Brett King

The 5 Stages of Social Media Grief

In Blogs, Customer Experience, Groundswell, Internet Banking, Retail Banking, Social Networking, Technology Innovation, Twitter on July 22, 2010 at 08:44

This week I’ve met with some very interesting people and the subject of social media has been high on the agenda. Yesterday, I met with Tom Cannon, who is leading the charge on the Internet Banking initiative that is part of HSBC’s “OneH” project – essentially their customer dashboard, single-view of the customer baseline technology. Earlier in the week with Sam Oakley from WolfStar, John Beck the Technology Editor for the Financial Times/The Banker magazine in London, and my good pal Christophe Langlois from Visible Banking, amongst others.  At these sessions we invariably repeated a discussion I’ve had 30 times in the last few months with innovators in the banking space the world over. The question simply being “when will the banking senior executives get social media?”

Facebook, Twitter, Foursquare – when will it end?

Facebook this week announced their 500 millionth active user. That number is pretty significant. Firstly, any corporation that can claim it’s customer base would make it the third largest country in the world (behind only China and India) has a case for celebration. Secondly, it doesn’t look as if its growth will slow any time soon. Lastly, their growth is not restricted by physical distribution or inventory constraints, their marketplace is anywhere you are.

Twitter is not far behind, with 190 million users as of June 2010, and 65 million tweets a day. Foursquare, the Geolocation Social Networking service is up there too – adding 100,000 new users every week at the moment.

When will it end? It’s won’t – that’s like asking when the internet and mobile phones will end. Which brings me to the realization that dealing with innovation in banking is a lot like dealing with grief.

So here are the 5 stages of Innovation Grief for Banks and Bankers (It probably works for most companies actually)

Stage 1 – Total ignorance

When a new innovation comes out banker’s simply ignore it because ‘banking has been around for centuries and it fundamentally doesn’t change…”

Stage 2 – It’s just a fad

“Visionaries see a future of telecommuting workers, interactive libraries and multimedia classrooms … Commerce and business will shift from offices and malls to networks and modems … Baloney. Do our computer pundits lack all common sense? The truth is no online database will replace your daily newspaper, no CD-ROM can take the place of a competent teacher and no computer network will change the way government works … Yet Nicholas Negroponte, director of the MIT Media Lab, predicts that we’ll soon buy books and newspapers straight over the Internet. Uh, sure.” – Clifford Stohl, Newsweek, 27 February, 1995

Ok so now it’s on our radar, but it’s just a fad – all the fuss will blow over soon.

Stage 3 – I still don’t get it, where’s the money?

Because of Stage 1 and Stage 2 banker’s are looking at social media’s incredible rise to fame and then looking at their competitors (who are mostly doing nothing) and saying, “well as an industry no one is making any money out of this, so let’s not bother just yet…”

How can you tell you are this stage? You have a Facebook page for the bank, but no one actively managing your social media listening post

Stage 4 – The Sonic Boom

Internet banking, mobile banking, social media is all the same for bankers. It’s like them sitting there watching the Concorde or an F15 doing a low-pass, fly-by and not yet registering what they are seeing as significant, until the Sonic Boom hits them and blows them off their feet. By then it is already too late because at Mach 1 or Mach 2 your competitors are already way, way in front of you. This is where the message finally breaks through the ignorance! BOOM!

This is the stage we are hitting for most banks today…

If you work in a bank how can you tell if you are at this stage – your bank has just hired a Head of Social Media.

Social Media is starting to hit banks like a Sonic Boom

Stage 5 – The Mad Scramble

Excuse the vernacular, but this is the “oh, crap” moment where bankers suddenly realize that they should have been heavily invested in this 3-4 years ago, and their lack of preparedness is highlighting to their customer base, employees and the world just how out of touch bankers are. The mad scramble may have occurred because of a PR disaster like those that BP has experienced with the Gulf Oil Spill, that Bank of America experience with Ann Minch’s Debtor revolt, or that Citibank experienced with the Fabulis debacle.

This is when the knee-jerk hiring spree starts with hit and miss initiatives occurring throughout the bank.

How do you know when you are at this stage? The CEO of the bank is talking about Social Media in press conferences and how the bank is committed to better reaching customers through this medium.

Getting out in front

So how do you stop the grief cycle within your organization? The first thing bankers need to do is rethink their organizational structure around customer. Social Media is a tool for reaching customers, for engaging customers. It is as important as investing in branches, it is just as critical as having a telephone number for customers to call, but more than that, it can help you transform your business internally too. To fix your organization to serve customers in the digital and social media age – you need to think independently of channels.

