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The 5 basic rules of calculating the value of a Facebook ‘fan’

A question that routinely comes up in social media circles is what is the value of a Facebook fan? (The question also applies to the value of a Twitter follower, Youtube subscriber, email recipient, etc.)

Invariably, whenever the question is asked, some mathematical savant – typically a self-professed digital alchemist – produces a proprietary algorithm that has somehow arrived at answer along the lines of $1.07 (Source: WSJ) or $3.60 (source: Vitrue) or even $136.38 (source: Syncapse), and so begins the race to answer this now quasi-hallowed question of the new digital age. The lure: He who can convince companies that he can calculate the value of a Facebook fan might have a shot at selling them on the notion that fan the more fans they acquire, the more value they generate for their business. (You can imagine the appeal of answering the “what is the ROI” question by explaining to a company that 10,000 net new fans per month x $136.38 = a $1,363,800 value. At a mere $75,000 per month, that’s a bargain, right?

All that is fine and good, except for one thing: Assigning an arbitrary (one might say “cookie-cutter”) value to Facebook fans in general, averaged out over the ENTIRE breadth of the business spectrum, is complete and utter BS.

To illustrate why that is, I give you the 5 basic rules of calculating the value of a Facebook fan:

Rule #1: A Facebook fan’s value is not the same as the cost of that fan’s acquisition.

Many of my friends in the agency world still cling, for example, to the notion that estimated media value or EAV (estimated advertising value), somehow transmutes the cost of reaching x potential customers into the value of these potential customers once reached. Following a media equivalency philosophy, it can be deduced that if the cost of reaching 1,000,000 people is generally $x and you only paid $y, the “value” of your campaign is still $x.

A hypothetical social media agency-client discussion regarding EAV: “Using social media, we generated 1,000,000 impressions that we converted into followers last quarter. At $1.03 per impression/acquired fan, the total cost of the campaign was $1,030,000. The average cost of an impression through traditional media being $3.97, the estimated media value of your campaign was $3,970,000.”

Next thing you know, the client believes 2 things: The first, that the value of each Facebook ‘fan’ is either ($3.97 – $1.03) = $2.94 or simply $3.97 (depending on the agency). The second, that the ROI of the campaign is ($3,970,000 – $1,030,000) = $2,940,000.

So you see what has happened here: Through a common little industry sleight of hand, a cost A vs. cost B comparison has magically produced an arbitrary “value” for something that actually has no tangible value yet. In case you were particularly observant, you may also have noticed how easily some of the authors of the posts I linked to in the intro mixed up costand value. Ooops. So much for expert analysis.

A word about why cost and value cannot be substituted for one another when applied to fans, followers and customers: Cost may be intimately connected to value when you are buying the family car, but the same logic does not apply to customers as a) you don’t really buy them outright, b) they don’t depreciate the way a car does, and c) they tend to generate revenue over time, far in excess (you hope) of what it cost to earn their business.

Even with the cost of acquiring a fan now determined, why has the value of that fan not yet been ascertained? Rule #2 will answer that question.

Rule #2: A Facebook fan’s value is relative to his or her purchasing habits (and/or influence on others’ purchasing habits).

Illustrated, the value of a fan can be calculated thus:

 a)      Direct Value: If a Facebook fan spent $76 on your products and services last month, her value was $76 for that month. If a Facebook fan spent €5697 on your products or services last month, his value was €5697 for the month.

The value of a fan/transacting customer is based on the value of their transaction. It is NOT based on the cost of having acquired them.

Example:

– Cost of acquiring Rick Spazzyfoot as a Facebook fan: €4.08

– Amount Rick Spazzyfoot has spent on our products and services since becoming a fan five months ago: €879.52

Which of the above two € figures represents the value of that fan to the company?

(If you answered €4.08, you answered wrong. Try again.)

 b)     Indirect value: If a fan seems to be influencing other people in his or her network to become transacting customers (or increase their buy rate or yield), then you can factor that value in as well for those specific time-frames. Because measurement tools are not yet sophisticated enough to a) properly measure influence and b) accurately tie it to specific transactions, I wouldn’t agonize over this point a whole lot. As long as you understand the value of word-of-mouth, positive recommendations and the relative influence that community members exert on each other, you will hold some valuable insights into your business ecosystem. Don’t lose sleep trying to calculate them just yet. Too soon.

The point being this: Until a Facebook ‘fan’ has transacted with you (or influenced a transaction), the monetary value of that fan is precisely zero.

One could even say that if each fan cost you, say, an average of $1.03 to acquire, the value of a fan before he or she has been converted into a transacting customer is actually -$1.03.

That’s right: A significant portion of your Facebook fans might actually put you in the negative. Something to think about when someone asks you to calculate the “value” of your “community,” especially if you purchased rather than earned a significant portion of your fans and followers (it happens more than you realize).

Rule #3: Each Facebook fan’s value is unique.

Every fan brings his or her unique individual value to the table. One fan may spend an average of €89 per month with your company. Another fan might spend an average of $3.79 per month with your company. Another yet may spend an average of ₤1,295 per month with your company. Is it reasonable to ignore this simple fact and instead assign them an arbitrary “value” based on an equation thought up by some guy you read about on the interwebs?

Three points:

1. The lifestyles, needs, tastes, budgets, purchasing habits, cultural differences, online engagement patterns and degree of emotional investment in your brand of each ‘fan’ may be completely different. These, compounded, lead to a wide range of behaviors in your fans. These behaviors dictate their value to you as a company.

2.  Many of your fans may only do business with you only on occasion. Because of this, you have to factor in the possibility that a significant percentage of your fans’ value may fluctuate in terms of activity rather than spend. How many of your fans are not regular customers? How many do business with you each day vs. each month? How many do business with you once a quarter vs. once every three years? Are you figuring your on/off customer-fans into your value equation?

 3. Lastly, we come to the final type of Facebook fan: The one that doesn’t fall into the transacting customer category.  They might remain “fans” without ever converting into customers. Do you know what percentage of your fans right now falls into this non-transacting category? Do you really think that their value is $3.97 or $139.73 or whatever amount an agency, guru or consulting firm arbitrarily assigned to them? No. They clicked a button and left. Their value, until proven otherwise, is zero.

 With this kind of fan/customer diversity within your company ecosystem, you come to realize that arbitrary values like “the value of a Facebook fan is $x” can’t be applied to the real world.

Rule #4: A Facebook fan’s value is likely to be elastic.

Because the value of a Facebook fan is a result of specific purchasing habits (and impact on others’ purchasing habits), a fan’s value is likely to be elastic over time. If you aren’t familiar with the term, it simply means “flexible.” As in: the value of a Facebook fan will change. It will fluctuate. It will not always be the same from measurement period to measurement period.

Let me illustrate: A Facebook fan might spend $76 on your products and services one month and $36 the following month. This means that her “value” was $76 one month and $36 the following month. If next month, she spends $290, $290 will become her “value” for that month.

Because transaction behaviors change, the value of a fan is also likely to change.

You can average this out over time (the fan’s value might average out to $97/month over the course of a year, for example), or just total her value per month, quarter, or year, depending on your reporting requirements. That is entirely up to you.

Example 1: “Based on her transactions, the value of Jane Jones, a fan since 2007, was $2,398.91 in 2010. Thanks to our fan engagement (digital customer development) program, Jane’s value increased to $2,911.02 in 2011.”

Example 2: Chris Pringle’s average monthly value in Q2 of 2011 was $290.76. His average monthly value in Q3 of 2012 was $476.21. He is one of 17,636 fans we managed to shift from a basic package to a premium package via our Facebook campaign.”

Note: In order to figure this stuff out, you are going to have to either get creative with the way your CRM solution interacts with your Facebook analytics suite or wait until Social CRM solutions get a little more robust. Some are getting close.

Examples of exceptions (where fan value may be somewhat inelastic):

 – You are a bank and a fan’s only transaction with you is a fixed monthly payment.

– You are a cable company and a fan’s only transaction with you is a monthly cable bill.

– You are a publisher and a fan’s only transaction with you is an annual magazine subscription.

– Your fans don’t transact with you. They clicked a button and left. If their value was $0 a month ago, it is still $0 this month.

If your business charges for a monthly service that tends to not fluctuate a whole lot, chances are that the value of each of your fans will remain rather constant. This compared to a Starbucks, a Target or an H&M.

Rule #5: A Facebook fan’s value varies from brand to brand and from product to product.

If a fan/customer’s value can fluctuate from month to month and that value can vary wildly from individual to individual within the same brand or product umbrella, imagine how much it can vary from brand to brand, and from product to product.

Compare, for example, the average value of a fan/customer for Coca Colaand the average value of a fan/customer for BMW. (Hypothetically of course, since I don’t have access to either company’s sales or CRM data.) What you may find is that a fan’s annual value for Coca Cola might average,say, $1,620 per year, while a fan’s annual value for BMW might average $42,000. Why? Because the products are entirely different. One costs less than $3 per unit and requires no maintenance. The other can cost tens of thousands of dollars per unit and requires maintenance, repairs, not to mention the occasional upgrade.

Moreover, a single strong recommendation from a fan can yield an enormous return for BMW, while a single recommendation from a fan will yield a comparatively smaller return for Coca Cola.

You can see how the notion that the “value” of a Facebook fan can be calculated absent the context of purchasing habits, brand affiliations, fluctuations in buying power, market forces and shifts in interests and even value perceptions is bunk. Unless of course you find yourself being asked to transform cost into value. (Less work. Easier to sell.) But that is a completely different conversation.

I hope this helped. From now on, if anyone seems confused about the topic of fan/follower/subscriber “value,” point them to this post.

Cheers,

Olivier

*          *          *

If you haven’t already, check out Social Media R.O.I.: Managing and Measuring Social Media Efforts in Your Organization. Lots of vital advice in there for anyone working with social media in a business environment. Makes a great gift to employees, bosses, contractors and clients too. You can even read a free chapter here: smroi.net

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In case you missed it, the “social media guru certification” crowd is at it again. Hat tip to Jim Mitchem for pointing me to this new one earlier today. Here… let’s give them lots of traffic*. (And get caught up on the fun.)

*Update 9/20/2012, 14:30pm EST – It appears that the entire thread referenced in this post (yes, the entire LinkedIn group discussion) has now been deleted by the community manager. Wow!

Pretty quickly after being posted, the LinkedIn comment thread* started to turn sour. Here are several of the comments so far:

Jim Mitchem • What? They didn’t offer me a certification for being a copywriter. I just did it. Won awards and sold a ton of product. No certification necessary. They didn’t offer certifications for me being an entrepreneur who launched one of the first virtual ad agencies in the world in 2001. I just did it. Won clients and shifted perception. They didn’t offer a certification when I helped launch Boxman Studios in the social space (exclusively) in 2009 based solely on a concept only to yield 6 million a year in sales in just 3 years. I just did it. No certification necessary. You ask how I differentiate myself from the fake gurus out there? By avoiding snake oil certifications. And just putting my mind to doing something right. Seriously, if you’re trying to get certified to be a social media rock star – you might want to make an appointment with a psychologist as well.

Jon Evans • I’ve been in the social media strategy field for sometime now and I have NEVER been asked for a certification. It is disappointing to see someone try to make money off of scrambling “Social Media Consultants” because those agents can’t figure out how to run their business and make money. I would also like to point out that the people that are most defensive are the ones that stand to benefit from the sale of this product. I find that interesting… Bad form folks just bad form.

Jessica Wicks • Until there is a professional standards body for licensing social media professionals (unlikely to EVER happen) that recognizes this ‘certification’, it means nothing. Perhaps you could use your certificate to con a couple clients into thinking that there is a governing body over the profession? Other than that, I can’t think of a reason anyone would open their wallet to this offer. You’re better off to sell this course as a learning opportunity only – or better yet offer it for free to promote something of value you’ve created like an analytical tool or aggregator. There are so many sources out there for FREE advice on using social media – perhaps you should take note. By offering to ‘certify’ me, I’m going to completely ignore your links.

Todd Copilevitz • This is the worst kind of entrepreneur, someone who sees where the crowd is moving and tries to cash in from behind. Actually there is some value to this program, it will allow me to quickly dismiss as irrelevant anyone holding this certification.

Linton Robinson • This is a sick joke. This entire type of mentality is a stupid rip-off.

Okay… You get the idea. (You can go check out the thread for yourself here*… assuming that any of the comments are still there. One of my questions was deleted just a few minutes ago, so I have to assume that the folks behind this thing are being selective about what actually stays in the thread and what doesn’t… but no worries, we’ll come back to that in two shakes.) *Update 9/20/2012, 14:30pm EST – It appears that the entire thread referenced in this post has been deleted by the community manager.

A few points:

1. Read the whole thread*. It’s well worth it. The problems I raise and the way that they are “addressed”* or answered by the person who seems to be organizing this thing will fill you in on several of the things I find suspect about certification programs like this. (Namely that without verified accreditation, any kind of so-called “certification” is worthless.)

*Update 9/20/2012, 14:30pm EST – Sorry. It appears that the entire thread referenced in this post has been deleted.

Note that I have no problem whatsoever with training programs. My issue, which is purely an ethical one, deals with people selling certifications that actually are not. (We’ve been here before.) Especially when the sales pitch includes stuff like this:

Do you think i can find a job after this certification?

Our Social Media certification program was designed by Social Media industry professionals. Combined they have done lot of hiring and one of the important element in any resume is actual social media work experience. That’s the reason we created a project based certification program so right after our program you will have something tangible to show on your resume. After all, in the business world it is WHAT you have done that matters. And no where is this more true than in social media. (Source: http://www.instantetraining.com/certification/smct-mc/)

2. There’s something strange going on with the experts list. When asked who the “top experts” who put this training together were, I was pointed to this list of folks: http://www.instantetraining.com/smct-mc/index.html#experts

Here’s where things get fun. Curious to find some pretty respectable names on the list (not the usual suspects), I reached out to several of them. I quickly heard back from two of them. They both indicated several things:

– Though they had been involved with the organization in the past (free webinars for their book launches, for instance) they were not in any way associated with the certification program.

– Moreover, they had no idea that their names, image and reputations were being used to sell this program.

I’ve only talked to 2 so far, so it isn’t to say that all of the “top experts” listed on that site are unaware that they are being used to sell a program that they did not contribute to… but some of them are, and that’s a little peculiar. I gave the organizers the benefit of the doubt and asked them if they wanted to either comment or amend the list. The answer I received was this:

Bob Tripathi • If they have spoken with us it would be this year and we have them as our on-demand session.

I checked again with those two folks, and that certainly was news to them.

Let’s just leave it at that for now. I don’t want to get between them and this organization. They’re aware of what’s going on now and I will let them handle it how they feel is most appropriate. All I’ve inferred so far is that the list – as it stands as I write this blog post – may not be 100% representative of the “top experts” who are actually involved with this certification program. I will leave you to draw your own conclusions. (Better yet, do your own research.)

3. Then I did a little more digging, and it all went sideways from there.

A quick check of the twitter account for the thread poster’s organization (@SocialMediopols, listed at the top of the thread) raised some puzzling questions – and feel free to try this for yourselves:

a) According to http://fakers.statuspeople.com/Fakers/Scores, @SocialMediopols, which currently counts around 9,500 followers, seems to be composed of 85% fake followers, 1% inactive followers and 14% “real” followers. That’s a pretty high percentage of fake followers by any standard. That would mean that… out of 9,500 followers, only about 1,300 aren’t fake. [Note: I mistakenly put the number of followers at 18,000 earlier. That was incorrect. (It was an August figure.)]

I found that surprising. Maybe it was an error, right? Perhaps the app screwed up. So I decided to get a second opinion…

b) I went to TwitterCounter.com and checked out the account’s follower growth for the last 6 months. Here’s what I found:

The most amazing thing I learned from that quick snapshot is that the @SocialMediopolis account grew by exactly 768 net new followers per day from May 31, 2012 to July 4, 2012.

That’s right. Every single day, the account attracted precisely 768 new followers. No variance at all. No 767 one day and 769 the next. Exactly 768 per day, every day, for 36 consecutive days.

Amazing.

Sadly, as if someone had flipped a switch, the follower count started dropping on July 5th, and has been ever since.

Ruh-roh.

4. Upon which my questions about this get mysteriously deleted from the thread. 

I brought this information to the attention of Bob, and asked him several questions. They went essentially along the lines of…

– Will buying fake followers be included in the normal certification training, or will that be covered by the top experts in the on-demand calls?

– Will you also explain how not to lose 100+ followers per day once you stop buying fake followers?

– Since your social media community claims to have 400,000 members, why is it that you only have about 1,300 real twitter followers? Even if all 9,500 were 100% legit, that’s a very low percentage. 40,000 followers would only be 10% of your membership.

Source: Twitter profile for the @SocialMediopolis account – “We’re the largest #private #community of Social Media Marketing (#SMM) #professionals on the planet! Social Media Marketing on #LinkedIn, over 400,000 members!”

I then offered to connect Bob and his organization to actual social media professionals who might be able to give them pointers on how to build a community on Twitter… but that evidently wasn’t received very well. Instead of answering my questions, my comment was quickly deleted from the thread. *Update 9/20/2012, 14:30pm EST – It appears that the entire thread has now been deleted as well.

5. Yes, that’s right: deleting my comment will make the tough questions go away. That’s how social media works.

These are the guys selling social media certifications. Awesome. Sounds super legit to me. Please take my money and send me a certificate of “you’re hired.”

Update 1 (9/19/2012): I have actually been banned from that thread now. I can’t comment there anymore. Classic fail. 😀

Update 2 (9/20/2012): It appears that the entire thread referenced in this post has also been deleted by the community manager. Fail x infinity.

Update 3 (9/20/2012): The community manager (I believe this would be Michael Crosson) attempted to repost his sales pitch/post on his community page. Nice attempt at a clean slate. Unfortunately, folks started commenting on it again. Those comments must have been inconvenient, because that post and all of the ensuing discussion and comments have now been deleted too. Link: http://www.linkedin.com/groups/Social-Media-Certification-Your-Ticket-66325.S.165779329?qid=482532ba-6f31-471c-a3b2-f09184d2ad35&trk=group_items_see_more-0-b-ttl

What a fiasco.

Okay. It’s all fun and games, but I want to leave you with some constructive advice, so here it is:

1. Do not delete comments unless they actually violate your TOS or community standards. Do not delete entire comment threads just because the comments being left are inconvenient. Do not attempt to repost the same content in an effort to wipe the slate clean of comments. Do not delete that thread as well when the same criticisms pop up in the comment thread. ugh… This is really basic stuff.

2. If you’re going to fake your reach and influence, at least learn how to do it properly. Adding 768 net new followers every single day for a month is something a robot would do. You have to mix it up. 327 here, 781 there… Make it random. You can’t be lazy when it comes to faking your shit. You have to work at it. That’s how the real pros do it.

