Social CRM: What’s Right, What’s Wrong, What’s Next? Inside Scoop with Graham Hill

On March 24, 2011, CustomerThink Founder/CEO Bob Thompson interviewed Graham Hill in a wide-ranging discussion about Social CRM.

Interview covers the following topics (click to jump to section in transcript):

• What is Social CRM?
• Has Social CRM become a “bulwark” of business?
• Social CRM as new communications channel
• Social CRM as new technology
• Social CRM as value co-creation
• The only sustainable track for Social CRM
• Five core questions about value co-creation

You can also listen to the audio here:

Transcript

Hello, this is Bob Thompson, founder of CustomerThink. For this episode of Inside Scoop, I’m very pleased to be talking with Graham Hill, one of the leading thinkers in CRM and, as you’re going to learn today, in Social CRM.

I’ve known Graham for a long, long time. He is one of the early “gurus” that I recruited to launch and grow CRMGuru.com. He was very active in the forums in the early days of CRMGuru. He was our most active, and he is still to this day the most popular, author that we’ve had on CustomerThink — our new name as of 2007. You can always count on Graham to be insightful, to be really thinking about what’s next.

And so, with that in mind, today I’m going to be talking with Graham about Social CRM, what’s right about it, what are some of the obstacles, and where’s it going. Graham, thank you for joining me on Inside Scoop. It’s really great to catch up with you.

Graham:

Hi, Bob. Great to talk to you again. It’s been a long time, but I’m really looking forward to it.

Bob:

Well, Graham is based in Germany. He is a Brit. He’s been traveling a lot the last 18 months and does a lot of his work on the road.

Graham, maybe you could start off and tell our listeners just a little bit about your background? Right now, as I understand it, you’re an independent consultant. You’re working with four different firms. Could you sketch out, for our benefit, what it is you’re doing these days?

Graham:

I come from a longstanding background in consulting. I’ve been doing consulting for over 20 years, management consulting with big companies like KPMG Consulting, Price Waterhouse Coopers, Sophron Partners and so forth. And about 10 years ago, I went independent because I wanted to do exciting work for clients at the leading edge of business. And that was difficult, working for large management consultancies. So, I’ve been spending my time over that period of time working with a variety of companies, and as you say, work for four different companies that provide me with the ability to do different sorts of work and bring together different sorts of skills when clients need interdisciplinary skills and projects.

So, one of those is Nyras Capital. This is a grouping of finance experts, ex-Price Waterhouse Coopers, and we work together with aviation clients and other clients providing guidance in private equity, venture capital and corporate finance. I also work with a completely different company called DesignThinkers in the Netherlands, and that is a network, a community of service design and design-thinking experts. And we work with clients around Europe on all sorts of service design and design-based jobs. I also work with Optima Partners, an Edinburgh-based company. They are experts – really, really experts – in customer value management, so getting more value out of customers through our traditional CRM tools.

And last but not least, I also work as an advisor to a software startup, Loyalty Factory, based in Germany. It is an automotive CRM vendor. It grew out of a relationship with Toyota when I was head of CRM for the bank there, and they’re really a big bunch and a really great bunch. So, finance, design, CRM, software – you name it, I do it.

Bob:

Well, that’s a pretty broad area to cover. In the last several years, I remember you writing a lot about what you learned with your experiences at Toyota. You were the interim head of CRM or something along those lines there.

Graham:

That’s right.

Bob:

More recently, what have you been doing?

Graham:

Well, for the last 18 months, I have been running part of a joint venture between Huawei Technologists, a Chinese technology company, and their client, Telfort, Dutch-based telco in Amsterdam. And I have had the rare privilege, if you like, of being able to build a telco campaign management system from the ground up on a green field site using the power of Huawei’s amazing software development factory, if you like, and the very demanding clients and users within the Telfort organization.

So, that’s what I’ve been doing, and the interface between a very rapid development of a Chinese company and very aggressive requirements of a western Telco means we’ve had to reinvent the methods that we’ve used traditionally for IT. So, we’ve built it around an extremely agile approach, we’ve built the whole system around jobs to be done of campaign management tool users, so campaign managers, list managers, those sorts of people. We’ve run two-week iteration cycles for the software development using the method of Steve Blank customer development methodology and a whole load of other things that I’ve borrowed and purloined from Toyota and other companies just to try and reinvent how we do software development, and by implication, how we do modern communications.

