The Collateral Damage to Business From a Social Media Crisis

Most discussions and case studies around social media crises faced by companies is focused on consumer reaction – and direct loss of sales or brand impact. While these are critical, a non-consumer focused company may think they are more immune to these issues and a consumer product company may think the damage is relagated to the consumer segment, not their business to business side. This can be a dangerous assumption. We look at some of the collateral, perhaps harder to measure, damage that can occur.

Mistake Number One: Many companies who only sell business-to-business (B2B) assume that social media is all about consumers and that they are immune to damage. This is a fatal error. Many industries have niche social networks, forums, blogs, Twitter accounts, where industry news is discussed. Failure to understand this can cause significant problems.

Risk From Government Contracts
If a business also sells to governments, contracts may be lost. Depending on the severity of the issue, such as legal actions being talked about or happening, government agencies may be reluctant to buy products or services from a business they feel may be distracted from a contract or unable to fulfil it. It is hard to know if this happens. Some indicators may help determine the risk however.

Competitor Leverage
The bigger the story via social media (whether general sites or industry-focused channels) the more a competitor can cause harm. Employees can quickly and easily share information, this means relying on stories only being in major news media is dangerous. Competitors can shape perceptions with existing clients of yours and use it to foster perceptions of inability to complete work and more.

Every Industry Has Social Media Channels
We’ve conducted research and analysis on many industries. There is always some engagement by people in the industry in specialized niche networks, Facebook groups, LinkedIn discussions, FastPitch, eCademy, forums and newsgroups. Whether or not a CEO or senior executive is aware or participating in them doesn’t matter – employees are. Including from competitors. And they share information. A lot.

Board Perceptions & Risks
If it is a public company or just has a board and a smaller set of investors, once word trickles out, problems of governance come into play. A board or set of shareholders, may feel management has lost control of the company or are nervous of the management teams ability to contain and deal with the issue. If it is a major shareholder or board officer who raises awareness of an issue to management, they may feel management is not suitably aware of industry issues. There is then the possibility of a fractious board, a senior management battle and so on…

Investment Challenges
Companies looking to raise capital from equity sources or even debt, may find themselves in a challenging place if a negative story has reached the ears of those in the financial sector whom they are courting. If financiers perceive problem or potential escalation, they may either require more security or stall on a deal.

Supplier Fears
Suppliers of services or materials to a company who are tuned into the industry networks (often, they are more connected into online channels than the buyer of their product) may be concerned with the company’s ability to surface from a crisis. If they have extended credit, they may retract that credit or require new terms or demand outstanding payment to mitigate increased fears of risk.

Perception Can Rule The Day
The reality of these challenges are ones that businesses are just beginning to grasp.  Since these issues are  beyond just reputation management and are not as quantifiable being more qualitative in nature. It is not as easy as seeing immediate sales losses or a series of negative “tweets” on Twitter. Often, senior management is unaware of the social media tools being used in their industry. Monitoring tools rarely, if ever, pick these up because they are focused a) on mainstream social media channels for consumers, b) more business-to-consumer than B2B and c) perform poorly with smaller data sets to display.

We live in a world where perception can quickly become the reality. And that can spread across far more than just the consumer market and into supplier networks, financial sector and shareholders.

A Whole New Set of Headaches
All of this to say, the CEO and executive management of a company today have a whole new set of risks to manage. In some cases, they may not even realise an issue escalated as the result of a forum discussion or blog posting. Some research into these deep Web sources (where social media monitoring or reputation management tools simply do not go) can help a) understand the issue and b) help address the issue and give management the opportunity to mitigate risks and deflect the damage quickly.

The Occupy Movement & Social Media

The use of social media technologies to create awareness and organise protests and “camp-ins” last year (and some continue today) was the first time these tools were used on an international scale. This is unprecedented in the history of mankind, at such speed and with incredibly well organised precision. As the Occupy protests lengthened, most often, it would seem, those protestors featured by many news media channels were the down-and-out, hippies and young students disenfranchised. Stories of partying, drugs and alcohol seemed the perfect fodder. But were they? Are they? We did some digging to analyse just who is online and who makes up the Occupy movement. What we found was not what we thought we would find.

