Social Networking For Business

The following is an article from the current issue of CRMGuru, where I was asked for my thoughts on a trend that CxO’s should be thinking about in 2007. Would love your thoughts.

Why You Shouldn’t Ignore Social Networks

By Christopher Carfi, Cerado Inc.

Social networking was big in 2006. Really big. Really, really big. MySpace has more than 50 million members. Google bought YouTube, a video-sharing site with a heavy social component, for $1.65 billion. Facebook, a social networking site for college students, is rumored to be courting buyers with a price tag in the billions as well. However, most of the social networking action in 2006 was in the consumer space. I predict 2007 will be the year when social network becomes a critical part of the business landscape. Customer-facing executives—and CSOs and CMOs in particular—need to be aware of this fundamental shift that is on the horizon if they want their companies to succeed in the wake of this transition.

Deceptively simple, online social networks contain great power. They change the online space from one of static web pages and stale marketing messages to a live, vibrant network of connected individuals who share their abilities, expertise and interests.

Online migration
In both professional and personal life, human beings naturally form groups based on affinities and expertise. We gravitate to others with whom we share interests. These real-world networks form organically, and consist of our family, friends, colleagues, mentors and advisors. These networks have always formed in the "real world" and, not surprisingly, rapidly migrated to the online world.

Customers have lost trust in traditional sales, marketing and service (the three areas commonly referred to encompassed by CRM. According to the 2006 Edelman Trust Barometer, a survey of 2,000 opinion leaders in 11 countries, "the most credible source of information about a company is now ‘a person like me,’ which has risen dramatically to surpass doctors and academic experts for the first time." The survey relates that in the United States, trust in "a person like me" increased from 20 percent in 2003 to 68 percent today.

The connections enabled by social networks are the glue that put the humanity back into business to solve the trust problem. In other words, the organizations that will win are the ones that most easily enable individuals to build relationships and communities with people they trust.

Not just kids
And don’t discount social networks as something just for young people. Although social networks such as MySpace (known for being an online hangout for the high schoolers) and FaceBook (which targets the college crowd) have garnered much press in the social networking space in 2006, other professionally-focused online networks are being used in many ways in the business and association realms, and social networking is poised for growth in 2007 in a number of areas. A few of these areas are:

  • Customer and member relationship development. Customer satisfaction is at an all-time low, perhaps as a result of reduced business focus on actual relationships and an increased business focus on CRM systems that emphasize the management of data, rather than personal connections. Online social networks allow a prospective customer or prospective member to easily facilitate a real, human-level connection with individuals within an organization. This enables genuine business relationships to form and puts an authentic human face on the interaction, changing the external perception of an organization from a sterile, faceless behemoth into a collection of individuals who are ready to help.
  • The use of the network to find experts or locate knowledge to better support customers. Only a fraction of an organization’s "knowledge" exists in databases. Another fraction exists in the form of explicit documents and reports that may be found on an organizational intranet. The vast majority of organizational knowledge, however, exists only in the heads of its members. Inside an organization, online networks with even basic profiles of its individuals’ experience, location and interests can greatly reduce the time required for organizational problem-solving, through enabling faster connection between a questioner and the person who has solved similar problems in the past.
  • Better service by providing customers with the "whole product." It is rare that a single organization can provide all the pieces needed to meet and create an entire solution. For example, even though a real estate agent aids in the process of buying a home, the customer must have an entire network of other service providers, such as title company, bank, insurance agents and contractors to complete the purchase. By creating a strong network of complementary providers with similar philosophies and business practices, a single service provider can provide a much greater proposition to a prospective customer than an individual working without the benefit of the network.
  • Creation of "all-star" teams that are right for each customer. Especially in service organizations, creating both the right set of skills and the right culture are key to creating a connection with a prospective customer. An internal social networking system enables the individuals responsible to creating relationships with prospects to pull together the "right" team to meet the prospective customer’s needs and, at the same time, pull together the unique group of individuals who will resonate with the prospect at a personal level.

As technology has progressed at an ever-increasing rate, the things that are actually beginning to bring customers closer to an organization are not technical at all. It’s an interesting bit of irony. And it’s inevitable.

