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Legal decisions in the wake of corporate failures like Enron, WorldCom and, in Australia, Centro continue to reinforce financial literacy as imperative for business leaders.
But we are yet to demand the same of arguably the biggest game changer of all, technology.
The impact of emerging technologies, including social media platforms that allow instant global communication, is deeply disrupting the nature of business.
In some industries that spells opportunity; for others, such as traditional print media, displacement.
But given the speed and ubiquity of technology-driven change, businesses will need to become digitally literate, and fast.
Putting aside the life-changing impacts of technology on everything from the way we meet to the way we connect, collaborate and educate, the level of expenditure alone demands that decision-makers show strong technical and strategic capabilities.
Gartner Inc for example forecasts that this year worldwide IT spending will total $3.8 trillion, a 4.1% increase from last year.
According to IDC, Australians will spend $44.9 billion this year; that takes into account earlier downgrades to factor in the slower economy.
These are big numbers.
To date, globally around $34 billion has been spent on big data and $109 billion on cloud, with predictions these will grow to $232 and $207 billion by 2016 respectively.
Given that more of the business dollar is likely to be spent in technology, leaders need to ask questions like:
In some ways making decisions on big IT projects is easier because leaders demand businesses carry out rigorous risk analysis.
The emerging digital and social layers are not well understood, and this includes many IT professionals who ‘get’ hardware and software, but don’t understand the power of digital content or social platforms.
For example, while many social media platforms are free, engaging in them is time intense and requires a high level of investment in human resources.
While it’s possible to measure ROI on social media once a customer enters the company’s digital or social media ecosystem, as with traditional marketing, it remains difficult to quantify the benefits generated by online conversations around brand awareness or reputation.
But we know these conversations are happening and that they have an impact.
The decline of trust in leaders and institutions long documented by Edelman has been replaced by the growth in peer-to-peer trust, which means the recommendations of friends and peers (including in digital channels) influences their decisions.
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What’s telling is that most US Fortune 100 companies have moved from thinking about social media to using it as a mainstream channel to gain greater access to their customers, suppliers and staff.
And while Boston Global predicts social media will contribute $4.2 trillion to the economy by 2016, a report released this month shows that fewer than half of Australian businesses are currently engaged.
Of those who are participating, many are simply creating a presence because they feel they must, rather than thinking about the end-to-end impacts.
This is a legitimate way to enter the space, but with IDC predicting that, by 2020, 98% of IT industry growth will be driven by technologies that today represent just 22% of ICT spending, including social technologies, future strategy will be vital.
But are these growth forecasts just that, predictions, or do they have legs?
Only last year during Thanksgiving in the US e-commerce rose 26% from the year before to $1.042 billion, the highest revenue generator other than the online store Amazon. That is nothing compared with China’s equivalent where Chinese consumers spent $3 billion on Taobao in 24 hours.
The importance of social networks is also reflected in a shift in advertising expenditure, this year set to be $5.54 billion in the US.
A BIA/Kelsey study reveals that social advertising will continue to grow and marketers will invest $11 billion in social media search integration in 2017.
Marketing director and co-author of Printed Peaches, Dr Google and the Driverless Car: Our Digital Future (due out 2014) Daniel King says the connected economy is heavily influencing commerce and unlikely social influence candidates at the B2B level are emerging.
“For example, Maersk [a shipping container company] engage using social media rather than push marketing, which has positively impacted their brand reputation in a way that traditional B2B marketing could not. However, adoption of social in the B2B area has been slow.”
But it’s not just about the money.
The power of social media to organise and influence played out in 2011-12 through the London riots, Arab Spring and in the US election, where online campaign spending rose 616% compared with 2008 and played a tangible role in the outcome.
Despite this, there is a glaring lack of digital and social literacy at the top, with only 32% of leaders seeing it as an executive priority and less than 16% of CEOs with a presence online.
How can boards sign off on the company’s strategy and marketing plan without understanding the social media component, or in some cases the lack of one? And what should CEOs in turn be demanding of their teams?
Just as leaders must be able to read P&Ls and cashflows without being accountants, so too should they be able to assess the opportunities and risks of digital on the shape of business without an expectation that they are technocrats.
Already boards are demonstrating a greater appetite for information with McKinsey showing technology increasingly on the agenda as an embedded business and not an IT issue.
The digital economy is expected to contribute 5.5% to the GDP of G20 countries by 2016, which means it is a productivity issue.
We are only at the beginning of what is projected to be a steep trajectory, but there is no doubt that for leaders who intend to climb it, digital and social literacy are must-have future skills.