The Growing Importance of Social Business

This is part 4 of 12 from “Social Business: What Are Companies Really Doing?” a report on the findings of the 2012 Social Business Global Executive Study and Research Project.

Almost all of the business leaders we interviewed describe their social business efforts in terms of “infancy” or “just beginning” or “early days.” Those with sophisticated social networks, including IBM and SAP, stressed that these have taken years to develop. Mark Yolton, senior vice president of SAP communities and social media, told us that SAP has taken nearly a decade to refine its developer network, and they are still improving upon it. IBM has been developing its enterprise-wide social network for at least 15 years.

The importance of social business to organizations is expected to grow over the next few years. While just 18% of all survey respondents believe social business is important to their organization today, 63% say it will be important in three years. That’s a jump of 250%. (See Figure 1.)

Charlene Li, author of the New York Times bestseller Open Leadership (Jossey-Bass, 2010) and founder of the research-based advisory firm Altimeter Group, described to us the growing importance of social business:

Over the past few years there’s been an awakening: people have moved on from asking “what is social business?” to “what do I do about it now? How do I integrate this into my business?” The line between real business and social business is diminishing.

Figure 1
The Importance of Social Software

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A new generation of workers is building momentum for new modes of collaboration and communication enabled by social business. MIT Sloan School of Management professor Wanda Orlikowski, who researches the interface between technology and organizations and the implications of new digital tools in the workplace, says, “Companies need to get started because this is here and it’s here to stay, especially for the Millennial generation. This is what they are used to.”

Perhaps the most telling anecdotal evidence about the present and future of social business comes from an unlikely source: the utility sector. In our survey, managers from this sector had the lowest appreciation of social business out of all the industries we surveyed. (See Figure 2.) However, even in this heavily regulated sector, which has been traditionally slow to adopt new technologies and new methods, we found a social business proponent. Charles Dickerson, vice president of customer care at Pepco Holdings, an American utility holding company in the mid-Atlantic region with 1.9 million customers, says: “I sincerely believe that social is one of the most important and significant tools that we have in our promotional efforts with customers.”

Figure 2
The Importance of Social Software by Industry

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Dickerson, who has earned industry recognition for his work on educating customers about the smart grid, is developing several customer-focused social business initiatives. One of these will use social gaming to entice customers to reduce their electricity consumption. Customers will be awarded points based on their energy reduction, which will go to a school of their choosing. Whichever school has the most points will win prizes, including laptops for students. “Customers will reduce their electricity use, post tips and see how others save,” Dickerson says. “At the end, both the customers and their school systems will be better off.” Pepco itself will benefit as well, as it will achieve a better understanding of the value customers assign to new services and their willingness to use the services.

The Challenge of Social Business

Implementing social business initiatives has been a difficult process for many organizations, however. The research and advisory firm Gartner estimates the failure rate for social business projects at 70%.5

Why such a high failure rate? A number of factors could be responsible, including not using enterprise software to solve a true business problem; failing to integrate social software into an organization’s daily workflow; and a lack of understanding and support from senior management.

Whatever the difficulties organizations have with adopting social business activities, social business appears to be a trend with staying power. Andrew McAfee, a principal research scientist at MIT’s Center for Digital Business and the author of Enterprise 2.0 (Harvard Business School Press, 2009), told us, “I have never spoken to an executive or a manager who says, ‘I just long for the days when we collaborated in the old style and e-mail was all we had and nobody had a voice. Man, that was so fantastic. Let’s please go back there.’”6

In practice, the term social business is used to refer to either activities, a phenomenon or trend, or a type of organization.7 Jeff Schick, IBM’s vice president of social software, describes his company as a social business: “I see IBM as a social business because of how we’ve broken down the barriers of reaching out to the people within the organization, but also how we’re leveraging these same tools externally facing, to interact with our partners and clients.”

Using the term “social” in conjunction with “business” can elicit a mix of reactions. Critics observe that every organization is already social in some way, so it is not clear what the new term adds. Another objection is that “social” activities are seen as unproductive. On the other hand, advocates have embraced the term, asserting that social business fulfills the basic human need to connect with others.8

Figure 3
Why People Participate in Social Media

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This need to connect with others is one of three basic psychological needs.9 The other two — the need to feel competent and the need to feel autonomous in one’s actions — may also play a vital role in social business activities. When we asked why respondents use social business at work, for instance, the top three answers were to network with others, to work more effectively and to voice opinions. (See Figure 3.) Motivations to participate in social business activities are thus far from superficial and even go beyond just our social nature. They can help fulfill basic psychological needs.