Clue Unit #2 Show Notes: January 30, 2007

(click here to listen – MP3)

(click here to listen – M4A)

(click here to subscribe to this feed)

In this, our second podcast, we bring back…

  1. Introduction
  2. Announcements — conferences, news, etc.
  3. Focused Topical Discussion
  4. Conference Chatter — Anything goes


Today’s Topics:

  • Our inspiration to get into the business of online communities
  • What would you say to a marketing manager if you had 5 minutes to talk about online communities?
  • The controversy surrounding Microsoft sending bloggers free Ferrari laptops loaded with Vista.
  • Continue reading “Clue Unit #2 Show Notes: January 30, 2007”

    Jeff Foxworthy Does VRM

    As part of the ProjectVRM meeting yesterday, Joe Andrieu and yours truly facilitated a session asking the question:

    “What are the expressions (or perhaps “gestures”) that indicate that you might be in a relationship, instead of just a simple transaction?”

    (This was intended primarily to be in the business domain, although there is definitely a blurring of business and not-business when talking about actual interpersonal relationships.) These “expressions” are things you do, or things you feel, or real-world manifestations that indicate that a relationship may exist between parties. Please note, the relationship may be positive, or may be negative.

    Here was the list the group came up with. Can you add to it?

    “You might be in a relationship when…”

    • there are implications for the future
    • expectations
    • recognition
    • subscription
    • payment
    • tipping
    • genealogy
    • hate sites
    • strong feelings
    • recommend
    • contract
    • employment
    • ask advice
    • expose yourself to vulnerability (“trust”)
    • blacklist
    • conversation
    • stalking
    • repeat patronage
    • badmouth
    • reliance
    • federation
    • referral/introduction
    • sponsor
    • invite
    • rebuff
    • evaluate
    • hug / P.D.A.
    • advocate
    • commenting (e.g. blogs)
    • give gifts
    • find
    • respond
    • keep apprised
    • request
    • extend credit
    • support
    • vouch
    • shared experience
    • having coffee
    • conferences

    What are other expressions of relationships that you can think of?

    Clue Implementation Unit Podcast #1

    (click here to listen) (click here to subscribe to this feed)

    In this, our
    inaugural podcast, we introduce the Clue Unit podcast format which includes
    these recurring sections.

    1. Introduction
    2. Announcements — conferences, news, etc.
    3. Focused Topical Discussion
    4. Conference Chatter — Anything goes


    Today’s Topics:

    • The role and basis of reputation systems in online communities
  • Introduction of Joost (formerly The Venice Project), and what the beta shows about the direction of the technology and social elements of the system.
  • Issues concerning how much an organization should be able manipulate/remix submissions for projects that depend on user-generated content.
  • Continue reading “Clue Implementation Unit Podcast #1”

    IBM Announces Enterprise Social Networking Offerings

    Big Blue has announced that they are working on a new product called “Lotus Connections,” which is targeted for a late 2007 release. From the IHT:

    “IBM is planning to introduce a set of social software tools Monday that will bring the kind of blogging, idea-sharing and war-story-swapping typically associated with sites like MySpace to the corporate world.

    And you thought social networking was all about, well, social networking — and mostly among bored teenagers.

    Called Lotus Connections, the new software, which should be available to companies this year, will let employees set up virtual worlds in which they can meet like-minded colleagues within the company and exchange ideas with them, all in the name of improving productivity.

    The idea, said the IBM vice president for social software, Jeff Schick, is to “unlock the latent expertise in an organization.”

    This is fantastic validation of this market.

    (In related news, we have been seeing a ton a traffic here and on the Haystack network from the Lotusphere2007 domain today. Welcome!)

    Bonus e-Book link:
    Social Networking for Businesses and Associations (12 page PDF) (online slideshow)

    Bonus list:
    The Top Ten Ways Businesses, Associations and Organizations Can Use Social Networking

    VRM Scenarios

    (Note: More background on VRM here.)

    Been doing a lot of thinking about VRM (Vendor Relationship Management) in anticipation of this week’s developer’s meeting. It’s a potentially expansive, and extremely undefined, area.

    One particular tactic I’ve found useful when dealing with uncertainty is scenario planning. There are many different implementations of scenario planning; the one I use is a modified version of the one described here and originally pioneered by Peter Schwartz at GBN.

    So, the two big questions:

    • Q1: Who controls the interactions between vendor and customer?
    • Q2: Are the interactions focused on transactions or relationships?

    This gives us a universe as follows:


    It’s important to note that the object of this exercise is most emphatically NOT to “predict” which of these four areas will “win.” Instead, it’s to draw a vivid caricature of each world, and determine its key traits. Doing this allows us to better plan for, and recognize, instances of that particular scenario when we run across it in the future.