3. If you fake this stuff, you will get caught. First, as you can see from the thread, our bullshit meters have gotten very good. Second, the tools to uncover the BS are free and available to everyone. It took less than 5 minutes for me to turn out those two reports and see what was going on there. All you need is an internet connection and an espresso, okay? Don’t play these games anymore. Once your reputation is shot in this space, it’s shot. There are far better ways of making money in social media.

4. This is what happens when you delete someone’s comments and then block them from further commenting. You force them to take the discussion elsewhere… like on their blog, and Facebook and Twitter. Had I not been deleted or blocked for merely asking inconvenient questions, I would have never written this post. It could have all gone away in a couple of days. But no. Instead, I came here and wrote about it. Lesson: don’t delete comments on a thread just because the present an inconvenient opinion. Social Media 101. (I wonder if Bob will include that in his certification program.)

5. Social media certifications will not get you hired by anyone. What looks good on a resumé is experience, not some piece of paper some blogger mailed you after attending a few of his webinars and writing an essay. Do the work. Build your own case studies. Do pro-bono work if you have to (that’s how many great portfolios begin), but don’t waste your time and your money on someone’s lame money-making scheme. Especially when the tactics they employ to appear to be legit are so weak that they can be shredded by anyone with an internet connection in just a couple of minutes.

6. There are solid training programs out there that don’t try to pass themselves off as certification programs. If those are too pricey, most of what you need to learn is already available for free on the web anyway. But the good stuff, the classroom-level stuff put together by real professionals, it’s there if you look for it. Just one word of caution: check the “experts” out. See what they’ve done. See who they’ve worked for. Are they just a “social media personality?” A blogger? A speaker? A network marketer with an incredible ground-level opportunity he would like to share with you and thousands of facebook friends? Red flags, all.

7. Go forth and socialize. Learn by doing and watching others. Save your money for something cool… like renewing a gym membership or going on vacation.

As always, this is all a matter of opinion… except for the parts that are, you know… fact-checked. 😉

Cheers,

O.

*          *          *

Social Media ROI – Managing and Measuring Social Media Efforts in your Organization was written specifically to teach managers and executives how to build and manage social media friendly business programs and incorporate social technologies and networks into everyday business operations. The book is divided into four parts: social media program strategy & development, social media program operationalization, social media program management, and best practices in measurement and reporting. If your boss doesn’t yet have a copy, time to fix that. If everyone on your team doesn’t yet have their own copy, fix that too. It makes for a great desk reference.

(Now available in several languages including German, Korean, Japanese and Spanish.)

CEO-Read  –  Amazon.com  –  www.smroi.net  –  Barnes & Noble  –  Que

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Every day, I run into people who seem emotionally and intellectually stunted. The amount of money in their bank accounts, the kinds of cars they drive, the square footage of their house or condo or sailboat, the job title printed on their business cards, none of that matters. They all have something in common: they seem limited in their ability to empathize with others. Worse, they even have trouble empathizing with themselves, which is far more problematic. Most seem at times unable to enjoy their lives in those moments when they aren’t making news or signing huge clients, or somehow living the “being successful” narrative they’ve pinned a whole lot of their self worth on. There’s a faint echo of bitterness there that you can hear when they talk about others. There is always also a deliberate – if regretful – detachment from the world that makes me a little sad to be around them. Far more obvious though is the undercurrent of fear that casts its shadow on almost everything they say and do.

They take that with them everywhere they go. Their kitchen, their blog, their job, their vacations, their workouts, their relationships… It isn’t the sort of thing they can tuck away. I’ve worked with many of them. I’ve worked for some of them. It’s always a little depressing. You see all the things that they are, all the things that they could be, and you want to focus on all that potential, but the reality is that you’re stuck in a version of the world in which that potential will probably never be released, and that’s a damn shame.

I know what they’re missing. I know what the missing piece is. It’s art. I mean, it’s more complicated than that, sure. But toss an art bomb into their trench, and you’ll see their lives (and the lives of the people around them) completely transformed.

In business, in love, in life, art matters. It really does. Especially our own. And I’m not talking about putting colors on a square of canvas or blowing into a trombone. I’m talking about opening doors and letting shit out that we wish we had the balls to share with our loved ones, with peers, with complete strangers. I am talking about giving form to the abstract currents of our hearts. Fear, love, anger, lust… You can’t let it all sit there, locked up for fear that people will reject you if you give them a glimpse. Hiding your vulnerabilities isn’t strength. It’s just hiding. Courage is letting it all out. It’s being more than the “personal brand” you’ve built to hide behind. Art isn’t pretty things on a wall. It isn’t the product of a hobbyist. It isn’t an abstract outlet for socially awkward intellectuals and “artsy types.” It’s is a vehicle for exploration and discovery, which is to say that it’s a vehicle for courage. Art provides human beings with the medium, discipline and language to open those secret doors and windows, to air out their dreams, their demons, their fears, their desires, all of it, and see how far their minds can go when they aren’t weighed down by fear and pain and bullshit.

Courage isn’t just picking up a rifle and going to war, by the way. It isn’t just standing up to a bully or doing the right thing when no one else will. Courage is also picking up a paint brush or a guitar or a lump of clay. It’s putting words on page after page for 6 straight months. It’s allowing yourself to be overcome with emotion while watching a movie and not giving a shit that the person sitting next to you sees you crying. It’s dancing or singing in front of a crowd. It’s letting the pencil, the scalpel, the chisel, the baseball bat and the steering wheel go where they want to, without fear. It’s trusting your skills, your instincts. It’s letting go of all of your baggage and your life’s hangups and just doing something pure and 100% in the moment. It doesn’t matter if that’s leading a team, crafting ad copy, designing a website, revamping a customer service program, flying a combat mission, assembling a pair of sunglasses, editing a movie or pulling a country out of a financial ditch. Art is the ingredient X behind every discovery, every evolutionary leap, every victory. Without a little art in your science, you’re really just playing at following best practices. You’re just going through the motions, playing it safe, coloring inside the lines.

By the way, there’s more to art than stuff like this:

This is art too:

And this:

And this:

And this:

And this:

And this:

And this:

And this:

And this:

Look at children. They’re natural artists. You know why? Because they don’t give a shit how their drawing and singing and banging on piano keys makes them look. They’re not saddled with social anxiety yet. They aren’t afraid of being rejected. Letting art into your life teaches you to hold on to that fearlessness.

Let me tell you something I’ve learned in the last few decades, both in the military and the private sector: anything that helps you hold on to who you are, anything that helps you be who you are, and anything that helps you walk through your day with a little more courage, self assurance and self-knowledge will make you not only a more complete person but a better leader as well. Period. You want to know what our kids need more of? Art. Every time I hear of an art program being cut somewhere, I cringe because I know where it leads. Every time I hear someone scoff about art, belittle it, treat it as a waste of time, I can’t help but shake my head at the short-shortsightedness of that opinion. We don’t need more math. Trust me. What we need more of is art.

Art is at the heart of every civilization, of every major technological, scientific, political and philosophical breakthrough. There can be no civilization without art because there can be no civilization without culture. Humans physically cannot function without it. From cave paintings to playing a Will-i-am song on Mars, art is at the core of everything that moves us beyond hunting for food, protecting our territory and breeding. Art is the force inside and the current between all of us that unlocks and feeds our humanity. A nation without art will break apart and die as surely as a company or brand without art will never invent anything worth remembering. 

No matter what our choice of profession is – CEO, auto mechanic, surgeon, soldier, EMT, assembly line worker, politician, restaurant manager, samurai, etc. – we’re all artists. All of us. You leave the art bottled up inside you, and your career will never reach its full potential. In life and love outside of work, you’ll always wonder why you feel stalled, why you feel alone, why you can’t connect with people the way you wish you could. You’ll always be a fraction of who you should be, of who you would like to be. But if you can find a way to let it out, to give it form, to embrace it, to let it permeate into every aspect of your life – professional and otherwise, – you will grow into a much happier, more fulfilled person. I don’t think that’s true. I know that’s true. I see it every single day.

One last thing to chew on, because in the end, it all begins and ends with you. Everything else in your life radiates outward from what goes on in your head: Your career, your friendships, your health, your sense of self-worth, your happiness, your achievements, how you gauge success… everything.  That last thing, it’s this: life without art is like sunshine without warmth.

Or as my old friend Kenn Sparks always likes to say, “Most people die with the music still in them.” – Josef Haydn.

He has a point.

Let it out. Break free. Grow into who you were supposed to be. Change the world. Show others the way. (Or keep being moderately happy. Your choice.)

Cheers,

Olivier

*          *          *

 

Social Media ROI – Managing and Measuring Social Media Efforts in your Organization was written specifically to teach managers and executives how to build and manage social media friendly business programs and incorporate social technologies and networks into everyday business operations. The book is divided into four parts: social media program strategy & development, social media program operationalization, social media program management, and best practices in measurement and reporting. If your boss doesn’t yet have a copy, time to fix that. If everyone on your team doesn’t yet have their own copy, fix that too. It makes for a great desk reference.

(Now available in several languages including German, Korean, Japanese and Spanish.)

CEO-Read  –  Amazon.com  –  www.smroi.net  –  Barnes & Noble  –  Que

 

Read Full Post »

So I published this over on the Tickr blog, but I thought it would be relevant for you guys as well.

2007 – 2011: Adapting to the new complexities of social business

Five years ago, when businesses – from the enterprise down to smallmom & pop retailers – started using social media to enhance their business processes, things were simpler than they are today. You had your blog. You had your Facebook page. Maybe you had your Youtube channel and your Flickr account. If you were really ahead of the curve, you were already using this new thing called Twitter.

Back then, it was already becoming obvious that social media might be a bit of a time-suck. Not only were you supposed to manage your business and take care of customers, now you had to be a multi-platform publisher as well. You had to write stuff. You had to take pictures of stuff. You had to make videos and edit them and put them on the web. If you were really ahead of the curve, you were spending parts of your evenings looking for forums and discussions, watching, listening, taking notes, maybe even participating.

Already, it became clear that managing a social media presence for your business – or rather, managing the digital aspects of your transformation from a traditional business to an increasingly social business – would soon become a full-time job. You can almost trace the early discussions of social media ROI to that point in social business’ early evolution. It wasn’t really the “should I be on social media” question that did it. It was the “should I pay someone to do this instead of what I know will help my business” question, because it quickly became obvious that social business could never be an after-thought or just a part-time thing.

But this isn’t a post about ROI or social business evolution. This is a post about complexity – specifically, social business complexity. Perhaps more to the point, this is a post about managing that complexity. From the very beginning of this shift to social business, one of the biggest problems business owners and department managers have had to deal with (independently of assigning resources to the task) was simply information overload. Over the course of a very short time frame, businesses went from being disconnected from market intelligence and consumer insights to being flooded with both. Where in the past, organizations could expect consulting and market research firms to act as a collection agent, filter and translator of data, they were now confronted with a volume of information they simply were not capable of managing on their own. Social media monitoring seemed like a great idea. It looked great on paper. In reality, it was a very difficult thing to execute on. Too many sources. Too many hours in the day. Too many platforms to track. And even if it was possible to make sense of it all, then what? What did you do with it? It was hard enough to come up with content and respond to comments and tweets. The entire web had to be monitored and managed as well? Operationally, the task seemed gargantuan. Worse yet, it didn’t scale. (No worries. Scale is a topic we will cover soon.)

While some companies dove into the process of figuring out how to do this all on their own, it wasn’t long before a chunk of the market threw up their hands and decided to outsource the process rather than taking care of it themselves. And for a while there, it was rough for everybody. But then, something cool began to happen.

Necessity, after all, is the mother of invention.

2011-2013: the rise of social monitoring ecosystems

After a few years of experimentation with various social media dashboards and monitoring tools, it became clear that managing a social media program was not an either/or equation when it came to hardware and software. The question began to shift from “what’s the best tool for social media management” to “what else should I be using.” It was clear that certain social media tools, when used side by side, could not only increase the overall effectiveness of an entire program, but also amplify the value of each individual tool. If the word popping into your head right now is symbiosis, you’re on the right track.

Symbiosis:

1. Biology A close, prolonged association between two or more different organisms of different species that may, but does not necessarily, benefit each member.
2. A relationship of mutual benefit or dependence.

Let’s geek-out a little and get a little more specific, because symbiotic relationships come in three types:

Commensalism: A symbiotic relationship in which one organism derives benefit while causing little or no harm to the other. (Good.)

Parasitism: A symbiotic relationship in which one organism (the parasite) benefits and the other (the host) is generally harmed. (Bad.)

Mutualism: A symbiotic relationship in which both organisms benefits from their relationship with the other. (Best.)

Needless to say, you don’t want parasitism. At worst, combining several social media management tools together falls into a commensalist symbiosis scenario – one where some of these tools (and associated) functions will benefit from the utility of other tools, while the utility of these stand-alone tools will not be affected. At best, combining several social media management tools together will create a mutualist symbiosisscenario – on in which every one of these tools will see their utility and value enhanced by the others.

Walk into any company’s digital  ”mission control” center today, and what you will find is an illustration of one or the other of these two ecosystems – and sometimes a combination of both.

Simplifying Digital Mission Control centers: too little vs. too much

So now that we are talking about digital mission control centers (a topic we will revisit often in the coming months), let’s look at them from the perspective of trying to minimize the complexity of social media management…

read more…

*          *          *

Social Media ROI – Managing and Measuring Social Media Efforts in your Organization was written specifically to teach managers and executives how to build and manage social media friendly business programs and incorporate social technologies and networks into everyday business operations. The book is divided into four parts: social media program strategy & development, social media program operationalization, social media program management, and best practices in measurement and reporting. If your boss doesn’t yet have a copy, time to fix that. If everyone on your team doesn’t yet have their own copy, fix that too. It makes for a great desk reference.

(Now available in several languages including German, Korean, Japanese and Spanish.)

CEO-Read  –  Amazon.com  –  www.smroi.net  –  Barnes & Noble  –  Que

Read Full Post »

2010 MIMA Summit: Featured Speaker – Olivier Blanchard from MIMA on Vimeo.

I know it’s been a while since I’ve released a video (well… one that doesn’t involve hanging out with an octopus or trying to crash my bike on mountain descents), so here’s one fished out of the vault by @KrisColvin that might come in handy. It hails back to the 2010 MIMA summit, but everything in the video is fairly straightforward and still applies to your social business programs today, so it’s well worth another pass.

If the embedded video at the top of the post doesn’t launch, watch it here.

Also, some news:

You know by now that I am generally pretty guarded about who my clients are, but my latest project calls for a little bit of transparency since I am giving them some visibility on Facebook and Twitter and helping manage some of their accounts. I have recently started working pretty closely with the folks at Tickr. They’re the folks behind the one-screen multi-channel aggregator you’ve probably seen in videos of social/digital control centers – like the one PepsiCo built for Gatorade. It’s kind of hard to run into a mission control center that doesn’t have a screen dedicated to Tickr now. Anyway, they’re launching a free version and a pay-as-you-go version to complement the enterprise version that big brands are already using, so they’ve asked me to help out for a few months. Check it out and tell me (or them) what you think.

Aside from the shameless plug, you may be interested to know that I’ll be blogging there as well as here for a bit, so if you are looking for more basic social media how to stuff than what I usually post here, news about the world of digital monitoring, digital brand management, and the rise of digital mission control centers, look for some of that there. The short list:

The blog

The Facebook page

The Twitter account (@TickrUS)

The website

You can start a free account and test drive Tickr in minutes, so give them a shot. It’s a pretty cool little app that works super well with the Radian6’s, Alterians and Spiral 16’s of the world.

Cheers. Let me know if you want more videos. There are more in the vault.

*          *          *

Social Media ROI – Managing and Measuring Social Media Efforts in your Organization was written specifically to teach managers and executives how to build and manage social media friendly business programs and incorporate social technologies and networks into everyday business operations. The book is divided into four parts: social media program strategy & development, social media program operationalization, social media program management, and best practices in measurement and reporting. If your boss doesn’t yet have a copy, time to fix that. If everyone on your team doesn’t yet have their own copy, fix that too. It makes for a great desk reference.

(Now available in several languages including German, Korean, Japanese and Spanish.)

CEO-Read  –  Amazon.com  –  www.smroi.net  –  Barnes & Noble  –  Que

Read Full Post »

Here’s the question that most companies still don’t ask themselves at the start of a project: what problem am I trying to solve?

Start with that, and you’re 80% of the way there. Blow it off, and you can be sure that you and your organization will waste a shit-ton of time and resources on something that won’t yield any concrete results.

For instance: discussions at planning & management meetings increasingly point towards three “projects” that seem increasingly inevitable – Your CMO wants to revamp the logo. Your CEO wants to get into social media. Your SVP Digital wants to redo the website.

Now what? Well, now begins the process of getting the projects approved. What questions will be asked? Well…

Why are we doing this?

How much will it cost?

Who will be in charge?

Who will do the work?

And that’s about it. That’s as far as it goes.

Why are we doing this? Because it’s been a while. Because it’s time. Because we need change. Because our competitors are doing it. Because it will improve our image.

How much will it cost? Somewhere between $x and $y.

Who will be in charge? Fill in the blanks.

Who will do the work? Fill in the blanks.

Except here’s the problem: companies have limited resources. When you think of resources in terms of money, talent, technology and man hours (and you should), you quickly come to realize that focusing a significant percentage of those resources on Project A rather than Projects B, C, and D means that you’ve just introduced an opportunity cost into your planning. In other words, choosing to monopolize these resources on Project A could limit your ability to really kick ass with Projects B, C and D.

If Project A is necessary or really smart, that’s probably a good thing. You’ve prioritized possible outcomes and you’ve decided that Project A has a high potential for ROI or impact on x, or whatever it is you’re after.

But of Project A isn’t necessary, what you’ve done is you’ve just taken essential resources away from essential projects… to feed a wasteful endeavor that won’t yield a whole lot of benefits to your company.

You know what question helps determine whether or not a project is worthwhile? This one: what problem am I trying to solve?

A practical overview: new logo.

We need a new logo. 

Yeah? Why? What problem are we trying to solve?

If you can show that your old logo is hindering your sales, you might be on to something. Do your customers complain about it? Do your competitors’ customers make fun of it? Okay. Time to consider an upgrade. In your considerations, ask yourself this: will the new logo solve a real problem for consumers? Will it solve a real problem for us?

If the answer is yes, and you can identify these problems clearly, move forward.

What problems will the new logo aim to solve?

If the answer is no, or you can’t quantify the “problem,” consider what else you might be able to focus on this quarter or this year that will solve a real problem. (Like customer service, R&D, packaging, messaging, shopping experience, etc.)

A practical overview: new website.

