Sunil Gupta: Business in the time of social media

Sunil Gupta, the Edward W. Carter professor of business administration at Harvard Business School (HBS), US, was in Mumbai last month in connection with the executive education programme he will conduct in August at the HBS premises in the city. Prof. Gupta has taught courses on digital marketing strategy at HBS, and is currently researching the impact of digital technology on consumer behaviour and company strategy.

He spoke to us about how digital marketing is affecting companies, and why this division is treated as a start-up within organizations. Edited excerpts:

What are the two biggest myths of digital marketing?

There is a lot of excitement about social media and viral networks, but all the research is fuzzy as to whether it pays off or not. I had the chief digital officer of Coke (Coca-Cola) come to my class at Harvard. He was pleased that Coke had 40 million “likes” on Facebook. I said, “What’s the big deal? I can go to India and buy you another 40 million likes!” So marketers are now going back to traditional metrics like impact on sales.

The second big myth is around mobile advertising. Even Google’s model of advertising, giving details of availability and location based on where you are, isn’t working. Research shows that most mobile users don’t spend time on their browser. Users spend 80% of their time on apps. So while apps may be a good customer-retention tool for some companies like, say, Flipkart or Jet Airways, customer acquisition will have to happen outside of mobile. There will be a few large companies that will get on to your primary real estate on your mobile and some such start-up will become the mobile mall—rather like the physical mall.

As a professor of digital marketing, what is the question you are asked most often?

“I know I need to do something about digital. I just don’t know what, and how.” It’s a typical question I get, and I get it a lot, especially from traditional brick-and-mortar companies.

In what way does digital redefine the traditional models of business?

It is no longer about being a competent player at producing a product or service. Look at Amazon—what is its core competency? They know the customer very well, they are a data-analytics company, they are a logistics company. Once you have those core capabilities, you can go into almost anything.

Companies used to say, “I will stick to my niche and expand wherever I have a core capability”. (Amazon chief executive officer) Jeff Bezos says he will do exactly the opposite: “I will go where my customers are going and if I don’t have the capacity, I will build that capacity.”

It is a much more complex ecosystem. The partnerships that need to form are very different and most companies are not ready for it. In banking, for instance, banks used to compete with other banks. Now banks have to partner with telecom companies, you have Alipay and PayPal and M-PESA and you have to figure out what to do in this ecosystem. It’s no longer clear any more who owns the customer.

How do you integrate digital marketing with the rest of the organization?

Digital marketing often begins as a separate division, almost like a start-up. If you integrate it right away into the organization, people reject it very quickly—it’s almost like foreign cells being rejected by the body’s white blood cells. But if you keep it separate and too far away, it is never leveraging the core business of the company. You need to start with it far enough to have some oxygen but it can be reeled back into the core business.

You have written a case study on Amazon. What can Indian e-commerce learn from Amazon’s journey?

Like Flipkart today, Amazon’s basic value proposition to the customer was price. That is not the model to make a whole lot of money. What Amazon has shifted to, slowly and very delicately, is they are more a convenience place with a wide variety of items. That is the direction the Flipkarts of India have to move towards, otherwise their profitability will really erode.

With e-commerce taking off in India, what changes do you see in the retail environment?

The retailing world will change dramatically. Rather than be a world for transaction, it will become a world for experience. I have written a case on an Italian supermarket called Eataly, which has gone from nothing to half a billion dollars in turnover in six years. It has done this by providing a fabulous combination of supermarket, restaurant and cooking classes, all in one place.

How can senior management keep abreast of trends in the digital space?

You have to know what’s going on. Go get a Twitter account, get a Facebook account. It’s like learning a language; you have to immerse yourself in it. Do it for a month or two at least, talk to your customers and see what comes of it. Don’t say, “That’s for kids and I don’t have the time for it”. Some companies have actually done some very interesting reverse mentoring by pairing a 25-year-old with a 50-year-old. The 25-year-old teaches technology trends and what’s hot to the 50-year-old, who teaches the younger employee about strategy. Through such conversations, you can start seeing the connections happen.