The Hidden Risks of Social Networks

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Not to throw cold water on anyone’s exuberance, but social networks could destroy your sales strategy, and your company along with it.

Why? Because technology and the Internet propel unplanned situations and events at unprecedented speed. So it’s important to recognize that the same social forces that create significant value also have the power to annihilate it. How you manage the risks will determine whether history will judge you to be a New Media Ninja or another unprepared victim. While new media and social networking present boundless opportunities, no discussion is complete without asking what could go wrong, and what actions should be taken.

Risk Silos



Consider the catastrophic outcome that Bob Furniss shared in which a disgruntled 15-year-old started a FaceBook group called “ACME Tied to Kill Me.”

As he described it, “She outlined her dissatisfaction. Suddenly, there were others who joined the group. Soon there were hundreds of links to personal and business blogs and complaint sites.” Twenty years ago, an unhappy teenager would have limited capacity to disseminate a product grievance, and would not have posed a measurable threat. That was then. This is now. The CRM breakdown likely led to a significant financial problem for the company. How many times do you think Acme’s Director of Customer Support said “Woulda . . . Coulda . .. . Shoulda” when he met with the company’s board?

How did ACME blow it? By failing to manage risks across the organization. CRM risks ARE financial risks. Unfortunately, many organizations like ACME silo risk management in the same way as they do business processes and information. Could this problem have happened if ACME’s VP of Customer Experience warned their CFO that through the Internet, an unhappy customer could singlehandedly undermine her best cash flow projections? Or, if the CFO had considered how events outside of market cycles and interest-rate fluctuations might put her imperil her financial planning? What preemptive actions could ACME have taken? In the absence of such strategic planning, the unprepared ACME managers must have appeared like deer in the headlights to this media-savvy kid.

For companies that value brand identity, social networks create unique risks as well. For example, a vexing trend is for consumers—not marketers—to use social networks to define product and brand attributes. While social media create the opportunity for products to better match required consumer outcomes, this shift in information power underscores the importance of asking the right risk-related questions:

• If we lose control of product designs and life cycles, what strategic risks would we face?
• What if the resulting product design or image is one we don’t want, can’t support, or both?
• What operational challenges could occur if we can’t manufacture the desired products in the right quantity at the right time?

While the operational questions highlight risks that companies have faced and managed for many years, social networks have rendered past mitigation strategies obsolete, so new strategies must be developed.

Strategy risk

In his article, Like On-Demand, the Social Web May Have Unintended Consequences for Businesses, Denis Pombriant highlighted another set of risks. He writes, “My bet is that social computing will provide us with an avalanche of new data from customers that must be analyzed, and that’s where I think we can look for unintended consequences.”

Those unintended consequences are the associated risks of implementing the wrong strategy, or implementing the right strategy the wrong way. According to Denis, one risk is “that we take the new information we collect too seriously and that we fail to perform analysis and challenge the results. If that happens, look for companies running off in strange directions chasing what amounts to unicorns. The odds are that some companies will fall into this self-baited trap…”



Reputation Risk

If you’ve worked in sales for few years, you’ve probably heard a manager in your company say “If we can just get meetings with the right people, our product sells itself.” Clearly, the best products in the world can’t be widely sold if influential people don’t know about them.

Based on that imperative, it’s easy to understand why social networking tools are vital for reducing sales risk.

John Todor explained why in his CustomerThink article, Social Networks and Online Communities Create Elastic Ties and Surprisingly Powerful Pay-Offs: “The power of online social networks comes, not from whom you know directly, but from the people the people you know know. People who actively pursue weak-tie relationships stand to gain substantial benefits. They can quickly take advantage of emerging opportunities, find collaborators, find jobs, find employees and build a pool of advocates.”

Barry Trailer’s blog provides empirical proof:

“For a test, 30 sales executives were selected to interview. Using LinkedIn members of our network were asked to facilitate an introduction to these people we had never met. Surprisingly, 29 of these individuals accepted the request and passed it on to their contacts with a personal note of introduction. More surprising, 23 of those targeted executives (including people in Europe and the Far East) accepted our request, and offered to consider helping our research effort.
In follow up, 18 of the 23 participated – a 60% hit rate! A much more favorable result compared to cold calling.”

