Cover Story

Social technology for business is much more than networking on Facebook,
LinkedIn or Twitter. Understanding its most critical foundational concepts, and how to integrate them into a business strategy, can be a game-changer for 21st century companies.

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MAY 2012 • FinancialExecutive

www.financialexecutives.org

LinkedIn’s IPO last year or the potential 2013 IPO for Twitter? Or that in January YouTube was getting four billion hits per day — an increase of 25 percent in only eight months.org FinancialExecutive • MAY 2012 41 . The phenomenon of these abilities to connect seamlessly across the world is much more powerful than most people understand at the moment. But the reality is that some of the ideas are already making a big difference for early adopters. The good news is that the cost of putting these tools to work is quite low. W © iSTOCKPHOTO / THINKSTOCK www. applications of a larger picture that promise to tremendously empower those willing to learn and experiment with new concepts. Twitter. LinkedIn or YouTube. These are merely tiny pieces in the wider view.By Scott Klososky T h e N e x t F ro n t i e r hy care about the much-anticipated initial public offering of Facebook this month. The bad news is that many will disregard the information as not yet relevant. as reported by Reuters? Why care? Because social technology in 2012 is not a subject for any business to ignore. so leaders of organizations small and large have a fair shot at stardom. And it will not be going away. This expanding social tool box is more powerful than Facebook.financialexecutives.

The conditions of the exemption are that: n The aggregate amount sold to all investors by the issuer. if either the annual income or the net worth of the investor is less than $100. To truly understand what is going on in digital marketing. does not exceed: • the greater of $2. Absent an exemption from U. crowdfunding efforts that involve sales of securities may be illegal. This covers all of the methods by which a searcher would form an opinion online.000. The Crowdfunding Provisions of the JOBS Act By David M. including any amount sold in reliance on the crowdfunding exemption during the 12-month period preceding the date of the transaction. They will not come to these properties unless they have a specific reason. various legislative proposals directed at easing regulatory and financing burdens on smaller companies have been discussed by legislators. for the purpose of sharing valuable information. there are a number of new tasks that have the word “social” bolted in front: SocialCRM and Social Recruiting are good examples.000. n Social networking refers to the tools that allow companies or individuals to communicate.net and others.financialexecutives. Providing social technologies. The bill was signed into law by President Barack Obama on April 5.org . business leaders and commentators. there are many techniques being used in the world today to lower costs and help organizations get smarter. Title III of the JOBS Act addresses “crowdfunding.000. not just for driving revenue.” Social technologies are beneficial to all areas of an organization.The World of Social Technologies To really understand the world of social technology. Twitter and other leading providers. and websites are not optimized to create ongoing connections. Lynn Over the past year. In addition. n Social media refers to sites that allow the uploading of videos.000 or 5 percent of the annual income or net worth of the investor.S. n Social relevance refers to a company or individual online reputation or brand. graphics/photos or presentations and share them with the world. and a crowdsourcing process can save companies thousands of dollars on a new Web user interface design. Scribd. as applicable. which provides a new crowdfunding exemption from registration under the Securities Act. These proposals were brought together under the Jumpstart Our Business Startups Act (H. if either the annual income or net worth of the investor is equal to or more than $100. inasmuch much as there are benefits for every department. These tools create the conversations that build ongoing relationships with clients and establish trust with prospects. including any amount sold in reliance on the crowdfunding exemption during the 12-month period preceding the date of the transaction. The umbrella term for all of these is “social technologies. Among the requirements to exempt crowdfunding offerings is that an intermediary used for the offering must register with the SEC as a www.R. To address this issue. or • 10 percent of the annual income or net worth of an investor. Slideshare. 2. n The transaction is conducted through a broker or funding portal that complies with the requirements of the exemption. the JOBS Act amended Section 4 of the Securities Act of 1934 to add a new paragraph (6). collaborate or be in community with each other — Facebook. by way of YouTube. Securities and Exchange Commission registration (or actually registering the offering with the SEC). not to exceed a maximum aggregate amount sold of $100. Flickr. Social technologies are most well known for their ability to help drive revenue in new ways as they fit into the larger marketing. as applicable.” a relatively new outgrowth of social media that provides funding for a variety of ventures. n The aggregate amount sold to any investor by the issuer. An “eWord of Mouth” marketing campaign can help deliver new prospects through the front door. Outside of marketing. is not more than $1 million. it’s important to understand the five-element formula comprising digital marketing: 1. or the JOBS Act. Building productive websites. Social tools can be compared to the Web itself. a primer on its terminology is helpful. Crowdfunding is based on the 42 MAY 2012 • FinancialExecutive ability to pool money from individuals who have a common interest and are willing to provide small contributions toward the venture. These are the destinations for people to gain access to archived information or to conduct transactions. and n The issuer complies with the requirements of the exemption. 3606). documents.

