How do you Measure the Impact of a Social Media Initiative?

While there’s a widespread usage of digital and social media within organizations’ value chains, there are several questions that I hear often. E.g.,

1. How  do you measure the impact of these initiatives?
2. There are several use cases for which social media can be used. How do you actually prioritize these and decide what you want to use social media for?

Of course, there are many mechanisms – such as measuring financial impact (RoI etc) — to measure the impact of any initiative,  it’s not really trivial to apply these measures for something like social media.

One way to measure the impact or to be able to prioritize is by using some other outcome – a performance outcome or something similar.

 “Competitive Advantage” is one such outcome

A social media initiative can be analyzed in the context of whether or not you are you able to achieve competitive advantage by using social media. Again, there are many ways to define competitive advantage but for the purpose of this post, let us consider the concept of competitive advantage based on Michael Porter’s Value Chain Analysis (VCA).

There are numerous examples of social media usage in an organizations’s value chain activities. Some of these are shown in the figure below.

Figure: Social media usage and its impact on different sources of competitive advantage

The figure  above also provides an example of how an analysis of social media for competitive advantage could look like. For each activity in the value chain, the table shows examples of how social media can contribute to that activity and resulting impact on cost, differentiation and focus (the factors of competitive advantage, as described by Porter) for an example organization. Note that this figure only shows the summary of a sample analysis. In practice, an organization will typically use a detailed methodology and tools to access the cost, differentiation and focus impact of each of the activities and outcome will vary from one organization to another.

Once such an analysis is done, an organization can find out what are the most important activities in terms of their impact on different sources of competitive advantage. Based on organization’s own strategy and vision, appropriate activities can then be chosen as a use case for social media implementation.

In next few posts, i’ll go into details and describe how to analyze social media in context of competitive advantage. It’s all part of my PhD work in which I define several constructs (or factors) that have an impact on usage of social media and ultimately on competitive advantage. We’ll also explore how these different constructs play with each other, and finally look at a framework (and an excel-based tool) that can help you with any digital initiatives in your organizations.