Digital Leadership Group Blog

Published Friday, 30 January 2009 on www.bbc.co.uk
By Tim Weber
Business editor, BBC News website, in Davos

It is not that the internet is a particularly recent invention. It has even had its very own economic crisis. So why are companies still struggling to engage with it?

Of course, every company worth its salt has a website, not least those who have sent their executives to the World Economic Forum in Davos. But the discussions here suggest that many companies are still struggling to move beyond having a colourful website towards really using the internet to their advantage. And to make things worse, hardly any company knows how to cope with the rise of social media – the Facebooks, Twitters, blogs and YouTubes of the digital world.

Digital confidence
Getting the web right starts with the basics: spam, privacy and fraud.

“The internet is seen by many [consumers] as an extremely dangerous place,” says Thomas Stewart of consulting firm Booz & Company. Companies have to tackle the “killers of digital confidence”, he says, from issues such as network security to fraud prevention. This is not just about having a secure website. It begins with basic issues such as being honest and upfront with your customers.
Networking website Facebook suffered a public relations disaster when it started to mine its users’ personal data to show them targeted adverts without warning them about it. In the UK, telecoms firm BT had a similar meltdown over the use of the much-criticised advertising platform Phorm. It is not the adverts that are objectionable, it is not being transparent about it.
Google’s online e-mail service Gmail also shows targeted adverts, but warns customers at sign-up how it works.
Even Amazon has started to explain why it recommends certain products to its customers (“Recommended because you purchased…”). It is not about legal compliance, say the analysts at Booz, it is about getting it right for the consumer.

Losing your business model
The problem is that many companies do not even get that far.

“Most people get the internet only because of a crisis, because they really have to,” says David Brain of PR giant Edelman, pointing at business leaders such as Michael Dell and Bill Gates of Microsoft. Companies that do not get it keep making life difficult for their customers, for example mobile or cable operators that confine customers to their own content offering.
“Many customers want that,” protests a cable executive, “they want their children to be in a safe environment.”
It is a fair point, but most customers have grown up, and all previous attempts to confine them to a walled garden have failed.
Another perfect case study is the media sector. One of the debates here in Davos demonstrates vividly how helpless many old media companies feel when they realise that their audience is disappearing into the digital vastness of the internet.
Hardest hit, of course, are print media. A recent study in the United States by Pew Research suggests that last year more Americans turned to the internet for news than newspapers (with television still ruling the roost).
As old media struggle with new-fangled things like “search engine optimisation” to ensure they stand out in places like Yahoo and Google News, many media leaders appear to be reduced to criticising the editorial quality and credibility of blogs and other online news sources.
Meanwhile, in the real world, the shift goes even further. In China, for example, more people now get their news on mobile phones than newspapers (never mind the fixed-line internet) and making news look good on a very small screen is an art in itself.

The rise of social media
Potentially most disruptive of all, though, is the rise of social media.

“The first thing that companies learn when they start using the internet is that they are not in control. They find it really difficult to abandon their control mindset,” says Mr Brain, who compares the experience to “crowdsurfing”.
But what are social media? At one Davos session, 10 prominent exponents of social media – from former Facebook and Linked-in executive Matt Cohler to Wikipedia founder Jimmy Wales and Techcrunch editor Mike Arrington – came up with 10 different definitions.
The most popular definition proved to be “human interaction in a virtual world”. Hiding behind that description is a teeming jungle of social networks that allows people instant communication with hundreds or thousands of “followers”, “friends” or plain old readers.

How not to use social media
How does it affect companies? Once your unhappy customer would have told 10 friends. Now he can tell 500 and, if you are unlucky, his complaint will be the first thing that potential new customers see when they search for your product on Google.
There are other pitfalls. In one recent example, an account manager with a well-known PR company visited the headquarters of FedEx in Memphis. On the way to the company, the hapless executive told his friends on Twitter that he would rather die than live in Memphis. The trouble is, FedEx people care deeply about their hometown and took offense. Online arguments ensued and a less-than-140-character message soured the relationship with one of the PR firm’s most important clients.
Ironically, the PR had come to Memphis to teach the FedEx communications team about using social media.

Under the radar
The FedEx people were actually trying to do the right thing. They tried to understand social media.
Most companies, though, have not got a clue. The boss of a company that makes it its business to know about technology admitted that 500 people in his company had signed up to Yammer – a social network designed to collaborate on work issues – before he had even heard that this service existed.
Using such networks can provide a huge productivity boost – or alienate your team if you get it wrong.
Others misunderstand social media and try to take control of them. For example, they run sanitised and boring corporate blogs, from which critical customer comments are purged.
Unsurprisingly, an Edelman study found that corporate blogs have the lowest credibility of all content on the internet.
Failing to engage with social media, all participants in the session agreed, could potentially lead to the destruction of a company’s brand. But used the right way, companies can turn customers into partners, through instant feedback that allows constant product development. Even better, done the right way (and with the right product or service), you can gently persuade happy customers to commend you using social media.
That is advertising that no money can buy.

http://news.bbc.co.uk/2/hi/business/davos/7861090.stm