What is Social CRM?

Bob:

The important point for me is that you have worked with some very large, very complex organizations. You have a very rich history in CRM, but you’re not – if you’ll excuse the expression – a one-trick pony. You have always impressed me by thinking ahead as to where things are going. You were one of the first people to talk about customer co-creation, for example. And you’re obviously into design thinking. So, that’s what I think has been great about CRM, in the sense that it’s been enriched by people like yourself.

I do want to focus mainly in this conversation today on Social CRM, though. I think it’s obvious to people listening that you have a terrific background in some other related fields.

Let’s start by something very basic. Let’s say you’re talking to a senior manager or executive at a company and they say, “You know, Graham, I’m hearing all this talk about Social CRM — the pundits all arguing about what it means. You’ve been in this industry for over a decade doing this kind of work. What’s Social CRM and why should I care about it as a businessperson?” How would you answer that executive concisely?

Graham:

That’s a really good question, and I do get asked that question sometimes, sort of less than I used to, but I still get asked that question. And I think the answer depends upon where you’re coming from. If you are a marketing exec, then I might try and try to talk to him about the conversations that customers are having already in the marketplace between each other, customers influencing customers. I look at studies like, I think it is Capgemini’s study of e-automotive when you look at which sources of information customers use in deciding to buy a new vehicle. And for quite some years now, the number one choice, in terms of most used and most influential information is customers influencing customers. Incidentally, the automotive industry doesn’t quite see it that way, and they think still the most influential choices, the number one used sources of information are TV, press ads and other such things.

So, to marketing, I talk about social media and how you can use social media, how you can harness social media, how you can listen in on customer conversations, how you can start to have dialogues with customers, actually listening and talking to rather than just listening or talking at. And then how you can develop things like communities to try and start and kick start good conversations and engagement with companies.

If I’m talking to somebody in the process part of the business or the IT part, then I might talk about some of the newer social CRM tools, things like Lithium’s tools, Attensity tools and what have you that allow you to work together with customers to mine sentiment and things that have been traditionally very difficult to do without a huge amount of manpower, to understand what conversations are going on out there in the marketplace.

If I was talking to somebody higher up the organization, so higher than the CMO, higher than the CIO, somebody in operations or finance or the CEO, then I might be having a conversation around value code creation, so what is it you’re trying to do, how do you create value so that it’s money and knowledge and relationships and what have you? And how can you better work together with customers so you can both co-create more value together than you might have been able to do in the past with an inside out model? It depends upon who I’m talking to.

Bob:

That’s a great answer. I interviewed a number of experts in innovation a while back, and what impressed me about the innovation crowd, which is a little bit different than what I’ve heard in the Social CRM pundit universe, is that almost everybody said, “Look, it’s important, rather than define innovation – we think innovation is this, that’s what everybody should think it is, — almost everyone said what you just said. It really has to be defined by the organization, has to be customized to their goals, objectives, to the job.” And I think you’re the first (CRM) person who basically has said, “It depends on who you’re talking to.”

Personally, I think that’s one of the problems with Social CRM is that we end up with a lot of debates about how to define it, but the reality is it’s a very broad and flexible framework. It’s not a particular thing that’s going to work exactly the same in every organization.

Graham:

I think you’re right, and if you look at it, if I look back to CRM maybe 15 years ago when I was going to conferences and I worked at Price Waterhouse Coopers, then you’d go to conferences and everybody would define what CRM was. And every definition would be a little bit different. And sometimes in the conversations, you’d have the people who would give one definition on the floor would give a different definition when you talk to them in private. And I think Social CRM’s a little bit like that. We’re in sort of a pre-paradigm phase. We’re not really sure what it is. We know it’s going to be important – or in fact, we know it is important – so we need to be doing something, experimenting with it, but we’ll see what comes out of it. Then, we’ll define what it is later. So, it really just depends who you’re talking to.

Has Social CRM become a “bulwark” of business?

Bob:

Yeah, so I want to segue to an article you recently wrote, Social CRM At A Crossroads: Where To Next? And challenge you on one of the statements you made, because I know that you would appreciate being challenged because you like to do that.

Graham:

Hmmm, yeah, you know me well, Bob.

