Creating value: An SME and social media

Abstract

This study examines how firms are gaining value from using social media. Social media can be used by businesses for a range of functions, including but not limited to marketing and customer relationship management. It is particularly suitable for small and medium-sized enterprises (SMEs) because of its minimal cost, low barriers to participation and low level of IT skills required to use it. This paper focuses on the early findings from one New Zealand SME, a restaurant. Of the possible sources of value investigated, the strongest evidence is that novelty, efficiency, the firm's strategic intent, firm practices, public practices are producing value for the restaurant. There is less evidence of value produced through lock-in or complementarities. Additional sources of value were also identified that were not included in the original conceptual model. As yet, this case study has not revealed any evidence of an effect on firm performance.

Full text

Association for Information Systems
AIS Electronic Library (AISeL)
PACIS 2011 Proceedings Pacific Asia Conference on Information Systems
(PACIS)
9 July 2011
Creating Value: An SME And Social Media
Richard Derham
University of Canterbury, richard.derham@pg.canterbury.ac.nz
Paul Cragg
University of Canterbury, paul.cragg@canterbury.ac.nz
Sussie Morrish
university of Canterbury, sussie.morrish@canterbury.ac.nz
ISBN: [978-1-86435-644-1]; Research-in-progress paper
This material is brought to you by the Pacific Asia Conference on Information Systems (PACIS) at AIS Electronic Library (AISeL). It has been
accepted for inclusion in PACIS 2011 Proceedings by an authorized administrator of AIS Electronic Library (AISeL). For more information, please
contact elibrary@aisnet.org.
Recommended Citation
Derham, Richard; Cragg, Paul; and Morrish, Sussie, "Creating Value: An SME And Social Media" (2011). PACIS 2011 Proceedings.
Paper 53.
http://aisel.aisnet.org/pacis2011/53

!
CREATING VALUE: AN SME AND SOCIAL MEDIA
(Research in Progress)
!
!
!
Derham, Richard, Department of Accounting and Information Systems, University of
Canterbury, Christchurch, New Zealand, richard.derham@pg.canterbury.ac.nz
!
Cragg, Paul, Department of Accounting and Information Systems, University of Canterbury,
Christchurch, New Zealand, paul.cragg@canterbury.ac.nz
!
Morrish, Sussie, Department of Management, University of Canterbury, Christchurch, New
Zealand, sussie.morrish@canterbury.ac.nz
!
!
Abstract
!
This study examines how firms are gaining value from using social media. Social media can be used
by businesses for a range of functions, including but not limited to marketing and customer
relationship management. It is particularly suitable for small and medium-sized enterprises (SMEs)
because of its minimal cost, low barriers to participation and low level of IT skills required to use it.
This paper focuses on the early findings from one New Zealand SME, a restaurant. Of the possible
sources of value investigated, the strongest evidence is that novelty, efficiency, the firm’s strategic
intent, firm practices, public practices are producing value for the restaurant. There is less evidence of
value produced through lock-in or complementarities. Additional sources of value were also identified
that were not included in the original conceptual model. As yet, this case study has not revealed any
evidence of an effect on firm performance.
!
!
!
Keywords: social media, value, SME.
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!
!
1 INTRODUCTION
!
!
Social networking sites are web-based services that allow users to post a profile and connect to other
users. Although users have traditionally been individual, in recent years social networking sites have
developed so that groups, organizations and companies are able to create accounts - for example "fan
pages" on Facebook. This lets an enterprise connect to customers and potential customers engage with
them and build up a sense of community around the brand. Further to the use of social media as a
marketing tool, firms can also use it to network with fellow professionals in the field, find work,
connect with the community, conduct background research on people and as a communication tool.
!
As there are low barriers to the use of social networking technologies, SMEs can make use of social
media in the same ways that large corporates can, without the need for extensive resources.
Furthermore, customers are not merely viewing the content served to them on static company
websites. They have the potential to create and upload their own content and interactively engage with
companies and other customers. Thus it seems likely that through various types of interaction, SMEs
could gain value from social media, including jointly created value with other parties.
