June 14, 2012

Brands: How to cut your exposure to Facebook business risk

Will Facebook stick to its core competency or be waylaid?

This is third of a three-part series on Facebook as an investment. Also see:
Facebook’s biggest barrier to enormous wealth? Trust
Facebook will remain king, but social pure plays will fade

Christopher RollysonMany brands are boosting their investments in social business platforms like Facebook, Twitter, YouTube and Pinterest with every passing quarter, but CMOs are too often focused on next quarter’s numbers. They fail to insulate themselves against platforms’ business risks. Facebook’s IPO will likely cause the company to change its behavior in surprising ways, and without warning, by changing its policies and features. Here, I’ll address how brand executives can insulate themselves from Facebook’s — or any platform’s — fortunes by moving to make their relationships and networks portable.

Seeing beyond the platform

Pure play firms like Facebook, LinkedIn and Twitter have defined language, behavior, features and the very concepts of digital “social networks,” but they are quite expendable when brands manage their investments appropriately. However, brand leaders need to follow the digital ecosystem closely and be ready to adjust quickly.

Here are some principles for avoiding surprises. Specific action steps follow.

Assume pure plays’ gradual obsolescence

Watch the ecosystem’s major players, and the interactions among them, but the trend will be specialist sites maximizing value from “social networking” and fading dominance of pure plays. The latter will continue to exist, but they will not maximize value because they are designed for “socializing” (which people can’t resist), not doing things. Moreover, I use “ecosystem” intentionally because it indicates a pervasive, real-time network that increasingly interoperates. Because it’s digital, it’s more dynamic than any human market we’ve ever experienced. Here are brief comments on some of the players:

Buying RIM won’t help Facebook enough to warrant the distraction — not even close.

Facebook is so entrenched globally that it may remain the dominant general social network for many years. However, there is a big caveat. Facebook’s management team looks like it’s losing focus due to the IPO and too much time with Wall Street bankers. It’s “using the money it raised” for M&A, purportedly considering entering the hardware market (buying RIM). If Facebook’s management team and core competencies included M&A (like, say, Cisco), I would be confident. But they don’t. If Facebook buys RIM, I would seriously question Facebook’s medium-term relevance and long-term survival. Making phones will not help Facebook sell more mobile advertising. Not even Apple’s best-in-class iPhones will likely display much advertising due to user backlash. The device wouldn’t help Facebook enough to warrant the distraction — not even close.

An interesting Facebook aside is that the thing about the company that “investors” fear the most — Zuckerberg’s control of the company — is probably its biggest asset and hope. Wall street bankers know little about sociality online. Facebook’s core competency is leading digital development of environments in which people can interact socially. Facebook will have to remain grounded in its core competency, and I fear it will be waylaid. Neither Google nor Facebook+RIM have Apple‘s core competency in hardware design, and Facebook’s software design is quite limited. The “Facebook Shares Plumb New Depths” post fails to mention that Google’s main motivation in buying Motorola Mobile was its patents. Google is probably smart enough to not entertain trying to be a market leader in the handset business.

Wall Street bankers love doing deals (M&A), which historically destroy economic value (researchers estimate the range for failure is between 50% and 80%). Strangely, Google’s acquisition of Motorola Mobile, if Google dreams of designing and manufacturing its own market-leading handset, is a major coup for Apple, whose software/hardware experience is probably second to none. If Facebook acquires RIM, that will help Apple, too, because Facebook’s innovation and focus will suffer.

LinkedIn has a far stronger team, and its value proposition to users is closer to money; also it’s a “general” purpose pure play, it’s focused on “work” and selling members’ data and access to enterprise functions (recruiting/HR). It will earn handsome returns, but much more quietly than Facebook.

Twitter may or may not endure as it still hasn’t found a strong business model. It is transformational, but I don’t see its long-term viability.

Manage within the ecosystem’s context — not pure plays’

In the Knowledge Economy, markets are far more dynamic and fast-moving than ever, and the ecosystem is its infrastructure. In part two, I predicted the fading relevance of the general social network pure plays, whose platforms vie to cater to general audiences. They will persist as “general connection areas” that will function like infrastructure for general communications, but few people will pursue activities there that they deem “important.” This will limit pure plays’ ROI compared to specialized collaboration spaces that will interoperate with each other and share data according to users’ preferences.

You will best manage your investments in platforms by assuming they will fade because it is better to remain more attentive to the social ecosystem’s dynamics than less. In 2012, most users don’t have a strong perceived value from social networks, except they are hooked on them. But few people understand how to create the value. Therefore, they have adopted a binary approach: LinkedIn for business, Facebook for personal. Twitter is seriously used by few people and struggles to find a value proposition or business model. It is the most vulnerable by far. But the likelihood that any of the “big three” will be displaced by “another” one is low.

Google+ offers an example that proves the point. It is arguably very similar to Facebook and Twitter, but, despite Google’s immense resources, it has not replaced either one (it isn’t supposed to, but that’s another post). Users’ change costs are too high.

Platforms matter less than people

Think of your social business initiatives as building relationships, trust and business

Think of your social business initiatives as building relationships, trust and business. Relationships endure disruptions, so form rich, multichannel connections and interactions with your primary stakeholders. To develop a consistent business-meaningful return on social business, you need to be very focused on outcomes that are meaningful to you and your stakeholders. You need to consisently deliver uncommon value to stakeholders, which means you need to know them very well. When you do this, they will follow you anywhere.

When disruptions occur, and you maintain an ecosystem viewpoint, you’ll rarely be surprised, and you’ll already have contingency plans in place. You’ll invite your highest priority stakeholders to new venues. An easy way to think about it: Look at platforms as trade shows, restaurants or other venues in which you develop relationships. Constantly evaluate your results, and assume that nothing will last forever. Prepare to move; remain informed, analyze all platforms and refuse to depend on any platform.

Action steps: Insulate your brand against surprises

To achieve consistent results in social business initiatives, you need to become focused, efficient and consistent in developing relationships online. This means making priorities and other choices.

  • Conduct a robust ecosystem audit, which should include specific descriptions of stakeholders, stakeholder rank (to you), stakeholder workstreams (what they are doing online that’s relevant to you) and rankings of the most relevant venues for engaging them.
  • Approach the ecosystem as the multipolar world it really is. Note the types of activities or conversations to stakeholders prefer in various venues Use this insight to guide your interaction strategy in each. Remember, just because stakeholders may be members of a platform, that doesn’t mean they like interacting there about the topics with which you want to engage them.
  • By interacting with stakeholders in more than one venue, you will: insulate yourself against losing the relationship if a venue fails and strengthen the relationship.
  • In your thinking and approach, unbundle platforms’ functions, and approach them as learning opportunities. Explicitly develop competencies in, for example, inviting people, which apply slightly differently in various platforms, but good practices hold true across platforms.
  • Develop institutional knowledge about platforms’ social features and behaviors and results by developing a Social Business Competency Team. I can’t say it strongly enough: Human OS is sociality, and social networks digitize big parts of it. Digital social features on the Web will explode. So, organizations need to develop competencies with social features, whether they reside in general pure plays or in specialist sites.
  • Create beta projects in which you invite small groups of pre-selected stakeholders to try out your presences on new platforms.
  • Don’t heed the 20th century siren song, “Content engages.” Meaningful interaction engages, although content can be a great spark.

What is your practice for assessing and selecting platforms?Christopher S. Rollyson is a partner in Socialmedia.biz and managing director of CSRA, a management consultancy that advises enterprises and startups on social business strategy and execution. Contact Christopher by email, follow him on Twitter and Google Plus or leave a comment below.