Bob:

You said earlier in your post that “Social CRM has evolved from a novelty to a tool that,” and I’m quoting here, “practically all use.” And another quote, you said, “It’s become a ‘bulwark of everyday business.'” That’s really at odds with what I’m seeing and what my research is showing. I don’t see Social CRM being that all widely adopted. So, what did you mean by that statement that basically you’re talking about it as being kind of commonly used here? At least that’s the way I interpreted your post.

Graham:

Yeah, another good question, Bob. And I think like many things, the answer depends on how you ask the question. If I go to most organizations, most organizations I work with today, so big banks, financial service companies of various kinds, telco’s, aviation companies, big automotive companies, all of those companies are involved in one of social media, using some Social CRM tools. And maybe you’re thinking about how they co-create value together with customers. So, the defining moment for me is moving through the evolution from CRM, which I always think about these days as something we do to or at customers because we can because we’ve got loads of data, because we’ve got loads of really good analytical tools.

Moving through that to customer experience manageability, CEM, where we start to do things, not only over the sales, marketing and service touch points, but over the entire life cycle with the customer or the product. But again, we’re doing it for customers, we’re still in charge, to more of what I think of as a Social CRM which is where we start to recognize that the customer wants something out of this, they want to control elements of the experience, they want to be involved in innovation, they want to and they do talk about products and services to other customers and other people they don’t even know through tools like Facebook and Twitter and what have you. And that’s what I think of as Social CRM.

So, if you take Paul Greenberg’s definition, which is as good as we’ve got, I think, at the moment, which is “Social CRM is the company’s response to the customer’s control of the conversation,” then companies that are listening in and responding in that way recognizing there’s more to marketing than what marketing departments say there is, recognizing that if you think it’s a peach but the customer thinks it’s a lemon, well it’s a lemon, so what are you going to do about it? That’s what I think of as Social CRM. Same with Social Media, bits of tools and bits of value code creation. And I see most companies doing that. And there’s one thing that brought it home to me.

Bob:

They’re doing something, but what’s the maturity level of what they’re doing, Graham? I mean sure, I agree with you. I’ve found that the majority, certainly the majority of companies are doing something, but what’s the maturity level, in your opinion, as you talk to people and work with your clients?

Graham:

It’s a good question. I think we’re still, as I said earlier, in the early experimentation phases. Now some companies are experimenting and it’s running faster than others. I saw a great presentation by a lady from KLM in Brussels a couple of weeks ago when I blogged at the Enterprise Social 2.0 event. And she described how when they started out only a year and a half ago with Social CRM, they were using it as a way to harness e-mail addresses from their customers, their flying public. That very quickly evolved into a way to have a dialogue. And then you go from just a dialogue with customers to providing delight and surprise to some customers, all the way to recently they actually, they’re opening a new route. I can’t remember where it was to, I think it was one in Brazil or somewhere where they do a lot of exciting dancing. And they were opening the route a week later and this big dance fest going on in this particular city where they were flying to. And some of the people going there said, “Oh, no, you’re picking it a week late.”

So, KLM challenged through Social Media, flyers interested in this particular destination, the dancing, if they could get enough people to fill a flight, they will open the route a week earlier. So, imagine all the change required in a big organization, a national airline like KLM, to bring forward by one week opening a new route to a new destination. And the people got together, and they got the numbers required, and KLM held to their side of the bargain and put on a flight. They put on a dance, a dance plane, if you like, DJ and disco, 35,000 feet in the air, in response to their customers in Social Media.

And that’s just one example. The thing that brought it home to me a little while ago was sitting in a hotel in New York, having spent the day talking to a client at a senior management Social CRM event, and watching an advert for the Ford F150 on TV, the everyday man’s pickup truck. And when it got to the advert, they didn’t lead you through the responses mechanisms to a telephone number. They didn’t lead you to a website. They led you to Facebook, and that was it. So, if you wanted to respond to Ford’s TV ad, you’d go to Facebook. But when an organization like Ford puts their only response channel on the TV, it’s Facebook, you know that Social CRM has arrived.

Bob:

OK. It kind of reminds me of many years ago now, in the early days of the CRM buzz. I would be speaking at a conference, and there would be the obligatory definitions and all that stuff. But I would ask people in the audience if they were doing CRM, and only a few people would raise their hand. Then I would ask, “Well, but do you have some process of acquiring customers? Do you sell to them, do you provide service?” I just listed a few things that are part of CRM, and everybody says, “Well yeah, we do all those things.” And I said, “OK, well congratulations, you’re all doing CRM!”