and they play a critical role history. the target amount for the offering.financialexecutives. agents or other persons for such solicitation or based on the sale securities displayed or referenced on its website or portal. The organization will change from one that asks. An organization must predictable. allowing for cancellation of commitments to purchase in the offering. Once the first four elements are in place and integrated. The world of the 21st century is a highly searchable Important points to bear in mind are that social technolorecommendation economy. as well as ongoing reporting after the offering as the SEC may determine pursuant to its rules. Other information would include its officers.org FinancialExecutive • MAY 2012 43 . such marketing campaign to the company’s market will result in a as traditional advertising.” Funding portals would not be subject to registration as a broker-dealer. possess or otherwise handle investor funds or securities. (2) solicit purchases. (3) compensate employees. sales or offers to buy securities offered or displayed on its website or portal. (4) hold. and the stool. intermediaries must take other steps related to the offering that are oriented toward investor protection. the ability build an ongoing relationship like to connect through a mobile device is chaos to one that is social tools. After integratWeb properties and mobile applications provide powerful ing the three elements above. there exists a method for busiin that they create the ongoing convernesses to connect 24/7 with clients geohave the ability to change sation with a company’s constituents. protecting privacy of information and avoiding conflicts of interest. or (5) engage in other activities as the SEC may determine by rulemaking. Mobile tools. Applying a sophisticated and well-considered digital There are many tools available for accomplishing this step. volume of traffic than currently exists into a relationship net. it’s time to drive a much larger tools for augmenting a firm’s ability to do this. A funding portal is defined as an intermediary for exempt crowdfunding offerings that does not (1) offer investment advice or recommendations. For most businesses. The SEC must issue rules to carry out these measures not later than 270 days following enactment. it would disclose specific offering information such as the use of proceeds for the offering. essential. It’s true that what gets measured gets “Where can I find new clients?. but would be subject to an alternative regulatory regime. combination of social tools along with 4. and the be ready to make that connection. such as ensuring offering proceeds are only provided to issuers when the amount equals or exceeds the target offering mount. the deadline to reach the target offering amount and regular updates regarding progress in reaching the target. as clients will want to conmanageable and All businesses must build trust nect at random times and from random and value-filled ongoing relationships points of origin. to be determined by rulemaking at the SEC and SRO.” to “How can I enable clients done. directors and greater than 20 percent shareholders. which would be reviewed or audited depending on the size of the target offering amount. sounds. manage. financial statements.gies are just one of the three legs of 3. Further. one in which it is much more Social technology tools broker or a “funding portal. in order to grow and prosper. and risks relating to the issuer and the offering. monitoring the amounts invested. subject to SEC and self-regulatory organizations (SRO) authority. Driving online traffic. including that an issuer file with the SEC and provide to investors and intermediaries information about the issuer — for example.com) is a partner with law firm Morrison & Foerster who chairs the firm’s Public Companies and Securities practice. Measurement systems. graphically and from anywhere in the an economy that is in No other elements have the ability to world. An intermediary also must register with any applicable self-regula- tory authority and provide specified disclosures to investors. www. The dollar thresholds applicable under the exemption are subject to adjustment by the SEC at least once every five years. 5. David M. In addition. search engine optimization and paychange in the sales process that is more profound than it first per-click campaigns. Lynn (dlynn@mofo. Issuers also must meet specific conditions in order to rely on the exemption. to find me?” create a full suite of measurements to understand exactly what is working and what needs improvement. For the first time in are multi-faceted.

