How Social Media is Changing Business

How social media is changing everything about the way we do business.
Magazine Contributor
12 min read

This story appears in the December 2010 issue of . Subscribe »

You may or may not work in a cube farm, but chances are you live in a silo. That's geek speak for the parts of our businesses and personal lives that are walled off from one another, intentionally or not--the marketing department exists in a separate silo from the product development team, which is isolated from the executive floor. Clients and their valuable opinions are walled off within customer service. We've become great at collecting information. But when it comes to sharing, the walls are still pretty thick.

Whatever you think about the current iteration of social media--whether you consider it a time suck, a marketing fad or the second coming--it's impossible to deny that it has begun breaking down the silos for businesses that have adopted it. Social media allows companies and their clients to communicate directly and frequently, forming strong relationships and even allowing them to collaborate on projects. Businesses adopt social applications and see it topple walls within traditional management structures.

Up until now, social media has been optional for businesses. But Charlene Li, one of the world's leading thinkers on social media and co-founder of the Altimeter Group, a research-based advisory firm in San Mateo, Calif., predicts that companies that do not get on the social media bandwagon soon--within three to five years--will not survive. It's not an overstatement to say social media is transforming every aspect of business.

We aren't talking about a moldy Facebook page updated once a month or sporadic tweets. The change is nothing less than the brink of a new social media ecosystem: one where every corner of an organization is in continuous collaboration and where customers are instantly part of that conversation.

In many ways, it's the destiny of the digital age. Tim Berners-Lee, the MIT professor who created the World Wide Web at CERN laboratory in Switzerland in 1990, always believed the Internet would be more about connecting people and less about housing data. "The Web is more a social creation than a technical one. I designed it for a social effect--to help people work together--and not as a technical toy," he wrote in his 1999 memoir, Weaving the Web. It is only recently--with Web 2.0 and its more cautious, business-minded cousin Enterprise 2.0--that Berners-Lee's vision of the web as a social, collaborative medium is shaping.

As usual when it comes to technology, business is running a couple of years behind the culture at large. Facebook has been around long enough to enter the dictionary as a verb and inspire a Hollywood film, but the business appetite for social media is just warming up. According to a University of Maryland Smith School of Business poll, in 2009 the percentage of small businesses using social media doubled to 24 percent from 12 percent. It's likely that the number will double again for 2010. Peter Kim, North American managing director for Dachis Group in Austin, Texas, which helps businesses design their social business strategy, says the coming year is when businesses will truly begin to harness the potential of social applications.

"These technologies are beyond the initial hype stage," he says. "We've had everyone from Fortune 100 companies all the way to small and medium businesses calling us. We started to see an uptick last December as companies began pulling out of the recession. Now as they're budgeting their social initiatives for 2011, it has the potential to be twice as big."

Already, there have been social media marketing homeruns, like the viral videos for Old Spice body wash. Or the Naked Pizza franchise, which derives 20 percent of its sales from tweeting. Or Blendtec's "Will It Blend?" comic videos, showing a "scientist" destroying everything from iPads to BlackBerrys in the company's high-powered blenders, which have pushed sales up 700 percent. Or Burger King, whose Subservient Chicken and Whopper Sacrifice Facebook application have made the fast-food chain a social media gold standard.

For the most part, that's all slick marketing. We have yet to really see how social media will reshape business--but we are starting to get glimpses of that future. Adam Kidron, for example, says his Manhattan burger joint, 4food, would not exist without social media. The health-conscious eatery, which opened in September, is based on customization: The center of the burger is popped out like a doughnut hole and customers choose from a variety of "scoops" to plug the divot (from cheddar grits to veggie sushi).

4food's Adam Kidron
4food's Adam Kidron

"Consumers are increasingly sophisticated and have very diverse palates," says Kidron, who plans to open 11 more stores in the New York area before expanding throughout the northeast. "We asked ourselves was there a way of creating a better product that was more customizable to the consumer's taste? Once we'd gone down that path, all the social media aspects came in. If a consumer creates a new product, it has to be saved in a database. It has to have a new name. Then we have to figure out how to sell it to other consumers. Really, social media is part of the fundamentals of the product."

In fact, Kidron and his team have a cradle-to-grave social media strategy for the 4food burger. After customers design a sandwich on one of the iPads placed around the restaurant or on their home computers, they then name their burger and save it in 4food's custom point-of-service database. If they liked the burger, they can post their creation directly to Twitter or Facebook. If they really like their burger, they can create a YouTube commercial, which will display on a 240-square-foot video wall in the store, along with Twitter feeds and other social data. If another customer buys their Hawaiian Gorgonzola Explosion or Edamame Stuffed Tsunami, the creator gets a 25-cent credit in their 4food account.

4food's concept may seem gimmicky, until you consider Burger King's "Have it your way" promise to customers, allowing them to customize a burger from a limited list of tomato, lettuce and condiments. Social media technology has helped 4food cater to a range of tastes that would be unfathomable in a traditional restaurant.

"The idea that social media is some kind of fad is ridiculous," Kidron says. "It's how we communicate. New companies will have social media in their DNA. Some will do it badly, some will not be quite right, and some will change the way things are done. The most important thing is to make sure that social media has a unique purpose and is not just an adjunct or gimmick."

Beyond Facebook and LinkedIn
Facebook, Twitter and LinkedIn are the major arteries of the social media world, but there are few options for customizing or managing the massive applications. Literally hundreds of developers have stepped in to help users optimize and keep tabs on their social media investment. Here are some of our favorite tools for transforming your social network from a frustrating black box to an open book. --J.D.

