It’s become commonplace for observers to tout the transformative potential of digital technologies and bemoan the allegedly slow pace at which companies support these initiatives. Two recent blogs published by HBR.org are representative and, I believe, wrong.
Walter Frick, an HBR editor, contrasts the enthusiasm of executives for spending money on digital initiatives versus their relatively unsupportive boards. “Digital growth is appropriately a priority for a diverse swath of organizations, and boards need to get with the program,” he writes. Didier Bonnet of Capgemini agrees, and is refreshingly direct in suggesting the cause: the average age of independent directors in S&P 500 companies is almost 63, they did not grow up with online technology, and many should be replaced for their lack of “digital awareness.”
Both cite a McKinsey survey which, ironically, found that “Organizations’ efforts to go digital . . . are picking up steam.” But look at what that survey also found: “Less than 40% of executives say their companies have accountability measures in place, either through targets, incentives, or ‘owners’ of digital programs, while only 7% say their organizations understand the exact value at stake from digital.” In other words, the current de facto digital business case in most companies goes something like this: “We’re not sure what the objectives are or how to calculate the ROI or who has responsibility here for clarifying those things and driving accountable execution. But invest in this digital project and ignore the opportunity costs—i.e., what else we could be doing with that money, time and people to drive customer acquisition and profitable growth.”
This is a caricature, but not by much. If you read the business press, you could easily assume that proficiency in social media or online data analytics now determine business success. But consider:
- According to a Gallup survey, about 62% of U.S. adults who do use social media say these sites have absolutely no influence on their purchasing decisions; 30% say the sites have “some” influence, and only 5% say they have a great deal of influence. Is it any wonder that it’s tough to calculate the ROI? And is the key to success here the technology, or fundamental segmentation and buying-process criteria?
- Even within the active-user segments, there is evidence that comprehension and retention decline significantly when information comes online. (See, for example, “Is Google Making Us Stupid? The Impact of the Internet on Reading Behaviour,” a paper reporting the results of research at the 27th Bled e-Conference). There is other evidence that the reported clicks and other alleged user-data on many social media sites are simply unreliable. Wouldn’t you want to know more about this before approving your firm’s investments?
- Another McKinsey survey, conducted in 2011, found then that the average company with more than 1,000 employees already had more data in its CRM system than in the entire Library of Congress. Those firms undoubtedly have even bigger data now. But is that how growth occurs or, in the absence of measures and objectives, how yet another garbage-in-garbage-out cycle gets going in many firms?
- If you peek behind the server farms of online firms themselves, you will find face-to-face and inside sales groups as the engine of profitable growth, and you might be surprised to know the bigger percentage of total employees at firms like Facebook, Google, and Groupon that work in sales, not technology or data mining.
Good boards ask these questions before getting with the program and, as always, bad boards follow fads. Good boards also pay attention to where and how money is spent and resources allocated.
The amount spent, annually, by U.S. companies on field sales efforts is 3X their spending on all consumer advertising, more than 20X the spend on all online media, and more than 100X what they currently spend on social media. Selling is, by far, the most expensive part of strategy implementation for most firms. Sales forces have NOT been replaced by social media or other internet tools. According to U.S. Bureau of Labor Statistics, the number of people in sales occupations in 2012 was virtually the same as in 1992—before the rise of the internet. And this almost certainly understates the real numbers because, in an increasingly service economy, business developers in many firms are called Associates or Vice Presidents or Managing Directors, not placed in a “Sales” category for reporting purposes.
When I cite these numbers, many business people and most twenty-something MBA students are surprised. That’s understandable because, in comparison to the hype about digital initiatives, you hear very little about sales in the contemporary business media.
Why? One reason may be that journalists have seen their industry rapidly transformed by digital technology. The peak year for newspaper profitability in the U.S. was as recently as the turn of this century. As the old saying goes, “When my neighbor is out of work, it’s a recession; but when I’m out of work, it’s a depression.” That’s also understandable, but it’s still a cognitive bias. Another reason is perhaps the natural interest that technology vendors and consultants have in promoting the next big thing, especially as hardware and software products become commoditized. That, too, is understandable, but caveat emptor.
The big story is that the internet is realigning, not eliminating, sales tasks, and that deserves more attention in business media.
My point here is certainly not to defend boards. I’ve sat there, and I agree there is lots of room for improvement. But focusing on digital initiatives may be perfectly backwards when it comes to improving governance. When boards ask relevant questions about digital investments and focus attention on the much bigger chunk spent on still-crucial sales resources, they are not being reactionary or senile. They may be following Mark Twain’s sage advice: “If you put a lot of eggs in one basket, then keep your eye on that basket!”