Graham:

And I think it’s the same as social CRM today. You watch companies and somebody in there has been doing it for years.

Bob:

Right.

Graham:

Yeah, they’ve been doing it for years. If you look at the evolution of customer orientation in companies, how they go from being purely product-oriented to becoming customer-oriented, organizationally, there are a series of well-defined steps that most of them go through one by one. And the first of those steps is recognizing that there are people out there already working closely with customers and listening and providing special solutions in a social network, a creation of the willing, if you like. And finding out who those people are and supporting them is the first step to becoming more customer-oriented.

Then you can build cross-functional teams that leverage those internal social networks. And then you can put in a coordinator, who brings together resources and helps to facilitate those networks and formalize in more detailed ways, all the way through to becoming a completely different customer-focused organization with a customer P&L, customer reporting, customer lines of business and all those sort of things we recognize in an end state customer-centric company. And I think you’ll find the same things happening in social CRM. There are people who have been doing this for years probably, listening in, going to communities where customers talk about products and services and how the hacking service has to make them do things that nobody thought that could be done in the company, but it’s not part of official policy. It doesn’t mean they’re not doing Social CRM.

Bob:

Right, and you don’t necessarily have to put a label on it to be doing it, do you?

Graham:

No, but increasingly, I think companies are, so I see the things that are classified as Social Media or some of the technologies of that in supporting community-building, Lithium sort of technologies or supporting sentiment analysis like Attensity360 technology or like Nimble on a smaller scale for SME’s, then those companies often have budgets now. And it might have to be 10 percent of the marketing budget for some of these activities, for example. So, they are doing Social CRM and they’re going to learn what works and what doesn’t work and improve things. And that, for me, is the start of becoming a proper paradigm shift because it has enormous potential that’s not been recognized, I think, so far, rather than just being more of the same, a new channel, a new technology or what have you.

Social CRM as new communications channel

Bob:

Right, so let’s talk a little bit about – you’ve touched on this already – that Social CRM has these three different aspects to it. In your post you outlined three directions for Social CRM and where it could go. One is that it’s a communication channel. Secondly, it’s this new technology that you’ve talked about already a little bit. And third, value co-creation.

So, I’d like to ask you to just expand a little bit on these three different directions, and also answer the question, why can’t all three directions be pursued essentially simultaneously? Does the company have to make a choice, or is it basically all three of these things going on? What’s your view on that, as well?

Graham:

OK, fine, that’s a good two-part question. So, let’s pick up the first one, and the first is the three parts, three sorts of channels. Looking around, talking to companies, reading around and going to conferences usually quite a lot of, I see a lot of companies doing different things in what I would call the social space. What I think you and I both recognize is becoming social business, rather than social something else. And one of those things is they’re using Social CRM as a channel. So, it’s an additional channel, it’s a more interactive channel, but it’s still a channel driven typically by marketing people, but not always.

Bob:

So, it could be used as Twitter or Facebook, things like that?

Graham:

Twitter, Facebook. A simple example, Vodafone. I look on the Vodafone on Facebook, and you see a competent, but not very exciting Facebook page for Vodafone, but it’s mostly a way for them to reach out to customers, a lot of gimmicks, a lot of sort of fairly high-level stuff to get people to sign up and so forth. But it’s not really about selling, not really about marketing the way that we traditionally recognize, not as good as, say, Ford Motor Company. A lot of this is driven by the idea that there are influencers out there, and people like Michael Wu at Lithium has written extensively about this and written extremely lucidly about this. There are influencers out there who influence others, and not everybody’s equally influential.

Another can be like Virgin Mobile in the UK. About 10 years ago – actually, I think it’s more than that – when Virgin was launched in the UK, they went to UK university campuses, and they sought out all the cool, trendy young people. And they signed them up with basically free mobile telephony at a point when a mobile company was really, really expensive. And they were telling them basically that they would influence other people to buy the services. And it worked phenomenally well and got Virgin started in the student community.

And I look at other research that I’ve seen at I think it’s Nottingham University in the UK, where they were following the development of social networks within a telephone calling community of real students, and they found that influences drove the choice of network, drove the choice of handset, and drove the choice of tariff plan that you would be picking up. So, we know that this is a very influential thing, and I think a lot of companies have now recognized that customers are having conversation, that some people are highly influential. If you can find those people, if you can engage them on their own terms, then they will work on your behalf – of course, they’re working on their own behalf. And then, of course, you’ve got Twitter service.

