We see a similarly broad shift with social media. Most marketing firms are command-and-control organizations, where every decision goes up 50 layers to get approved. But tweets and blogs require speed. We’ve seen situations where someone posts a complaint online about a client company, and it takes the company 36 hours to manage the response through legal and marketing. Because no one responds quickly, it becomes a major communications crisis.
To be effective in social media, you have to empower junior people to be brand ambassadors, to communicate online rapidly. That seemingly tactical, small move can lead to massive organizational shifts. Somebody 20 levels down in the hierarchy who’s responding to a tweet has to know and understand the whole company’s strategy around things like pricing and social responsibility. There has to be a tremendous amount of training and a very big cultural shift.
S+B: How should companies manage the risks in all this online openness — for instance, risks involving legal liabilities or leaks of intellectual property?
SHAPIRO: There are a lot of issues, especially in industries like financial services or pharmaceuticals. Eventually some of the regulatory rules may have to evolve; for instance, if a junior employee spontaneously tweets that a drug could be good for a non-approved medical problem, how much leniency should there be? That’s a tricky question, and it’s one reason pharma companies have been relatively slow to adopt social media.
On intellectual capital, only a few companies — Apple and Amazon, for example — have successfully kept technological information locked down. Most companies hope that the speed of innovation exceeds the risk of leaking information to competitors.
S+B: Do you think businesspeople are prepared for the kinds of changes required by the Internet?
SHAPIRO: Some companies are still being caught flat-footed. Look at the success of personal financial services like Mint.com and Simple.com, an online bank with a very simple website that is like what every consumer wants his or her bank to be. Why does it take a startup to do it correctly? It’s only a matter of time before these incumbent retail banks wake up and see that half of their capital is going elsewhere.
But other companies are learning. In 2009, two Domino’s workers videoed themselves contaminating the food; the video went viral. This led to a lot of Internet traffic about the substandard quality of the chain’s food. So the company’s new CEO apologized. Domino’s put up a website called pizzaturnaround.com and reworked the recipe; sales went through the roof, and net income jumped almost 11 percent in one quarter. Two years later, Domino’s still runs ads about how much better its food is than it used to be. When you embrace the digital ethos, consumers respond.
- Art Kleiner is editor-in-chief of strategy+business.