Forget About Youth In Occupy Movement – The Demographics
It wasn’t just a bunch of university students. In fact, as we analysed the age groups, we found the average age to actually be 36. We also found that across the 5,000 profiles and commentaries we looked at, over 50% had a university education. We also found they weren’t poor either. Perhaps the “working poor” – yes. We estimate an average income of about $45,000CAD from  USA, Canada and UK. We suspect this median would hold up in many other countries as well. Certainly there were those who are on the margin of society and the students or youth movement. But they do not represent the majority. Involved were doctors, lawyers, entrepreneurs.

Nor was there racial or religious divide. All forms of faith and races were represented as were men and women.

It’s Not A Union Driven Thing
That unions played a key part there is no doubt. Unions have and likely will continue to, play a key role. But unions, mentions of unions and references to union messages we estimate were less than 10% of the overall social media engagement. The Occupy movement is not owned or being driven by unions. The unions help in rallying and organising but it is being driven not by any one organisation. It is truly driven by the average citizen.

Activist Groups & Agitators
While some may suspect underlying activist groups with more radical agendas, this doesn’t appear to be the case. We found little evidence of more fringe, radical activist groups. The organisations that support the Occupy Movement are more socially oriented, those that are necessary in a functioning democratic society.

Our Summary Conclusion
While we haven’t provided all the detail of our research here, we can quickly surmise that the Occupy Movement is international in nature, it is still active and likely to become increasingly more organised. What started out in anger and protest with no  defined agenda has developed an agenda and is refining that agenda. This is truly a movement more of the disenfranchised middle class who are also looking to the margins of society to help them as well.

Our forecast is that we will see increased Occupy activity and a clearer agenda form. There will likely be “fractioning” of the movement, if it can be said to be organised enough for there to be fractions occurring. Even the thought leaders of Davos have realized this is a serious societal issue of significant scale across multiple countries. We suspect the Occupy Movement to be a significant indicator towards a demand for greater change within current political systems.

Social Media & Corporate Due Diligence

Is there any real value to social media when it comes to corporate due diligence? There is indeed. In the due diligence process, sometimes vital information may be uncovered that could impact an investment transaction; good or bad. The key is to know what you’re looking for, how to ask the question and where to go looking. A Google search will tell you a lot. Perhaps. An online reputation management tool will tell you about the same, perhaps with some nicely designed graphs that, well, mean nothing.

Case Study Example
A client came to us that we had done market intelligence work for. This time, they were looking to invest in a software company in their sector. It was a strategic investment that would give them the software they needed and revenues from selling it to others. They were in the final stages of the due diligence process. So far, everything had checked out; the software was where is was supposed to be and the financials were as they should be. Since the investment included the key management of the company, they wanted to gain a better understanding of these people. That’s when it got interesting. The result of the research we did showed one of the co-founders was deeply engaged with a competitor and there was evidence of a side deal taking place – all of this from publicly available sources. But unless you know where to look and unless you have the ability to connect relationships in social media, this information may not have come to light until it was too late.

Social Media Research in Due Diligence
Just as social media can have an impact on board governance, so can it play a role in due diligence best practices. Arguably, a deep look into social media before the deep due diligence begins, may save an investor or buyer of a company a lot of up front time; and may give clear direction for due diligence. So what can social media potentially tell a VC, investor or buyer? Here’s a partial list;

- Reputation and standing of the founder(s) of the acquisition target

- Business and industry standing (to avoid potential damages)

- Other potential issues with Intellectual Property

- Prior business dealings that could send up red flags or indicate a good outcome

- Validate founder(s) claims of work and past experience

- Provide insight into what customers are saying in case there is cause for concern

Just as an individual can be vetted to ensure accuracy and reliability of claims, so can the company. And lets face it, people like to talk, always have, always will. This is a key underpinning of social technologies – that humans like to communicate. Often times, employees, customers or partners may say something in a blog post, on a public Facebook page, Twitter or other public spot. In and of itself, what is said is seemingly innocent at the time. Within that context, it is. Later on however or combined with additional information – that innocuous comment or blog post suddenly becomes very relevant and very important. Dots can be connected and a picture comes together. Competitors may use this information or investors. Either way, this is incredibly valuable information in the public domain.

How The U.S. Government is Leading Cyber Diplomacy

I was reading Undersecretary of State for Public Diplomacy and Public Affairs, Judith Mchale‘s remarks to the Council on Foreign Relations on June 21st this year. One statement caught my attention on how the US State Department has looked to deal with our complex world of communications today and she’s very right: “By taking our public diplomacy into the marketplace of ideas.”

