Social Sigma is the use of social networks to improve products and services. I first talked about it here. I counseled CEOs to pay attention -- social will represent an important new font of data and feedback for product development and refinement.
Forrester's data reveals the growth of social critiques -- the front end of Social Sigma. 6% of online Americans post ratings and reviews of products at least monthly, up from 5% last year. 25% of online adults read these ratings and reviews at least monthly. The trend is more pronounced for young consumers aged 25-34, 32% of whom use reviews every month to make purchase decisions.
As shown in Forrester's graphic on the left, consumers are using diverse channels, led by Facebook, to voice their opinions online.
What does all of this mean about Social Sigma for large companies?
1)Tune in. This may sound obvious. But Forrester estimates that one in five companies do not participate in the social realm, and another one in three have no coordinated social strategy. This means that more than half of you are unprepared to handle Social Sigma. Companies work in three dimensions -- social needs to become the fourth.
2) Tune in lots of stations. As shown above, social feedback isn't restricted to one or two sources -- you're going to have to listen to a wide variety of sites to create a full picture.
Quickly: Mark Zuckerberg's skills as a CEO are overrated.
Content: What can Mark Zuckerberg, CEO of Facebook, teach other CEOs? Not very much. To date, he is a one-trick pony -- a leader who has expertly refined and polished one very, very big idea -- remaining unproven beyond the borders of that idea.
Zuckerberg's media profile vastly overshoots his abilities. David Kirkpatrick’s The Facebook Effect describes him as ". . . a natural CEO" and ". . . a visionary business leader." In the October issue of Vanity Fair, Zuckerberg is named No. 1 in the magazine’s power ranking of the New Establishment, just ahead of Steve Jobs, the leadership of Google, and Rupert Murdoch. The magazine declares him “Our new Caesar.” The movie The Social Network portrays him as the successor to Bill Gates.
If you're a typical CEO, you've probably had a few nights where you lay in bed pondering where all that money your company spends on technology goes. If you've studied your CIO's budget, you may have asked the question, "What are these software maintenance contracts, and why the hell are they so damn expensive?" Or you may have questioned why your company has to make large capital investments every four or five years to buy new switches for your global private network. In short, you may wonder if you're paying too much for technology and if your vendors are treating you fairly.
Now, is there a dirtier word in the CEO's world than "antitrust?" CEOs never like to be told what to do, and I'll include myself in that group. CEOs focus on increasing revenue and profit -- the big always want to be bigger, and they don't want the government or anyone else telling them they can't grow.
But if you look at history, antitrust has generated benefits for your company. Theodore Roosevelt is arguably the father of 20th century American capitalism, through his fight to reduce the power of concentrated monopolies, then called trusts. If your corporation is based in the US, it may have been founded under the protection of Roosevelt's antitrust umbrella. In 1969, the Nixon administration pressed forward with action against IBM, stimulating the company to unbundle software from hardware. This sparked the formation of a new market for independent software companies -- their products lie at the heart of your operation today. Ronald Reagan's administration used antitrust to break up the US phone monopoly AT&T, setting the stage for sharply lowered long-distance pricing for your company.
Enough with the history lesson -- what does this mean to you? Let's face it: You and your CIO want two things: 1) reasonable, competitive pricing, and 2) new technology that could make your operation more efficient. From 1980 to 2010, the number of tech companies in the Fortune 500 increased 115%. But there has been increased concentration in some markets -- enterprise software, network equipment, and systems providers (the big vendors that can "offer it all"). The latter category has fallen from 12 companies in 1980 to seven in 2009.
So don't be surprised if regulators put their antennae up and prepare to use antitrust to ensure that: 1) prices for users of technology (especially at the enterprise level) remain fair, and 2) markets remain open, enabling new technology companies to blossom. Remember what happened to the car industry in the US? When it boiled down to three players, it began a long, slow slide toward mediocrity. A plodding tech market dominated by a few big dumb companies would be disastrous for your company -- and for the economy.
The next wave in technology will consist of applications that seamlessly leverage the power of the local device (a smartphone, a PC, a tablet), and the power of the Cloud. iPad apps are the best early example. This model will challenge two old approaches: 1) the Microsoft model of applications running locally, and 2) the Web/Cloud model with applications running remotely. App Internet incorporates elements of both and combines them to create an improved experience.
Despite its efforts with Android, Google makes approximately 98% of its revenue and 100% of its profit from old model two: Web/Cloud. And that approach heavily relies on the segment of basic technology that is improving in price/performance at the slowest rate: the network. In contrast, processors and storage (the technologies powering local devices) are improving at much faster rates.
Google wants you to run your applications (search, mail, calendar) at a remote server, and in the process continually move all your bits back and forth across the network (with ad impressions delivered with each to and fro). This bandwidth-hungry approach makes Google a powerful ally of Verizon. And it explains why Google wants to raise network prices in the future and potentially give itself a network cost advantage -- because its model won't ultimately keep up in price/performance or popularity with App Internet.
Like most CEOs, you're probably feeling good because your company finally has a great Web site. But don't get too comfortable. The way you connect to your customers is about to change again...