We need a new website. 

Yeah? Why? What problem are we trying to solve?

If the answer falls along the lines of “It looks like it was designed in 1995, the UX is horrible, it uses flash, it’s horrendous on mobile devices, our customers complain about it all the time,” then you’re good to go. Dig deeper and move forward. What is it that your customers complain about? What can we improve in terms of user experience? What do we wish the site could do that it can’t in its present form (and why)? What kinds of functionality would we like to build into it (and why)?

What problems will a new website aim to solve?

If the answer falls along the lines of “It’s been two years since we redesigned it, and I want to rebuild it in Drupal,” then that meeting is adjourned. (No offense to Drupal. I just needed to throw something in there real quick.)

A practical overview: new social media strategy/program.

We need a social media strategy. 

Yeah? Why? What problem are we trying to solve?

If the answer falls along the lines of “we physically can’t continue to do business without it anymore,” then you’re on to something. Dig deeper. Your next conversation should include items like these:

47% of our customers prefer to engage CSRs through Twitter and Facebook than by calling a toll-free number now. We can also serve 5x more customers per hour via these channels than we can via traditional call centers, so we’ll even save money that way.

We’re losing traction in category and keyword searches because we have no fresh content for the Googlenets and the Bingwebs to index. If we had a blog and some social media properties, we could potentially double our web traffic and digital exposure.

We can’t really get into mobile commerce without it. It’s already costing us $23,000,000 per quarter, and we’re even losing customers and market share as a result. if we keep operating like this, we’ll be out of business in 5-7 years.

We’re spending $12,000,000 on outsourced digital marketing research every year that we could do ourselves if we just assigned two people to monitor the web using social media monitoring platforms.

Our PR department can’t anticipate, monitor, respond or manage PR crises without it. The cost to the company each year in lost revenue is $x, and our brand image is suffering more and more each year as a result.

40% of our net new customers leave us after 12 months. We think we can use social media to engage them, find out why they’re think of  leaving, and give them a reason to stay. Potential impact on the business: an additional $xM per year.

Social media can help drive word-of-mouth recommendations. We want to use social media as an in-network lead generation engine. The impact we expect: a) more leads. b) more qualified leads. c) a higher conversion rate (prospect to customer).

It will help us recruit better talent. Period.

It will amplify our advertising’s reach and make it stickier. Look at the numbers that Coca Cola, Pepsi, Ford and Old Spice have been getting against companies that only use traditional (paid) media.

If done properly, engagement = loyalty. Right now, only 23% of our customers consider themselves loyal. We want to bring that up to 60% over the next four years. Some of it will be offline, but we need an online piece as well.

69% less expenditures on each new product launch.

Etc.

All of these suggestions solve one or more of the following problems:

1. Not enough leads? Doing this will attract net new potential customers.

2. Not enough new customers? Doing this will convert net new prospects into net new customers.

3. Short term customer attrition? Doing this will develop net new customers into returning customers.

4. Long term customer attrition? Doing this will develop returning customers into loyal customers.

5. Budget cuts getting in the way? Doing this will cut costs while delivering equal or better outcomes.

6. Frozen budgets getting in the way? Doing this will keep costs level while delivering better outcomes.

7. Wasting money on outdated services you feel locked into? Doing this will help you free your operation from unnecessary burdens.

8. The chasm between you and your customers has been widening? Doing this will shrink it.

9. Feeling less relevant than you were 10 years ago? Doing this will help you find your way again.

10. Shrinking profitability is an increasing concern? See 1-9 (above), particularly 5 and 6.

11. Not reaching enough potential customers? Doing this fixes that. See 1 (above).

But if the answer to “what problem are we trying to solve with a social media program” is never asked (or worse, answered incorrectly,) then you will basically end up with an endless churning out of cheaply produced, keyword-optimized “content” that will vaguely boost web traffic and online mentions without ever yielding particularly helpful results. Say hello to crap metrics like “likes, Return on Influence, and all of the rest of the bullshit that still plagues the digital world and social business these days.

Because… we need to be on Facebook so we can engage with people and have conversations.

Because… we have to have a social media strategy.

Because… “content is king.”

Because… our competitors are doing it.

Because… our agency told us we should be in social media.

Because… something about owned, paid and earned media.

Because… we need followers and likes.

Because… we don’t know, but we’ll eventually figure it out.

Okay. Good luck with that.

The reason why snake oil, incompetence and irrelevant metrics are still so prevalent in the social business space is because they fill the gap created by the absence of proper questions and answers at the start. Starting with: what problem am I trying to solve?

Which is to say: what is the purpose of doing this in the first place?

New product feature? What problem am I trying to solve?

New packaging? What problem am I trying to solve?

New logo? What problem am I trying to solve?

New branding strategy? What problem am I trying to solve?

New campaign? What problem am I trying to solve?

New Facebook page? What problem am I trying to solve?

New blog? What problem am I trying to solve?

New hire? What problem am I trying to solve?

Don’t just go through the motions of doing something or going somewhere just because the rest of the herd is shuffling that way. I know it might make you the annoying guy in the room to be the one who asks the question (so… do so judiciously), but the question MUST be asked by someone. And more importantly, it must be answered. Otherwise, you’ll be wasting resources and a chunk of your potential for real success.

Cheers,

Olivier

*          *          *

Social Media ROI – Managing and Measuring Social Media Efforts in your Organization was written specifically to teach managers and executives how to build and manage social media friendly business programs and incorporate social technologies and networks into everyday business operations. The book is divided into four parts: social media program strategy & development, social media program operationalization, social media program management, and best practices in measurement and reporting. If your boss doesn’t yet have a copy, time to fix that. If everyone on your team doesn’t yet have their own copy, fix that too. It makes for a great desk reference.

(Now available in several languages including German, Korean, Japanese and Spanish.)

CEO-Read  –  Amazon.com  –  www.smroi.net  –  Barnes & Noble  –  Que

Read Full Post »

Yesterday, I promised you a post that would help hiring managers identify key skills and abilities needed in a prospective hire looking to fill a social media manager role. Note that we are talking about management, not just content creation or community relations. Before I get into it, a few considerations:

1.  This list isn’t complete. It is meant to help guide you and point you in some key directions, but you’re going to have to add a few requirements of your own and ignore the ones that don’t apply to your specific needs.

2. Every company has different capabilities and objectives. Every company will also look at social media’s role in a  completely unique way. Some will see it merely as a digital marketing function while others will see it as a fully integrated component of an organization-wide communications ecosystem. Because every company is unique, every social media management position’s requirements will also be unique. Keep that in mind.

3. Are you hiring someone who will help you build a social media program from scratch, or are you hiring someone who will manage an existing social media program? Because the requirements for each won’t be the same.

4. Are you a small, medium, local company, or are you a global consumer brand? Because again, the degree of complexity (internal to the org and external to the org) will require completely different types of resumes.

5. Are you looking to fill a strategic role or a tactical role? Strategic = more vision and planning oriented. Tactical = more day-to-day, operationally oriented.

6. Are you a niche or specialty brand in an obscure industry, or an international superbrand? Because again, the req is going to look different based on that.

7. Is your social media program purely internal or are you working with one or five or twenty agencies as well?

8. Is your social media program focused on lead generation and fan acquisition, or is it also focused on customer development, customer retention, and/or organic WOM? Again, huge differences in skill-sets and abilities to consider there.

9. How many departments will this role be working intimately with? Mostly digital marketing, or also HR, Customer Service, Product Management, Technical Support, PR and R&D?

10. Is your brand a challenger? A rebel? Conservative? Academic? Irreverent? Political? Apolitical? These things matter. Hire someone who understands who you are and will fit within your culture and brand ecosystem.

Right off the bat, you kind of have your work cut out for you. Building out a req for your social media management role is going to require a little more work than just throwing together some bullet points and filling the blanks on a standard x years of blogging experience bullets. This is not an exercise in generic job req design. There is nothing generic about this hiring process.

Here are a few bullets for you:

Basic skills & qualities:

  • Applicant has had a continuous professional presence in the Social Media space (via blogs, Twitter, Facebook, Ning or other platforms) for at least two years.
  • Applicant has managed a business blog and/or business community for a minimum of one year.
  • Applicant has built or managed a community for longer than one year. (This could be as a product manager or customer service rep, for instance.)
  • Applicant demonstrates a thorough knowledge of the Social Media space, including usage and demographic statistics for the most popular/relevant platforms as well as a few niche platforms of his/her choice.
  • Applicant demonstrates a thorough understanding of the nuances between Social Media platforms and the communities they serve.
  • Impeccable communications skills.
  • Applicant understands the breadth of tools and methods at his/her disposal to set goals and measure success in the Social Media space. (Applicant’s toolkit is not limited to Google analytics.)
  • Applicant has been active on Twitter for more than two years.
  • Applicant knows who Scott Monty, Frank Eliason, Jeremiah Owyang, Porter Gale and Christopher Barger are, and can explain why these names are important to the social media profession.
  • Applicant can explain succinctly why buying followers and fans is both unethical and counterproductive.
  • Applicant demonstrates a high level of proficiency working with popular Social Media platforms and apps such as FaceBook, Twitter, LinkedIn, Flickr, Ning, Seesmic, YouTube, FriendFeed, WordPress, Pinterest and Tumblr. (As applicable.)
  • Applicant is capable of mapping out a basic Social Media monitoring plan on a cocktail napkin.
  • Given 5 screens to play with, applicant can build you a social media monitoring control center in just a few days.
  • Applicant can cite examples of companies with successful social media programs and companies with ineffective social media programs. He/she can also argue comfortably why each was either successful or unsuccessful.
  • Applicant has spent at least one year working in a customer-facing role, preferably customer-service related.
  • Applicant is more excited about engagement, building an internal practice and finding out about your business’ pain points than he/she is about firebombing you with the awesomeness of their personal brand.

Advanced skills & qualities:

  • Applicant has developed and managed marketing programs before. Not just campaigns but programs. Find out about them. What worked? What didn’t work? Lessons learned?
  • Applicant has at least two years of experience managing projects and working across organizational silos. What worked? What didn’t? Etc.
  • Applicant has managed a brand or product line for more than one year.
  • Applicant has demonstrated a strong ability to forge lasting relationships across a variety of media platforms over the course of his/her career.
  • Applicant understand the difference between vertical and lateral action when it comes to customer/community engagement – and has working knowledge of how to leverage both.
  • Applicant has managed national market research projects.
  • Applicant is comfortable enough with business measurement methods to know the difference between financial impact (ROI) and non-financial impact. He/she also knows why the difference between the two is relevant.
  • Applicant demonstrates the ability to build and manage a Social Media practice that works seamlessly with PR, product marketing, event management and customer support teams within the organization.
  • Applicant has managed a team for more than one year. He/she was responsible for the training and development of that team.
  • Applicant has spent at least one year in a project management role outside of an ad agency, PR or other Marketing firm.
  • Applicant has been responsible for managing a budget/P&L.
  • Applicant already has the framework of a Social Media plan for your company before he/she even walks through the front door, and thankfully, it doesn’t involve setting up a fan page on FaceBook.

Enterprise & Global CPG skills:

  • All of the above, but with 5 – 10+ years of experience instead of 1 – 3.
  • For everything else, scale up.

What you shouldn’t waste a whole lot of time worrying about:

  • The applicant’s age.
  • The applicant’s Klout or Kred scores.
  • The applicant’s number of followers on Twitter or fans/likes on Facebook.*
  • The applicant’s SxSW or blogworld stories.
  • How many Top 10, 15, 20 or 100 lists the applicant is on.

* Less than 1,000 Twitter followers is suspect. Unless they are a media celebrity, more than 75,000 Twitter followers is suspect as well.

All right. You still have some work to do, but that ought to get you started.

Other sources:

Social Media ROI – Managing and Measuring Social Media Efforts in your OrganizationParticularly Chapter 6 (pages 73-82).

The Social Media Strategist: Build a Successful Program from the Inside Out – by Christopher Barger

Smart Business, Social Business: A Playbook for Social Media in Your Organization – by Michael Brito

I hope that was helpful.

Cheers,

Olivier

*          *          *

Social Media ROI – Managing and Measuring Social Media Efforts in your Organization was written specifically to teach managers and executives how to build and manage social media friendly business programs and incorporate social technologies and networks into everyday business operations. The book is divided into four parts: social media program strategy & development, social media program operationalization, social media program management, and best practices in measurement and reporting. If your boss doesn’t yet have a copy, time to fix that. If everyone on your team doesn’t yet have their own copy, fix that too. It makes for a great desk reference.

(Now available in several languages including German, Korean, Japanese and Spanish.)

CEO-Read  –  Amazon.com  –  www.smroi.net  –  Barnes & Noble  –  Que

Read Full Post »

So evidently, the ideal age for a social media manager is under 25.

Wait… no… the ideal age for a social media manager is over 25.

Are you kidding me? Age? We’re talking about age? Like… the ideal age to be a CEO is 45-65? Or the ideal age to be an HR manager is 43-52? Would anyone with the slightest bit of credibility ever write a piece like that? No. Not without concrete research to back it up, at any rate. So why is it acceptable when it comes to social media? Why? Because it’s still en vogue to write complete nonsense about social media management?

There is no ideal age to manage a social media program, just like there is no ideal age to manage a PR or marketing or HR campaign, program or department. Unless you’re a professional athlete, age is pretty much irrelevant when it comes to your ability to do a job. Any job. Some people are already good at 20. Others still suck at 40. There is no magic formula. What you are looking for is competence, professionalism and a sharp, agile mind. That is what you should focus on. Not age.

Let’s take a look at this piece published by Inc. just a few days ago: 11 Reasons a 23-year-old Shouldn’t Run Your Social Media, by Hollis Thomases.

So first… who is this Hollis Thomases person, and more importantly, why does Inc. feel that she is qualified to write an article on this topic? Well, there’s this:

Hollis Thomases is the President & CEO of Web Ad.vantage, which provides outcome-based digital marketing and advertising services to up-and-coming brands. She is also the author of Twitter Marketing: An Hour a Day, a contributing expert to Social Media Marketing Magazine, and has been a Media Planning columnist for ClickZ since 2005. She has taken her subject matter expertise to television, radio, and trade conferences. Here is her Twitter account: @hollisthomases (6,820 followers).

Note the url, by the way, which is different from the title Inc. eventually went with: http://www.inc.com/hollis-thomases/social-media-dont-put-intern-in-charge.html – don’t put intern in charge. Ah, well. We’re already off to a killer start: what’s a 23-year-old good for? Being an intern. Great.

Now don’t get me wrong: anyone who puts an intern in charge of their social media program is clearly being negligent. But we aren’t talking about interns here. We are talking about 23-year-olds and “young hires.”

Not to put too fine a point on it, but that hoodied 23-year-old you just crossed in the hallway might not be the intern anymore. In this day and age, he or she might be the CEO, and a solid one at that. There are “kids” right now building  companies at 23 that will reshape the face of business, technology and communications in the next ten years. There are guys leading combat teams at 23, and I can tell you from experience that they are supremely competent and plenty mature. There are young women right now, today, already on their way to revolutionizing dozens of fields, from particle physics and presidential campaign strategy to industrial design and popular fashion. A few of them even won Olympic medals in London over the last few weeks. So how about this: instead of discounting young twenty-somethings as quasi-worthless, not particularly dependable assclowns, why not get to know them instead?

But no. It’s much easier to fall back on crap stereotypes to write a poorly researched article, and then somehow get Inc.’s editorial staff to give it the go-ahead. And thus begins an 11-point exercise in shameless clichés and assumptions. Let’s have a look-see:

  1. They’re not mature enough.
  2. They may be focused on their own social media activity.
  3. They may not have the same experience – or etiquette.
  4. You can’t control their friends.
  5. No class can replace on-the-job-training.
  6. They may not understand your business.
  7. Communications skills are critical.
  8. Humor is tricky business.
  9. Social media savvy is not the same as technical savvy.
  10. Social media management can become crisis management.
  11. You need to keep the keys.

Where do I begin? Do I even need to explain how absurd this is? It seems that professional, capable twenty-somethings have suddenly become as immature as ninth-graders on a school field trip.

1. They’re not mature enough. Right. Based on what data? And compared to whom?

I have a friend. Let’s call him Tim. Tim is 48. Tim has been going through a mid-life crisis for the last four years. You want to talk to me about the maturity level of a 23-year-old? You don’t get to unless you’ve spent a Friday evening around Tim. Tim is a CEO, by the way.

But that isn’t even the point. The real point here is this: if someone isn’t mature enough to manage your social media program, regardless of their age, don’t be an asshole and put them in charge of your social media program. Instead, hire someone who is qualified and well-suited for the job. Is that too simple? Too obvious maybe?  Or should we keep going on the stupid stereotypes?

Okay. Let’s keep going then.

2. They may be focused on their own social media activity. Yeah, and they also may not. Because age has not a damn thing to do with that.

Not hiring unprofessional assholes usually takes care of that problem.

3. They may not have the... oh, whatever. If they don’t have the experience or etiquette, why did you hire them to manage anything, let alone your social media program? Regardless of their age, if they don’t have the skills or experience or etiquette, don’t put them in charge. But if they have the experience, skills and etiquette, and they happen to be 23, don’t be stupid: hire the shit out of them before someone else does.

I know. This stuff is really hard to grasp.

4. You can’t control their friends. Really? Is that because 23-year-olds are just party-going loudmouths who will post obnoxious updates on Facebook? So naturally, yeah… a 23-year-old is going to be a liability to your brand, right? Nice!

Except, no. Show me the data that supports your theory. What… no data? Hmmm. That’s too bad. My next question would have dealt with how you intend to “control” angry customers and trolls.

Ms. Thomases, your personal prejudices against this age group suck.

5. No class can replace on-the-job-training. I have no idea what that even means or what it has to do with age.

6. They may not understand your business.

This article is starting to give me a headache.

What if that 23-year-old has been a fan of your business since they were a kid? Say you’re Nike or Disney or Nintendo, you really think a 23-year-old managed to live their whole lives without knowing what you do and how? Why do you think they’re applying for a job at your company in the first place?

Here’s another one: a 40-year-old new hire and a 23-year-old new hire are going to go through the same onboarding process. Why would the 23-year-old be somehow less qualified than the 40-year-old to manage the company’s social media program solely based on “not understanding the business?” Is there something physiological about 23-year olds that makes them incapable of learning your business model?

If you are hiring someone to manage your social media program, they’ll need to understand your business, regardless of their age. Train them. Get them ready to manage that function. This is not an age issue, it’s a preparation issue.

This argument is invalid.

7. Communications skills are critical. I can’t even wrap my mind around this. Let me just quote the writer and see if you can make any sense of it:

“Communication is critical to solid social-media execution. Before you let a young hire take over your company blog posts, take stock of his or her writing skills. Also: Many young people have not yet learned the “art” of communicating. Make sure they know how to read between the lines, rather than taking things too literally.”

