Chicken, Twitter & Gay Marriage: The Downside of Social Technology

Now that we've not only discovered the benefits of Enterprise 2.0 tools but also considered the question how to measure the impact of such tools last week, it is time to talk about the risks of stepping on the grounds of Enterprise 2.0 and focus on potential drawbacks of misusing social technology. This will be - at least for the near future - the last blog post in this series of Enterprise 2.0-related topics. However, this does not mean that the possibility that I'll continue this blog at another point in time is completely ruled out forever. Whatever the case may be, let's have a look at this week's example:

Chick-fil-A and Dan Cathy 

 

Chick-fil-A is an U.S.-based fast food restaurant chain which was founded by S. Truett Cathy in 1946. The company primarily sells chicken sandwiches and has over 1,800 stores across the United States. Due to its founder's strong religious beliefs, the company is well-known for its conservative image. For example, all Chick-fil-A restaurants are closed on Sundays.

Source: Katie Lobosco (2013). CNN Money. Retrieved from: http://money.cnn.com/2013/06/27/technology/social/chick-fil-a-gay-marriage-tweet/

In 2013, Dan T. Cathy, son of founder S. Truett Cathy and by that time president and chief operating officer of Chick-fil-A, released this twitter post as a response to a Supreme Court decision on same-sex marriage. Even though he deleted his post quite quickly, the twitter post certainly brought back memories of a huge debate one year earlier when Cathy stated in an interview with the Baptist Press that the company supports the "biblical definition of the family unit". Back in 2012 this statement caused a lot of uproar in the media and general public. Jim Henson Co, a toy producer for Chick-fil-A, decided to terminate its contracts with the chicken giant and the majors of Boston and Chicago raised their voices against openings of new restaurants in their cities. Ultimately, the whole debate was resolved with the company ceasing all funding to parties who are against same-sex marriage and emphasising that they want to keep out of any political debate.

Ethical Issues & Consequences

 

First of all, it is important to clarify why this twitter post can be considered as unethical or misuse of social technology. Rogerson (n.d.) describes 8 ethical principles that serve as some sort of checklist when it comes to actions associated with computer systems. Drawing from these principles, Cathy's twitter post breaches the principle of Honesty - Will the action violate any explicit or implicit agreement or trust? - as the company agreed to not take part in any political debate and Cathy ignored this agreement with his twitter comment. This is a close call though, as one could argue that it is his personal opinion that he is expressing over his personal twitter account. I think, however, that he should have been well aware that his persona is representative of the entire company and every comment will be eventually linked back to it. Additionally, such a discriminating view is quite likely not shared by all employees, shareholders and most importantly all customers and therefore also breaches the principle of Fairness (are all stakeholder's views considered with regard to the action?).

Dawson (2008) talks about key risks and concerns of implementing Enterprise 2.0. Clearly, one of the most visible risks in the presented case is the loss of reputation due to negative external comments and inapproriate staff behaviour. The twitter post is particularly bad because the company had gone through the whole debate one year earlier and seemed to have finally recovered from an anti-gay image. Now, with just one (!) personal comment by the COO and founder-son on his own twitter account the public was again picking up on the old stories and reputation was suffering. Although there are no specific figures of sales drops or alike, I think many people might have been disappointed to see that not that much has changed in the end and decide to boycott Chick-fil-A. Same goes for their employees or future candidates, who might not want to work for a company whose public face is clearly discriminating against others. Still, many others might say it is Cathy's personal freedom to express his opinion and this should not be linked in any way to the business. There is clearly a blurred line for managers who are so close connected to the image of the company. 

Lessons learned

 

Just one day after the incident, the company announced a statement saying that Cathy recognises that he is aware of the fact that his views and beliefs might not be shared by all people who are involved with Chick-fil-A. This year, now-CEO Cathy admitted that he has made mistakes in the past with bringing up controversial personal opinions that are or might be connected to the company. He underlined that the organisation is more important than personal issues. So what can we learn from this story? Firstly, because of the fact that any faux pas or infelicitous remark on social media platforms will spread rapidly across several channels (and hence the chance that nobody will notice it is almost zero), every business or business representative has to be cautious of what to post on these platforms. Secondly, persons who are closely connected to their company - which is the case for almost all Entrepreneurs - have to pay special attention to what they publish on any social technology platform as every statement or comment, even just over personal accounts, will be connected to their company. For Chick-fil-A to avoid issues like this in the future it very much depends on the behaviour of CEO Dan Cathy. In general, however, businesses need to establish policies and rules for all of their employees how to engage with social technology at or outside the workplace.


One last question to round this last blog post up: Do you think managers like Dan Cathy should be allowed to express their personal opinions on social media platforms?

References

• Dawson, R., Hough, J., Hill, J., Winterford, B., & Alexandrov, D. (2008). Implementing enterprise 2.0. San Francisco; Sydney: Advanced Human Technologies.
• Rogerson, S., & Fidler, C. (n.d.). A practical perspective on information ethics. Retrieved from https://www.academia.edu/322961/A_Practical_Perspective_of_Information_Ethics.