HootSuite: This social media dashboard lets you coordinate and keep track of company-wide tweets, monitor mentions of your brand or company on almost any social networking platform and even reports the results of your efforts in real time. HootSuite is free, but HootSuite Pro, which lets you manage unlimited accounts, costs $5.99 per month.

CubeTree: This tool allows you to create a social network within your business. Employees can collaborate on wikis, create polls, monitor status updates and collaborate and comment on social documents. CubeTree is free, though an enterprise service allows 1GB of storage per user and costs $5 per month.

CoTweet: This stand-alone application coordinates a team of tweeters writing on one corporate account. Essential for companies that want to speak with a unified voice through a single Twitter handle or companies that want 24/7 social media engagement. Free.

UserVoice: This application allows businesses to post customer feedback and ideas on their websites. Other visitors are then allowed to vote the comments and ideas up or down, and site managers are able to reply directly to customer problems. Basic package is free.

Building a new enterprise from the ground up using social media is much simpler than retrofitting it into a long-established business culture. "I think what will happen, as companies get increasingly social, structural stuff will have to change. Older companies' silos haven't changed for a long time," says Maggie Fox, CEO and founder of Social Media Group in Toronto, a full-service social media agency, which has led some of the world's largest businesses into the social media world. "At the C-level management, they have to plan and understand how it will reshape their business and change their management efforts."

Surprisingly, some of the largest businesses in the world have been quick to adopt social media. After a miserable 2005 and 2006, when bloggers coined the term "Dell Hell" in regard to quality-control issues and videos of self-immolating laptops made the rounds on YouTube, Dell computers began to reach out to consumers on the web. After initially causing an Internet uproar by saying that Dell did not respond to bloggers, the company reversed course. It began its Direct2Dell blog, which gave a human voice to the company, and it even sent out technicians to solve the problems of the most irate bloggers.

Dell now is a model of customer engagement. It closely monitors discussions on technology forums and LinkedIn and steps into the conversation to answer questions. Its IdeaStorm website has generated more than 420 customer ideas that have been implemented. Developers of their Dell Mini notebook even fielded design ideas from interested consumers through IdeaStorm and a dedicated Twitter account.

Starbucks has earned kudos for a similar program. The MyStarbucks-Idea blog connects 50 representatives from around the company with consumers who submit suggestions for improvements. The reps review the ideas, and the best make it into the store, like the Venti-sized travel mug and reusable rubber cup sleeve. Starbucks tries to keep a unified voice and has only one official Twitter account, which it uses to answer questions from 1 million followers in real time.

One reason social media has permeated these companies is that employees, and not necessarily IT departments, are powering the agenda.

"Social media is driven primarily by a Gen Y tech perspective--if employees don't find tools to do their jobs at work, they'll bring them in from the outside," Fox says. "IT needs to be more nimble and learn to leverage that behavior."

German business software company SAP, one of the largest software companies in the world, followed that bottom-up approach with great success. Its SAP Community Network, which has more than 2 million members, is one of the corporate world's most robust and has been operating since 2003. More than 5,000 members, including customers, partners and outside developers, blog on the network, creating a huge database of feedback for the company. Seven hundred other members moderate tech-focused conversation threads, covering topics from scripting languages to sustainability. A constant flow of webinars and e-learning materials keeps everyone in the community up to date. Not only is the network a valuable resource for the companies, clients and thousands of employees, it's created an extended culture.

"People are more passionate about working with SAP. We've created a community of enthusiasts," says Gail Moody-Byrd, senior director, marketing for SAP community networks. "And it's given us the ability to upsell and cross-sell existing customers."

Now the company is stepping in with a small amount of governance for the blooming network, and it also has created an office to help codify the lessons learned from its experience. The idea at this point is not to keep growing the network but to get more community members to engage. Membership numbers aren't the true measure of a social network, Moody-Byrd says, but the number of people who actively contribute.

Not only can SAP employees now keep tabs on what other divisions are doing, they also can collaborate on ideas with customers and colleagues through forums and blogs. Internally, SAP uses social networking software to create intranets. Social media integration will be featured in its business products. No part of the company has been untouched.

The bottom line: The network has created client loyalty to the SAP brand, and it also has helped the company generate narrowly targeted leads for product sales, with record results.

"It used to be organizations could create a brochure and push it out and hope people would visit the website and click and register and then that would be followed up by a salesperson," Moody-Byrd says. "Now we're unbundling the brochure. That changes the role of marketer from creator to conductor."

Perhaps the greatest hesitancy about social media, the one that prevents many companies from embracing it, is the fear that the technology will morph overnight--that a new Twitter will take off, or Facebook will be abandoned for something new.

Aaron Strout, CMO of Powered, a social media agency in Austin, Texas, says the general outline of social media has been drawn but that social media will develop a more open architecture. Instead of having your profile locked into Facebook, an open system would act more like e-mail, where users own their profiles in the way they own their e-mail addresses and can use them in whatever networks they choose. He predicts that in the next few years, systems can verify users' real-life identities, bolstering confidence in social networks.

"There's so much information out there right now, and no one really knows how to separate the wheat from the chaff," Strout says. "This does take a leap of faith, especially when lots of CEOs, CTOs and CFOs are not even sold on social media yet."

The tools may come and go, but the concept is so basic, it's almost hard to imagine the digital world heading in any other direction. As Kim of Dachis Group says, "Being social is fundamental to the nature of human beings. We want to use whatever channels we have to communicate, whether it's smoke signals or the net."

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