Anne McCrossan: Where is the margin in social media?

Anne McCrossan, founder of Visceral Business is a branding and change management consultant with a dizzying track record and client list. In this post, Anne is giving a preview of what she will be talking about at SOMESSO Zurich 2009 on November 3. Anne will also join us for the Swiss Re Risk Talk on November 2.

According to a data from Forbes, Altimeter and Visible Banking, only 5% of the world’s 100 largest hundred banks, 9% of the world’s largest diversified financial groups and 6% of the world’s insurance companies are acknowledged as having a profile in social media.

Financial services organizations face inherent cultural difficulties in engaging with customers because, culturally speaking, protection and security issues determine a vault-like mentality runs like a thread throughout the banking and insurance sectors.

The diversification of risk might support the social network principles of outreach and creating loose ties, but mitigation of risk by financial service organizations is, on the one hand, a strong proposition and reason for product purchase and, on the other, a handicap in forming strong and committed connections. Culturally in the financial services sector, organizations generally tend to be closed, conservative, and analytical skills dominate over empathic ones.

In the social space, affinity is stronger than structure and relationships drive the business model. The automation of transactional value has opened up a new highway for relationships and connections made around soft assets such as purpose and values. Data has never been the whole deal and niche audiences, mass market ones, local and global constituencies alike, can all benefit from your business having a social business design strategy.

In 1997 Times Mirror had an opportunity to buy Ebay, (then Auction Web) for $40m, and passed. Just three years later, Times Mirror was purchased by the Tribune Company for $8bn, and by that time Ebay was worth twice that amount. Ebay created a model where retailing goods became the domain of everyone.

The news and media sector has been radically altered over the last few years by social networks and new file sharing capabilities that, between them, have had the effect of making everyone a journalist and their own curator of information. The Huffington Post now has more unique visitors than the Washington Post. Social campaigning, as has been seen from The Telegraph and The Guardian, create significant social equity and purpose where subscription only models do not. Reputation, as bolstered by network effects, is determining perceived performance and therefore value.

The critical characteristic of the internet is that it challenges traditional sector concepts such as news, health, retail, government and finance, and makes them much more granular and accountable.

So, in this way, ‘news’ has become the domain of everyone. It’s possible to imagine financials services organizations running the ultimate risk of marginalization by peer-to-peer networks and virtual currencies in potentially a very similar way. In that sense maybe social media is itself good insurance by cultivating social relationships and behaviours.

When people can trade independently and individually all around the world, instantly and digitally, traditional currencies can become cumbersome compared to peer-to-peer currencies and social capital. The reputation of all the constituent parts of your organization, from the master brand through to corporate officers and the talent that exists company-wide, and beyond, has value within it. Those formative relationships may be the fuel for your future business strategy.

By offering what Forrester’s new report “Adaptive Brand Marketing: Rethinking Your Approach to Branding in the Digital Age” calls the 4 P’s of adaptive brand marketing – permission, proximity, perception, and participation – it is arguably the formative, adaptive relationships – the currency of social media and social business design – that will enable financial service organizations to become leaner and more agile. That’s worth considering as a significant potential margin on offer.