This replaces many of the “interruption marketing” methods used in the past. Providing real value to clients will produce for the company an “earned media” relationship with its constituents. the Jumpstart Our Business Startups Act allows crowdfunding. delivering a useful organizational voice channel tightens the perceived relationship between a company and its clients. The Organizational Voice and Reputation The first foundational social tool to apply in creating the company’s selling environment is to create and master the delivery of an “organizational voice. companies have been moving certain types of work overseas in order to take advantage of educated workers who have a lower wage base. The other benefit of creating such content will be the boost to the firm’s online reputation as it provides digital proof that it is an expert in its field — a key attribute for clients who want to deal with industry experts. Thankfully. print and video blogs. It’s also a way to tap into the capital markets for launching new businesses or expanding on existing businesses. In addition. create unique and interesting content for each one that would appeal to the client base. Crowdscribing is the process of leveraging the Internet herd to build a book project. thus permitting groups to contribute relatively small amounts of money to a pool of funds to be used by a small or startup company for further growth or other objectives (see page 42). Provide valuable content and clients will feel that the company is “talking” to them regularly and thus building a value-based relationship. Absent this. a combination of these should be used to reach diverse audiences. are truly interesting to read and full of valuable insights and information. which will serve to augment in-person meetings that must continue. Building an organizational voice provides a method to communicate with constituents on an appropriately regular basis.net. this approach moves to more conversation and less shouting at clients and prospects. of course. difficult to hunt for new clients without the backing of a digital marketing net. For example. which allow a person to ask any question of the crowd and get answers.financialexecutives. The setup is free. so there is little rationale to delay. Think in terms of 100 or more assets spread across all channels. Slideshare. The difference is that tasks can now be performed by nearly anonymous workers who compete to impress virtual employers with their output. In other words.com).” There are many channels through which to deliver this voice.A New Way To Tap Into Capital The power of the crowd has always been around. Companies must learn to use digital marketing to create an environment where individuals can close more sales. In many cases. Crowdsourcing has the ability to dwarf the volume of work that is currently being outsourced. it will not even get a second glance. It will not be unusual for colleagues to ask for recommendations on business firms through friends on LinkedIn. and then to verify the credentials of the recommendations by doing a search online to see if their own firm is expert and well-regarded by its current clients. in some cases. Be clever with what is created — creativity and innovation are critical to standing out and attracting lots viral uplift when these assets are sent out. among other outlets. if the company’s blogs. Crowdfunding can be used to raise money online — for a not-for-profit organization or to raise money for a startup idea (Kickstarter. The next step will provide a number of benefits through one critical technique — the social media campaign. Once the conversation has started. In addition.com and Jig. Other uses for crowdsourcing are growing. faster and with more innovation. Flickr and Scribd. Twitter. such as advertising. That competition is what raises the bar over traditional outsourcing as workers from around the world join online competitions with the goal of winning. but the difference for today’s organizations is their ability to tap into the power of the “Internet herd” to get work done less expensively. The list of new crowd dynamics will certainly grow over time and savvy leaders are investing resources in learning how to apply these new tools. it should be augmented with a large inventory of online assets. there are very inexpensive ways to communicate with millions of people in an instant.com.org . Twitter streams and podcasts. For more than a decade. Start by creating custom channels on YouTube. Once the accounts are established. such as Facebook. Crowd Accelerated Innovation provides the ability to dramatically speed up the innovation process by leveraging ideas and observations from the crowd. the wisdom of crowds is tapped by sites like Quora. if it is a financial services company: 44 MAY 2012 • FinancialExecutive www. This is. For example.