Bob:

But what you’re describing here, you’re describing the use of social media in business that’s not necessarily connected to CRM systems.

Graham:

It may not be, indeed.

Bob:

The reason I bring that up – we’re going to talk about the technology piece in a second – but there is one school of thought that I’ve been reading about in the industry that says look, if you don’t have CRM technology, you don’t have Social CRM. You’re basically describing one approach to Social CRM that says it’s basically “social business.” I’m going to use Social Media to connect with, to enable customers to connect with each other. There’s value in that even if I don’t have it all organized in a CRM sort of system, as well.

Graham:

But in the same way that brand communications and much of marketing communications is also not part and parcel of any CRM system doesn’t make it any less valuable. And recognizing also that CRM systems are useful for customers that you already know something about, but perhaps not quite as useful for people who aren’t yet customers, so leads and prospects, people who are influential but actually aren’t customers at all.

Bob:

Yeah, exactly. I just wrote about this whole issue of influencers. A lot of the marketing automation industry is all hot about lead scoring. It’s basically scoring people that you think might be a good customer, and it’s kind of ignoring all the people that might not be a good customer but could be great influencers.

Graham:

Yes. That’s important. I mean you look at Kumar’s research published in the Harvard Business Review. When he looked at this, he found that there was practically no relationship between the value of a customer through their purchases and transactions and the value of that same customer through their influence with other customers and their purchases and transactions. So, we have the idea of customer lifetime value, customer referral value and even the value of the network, itself. So, it’s not a simple thing. It’s not just about the traditional CRM. This is why I have CEM, it’s more than just marketing, sales and service. It certainly is for the customer.

Social CRM as new technology

Bob:

All right, let’s turn to that second pillar or at least your second choice, in terms of direction, new technology. What does that mean?

Graham:

Yeah, well that’s the idea of as we think back a few years to CRM, we can see a lot of CRM involved basically in promoting technology — rightly or wrongly. The success rate in the early days was not necessarily high. I think Michael Krigsman’s figures are from various studies between 55 percent and 75 percent failure rate. I think that’s much, much better today because we understand what you need to do. There’s not just limiting technology. To use one of my favorite expressions, OO + NT = EOO, old organization plus new technology equals expensive old organization. So, we need to pull the levers that go together with technology, in order to get the best out of it, to use it as a real enabler.

So, I see companies implementing products like Lithium to develop communities. A company like AT&T has over two million of its customers are registered with its aligned community. Companies like Giffgaff, a co-created telco in the UK – we’ll come on to that again in a minute – also uses Lithium, too, in its community. And the whole telco is more or less run by this particular community. Very, very powerful new concept. Very disruptive concept for mobile telco’s in and around wherever there is a competition. I see companies like Attensity mining sentiment in companies like JetBlue or companies like O2 in the UK. So, they are picking up all the information, online information that customers are talking about, O2, or other companies, they’re picking up customer service transcriptions and other unstructured data, working through it, looking for problems with the services and the products, opportunities for improvement, customers who need help.

And then, of course, they’re integrated quite closely with CRM systems, so knowing that a customer needs help, OK, of course, we should provide help, but we can also recognize this customer has been with us for a long time and this customer’s quite influential and potentially a long-term future with us, so we can make a more balanced judgment around information we wouldn’t have had in our traditional non-social CRM environment. But I also think it’s things like Spigit — an open innovation platform used by many companies, as well, to drive innovation through people having ideas, serving those ideas up to the company, voting on ideas, adding comments and what have you, and then providing a source of innovation, new ideas for the companies to actually implement. They’re just some of the technologies that you see.

Bob:

I agree. I mean there’s a lot of very exciting, new tools that have hit the market.

Graham:

Yeah.

Bob:

But I have to say there’s also been a lot of older tools that have been given a, I would call a lightweight social makeover.

Graham:

A bit of a, makeover is the right term. It’s been like, well there’s TV programs, you go in for half an hour with TV and polish a few things and change a few things, but the question is, is it really different?

Bob:

I think that’s what makes it difficult for business people to pay attention to these buzzword debates is that when a buzzword becomes hot, everybody starts using it and it kind of loses its meaning.

Graham:

Absolutely.

Bob:

But there is something more than buzzwords here because, when we started writing about social CRM almost two years ago, it’s clear that the community tools, the text mining vendors that have actually been around for quite a while now, as well as the innovation process support vendors like Spigit, Bright Idea, and some others, that there’s some really interesting and new and powerful tools that use social computing, social networking principles to deliver value.

