We Google it

When we want something we don’t just Google a business name. This is one of the first mistakes many businesses make. They believe we’re going to sit down at a desk and type their name into a computer, read what they tell us, believe it, and cough up or turn up.

It simply does not work that way. Now we Google as we think. We’re having a coffee, something pops into our mind and we type that into Google: ‘Is there really more sugar in yoghurt than ice-cream?’

And because you are different from me and Google knows from previous searches what you like or from your IP address what country you are in, even if we put in the same question we will get different results. Google contextualises our search. This is called personalisation. On the upside, the results are tailored, which is helpful in a noisy world with overwhelming choice. On the downside, this can narrow your view.

Say an elderly parent lands up in hospital one weekend when their health takes an abrupt turn for the worse. We are advised that they will require constant professional medical care. Suddenly we need to find somewhere for them to stay. Do we know if they have a will? Insurance? Who manages their affairs?

An initial search may look something like this:

Mum sick 82 years needs home 24/7 professional medical care within 25 km Camberwell.

That’s if we’re thinking straight. We don’t plug ‘The Wonderful Hospice Company’ into Google. We don’t know it exists.

And the first company that comes up from this kind of search (called a longtail search because of the length of the question) and is served up on the front page of Google (the only page that counts) is the one we’re going to check out.

To get on the front page, that company:

• has a web presence
• has a website optimised for the keywords that people use to search for the services it offers (this is called SEO or search engine optimisation), which is likely to place ‘24/7 medical care’ (their need) above ‘wonderful, caring staff and lovely grounds’ (our idea of who we are)
• generates positive recommendations, feedback and conversations in social media networks and the online forums that lead to ratings; social media properties often land on the first page of search results
• puts out good content about their products and services (called content marketing), because this contributes to visibility.

The algorithms that connect you to the information you’re looking for take all those elements into account.

You can have the flashiest website in the world but Google is looking for something more: it’s trying to pull in real responses from real people because this is what makes your search worthwhile.

And 89 per cent of consumers conduct research using search engines. That makes being a part of those conversations, including managing any complaints that might emerge, very, very important.

Not being there is a problem. Being there if people don’t like you is still a problem. So even on the most basic, technical level, being online and engaged has a great impact. But that’s just the start.

We ask friends

Here’s another reason why participating in social media networks is important. People talk about brands and purchases all the time. And we trust those recommendations.

Personal recommendations have always been important — that’s not new. We’re far more likely to trust the opinion of someone we know than an anonymous head of marketing. But what makes those recommendations important is that in other areas trust is on the decline. According to the Edelman Trust Barometer, which has measured trust on a number of dimensions over many years, there’s a clear trend. We don’t much trust journalists, politicians or CEOs, and over time we have come to trust them less and less.

Although the findings vary, the essence is that we don’t trust companies to tell us the truth either. Was this always the case? Possibly, but couple that with the fact that accessibility has taken away the need for gatekeepers and it’s clear that the days are gone when you could declare from a position of authority that something was so because you said it was.

So who do we trust?

The answer is friends. I am far more likely to go to a café because someone whose opinion I value went there and thought the coffee was good than because of the café’s own claims. The interesting thing about trust is that it makes no difference whether the relationship is in a physical or a virtual network. We treat them the same.

The billions of conversations that go on every day in social media networks matter hugely. They influence choices. And the emergence of comparison pricing and rating sites only further entrenches their value. According to econsultancy, 79 per cent of consumers trust online reviews as much as personal recommendations and 73 per cent of consumers say positive customer reviews make them trust a business more. Sixty eight per cent of consumers place greater trust in business with good and bad reviews, and only 12 per cent of consumers say they take no notice of online reviews.

To influence those conversations you have to be in them. You can use social media to acknowledge a mistake or correct misinformation, or to thank someone for a recommendation, further deepening the connection you have with them. While a globally connected world offers choice, it’s also overwhelming. If you’re where your customers are, listening and responding to their needs, you’ve created the basis for relationship.