That’s it. That’s the whole explanation.

Between you and me, I have no idea what half of that means. “Many young people have not yet learned the ‘art’ of communicating?”

“Make sure they know how to read between the lines, rather than taking things literally?”

Let that be the point: communication is indeed critical to solid social-media execution. Which is why social media professionals who write expert commentary for Inc. should learn how to express themselves clearly. “Make sure they know how to read” between what lines, exactly? Is there something about 23-year-olds that makes them read everything literally? And can we at least get some kind of idea as to what the “art” of communicating is? I wonder if it involves learning proper comma usage. Here’s an example: “Make sure they know how to read between the lines rather than taking things too literally” instead of “make sure they know how to read between the lines, rather than taking things too literally.”

I know a bunch of young 20-somethings with terrific communications skills and a shit-ton of people my age with horrendous communications skills (and many of them are in PR and marketing). So can we please stick to competence and skill instead of crapping on young twenty-somethings for the sake of it?

8. Humor is tricky business. Let me guess… because young twenty-somethings are incapable of understanding the boundaries and cultural nuances of certain types of humor… As opposed to 35-year-olds or 50-year-olds?

You’re right. Humor is tricky business. Unfortunately, it has nothing to do with age. Not one thing.

Something just occurred to me: if you took that piece and replaced “young hire” with “women” or “old people,” it would be taken offline immediately. Prejudice is prejudice, and the opinions listed in these eleven points reek of it.

9. Social media savvy is not the same as technical savvy. Excuse my French, but… (cover your ears) what the fuck does that have to do with age?

This argument is invalid.

10. Social media management can become crisis management. Yes. It can and it does. What does that have to do with age? Do you want me to list every PR crisis in the last ten years that was completely botched by people over the age of 25? Here’s a taste: BP, Nestle, Enron, Toyota, Southwest Airlines, Chic-Fil-a, United Airlines, Eurostar, FEMA… We could be here all day.

This argument is frightfully invalid.

11. You need to keep the keys. Yes. That’s a basic social media program management 101 lesson that is applicable regardless of your social media manager’s age.

This argument isn’t just invalid, it isn’t even an argument.

Here’s an idea: instead of writing (and publishing) pointless pieces of hateful, misinformed garbage that fail to a) offer relevant reasons why young professionals under the age of 25 are somehow not qualified (or under-qualified) to manage a social communications program, and b) provide evidence to back up the writer’s opinion, why not write a piece that outlines the qualities and skills you should look for in someone who will help you build and manage a social media program? You know, things like competence, skill, talent, personality, adaptability, resourcefulness, even cultural fit with the company, for instance?

But no. Let’s focus on age instead. Let’s talk about age as a qualification to run a social media program… Good grief. How did we even get here? Really. WTF.

I can’t leave you like this though, so here’s basically all you need to know about the ideal candidate for your social media management job. Are you ready? Here it is:

Hire someone wonderful and competent. Who gives a shit how old they are?

Okay? And if you want some pointers on what to look for, I’ll be back tomorrow with a few.

Cheers,

Olivier

*          *          *

As an aside, you can find some pointers on how to hire (and train) a social media manager in Chapter 6. (Pages 73-82.)

Social Media ROI – Managing and Measuring Social Media Efforts in yourOrganization was written specifically to teach managers and executives how to build and manage social media friendly business programs and incorporate social technologies and networks into everyday business operations. The book is divided into four parts: social media program strategy & development, social media program operationalization, social media program management, and best practices in measurement and reporting. If your boss doesn’t yet have a copy, time to fix that. If everyone on your team doesn’t yet have their own copy, fix that too. It makes for a great desk reference.

(Now available in several languages including German, Korean, Japanese and Spanish.)

CEO-Read  –  Amazon.com  –  www.smroi.net  –  Barnes & Noble  –  Que

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Today, instead of doing all the talking, I will let people with a whole lot more experience than me give you some tips about how to become a better leader.

Great stuff that transcends the typical quotation mill.

Anne Mulcahy – Former CEO of Xerox:

In a crisis, you have the opportunity to move quickly and change a lot – and you have to take advantage of that.

Change doesn’t happen if you don’t work at it. You’ve got to get out there, give people the straight scoop, and get buy-in. It’s not just good-looking presentations; it’s letting people ask the tough questions. It’s almost got to be done one person at a time.

There’s not a lot of room anymore for senior people to be managers. They have to be leaders. I want people to create organizations that get aligned, get passionate, get really inspired about delivering.

Stories exist at every level of the company. Whether it was saving a buck here, or doing something different for customers, everyone has a story. That creates powerful momentum – people sense that they’re able to do good things. It’s much more powerful than the precision or elegance of the strategy.

I communicate good news the same way I do the bad news. I thank people and make sure they feel a sense of recognition for their contribution. But the trick is always to to use the opportunity to talk about what’s next, to pose the next challenges. Where do we want to go? How do we want to build on it?

Margaret Heffernan – Author, The Naked Truth:

Nothing kills morale like a staff’s feeling helpless. This often plays itself out when there are rumors of a new strategic shift or a major personnel move, or worse, when the papers are littered with bad news about your company. A big part of boosting morale is about constructing a haven of logic that offers individuals shelter from any storm. At its most basic, leaders have to communicate their awareness of business conditions and place their plans in that context. Each time [a CEO outlines] a future that comes true, he demonstrates his own competence and reinforces trust.

The happiest people aren’t the ones with the most money but those with a sense of purpose – a sense that they are contributing to something bigger than themselves. At least some of this has to derive from work. The purpose of a business, then, must be explicit and go beyond boosting the share price or fulfilling some bland mission statement. People want to believe that they are part of something meaningful. The sense of purpose doesn’t have to be grandiose or revolutionary, merely credible and anchored in values.

Purpose is achieved through goals, and the acid test for any leader is defining the appropriate ones. Too small, and celebrations soon ring hollow. Small goals breed cynicism. But too-big goals produce helplessness. Although it can be temporarily thrilling to rally around a big corporate slogan like “kill the competition,” the reality is that employees can’t do it alone and they can’t do it quickly.

Alignment between corporate goals and personal development has never been more critical. The more unpredictable the outside world, the more urgent the personal quest for self-determination. What employees look for in leadership is a sense that their personal journey and the company journey are part of the same story.When these goals aren’t aligned, employees tend to whine with others, eager to share their sense of anger and injustice, polluting morale. The only way to combat this and get back on track is proper feedback. Give employees the tools to influence their own fate.

Get a life. Keeping morale high is like being on a diet: It requires constant effort and is never over. New ideas, stimuli and motivation come from all around you. It’s the larger life, after all, that gives purpose to the climb.

Alan Deutschman – Senior Writer, Fast Company – writing about how IBM builds new businesses:

Look for opportunities that can become profitable [billion-dollar] businesses in five to seven years. You’ll probably find them by talking to customers rather than to brilliant researchers in the labs, who are are looking further ahead.

J. Bruce Harreld – IBM:

You want to celebrate failure because you learn something. You need some level of security to say ‘I screwed it up,’ and be comfortable that you won’t be fired.

Marcus Buckingham – Author, Break All The Rules:

Turn anxiety into confidence. For a leader, the challenge is that in every society ever studied, the future is unstable, unknown, and therefore potentially dangerous. By far the most effective way to turn fear into confidence is to be clear – to define the future in such vivid terms that we can see where we are headed. Clarity is the antidote to anxiety, and therefore clarity is the preoccupation of the effective leader. If you do nothing else as a leader, be clear.

Effective leaders don’t have to be passionate, charming or brilliant. What they must be is clear – clarity is the essence of great leadership. Show us clearly who we should seek to serve, show us where our core strength lies, show us which score we should focus on and which actions we must take, and we will reward you by working our hearts out to make our better future come true.

See? Told you these folks know what they’re talking about.

Thanks to Fast Company‘s March 2005 issue for providing much of today’s content. (My collection goes way back.)

It’s a brand new week. Make it count. Cheers.

***          ***          ***

Social Media ROI – Managing and Measuring Social Media Efforts in your Organization is the reference manual for business managers involved with  social media program development, strategy, management, measurement and reporting. If your boss doesn’t yet have a copy, time to fix that. If your team doesn’t have copies, get them their own. Tip: you’ll want to have a highlighter ready. Earmarking of pages is strongly recommended.

Now available in English, German, Korean, Japanese and Spanish.

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So my buddy Tyler passed this on to me over the weekend, and it stirred a little brain sauce I felt I should share with you. In the piece, Kivi Leroux shares some of the complaints she’s been receiving from some of her NFP friends about patterns of incompetence that they run into at work. Here are some examples:

[…] what I do find a little surprising is how often I will meet a program or policy director, or even an executive director, for the first time, and upon learning what I do for a living, they will say, “Ugh. Our communications director is a complete idiot.”

[…] When I probe a bit further, here are the more specific complaints I hear.

“She knows zero about what we do. She is always asking really stupid questions.”

“She edits the articles I submit for the newsletter, and she dumbs it down so much or cuts it back so far that what we are left with is factually incorrect, and therefore embarrassing.”

“She wants to know about my day, because she says she needs to tweet it. WTF?”

“It’s her job to update the website and write the newsletter. So why is she constantly bugging me to write stuff for her?”

Okay, look…yes, people can be annoying, and yes, sometimes it takes them a while to figure out how to operate in an organization they just joined, especially if some of the staff has taken a dislike to them out of principle. But in ever one of the instances mentioned in the piece, there is also obviously a leadership problem within the organization. Here’s a quick overview:

Poor hiring practices. (Why did they hire this clown?)

An absence of employee development. (How does he still not know how to do his job?)

Lousy internal communications. (Why does she never seem to know what anyone is doing?)

Zero team work or esprit de corps. (Why do those Marketing people have to be so annoying?)

An absence of clearly defined goals. (Okay, I’ve allocated our budget. Now what?)

Not a whole lot of discernible guidance or supervision. (See everything above.)

Did I miss anything?

By the way, here are some of the comments I picked up from sharing the article on Facebook so far:

6/10 times the problem is poor training, leadership, or general communication. Another 2-3/10 can be poor job fits, in which case you should have open discussions with that employee about finding a different niche in your organization, or another job. That misplaced employee might recruit and train their replacement while looking for a new job. Then there is always the 1-2 rotten egg. […]  One of the strongest determinants of employee engagement is leadership. Are you, as a leader, communicating, rather than coercing, coaching rather than criticising, taking the time to set expectations, rather than assuming they should know? – Cherie Turner

Part of the problem is that when someone does their job very well it looks easy. What’s more a lack of understanding of what any job entails means that people can think something is very simple to do in short order. — On the other hand, I’ve also seen people in various job functions who refuse to keep up with the changes in their field. Or, worse, think they are and are just trying to overlay something new on the old ways of doing things. — That said, communication only works if both sides want it to work. Contempt for the other person’s work has a way of shutting down a person’s hearing and understanding of what is being requested of them. – Brenda Young

Yeah, I was thinking before I read the post … Ummm if you’re captain of that boat and your crew are all incompetent ( or if you think they are) what does that make you? – Joseph Allen Gier

So let’s talk about leadership for a second, because incompetent employees, crap internal communications and an absence of clearly defined organizational goals don’t happen when an organization is being properly led.

A note to managers, officers, business owners and corporate executives:

If all of your employees are competent, great. Keep on focusing on ways to translate that into growing market-share, designing the best products in your industry, making your customers rave about you, or whatever other criteria your business uses to define success.

But if some of your employees no longer are competent, then you have two choices: a) Train them properly, or b) replace them with someone who is. That’s it. Those are your only two choices. There is no c) option: look the other way and hope things work out.

As a business owner or manager, part of your job is to make sure that incompetent employees (and managers) don’t become a drain on your resources and overall morale.  It is your responsibility to make sure that everyone on your staff is the best possible person for the job that you can afford. You’re in charge. So if you have people like this on your payroll, what you need to do is basically this: fix your shit.

How to fix your shit in 5 simple steps:

1. Be competent.

I know this seems really basic, but if everyone observed this rule, our economy wouldn’t be in the crapper, unemployment rates wouldn’t be what they are.  So let’s talk about it.

Competence begins and ends with you. If you’re going to be in charge of something, you need to really know your shit.  And if you don’t, you at least have to be 100% committed to getting there as quickly and thoroughly as possible. That requires a “perpetually in beta” mindset. (Great leaders tend to operate in this mode. It is one of the most conspicuous distinctions between business leaders and mere managers, by the way.) There is no getting around this. The alternative is to be an incompetent boss. How do you think that’ll work out?

Every winning organization in history has had at its head a supremely competent leader. Disney, Jobs, Ford, Chanel, Patton, Cousteau, Ferrari, Candler, Alexander, etc.  You don’t get to safely send astronauts to the moon and back by just being okay at math. You don’t get to turn a company you started in your garage to become a Fortune 500 in under 20 years by being kind of clueless about your market or industry. It just doesn’t happen.

Julius Caesar knew his shit. When he took on the conquest of Gaul (and later fought his rival Pompey for control of Rome), good old Jules wasn’t looking to sort of tell his legions to walk north, hang back and look forward to a fat payday. We’re not talking about a guy who sat around and delegated strategy to agencies, intelligence to research firms, and the fighting to cheap foreign labor. There wasn’t a damn thing he didn’t know about soldiering, about campaign logistics, about siege warfare, about politics and geography and morale. The guy lived for one purpose: to be the most capable and accomplished general on the planet. His legacy of success was so great that today, his name is synonymous with “leader.” Czar and Kaiser are variations of his last name. There’s a reason for that. (He eventually overreached and paid for that, but that’s Caesar the emperor, not Caesar the general.)

Every time I run into a manager, director, vice-president, CMO or even CEO who hasn’t bothered to remain informed about and fluent in the developments that have driven his or her field forward in the last 20, 10, 5, even 2 years, all I see is someone who has given up on being competent. I don’t care if the reason for that decision is laziness, being too busy, being distracted, or whatever the excuse happens to be. The end-result is the same: that person no longer has the appropriate set of competencies required to be effective at their jobs. Period. I’m sorry, but if you’re the least knowledgeable person in the room, you aren’t fit to lead. And if you’ve allowed your competencies to fall ten years behind the times, you need to go fix that shit because otherwise, all you are now is a liability to your organization.

Here’s something I have a difficult time understanding: for some bizarre reason, we don’t accept incompetence from brain surgeons, restaurant chefs, military officers, FEMA administrators, football coaches, and first responders, but we give business managers and corporate executives a pass. Why? Because it’s no big deal if a CEO or a CMO doesn’t know his shit? Well… actually, it matters. It matters to the 10,000 people who just got laid off because their boss just invested $150,000,000 in worthless acquisitions and ineffectual media spends. It matters to every employee of Circuit City and Blockbuster, neither of which should have gone belly-up for something as dumb as not being able to adapt to obvious market changes. It matters to all the folks at Microsoft advertising who lost their jobs this year, folks at RIM, who ten years ago thought they owned enterprise mobility, and everyone at Yahoo who is probably wondering if 3 CEOs in 12 months is a sign that they should update their CVs. It also matters to the folks at GM, the Olympic Games, the NFL and hundreds of other organizations who depend on their bosses to eventually (sometime this decade) figure out how to properly leverage Social Media and finally step into the 21st century. (It isn’t complicated, guys. Really. This is what I am talking about.)

As a leader, the success of your organization, whether it is a multinational corporation, a small team of developers or a small clothing retailer, is your responsibility. It’s a lot of pressure, I know. That’s leadership for you. It isn’t all titles, prestige and fat paychecks. Responsibility is worry that you won’t be as good as you hoped you would be. Responsibility is shame when you let your employees down. Responsibility is making sure that your organization comes before your ego, your swag and your golf swing. It means that you have to devote yourself to being the best possible leader that you can be. It demands it. That begins with being competent. Not only competent but ridiculously competent. So competent that if someone were to put you in a room with the world’s top 100 people with the exact same job as yours, you could kick all of their asses with how awesome you are at your job. You should want to be so competent that they all want to be you. If you aren’t that guy, then fix your shit and become that guy. Don’t start tomorrow or next week. Start right now. I shouldn’t even have to tell you this.

2. Surround yourself with competent people. 

We’ve already touched on this, but here are the basics:

Hire the best people possible. If you can’t convince the best people to come work for you, figure out why and then fix your shit.

If you can’t afford to hire top talent, then recruit young talent before it gets expensive. This isn’t difficult. It just takes work. You know… It really is as simple as building a network that you can leverage to identify and approach young talent for you. Be involved enough in your industry (or other industries that might breed the types of folks you want working for you) and key universities that you are constantly aware of either rising stars or kids still studying to become someone you might want to mold into an executive someday. The three rules here are these: Be there. Do your research. Invest early.

Once you’ve recruited your diamonds in the rough, train them. Develop them. Mold them. If they leave after a few years, it’s okay. People leave. So what? I guarantee that if your company becomes known as the place where top talent goes early in their careers before moving on to Apple, Nike, Disney or Ogilvy, that won’t exactly hurt your brand or your HR department. If you really want to keep those junior champions from leaving, just figure out what it is they’re walking away from, and fix. your. shit.

By the way, that training, developing and molding thing, it only happens if done by competent people. If the managers and execs doing the developing are incompetent dumbasses, all you’ll manage to accomplish is turn perfectly promissing young professionals into messes of confusion and frustration. Competence breed competence. Discipline breeds discipline. Incompetent dumbasses breed incompetent dumbasses. (It’s just science.) Shape your organization accordingly.

3. For the love of puppies, start hiring outside of your industry.

Stop hiring the same 500 fucking people. Seriously. Stop it. I know their CV looks awesome, but look… ten years ago, they were director of whatever for competitor A. Seven years ago, they were VP of Business Development for competitor B. Five years ago, they were SVP of communications for competitor C. They’re just going round and round the same circle of crap, and all you are is the next stop. If they ever had great ideas, they’re gone. They’ve been sucked out of them by your competitors already. Now, these hires are only working for you because their last boss wouldn’t give them a raise. Worse yet, they’re only working in your industry because they’re too chicken-shit to go try something else. They’ve stopped being interested in learning anything new. They’re just looking to move up in the world and use you to give their career a 6.3% annual boost. I know these people. I can smell them down the hall the moment I walk into your offices. Stop hiring your competitor’s hand-me-downs. You’re hiring yourself into a cycle of failure and you need to snap out of it.

You know what works? When a designer who spent ten years working on sailboats goes to work for a race bike manufacturer. Or when a product manager from the pet toy industry goes to work for a faucet manufacturer. That designer from Pixar you met at the Pivot Conference or FusionMEx, she’s the missing ingredient in your medical imaging group’s patient UX team. It’s at the intersection of those worlds that cool stuff happens. Where it doesn’t happen, ever, is in a conference room filled with ten guys who have worked at the same jobs for the same kinds of companies for the last 35 years. Think.