    “Minority Report”
    MinrptVendors bring every resource to bear to extract the last bit of margin out of every customer. Targeted ads, served relentlessly and based on our past purchasing behavior, attempt to entice us to consume the next new thing. Friedman’s “Flat World” observation plays out to its logical conclusion, with manufacturing and marketing, sales and service taking place at whatever patch on the globe can deliver the product most cost-effectively. Since vendors use data mining of petabytes of customer data in order to predict the next hot trend, post-sale service becomes increasingly unimportant, since product lifecycles are measured in weeks. Customer data becomes a pure commodity, created, owned and traded by vendors in the way that carbon credits and pork bellies are traded today. Vendors with economies of scale rule the day. Customers get low prices, and limited choice.

    Happybunny_1Cryptography, identity management and business processes have all converged, enabling customers to shop securely both online and off. Customers issue anonymous “personal requests” for goods and services, and vendors battle each other relentlessly in order to be selected. Prices are driven to just above cost for commodity items, and a cadre of flexible, “long tail” suppliers emerge to meet the non-commodity requests. eBay stumbles, and then launches a service that is the converse of its current offering. Reputation systems abound for both customers and vendors, leading to the creation of RepTorrent, an anonymous network for the trading of gray-market reputation identities.

    “The Global Village”
    The customer owns her own information, and does with it what she pleases. In some cases, anonymous transactions are conducted, but most interactions happen with trusted vendors with whom the customer has dealt over time. The customer chooses vendors based on interpersonal empathy and affinity, as well as technical capability. Relationships grow over time, and vendors evolve beyond being simple suppliers of goods and services and into confidants (and sometimes friends). Customers pay somewhat higher prices, but look at interactions with vendors holistically, feeling that price is only one aspect of the true cost of a good or service. Customers and vendors work together to come up with new products and services. Competent and personable vendors succeed, scam artists are quickly outed and ostracized. The same is true for customers, as both vendors and customers belong to interconnected offline and online communities.

    “The Matrix (Blue Pill)”
    BluepillVendors control production, allocation and distribution, and at the same time understand that a connected customer is a lifetime customer. Supply chain models such as vendor managed inventory and consignments are used. The vendor controls what purchase options are given to the customer, and realizes that he must be equitable, or the customer will terminate the relationship. The vendor has perfect information on the behavior of his customers, including purchase history. Vendors use this information to continually refine and model the selection and quantity of goods and services made available to each customer not only to maximize profits, but also to ensure continued access to that customer. Customers select their vendors based on the belief that they will have an ongoing relationship with the vendors they choose, and give them feedback as to what they’d like to see.

    So. These are just first thoughts. Would love to work on this together, both here in the comments and here on the wiki.

    marrakech market: malyousif

    Changing The Channel

    Joe Andrieu, regarding the Shopatron:

    “Their system is remarkably simple. They host an online store for a manufacturer, such as Callaway or Brooks. The store is branded 100% as the manufacturer’s and visitors to the manufacturer’s website are seemlessly directed to the store as a way to purchase products. Customer orders are placed on a retailers-only bulletin board, with a fixed price for retailers to “bid” on the right to fulfill that order. Retailers who bid essentially say “Yes, I have that product in inventory and I’ll ship it at that fixed price.”

    Once each day, Shopatron resolves all of these bids, sending them to the nearest retailer. That retailer boxes up the product and send it to the customer. The customer gets the product with local support, quickly, and with minimal shipping costs. The retailer gets a new customer and the profit from the sale.

    In cases where no retailers want the bid, the manufacturer ships the product themselves. And because nobody wanted it, there is no channel conflict, just higher margins.”

    Writing Well Is The Best Revenge

    From the “people I don’t link to nearly often enough” file…go read Eden Kennedy. Example:

    Mcd_tree_pose“So, McDonalds! What’s up with this?

    This bag contained a somewhat bland sandwich consisting primarily of ground-up cow.

    You offer the cow flesh sandwich in a bag that has the image of a pretty American woman demonstrating yoga.

    You believe that yoga is a healthy practice, and so you like to associate health with your cow flesh sandwiches.

    Yoga is a practice that was developed in a country wherein cows are traditionally allowed to roam the streets and live their happy cow lives through to their natural ends, and not have their flesh end up between two bleached-flour buns and accompanied by fries and a Coke.

    Also, the pretty American woman doing vrksasana, the tree pose? On a paper bag made of? Trees!


    Bonus link: Yoga, as done by plastic action figures (n.b. the surgeon general advises that you finish consuming whatever beverage you have in front of you before clicking that link, lest you spew said beverage out your nose via spasmodic, very un-yogalike laughter)

    Bonus link #2: Ooops, I wrong wrong. Apparently laughing yoga is ok.