A Manifesto for Social Business
The nature of business is inexorably changing. The changes are being driven by a number of factors: ranging from the need to compete differently after the recession, through the availability of huge volumes of new information, to the rapidly growing influence of social customers.
I would almost go as far to say that we are fast approaching a period of ‘Business Enlightenment', based not so much on the linear thinking that drove the Enlightenment in the 18th Century, as on networked, emergent thinking which is driving so much new thinking in the 21st.
Many different themes are coming together and new business models are emerging from where they meet and mutually reinforce each other. Together, they have the potential to change many aspects of what we call business today. They have the potential to create a new kind of Social Business, driven not so much for social purposes as by social relationships. Many companies are already experimenting with these themes, some companies with a number of them. Although no companies are experimenting with all of them yet, it is only a matter of time.
Here are the fifteen themes (the Manifesto) driving Social Business:
- No1. From Individual Customers… to Networks of Customers
The emphasis for business today is still on managing customers as individuals. But we have evolved as social animals with highly developed and highly influential social networks. For example, research by Christakis & Fowler suggests that we are highly influenced by three degrees of influence – friends, friends’ friends and friends’ friends’ friends. It’s not about ‘influencers’ per se, but the social networks in which influence happens. If we are to be successful in Social Business we must recognise the power of customers’ social networks to shape customers’ behaviour.
- No2. From Customer Needs, Wants & Expectations… to Customer Jobs-to-be-Done
For years we have struggled with the psychobabble generated by trying to understand customers needs, wants and expectations. Customers know what they are trying to do but codifying this has baffled market researchers and cost companies millions in failed new products. Recently, Tony Ulwick has shown how looking at the jobs customers are trying to do and the outcomes they are trying to achieve, can cut through the psychobabble and provide a foundation for innovation. If we are to be successful in Social Business we must start to understand the jobs customers are trying to do and how we can help them do the jobs better.
- No3. From Company Value-in-Exchange… to Customer Value-in-Use
The dominant model in business today is based on value-in-exchange. The company sells products in exchange for the customer’s money. There is obviously value in exchange for the company, but not much value for the customer. Customers only create value when they use the products in the days, months or even years of the product’s lifecycle. Think of buying a new car. Customers create value over many years of happy motoring. But the carmakers pretty much abandon the customer (to their dealers) immediately after the sale. If we are to be successful in Social Business we must understand how customers use products to get jobs done throughout the lifecycle of the product.
- No4. From Delivering Value to Customers... to Co-Creating Value with Customers
In the value-in-exchange model, companies embed value in their products and then try and find willing buyers. Value is delivered at the point of sale. But as we have seen, value for customers is co-created when customers use the products to help them do jobs more effectively. The product is a means for the customer to co-create value. If we are to be successful in Social Business we must understand how customers use products to help them do jobs and to embed the collected knowledge, skills and experience in the products themselves so that customers can co-create more value-in-use.
- No5. From Marketing, Sales & Service Touchpoints… to the End-to-End Customer Experience
Traditional CRM is based largely on the marketing, sales and service touchpoints. But customers see many more touchpoints, in particular, they see the many touchpoints as they use products to help them do jobs. CEM has extended CRM to include all the touchpoints in the end-to-end customer experience. But far too much CEM is about the company’s brands rather than about customers. It is a step in the right direction but it doesn’t go far enough. It isn’t about how customer co-create value. If we are to be successful in Social Business we must understand all the touchpoints important to customers and how we can help customers co-create more value during the touchpoints.
- No6. From One-Size-Fits-All Products… to a Long-Tail of Mass-Customised Solutions
Most companies still make a limited range of products and then try and find willing buyers. Many companies have gone beyond this simple model by bundling a range of complementary products, information and services. But as anyone looking for a new mobile telecom plan knows, the bundles never give you exactly what you want without bankrupting you in the process. Some companies, like Turkey’s Garanti have started to offer customers modular products they can mass-customise for themselves. Their Flexi credit card offers 9,000 different variations through only 19 easy to customise options. If we are to be successful in Social Business we must modularise products and provide simple configuration tools to allow customers to create just the right solution at the touch of a button.
- No7. From Competing on Products, Price or Service… to Competing over Multi-sided Platforms
The Delta Model tells us that companies should compete based on innovative new products, keener pricing or superior service. This approach has served companies well in the past 20 years. But new advances in business models, in particular, the growth of multi-sided markets like credit cards, internet retailing and more recently, the Apple iPhone application store has changed whole industries. Multi-sided markets allow thousands of sellers to trade with millions of buyers who normally would never meet each other. If we are to be successful in Social Business we must provide multi-sided platforms over which customers can trade with our companies and a whole ecosystem of partners.
- No8. From Company Push… to Sensing and Responding in Real-Time to Customers
As we have seen, most companies still operate using a push model. Products are made and then marketed and sold to willing buyers. That works fine when most customers want what your company has to offer. Or if there isn’t any real competition. But today’s customers are no longer willing to accept products that don’t exactly match their needs. Companies like Capital One and Tesco have used the power of customer analytics to offer the right products to thousands of dynamic customer micro-segments. Capital One reputedly carries out over 50,000 such marketing experiments every year. If we are to be successful in Social Business we must learn to sense and respond to the changes in behaviour of small groups of customers in almost real-time.