So please, cut out the industry inbreeding, and start fixing your shit once and for all by making it a habit to inject your company with fresh DNA.

4. Communicate better.

Your employees’ job isn’t to “do their job.” It’s to do their job so that the company can become… (enter answer here). You have to figure out what that blank is, and you also have to figure out how to communicate that to your employees (and customers, for that matter). Just so we’re clear, I am not talking about mission statements.

Note: nobody cares about your mission statement. The only asshole who ever did was the consultant you overpaid to help you come up with it in the first place, and he sure as shit doesn’t care about it now.

No, what I mean is your purpose. Your raison d’etre. Your actual mission, without the statement. Even if it’s just for this month or this quarter or this year, figure out what it is.

What your purpose it is not: “To establish a global leadership position in the ball-bearing polishing industry.”

What it could be: Become #1 in customer satisfaction for our industry, starting at 10:04 this morning. Consistently be 18 months ahead of our competitors in terms of product innovation. Become the most highly recommended resort destination on the French Riviera. Earn a third Michelin star this year. Make the coolest looking purses in the world. Make the most comfortable toilet seats known to man. Etc. Get it? Start there. So what’s your company about? What do you want it to be? Clarify that simple vision. Strip it down to the core. Then communicate it to everybody you know, starting with your employees.

Once your organization knows what you want (and they also know the role they are to play in getting there,) good things will start to happen. People in your org will become mission-aligned. Silo walls will start to erode bit by bit. People will start to feel like they are working towards a common goal. If someone isn’t up to speed on something, the team will naturally help them get caught up. Good shit will happen.

But if all you do is give your employees individual or departmental goals month after month after month, or worse, expect them to carry on with little more than their job description and an endless stream of vaguely connected projects, all you’ll end up with is an organization that spends all day spinning its hundreds of stupid little self-serving wheels with nothing to show for it. Your best talent will get frustrated and leave, and before long, all you’ll be left with are people who only stick around for the paycheck and the benefits. Oh what wonders will you accomplish with a building-full of those highly-motivated overachievers!

If that last paragraph sounds like a horrible plan, fix your shit and learn to communicate better.

5. Say no to excuses.

Kill excuses. All of them. Ruthlessly exterminate those little fuckers. Why? because if you don’t, failure will spread like a bad case of herpes across your entire organization and infect everyone. Before you know it, rationalizing failure every time you fall short of reaching your goals will become your corporate culture’s very own little brand of crotch rot.

Just for entertainment purposes, here are a few of the excuses I’ve actually heard in meetings these past few years:

“We already tried that. It doesn’t work.” (No, you didn’t. And it does.)

“We’ve already committed to another solution.” (Yeah. It isn’t working. Change it.)

“It’s what we’re already doing.” (No, it most certainly isn’t.)

“That isn’t my job.” (Yes it is.)

“It isn’t in my budget.” (Yes it is.)

“It’s the economy.” (No, it isn’t.)

“Our competitors can afford to spend a lot more money on that than we do.” (So what?)

“That isn’t one of our core competencies.” (Why not?)

“We’ve just hired someone to do that.” (So why isn’t it being done?)

“Actually, we thought it was a huge success.” (Really? Are you serious?)

“We’re not in the video streaming business.” (No? Are you in the “staying in business” business?)

“I don’t know. Our digital agency handles that for us.” (Are you sure they know that?)

“Our IT manager doesn’t want us to do that.” (Oh? Is he your boss?)

“Legal won’t let us.” (Legal won’t let you? What are you, six years old?)

“We can’t compete against Chinese imports on price.” (So compete on something else.)

“There’s just no demand right now.” (Really? See below.)

No demand? Okay. Tell that to luxury car manufacturers. Lexus saw a 99.7% growth in June 2012 over June 2011. Acura saw a 76.5% increase in sales for the same months. Infinity: 66.1%. BMW sold almost 22,000 cars in June 2012 alone, just shy of the number of cars sold by Mercedes-Benz in May. Tell that to Kate Spade, whose direct-to-consumer sales were up 74% last year. Tell that to Fortune’s Top performing companies for 2011.

Here are some growth stats for you, just in case you haven’t kicked your organization’s dependence on excuses in the nads yet:

Oh, but the odds are stacked against you? Unfair competition and all that? Tell me all about how the world is unfair. Please. I’m all ears. Meanwhile, companies with a fraction of your resources are well on their way to kicking your ass and eventually displacing today’s Fortune 500 companies. It might take them five years, maybe even 10 or 20, but they’re not letting that get in their way. They’re figuring it out and pressing on. What are you doing?

Start to think of excuses as tiny little ball bearings that make it easier for you to fail a little more every day. That’s what they are.Excuses give you permission to fail. You didn’t get it done this month? Let’s walk over here to the wheel of excuses and spin it. Let’s see what the reason was this time… (Does it matter?) You can’t seem to retain your top talent? Spin that wheel. Your tablet can’t compete against Apple’s? Spin it. Your TV show was reviewed poorly? Spin it. Your Facebook ads aren’t converting? Spin that shiny wheel. You aren’t happy with where your company, your marketing, your product penetration or your career is going? That really sucks. So what are you going to do about it? Truth is, you have two choices: a) spin the wheel of lame excuses again, or b) figure out what didn’t work and fix your shit.

In closing… fix your shit. No, I’m kidding. (But not really.)

There’s no cosmic force at work here. Whether your company becomes an incompetent dumbass factory (or not) is up to you. Whether your company is drowning in idiotic silos (or not) is up to you. Whether your company falls out of the Fortune 500 club (or not) is up to you. None of this is rocket science.

All you really need to do is make a decision not to settle for mediocre bullshit, and then follow that impulse all the way through: be competent, surround yourself with competent people, look for ideas outside your professional bubble, communicate better and stop accepting excuses. There’s more, but if you follow these five basic little rules, you’ll be a lot better off this time next year and then we can talk about the next five.

So this week, please, instead of perpetuating the same droning routine of meetings, emails, presentations and more meetings that haven’t really gotten you anywhere these last few years, take a step back from the quick-sand of everyday busy-work, and take concrete action to start fixing your shit.

Cheers,

Olivier

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Social Media ROI – Managing and Measuring Social Media Efforts in your Organizationisn’t a social media book. It’s a business management book, and it focuses on social media program strategy, management, measurement and reporting. If your boss doesn’t yet have a copy, time to fix that. If everyone on your team doesn’t yet have their own copy, what are you waiting for? (Now available in several languages including German, Korean, Japanese and Spanish.)

CEO-Read  –  Amazon.com  –  www.smroi.net  –  Barnes & Noble  –  Que

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We probably all agree: ideally, Olympic athletes should head to The Games clad in uniforms and gear designed and made in their respective countries. The miracle of globalization aside, The Games are still an international contest not only of athleticism, skill and sportsmanship but also of national pride. Over the course of the last century or so, the event has become the single-most conspicuous showcase of national and cultural achievement in the world. If the competition itself is about sport, the event in its totality is about much, much more. So yes, in an ideal world, every bit of swag carried by a team should come from its country. Hats, shoes, warm-ups, backpacks, they should all suggest to onlookers “this is us too. This is what we can do. Our country is cool like that.”

So naturally, it stings when a team arrives at The Games clad in uniforms made by foreign labor in a far-off country. It kind of sends the wrong message, doesn’t it? It kind of says “we could have made that stuff here, but we’ve decided to export our national pride right along with our jobs. Don’t tell anyone but we were too lazy to try to make it all here, and it cost too much anyway. And in case you hadn’t noticed, we kind of like cheap shit. I mean look at us! This beer helmet only cost me $9.99 for crying outloud!”

Not exactly what you would call a well crafted exercise in national branding.

It isn’t surprising then that last week, American lawmakers, after being notified that the US Olympic team’s uniforms had been manufactured in China instead of the good old US of A, decided to bitch and moan and show how disgusted they were about the whole thing:

Republicans and Democrats railed Thursday about the U.S. Olympic Committee’s decision to dress the U.S. team in Chinese manufactured berets, blazers and pants while the American textile industry struggles economically with many U.S. workers desperate for jobs.

“I am so upset. I think the Olympic committee should be ashamed of themselves. I think they should be embarrassed. I think they should take all the uniforms, put them in a big pile and burn them and start all over again,” Senate Majority Leader Harry Reid, D-Nev., told reporters at a Capitol Hill news conference on taxes.

“If they have to wear nothing but a singlet that says USA on it, painted by hand, then that’s what they should wear,” he said, referring to an athletic jersey.

House Democratic Leader Nancy Pelosi told reporters at her weekly news conference that she’s proud of the nation’s Olympic athletes, but “they should be wearing uniforms that are made in America.”

House Speaker John Boehner, R-Ohio, said simply of the USOC, “You’d think they’d know better.”

Can you blame them? No. Of course not. They’re right. My first reflex was exactly the same as theirs.

But then, I read this:

In a statement, the U.S. Olympic Committee defended the choice of designer Ralph Lauren for the clothing at the London Games, which begin later this month.

Unlike most Olympic teams around the world, the U.S. Olympic Team is privately funded and we’re grateful for the support of our sponsors,” USOC spokesman Patrick Sandusky said in a statement. “We’re proud of our partnership with Ralph Lauren, an iconic American company, and excited to watch America’s finest athletes compete at the upcoming Games in London.”

Ralph Lauren also is dressing the Olympic and Paralympic teams for the closing ceremony and providing casual clothes to be worn around the Olympic Village. Nike has made many of the competition uniforms for the U.S. and outfits for the medal stand.

On Twitter, Sandusky called the outrage over the made-in-China uniforms nonsense. The designer, Sandusky wrote, “financially supports our team. An American company that supports American athletes.”

And right there and then, I realized something that, in my initial disgusted outrage, I had missed completely that the U.S. Olympic Team is privately funded. Ah. Well, that changes everything.

Here’s an idea: if you want American-made uniforms (which is totally understandable, we all want that) then write your congressman and demand that the Olympic program receive adequate funding from the federal government. Then, as owners of the US Olympic program, we the people can legitimately have a say as to where the uniforms are made (hopefully right here in the US).

Otherwise though, it’s probably best to just thank the sponsors who are footing the bill for you and STFU.

Here’s the soundbite I would actually like to hear from those outraged lawmakers at some point: “We could have opted to hand over funding to the private sector and risk have the uniforms manufactured overseas, and there were certainly compelling financial reasons to choose that option, but we felt that the uniforms absolutely should be American-made. To that end, we voted to do the responsible thing, which is to provide adequate financial support to the US Olympic program and ensure that those manufacturing jobs remain right here in the US.”

But no. Instead, we get fist-shaking and finger-pointing.

In the same vein, I can’t wait for lawmakers to voice their outrage when they finally discover in a few years that US astronauts have to resort to hitching rides on really ugly and dangerous looking European and Chinese rockets instead of fancy American spacecraft. (What? We defunded NASA’s manned space program? When?!)

It’s almost as if US lawmakers are just now finding out that the US textile industry has all but been decimated under their watch in the last few decades. (Um, yes, that fancy golf-themed tie you’re wearing was made in Bangladesh, that crap suit you couldn’t be bothered to have taken in by a proper tailor was made in Vietnam, and those rubber-soled 2-for-1 shoes you think are so fly were made in China.) So a) thanks for protecting and supporting US jobs, asshole, and b) please, why don’t you shake your angry little fist on TV and lecture us all on how we need to buy American? Because coming from you, that’s just dandy.

But I digress.

Friendly tip to lawmakers: if you deliberately defund a program, that program has to go become someone else’s bitch. And here’s the funny thing about giving up ownership of something: it isn’t yours anymore. You gave it away. It’s kind of like dumping your girlfriend and then bitching about how the diamond ring that her new boyfriend gave her isn’t what you would have bought. Yeah. You’ve just become that guy.

If you want to have your say, then fund the program. Own it. Nurture it. Grow it. Be responsible for it. Otherwise, have a Coke, a smile and shut the proverbial fuck up. Or better yet, call up the sponsors who are generously footing the bill for your lazy, stingy ass and thank them for picking up the tab for you.

Instead of complaining about the made-in-China uniforms they paid for because you wouldn’t, you should be on your knees kissing their asses and sending them chocolates for Christmas. Because without them, you wouldn’t even have an Olympic program to complain about. And if you had done your jobs for the last 30 years, the Ralph Laurens and Nikes of the world would have had realistic incentives to invest in more manufacturing capacity in the US instead of moving those jobs overseas. Chew on that next time your pro-deregualtion, pro-private-sector-solution ass walks into a clothing store and decides to continue supporting the creation of foreign jobs at the expense of US ones with every dollar you spend there. Keep preaching economic patriotism and US job creation too, while you’re at it. What? Our Olympic uniforms are made in China?! Oh the humanity!!!

So here we go:

Dear Ralph Lauren, Nike and the rest of the brands sponsoring and funding the US Olympic program, thank you for what you do. Without you, the US probably wouldn’t be going to the Olympics at all. What could be better than American companies that support American athletes and put clothes on their backs? Thank you. You do more for these kids and the image of the United States than all of Congress put together. So don’t listen to their sourpuss bullshit and keep it up.

Grrr.

</rant>

Cheers. 😉

(Image courtesy of Kevin McNulty)

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Social Media ROI – Managing and Measuring Social Media Efforts in your Organizationisn’t a social media book. It’s a business management book, and it focuses on social media program strategy, management, measurement and reporting. If your boss doesn’t yet have a copy, time to fix that. If everyone on your team doesn’t yet have their own copy, what are you waiting for? (Now available in several languages including German, Korean, Japanese and Spanish.)

CEO-Read  –  Amazon.com  –  www.smroi.net  –  Barnes & Noble  –  Que

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Today, instead of talking about social media, brand management, internet bubbles, who does what well and who does what poorly, let’s just talk a little bit about leadership. Corporate leadership, that is. Why? Because every single problem and dysfunction holding back an organization stems from poor leadership. Every. Single. One. Without exception. Hiring executives with obsolete skills to build new business models, not understanding how to properly leverage social media, getting dragged into a botched IPO, promoting risk-averse managers to leadership positions, expecting that the $10M a year you dropped on Facebook advertising will sell $100M worth of cars… That sort of thing.

Instead of doing all the talking, I will let people with a whole lot more experience than me give you some tips about how to become a better leader. Great stuff that transcends the typical leadership quotation mill.

Anne Mulcahy – Former CEO of Xerox

In a crisis, you have the opportunity to move quickly and change a lot – and you have to take advantage of that.

Change doesn’t happen if you don’t work at it. You’ve got to get out there, give people the straight scoop, and get buy-in. It’s not just good-looking presentations; it’s letting people ask the tough questions. It’s almost got to be done one person at a time.

There’s not a lot of room anymore for senior people to be managers. They have to be leaders. I want people to create organizations that get aligned, get passionate, get really inspired about delivering.

Stories exist at every level of the company. Whether it was saving a buck here, or doing something different for customers, everyone has a story. That creates powerful momentum – people sense that they’re able to do good things. It’s much more powerful than the precision or elegance of the strategy.

I communicate good news the same way I do the bad news. I thank people and make sure they feel a sense of recognition for their contribution. But the trick is always to to use the opportunity to talk about what’s next, to pose the next challenges. Where do we want to go? How do we want to build on it?

Margaret Heffernan – Author, The Naked Truth

Nothing kills morale like a staff’s feeling helpless. This often plays itself out when there are rumors of a new strategic shift or a major personnel move, or worse, when the papers are littered with bad news about your company. A big part of boosting morale is about constructing a haven of logic that offers individuals shelter from any storm. At its most basic, leaders have to communicate their awareness of business conditions and place their plans in that context. Each time [a CEO outlines] a future that comes true, he demonstrates his own competence and reinforces trust.

The happiest people aren’t the ones with the most money but those with a sense of purpose – a sense that they are contributing to something bigger than themselves. At least some of this has to derive from work. The purpose of a business, then, must be explicit and go beyond boosting the share price or fulfilling some bland mission statement. People want to believe that they are part of something meaningful. The sense of purpose doesn’t have to be grandiose or revolutionary, merely credible and anchored in values.

Purpose is achieved through goals, and the acid test for any leader is defining the appropriate ones. Too small, and celebrations soon ring hollow. Small goals breed cynicism. But too-big goals produce helplessness. Although it can be temporarily thrilling to rally around a big corporate slogan like “kill the competition,” the reality is that employees can’t do it alone and they can’t do it quickly.

Alignment between corporate goals and personal development has never been more critical. The more unpredictable the outside world, the more urgent the personal quest for self-determination. What employees look for in leadership is a sense that their personal journey and the company journey are part of the same story. When these goals aren’t aligned, employees tend to whine with others, eager to share their sense of anger and injustice, polluting morale. The only way to combat this and get back on track is proper feedback. Give employees the tools to influence their own fate.

Get a life. Keeping morale high is like being on a diet: It requires constant effort and is never over. New ideas, stimuli and motivation come from all around you. It’s the larger life, after all, that gives purpose to the climb.

Alan Deutschman – Senior Writer, Fast Company – writing about how IBM builds new businesses

Look for opportunities that can become profitable [billion-dollar] businesses in five to seven years. You’ll probably find them by talking to customers rather than to brilliant researchers in the labs, who are are looking further ahead.

J. Bruce Harreld – IBM

You want to celebrate failure because you learn something. You need some level of security to say ‘I screwed it up,’ and be comfortable that you won’t be fired.

Marcus Buckingham – Author, Break All The Rules

Turn anxiety into confidence. For a leader, the challenge is that in every society ever studied, the future is unstable, unknown, and therefore potentially dangerous. By far the most effective way to turn fear into confidence is to be clear – to define the future in such vivid terms that we can see where we are headed. Clarity is the antidote to anxiety, and therefore clarity is the preoccupation of the effective leader. If you do nothing else as a leader, be clear.

Effective leaders don’t have to be passionate, charming or brilliant. What they must be is clear – clarity is the essence of great leadership. Show us clearly who we should seek to serve, show us where our core strength lies, show us which score we should focus on and which actions we must take, and we will reward you by working our hearts out to make our better future come true.

See? Told you these folks know what they’re talking about.

Thanks to Fast Company‘s March 2005 issue for providing much of today’s content. (My collection is… extensive.)

Cheers.

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Social Media ROI – Managing and Measuring Social Media Efforts in your Organization isn’t a social media book. It’s a business management book, and it focuses on social media program strategy, management, measurement and reporting. If your boss doesn’t yet have a copy, time to fix that. If everyone on your team doesn’t yet have their own copy, what are you waiting for?

CEO-Read  –  Amazon.com  –  www.smroi.net  –  Barnes & Noble  –  Que

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That.

