Leaders need trust more than Twitter

FT.com

October 21, 2013 3:32 pm

By Andrew Hill

Running a business raises many questions to which ‘social media’ is not the answer

Irecently spent time sifting strategic plans for seven non-profit organisations, drawn up by teams of MBA students for an FT competition, the winner of which will be announced this week.

It was a rare insight into how bright young executives are thinking and I am sure their efforts will benefit the non-profits themselves. But one thing stood out: the number of entrants that believed that, whatever the problem, social media would help solve it. Raising money? Go to Twitter. Building local, national and international support? Try Facebook.

Their obsession with such shiny new tools is no shock. MBA students come from a generation whose early careers have advanced in lockstep with social media. Business schools are rightly encouraging them to think about the implications for management, which terrify their future bosses. In a survey of 4,000 senior executives, IBM found 68 per cent thought there would be more social and digital (as opposed to face-to-face) contact with customers over the next three to five years. When IBM’s Watson computer analysed the interview transcripts, it came up with an unsurprising insight: nearly two-thirds of respondents worry that without a social media plan they will not be able to bring their business and digital strategies together.

The executives’ prediction is correct but their concerns are overblown. Social networks, and the data they contain, are fuelling new marketing initiatives and yielding novel consumer insights. But absurd headlines that suggest social media are “revolutionising” everything from healthcare and the music industry to urban planning and teaching are plainly exaggerated or premature or both.

Running a business raises many questions to which the answer is not “social media”. Among them are tasks involving high levels of trust, local knowledge or regulation.

Bob Bechek, who heads Bain, the consultancy, says while social media are breaking down information barriers, the “age-old challenge” of how to achieve the kind of intimacy that wins the trust of a large client or a senior management team is immune to social media.

At the other end of the scale, as the FT MBA Challenge teams will discover if they take their solutions into the field, for some organisations, particularly in developing markets, contact that is local and direct, rather than fleeting and virtual, is what really counts.

In regulated areas, the efficacy of new tools of engagement and communication is limited by the requirements of compliance and control. For banks and financial services companies wishing to engage with customers, this can be frustrating. But sometimes, what seems to be a new concern is simply an old one in fresh clothes. Finance companies worry that product offers that have expired, but can still be recovered online, may cause confusion. But as a UK regulator told the Social Media Leadership Forum last week, out-of-date print promotions in telephone directories used to pose the same problem.

As a lubricant for modern business, social media – especially internal corporate networks – are becoming indispensable. Cement maker Cemex’s Shift initiative has helped colleagues collaborate online to develop a better product catalogue and a sharper strategy. Task-management applications allow teams to work on projects and monitor them without having to break off for progress updates. Ed Lawler, University of Southern California’s human resources expert, says online networks can ease even personal encounters, such as performance appraisal, because managers find it easier to send tough messages and timid team members can “craft their responses better”.

So some of these tools could, in due course, change the nature of the tasks and how they are managed. But in many cases management of big companies will have to change first – and that will not happen tomorrow.

I learnt a lesson in 2000 when the dotcom bubble was at full stretch. Business-to-business exchanges, linking manufacturers and suppliers online, were the Next Big Thing and I wrote they were “here to stay”. Correct – sort of. Shares in one, Covisint, which started as an exchange for US carmakers, recently began trading on Nasdaq. But it took a decade of technological evolution to transform the company into a “cloud engagement platform”; even now, it is worth a tenth of the $5bn valuation optimists expected it to command at the turn of the century.

andrew.hill@ft.com
Twitter: @andrewtghill