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Remembering to use good business sense in social technology

June 27, 2011

It seems there are so many people trying to push business into using social media, that too many are forgetting to apply good old-fashioned business sense. And the results can be disastrous.

I’m currently reading Gary Vaynerchuck’s ‘The Thank You Economy’. It’s a fantastic piece, during which he explains how big businesses, who have spent the last 25+ years trying to make everything so damn cost efficient that you now can’t even talk to a human being when you want a question answered – are now grappling with the reverse phenomenon that social media has created – which is to say, that cost efficiency counts for naught when someone just wants a simple question answered.

Yes indeed – people power has returned, and businesses simply cannot afford to be the inanimate monolith and rest on their laurels – unfortunately for them, unlike the inanimate carbon rod that saves the space shuttle from imminent disaster in that long-ago episode of the Simpsons, their customers’ affections and loyalty must be earned at a one-on-one level.

Brand value is therefore calculated as the sum of the individual representations of your brand experience in a social technology day and age, and not as the birds-eye view that brand managers have traditionally used.

So on the one hand, big business did what business must do – they looked at the bottom line. What they failed to do however was to continually invest in their relationships with human beings, who were otherwise known on their balance sheet and annual reports as ‘revenue’ and nothing more.

But on the other hand, we’ve already seen the start of a shift in online metrics. We stopped worrying about site traffic and page impressions, and started thinking more about engagement metrics, like time on site and so forth. Now, we’re tracking things like the number of times something is shared with others, the number of times it is ‘liked’ as well as a whole host of other complex calculation of user engagement.

This has resulted in an army of social media gurus and advocates who aggressively push business – big and small – toward disaster, by insisting that ‘if you don’t get involved in social media, you won’t have a business in 5 years.’ To be clear, I actually do believe that to be true. The other side of the coin however is that if you rush into social media too quickly without planning it properly, you still won’t have a business in 5 years.

Businesses who rush into any form of social technology without some kind of an understanding of how that will either grow or completely replace their revenue base is insane.

Just look at print media if you don’t know what I’m talking about. The slow but inevitable leakage of revenue from their classifieds products means that in a few years, there simply won’t be the revenue to sustain their high overheads – things like printing presses, offices – and journalists, the very thing that creates value for readers.

Fairfax and News Limited in Australia, bitter rivals, have already started discussions to share print facilities, and massive cost cuts have been made to the editorial function at Fairfax in the last few weeks to make things as streamlined as possible.

Their innovations around providing great content via iPad apps, paywalls for online content and so on might – MIGHT retain some of their circulation revenue. It will retain some of their readers. But it will never recoup the hundreds of millions of dollars of revenue that traditional newspaper classifieds brought them. So companies like this can be forgiven for spending their time trying to save as much revenue as they can, before they realise that the iceberg they have struck – runs deep.

For companies like this, social technology is a great opportunity – but doesn’t address the basic business challenges they need to address.

This blog has drawled on for a bit now, so stay tuned for a later installment and I’ll put some thoughts down about how this applies to small business…

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