 

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Problem? Solution:

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Moneyball - Courtesy of Sony Pictures

Filed under: opinion

Earlier this week, I wrote about what Moneyball‘s Peter Brand called the “epidemic failure to understand what is going on” plaguing the business, marketing and advertising worlds – when it comes to understanding that social media and social business are not just extensions of traditional “digital” strategies. Yesterday, I was reminded by both Christopher Barger and Justin Whitaker that the same type of off-target thinking is also plaguing other aspects of the world of business, particularly when it comes to the ever hot world of the dot-com.

If you read that post, you’re already 80% of the way there. What follows will fill in the remaining blanks for you. Here is basically how this plays out:

Christopher Barger (on Facebook): And the bubble burst countdown is officially on in 3…2… 1. The “logic” behind this claim is utterly insipid. And we’ve seen this movie before, folks. It came out in 1999 and was called the Dotcom boom. Dear social media business: Stop it. Just. Stinking. Stop it.

Here is the story he is referring to: Forbes – Pinterest is a $7.7 Billion Company. Below are a few clips from that Forbes piece.

Facebook values Instagram at $1 billion and LinkedIn (LNKD) has a market cap of $10 billion. Twitter claims it is worth $8 billion. So where does that leave the new kid on the block Pinterest? Well, it looks like you can pin $7.7 billion on your Pinterest board.

Pinterest is important because the traffic is growing and statistics are impressive. It is known for its magazine quality images. Pinterest is to artful images what Twitter is to artful words. What’s more, Pinterest appeals to college-educated females between the ages of 25 to 44. A sweet demographic known for its spending decisions and habits.

According to the scoreboard from Experian Hitwise data from March 2012, Pinterest is the third most popular social media platform in the United States. It is running close behind Twitter in the number of total visits. Facebook is the big beast at seven billion total visits, Twitter while very far behind, is logging 182 million visits. Pinterest is next with 104 million and gaining quickly.

[…]

Pinterest scored 21.5 million visits for one week at the end of January which was an increase of 30x from six months prior. So we can try to place a value on Pinterest by visits alone. If LinkedIn has 86 million visits and a market cap of $10 billion that values the visits at $116. By that method, you could pencil in a value of say $12 billion for Pinterest.

I am not making this up. It gets better.

Worth of Web, a website value calculator places Pinterest’s value at $267 million. It says the company has 10.8 million daily visits and 324 million monthly visits. It claims daily revenue is $74,520 with annual earnings of $26 million. Unfortunately Worth of Web seems to be way off on its valuations. For example, Worth of Web only values Yelp! (YELP) at $115 million, while it currently has a market capitalization of $1.5 billion. It also grossly underestimated Instagram at $2.6 million. But if we take the Yelp undervaluation and apply that to Pinterest, you get roughly $3.4 billion. Not so far-fetched these days. 

[…] Thus, grabbing an envelope and scribbling on the back, I split the difference between the two previous valuations and come up with $7.7 billion.

Don’t get me wrong: I love Pinterest, and I think there’s big potential for the platform, but I’m also not stupid. I can put its potential value in perspective. And I know how easily bad metrics, bad measurement schemes, bad assumptions can put us all in the weeds. Forbes evidently… not so much.

Look at that ridiculous valuation model. This is how a young company with $75,000 in daily revenue (according to that piece), by being compared to other overvalued companies, can magically find itself valued at $7.7 billion. Even if its revenue grew 30x in the next year, (and that is a very big “if”), you would be looking at $780 million/year. Can we say now that Pinterest has a 10-year shelf life? Where is that $7.7 billion coming from? Or that even more fascinating $12 billion figure? This? Nope. Pinterest, like every other social platform won’t be disrupting the market that long. Something else will come along to take over and kill its momentum, and it won’t take ten years.

So thanks, Forbes, for that enchanting little ride on the magic math train. Welcome to the fairy-dust world of equivalency equations – the same equations that lead agencies and brands to mistake the cost of acquiring an impression to the market value of a follower, to the notion that a Facebook fan is worth $372.99 without ever taking into account that fan’s purchasing behaviors, to the notion that a random start-up with no revenue model might simultaneously be $70M in the red and worth more than Luxembourg and the Isle of Man combined.

As Chris points out, we’ve been here before. But this is just the layup. There’s more:

Justin Whitaker (on Facebook): Olivier, did you see Calacanis’ newsletter on recent valuations? Gives you some insight into what is going on. His end result is that we have competition for good teams, and that’s pushing valuations up. To my mind, that’s exactly what’s wrong with what’s happening . We’re valuing teams, not revenue models.

That last sentence. Sound familiar? Remember Peter Brand’s conversation with Billy Beane from yesterday’s post? Hold that thought. Here is what Jason Calcanis had to say on Launch:

 Is the internet industry experiencing a bubble? Yes there are bubbles, but those bubbles make up the froth on top of the massive rising tide of value being startups are creating today.

The $210M sale of OMGPOP and the $1B Instagram purchase feel like a bubble, but you have to step back for a moment and realize that OMGPOP was purchased for 2% of the value of Zynga and Instagram for 1% of the value of Facebook.

Now, are Zynga and Facebook overvalued? Well, that’s a separate email of 2k words. The short version is they are aggressively valued based on their massive growth. I’ve heard folks say that $10B for Zynga and $100B for Facebook are anywhere from 0 to 30% rich. Most folks believe we are seeing a premium for growth — not a bubble — in these stocks.

[…]

What we’re seeing now is founders doing their jobs: getting the best price for their teams. Angels are willing to pay under these terms, so they are essentially saying they’ll give up the first 2x to 3x of a deal’s return in the hopes of getting YC’s next Airbnb or Dropbox. (Those two investments are up 50x to 300x since their YC days.)

Most angel investors have their activity covered by one big hit. Bottom line: It feels like a bubble, but it’s really just a hot market.

[…]

We’re not in a bubble. We’re in a revenue tsunami like nothing any of us have ever seen in our lifetimes.

In a market like this, founders shouldn’t optimize for valuation. They should optimize for getting the involvement and attention of the best investors who provide the best long-term value.

And there you have it: “We’re not in a bubble. We’re in a revenue tsunami like nothing any of us have ever seen in our lifetimes.” Us  meaning founders and A-round investors, industry insiders who invest in, buy and sell companies early, based on “potential growth,” rather than real world, sustainable revenue models (that’s a very different game). Every time one of these “we don’t know how to make money yet” companies gets slapped with an inflated value before being sold off to a Facebook or a Google, what do you think the real game is? That’s right: maximizing profit for the team of early investors who got them all prettied up for their big market day. There’s nothing wrong with it, mind you. Calcanis isn’t a bad guy. His business model works for him, his team and the people who spent a couple of years building really cool technology. But because most of the game is being played pre-IPO, the further down the river you are in the investment chain, and the higher the “valuation,” the further away you are from the reality of what dividends that company can actually produce for its late investors. At least Zynga has a revenue model. It’s being run and managed like a real business. But most of these young companies either don’t, or what meager revenue model they have is not nearly on par with their market cap. That’s a problem.

$7.7 billion for Pinterest. I want you to think about that. I want you to think of the gap between that $26 million in actual annual revenue mentioned in the Forbes piece and its subsequent $7.7 billion valuation fantasy. Why not $300 billion? Why not a zillion dollars? Could happen, right? And maybe if you follow the same thinking, maybe if VCs keep telling us all day that this isn’t another dot-com bubble, we’ll all stop asking.

So one more time, in case you missed it earlier, from Moneyball:

Peter Brand: There is an epidemic failure within the game to understand what is really happening. And this leads people who run Major League Baseball teams to misjudge their players and mismanage their teams. I apologize.

Billy Beane: Go on.

Peter Brand: Okay. People who run ball clubs, they think in terms of buying players. Your goal shouldn’t be to buy players, your goal should be to buy wins. And in order to buy wins, you need to buy runs. You’re trying to replace Johnny Damon. The Boston Red Sox see Johnny Damon and they see a star who’s worth seven and half million dollars a year. When I see Johnny Damon, what I see is… is… an imperfect understanding of where runs come from. The guy’s got a great glove. He’s a decent leadoff hitter. He can steal bases. But is he worth the seven and half million dollars a year that the Boston Red Sox are paying him? No. No. Baseball thinking is medieval. They are asking all the wrong questions.

Now here’s Justin again:

“To my mind, that’s exactly what’s wrong with what’s happening . We’re valuing teams, not revenue models.”

Let the wheels turn.

But because I am neither a VC nor a startup founder, maybe I have this all wrong. But then again, maybe all it is is just a big game of hot potato whose object is to keep all of the potatoes in the air while investors like me and you and our banks get sucked into collectively investing billions of dollars into fledgling companies that have yet to generate as much as 1% of their market cap in revenue.

The VC game might just be this: get in with a million bucks, get out with a billion, pass the hot potato on down to the suckers who see a score but haven’t figured out that unless these companies find a way to actually make money and pay investors back, it’s all basically a big fat ponzi scheme. What’s the secret? Everyone needs to stay focused on the imaginary bag of money at the end of the road, the Google dollars, the Facebook pesos. If the value of these startups keeps growing exponentially (like a Pinterest or an Instagram going from $5M to $1B+ in 18 months) we can all believe that we’ll become internet millionaires if we only invest in them when we get a chance. It’s that simple. The bigger the valuation, the more attention it attracts. $8B? Wow. Let’s all buy that dot-com lottery ticket!

Have you ever chatted with a VC or an angel investor? Nine times out of ten, here’s what you’ll hear: “We’re not investing in the company. We’re investing in the people. Because we know that even if this company doesn’t make it, eventually, these people will build something big. That’s what we’re really investing in. That’s how it works.”

We’re not really investing in the Brooklyn bridge. We’re investing in the architects. Unfortunately, to do that, you have to get people to back up your investment by buying the bridge from you, preferably for a lot more than what you paid for it. If 5x is good, 30x is better. How do you do that? By convincing them that your bridge is worth 100x of its actual value. The process behind that isn’t all that hard. The pieces are already on the board. All you really need to get things started is for someone with an imperfect understanding of where value actually comes from to write a piece about you in a publication like Forbes, Mashable or the WSJ. Five years ago, it was hard to get that done. Today, most big circulation publications also have online versions whose editorial standards are… well, lax. Their contributors aren’t always journalists or even analysts. Many are little more than glorified copywriters, underpaid to create content whose only purpose is to drive page views. A simple phone call from a senior exec promising an exclusive, or a friendly beer and a little attention can score you the story you want them to write.

Here’s another dose of reality: Companies like Google and Facebook are businesses, just like Nike and Apple. They have to be able to run in the black at some point. That means that there comes a time when buying $7B companies that don’t generate enough revenue to pay for themselves eventually comes to an end. That acquisition game only makes sense in the very short term on when it comes to sacrificing black ink for a strategic move that hopefully isn’t entirely Pyrrhic in nature. Growth through the acquisition of upside down companies just isn’t sustainable. Look at it this way: If you’re eagerly buying stock in a company valued at $15B that only generates $200M per year in revenue from, say, advertising, and inflates its market value by buying $1B startups with no significant revenue stream every six months to make it look like they’re growing and making big moves, it doesn’t take a genius to see where the value of that stock is really going. What’s the company’s plan, then? To keep borrowing money from investors? To get banks in so deep that they can’t pull out without taking  a huge hit? To keep acquiring overvalued companies with Monopoly money and hope no one ever decides to cash-in their chips?

This is part of the mechanism that creates bubbles.

No matter how many companies with zero revenue you acquire, math is math. Profits are profits. You can’t keep promising “next year” forever. And when company valuations start hitting the stratosphere and the gap between price and value starts to look like the Grand Canyon, people finally stop being stupid. That’s when things get dicey.

Think of it as a game of hot potato. What’s the objective? To keep the potato in the air as long as possible.  The way it works is nobody stops to look at the potato. Nobody wants to get burned or miss the next toss because then it’s game over. How do you keep people playing? You convince them that the longer the potato stays in play, the more value they will get out of it. And as long as no one flinches, as long as no one asks questions, as long as all the potatoes stay in play, the game goes on; people who know how to get in and get out at the right time make money and the rest keep on paying and playing, not realizing that what happens when the music stops is they find themselves holding a old wrinkled-up overpriced potato. They were so focused on playing the game that they never stopped to look at what they were really buying. It’s what happened with the first dot-com bubble, it’s what happened with mortgages in 2008, and it’s what is brewing here too.

We’re valuating teams, not revenue models.

Here’s some perspective: Apple sells iPhones and iPads and media all over the world. It’s the biggest tech company on the planet. It’s so big it generates profits on the same scale as the world’s biggest energy companies. Starbucks sells zillions of gallons of coffee in little cardboard cups at an insane premium, and every day, millions of people eagerly pay for the privilege of walking around the office with their logo in their hand. McDonald’s sells burgers and fries and soda in almost every country in the world. Every morning, there’s a line of people getting their McCoffee and Egg McMuffins at virtually every McD’s on the planet. Ford sells cars. Lots of cars. Cool cars, even. Levi’s, RayBan, Coca Cola, Amazon, they all sell something a lot of people want. They generate insane amounts of revenue. What’s Pinterest selling? What is its revenue model, to be worth $7.7B?

Oh yeah… it gets web traffic. 104 million visits in March. My bad. $7.7B it is then.

Based on that equation – or more to the point, that kind of thinking – this blog should be worth $2.7M.

Tell you what: here’s a bargain. If you’re willing to pay cash, I’ll sell it to you right now for $2M even. Any buyers? No? I didn’t think so.

There is an epidemic failure within the game to understand what is really happening. And this leads people who run Major League Baseball teams to misjudge their players and mismanage their teams.

That. And this: there is a disconnect between the message and what is actually happening.

Do yourselves a favor: think. Ask the hard questions. Don’t just read Forbes or some industry white paper and take what’s being sold to you as gospel. Don’t surrender to marketing religions or measurement cults or self-serving sales pitches disguised as business philosophies. Challenge whatever conventions that make you raise an eyebrow or gasp in surprise. If you don’t understand something someone just presented to you, don’t delegate. Don’t leave that room until you understand every aspect of it. Don’t make a decision until you have left no stone unturned.

Why should we invest in a company with no revenue model?

Why is a Twitter follower valued the same whether she is a transacting customer or not?

Why are these qualifications even relevant to this role?

Why is content king?

What do you mean, “we’re investing in people, not the company?”

What’s your angle in this deal?

Question whatever business thinking that keeps you stuck in the same cycle of “why aren’t we doing better?” Bad insights lead to bad decisions. It’s painfully simple. The way you run your business, the way you hire people, the way you invest your resources, even the things you believe are real because you read about them in a magazine, it’s all the same thing. Mistakes all come from the same place. You want to know what the hottest product is in 2012?  It’s bullshit. The stuff gets sold by the ton. It’s hotter than gold, oil and cocaine combined. It’s even bigger than internet porn. My advice: Buy something better.

Then again, I could be completely wrong. You tell me.

*          *          *

Here it is. A whole book on how to make social media work from a business standpoint. ROI is covered, along with a lot of process elements that tie back to it. If your favorite social business “expert” doesn’t seem to get this stuff yet, don’t feel bad about sending them a copy. Knowledge is never a bad gift.

CEO-Read  –  Amazon.com  –  www.smroi.net  –  Barnes & Noble  –  Que

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Moneyball - Courtesy of Sony Pictures.

I finally watched Moneyball over the weekend. I’m not a big baseball fan but it held my interest, partly because it was based on a true story and partly because the movie really wasn’t about baseball at all. It was about old thinking vs. new thinking, about industry politics vs. the heresy of innovation, about dinosaurs desperate to hang on to a failing model that sustains their livelihood even when that model is clearly broken, ineffective and no longer relevant.

The scenes in which Oakland As’ general manager Billy Beane (Brad Pitt) locks horns with his cadre of coaches and scouts over how to do more with less, about how to break the cycle of mediocrity plaguing their organization, about how to get results again is brilliant, not because of the writing or the acting but because it is spot on target. How do I know this? Because I have been in that meeting hundreds of times. Well, not that particular meeting, but in others exactly like it. And every week that goes by, I find myself sitting in that meeting again and again and again.

In the US, in Europe, in Asia, the same meeting goes on almost daily. The conference table is always basically the same, the fluorescent lighting too. The players, they’re the same as well, everywhere I go. Only the vocabulary changes, the industry lingo, but the meeting, it’s the same and it goes pretty much like this:


Billy Beane
: Guys, you’re just talking. Talking, “la-la-la-la”, like this is business as usual. It’s not.
Grady Fuson: We’re trying to solve the problem here, Billy.
Billy Beane: Not like this you’re not. You’re not even looking at the problem.
Grady Fuson: We’re very aware of the problem. I mean…
Billy Beane: Okay, good. What’s the problem?
Grady Fuson: Look, Billy, we all understand what the problem is. We have to…
Billy Beane: Okay, good. What’s the problem?
Grady Fuson: The problem is we have to replace three key players in our lineup.
Billy Beane: Nope. What’s the problem?
Pittaro: Same as it’s ever been. We’ve gotta replace these guys with what we have existing.
Billy Beane: Nope. What’s the problem, Barry?
Scout Barry: We need 38 home runs, 120 RBIs and 47 doubles to replace.
Billy Beane: Ehh! [imitates buzzer]

What we see in this scene is a roomful of insiders with a century and a half of industry experience between them, and yet they haven’t figured out that their model is outdated, that their “experience,” is no longer enough to keep moving forward. They carry on day after day, season after season, doing the same thing over and over again, half-expecting a different result, but then again, maybe not. Worst of all, most of them have no idea what the problems plaguing their organizations actually are. A lot of it is just operational myopia. Some of it is also ego: they couldn’t possibly be wrong. All that experience and intuition, the entire industry’s decades-old model… how could things have changed that much, right?

And yet they are wrong, the model isn’t working anymore, and instead of listening to the guy in the room who sees it and knows how to fix it, they treat him like a punk. When he wants to do something about it, they push back. Hard. In Moneyball, he’s their boss. Imagine when he is just a Director or a VP, or even just an account manager. Imagine how quickly he gets overruled then. I’ve seen amazing people get shut down and pushed out of organizations over this sort of thing. I could give you names and dates. I could make you ill with true stories of stupidity and petty politics, of wasted opportunities and complete operational failures that turned what could have been huge wins for companies that needed them (and customers who demanded them) into case studies in wasted potential. And as tragic as  these stories would be, they are no different from the opportunities that will be wasted this week, and the next, and the one after that, always for the same reasons, always because of the exact same thinking and business management dynamics.