!
This research uses one firm to identify how SMEs can gain value through using social media. A
conceptual framework based on Tallon et al
‟
s (2000) model of value creation was used to analyse the
firm and help identify a broad range of types of value.
!
2 LITERATURE REVIEW
!
!
2.1 Business use of Social Media
!
!
The history of social media sites began with the launch of SixDegrees.com in 1997, progressed
through the launch of major sites such as Facebook and MySpace in 2003 and by 2008 it had become
a global phenomenon (Boyd and Ellison, 2008). Because social networking is a new technology that
has grown rapidly, scholarship on it has lagged behind its adoption by users and the attention of the
media.
!
Although social media was originally a tool for friends to connect, communicate and share it has also
been adopted as a business tool (Bughin and Manyika, 2007). Many businesses now have a presence
on social networks in order to assist with business processes such as marketing (Kim et al, 2010;
Harris and Rae, 2009b), customer relations management, (Kim et al, 2010; Harris and Rae, 2009b;
Hawn, 2009), business networking both inside (Kim et al, 2010; Leader-Chivée et al, 2008; Misner et
al, 2009) and outside (Misner et al, 2009; Kim et al, 2010) the company and recruitment (Millard,
2007).
!
2.2 Social Media in SMEs
!
!
Chua et al (2009) and Parker and Castleman (2007) recognized that SMEs are not a homogeneous
group, but rather that they differ in several ways. For example, SME owner-managers differ from each
other in their age and educational level, their attitude towards eBusiness, their degree of
entrepreneurship, market and/or export orientation, their business goals and their degree of preference
for face-to-face interaction with customers, strategic focus, customer orientation, business growth,
business processes, owner attitude and social networks, level of eBusiness knowledge and skills.
Furthermore, they note differences in the pressure from customers and/or suppliers to use eBusiness.
Each of these different dimensions makes every SME different and means that blogs are a more
suitable tool for some than others. Additionally, many of the decision makers in SMEs are not
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governed by typical business objectives such as profit, growth and competitive advantage but more by
social and family motives, such as maintaining personal identity or maintaining family connections.
!
Harris et al (2008) point out that SMEs have often struggled to adopt technology due to their lack of
skills, resources and technical knowledge compared with large firms. However, Web 2.0 provides an
SME with an opportunity to overcome these difficulties. The internet has massively reduced costs of
marketing compared to traditional methods (Harris et al, 2008). Businesses can take advantage of
others‟ connections to each other to market their products, services and brands (Harris and Rae, 2009).
Thus “gifted amateurs” can “punch above their weight” (Harris and Rae, 2009).
!
2.3 IT Business Value
!
!
Carr (2003) is one of many to turn the research spotlight by questioning the value gained from
investments in IT, and there is considerable literature on the IT productivity paradox that examines
„
IT
investment
‟
and its relationship with firm performance. Rather than focus on
„
IT investment
‟
, Devaraj
and Kohli (2003) chose to focus on
„
use of technology
‟
and found that IT payoffs can be found and
measured.
!
Many studies have attempted to identify different types of IT value. For example, Melville et al (2004)
claimed IT to give both efficiency impacts and competitive impacts. Tallon et al (2000) argued that IT
provides value at the business process level through improved inventory management, greater product
variety, and enhanced customer service. They argue that IT influences business processes, which drive
business process performance, which finally results in organizational performance.
!
Amit and Zott (2001) developed a theory on value creation by eBusiness. The model consists of four
interlined value drivers: efficiency, novelty, lock-in and complementaries. Efficiency is about reducing
the cost of each transaction, complementaries involve bundling goods and services together for a
greater value than those goods and services would have u nbundled, lock-in is motivating customers to
continue trading and incentivizing strategic partners to maintain the relationship and novelty is
introducing something new to the business environment. In eBusiness, the source of value creation is
in the interdependencies between each of the sources of value (Amit and Zott 2001).
!