Two ways of computing have dominated over the past 20 years. The first I'll call the "Microsoft model" -- where local personal computers do most of the work. The second model is the Web/Cloud model, in which most of the work happens on remote servers. Both are outmoded. The Microsoft model fails to leverage the economies of scale in the Cloud; Web/Cloud fail to leverage the exponential growth in the power of local storage and processors.
So what comes next? Something I call the "App Internet." In this model, powerful local devices (PCs, smartphones, tablets) run applications that simultaneously and seamlessly take advantage of resources in the Web/Cloud. If you want to see this model in action, check out iPhone and Android applications.
If you're a typical CEO, you probably find design to be somewhat of a mystery. In a thoughtful moment, you may have pondered whether there is a quantifiable return on the design of your products.
Here's one case where design has massively inverted the economics of a business.
Nokia and Apple reported Q2 earnings two weeks ago.
Apple offers two phone models. In the second quarter, the company sold 8.75 million iPhones for $5.3 billion in revenue. Forrester conservatively estimates that Apple's net profit in the phone business was $1.1 billion, for a net margin of approximately 21%.
Nokia offers over 86 different models of cell phones globally. The company sold 111 million phones in Q2 for revenue of $8.8 billion. We estimate its net profit in the phone business to be $286 million, for a net margin of 3%.
How can this be? You can point to Apple's stranglehold of AT&T, or its retail stores, or its formidable brand. But all of those advantages are muted without one essential element: design. Of hardware, of experience, of software, of subtlety.
Obviously, we got the shipment forecast wrong -- it looks like Apple is on track to deliver between seven to ten million iPads this year. People may have come to the same conclusion I did -- the iPad is an important executive tool, differentiated from the PC and the smartphone.
The iPad is my meeting aid. Board sessions, client visits, or internal operational reviews invariably turn to digital -- the iPad gives me access to that world. Someone refers to a client -- I can quickly look at their Web site. There's a guy sitting next to me from Goldman Sachs -- I quietly look him up on Wikipedia and remember that we met 10 years ago (and that he's running Carly Fiorina's campaign in California). A client brags about his company's iPhone app -- I can quickly scan it.
Phones and PCs don't perform well in this role. The phone's screen is too small -- and its presence signals that you aren't paying attention, you are rudely checking email. PCs don't work in meetings because the screen acts as a barrier between you and other participants. Using a PC in a meeting subtly lowers your status -- you devolve from thinker to clerk typist when you swing that screen open.
Q: "Are customers really interested in what the CEO thinks? Aren't they more interested in the message from the company?"
A: They're interested in both, as long as the CEO has something enlightening and valuable to say. Hey, why buy products from a company run by a schmuck?
Question: "Is there any data that shows the ROI of having a social CEO -- or do they not want to be measured?"
Answer: The CEOs that I hang out with are measurement-crazed, and that's part of the problem. They may use the squishy measurement of social return as an excuse not to do it -- and that keeps them from gaining the "soft" returns -- fortifying the brand, attracting new customers, retaining customers, and winning new employees.
Q: "How much do you need to monitor your CEO's blog? And how is that done? It can't be easy."
A: The Social CEO should have a strong support team -- that monitors and reviews Twitter and blog traffic at least every 24 hours.
Q: "What are the ways to build followers, especially for B2B companies?"
CEOs are not social, for good reasons. But I believe that some should be -- as a means of talking and listening to customers, attracting new employees, and strengthening their company’s brand. So how should CEOs do it?
Start with the POST methodology:
1) People. Target the CEO's audience.
2) Objectives. Create a clear reason for the CEO to be social.
3) Strategy. Establish how many times the CEO will be social per month; who will support the CEO; who will teach and coach the CEO.
4) Technology. Decide what technology platform is appropriate for the CEO.
Here are my recommendations on POST for the CEO:
For people, have the CEO focus on talking to and listening to customers. He or she is already doing this (if not, you've got bigger problems) -- so no leap is required. Bill Marriott from Marriott International and Tony Hsieh from Zappos lead this charge.
Are CEOs social? No. Are there good reasons they aren't? Yes.
Which brings us to a third question: "Should CEOs be social?"
1) The CEO has something valuable and distinctive to say. Forget the corporate vapidities or pablum — the world can get that from your press releases or company site. But if the CEO has the urge and facility to be helpful, illuminating, interesting, original, and insightful, open the social valves.
But keep it in the distinctive voice of the CEO. Your customers want to know the CEO's approach before buying your products; a prospective employee wants a window into their ultimate boss's brain; and a prospective investor wants to research the CEO's philosophy before buying the company's stock. Let the CEO be the CEO.
2) The CEO is prepared to navigate thorny and unique restrictions. These come from regulators, risk-mitigators, company message concoctors, and lawyers. You can draw inspiration from the outspoken meanderings of Mark Cuban. But remember — he's not running a public company.
3) There is an audience that will, over time, tune in to the CEO's social message.
4) The CEO employs a specialized strategy for social — what I call "social light." This is a limited but powerful social profile — I'll explain in my follow-on post.