for example. Analyzing monthly how many times the company is mentioned is also important There are millions of clever ideas for creating digital media assets that will help with business clients and prospects. Scott Klososky (scott@klososky. He is a much sought-after speaker and former CEO of three startup companies who specializes in looking out over the horizon to describe how technology is changing the world. rather than losing out to others who take advantage of it. They can be sent to individual prospects and clients for individual use. Embedding links to a company website. faster and with more creativity. www. where people make the bulk of their decisions based on what their friends — or the “Internet herd” — says about a product or service. Once the ability to drive more revrather than losing out to others enue is enhanced.n Videos that show financial best practices for retirement plans.org FinancialExecutive • MAY 2012 45 . Flipboard. it would be wise to focus on lowering costs and improvwho take advantage of it.com. Examples include sites to help produce any creative design (new logos. Bloggers and Tweeters are always looking for exceptional content to send to their readers. In addition. Identify the top 50 bloggers and Twitter users who already have thousands of followers in the relevant market and enlist them in distributing the company’s digital assets. Competitors will be using them and the advantage will be exponentially greater going forward. and have the ability to change an economy that is in chaos to one that is manageable and predictable. ing the IQ of the team. consider the eWord of Mouth marketing method. All of the social tools that allow people to publish information have created an explosion in the volume of information available on any subject. Learning to thank people for complimenting performance and products. He’s also authored three books including Enterprise Social Technology (Greenleaf Book Group Press.financialexecutives. Social technology tools are multi-faceted. For example. Once Web traffic increases. the social networking world is a recommendation economy. Managing reputation should include having a plan for responding to any online comments — negative or posi- done through applying crowdsourcing and building rivers of information. the Internet’s rise as a force in business decision-making and reputation-building. Google Reader. As mentioned. it is filter failure. So instead of feeling as though expertise is being given away for free. website design or brochures) and sites that do everything from helping to raise money to doing research. can help drive inbound traffic. people could dramatically improve their financial intelligence. is a positive reputational step. there are many ways of reaping the benefits. That might seem unfair. or potentially problematic because of the chance of fraud. as do the smarter teams. n Whitepapers that outline everything someone might want to know about possible investment strategies in different economic climates. Once these assets are uploaded and ready to distribute. All of these efforts can go a long way toward building a superior brand. A company could do everything else right.com. 2011). and still lose it all by failing to build a positive online reputation. Twellow. most people are wasting the opportunity to harvest and digest it.com. services and skills will form the basis of a company’s online reputation. just remember — it is not information overwhelm. Assets can be included in sales proposals and sent to online magazines and newspapers for placement in their online properties. Those who are especially clever can go viral on the Web and get large amounts of views. Crowdsourcing is the process of leveraging Internet readership to do work on the company’s behalf — less expensively. In case the volume of information seems too great to sort out. There really is not a choice to just opt out of learning to use the tools. That’s a shame because it costs nothing to access this information. Ratings systems and online commentary about products. the financial space is a knowledge economy and the smarter players win. a technology startup. n PowerPoints that highlight specific instructions and steps for teaching young people financial literacy or what it means to have a balanced portfolio. n Pictures and infographics that provide helpful or fun facts about the successful management of money. learn to manage the firm’s online Just Scratching the Surface reputation to reap benefits.com) is founder and chairman of the board of Alkami Technology. This can be Instead of fretting about tive. think of it as proving industry expertise to prospects. Many organizations today are using crowdsourcing to cut thousands of dollars from their monthly bottom line. learn to manage the firm’s online reputation to reap benefits. There are now more than 150 websites that specialize in various forms of crowdsourcing. or having a business partner do the same. The social tool box is vast and growing rapidly. But instead of fretting about the rise of the Internet as a force in business decision-making and reputation-building. Yet with the huge quantity of this information flying around in real time. The reality is that today’s capabilities are just scratching the surface. and blogs. For lack of 30 minutes a day and knowing how to use tools such as Netvibes. maximizing reputation is the next step in closing deals. college savings plans or retirement rollovers.

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