Because payoffs from technology use might not be immediate, Devaraj and Kohli recommend that IT
value researchers make more use of longitudinal studies. They additionally recommend cross-sectional
studies with large samples in order to generalize results across different industries (Devaraj and Kohli,
2003).
!
2.4 Co-creation
!
!
Marketing has historically been viewed as the exchange of goods, whereby the goal of economic
activity is the production and selling of goods. In order to sell goods, they needed to have value
embedded in them during manufacture so that they would be more desirable to customers than the
goods manufactured by competitors. This traditional view has been challenged by a service-dominant
model (Vargo and Lusch, 2004) that views marketing as an ongoing social process focused on
providing a service. Value is not something residing in a manufactured good, but is in fact defined by
and co-created with the customer (Vargo and Lusch, 2004, 5). In the service-centered logic, a good is
not a repository for value, but is rather one of a kit of tools with which firms and their customers
jointly create value (Vargo and Lusch, 2004).
!
Historically, marketing has been a one-way flow of mass communication, from the marketer to the
market. In order to co-produce value with customers this communication has to become a dialogue,
asking and answering questions (Vargo and Lusch, 2004). This dialogue is not necessarily controlled
or even initiated by the firm and, with the advent of social media, can even be customer to customer
with the marketer observing but not necessarily directly participating (Vargo and Lusch, 2004).
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Prahalad (2004) takes this further arguing that the next dominant logic for marketing is that of
experience-centric marketing. This moves beyond the service-centered view, as the firm is no longer
the central figure in the interaction. This change is driven by technological advances: ubiquitous
connectivity, convergence of (digital) technologies and the globalization of information. Under the
experience-centred view, customers, communities and firms all interact and communities of customers
are integral to the process of value creation. Both physical products and services are merely artefacts
of the value creation process – the value itself is in the experience. Prahalad (2004) regards dialogue,
access to and transparency of information, and risk assessment as the building blocks of this co-
creation and proposes that the full experience is beyond the capability of any one firm; and thus
involves a network of firms.
!
3 RESEARCH OBJECTIVE
!
!
Social Media is a relatively recent phenomenon. The research into the business use of social media
produced so far has almost exclusively investigated its use by large corporations (Constantinides et al,
2008; Bughin, 2008, Dupre-Barnes & Barnes, 2009). The few articles concerning social media use by
SMEs have been largely descriptive, pertaining to what they are using social media for (Chua et al,
2009; Harris & Rae, 2009). Thus it is not surprising that a thorough review of the literature failed to
identify prior studies of social media use by SMEs from an IT value perspective.
!
The main objective of this research is to explore the value that SMEs can derive through the use of
Social Media. Part of this is to look at what value the SME gains through using social media, another
is how the value is derived. The interactive nature of social media and the network effect associated
with it mean that it is not only the SME that is producing content on its social media sites but also its
customers and members of the public interacting with the SME and each other. Therefore, this
research will also be looking at the value produced through this interaction. The social media space is
fast changing both in terms of the technologies available and the popularity of particular sites over
time. This research will seek to explore how the value to SMEs changes over time as their level of use,
their customer network and even the technologies in use change over the course of the study.
!
The main research question for this study is how does the use of social media produce value for
SMEs?
!
To help answer the above question, the following research questions will be addressed:
!
1. What are SMEs intended uses for social media?
!
2. What value is gained by SMEs through the use of social media?
!
3. How are SMEs and their customers co-creating value through use of social media?
!
4. How does the IT value change over time?
!
4
CONCEPTUAL
FRAMEWORK
!
!
The study will be informed by the use of a conceptual framework influenced by Tallon et al (2000).
The framework begins with the firm
‟
s intent and goals for social media use. The practices of the SME
and the public are then added. The public is an addition to Tallon
‟
s model as the value in social media
is not created by the firm alone but from their interaction with their customers and in fact the public at
large. It is likely that this study will reveal additional or different sources of value specific to SMEs
and social media.
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!
Firm Practices
!
!
!
Strategic
intent for
IT
!