Talking Numbers: The ROI of Enterprise 2.0 Projects

In my last posts so far, I've already outlined quite extensively how companies create value through the use of Enterprise 2.0 tools and what benefits social technology can deliver to an organisation. Just by looking at this, it appears to be somewhat obvious that every company should invest in it if the necessary resources are available. In reality, however, a manager generally faces an entire set of investment opportunities rather than just only one. Therefore he or she needs to base the decision of which project to pursue on a comparable and measureable value. One widely used value/ratio is the Return on Investment (ROI) of a project. In other words: How much value is created through a particular project in comparison to the initial investment in it (see the graph below for a more detailed overview). In today's blog post I'm going to show one example ROI calculation based on an Enterprise 2.0 project at Intuit and further I'd like discuss the applicability and limitations of the use of such a measurement.

A good explanation of the idea behind ROI (of course, projects with a negative ROI should NOT be pursued at all):

 

Source: Hinchcliffe, D. (2009) Determining the ROI of Enterprise 2.0. Retrieved from: http://www.zdnet.com/blog/hinchcliffe/determining-the-roi-of-enterprise-2-0/334

 

Brainstorm at Intuit

Intuit Inc. is a U.S.-based software company founded in 1983 in Palo Alto, California. With products such as QuickBooks and TurboTax, the company mainly focuses on financial and accounting programs for small businesses and indivuals. In the early to mid 2000s, Intuit, similar to many other companies, struggled to turn new ideas into reality. To address that problem, the company came up with the internally-developed Brainstorm platform in early 2007 followed by a full-scale rollout in 2008. According to Andrew Nusca and also other sources (I wasn't able to track down the original numbers from Intuit itself), Intuit was able to increase the number of created ideas by 1,000% while effectively decreasing the time to market time by 60%. In other words, they launched 6 times more new products in the market in one year. Let's have a closer look what this means in terms of ROI.

Crunching the Numbers

 

The ROI-formula is quite simply to understand. Following from what was explained already earlier, it is just the Net Benefit from a particular project  (Added value - initial cost) over its initial cost.

 

Usually, investment cost would consist of buying/leasing a software solution, installing the tool as well as the training of employees. 

• Buying/Leasing Cost: Because of the fact that Intuit developed the Brainstorm platform in-house, they of course didn't have to pay for it in the sense of buying/leasing a product but rather accounted for it as research and development cost. In 2007, Intuit spent $472.516 million for research and development (Annual Report 2007). So if we assume they spent only 5% of that amount on the development of the Brainstorm platform we end up with $23.503 million. On the other hand, if we assume a license cost of $2 / user / month and a company with the need of 4,000 users (half of Intuit's 8,000 employees use it) we end up with a yearly cost of $96.000. As you can see there is a huge difference between the two amounts but as the buying/leasing is the more natural cost, I'll use this one in the rest of the calculations.
• Implementation Cost: Again, Intuit probably didn't have a classical implementation as every other company that would buy their software. For simplicity reasons, however, let's just assume they used a normal implementation team consisting of 10 members who worked 8 hours a day for 30 days to implement the system. If we multiply the total of 2,400 hours with an hourly wage of $35 we end up with $84,000. As the team could have used the time to perform their usual tasks we double that amount to account for forgone revenue.
• Training: Besides the very technical aspects, employees also need to be trained for using the new tool. To calculate the cost of training I adapted and slightly modified a formula used by Newman, Thomas and Ebrary (2009). So if we assume that the 4,000 users need to be trained 1 working day of the year and these workers would usually produce an average annual output of $55,000 we would lose 4,000 x $55,000 x (1/230) = $957,000 revenue. It is likely that employees will also spend one additional day experimenting with the program and thus, we double that amount, too.
• Total Cost: 2 x $957,000 + 2 x $84,000 + $96.000 = $2,178,000

As already mentioned earlier there were 2 main benefits from introducing Brainstorm at Intuit: more generated ideas in general and decreased time to market. We can assume that the first point is closely related to the latter as more good ideas in general ultimately mean more products in the market. Naturally, not every launched product will have the same success but let's say a new idea that is released to the market, on average, is worth $900,000 (look, there will be some star products but most of them probably serve a niche market). With Intuit decreasing its time to market by 60% and hence launching 6 times more products this results in a total value gained of $5.4 million.

So if we plug the numbers in the formula we get a final ROI of:

 (($5,400,000 - $2,178,000) / $2,178,000) x 100% = 147.93%

A positive ROI of roughly 150% proofs that Brainstorm was indeed a very successful project for Intuit. Of course, a ROI calculation usually would be performed prior to the actual execution of a project in order to compare the expected value of the project to other investment opportunities.

What does this all mean?