- No9. From Technology, Processes & Culture… to Complementary Capabilities and Micro-Foundations
Most companies recognise that it is no good just installing new technology and expecting things to get better. As we used to say in PwC’s Change Practice, Old Organisation + New Technology = Expensive Old Organisation. Today, companies look to a basket of technologies, processes and people to plan business improvements. But this isn’t enough. We need to look deep into the nuts and bolts of our companies to understand the complementary capabilities and micro-foundations that drive success. And in today’s networked environment, that may mean understanding partners and even customers’ capabilities too. If we are to be successful in Social Business we must really understand what drives success in our companies and our network of partners, not just use simplistic improvement models and hope for the best.
- No10. From Made by Companies for Customers... to Made By Customers for Each Other
Companies exist as they are more efficient at providing what customers need than either markets or other customers; they have lower transaction costs. But the Internet is slowly chipping away at these transaction costs and is enabling new ways of transacting. Customers can now transact directly with other customers, often at a lower cost than going through a traditional company. As the success of peer-to-peer bank Zopa shows, customers can now do business with each other directly, cutting out the expensive middleman. If we are to be successful in Social Business we must ensure that our companies are not in danger of being cut-out of the equation as customers start to deal directly with each other. Or to adopt, e.g. a multi-sided platform business model if we are.
- No11. From On-premise Applications… to On-demand Solutions from the Cloud
As companies recognise that yesterday’s complicated approach to business won’t work in tomorrow’s complex environment, they must adapt or die. Part of the adaptation is moving away from suites of all-singing, all-dancing on-premise applications to solution clouds of integrated on-demand applications. Although this is still very much work in progress, it should be clear that only on-demand solutions through the cloud will give companies the flexibility they need to cope with emerging changes to the business environment. If we are to be successful in Social Business we must have access to use just enough on-demand applications delivered through the cloud to respond to changing market conditions.
- No12. From Stand-alone Companies… to an Ecosystem of Networked Partners
Most companies still only work with a limited number of partners. But these times are changing. As customers increasingly demand complete solutions to help them do their jobs, companies are forced to work together with a network of partners to provide exactly what customers need. For example, Procter & Gamble’s Connect & Develop programme allows it to partner with thousands of potential partners to deliver better solutions for customers. If we are to be successful in Social Business we must identify the partners we need to deliver better solutions for customers and learn how to partner with them for mutual advantage.
- No13. From Hierarchical Command & Control… to Collaborative Hybrid Organisations
When companies are organised to minimise transaction costs, it usually leads to a hierarchical, command & control approach to organisation. This is fine if companies want to operate as efficiently as possible in an unchanging environment. But if the environment is continuously changing, companies cannot sense and respond quickly enough if they are organised in this way. To make sense of changing environments, companies need a flexible, network-based organisation that can work together with customers to identify and respond in real-time to their needs. The answer to these apparently conflicting ways of organising is to create hybrid organisations that combine the best of both worlds. If we are to be successful in Social Business we must create collaborative hybrid organisations that combines the efficiency of command & control with the flexibility of networks.
- No14. From Customer Strategy… to a Portfolio of Emergent Customer Options
In an unchanging world companies should formulate customer strategies that allow them to make the best of their limited resources. But in the continuously changing world we find ourselves in today, that just creates problems as plans quickly become out of date. As McKinsey’s Eric Beinhocker points out in his book The Origin of Wealth that means creating a portfolio of customer options with which to respond to customers’ emerging behaviour. And as we have seen, today’s social customers are highly influenced by what their friends do. Their behaviour is highly emergent. If we are to be successful in Social Business we must create a portfolio of customer options with which to respond to changes in customer behaviour.
- No15. From Customer Lifetime Value… to Customer Network Value - Customer lifetime value is based on the customer as a purchasing island. But as we have seen already, the customer is highly influenced by friends, friends’ friends and friends’ friends’ friends, and in return, influences then back. This led to the development of Customer Referral Value as a way to measure these influence networks. But that isn’t enough. As I pointed out in an earlier blog post on Take Three Bites at the Customer Value Cherry customer networks by dint of their ability to attract other customers and sellers has a value over and above the customers’ referral value. If we are to be successful in Social Business we must understand how customers, their referrals and the customer network as a whole creates value for companies.
The fifteen trends driving social business are not meant to be the final word on the subject. Rather, they are meant to provide a framework to start to think about social business in a structured way and at the same time, a catalyst to stimulate everyone else’s own thinking on Social Business.
Social Business is too important to leave to individuals or individual companies to decide. It is SOCIAL Business after all. That means everyone with an original thought should feel free to add to the many conversations now spring-up on Twitter, Googlewave and elsewhere.
As Alan Kay famously said, “The best way to predict the future is to invent it”. Let’s get inventing.
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