Focused goals
!
Unfocused
!
Firm
Perfomance
!
!
!
!
Public Practices
!
!
Figure 2. the research framework
!
!
5 RESEARCH APPROACH
!
!
With a lack of prior research in the area, an exploratory case study approach was adopted (Yin, 2003).
Data was collected through the use of semi-structured, face to face interviews with business owners or
key decision makers within the firm. The use of semi-structured interviews ensures a degree of
consistency in the information collected between the different firms but still has enough flexibility to
allow for new, unexpected or interesting information to emerge during the interview.
!
Data from interviews was transcribed and then coded manually. Interview data was triangulated with
data obtained from the social media outputs, such as material posted on Facebook, Twitter YouTube
and similar web sites. Triangulated data strengthens the constructs and hypotheses created from the
interview data (Eisenhardt, 1989).
!
6 CASE ANALYSIS
!
!
The restaurant used as a case study is very much a family business, owned by the parents and operated
by both the immediate family and many other relatives. Front of house and waiting staff are made up
of a range of cousins, friends, girlfriends and others. It is a family business that serves as the social
hub for the extended family.
!
Although the restaurant is popular and successful, the restaurant noticed a worrying trend. Increasingly
they would receive calls from confused customers. Typically the caller would say that the restaurant
had been recommended to them by friends. However, when they went to a popular restaurant review
site they found that the majority of reviews were negative. The restaurant would advise the customer
to make a booking and come to see for himself what the experience of dining is like. In response to the
phone call problem, the restaurant established a Facebook page in November 2009. Customers were
encouraged to use the Facebook page by daily uploading photos taken in the restaurant the night
before. Customers are encouraged to go to Facebook to view the photos, tag themselves and their
friends and hopefully post a comment about enjoying their night out. The network effect of Facebook
means that these tags and comments show up in customers‟ news feeds, which in turn prompts their
friends to view and possibly tag photographs, leave their own comments and in turn distribute this
information through their own news feed.
!
The main social media used by the restaurant is the Facebook page. It is the Facebook page which has
had the most attention and is currently delivering value. However, there are a number of other social
media technologies under consideration as summarized in Table 1.
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!
!
S
ite
S
tat
us
Us
e
s
V
al
ue
Facebook page
In us
e
Post photos of gues
t
s
Guests tag pho
t
os
Feedback from gues
t
s
Arrange staff ros
te
rs
Staff/family so
cializati
on
Has eliminated confusion due
t
o
clash between positive word of
mouth vs negative online r
e
v
ie
ws.
Convenient way for casual staff
t
o
keep in touch & update
a
v
aila
b
ilit
y
YouTub
e
P
il
o
t
Cooking demons
t
ra
ti
ons
!
Google m
a
ps
In us
e
Valid Restaurant info comes up on
a
Google maps s
ea
r
c
h
Customers can view
acc
ur
ate
location and contact de
tail
s
Online r
e
v
ie
w
S
ite
In us
e
Customer r
e
v
ie
ws
Negative value due to lack of
control over pro
ce
ss
Foursquar
e
Cons
i
der
i
ng
Customer
l
oy
alt
y
!
Facebook
a
ds
Cons
i
der
i
ng
Targetting ads to possible
c
us
t
om
e
rs.
E.g. people discussing venues for
their functions &
cele
br
ati
ons
!
!
Table 1. Summary of social media services used by the restaurant
!
The restaurant has found that the Facebook page has resulted in a steep reduction in calls from people
confused by positive word of mouth recommendations but negative reviews on the review site. They
credit the Facebook page for this result and are very happy with what using Facebook has achieved for
them so far.
!
An additional, unforeseen benefit to using Facebook is that casual staff started to use it to arrange their
shifts. For example, a waitress could post a message to the restaurant
‟
s wall giving dates she would be
unavailable to work. Other members of the extended family have been using the Facebook page to
organize their social lives.
!