The baseline

According to the International Data Corporation (IDC), the global online economy, including business-to-business (B2B) and business-to-consumer (B2C) ecommerce transactions, was worth US$16 trillion in 2013. (Note that since US dollars are used in almost all the data on social media drawn on in this book, unless otherwise indicated the currency figures refer to US dollars.) Of this, the global market for digital products and services was around $4.4 trillion.

In 2012 the Boston Consulting Group (BCG) published a report predicting that by 2016 online business would contribute $4.2 trillion to the GDP of G20 nations alone, making it the fifth biggest economy worldwide.

Growth

The underlying message in these and other reports is that whatever the current baseline, digital will grow, and grow. Within the economy there will be some interior decorating. For example, in the retail sector online shopping may grow then shrink back as ROPO climbs and retailers stop just broking brands and instead provide shoppers with a high-quality blended service.

Mature markets are expected to grow annually at 8 per cent, but the runaway story is in developing markets where growth is conservatively projected to be twice as fast as in the developed world.

In the UK the digital economy already contributes 8 per cent to GDP, and BCG expects it will contribute an average 5.5 per cent to the GDP of G20 countries by 2016. That provides some countries with a significant advantage over others. For example, Australian digital growth has been only 3.7 per cent compared with the average of 5.5 per cent. This clearly affects productivity.

The BCG report shows that small and medium-sized enterprises that actively engage consumers online have had three-year sales growth rates up to 22 per cent higher than those that don’t.

A 2013 three-year joint study by French multinational Capgemini and MIT that surveyed almost 400 firms confirmed this large differential. It showed that businesses that are more digitally mature, the Digirati as the report calls them, have a clear digital advantage over their less mature peers. This trend applies across every industry.

The report found that Digirati:

• were 26 per cent more profitable than their less mature peers
• generated 9 per cent more revenue through their employees and physical assets
• generated 12 per cent higher market valuation ratios.

What distinguishes the Digirati is that they make strategic decisions on where to excel in digital. Their technology-enabled initiatives change their internal operations and engagement with customers, and even transform their business models.

The World Bank believes the adoption of digital technologies can be directly correlated with economic growth. They claim that for every 10 additional mobile phones per 100 people in developing nations GDP grows by 0.8 per cent. Similarly, management consultancy Arthur D. Little found that GDP increases by 1 per cent for every 10 per cent increase in broadband penetration.

Productivity

Social media has frequently been cited as contributing to a time-wasting culture that costs countries billions. This has reinforced a style of leadership in which managers create more processes or systems to grab back 15 minutes a day in productive time from each employee.

In the wrong hands such measures create a focus on inputs rather than outputs, appropriate in a manufacturing environment, for example, but not those based on intellectual capital. They can reflect a mindset based on compliance and control rather than appropriate risk management.

The bigger risk is that they prolong a widget-based leadership mindset that will not equip managers to deal with the complexity required to thrive in the digital and social age.

Many employers continue to ban social media at work, viewing it as a waste of time even though there is a significant body of research to suggest it drives engagement.

It’s well recognised, for example, that young professionals value internet-connected mobility over money, and it’s the skill set (and mindset) of these digital natives that employers need.

A recent Cisco study found companies that embrace social media during business hours are more attractive to job applicants in the highly competitive talent pool. But it’s wrong to think of adopting social networking as a concession to Millennials.

Employees currently spend as much as 20 per cent of their time at work looking for information. McKinsey & Co believe productivity could be increased by as much as 25 per cent by social technologies that increase collaboration. It’s a sentiment echoed by professional services multinational Ernst & Young. For one thing, social networking creates searchable content and connections that allow employees to access the right information and people within and across enterprises — fast.

McKinsey Global Institute (MGI) estimates social technology could increase professional productivity by up to 25 per cent. But MGI says that while 72 per cent of companies use social technologies in some way, very few are anywhere near to achieving the full potential benefit, and the most powerful applications of social technologies in the global economy are largely untapped.

