Josh Bernoff, a senior vice-president at Forrester Research, is one of the world’s foremost thinkers on the business impact of social technology. In 2008, he co-authored the highly influential bestseller, Groundswell, with Charlene Li. His new book, Empowered, co-written with Forrester colleague Ted Schadler, examines the latest management challenges and opportunities that are presented by the ubiquity of Web 2.0 technology.

Here, he shares his views on the innovative ways organisations should respond to customers empowered by social media, how to handle social technology in highly regulated industries, and the role of the CIO in this dynamic business environment.

What new trends are emerging in the way Web 2.0 technology is impacting organisations?
One of the main themes of Empowered is that top-down organisations cannot function at the speed that’s required with customers who are empowered by the use of social technologies. So when your customers are out there Tweeting and reading things on social networks and using mobile phones to get instant information about your company, if you try to manage that in a top-down way you’re just going to be too slow. What that means is that you have to depend on your own employees to come up with solutions, whether it’s a quick, simple innovation that happens in the context of an interaction with a customer, or designing a new program using technology.

What management challenges does this present?
It’s more important than ever for management to communicate what the company's values and rules are, so that the employees know what they are and are not supposed to do, as opposed to trying to manage every activity that those employees undertake.

So trust becomes a key factor?
Well, you definitely need trust. Let me give you an example. If I were to stand up at a conference and say: “Let me tell you what Forrester Research's financial results will be in the next quarter,” I would obviously be violating a rule that the company had put in place and we all know we’re not allowed to do that. Well, if I use Twitter to do the same thing, it is an identical situation. That’s a management problem. It’s a training problem. It is not a Twitter problem. And people need to understand that shutting down technology to try and stop communication is not the solution. The solution is to make sure that all employees are aware of the rules that they need to live by and then allow them to innovate within those rules.

Why is there such a strong imperative for this kind of social media-driven empowerment at the moment? Detractors will say it's all just a fad.
The trend towards empowered consumers or empowered employees is accelerating and you need to pay attention to it. I think people will look back five or ten years from now and say: “That was our chance to change.” And it’s not like it’s going to go away. I don’t think people are going to dump their iPhones and go back to some sort of phone that just makes telephone calls. I don’t think people are going to stop checking TripAdvisor to see what hotels to go to. And I don’t think they’re going to stop using the internet to connect with other customers about how they feel. So, no, I don’t think it's a fad – and businesses that fail to adapt to this world will be at a competitive disadvantage.

Is this just an issue for consumer-facing organisations, or should B2B vendors be paying attention too?
Yes, it turns out that business-to-business buyers are even more active in these environments than average consumers are. Whatever your customer is buying, there’s a trade group, there’s an online community they’re getting information from, and you’re just as susceptible as anybody who sells to consumers.

But even before doing this, for any company the first thing to do is to fix your service problem, because if your product stinks or your service is poor then participating in social environments just makes you a target. So, much better to spend some energy fixing the problem, not just getting out there and saying how great you are.

Is this kind of employee empowerment suited to all organisations in all sectors – even highly regulated industries?
You need to have more rules in place, but, yes, it is suited to everyone. A significant number of pharmaceutical companies, for example, are trying to figure out ways they can reach out within the rules. Should an employee in the pharmaceutical industry use Twitter and say, “Hey, we’re working on a new cancer drug, I think it’s going to be great”? Oh, no, no, no, no. That violates the regulations and they need to be trained that using Twitter is no different from any other place: you simply can’t say things like that.

But we’ve seen pharmaceutical companies create communities where people who have particular conditions can get together and help each other out. The companies are certainly all using the listening tools to find out what’s being said on social networks – and I believe that the regulators will soon require this. So if they claim, for example, “I didn’t know there were side-effects to my drug”… Well, they could have looked at Twitter and seen a whole bunch of people tweeting about the side-effects. The fact that you weren’t listening is not an excuse any more.

So you think, at some point in the future, regulation will actually require engagement in social media?
Yes, I think it will. In fact, I think the regulation is already a generation behind. In the US, pharmaceutical companies complain to me that the FDA [the US Food and Drug Administration] has not made a definitive set of rules for their communication on the internet – let alone social environments. Recently a number of pharmaceutical companies were warned that the way they were using ads on Google was inappropriate. The response, which I think was justified, was, “How are we supposed to know? We were trying to follow the rules, but you haven’t told us what is and isn’t possible here.”

So the regulators definitely need to keep up here. The challenge is that in any regulated industry, the customers are going to be talking to each other, and how the company is permitted to participate in such an environment is certainly something I’d like to see defined by the regulators.

The other really important regulated industry is financial services, and we have many examples of financial services companies that have been successful here. There are, for example, three different insurance companies in Empowered that are innovating in this way. So if you’re telling me you can't do this in a regulated industry, you just need to look at what your peers are doing and you need to figure out how you can do it within the rules.

Certainly in such industries employees speaking publicly is one of the things that’s regulated, but that doesn’t mean the employees can’t innovate in coming up with ideas on reaching out to customers. It just means you’d better get the regulatory affairs people involved to make sure you’re doing it in a way that’s safe and successful.

What are the particular issues for CIOs in creating these empowered environments?
CIOs are in a very challenging situation here, because they’re very good at running large technology projects and supplying infrastructure. But these are tiny technology projects and they often create challenges to infrastructure. So the CIO's general response to these little projects that come from marketing or customer service or sales is to say no. But we’re recommending that people stop saying no and start saying, “How can I help?” Obviously a customer community is not going to be owned by IT, but IT would certainly be able to contribute by helping with vendor selection, for example. IT also needs to create infrastructure so that people who have these ideas can collaborate and communicate with each other.

So is it just about supplying the right technology?
No, it is definitely about a lot more than that. IT also needs to make relationships that cut across organisational boundaries. I recently talked to a senior IT executive at a bank who had been recommended to me as somebody who had deployed collaboration software, and he said, “Oh, yeah, the rollout went extremely well.” And I said, “So what ideas have come up? How are people using this?” And he said, “Well, that’s not really my department. I set it up, it’s working and now it’s up to them to use it.”

And I thought, that’s a total waste. The real business-focused CIO is going to be supplying the fuel that gets these ideas off the ground and then he’s going to actually be looking at when they are successful or when they're not, rather than just saying, “Well, hey, I put the tools in place, it’s up to you to do what comes next.”

So that’s driving towards the notion of chief information officers becoming chief innovation officers…
Well, it would take a really advanced CIO to be taking that role on, but it is possible and exciting when it happens. When innovation gets stimulated by the CIO, he doesn’t end up owning it – but the organisation perceives that CIO as actually advancing the goals of the organisation beyond just keeping the computers running. The lack of job security for CIOs is certainly something everybody understands, so if you can point to a change in the innovation culture that you created then you’re much more likely to be retained.

The alternative is to sit in your bunker, say no, and try to shut off all of the things that could go wrong. But with everybody having mobile phones that connect to the internet, and going home and getting on their own computers, the chances are you can’t succeed at that. So not only will you have shut off the innovation at your company, but your desire to use technology blocking to keep everybody safe is a futile strategy anyway.

• Empowered by Josh Bernoff and Ted Schadler is out now.