Table 2 presents the various sources of value created through the restaurant
‟
s Facebook page. The
sources of value analysed came from the conceptual model plus the possible sources suggested by
Amit and Zott (2001) and additional sources that arose during the study. The findings are supported by
quotes taken from interviews with the business operator.
!
!
Source of v
al
ue
F
i
ndings
Quo
te
s
Eff
icie
n
c
y
Facebook pages are free and costs
i
n
terms of equipment and b
a
ndw
i
dth
are m
i
n
i
m
al
Many customers already have
a
Facebook
acc
oun
t
Network effect means friends of
customers are also exposed to
t
h
e
restaurant
e
xper
ie
n
ce
“… without even a Facebook account they
ca
n
see their photos” “…we find lots of peopl
e
from all ages are getting Facebook
acc
oun
t
s.
”
“people are using, Facebook to
c
ommun
icate
with the chat or with the messages or
j
us
t
posting to each o
t
h
e
rs
‟
w
all
s.
”
“…if they find their photo there they can
ta
g
their photo – tag their friends in the photo
a
nd
then that goes out there to all their fri
e
nds
‟
friends and fr
ie
nds
‟
friends, friends, fr
ie
nds.
”
Lock-in
Restaurant newsfeed
i
nforms
customers what is happen
i
ng
Discussion about photos ke
e
ps
customers
e
ng
a
ged
DON‟T offer any sort of
l
oy
alt
y
program (ant
i
-
l
o
c
k-
i
n)
“if you look at some of the photos, they s
ta
r
t
writing stuff to each other on those pho
t
os.
”
Nov
elt
y
Innovative use of Facebook
t
o
solicit comment, rather than
a
dedicated review s
ite
“…our purpose is to try and take an action
t
o
show people what actually goes on here, not
t
o
believe
what‟s
written on D
i
n
e
Out.
”
“We wanted to create like an alternative and
a
real one, not one that competitors can go
i
n
and write rubbish under a fake n
a
m
e
…
”
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!
Openn
e
ss
Facebook is a platform that is op
e
n
for anyone to participate under
t
h
ei
r
real nam
e
“…we‟re using this to communicate it –
a
nd
the fact that everybody can just go there
a
nd
write whatever they want – that means a
l
o
t
and
that‟s
the futur
e
.
”
“You‟ve pretty much just got to focus on your
business and doing the best for your
c
us
t
om
e
rs
and let everyone talk about it, not try and s
t
op
people from talking about
it”
Strategic intent for IT
Wanted real comments from r
eal
c
us
t
om
e
rs
Wanted to take power away from
the websites and give it to
t
h
e
peopl
e
Wanted to use an open p
lat
form
Wanted to utilize word of mouth
“Now what I thought I wanted to get was to b
e
able to pull people to some sort of pl
at
form
where they are actually using their real n
a
m
e
s
;
its real peopl
e
.
”
“…what we‟re trying to do is put reviews on
a
trustworthy platform –
it‟s
open. So
i
f anyone
wanted to write a bad review
t
h
e
y would have
to set up a fake name and then go into our
page and then write whatever
t
h
e
y wanted to
write and then you could prob
a
b
l
y see they
only had one friend or something
a
nd that they
were not a real person.
”
“So what we are doing is we are
e
n
c
ouraging
that whole „word of mouth
‟
thing in an open
forum
”
Firm pr
actice
s
Take photos of customers
eati
ng,
socializing and dancing every n
i
ght
Post photos to F
ace
book
Direct customers to R
e
s
ta
uran
t
website and from there to F
ace
book
page.
“pretty much every night we take some pho
t
os
and upload them on F
ace
book”
“There is something in it for them which
a
r
e
where we came to the photos. Take the pho
t
os
of people – tell them go to the s
ite
.
”
Public pra
ctice
s
View and comment on pho
t
ogr
a
phs
Tag themselves and friends
i
n
pho
t
ographs
“Like” r
e
s
ta
ur
a
nt
“And people tag themselves on what they‟re
do
i
ng?
Yeah, they do.