Graham:

Absolutely.

Bob:

And that’s new, and not just a marketing makeover.

Graham:

I agree. And that is recognizing that there are customer conversations going on outside of your company walls, and you need to be part and parcel of them. Listening is the very first step, being engaged, and then helping people, using this information to help make their lives more effective and help make your bottom line more effective at the same time is all part and parcel of it, I think. But these are early days. Through the cloud, we can often try tools out much more easily than it is implementing SAP or Oracle or any of those large, big iron CRM suites. And I see certainly there’s a movement in that direction where companies really need to try things out in a 100-day trial project because if it can’t make it in 100 days, what’s the probability of making it to 300 days or 900 days, which would have been the timescale for traditional CRM implementation on a large corporation. But I’ve worked on these sorts of programs.

Social CRM as value co-creation

Bob:

All right, let’s talk about your third direction, value co-creation. What’s that about? In fact, I want to read a quote here from your recent post. You said that “It’s the only sustainable track.” So, I’d also like to understand why you believe that’s the case with value co-creation.

Graham:

OK, if social CRM as a channel, is about influencers, and social CRM as a technology is about new kit, then they’re mostly serving, to a large extent, the company still. And I think the opportunity is to recognize that just as CRM and CEM are about the company’s control of things, the reality is the company has much less control over what’s going on out there in the marketplace than they ever thought was the case in the past. So, social CRM — as co-creation — recognizes that the world is driven by value networks. That’s networks of people who have come together to co-create value at touch points by exchanging information, money and all those sorts of things, and products, and that that network of value and resources that flow behind the scenes is really what should be driving social CRM.

Here are the best examples that I’ve come across after a lot of looking. It isn’t companies like P&G or Lego or BMW, all of which have been working hard experimenting with co-creation, but a little UK startup I mentioned earlier, Giffgaff, a mobile telco run on the back of the O2 network in the UK that basically co-creates everything together with its customers.

In fact, it says, “The mobile network run by you” is its tagline. And when it was being formed a year and a half ago, they put up a community with the help from Lithium before they even had an actual product on the marketplace or proper offering, and said, “Help us decide what we should be as a telco. Here’s our manifesto. We want you to help us.” So, customers came on board and helped them to set up, OK, well do we want as customers, what? If you like these terms I often use, what jobs am I trying to do as a customer, what outcomes am I trying to achieve for which I hire telcom’s tools, and what do I want from you at telco to help me to do that more effectively?

So, Giffgaff, which only has a staff of about a dozen people, amazingly, for a mobile telco in the UK, uses customers to do most of its heavy lifting, doesn’t own a network, doesn’t have to run network operations. So, customers decide the marketing products. And when they had a revamp a little while ago, they asked customers, “Well, what do you want in products and services and bundles?” And 285 people, I think it was, responded. And out of that came five called Goody Bags, as they called them, the combination of minutes and messages and megabytes.

When customers have questions, that goes on to the community, and the community answers. And the average response time unbelievably for mobile telco, but in any company is three minutes. It’s just unbelievable for mobile telco. And 99 percent of questions, anything that’s not technical to do with billing or the network or something that customers couldn’t legitimately respond to, is responded to by customers. And in return for that, customers get kudos if you like for being involved. Some customers spent up to 160 hours a week – I’m sorry, a month – on the network, providing answers to the customers. That’s between five and six hours a day. But they also will get points, which turn into money. And customers get, if you like, the ability to take this money and put it against a contract or put it against the next Goody Bag or what have you. And I think the largest pair that they paid out recently was over 680 pounds. So, round about $900.00, $1,000, just for answering questions.

Bob:

You’re describing a world where a business and customer relationship is collaborative — it’s a win-win and it goes beyond the buzzword or the platitude that you often hear about.

Graham:

Oh, it’s great. They don’t do any marketing.

Bob:

Not “we build something, deliver it, and you get value from it.” It’s about let’s work on this together so that we both benefit, but it’s more of a collaborative effort, as opposed to just a transaction.