We talk about multi-channel alot these days, but clearly social media is showing us that new channels and ways of interacting can grow very fast. Who’s to say what will come after social media? Something will. The key is that channel complexity continues to grow, and no single channel should be singled out as more important. For customers branch is no more important than Internet, mobile than social media, call centre than ATM. These are tools to engage, and increasingly banks need to be more pervasive – everywhere the customer is.

So break the back of organization structure silos around channels. Think customer – think total channel engagement, and get moving on Social Media fast: BOOM!

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  1. Is the banking industry short on customers? Is there any bank on the planet that is increasing their market share by going social? Are credit unions stealing banking’s thunder by going social?

    I think the financial sector learned its lesson when the dot-com bubble burst. Technology comes and goes – like Sony Walkmans and in car mounted cell phones. What’s hip today may be gone tomorrow – which is something that definitely doesn’t apply to money.

    • MR,

      Let’s take PayPal. PayPal is clearly perceived as the preferred method for international payments by eBay sellers. 72% of eBay sellers say they use PayPal as their payment option for auctions. PayPal’s success was born during the DotCom period. Right now Zopa, LendingClub and others are innovating around the banks, just like eBay did. What about M-PESA and G-Cash too? There are so many challenges to traditional banking paradigms at the moment, due to technology innovation in the customer experience, that banks will surely be marginalized as the back-end networks for transactions, or product manufacturers. Why? Because banks believe they have a lock on money. But cash itself is under threat because of innovation. If you don’t agree – look at the take up of Debit Cards.

      Your perception that the ‘dotcom’ bubble was a failure for tech is a massive mistake. A few small ‘dotcom’ companies like eBay, Google, Amazon managed to survive and redefine interactions. Technology does not come and go – it continues to innovate and evolve. By ignoring it the finance sector simply confirms the fact that they don’t get customers.

      I might be mistaken, but it seems pretty clear that customers are not happy with their bankers at the moment. The arrogance of the sector in respect to technology is representative of why.

      BK

  2. Interesting points.

    PayPal, eBay, Google and Amazon survived because they had a business model that actually made money. Most of the companies that imploded didn’t. The aforementioned companies were well on their way into the lack before social media went mainstream.

    PayPal is an interesting case study with respect to its popularity. Can people hide income by using PayPal? This is a question I’ve never pursued. I see PayPal as alternative banking, not social media.

    I understand what you’re saying with respect to competitors to traditional banking and debit cards, but that still isn’t social media either. With respect to banking, I’m still looking for the case study that proves that social media is the great equalizer.

    How do credit cards companies fit into this equation? Visa, Mastercard and American Express have been in the transaction market space for years. Are they also perceived as a threat to the banking industry?

    I think we’re talking apples and oranges through not fault of yours. I guess I just see things from a different perspective. Can we agree to disagree? I would like to have this discussion again next year. 😉

    Cheers

    • MR,

      Sure we can agree to disagree. On the social media front, I see the dotcom parallels as very significant. Most of those companies we’re talking about were barely break even by the end of the ‘bubble’, but survived because of future revenue opportunities. Google certainly didn’t start making money till after the bubble burst – now they are the biggest dot com.

      All of the social media start-ups have business models with revenue, but some will undoubtedly go under. Foursquare may survive where Gowalla does not. Some social media companies that have grown up as support mechanisms for Twitter, for example, just may not have enough revenue to be viable long term. But social media is just like the dotcom phenomenon in the respect that the bursting of the bubble didn’t kill the internet, it just killed bad business models.

      The issue is that many are like you and don’t perceive innovation in social media or mobile payments for that matter as being of real/significant impact, until after the fact. The issue with such innovations is that when ignored, they become threats. Instead they should be seen as opportunities and bankers should play with a lot more of these new innovations because it will bring a new depth to their customer business. The alternative is they’ll keep customers, but the ‘cream’ of the interactions (where the margins are) will be captured away from them.

      BK

  3. Very insightful post. Banks enjoy a kind of de-facto Oligopolistic position in the Services Market, due to the heavy regulation and high entrance toll.

    Pay Pal and stock market brokerage services are market share loss for the Banks, but eventually is a bank behind the transaction recovering the usual fees like a kind of Chicago mobster.

    I don’t see any revolution coming from the Banking sector, is up to us the consumers who needs to raise from the servitude of hidden fees, time constrains, keeping your funds transfer 2 or 3 days before paying them off and so on, and re-invent the Financial Service Model.

    Looking forward to read more articles on this subject.

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