But these discussions don’t tell the risk part of the story. As I’ve learned the hard way, prospects hold very high expectations from social connections, and underperformance in the sales process causes backfires that can remain ugly. For example, one company I worked with believed its account executive was so well connected in a prospect’s organization that they didn’t apply customary rigor to navigating the steps to the sale. “No need for account qualification, value propositions, or financial justification because we know Joe through Steve,” they said. They were wrong. Not only was Joe disappointed, but he called Steve and asked “How did you ever get involved with these guys?” Beyond the introductory social connection chit-chat, somebody still needs to sell something. Complacency gets in the way.

Further, I was struck by a certain irony as I read Barry’s findings. Although we admonish our school-age children to be wary of social networking tools on the web, the high ratio of invitation acceptance he describes suggests that executives don’t exercise similar caution (albeit they need to do so for different reasons). Does the risk of a damaged reputation seem so remote that executives readily accept requests from cyber-strangers to endorse them? Will the current success ratio Barry discovered diminish as social networking becomes more mature, and executives learn how carefully-built reputations can become damaged? Will we see a similar wave of caution as we did with chat rooms, FaceBook, and MySpace?



Stay tuned.

(Apologies to Rob Cross for corrupting the title of his excellent book, The Hidden Power of Social Networks.)

4 COMMENTS

  1. Andrew,

    It is a good thing that you point out the risk in social networking. I think we are in the wash between to waves. The wave we have been riding is the transactional economy. The wave in front is a little confusing and hard to put an exact label on, yet. However, clearly it involves a free flowing of information. Customers have access to information about
    products that doesn’t necessary come from the company. And, people network freely.

    I agreed with you that there is a danger in assuming that because we are connected in Linkedin or another networking site, that we have relationship. In the article of mine you reference, one of my points was these are weak ties — ties that might open doors but ties that need to be nurtured.

    Here’s another risk. Companies that choose not to participate the online conversation are not immune from being talked about. In my book, it is better to be part of the conversation. I recently came across a statistic that said “75% of B to B customers contact a vendor when they are ready to buy, only 25% are sold by company initiated prospecting.’ I am in the process of checking this study out but suppose they are even partially right.

    Wouldn’t this suggest that the traditional sales process needs some re-alignment?

    John

    John I. Todor, Ph.D.
    Author of Addicted Customers:How to Get Them Hooked on Your Company.

  2. John: from a sales-process perspective, traditional cold-call selling is becoming an anachronism. This will change the world of service providers as well. In the next three to five years, companies that specialize in telemarketing and selling lead lists will lose share to companies that provide broader lead capture management services.

    Most companies haven’t picked up on the trend you describe, and will need to realign their sales processes to manage the realities of social media. There are a few notable examples of companies that have, one of which I mentioned in my January article “A Tsunami of New Social Connectedness is on the Way”:

    “Beds.com has embraced the Internet’s transparency by enabling any visitor to its web site to read about its customer-service problems along with its customer accolades. The airing of the full thread of the online conversation makes it possible for Beds.com to showcase its commitment to customer satisfaction . . .”

    What Beds.com has done reinforces your point. Companies recognize that they don’t control the flow of information that consumers use to make purchase decisions. As a response, they have featured this reality in innovative ways.

  3. The generation gap is alive and well, and it plays out with a vengeance. Again, social networks are the tool of choice to claim another victim.

    The Washington Post today reported in an article “Va. Student’s Snow-Day Plea Triggers an Online Storm,” describing how a student contacted a Fairfax County Public Schools administrator at his home to ask him about a decision he made not to close schools on a snowy day last week. The student left his name and call back number on the administrator’s home phone.

    That phone message elicited a response from the administrator’s wife, who then called the student and left him a phone message of unfiltered rage. She was totally unprepared for what would happen next.

