a marketing campaign using these social sites. But i decided to give it a go and the results were amazing to say the least.

[anna smith]

An informal company-internal network that fosters peer-to-peer learning, collaboration and innovation with great content and great context at its core would seem to be a strategic advantage. But not all corporate cultures are able to get their employees involved to make such a network successful.

[Cy Tarsa]

People want that feeling of community, that is what social networking is about. Sharing information and feeling that you've gotten that piece of insight from a friend rather than some cold search engine.

I'm really curious to see where Web 2.0 will take us, what's the next level. Where search engines will be replaced by... ?

[facebook seo]

Although Social Networking sites were not created for business purposes and Internet Marketing, they have become a very big factor. You can't blame business for using a place with millions of people to market themselves.

[Robert]

I agree with a lot that is said in this post. I know that social media can be a god-send at times, but there is a growing problem with spam and other annoying tendencies by internet marketers. It definitely allows for more community, but could also be taking away from precious face to face time. People tend to be spending more time in front of computer screens, unfortunately.

[Craig]

I believe the value of Social Networking sites as a marketing tool has passed it's zenith. If you look at the history of Internet Marketing over the past 10 years, nearly every tool has an expiry date before it is overused and then ignored by those who it is aimed at. Twitter is a prime example of a service which is so overrun with spam that it's days as a credible tool are numbered.

[Shannon - Directory Tasmania]

As annoying as social networking can be, it has proven itself as the major vehicle for advertising and interacting with customers today. Its not going anywhere, it will eventually replace many traditional methods as the new generation will use nothing but these sites.

[George Brown]

It is amazing, as a guest speaker on this topic, there there are 2 ways that companies views social networking, either as a tool to increase sales, or as a tool to increase PR.

Now with Google doing more of it's indexing in the social networks, I see the problem being reputation management. I have a client who gets at least 5 e-mails a month with threats from customers who say they will post what happened to them on the social networks if they do not change their products, or fire an employee who gave them bad service etc. This could become a nightmare.

[Ron Stone]

I know these networks can help a business if used wisely but I doubt that businesses, particularly big businesses will ever truly embrace them. They just can't let go of their desire to watch over and control every minute of their employees' time. It's just in their nature and unlikely to change.

[chat]

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I’ve bookmarked this particular page and I’ll tell my pals over it.
Bless you

[Small Business Marketing Ideas - Travis]

I've seen so much abuse of social media since working with a lot of internet marketers the past two years. What businesses need to realize is that these platforms were not created for them to market through. You get such a better response if you use them as they were intended...to socialize. Help as many people as you can that are targeted towards your business and you will see more traffic then you can imagine to your business

[Nate Harker]

I own a service business and I've had great success with a Facebook page. If you can get a decent amount of people to "like" your page, everyone in each of their friend network sees it and you start getting free word of mouth so to speak.

[Vince Ammon]

Social networking is really powerful. Twitter alone can get your business and its message in front of a lot of people quickly. Just make sure you tweet interesting stuff 70% of the time, and business related info only 30% or people will quit following you.

[Binary Options]

Businesses can not afford to ignore social networks, this is the internet all over again. I remember when businesses felt like they didn't need to have an internet presence 10-15 years ago. As a small business owner myself I've used Twitter, LinkedIn, and Facebook to drive business with much success.

[Apartment Mailing Lists]

Business social networks are growing fast but don't get the publicity or the readership of Facebook or YouTube. LinkedIn is a good example of a business social network and is an excellent way of creating your own mailing list to keep your audience up to date with your products and services.

[Internet Home Business Travis]

No doubt, social media offers many powerful marketing tools. I have had the most success using social sites to promote my online businesses and websites, as these are Global in scale. I have not had as explosive results within my local businesses, although I have received work out of the blue from customers who made good comments about me on social sites. In either case, people use social media to communicate, and that is exactly where us marketers want to be.

[Asx trading]

Social Networking Sites are beneficial both for the company and the employees.The company can use these sites to market their product and increase their Sales. Employees will also see access to Social Networking Sites as incentive - a privileged given by the companu thus promoting good employee and employer relationship. I think the key is moderation.

[accounting services]

Social Networking just like any tools, has it's pros and cons.The right usage of this tools is the key to a successful campaign. We view social media as a way to connect with friends and not clients and that is where I think we did wrong. We need to view this media as an opportunity to introduce our business and not our personal lives. That way, we can drive potential clients to our business. I know you'll say "easier said than done", but we need to remember that venturing to any business involves risk and in my opinion enjoying your work even with the risk is the main key to succeeding in any business.

chartered accountants in barnet

[Direct Debit Services]

I certainly agee with the point in the Economist article surrounding 'threat to corporate wealth'.

Email is a more deliberate form of communication whereas using the quick social media channels, people often say things without really thinking, plus they're one to many rather than one-to-one, so once information is out there, it can spread rapidly.

Companies embracing social media really do need to have good policies in place for such usage.

[Rapid Income Creator]

The fear of companies that their staff might broadcast politically incorrect comments is truly absurd. Social networks are everywhere nowadays, employees can even access it when they're on the go using their mobile phones equipped with WIFI! So there is really no stopping them if they want to have their opinions read and found on the social networks.

I believe that these companies need to embrace what technology has done to our times now. It can even be a great way to show how open minded a company is if they train their employees on what their responsibilities and obligations are than stopping them to be responsible employees.