The social web is very much about ideas. It is where ideas are first translated from mind into an electronic world where they can be quickly and easily adopted, fostered and developed into actions that take place in the real world. Such as the Arab Spring, raising money for Obama’s election campaign, gaining support for petitions at a local level or simply creating new products. For governments around the world the social web represents a challenge from municipal government through to federal and as the U.S. State Department truly understands – international relations.

Undersecretary McHale’s remark reflects a national government that truly understands the very nature of the social web; that it is a marketplace of ideas, that it is ideas that become actions. But then, the social web is from ideas primarily hatched and adopted globally by America. The social web is in part, an embodiment of the American nature of having an idea and being able to turn it into something that moves the world.

The State Department also recognizes that the social web is not all roses and hugs for peace and love. Just as many of the people in the Middle East are using social media to share ideas and organize for democracy, so have dictators like Assad in Syria and al-Bashir in the Sudan vowed to use those same tools to crush freedom of thought. China throws up its Great Firewall to discount ideas of freedom. Somehow, just as communism collapsed, I suspect democracy and capitalism will win in the end; I’m an eternal optimist in this regard.

Political views aside however, the State Department has recognized and embraced this new medium; and they share ideas, foster the values of democracy and freedom of speech and they listen and respond. From blogs to Twitter to Facebook and beyond. Some governments have been afraid to step into such turbulent and unpredictable waters. They have only to look at the US State Department, who has made its missteps for sure, but acknowledged them, stood back up and kept on going. As an averag citizen, well, I’m impressed.

Perhaps the continuance of this dialogue they have bravely enjoined, will play a part in improving international relations through debate, discussion and consensus. It’s sure an awful lot better than lobbing bombs.

The Role of Social Media in Investor Relations

A number of our research projects have been for public companies, mostly in the area of market research. Increasingly though, projects are looking at issues of governance and the role of social media in Investor Relations. Here are some of the challenges for investor relations professionals and public companies;

The Role of Information & The Investor Relations Officer
The accessibility of social media and the critical role of an investor relations person in disseminating information within a regulated environment creates an almost “perfect storm” of communications tensions. More than ever before, and IR professional has to be extremely cautious not only with “what” they say, but how and where. They must represent the company and the investors and relay to shareholders enough information to assure them their investment is safe, while also withholding information that may tip a competitor or result in a run or buying spree of the stock. An increasingly challenging role with social media.

The Ease of Communication
Nothing is private between an IR officer and investors today. If a shareholder of a company wants to, and they often do, they can engage with an IR officer and within minutes of a conversation by phone transcript it to a blog or post comments on stock bulletin boards like Stockhouse.ca provides.

The Retail Speculators
Bulletin boards to discuss both small and large cap companies have been a strong force and often a thorn in the side, of public companies since the mid-90′s. Most of the discussion in bulletin boards is from “retail” stock traders or “day traders” with little experience in the stock market and often not much business acumen one might argue. These can’t be entirely ignored, but the bulletin boards were easily monitored and managed. That has changed and it has cost some public companies money by ignoring the growth of other social media channels such as blogs and Twitter.

Enter The Social Media Challenge
The challenge with social media channels is that text, data, images, voice and video and the ease of producing that content and distributing it means even a short tweet on Twitter can send a stock into a tailspin. As happened when a person pushed out a blog post in 2009 about United Airlines going bankrupt – the story was true, five years before.

The Impacts of Social Media on Investor Relations

Stock Fluctuations: Simple comments (whether right or wrong) can cause a stock to plumment. Like rumours of Steve Jobs having cancer did to Apple. Although true, they were out of context and improperly timed.

Insider Information & Speculation: An employee may innocently “tweet” about an event or write a blog post of something happening at the company without realizing the broader implications. This may result in a speculation or be viewed as sharing insider information in social media. Next thing you have a run on the stock (good or bad) and securities regulators down the corporate neck with the CEO and CFO into some serious issues.

Board Issues: Shareholders may connect with a board member and have a discussion. Next thing the company knows, that discussion is on a blog post and the investor relations team is moving into damage control.

Shareholder Organizing: Shareholders, unhappy with reporting or a proposed change to the company can use social media technologies to organize to represent a voting block and/or disrupt an AGM or special meeting.

Our research is showing that retail shareholders are beginning to leverage and understand the value of the tools at their fingertips. Companies both small and large cap are going to be increasingly impacted. Understanding the landscape they are in in Cyburbia will become critical.