”
“… they go into your Facebook page and
t
h
e
y
can see photos of their night. If they have
a
n
account they can
„like‟
the page or become
a
fan or r
ec
omm
e
nd
”
Positive unpl
a
nn
e
d
Out
c
om
e
s
Facebook used for staff ros
te
r
i
ng
Facebook used for s
ta
ff
/
f
a
m
il
y
social
acti
v
itie
s
New slogan idea from F
ace
book
c
omm
e
n
t
“… using it to organise waitresses and wh
at
have you. You know who is going to work
this w
ee
kend.
”
“…it‟s got a lot of us
e
s.
”
“There are other things with having
t
h
e
Facebook page as well, because it‟s social for
us here as w
ell
.
”
“This lady wrote, “Thanks for an amazing fun
filled night and we loved it”. So I thought
t
ha
t
sounds like a good slogan. So I went into our
site and made it into this slogan on the n
e
w
s
ite
.
”
Negative unpl
a
nn
e
d
Out
c
om
e
s
People “un-like” Restaurant wh
e
n
they receive daily photos in
t
h
ei
r
news f
ee
d.
“we get people who unsubscribe as w
ell
because every week we‟re putting photos up
and so it shows up in their news f
ee
d”
!
Table 2.
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!
7 DISCUSSION
!
!
This study aimed to identify what SMEs use social media for, what value this use produces and how
SMEs and their customers co-create value. In this case the social media technology used by the SME
is Facebook. This was adopted for the specific purpose of soliciting customer feedback in an open and
neutral environment. Photographs of diners are used to draw customers to the Facebook page and the
comments left by the diners and their friends contributes to a positive buzz about the restaurant.
!
The purpose of the social media use in this case is for marketing (Kim et al, 2010) and Customer
Relationship Management (Harris and Rae, 2009b). Facebook has been specifically selected because it
allows these communications to go beyond a private one-to-one conversation and become a
conversation of many-to-many (Hawn, 2009).
!
In the conceptual model, strategic intent leads to practices both by the firm and by the public that
produce value and therefore increase firm performance. The value comes from four sources,
efficiency, novelty, lock-in and complementarities. The strategic intent was clear in this case, given
that there was a clearly identified problem to be solved by social media. Similarly there are distinctive
practices carried out by the firm and by the public. The use of Facebook has provided value for the
restaurant. It has solved the problem it was intended to. Since the Facebook page has been live, calls
referring to negative reviews on the leading restaurant review site have been virtually eliminated.
However, this study did not reveal any evidence of an effect on the firm performance.
!
Of the four sources of value, the strongest evidence is that novelty and efficiency are producing value.
In table 2 we see that Facebook is efficient because it is very widely used by customers and provides
an ecosystem to be used without requiring additional resources from the restaurant. The use of
photographs on Facebook to promote a restaurant has proved to be a very novel usage. There is less
evidence of value produced through lock-in and none from complementarities. Additional sources of
value were also identified that were not included in the original Amit and Zott model. These sources of
value relate to the neutrality of social media and the network effects produced by it. Facebook
provides a platform for businesses that they do not themselves have any interest in. This can be
contrasted with a restaurant review site, which has a major interest in the industry and the way it is
used by the industry. Additionally, because of the connections between friends on Facebook,
interactions between the restaurant and its customers are visible to the friends of the customers. This
has the effect of drawing the friends into the conversation and extending positive (or indeed negative)
results of the interaction out to those friends. This means that any value produced, or destroyed,
through social media is amplified.
!
7.1 Limitations.
!
!
This study was exploratory in nature and sought to examine the value of social media use by one firm.
In common with qualitative research in general, this project does not have the generalisability or
external validity that quantitative research produces. The use of multiple case studies (Yin, 2003) and
triangulation with the cases own social media output (Eisenhardt, 1989) will help to mitigate this
effect, but cannot completely eliminate it. This paper presents the results of the initial case studied as
part of a larger study.
!
!
References
!
Amit, R., and Zott, C. (2001). Value creation in e-business. Strategic Management Journal, 22(6/7) ,
493-520.
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