1. As used in this document, “Deloitte” means Deloitte Consulting LLP and Deloitte Services LP, which are separate subsidiaries of Deloitte LLP. Please see for a detailed description of the legal structure of Deloitte LLP and its subsidiaries. Certain services may not be available to attest clients under the rules and regulations of public accounting.

2. Source: MIT Sloan Management Review interview with David Sacks, CEO of Yammer, February 24, 2012.

3. Social media is how people get together virtually to accomplish outcomes. Social software is the set of tools that gives people in a social network the means for automation, virtualization, scale and abstraction. Social networks are formal descriptions of groups of people who congregate in a social medium.

4. Not all social business activities will produce mutually useful connections between individuals. In some cases, it may be beneficial to diminish certain connections between staff or with some customers. Further, the use of emergent communication and collaboration tools like Yammer may one day become part of the baseline. When that happens, using these tools may cease to qualify as a social business activity as we’re defining it, not because they are any less social but because they no longer “amplify” connections.

5. D.M. Smith et al., “Predicts 2010: Social Software Is an Enterprise Reality,” Gartner, December 3, 2009.

6. A. McAfee, “What Sells CEOs on Social Networking,” MIT Sloan Management Review, Spring, 2012,

7. Other uses of “social business” might refer to organizations or to economic systems that promote some notion of social welfare. For an example of the latter, see M. Yunus, “Building Social Business: The New Kind of Capitalism That Serves Humanity’s Most Pressing Needs” (New York: Public Affairs, 2010).

8. See F. Gossieaux and E. Moran, “The Hyper-Social Organization: Eclipse Your Competition by Leveraging Social Media” (New York: McGraw Hill, 2010); and A.J. Bradley and M. McDonald, “The Social Organization: How to Use Social Media to Tap the Collective Genius of Your Customers and Employees” (Cambridge: Harvard Business Review Press, 2011).

9. E. Deci and R. Ryan, “Intrinsic Motivation and Self-Determination in Human Behavior” (New York: Plenum, 1985).

10. This example comes from an interview with Fergus Griffin, senior vice president for solutions marketing at Additional detail was sourced from:

11. G. Tay, “Ask Five Questions to Determine Whether to Deploy Social Software Bottom-Up or Top-Down,” Gartner Research, January 20, 2011,

12. P.F. Drucker, “The Practice of Management” (New York: Harper & Brothers, 1954), 37.

13. Of course, social business activities can be valuable in many ways. It is our belief that social business activities in these four areas have the potential to generate substantial value.

14. E. von Hippel, S. Ogawa and J.P.J. de Jong, “The Age of the Consumer-Innovator,” MIT Sloan Management Review 53, no. 1 (fall 2011): 27-35.

15. S. Nambisan and P. Nambisan, “How to Profit from a Better ‘Virtual Customer Environment’,” MIT Sloan Management Review (spring 2008): 53-59. For an analysis of Threadless and social media, see D. Hinchcliffe and P. Kim, “Social Business by Design: Transformative Social Media Strategies” (San Francisco: John Wiley and Sons, 2012).

16. This example is based on Y.M. Antorini, A.M. Muñiz, Jr. and T. Askildsen, “Collaborating With Customer Communities: Lessons From the Lego Group,” MIT Sloan Management Review 53, no. 3 (spring 2012): 73-79.

17. J. Hagel, “Pull Platforms for Performance,” February 20, 2012,

18. T. Levitt, “Marketing Myopia,” Harvard Business Review, September/October 1975.

19. Providing clear guidance about communications external to a business can be tricky, especially in regulated industries like health care and financial services. Too much guidance can put a damper on social business activities. “If I ask an organization for their social media policy, and I get back a 50-page document,” says MIT’s Andrew McAfee, “that might as well just say, we’d prefer it if you don’t use social media.” Even in unregulated industries, too much oversight can cast a shadow on innocent interactions. Babson College’s Keri Pearlson describes a recent meeting with a colleague and two representatives from a large technology firm. Her colleague tweeted that she and Pearlson were at a lunch meeting, naming the firm but not the individuals. When the representatives returned to work, the office was buzzing about who was speaking without authorization about the company. Staff had been monitoring information flows from Twitter about the company and had seen the tweet from Pearlson’s colleague.

20. M. Miller, A. Marks and M. DeCoulode, “Social Software for Business Performance: The Missing Link in Social Software — Measurable Business Performance Improvements,” Deloitte Center for the Edge, 2011.

21. M. White and B. Briggs, “Tech Trends 2012: Elevate IT for Digital Business,” Deloitte, 2012: 5.