Directors need to understand how strategies are being applied or affected by the social world.
Or as I like to say “Directors need to make friends with Social Media if they want their strategy to be relevant in 2014”
As a board leader a half decade ago, you might have believed that emerging social technologies such as LinkedIn, Facebook, Twitter, and Google+ had no place in the boardroom. Social media platforms appeared to have no relation to financial performance, nor were they considered strategic business drivers, and therefore were not part of the boardroom agenda.
In 2014, the corporate boardroom is being bypassed by the investment community in recognizing the strategic importance of social media to corporate performance. Investors are analyzing and interpreting “big data” derived from social media as predictive tools. In 2013, 11 percent of Twitter’s revenue was derived by licensing data culled from its massive store of user data. Many firms are using this information to inform strategy and decision making. Both Twitter and @StockTwits have built a category of investor relations to connect investors to equities.
These initiatives present the boardroom with three alternatives:
■ DO NOTHING Continue to define social media as a fad for your children.
■ FOLLOW Follow the lead of the investors and try to catch up to your competitors.
■ LEAD Build the foundational knowledge in your boardroom to govern a comprehensive social media strategy that drives results.
Social media sites are accessed by 4.2 billion people around the globe using mobile devices. McKinsey estimates the value potential that could be unlocked for social technologies at $900 billion to $1.3 trillion a year. Still not convinced? Here are some additional factors affecting your boardroom:
■ Right now the social media conversation includes your customers, investors, employees, and competitors.
■ Every second two new members join LinkedIn. Many are companies.
■ In 2013, the SEC announced that Twitter could be used as a legitimate form of disclosure.
■ Twitter is being used by many companies as a customer service platform.
■ The risk of cyber security to your network and intellectual property theft is growing.
Digital is a second language for business globally. Your board needs to speak it. Developing a strategy begins with board chairs and directors rejecting the idea that social media is just a fad. Demographics are driving social media being used on an everyday basis as a newsfeed. This trend will continue as the information economy grows. This issue for boards is not about individual directors being on social media.
The issue is about the enterprise advancing its brand and enhancing its reputation. To govern this new reality, directors need to understand how strategies are being applied or affected by the social world. A good starting point is to ensure the board is kept informed on:
■ SHAREHOLDER ENGAGEMENT It is not just investors who are activist and want engagement. Think broadly about what is being said about your brand. According to a recent PRNewswire study, when investor relations professionals were asked, “Will your department be tweeting in 2014?” some 53.9 percent said, “Unlikely,” while only 1.8 percent said, “Definitely.”
■ RISK MANAGEMENT Cyber security and crisis management include social media.
■ ASYMMETRIC INFORMATION RISK What content is being provided that tells the company’s story? What can customers, investors, and employees learn about the company, officers, and directors? How can social media be rebalanced or deployed to the company’s advantage? Steps to Social Media Success
■ Have a board leader ask the CEO: “We want a briefing on how social media is being used strategically for our business. How can we help you talk about it with us?”
■ Begin by analyzing the company, investors, customers, employees, and competitors.
■ Focus on what is being said about the company, C-suite, and board members and the number of followers represented.
■ Be sure to institute social media policies for the board and directors that comply with Reg FD.
■ Ask the CEO to provide regular updates on social media strategy, including comparisons with competitors.
■ Offer briefings to board members on how to read and speak digital and social media. Individual sessions can speed digital literacy learning and bring new insights into boardroom deliberations.
Social media does not replace face-to-face meetings or phone calls. It enhances them. In today’s world, customers, investors, and employees want what they are saying to be heard. Social media monitoring can help directors learn to listen. Done well, it will help shape the company’s success.
The need for growth and competitiveness will force companies to build strong digital capabilities. Let it begin in the boardroom.
Fay Feeney is the founder of Risk for Good, a board advisory firm specializing in enterprise risk management and social media.