Professional services powerhouse Deloitte also believes social technologies will be integral to recruitment and HR. Deloitte itself integrates gamification features such as badges on its top-scoring leader boards at its Deloitte Leadership Academy. Deloitte believes that letting employees share accomplishments on Twitter and LinkedIn is hugely motivating, particularly in a world where it’s critical to maintain a personal brand. A caveat here is that a trusted personal brand does not mean just pushing personal strengths. As author and co-chairman of Deloitte’s Center for the Edge John Hagel says, sharing a more complete picture of who we are, including vulnerabilities and weaknesses, is critical for creating trust. Likewise CMO of Extreme Networks and Huffington Post columnist Vala Afshar says that authentic leadership is an important characteristic of building social influence.

Interestingly, employee wellbeing is typically high on the list of factors believed to increase individual productivity, but the role of social media in driving engagement has not, to my knowledge, been directly investigated.

Going forward, productivity measures will need to take into account the impacts of the connected ‘digital and social ecosystem’ on motivation, which are not easy to quantify.

The value of digital to productivity means measuring direct contributions from pure online businesses but also the indirect activity of mixed businesses, including the use of social media for engagement, sales and customer service. This is a paradigm shift that demands a change in the mindset of business leaders that starts with recognising that in a hyper-connected world, connectivity itself is an enabler and a multiplier.

Shopping

Here’s another reason having a social media presence matters: people online 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 (who people vote for, say, or what accountant they use), consider that this year ecommerce is growing at a staggering 20 per cent.

Ecommerce over Thanksgiving in the US in 2012 rose 26 per cent from the year before to $1.042 billion, the highest revenue generator being the online store Amazon. This was modest compared with the $3 billion Chinese consumers spent in 24 hours on China’s equivalent online marketplace, Taobao.

According to Nielsen, 70 per cent of active online adult social networkers shop online and 53 per cent follow a brand. The internet marketing news organ Marketing Land tells us that 91 per cent of people have gone into a store because of an online experience; and 62 per cent of consumers end up making a purchase in-store after researching it online. This is the ROPO phenomenon mentioned earlier. But it’s only going to be a business benefit if your website and social media ecosystem create that opportunity.

Forbes writer Steve Olenski notes that 78 per cent of consumers claim the posts made by companies on social media influence their purchases, or as high as 81 per cent if the comments are from friends in social networks.

Small to medium-sized enterprises (SMEs) lag behind better-resourced organisations such as the Fortune 100s, which have taken these trends to heart:

• 87 per cent of Fortune 100 companies use social media
• 75 per cent of Fortune 100 companies are on Facebook
• 73 per cent of Fortune 500 companies have a Twitter account
• 66 per cent of Fortune 500 companies have a Facebook page
• their corporate YouTube channels average two million views
• Fortune 100 companies have multiple accounts per region (one size does not fit all, and culture counts)
• 50 per cent of Fortune 100 companies have a Google Plus account
• 25 per cent are on Pinterest.

Depending on where you look, SMEs come in around the 30 per cent level. SMEs face a number of barriers, ranging from lack of time and resourcing to a lack of understanding of social media.

Of those that are in social media, 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 by adapting websites for mobile to 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 farming it out to the marketing department that outperform their peers.

In his excellent article ‘The Operating Model That Is Eating the World’, the CEO of Undercurrent, Aaron Dignan, suggests 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 multi-million-dollar markets (software companies Medium, Hipchat, Circa, Outbox and Quirky through to giants like Amazon, Google, Twitter, Facebook and PayPal) that dominate the online sphere.

They have in common 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 forbears in the software industry they are nimble and are able to tap into (or create) customer demand and collaborate with future users, giving the product wings.

Amazon is a global marketplace. Facebook and Google are effective online advertising companies. They understand the power of digital in its entirety and in particular how cloud, mobile and social computing and predictive analysis together can produce massive competitive advantage.

Categories like real estate or car services (compare Uber with conventional taxi services) 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’.

Companies with lower capital and operating costs and more flexible and intelligent systems and platforms can be a huge threat.