Stay committed to your decisions, but stay flexible in your approach.
- Tony Robbins
Social media and the risks for Boards of Directors
September 19, 2014
An important part of the remit of Boards of Directors is the appropriate assessment and management of risk in the organisations they oversee. This can range from strategic risk in say the markets where they operate to the more day-to-day operational risks in the business.
In recent times, the digital strategy of an organization has been more prominent in discussions at the Board table. There is no doubt that Boards have taken a sharper focus on the issue of risk in this arena.
Not just about upgrading the website
Some organizations have taken a minimalist approach to their broader digital strategy. For instance, some view the establishment or refinement of their website as evidence of a clear digital strategy. Ten years ago the establishment of a website for a business was seen as being right out there. But today this is seen as providing table stakes only. This is but one small step along the journey and one that can be considered as foundational only.
But today social media challenges organizations and Boards to lift to a whole new level. This is especially the case because social media is characterized by unstructured data and information. The instant, global and transparent nature of social media heralds enormous social change, and social change in turn means business change.
It changes the playing field in regards to what information is out there about organizations, their people, and their services and products. This is particularly so for those organizations that deal directly with consumers. This in turn creates a different risk profile for organizations, and for their Boards.
For example, in assessing market sentiment, a traditional consumer survey would typically be issued to a range or sample of customers with structured questions and various responses set out possibly in multiple-choice format. Such surveys are popular and indeed still essential. But social media creates a new ball game in that it generates huge amounts of unstructured commentary and dialogue. It is about people talking and saying what they think, some of which can be quite direct and in some cases confronting. Boards are rightly focussed on managing any downside risks of social media exposure and criticism.
Another dimension of risk regarding social media
But there is also another dimension of risk that Boards need to confront regarding social media, namely the risk of not moving quickly enough to capitalise on the opportunities presented by social media.
For organizations both large and small, the social media approach needs a commitment beyond merely a token presence. Businesses need to map out a strategy around their social media approach and execute well against it. Surfers know that catching a good wave requires keen judgment around positioning, timing, and agility. Each of these needs good execution for success, and this is particularly the case with social media. What track will your business embrace around social media and how will you shape that decision? Will it be a deliberate decision process or will it happen by default? How will you craft your positioning, timing, and agility?
Understand where you want to be positioned
Organizations need to consider and be very clear on where they want to be positioned in social media – minimalist involvement vs extensive – and how this will drive value. This may need some thought if the organization is a mixed business or conglomerate. For example, a bank that is involved heavily in consumer banking and corporate lending will need to consider an approach that is tailored to each of the two parts of the business. In this instance, a one-size-fits-all approach will not work.
The social media positioning will also depend on what is happening in the market and also the activities of competitors. For instance, the need to rapidly catch a competitor’s dominance in social media presents a very different risk profile than a more measured and evolving approach.
Ensure the strategy is understood and supported at the Board level
The development of a business strategy around social media must take into account a number of factors. The first of these and probably the most fundamental is the degree of connection appropriate to the organization. This is a fundamental but basic element for business and social media. For instance, the use of the “like” button on a Facebook page provides such a level of connection between consumers and an organization. It provides a channel for some basic connection with consumers and stakeholders, albeit a somewhat passive one. It could be that after a “like” very little feedback happens that is visible to the consumer. The question is how much is that “like” really worth to the business and is it helping the push for more sales and business growth? Many organizations are positioned in this somewhat basic level of social media activity. Whilst this may be an entry point for businesses into the world of social media, it is relatively passive and largely a one-way process. But it is also relatively low risk.
A second and more advanced element involves engagement, which is far more proactive and dynamic. This consists more of a two-way dialogue and flow of commentary and feedback. This approach invites and expects the two-way dialogue, but it means there is far more investment needed in the management of the process. For example, who is the person(s) in the organization providing the responses to the comments from consumers? How is this dialogue managed and what governance needs to be established to minimize risk yet deal with the issues raised? When confronted with this scenario, many Board members and executives feel very nervous regarding the possible exposure of their organization and the prospect of something going wrong in the two-way dialogue. Nevertheless, many organizations are pushing down this path. For instance, data from the University of Massachusetts indicates that in 2013, 77 percent of the Fortune 500 had Twitter accounts with a tweet in the previous thirty days. This suggests that social media is on the map for big business. Businesses involved in the travel and hospitality industries are well versed in this area, and there are many examples of airlines, hotels groups, and restaurants that have developed a regular and well-structured dialogue with their potential and current customers.
The most advanced element to consider in the strategy is collaboration, whereby the organization uses social media to not only connect and engage with its stakeholders and customers but also to effectively collaborate with them in areas such as product and service development. This requires a level of maturity in the use and appreciation of social media and is not for the fainthearted. It challenges organization capabilities in the way it is managed, how it is communicated, and how it can deliver real value. Remember also that this is not just simple commentary and thoughts passing between consumers and the organization. In most cases, it involves a transparent dialogue visible to participants across the value chain. This is still an emerging area and is in various stages of experimentation in different industries. It presents a different level of risk for organisations and how they manage their relationships and information across their value chains. As described earlier, for instance, some retailers have started to use social media to expand their product development footprint and the social media input to enhance their options and opportunities for new ideas.
Three areas of focus are important for Boards in considering the risks around social media:
Consider the risk of not doing sufficient activity in this arena – will competitors move ahead of the game and drive greater success?
Have a clear view of how the organisation wants to be positioned with social media – is it more of a toe in the water or is it a solid commitment to action?
Ensure the strategy is clear and is understood at the Board level – the strategy is about being integrated and well considered, but also about being understood and supported by the Board.
The above material is derived from Matt English's book Grasping Socia Media available at http://www.amazon.com/Grasping-Social-Media-social-journey/dp/149601488X