I see that scene, that meeting, that discussion being played out almost everywhere I go, especially when it comes to social media and social business: guys sitting around a table, treating social like it is just an extension of the same old traditional digital marketing game they all understand and desperately want to stick to. And so they make strategy decisions based on models that don’t apply at all to the social space, they insist on using measurement schemes that aren’t the least bit relevant to it or the business as a whole, and worst of all, they make hiring decisions that absolutely make no sense at all for the new requirements of social communications. Why? Because even though the game has changed, no one in the room wants to accept that it has. No one in the room wants to adapt. No one in the room wants to look reality in the eye and do what needs to be done to actually win. Talk about it, sure. Use cool new words like earned media and engagement, definitely. But actually change anything and adapt to a new model? Nope. Not happening. The change management piece that comes with social business integration, the piece that is absolutely vital to it actually working, that piece is still DOA.

Here’s another conversation that also goes on “offline” at every company (agency or brand) around the world right now in regards to hiring decisions that touch on social media management. Here it is again, through the filter of Moneyball:

Peter Brand: There is an epidemic failure within the game to understand what is really happening. And this leads people who run Major League Baseball teams to misjudge their players and mismanage their teams. I apologize.
Billy Beane: Go on.
Peter Brand: Okay. People who run ball clubs, they think in terms of buying players. Your goal shouldn’t be to buy players, your goal should be to buy wins. And in order to buy wins, you need to buy runs. You’re trying to replace Johnny Damon. The Boston Red Sox see Johnny Damon and they see a star who’s worth seven and half million dollars a year. When I see Johnny Damon, what I see is… is… an imperfect understanding of where runs come from. The guy’s got a great glove. He’s a decent leadoff hitter. He can steal bases. But is he worth the seven and half million dollars a year that the Boston Red Sox are paying him? No. No. Baseball thinking is medieval. They are asking all the wrong questions. And if I say it to anybody, I’m-I’m ostracized. I’m-I’m-I’m a leper. So that’s why I’m-I’m cagey about this with you. That’s why I… I respect you, Mr. Beane, and if you want full disclosure, I think it’s a good thing that you got Damon off your payroll. I think it opens up all kinds of interesting possibilities.

Every company has a Peter Brand either on staff or sitting in a stack of CVs. Not necessarily in the sense that they are geniuses with statistics  but in the sense that they see the forest from the trees, that they see what needs to be done, but every time they open their mouths, they get shot down. Worse, if they open their mouths too much, they’re gone. And if their CV doesn’t have the bullet points and keywords that hiring managers were trained twenty years ago to find relevant, they don’t even get considered for the position.

If I see one more social media leadership position go by default to candidates with “big agency digital experience” or “big brand digital experience,” I am going to throw my pencil at somebody’s head. There is the medieval thinking in action, right there. There’s the primary reason why almost every social media program on the planet is failing to produce results, why three fourths of companies still can’t figure out how to calculate the ROI of their social media programs, why most brands see less than 1% of engagement from their followers and fans after the first touch, why “content is king” is failing, and why increasingly, “social media” strategy and budgets are shifting to ad buys on social networks. That’s right: For all the talk about earned media and engagement and conversations, social media account roles are starting to go to media buyers now. (Here’s some insight into it.) Everyone loves to talk the talk. Almost no company is willing to actually walk the walk. That sound you’re hearing is the banging of traditional marketing hammers pounding nails into social business’ coffin.

You want to know why most big brand social media programs aren’t gaining real traction? Why they don’t work without a constant influx of ad spending? Why nobody sticks around when the “free iPads for likes” promotions are gone? Start there: no one in the room gets it. No one in the room wants to get it. And when someone in the room does get it, he or she doesn’t keep their job for very long. You think most companies are going to hire, promote and support change agents all on their own?

So the real question is this: Do you want to actually score some real wins or do you just want to spend big marketing budgets and play at being a digital big shot?

It’s a real question. In fact, it’s the most important question you might ask yourself all year. Because the answer to that question will determine whether or not you still have a job in two years. No wait… I misspoke. The answer to that question will determine whether or not you have the job you want in two years, and yes, there’s a difference. A big one.

When you find yourself looking for your next gig (and you will eventually,) do you want to just be the guy who was SVP digital at (insert big brand/agency here) or do you want to be the guy who took (insert big brand/agency here)’s theoretical social media and social business programs, and turned them into the new industry standards, into the business model that everyone will be copying and basing theirs on for the next decade? It’s a real question. Which guy do you want to be? The dinosaur or the pioneer? If the answer is the latter, then are you going to have the huevos to go against the grain? To take chances on whom you hire, what kinds of programs you launch, where and how you invest your budgets? Are you willing to stick your neck out and do it right? Or is it more likely that you’ll just play it safe, hoping that the system will just carry you for another decade or two, that the CEO or CMO you will interview with next won’t notice that your job was basically to spend ad dollars and shuffle digital board pieces for the CEO’s monthly show-and-tell meeting?

Who do you want to be? What do you want to build? Do you want to just wear the jersey or do you want to win? Hold that thought. Here’s another key piece of dialogue from the movie, after Billy Beane’s gamble has paid off, after he has started turning some wheels in a big way. He responds to an invitation from John Henry, owner of the Boston Red Sox, who tells him this:

John Henry: I know you’ve taken it in the teeth out there, but the first guy through the wall. It always gets bloody, always. It’s the threat of not just the way of doing business, but in their minds it’s threatening the game. But really what it’s threatening is their livelihoods, it’s threatening their jobs, it’s threatening the way that they do things. And every time that happens, whether it’s the government or a way of doing business or whatever it is, the people are holding the reins, have their hands on the switch. They go bat shit crazy. I mean, anybody who’s not building a team right and rebuilding it using your model, they’re dinosaurs. They’ll be sitting on their ass on the sofa in October, watching the Boston Red Sox win the World Series.

And a couple of years later, they did.

So let’s talk about our world again for a minute. Let’s talk about what’s coming, about tipping points, about momentum: Ford not only hired the right guy (Scott Monty) a few years back but gave him the authority to build a solid program there. The result: some serious wins on just about every front, from customer perceptions to purchase intent to customer loyalty and recommendations. Even car design was impacted in 2010 by the importance of social communications in the Ford organization. Edelman Digital seems to be doing something similar (I keep running into some pretty solid folks there, notably Michael Brito and David Armano). Want to see something cool? This is one of the things they’re working on. Starbucks caught an early train with that too. So did Dell. What sucks is that in 2012, virtually no one else has even tried to keep up with them. For all the money being spent and all the “case studies” being pushed around the conference circuit, most companies are still fighting it, still refusing to accept that the game has changed – worse, trying to keep playing with old methods, with old thinking, with old, outdated skills and CV bullet points. But there will come a day when someone will be given the authority to build out this new model, when it will blow everyone out of the water, and when the blindfolds will have to come off. That day is coming. What side of change do you want to be on then?

Old thinking will not score wins here. Old tactics, old hiring, old measurement, they’re all wrong for these new marketing, communications and business models. They just don’t work anymore. If you don’t believe me, that’s fine. Keep watching your margins erode. Keep watching your digital dollars go to waste. Keep laying people off and outsourcing every last business function you can’t afford to keep in-house anymore. Keep pretending the world is the same today as it was five years ago, and that what you were doing five years ago will still be relevant five years from now. Whatever makes you feel better. Keep doing the same old thing that used to work, back before people carried smart phones and iPads. Keep thinking that the guy you just hired because he spent ten years managing digital for a fast-food brand knows fuck-all about building capacity and traction for a social media program, let alone produce concrete business results for you. Keep coloring the same old boxes with the same old crayons and see how far you’ll get.

_ Okay good. What’s the problem?

We need to fill a VP Digital role.

_ Nope. What’s the problem?

All right… Whatever. We need to fill a VP social media strategy role.

_ Nope. What’s the problem?

We need to hire someone with proven global digital management experience, Billy. Someone with Disney or Nike on their CV. Someone with serious digital campaign experience.

_ Nope. What’s the problem, Barry?

The problem is, we’re not growing our Facebook community fast enough, and our content isn’t seeing the numbers we want. We need a…

_ Nope. [Imitates buzzer]

Get unstuck. Watch Moneyball and let the light bulb go off in your head. Then go find your Peter Brand and hire the shit out of him before someone else does. If you’re lucky, you’ll save both your career and your company in the process.

*          *          *

Here it is. A whole book on how to make social media work from a business standpoint. ROI is covered, along with a lot of process elements that tie back to it. If your favorite social business “expert” doesn’t seem to get this stuff yet, don’t feel bad about sending them a copy. Knowledge is never a bad gift.

CEO-Read  –  Amazon.com  –  www.smroi.net  –  Barnes & Noble  –  Que

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The 5 basic rules of calculating the value of a Facebook ‘fan’

A question that routinely comes up in social media circles is what is the value of a Facebook fan? (The question also applies to the value of a Twitter follower, Youtube subscriber, email recipient, etc.)

Invariably, whenever the question is asked, some mathematical savant – typically a self-professed digital alchemist – produces a proprietary algorithm that has somehow arrived at answer along the lines of $1.07 (Source: WSJ) or $3.60 (source: Vitrue) or even $136.38 (source: Syncapse), and so begins the race to answer this now quasi-hallowed question of the new digital age. The lure: He who can convince companies that he can calculate the value of a Facebook fan might have a shot at selling them on the notion that fan the more fans they acquire, the more value they generate for their business. (You can imagine the appeal of answering the “what is the ROI” question by explaining to a company that 10,000 net new fans per month x $136.38 = a $1,363,800 value. At a mere $75,000 per month, that’s a bargain, right?

All that is fine and good, except for one thing: Assigning an arbitrary (one might say “cookie-cutter”) value to Facebook fans in general, averaged out over the ENTIRE breadth of the business spectrum, is complete and utter BS.

To illustrate why that is, I give you the 5 basic rules of calculating the value of a Facebook fan:

Rule #1: A Facebook fan’s value is not the same as the cost of that fan’s acquisition.

Many of my friends in the agency world still cling, for example, to the notion that estimated media value or EAV (estimated advertising value), somehow transmutes the cost of reaching x potential customers into the value of these potential customers once reached. Following a media equivalency philosophy, it can be deduced that if the cost of reaching 1,000,000 people is generally $x and you only paid $y, the “value” of your campaign is still $x.

A hypothetical social media agency-client discussion regarding EAV: “Using social media, we generated 1,000,000 impressions that we converted into followers last quarter. At $1.03 per impression/acquired fan, the total cost of the campaign was $1,030,000. The average cost of an impression through traditional media being $3.97, the estimated media value of your campaign was $3,970,000.”

Next thing you know, the client believes 2 things: The first, that the value of each Facebook ‘fan’ is either ($3.97 – $1.03) = $2.94 or simply $3.97 (depending on the agency). The second, that the ROI of the campaign is ($3,970,000 – $1,030,000) = $2,940,000.

So you see what has happened here: Through a common little industry sleight of hand, a cost A vs. cost B comparison has magically produced an arbitrary “value” for something that actually has no tangible value yet. In case you were particularly observant, you may also have noticed how easily some of the authors of the posts I linked to in the intro mixed up costand value. Ooops. So much for expert analysis.

A word about why cost and value cannot be substituted for one another when applied to fans, followers and customers: Cost may be intimately connected to value when you are buying the family car, but the same logic does not apply to customers as a) you don’t really buy them outright, b) they don’t depreciate the way a car does, and c) they tend to generate revenue over time, far in excess (you hope) of what it cost to earn their business.

Even with the cost of acquiring a fan now determined, why has the value of that fan not yet been ascertained? Rule #2 will answer that question.

Rule #2: A Facebook fan’s value is relative to his or her purchasing habits (and/or influence on others’ purchasing habits).

Illustrated, the value of a fan can be calculated thus:

 a)      Direct Value: If a Facebook fan spent $76 on your products and services last month, her value was $76 for that month. If a Facebook fan spent €5697 on your products or services last month, his value was €5697 for the month.

The value of a fan/transacting customer is based on the value of their transaction. It is NOT based on the cost of having acquired them.

Example:

– Cost of acquiring Rick Spazzyfoot as a Facebook fan: €4.08

– Amount Rick Spazzyfoot has spent on our products and services since becoming a fan five months ago: €879.52

Which of the above two € figures represents the value of that fan to the company?

(If you answered €4.08, you answered wrong. Try again.)

 b)     Indirect value: If a fan seems to be influencing other people in his or her network to become transacting customers (or increase their buy rate or yield), then you can factor that value in as well for those specific time-frames. Because measurement tools are not yet sophisticated enough to a) properly measure influence and b) accurately tie it to specific transactions, I wouldn’t agonize over this point a whole lot. As long as you understand the value of word-of-mouth, positive recommendations and the relative influence that community members exert on each other, you will hold some valuable insights into your business ecosystem. Don’t lose sleep trying to calculate them just yet. Too soon.

The point being this: Until a Facebook ‘fan’ has transacted with you (or influenced a transaction), the monetary value of that fan is precisely zero.

One could even say that if each fan cost you, say, an average of $1.03 to acquire, the value of a fan before he or she has been converted into a transacting customer is actually -$1.03.

That’s right: A significant portion of your Facebook fans might actually put you in the negative. Something to think about when someone asks you to calculate the “value” of your “community,” especially if you purchased rather than earned a significant portion of your fans and followers (it happens more than you realize).

Rule #3: Each Facebook fan’s value is unique.

Every fan brings his or her unique individual value to the table. One fan may spend an average of €89 per month with your company. Another fan might spend an average of $3.79 per month with your company. Another yet may spend an average of ₤1,295 per month with your company. Is it reasonable to ignore this simple fact and instead assign them an arbitrary “value” based on an equation thought up by some guy you read about on the interwebs?

Three points:

1. The lifestyles, needs, tastes, budgets, purchasing habits, cultural differences, online engagement patterns and degree of emotional investment in your brand of each ‘fan’ may be completely different. These, compounded, lead to a wide range of behaviors in your fans. These behaviors dictate their value to you as a company.

2.  Many of your fans may only do business with you only on occasion. Because of this, you have to factor in the possibility that a significant percentage of your fans’ value may fluctuate in terms of activity rather than spend. How many of your fans are not regular customers? How many do business with you each day vs. each month? How many do business with you once a quarter vs. once every three years? Are you figuring your on/off customer-fans into your value equation?

 3. Lastly, we come to the final type of Facebook fan: The one that doesn’t fall into the transacting customer category.  They might remain “fans” without ever converting into customers. Do you know what percentage of your fans right now falls into this non-transacting category? Do you really think that their value is $3.97 or $139.73 or whatever amount an agency, guru or consulting firm arbitrarily assigned to them? No. They clicked a button and left. Their value, until proven otherwise, is zero.

 With this kind of fan/customer diversity within your company ecosystem, you come to realize that arbitrary values like “the value of a Facebook fan is $x” can’t be applied to the real world.

Rule #4: A Facebook fan’s value is likely to be elastic.

Because the value of a Facebook fan is a result of specific purchasing habits (and impact on others’ purchasing habits), a fan’s value is likely to be elastic over time. If you aren’t familiar with the term, it simply means “flexible.” As in: the value of a Facebook fan will change. It will fluctuate. It will not always be the same from measurement period to measurement period.

Let me illustrate: A Facebook fan might spend $76 on your products and services one month and $36 the following month. This means that her “value” was $76 one month and $36 the following month. If next month, she spends $290, $290 will become her “value” for that month.

Because transaction behaviors change, the value of a fan is also likely to change.

You can average this out over time (the fan’s value might average out to $97/month over the course of a year, for example), or just total her value per month, quarter, or year, depending on your reporting requirements. That is entirely up to you.

Example 1: “Based on her transactions, the value of Jane Jones, a fan since 2007, was $2,398.91 in 2010. Thanks to our fan engagement (digital customer development) program, Jane’s value increased to $2,911.02 in 2011.”

Example 2: Chris Pringle’s average monthly value in Q2 of 2011 was $290.76. His average monthly value in Q3 of 2012 was $476.21. He is one of 17,636 fans we managed to shift from a basic package to a premium package via our Facebook campaign.”

Note: In order to figure this stuff out, you are going to have to either get creative with the way your CRM solution interacts with your Facebook analytics suite or wait until Social CRM solutions get a little more robust. Some are getting close.

Examples of exceptions (where fan value may be somewhat inelastic):

 – You are a bank and a fan’s only transaction with you is a fixed monthly payment.

– You are a cable company and a fan’s only transaction with you is a monthly cable bill.

– You are a publisher and a fan’s only transaction with you is an annual magazine subscription.

– Your fans don’t transact with you. They clicked a button and left. If their value was $0 a month ago, it is still $0 this month.

If your business charges for a monthly service that tends to not fluctuate a whole lot, chances are that the value of each of your fans will remain rather constant. This compared to a Starbucks, a Target or an H&M.

Rule #5: A Facebook fan’s value varies from brand to brand and from product to product.

If a fan/customer’s value can fluctuate from month to month and that value can vary wildly from individual to individual within the same brand or product umbrella, imagine how much it can vary from brand to brand, and from product to product.

Compare, for example, the average value of a fan/customer for Coca Colaand the average value of a fan/customer for BMW. (Hypothetically of course, since I don’t have access to either company’s sales or CRM data.) What you may find is that a fan’s annual value for Coca Cola might average,say, $1,620 per year, while a fan’s annual value for BMW might average $42,000. Why? Because the products are entirely different. One costs less than $3 per unit and requires no maintenance. The other can cost tens of thousands of dollars per unit and requires maintenance, repairs, not to mention the occasional upgrade.

Moreover, a single strong recommendation from a fan can yield an enormous return for BMW, while a single recommendation from a fan will yield a comparatively smaller return for Coca Cola.

You can see how the notion that the “value” of a Facebook fan can be calculated absent the context of purchasing habits, brand affiliations, fluctuations in buying power, market forces and shifts in interests and even value perceptions is bunk. Unless of course you find yourself being asked to transform cost into value. Less work. Easier to sell.

So why does this happen?  Tune in next week for Part 2 of this post, in which we will talk about why so many “social media gurus,” digital agencies and “industry analysts” still seem to be having trouble with something that should be pretty simple.

I hope this helped. From now on, if anyone seems confused about the topic of fan/follower/subscriber “value,” point them to this post.

Cheers,

Olivier

*          *          *

If you haven’t already, check out Social Media R.O.I.: Managing and Measuring Social Media Efforts in Your Organization. Lots of vital advice in there for anyone working with social media in a business environment. Makes a great gift to employees, bosses, contractors and clients too. You can even read a free chapter here: smroi.net

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LTV infographic by Kiss Metrics

“People pay you. Not pageviews.” That pretty much says it all. (image source.)