    The student aired the woman’s voice message using an audio link on a Facebook page. The voice mail also aired on YouTube (on January 23, the recording was removed by the user, according to the YouTube website). As of January 22, over 9,000 people clicked on the link. The dust is still swirling here in Virginia, and it will land everywhere there is an Internet connection.

    Was the student unfair? Unethical? Outside the bounds of good conduct? Within the law? You decide. There are two sides to this story and both are right, depending on your point of view. This is a clash not just of technology, but of culture as well.

    What’s clearer are the risks that social networks expose, and why it’s imperative that companies recognize what those risks are and take appropriate action (or, in the case of the administrator’s wife, inaction).

    What are the characteristics of unplanned events and situations that organizations face today? Transparency, speed, and scalability. Social networking provides all of these, and, as the Washington Post article points out, they can be devastating when turned against a person or organization. Risk strategies must address these conditions.

    How will Fairfax County Public Schools change the risk mitigation in light of this incident? In order to figure this out, administrators will need to ask the following questions:

    1) How will we manage our policies and communications when public safety is an issue?
    2) How will we hold our administrators accountable for making sure the correct procedures are in place to address questions?
    3) How will we protect the personal information of our staff?
    4) Given the high impact of new media communications, what policies will we prescribe to make sure they are not used maliciously by students, faculty, or staff? How will we enforce those policies?
    5) When it comes to communications, how will we manage the cultural differences not only between diverse ethnic groups, but between different age groups?

    The Fairfax County Public School system has many bright senior officials and I trust they will work diligently to address these questions and others over the next few months.

    At the same time, those who use social media also face risks. How many times will people be able to use new media to cry “foul”–for reasons both justified and unjustified–before the messages morph into noise and become meaningless as they fade into the daily din of communication? Will existing laws and developing legislation put boundaries around such speech? Will personal reputations of the originators be jeopardized if damaging misinformation if proliferated?

    In earlier articles I’ve described how a shift in information power has changed the relationship between producers and consumers of information. Organizations–both public and private sector–no longer have hegemony over their information and image.

    –AR

  4. Maybe I should write a separate blog on this…yeah, that’s what I’ll do but let me lay out the basics here.

    A lot of what we’re talking about in reference to social networking, has already been seen in other social media, specifically in blogging (gulp!). That’s right, blogging, and there’s a still smouldering debate, dare I say controversy, over the differences between blogging and ‘real’ journalism.

    Journalism is both practice and profession and it is overseen by a loose but very effective set of professional standards such as the US Constitution (let me be provincial here but other Western countries have similar but not identical safeguards for the freedome of speech), libel laws, and professional standards like fact checking.

    Take one of these standards, fact checking as an example. Journalists hold themselves to (usually) high standards for verifying facts before they are reported; bloggers, as Jon Stewart might say, not so much. While the First Amendment provides a great deal of protection to the fourth estate, over the centuries, journalists have done a reasonable job of not hiding behind it to publish pure rubbish — at least in this country and not including the New York tabloids or their British cousins.

    My simple point is that social media has loosened our moorings and we really get all stripes out there from responsible users of social media to its polar opposite. (Parenthetically, this reminds me of the sexual revolution when suddenly people were ‘free’ to pursue the opposite sex, in both directions. It was a fun party for a while but sooner or later we all came to realize that just because societal norms were loosened it didn’t mean we no longer had a need for personal standards. People who learned this lesson late suffered from all sorts of ill effects like disco bars.) But I digress.

    Loosened standards is what makes social media at once both a danger and an advantage for business. In business we need facts and firm data upon which we can make decisions. Not understanding the limitations of the data churned up by social media can seriously hurt a company and your career.

    All of the innovations in social media over the last few years have provided enormous freedoms to people, putting the “means of production” a wonderful old economics term, into the hands of the masses but without controls.

    So the issue really is one of personal standards, knowing what you want to get out of the new technology and even knowing when you’ve gotten it. Whether it’s social interactions, blogging or social networking, it still behooves us to accept a certain amount of personal responsibility for the new freedoms that technology has wrought and to act with caution on the output.

    Thanks,

    Denis

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