 

To wrap it up one final time again, all we've essentially done above is compare benefits with costs. In general, benefits can be broken down into hard and soft benefits (Newman, Thomas & Ebrary, 2009). Most ROI calculation, including my calculation for Intuit, solely focus on the hard benefits, that is, benefits that can be easily identified and expressed in "hard" numbers (e.g. more revenue, less costs etc.). This is the point where one critical drawback of the ROI becomes visible. Many managers might be too focused on numbers and pure facts instead of thinking about what other "soft" benefits might be possible to achieve. For example, a more vivid corporate culture or increased employee satisfaction are more difficult to quantify but certainly add a lot of value to the company. So instead of heavily relying on the numbers, I believe more managers need to take the risk of aiming also for the intangible benefits when choosing new investment projects - especially because social technology heavily focuses on those intangible benefits. 

As a balance, worried managers could use what Aaron Kim refers to as 'lagging ROI'. So they would still need to take the risk to start some projects without 100% factual support but metrics will be provided after some time into the project and one can then decide whether to terminate or continue the investment. Still, the overall message will remain the same for today: ROI offers a relatively quick and easy way of comparing different projects but only those who dare to also aim for the intangible benefits will be able to reap the benefits of social technology. 

How do you think can providers of social technology convince some of the number-obsessed managers that exist out there?

References

• Newman, A., Thomas, J., & Ebrary. (2009). Enterprise 2.0 implementation. New York: McGraw-Hill.

Marketing 2.0: Social Media at Aldi

As you may have noticed there was no blog post last week so it is more than time again to plunge into the world of social technology. Even though I was not blogging for some time, there still were tasks that needed to be done. Tasks like going grocery shopping for instance. This, of course, is nothing special in itself but two weeks ago a friend of mine told me that they would have one of the most German institutions here in Australia: Aldi. So I decided to search the web and, indeed, I found a just recently built store very close to where I live. On the way back from the Aldi shopping trip I was wondering how they would facilitate their international expansion and what role social technology would play. Along those lines of thoughts today's post is going to discuss how Aldi uses social media to create value and promote growth for the company.

About Aldi

 

With over 10,000 stores, Aldi is one of the biggest discount supermarket chains in Europe and was founded in 1946 by the brothers Karl and Theo Albrecht in Germany. In 1960, the brothers decided to split the company into Aldi-Nord (North) and Aldi-Süd (South). For simplification reasons I will just refer to the overall Aldi-group in the following. The name Aldi is an abbreviation for ALbrecht DIscount. Although the majority of their stores is located in Europe, Aldi operates about 1,500 stores in the U.S.A and Australia. 

Social Media & Value Creation

 

In my previous blog posts I already introduced several rather less-known web 2.0 tools such as Lithium or Engage. However, the most prominent examples one would probably think of first when hearing the term web 2.0 are social media platforms such as Facebook, Twitter and LinkedIn. According to Ipsos Open Thinking Exchange we spend an average daily amount of 3.6 hours on online social networks. Not surprisingly, this virtual exposure offers a lot of opportunities for companies around the globe. Again, I'd like to refer back to the 10 value "levers" by McKinsey. Aldi is operating in the retail industry which can be compared to as what the McKinsey report labels the consumer packaged goods (CPG) sector. The report highlights that the most value potential in this sector lies within marketing and sales applications. So let's have a closer look how Aldi utilises social media platforms for marketing and sales purposes: 

  

• Deriving Customer Insights (value lever 4): Traditionally, companies acquired feedback and opinions on their products through surveys or focus groups. Usual drawbacks of those methods include either limited reach or very high costs. Social media sites such as Facebook, however, offer a high reach for very low cost. For example, Aldi USA's Facebook page alone has over 875,000 followers. Through simply asking questions on their page Aldi is able to gain information about their customers and the perception of their products. Here is a good example of how such questioning is used to derive insights about customers shopping behaviour:
  
• Marketing Communication/Interaction (value lever 5): One of the rather obvious advantages of social media platforms is yet another channel for direct advertisement placement to promote special offers and new products (even the Queensland government is showing you how to market on social media platforms). This includes the display of pictures or even links to Aldi's Youtube channel. Similarly to the previous point about customer insights, the ads can be complemented by questions to make it more interactive. This is a very good example:
  
• Measuring success: How do you measure the real 'success' of an advertisement poster in the streets? Everyone would agree that this is a rather difficult undertaking. Social media platforms such as Facebook and Twitter offer direct, visible 'success' rates in form of likes and shares of the messages. A like on Facebook is not only a neutral indication of exposure but also signals empathy of the customer.

 

The Holy Grail of Marketing? 

 

More customer insights and advertisement exposure for even less money sounds like the heaven for every company who is trying to push its sales in either domestic or growing markets. Interestingly enough, Mitchell Harper, the co-founder of Bigcommerce.com, notes that there is a huge gap between what people expect from social media and what benefits are actually achieved through it. Even e-mail outperformes social media when it comes to overall e-commerce traffic. While this might still be true and there might be some sort of hype going on, I believe that with the next born-with-Facebook generations of buyers coming up, the focus of all companies has to be on social media (maybe not entirely but to a great extent). 

So what are your thoughts on social media of companies - do you think it is a hype or do you agree that it will be a necessity in the future?

References:

• McKinsey (2013). The Social Economy: Unlocking value and productivity through social technologies.