Emily Tan
Jul 30, 2012

CEOs need social media, but many fear it: IBM

GLOBAL – The world’s CEOs believe that in the next five years social media will push past websites, call centres and channel partners to become the No. 2 way to engage customers (after face-to-face communications), according to IBM’s latest Global CEO study.

CEOs range from sceptical to terrified on social media
CEOs range from sceptical to terrified on social media

This opinion varied widely across industries with over 70 per cent of CEOs in education, telecommunications and retail expecting social media to be a key channel for customer engagement but only 34 per cent of CEOs in industrial products thinking likewise.

“We’re approaching the stage when almost everyone will have to figure out how to use it to conduct business successfully,” a US CEO from the financial markets told IBM.

IBM’s fifth biennial Global CEO Study was based on face-to-face interviews with 1,709 CEOs and senior public sector leaders worldwide from September 2011 to January 2012. The CEOs led organisations in 64 countries and across 18 industries. To smooth any geographic distortion, CEO responses were weighted based on actual regional gross domestic product (GDP) for 2010.

For the CEOs IBM spoke to, social media’s true value lay beyond communicating with customers and as a source of insight and means of collaboration both with consumers and their talent pool.  

This finding wasn’t restricted to B2C corporations. One UK CEO from media and entertainment told IBM that, “Our B2B customers are also consumers of social media; you cannot split the two.”

Another CEO, this time from Japan’s electronics industry, described how his organisation is helping B2B customers innovate by “incorporating the end user’s voice directly into product development.”

Gathering this insight and acting on it is crucial to business performance. Compared to their peers, IBM found that outperformers have more access to data, greater capacity to draw meaningful insights and a stronger ability to act on these insights. However, almost a quarter of CEOs surveyed said their organisations operate below-par in terms of deriving value from data. In an era of connected customers, the volume and variety of available data can be overwhelming. As an insurance CEO from Hong Kong commented, “Initially, it feels like you’re drinking from a fire hose.”

Despite recognising the use and importance of social media and the data it provides, many CEOs range from sceptical to terrified when it comes to embracing the new medium, finds IBM. Possibly because few are social media users themselves. “We are all scared to death about social media within our industry. We want to start with it. But we’re all just looking at each other, and nothing material is happening,” admitted a life-sciences industry CEO in Switzerland.

“This arms-length involvement puts CEOs in a precarious position, they are making critical judgments about a disruptive technology without much firsthand knowledge,” commented IBM.

Because they are not immersed in social media, these CEOs are in the uncomfortable position of having to rely on the counsel of less-experienced, Gen Y advisors. “CEOs need a feeling for social trends and for the current value change,” explained a financial markets CEO from Europe to IBM. “In this context, a dose of humbleness can help.”

The trick for CEOs is to learn while leading from their own networks. “They will need to assemble those networks like portfolios—with generational, geographic, institutional diversity. Then, they’ll need to help their organisations do the same,” advised IBM.

This need for knowledge is an opportunity for the CMO to step up to the plate, observed IBM. Based on its 2011 Global CMO study, 'Big Blue' learnt that organisations are still focused on understanding markets, not individual customers, with more than 80 per cent of CMOs relying on market research and competitive benchmarking.

“While these traditional sources of information are still valuable, they offer little insight into individual customers,” commented IBM. “In contrast, blogs, consumer reviews and other unstructured online sources can reveal customer sentiment at a personal level, in context.”

Unfortunately this is a resource relatively few CMOs are exploiting, with only 26 per cent tracking blogs, only 42 per cent tracking third-party reviews and only 48 per cent tracking consumer reviews.

Non social media savvy CEOs could also be hampering their company in the war for talent. “To connect with the new generation of employees,” a banking CEO from Argentina acknowledged, “We will need to change communication methods. We are the e-mail generation; they are the social network generation.”

Because the economic environment is evolving at such a high pace, CEOs are placing higher priority on talent that is adaptive and collaborative. To best enable this talent however, internal communication structures in organisations must change to enable more openness, a trait that IBM learnt was 30 per cent more prevalent among companies that were outperforming their peers.

To take action, the study found that 52 per cent of CEOs surveyed intend to make significant changes to their organisations to improve internal collaboration. Those ambitions are even higher in some industries: 63 per cent in professional services, 60 per cent in healthcare and 59 per cent in education and automotive. These CEOs are not leaving these changes up to their HR department, they intend to involve the entire C-Suite and personally lead this shift.

Moving forward, companies can take action by “listening lavishly and responding with focus” both to consumers and employees, recommended IBM.

“The goal of understanding customers better is not to learn more so that you can barrage them with more offers. Instead, it’s so that you can be discriminating and perhaps offer less—exactly what this individual customer needs, precisely when and where he or she needs it,” said the study.

Companies should also focus on capturing what their employees see and hear and work on establishing easy ways to channel clues employees observe in their customer interactions so it can be incorporated into analysis.

Finally, rather than fear the social media and mobile revolution, brands should be revelling in the technological wave and taking full advantage of it. “Organisations have a tremendous opportunity to create value out of immediacy,” noted the report. Examples in the study include virtual pop-up stores that appear when consumers are at specific locations such as shopping malls or tourist attractions.

Brands should avoid thinking of mobile as a separate channel but exploit augmented reality to make mobile part of an “integrated, multichannel customer experience,” said IBM.  Mobile also enables greater connectivity with the consumer so offer value that stands out, is meaningful and tailored to the individual, said the study.

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