Graham:

But it’s also deep engagement. So, if you think of the 1-9-90 rule that seems to apply to most communities. Say in a typical community, 1 percent of the people are really heavily engaged in most of the questioning, 9 percent come in to add value occasionally, but 90 percent don’t do anything at all. In Giffgaff’s case, 40 percent of the people, of their customers are involved in the first six months. And in the long-term, 20 percent are actively involved. They didn’t do any marketing, Giffgaff. I think it’s more than the 150 videos on YouTube and Vimeo and these sorts of sites have been put up by customers over the years. And these are all we love Giffgaff, and here’s what’s in it for you, and come and join us sort of videos. They’re not sort of moaning and ranting and raving against the company, the things they haven’t done like with many other telco’s. And if you look at that, their satisfaction rating is 92 percent.

The only sustainable track for Social CRM

Bob:

All right, this is very exciting but why do you say this is the only sustainable track?

Graham:

The reason why, I think, is quite simple. If I look at the channel, this tends to be localized, so it’s going to be in marketing, less in sales, it might be in customer service, it might be in innovation. So, I’m going to get benefits from making my marketing more efficient and effective, more productive because I’m engaging customers to a certain extent, but it’s always on the marketer’s terms. So, I can make money from that, I can create value, whatever I think is value, money, knowledge and relationships, what have you, but it’s only departmental.

If I look at the technology track, unfortunately, technology has a record of not creating enormous amounts of value. When you buy it implemented, it costs you a lot of money. It’s very much cost-intensive. And only when you build all those complementary capabilities, matching processes, matching roles responsibilities, data flows, new performance measures, a new working climate, new coach within the organization can you really get the benefit out of the technology? So often, we find that technology leads to a net negative position because it’s just too hard to get all of your levers pulled, often because those implemented in IT don’t have command over those other levers.

If I look at value co-creation as a contrast, it’s about understanding value, from the customer’s perspective, from all the other players in the network and the customer and partners and what have you. It’s about understanding the touch points when value is co-created between all the parties. It’s about doing the things, the resources they need to bring and the capabilities they need to have in the background to deliver those resources. It’s about understanding how all this plays out over a period of time throughout the end to end customer journey. And I think if you understand these fundamentals of business, how value flows around the organization in its periphery with customers and partners, you have a much better chance to re-engineer your corporation, if you like, for real value co-creation, value for me, the company, value for customers, and value for partners.

If you look back to successful CRM, if you look back to the implementations of e-commerce, all of those programs have shown that you need between 40 and 50 percent of the total organization involved in a new way of working if you’re going to affect long lasting value creating change. Otherwise, your departmental thing, small amount of value, your toy, a tool plus a potentially negative value only when you start to pull all of the organization together, when you get most of the people moving in a new direction, can you really create an enormous amount of value for the organization, as a whole. And that, unfortunately, rules out the channel approach because it’s departmental. It rules out the technology approach because it’s difficult and it’s also departmental. Value co-creation, social business driven by value, rather than social media or social technology as the way for large-scale value creation.

But it goes back to what you said earlier. It isn’t either/or. You don’t have to do social media or social technology. In fact, you shouldn’t be. You should be experimenting with bits of all of those things.

Bob:

You seem to be describing an evolution or a vision that companies should have. That even if they’re starting in social media and they’ve put up a Facebook page, and they’re doing something that’s more about communication channels, they should be thinking longer-term how can we move towards this vision of co-creation. If you put up a community or you’re using text mining, how are you going to move toward value co-creation. Because ultimately, that’s a more engaged relationship, more of a sustainable competitive advantage than just doing channels or technology.

Graham:

Yeah, one of the companies I work with is corporate finance, so I am very focused on the numbers. And I always have been. It’s not about new technology or new exciting things. It’s about the numbers. And I drive most of my companies to create more value more quickly through certain approaches. So, I’m approaching value co-creation as a way forward and more encompassing, including channels, including technology, including other things because I want to understand where is the value, how do I get more of it, how to create more of it, and also recognizing that in order to create more value for myself, I need to make sure that my partners and my customers gain more value for themselves, as well, otherwise, I’m in a short-term situation like many mobile telco’s are where they have churn rates of 30 percent each year. And they spend 70 percent of their acquisition budget acquiring the customers they lost the previous year.

Or I’m in a situation where I give away so much value to customers that I’ve become a charity and I go bankrupt in a relatively very short period of time. There’s a sweet spot, and it’s recognized that it’s giving a value, in order to earn value. And co-creation provides a framework to think about that and then work out with that knowledge, what to do next. But much better than guessing or just following the trend, following fads.

