Can Social Media Be Used to Foment Corporate Revolutions?

Can Social Media Be Used to Foment Corporate Revolutions?
Can Social Media Be Used to Foment Corporate Revolutions?

Over the last month, we've seen that social media can be a powerful tool in assisting revolutions in countries. But can those media be useful in empowering corporate revolutions? The answer is a partial yes -- but not in the same way as they are for political revolutions.

In countries like Egypt, revolutions happen because people feel that their government is not serving them. That frustration leads to a desire for change, and the people use whatever means are available to make that change happen. In the case of the recent Egyptian revolution, controlling the social media was pretty difficult -- although the Mubarak regime did find a kill switch for the Internet -- so they became the protesters' communications channel of choice. Combine the revolutionary tweets and Facebook postings that helped motivate and organize protesters, the broader media's actions in focusing world attention on Egypt, and protesters' willingness to go in the streets day after day to battle government troops, and you have the ingredients for a revolution.

What does this have to do with revolutions in a corporate environment? Think of these along two dimensions: employee-led and customer-led. Social media won't help employees get rid of tyrannical bosses. But social media can foment corporate warfare by enabling the speedy emergence of new companies that take the customers away from companies that aren't serving them well enough.

Before getting into the details of how this might work, let's define "corporate revolution." Such an event could take many forms, among them:

  • Tossing out a bad CEO

  • Radically altering a company's corporate strategy

  • Driving a big company out of business

The further you go down this list, the more the capacity for social media to have an impact in spurring corporate revolution rises.

Social Media and Dumping a Bad CEO

Social media is unlikely to be of much value in an attempt to remove a CEO. If, for example, unhappy employees started complaining to the board of directors or leaking evidence of a CEO's bad acts via Twitter or Facebook, the leaking employees would likely be tossed out rapidly.

While such leaks might ultimately prompt board investigations that would result in the CEO's ouster, that information could just as effectively be leaked by dropping incriminating photographs in an envelope and mailing them to the board. For fomenting that first kind of corporate revolution, then, there's nothing special about social media.

Social Media and Uprooting Corporate Strategy

If the goal is to change a company's strategy, on the other hand, social media could help. That's because social networks have the potential to provide corporate strategists with an unbiased view of what customers really think about a company and its competitors. And the job of those strategists is to position the company to boost sales to existing customers while carefully attracting new ones.

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If social media reveal that a company's customers are deeply dissatisfied with its services, then the value of those social media as a revolutionary force depends on strategists' willingness to take that feedback seriously. And for this purpose, there is something uniquely valuable about social media -- it allows others to vote on which comments best capture the feelings of the group. That can help strategists to distinguish the rare meaningful signals from the more common noise.

Here again, there are many ways besides social media for companies to get feedback from the market. Companies can use focus groups, analyze the strategies of fast-growing competitors, or survey potential customers. Consider a coffee company that charges $4 a cup and is watching its revenues drop in the midst of an economic contraction. Social media might indicate that people love the product, but no longer feel able to afford it at that price.

The coffee company's strategists could use that social media signal to introduce a new product at an affordable price and make the new offer available on the social media to the very people voicing their views. Similarly, it could use such social media to analyze whether it could lower its costs by cutting the most expensive products from its stores without causing customers to defect.

Social Media and Upending Market Structure

But such tweaking of corporate strategy is more evolutionary than revolutionary. For true corporate revolution, you need to upend an industry's structure. That is -- companies that were previously leaders must be toppled and replaced by new companies that better serve customers.

Examples of companies that do that abound. The first that comes to mind was the revolution that occurred within the social media industry. In 2005, MySpace was the place to be. But Facebook toppled MySpace. While the new leader has 600 million users and is valued at $50 billion, MySpace owner News Corp (NWS) recently dismissed half of its staff, took a $275 million charge, and is looking for a way to sell the social networking site.

A different kind of social media revolution is being led by Groupon, the local group buying service. More than displacing a leader, Groupon created a new category -- connecting local companies eager to get rid of perishable inventory while it still has value with groups of consumers eager to gobble it up for a good price.

Groupon's fast growth is testament to its value. According to the Chicago Sun Times, Groupon's popularity is rising, with 20% growth and 60 million subscribers in 42 countries -- mostly "urban and affluent 18- to 34-year-old women" who use Facebook and Twitter. Moreover, Groupon gets to keep a whopping 40% to 50% of the revenue it generates for these local merchants. And Groupon shareholders could get big paydays from this corporate social media revolution -- an IPO might value the company at $15 billion.

In ways that differ from political revolutions, social media can enable corporate revolution -- the most powerful form of which is to start a new company that exploits radical ways to improve the customer experience.

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