This is as badass as it is self-explanatory. For those of you who don’t know how to estimate customer lifetime value (LTV, or CLTV), this infographic should be a pretty handy little tool. (Just ignore the Starbucks references.) Why is this important? 3 reasons:

1. When justifying an investment in a marketing program whose goal will be to acquire (create) new customers, you can sift through your customer data and determine what the average customer spend (their value to the company in terms of net revenue) should be over time. You can drill into demos or average out every customer category to arrive at a gross average – that’s up to you. This helps you set targets. If the investment is $100,000 and management expects a x10 return on their investment for a certain timeframe, you can now figure out what your net new customer target needs to be for this campaign by performing some basic 8th grade math. If the brass still isn’t sure about the value of the investment, you can make your case by projecting the lifetime value of net new customers rather than monthly, quarterly or even annual sales. For that alone, it’s a handy little set of equations

2. Good marketing is about more than customer acquisition. It also has to focus on customer development and customer retention. When making your case for a program that focuses on keeping existing customers from leaving, being able to present LTV/CLTV figures provides you with a compelling argument for the funding of such programs. (It is a lot more cost effective to develop and retain customers than to acquire new ones.) Use LTV to model for management what breaks in the conversion chain will cost the company in lost revenue over time, and loyalty programs will be a lot more likely to get a little more love. If you spend $5,000,000 to onboard 10,000 new customers per year only to lose 60% of them by the following year, you can see whether or not your marketing plan is in fact a leaky bucket. You can’t know what you don’t know. Calculating LTV gives you parameters with which you can properly analyze your programs’ efficiencies and inefficiencies, including long term ROI.

3. Once you know your customers’ overall average LTV, you can start attacking not only the net new customers piece (acquisition) and the retention piece (loyalty), but the development piece as well. Say your overall customer LTV average works out to be $14,099. Why not try and move that needle up to $15,001, then $15,100, then $15,250?  This is the purpose of the customer development side of marketing (or business development, even). Devise ways to grow wallet-share. Increase average spend per transaction (yield) and buy rates (frequency). [Remember FRY? That’s what we’re talking about right now.] Tracking this number not only gives you baselines from which to devise targets and tactics, but it also gives you a dashboard needle with which to gauge your progress AND revise long term sales projections.

Do you know how many product managers and CMOs know how to do this (or bother to do this kind of analysis even if they do)? Not many. If you smell an opportunity to suddenly become a whole lot better at your job and maybe even impress higher paygrades with your business acumen, it means your nose is working.

One quick piece of advice: Don’t just file this away for later. Do something with it. Print the infographic, start playing with the equations, and see what you come up with. Create a baseline. Play with projections. Sift through customer data to see if certain demos might be more receptive to different types of messages and offers. Then use the data; don’t just collect and report it.

Very big hat tip to Business Insider and Liz Scherer for starting the information daisy chain, and of course a big thank you to Kiss Metrics and @avinash for putting together such a clean, clear and concise infographic detailing the LTV calculation process.

PS: If you aren’t familiar with F.R.Y. methodology, it’s all spelled out here:

Score your own copy of Social Media ROI: Managing and Measuring Social Media Efforts in Your Organization (Que) just about anywhere business books are sold, if you haven’t already. The book is actually about a whole lot more than ROI and focuses on a lot of business fundamentals with applications reaching beyond the digital world. (The Chapter on F.R.Y. will be particularly helpful given today’s blog topic.)

You can also check out smroi.net to dig deeper into the book and even sample a free chapter, or let the reviews on Amazon.com help you decide whether or not it is worth the price of a turkey sandwich.

Cheers,

Olivier

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I was scheduled to participate in a panel on Social Media and ROI at the #sxswi conference this week. My schedule being what it is, I couldn’t be in two places at once and had to make the painful decision last week of cancelling my trip to Austin altogether. As much as I was looking forward to finally making it to Sx and being on this panel, priorities are priorities. Muchas gracias to the panel’s organizers for having invited me to participate. In spite of what I am about to say here, I am very grateful to them.

Anyway. After days of reading tweet after tweet about how wonderful and fun SxSWi was, how much of a blast everyone was having, seeing pictures of some of my favorite people meeting up and smiling big for the camera, it was with a heavy heart that I logged into Tweetdeck for the #sxsmroi session Monday afternoon, in the hopes of at least being there from a distance. My expectations:  A great discussion, a professional discussion, an intelligent discussion about ROI and Social Media. After all, it’s 2012, right? This should be a mature topic. I released the book last year, the various presentations I put together on the subject have made their way around the globe, my blog posts have been read and read again, shared, retweeted and whatnot. ROI when it comes to social media is devastatingly simple to understand. Right?

I guess not. What I found myself confronted with instead of the intelligent session I expected was… a complete disaster.  I knew we were in trouble when I started seeing eager tweets about ROI being tied to “Return on Efficiency” less than 3 minutes from its start.

Let me give you a taste of some of the brilliant “insights” retweeted from this unfortunate session:

What’s the ROI of NOT engaging in SM? 

Asking if there is ROI for Social Media is like asking if there is an ROI of the telephone or a pencil.

If social is done well it builds trust. if done really well, it is true trust. then 2-way convo: speed and reach. 

There is an answer for CFO – if social has done well, it builds trust.

Seems like the new question is “What’s the ROI on coming up with a formula for ROI?

That’s right: The same nonsense social media “gurus” were selling on their blogs and all up and down the social media “speaking circuit” back in 2008, when social media started being integrated into business models.

So… 2008 goes by.

2009 goes by.

2010 goes by.

2011 goes by.

We are now in 2012. How is it that the same bullshit is still being spewed as “insight” on a #sxswi panel on ROI? How does this happen?

I know I couldn’t be there so I bear some of the responsibility, but I have to ask: Where are the professionals? Surely, we can find 5 people for a panel on Social Media and ROI who know what the hell they are talking about, right? I don’t even mean “experts.” I mean just normal professionals with a fair fluency on the subject, who can speak intelligently about what it is, how it is calculated, and even offer concrete examples to illustrate how companies are determining the ROI of key activities and channels on a specific timeline.

Just 5 or 6 people. That’s all.

No? Too hard? Really?

What happens if I get hit by a car tomorrow? Nobody can handle this topic? I don’t buy that. Where are the professionals? Sound off. Please, for the love of puppies, raise your hands and step forward. This crap needs to stop. Now. Today. And I can’t be the one carrying this flag. (Unless by some miracle, my book finally starts making its way to every single desk in Corporate America, which would be fine too. #NotHappening)

Back to more of the session’s brilliant “insights” on ROI and Social media. Brace yourselves for the worst because it is coming:

Social doesn’t always need to be quantified. Its not a spreadsheet metric only – trust, relationships, advocacy. 

Social extends beyond traditional ROI and you can’t quantify it on a spreadsheet.

You can’t put love and trust into a chart. Why? Because love and trust defies logical reasoning.

Because we lied and told people digital was measurable.

How do you put trust and love into a spreadsheet? silence 

Measuring digital is different because we’re the first generation doing it. 

We’re getting so granular with SM and trying to label it with a quantifiable ROI, that we’re missing the overall impact of it.

You don’t measure activity, you measure results. 

The minute we standardize in #smroi, we will fail.

Innovation is miles ahead of where we are in terms of measuring ROI.

Don’t spend all of your money trying to measure social ROI.

There’s no ROI for measuring ROI – it’s just too difficult

Just because I can measure something doesn’t mean I should.

That was what was being retweeted from a #sxswi panel on ROI. Maybe it should have been called “beating around the bush of #smROI for the fourth year in a row.”

It isn’t surprising then that about twenty minutes into the session, a lot of the back-channel chatter started looking a lot like this:

Did I really just hear someone at #sxsmroi say a lot of data when trying to quantify social ROI is unnecessary? …On to another session…

This panel could benefit by examples of ROI measurement. Some people in this room probably have to report that. #SxSMROI

I am shocked that the #SocialMediaROI panel at #SXSW isn’t giving people the real “How To Measure SM ROI” they came for. #sxsmroi

Have to wonder who the #sxsmroi panel is talking to. Definitely not business owners or people who sign the checks.

I think I’m glad I’m not at #sxsmroi because it’s not a ROI panel. Maybe call it SM Value or SM Efficiency panel, but it’s not a ROI panel.

Sorry #sxsmroi panel, you can’t send people out of the room w message that social isn’t measurable. It is and it’s critical

Disappointing panel at #SXSMROI same song & dance we’ve been hearing for years.

People walking out. You really think they were going to magically tell you how to measure SM ROI? #sxsmroi

In a nutshell.

In case you think that my having been there would have made a difference, think again. I wouldn’t have endured 45 minutes of that. Though I have never walked off during a panel at any conference anywhere, be assured that I would have pulled off my mic and walked out of this one. I would much rather meet up with people outside the session and answer their ROI questions directly (my purpose for attending events like this) than endure almost an hour of complete and utter bullshit that has no place at a conference the scale of #sxswi.

No offense to the couple of pros who were on the panel and whose comments were either not retweeted at all or simply not mentioned in this post. A few solitary bits of general, elementary ROI wisdom did find their way through the barrage of bullshit, but not nearly enough and certainly not driven by either adequate vigor or accompanied by concrete examples. So understand that I am not taking a blowtorch to the entire panel but rather to the balance of its outcome.

Here’s what really disappoints me: A full complement of professionals (with or without me) shouldn’t be that difficult to come up with right?  There shouldn’t have been a single dumbass comment retweeted from this session. Not one. So I ask again: Where are the professionals?

I am appalled.

As for those of you who walked away from that panel thinking it was wonderful, that Social Media ROI is a myth, channel-optional or even elastic enough to mean Return on Engagement, Return on Efficiency or Return on Conversation, do yourselves a favor: Search for every post containing the term ROI (or R.O.I.) on this blog and start there. Once you start to get what #smROI actually is and isn’t, feel free to spend $10 or $15 on the #smROI book (link below). That’s all you need to get started. The rest will come naturally once you start applying what you’ve learned here to the real world.

*          *          *

Here it is. A whole book on how to make social media work from a business standpoint. ROI is covered, along with a lot of process elements that tie back to it. If your favorite social business “expert” doesn’t seem to get this stuff yet, don’t feel bad about sending them a copy. Knowledge is never a bad gift.

CEO-Read  –  Amazon.com  –  www.smroi.net  –  Barnes & Noble  –  Que

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This isn’t brand new data, but I came across it last week and thought it would be cool to share here. No need for me to write a 30,000 word blog post or white paper on what it all means. I will give you the main bullets but the graphics kind of speak for themselves. You should be able to connect the dots all on your own.

Above: Global Media Consumption per week 1900-2020. What do you see?

1. The main line: Global media consumption doubles every 25 years or so. Bear in mind that there are only 24 hours in a day, so that curve eventually levels off (even with second and third screens… but we won’t get into that today).

2. The nature of media is changing: 5 years ago, 50% of media was digital. In 8 years, that ratio will be 80%. Think about that and what it means.

3. Individual performance of specific media:

Print is steadily shrinking and has been since the 1940s, contrary to popular lore about the internet killing print. This is not a new phenomenon. It’s accelerating, sure, but it isn’t new. TV started that trend long before most of us were born.

Analogue TV and radio formats have been replaced by digital formats. Radio has been relatively flat for a very long time. TV saw enormous growth from 1940 to 1980 but has been relatively flat ever since. Note that this graph doesn’t look at the growth of channels (channel proliferation and fragmentation, but consumption only. Adding 100 new TV and radio channels per day wouldn’t affect consumption).

Outdoor has been relatively flat for over a decade, as has been cinema.

So what’s growing? You already know: Internet, mobile (wireless) and games.

Speaking of mobile:

What this graph tells us:

Mobile cellular subscriptions are steadily increasing worldwide each year, as is the number of internet users. Active mobile broadband subscriptions are also growing quickly. That’s the black bar on the graph. It isn’t even there in 2006 but by 2010, it already reaches about 1 billion.

What’s flat (or close to flat?) Fixed broadband subscriptions and fixed telephone lines.

What does this graph show us?

1. Look at the relationship between internet users (green) vs. Fixed broadband subscriptions. What do you see? There are far more internet users than broadband subscriptions. Part of the reason for that is that one broadband subscription may serve an entire household or office, but there is more to it than that: Mobile broadband. More and more people now access the web through mobile devices. It isn’t to say that PCs are dead, but this indicates a pretty key shift in how people (it’s okay to call ourselves consumers) now access content and information.

2. Look at the relationship between fixed and mobile broadband (pink and black, respectively). In 2006, fixed broadband was it. By 2008, they were essentially tied. By 2011, mobile broadband was double the size of fixed broadband.

Bear in mind: Mobile broadband subscription = 1 user. Fixed broadband = several users. It’s simple math. Regardless of the apples to oranges comparison, growth is growth. Shift is shift. 75% of media will be digital in just 4 years. 80% of it will be digital in 8 years. Mobile devices are becoming the interfaces of choice for digital content. If you aren’t building your business processes and designing your content with this in mind, don’t blame “the economy” for what is about to happen to your market share.

Now let’s look at a quick graph on the relationship between age and internet use in developing economies vs. developed economies:

 Now look at this:

See the change in just 5 years?

Here’s another one that should make you think a bit, especially if your company has a global footprint:

Three things:

1. Globally, 45% of internet users (regardless of the interface) are under the age of 25. Though it may be obvious to most of you, don’t take for granted that every CEO and CMO has figured this out yet: It doesn’t matter if your typical customer is mostly over the age of 35. In 10 years, those 25-year-olds will be potential customers and they will expect you to do business the way they want you to do business. Better start working on them now. And while you’re at it, better start working on bringing every aspect of your business and its marketing/communications up to speed. You wouldn’t believe how many senior executives completely miss this.

2. Developing economies have some catching up to do when it comes to internet use, but they are quickly closing the gap.

3. Look at the growth of 3G penetration between 2009 and 2014: From 39% to 92% in Western Europe. From 9% to 40% in Eastern Europe. From 38% to 74% in North America. Japan hits 100% two years from now. 100%. (Japan is the model, by the way.) Even developing regions like Africa, the middle East and AsiaPac (minus Japan) are quadrupling 3G mobile penetration in the next two years. We are moving towards 80% of all media being digital. Mobile devices are increasingly becoming the digital interface of choice for consumers. Connect the dots.

Here’s a thought if you still don’t understand how this applies to your business: Follow the money. If it isn’t clear why any of this matters or even where things are going, look no further than shifts in advertising budgets in relation to digital and other media:

What do you see? Ad spend is flat in print (actually shrinking a bit) while digital ad spend is steadily growing. Every graph that compares online ad spend to other types of media ad spend look basically like this. If you don’t understand why this is happening, the graphs further up the page will help connect the dots.

Here’s another graph that ought to make you think about how your media planning strategy should already be shifting:

 What this graph shows is the point where online video wins the attention war and TV begins to recede. Same content but different interface, different medium, different level of user control. 2019 will be here before you know it. What are you doing today to prepare for the television set’s Waterloo? From media buying to content production and distribution, are you sitting on your hands talking to analysts about future trends or are you staffing up with people who understand this and know how to prepare you for it?

Let’s continue with today’s #graphfest. This ought to shed some light on what is happening on the interface front:

The 411: Desktop PCs are flat and mobile PCs (laptops) are growing. No surprise there. Also no surprise as to the growth of smart phones and tablets. But check this out:

Smart phones sales overtook desktop PC sales in 2008 and will take over mobile PC (laptop) sales in 2013. That’s next year.

Tablet sales will overtake desktop PC sales (that boxy thing taking up space in your employees’ cubicles) next year.

If you are an executive, go for a walk around your offices and ask yourself: What decade are you operating in? In fact… What century are you operating in? Look at your business processes, internal collaboration, media planning and productivity. Go spend a day at a media conference or tour your local coffee shops. Ask yourself if your business is operating in a bubble or if it is as technologically and strategically competitive as it could be. Be honest with yourself. Tip: If the average twenty-something hipster lounging around at Starbucks is better equipped than your average middle manager or business development team, the answer is no. Here’s another one: If your business isn’t creating apps or content specifically designed for these new devices (let alone social channels), the answer is also categorically no.

Every time I run into an executive working on a presentation on a plane, I look at what kind of tech they use. Nothing against Lenovo and IBM (great companies) but whenever I see one of those boxy black thinkpad laptops with the little red button in the middle of the keyboard, I cringe for that poor sap whose boss forces to work on outdated tools. It’s 2012. Shape up. You don’t see 20-year old tech winning on the racetrack, the field, the court or the links, right? Business is no different from sports in that regard: 20-year-old tech doesn’t give anyone an advantage. All it does is make you less competitive. Stop doing that to yourself. Move on. Look forward, see what’s coming and get unstuck.

Here’s a thought: When the world is changing faster than you are adapting to that change, it’s time to start a) worrying, and b) doing something about it. The idea isn’t even to eventually catch up, mind you. That’s a defensive position, a survival position. The idea is to actually get ahead of that change. That’s where the real competitive advantage is. Survival is a nice default position, sure; many businesses aren’t even there. But with only maybe 5% more thought and work than it would take to just play catch-up, you can shift from being just an “also in” company to becoming the leader in your industry or category inside of 5 years. That sort of surge in competitiveness doesn’t happen by accident. It takes will, foresight and initiative. That takes leadership. Real leadership. And sorry to have to tell you this, but real leaders make it a point to know their shit. “I don’t understand this new digital stuff” isn’t leadership. It’s an urgent call to action.

One last little media-related graphic to close today’s post and help you get your bearings:

Hopefully, this post will help you (or your boss) connect the dots between today and tomorrow a little bit. Something to think about: Becoming more “social” is only part of the shift that is taking place in media. It’s important, vital even, but without understanding how media as a whole is evolving, being “more social” probably won’t do most companies a whole lot of good. We’re seeing that already. There is a much bigger field, and the more of that field you and your senior leadership see, the better equipped you will be to not only survive the next decade but come out of it stronger and more competitive than ever. That’s the goal, right?

Plan beyond next quarter and/or year.

Get IT more involved in the day to day discussions that affect your business.

Revamp your HR’s hiring parameters.

You aren’t necessarily going to become a digital business, but your business does need to be as effective in the digital space as it is everywhere else. Welcome to the great reshuffling of the Fortune 5000 world.

Cheers,

Olivier

PS: I will be speaking about this in Brussels at the end of the month for Marketing Day Belgium. If you happen to be around and want to discuss this in greater detail during the Q&A or after the session, let me know. I look forward to it.

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If the Brandbuilder blog isn’t enough, Social Media ROI provides a simple, carry-everywhere real-world framework with which businesses of all sizes can develop, build and manage social media programs in partnership with digital agencies or all on their own. Do yourself a favor and check it out at www.smroi.net. Now available at fine bookstores everywhere. Also available in German, Japanese and Korean.

Click here to read a free chapter.

CEO-Read  –  Amazon.com  –  www.smroi.net  –  Barnes & Noble  –  Que

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