Bob:

And you’re not suggesting that it’s just a do-gooder type of thing?

Graham:

Oh, Lordy, no.

Bob:

This is a solid business proposition? It’s value for value?

Graham:

Absolutely right, it’s all about value.

Five core questions about value co-creation

Bob:

(Co-creation) is not just a value exchange like a transaction, it’s more about customers and the companies actually engaging with one another?

Graham:

Oh yes, in a nutshell. It comes down to sort of five core questions.

1. First of all, who’s involved in whatever they’re looking to improve, your business improvement to area? Who are the actors and what do they do? Customers are going to be there, you’re going to be there, partners of various kinds that you hire to do bits of that activity are going to be there, as well. And all of those have things of value, money, knowledge, experience, relationships and so forth that they value and they’re in business to actually gain. And ultimately, most of those have to flow into financial value in one way, shape or form over time because we’re not charities.

2. And then underneath that, we want to look at what are the touch points that customers and companies and partners use where they to co-create value together because I need to understand, in order to work out, OK, where is it and how is it, what tools are they using to co-create value?

   Now value comes of jobs and outcomes and so forth is the top part of the equation. The bottom part of it is also they need to bring to the point to do that. And sometimes that means a company providing resources for one of their partners or a customers to create more value for themselves.

   So, think back to the early days of airline check-in. And I saw this when I worked for British Airways in the 80’s. And went in to use the kiosks. You can see people going from the queue thinking, “oh, a kiosk, check-in, that makes life so much easier.” And you see the abject horror on their face when you think, “my God, I need a PhD to use this terminal. Back to the queue, and I’ve lost my place.” So, British Airways, who I was working for at the time put a lady next to the terminal – or a gentleman – next to the terminal to explain how it worked and show people how it worked. So, they transferred the resources of knowledge and skills from themselves at their cost to the customer, which means the customers now armed with new skills could then check in themselves, saving the money of having so many check-in staff, saving queuing times, increasing satisfaction, increasing relationships, giving more time from the go airside and shop, and the new shops being built and so forth. So ultimately, everybody wins by the airline in this case, providing resources for somebody else to use.

3. And then I need to, having understood the resource side and the value side and the touch points, how does all this pan out into one long-term customer journey? Because customers may well be satisfied and satisfied at an individual touch point, but they will make their judgment about whether to go back to an airline and use it again or any other company over, as a result of all those touch points in the life cycle, in the customer journey they have to go through, not just individual ones. So, I need to understand how all this pans out into a journey.

4. And then, I need to understand for all of the people involved in delivering a value at touch points during the journey, how does the value flow between the different people, and how do the resources flow between different people because that’s the basis of understanding how the value network works.

5. And if I understand that because I’m in a good position to know which levers to pull to create more value for me because I’m promoting me, as a company, but also to provide more value for customers and for partners because if they win and I win, then we’re in a much more sustainable business together.

So, it’s a new way, a more fundamental way of thinking, and there are new tools that have come around in the last two or three years that’s enabled this to be done. So, some of the work of people like Verna Allee on value networks and Eric Hu looking at requirements analysis for early software to paradoxically provide tools, to understand how value flows in networks that we can use to effectively reengineer the corporation for value, value for me, the company, and value for all those others involved, as well. And that’s really a huge opportunity, I think, to go from doing what you’ve done better, smarter, faster.

So, Social CRM as a channel or Social CRM as a technology to reinventing our business for value co-creation.

Bob:

Well on that note, Graham, I want to thank you for sharing your perspective on Social CRM. It’s really been great catching up with you. I think this podcast is going to do a lot to help clarify what’s really going on. And this evolution, I think, is extremely important that you talked about, social media channels to technology to social business.

It seems to me that the industry, instead of debating terms and trying to play the buzzword games, that we really ought to get organized around trying to help companies through this evolution because otherwise, it’ll be another “CRM is a piece of software you install” and we know how that ended up.

Graham:

Yeah, I think you’re right, Bob. These are exciting times where we’re learning what works and what doesn’t work, we’re experimenting as companies. That’s the way it should be. Nobody really knows, least of all me, where it’s going to end up, but I have a pretty good idea where I think the value is, and I want to help companies try to achieve more value for themselves, their partners and their customers.

Bob:

Well again, thank you very much for your time today, Graham. Appreciate you joining me on Inside Scoop.

Graham:

Great, great to be here. Thanks so much for asking me.