In the next 3-5 years, social media will go from the least used customer engagement tactic to the second, surpassed only by face-to-face interaction.

IBM has released its 2012 IBM Global CEO Study of more than 1,700 Chief Executive Officers from 64 countries and 18 industries worldwide.

The study reveals that CEOs are shedding the command-and-control nature of corporations that has existed for over a century, and introducing openness, transparency and employee empowerment.

The reason for this fast-moving change: companies that outperform their peers are 30 percent more likely to identify openness as a key organizational influence.

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These outperformers – often characterized by a greater use of social media to facilitate innovation and collaboration – are embracing new workplace paradigms:

Although organizational openness might sound soft, CEOs are looking for hard outcomes. Through diversity of thought and the free flow of ideas, they expect innovation. By turning the workforce into a market intelligence network, they’re expanding their ability to sense shifts and respond nimbly. By empowering employees to act on their own ideas, CEOs are building employee accountability, initiative and loyalty. And by equipping employees to work in an open environment, they are arming the people who represent their brands to the world.”

Here’s why social media will become kind of a big deal: to get closer to customers, partners and employees, CEOs will be shifting their focus from using e-mail and phones as primary communication vehicles to using social networks as a means of direct engagement.

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As the accompanying graph indicates, only 16 percent of companies are using social media to connect with customers, but that number is expected to surge to 57 percent within the next three to five years. The CEOs in the study predict that social media will push past websites, call centers and channel partners as the number-two way to interact with customers.

Social networking has and will continue to significantly change how we do business. The way we collaborate with our customers will be transformed.” – Enrique Salem, CEO, Symantec

B2B CEOs were quick to point out that social media is not just a B2C phenomenon as many in the B2B arena have mistakenly believed.  A U.K. CEO explained B2B social media’s applicability this way:

Our B2B customers are also consumers of social media; you cannot split the two.”

A Japanese electronic industry CEO described how his company is helping B2B customers innovate by “incorporating the end user’s voice directly into product development.”

And a Swiss CEO added that, while social media has marketing merit, it has even more important value via the insights it delivers: “We use social media less as a marketing or distribution channel and more as a knowledge platform to obtain information about customers.”

Despite the gains it will make, CEOs are still struggling with social media:

  • CEOs are struggling to separate social media’s hype from the actual opportunities.
  • With social media, they are seeing the control of their brands go from their institution to individuals.
  • They are fearful that social media is growing faster than best practices can be established on how to use it.
  • They aren’t sure where to start.
  • CEOs are not personally immersed in social media, which puts them at a precarious arms-length position…

[CEOs] are making critical judgments about a disruptive technology without much firsthand knowledge. And they’re uncomfortably reliant on the counsel of less experienced Generation Y advisors.”