Everywhere E-Book

Larry Weber

• Herausgeber: John Wiley & Sons
• Kategorie: Fachliteratur
• Sprache: Englisch

Seitenzahl: 404

Veröffentlichungsjahr: 2011

Beschreibung

Put digital business strategy at the center of your business Welcome to the social media age. Although its impact was first felt in the marketing department, the social web is spreading across all business functions, impacting the way they communicate, operate, organize, and create value. A comprehensive digital strategy is essential for businesses hoping to build this new form of competitive advantage. Everywhere explains how to put your digital strategy at the center of how your organization communicates, operates, organizes itself, and creates value. * Develop a comprehensive digital strategy for your organization * Put your online business strategy at the center of your customer's experience, and at the heart of everything you do * Larry Weber's W2 Group is helping companies like Sony, IBM, Harvard Pilgrim Health Care, and the government of Rwanda, craft new online business strategies The Web is not just another marketing channel. Put social media, email, Web, and other digital interactions Everywhere in your business, and make digital business strategy the heart of your thriving enterprise.

Leseprobe

Contents

Cover

Title Page

Copyright

Dedication

Acknowledgements

Preface

Introduction

Threadless.com: Born on the Web

Dell: A Presocial Company Retools

Please Try This at Home

It Doesn't Have to Be Made Here

From Twitter to Competitive Advantage

In Sync with the Marketplace

Improving Strategy Execution

Staying Ahead of the Commoditization Cycle

Developing New Sources of Market Influence

Improving Corporate Cost Structures

Winning the Talent Challenge

It's Not Just the Tools; It's the Behavior

Welcome to Everywhere

Questions to Consider

Part I: The Evolving Social Web

Chapter 1: The Social Enterprise

A Closer Look at the Social Enterprise

How Are They Doing It?

Facing the Fear

Questions to Consider

Part II: On Becoming a Social Enterprise

Chapter 2: Toward a Comprehensive Digital Business Strategy

Guidelines Get You There

Identify Your Key Communities

Take a Deep Dive

Observe the Landscape Continually

Showering Without a Shower Curtain

Who's on First?

Questions to Consider

Chapter 3: Building Enterprise-Wide Engagement Capability

Establish a Social Enterprise eForum

Broaden Your Base of Engagers over Time

Pursue a Strategic Approach to Social Engagement

Create New Social Media Roles

Engage, Engage, and Engage Some More

Proactively Manage the Enterprise-Wide Brand

Get Senior Leadership Involved

Questions to Consider

Chapter 4: Developing a Digitally Driven Company

Create the Vision

Embrace Transparency

Manage from Your Moral Purpose

Realize It Doesn't Have to Be Made in Your Shop

Commit to Working Collaboratively

Rethinking Your Leadership Style

Enourage a Culture of Controlled Risk Taking

Rethink Your Notions of Speed and Professionalism

Walk the Walk

Questions to Consider

Part III: Across the Business Universe

Chapter 5: Marketing, Sales, and Service, Step 1

Say Goodbye to the Funnel

Resetting the Game Plan

Say Hello to Multiple Channel Pathways

You Can Get There from Here

Integrating Social and Traditional Channels

What About Paid Media?

Integrating the Marketing Department

Coordinating the End-to-End Customer Experience

Introducing the Customer Engagement Department

Questions to Consider

Chapter 6: Marketing, Sales, and Service, Step 2

Social Destinations Are Satisfying

Being Welcome at the Social Table

You're a Publisher Now, Too

Creating Content to Fuel Connection

Develop a Content Calendar

Sampling, Applications, Contests, and More

Moral Purpose Makes for Great Interactions

Questions to Consider

Chapter 7: Innovation

Innovation Is the Trump Card

By the People and for the People

Exercise, Eat Right, and Innovate Daily

Brainstorm with Your Competitors

Rally the Troops

Idea Jams: Getting the Ideas Flowing

Shopping for Ideas

Monitizing Your Intellectual Property

Stay Close to Scientific Communities

It Sounds Good but . . .

Questions to Consider

Chapter 8: Strategy Execution

Putting Employees on the Same Page

Expanding Employees' Personal Networks

Providing Simple Collaborative Tools

Tapping into Employees' Insight

Promises, Promises

What About Productivity?

Leakage and Discoverable Evidence?

Questions to Consider

Chapter 9: Human Capital

Social Recruiting Is Hot

You Gotta Be Part of LinkedIn

Tweeting for Hires

Finding Candidates on Facebook

Company Career Portals

Be Where They Are

Successfully Reeling Them In

Human Resources Meets Marketing

Accelerating the Onboarding Process

Keeping Employees on the Cutting Edge

Engaging with Your Current Employees

The Twenty-First Century Work Environment as a Selling Tool

Questions to Consider

Part IV: The Future of the Social Enterprise

Chapter 10: Next

Social Enterprises Come of Age

Consumers Are at the Center

There Is No Place Like Home

Expanded Challenges for Corporations to Tackle

Keeping the Internet Open and Accessible

It Is Not Necessary to Change

Questions to Consider

Notes

Index

Copyright © 2011 by Larry Weber. All rights reserved.

Published by John Wiley & Sons, Inc., Hoboken, New Jersey.

Published simultaneously in Canada.

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Limit of Liability/Disclaimer of Warranty: While the publisher and author have used their best efforts in preparing this book, they make no representations or warranties with respect to the accuracy or completeness of the contents of this book and specifically disclaim any implied warranties of merchantability or fitness for a particular purpose. No warranty may be created or extended by sales representatives or written sales materials. The advice and strategies contained herein may not be suitable for your situation. You should consult with a professional where appropriate. Neither the publisher nor author shall be liable for any loss of profit or any other commercial damages, including but not limited to special, incidental, consequential, or other damages.

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Library of Congress Cataloging-in-Publication Data:

Weber, Larry.

Everywhere: comprehensive digital business strategy for the social media era/LarryWeber.

p. cm.

Includes index.

ISBN 978-0-470-65170-4 (cloth)

ISBN 978-1-118-01627-5 (ebk)

ISBN 978-1-118-01628-2 (ebk)

ISBN 978-1-118-01629-9 (ebk)

1. Management—Social aspects. 2. Social media. 3. Internet marketing. 4. Information technology—Management. 5. Strategic planning. I. Title.

HD31.W37 2011

658.8 072—dc22

2010043308

Printed in the United States of America

10987654321

To my family

Acknowledgments

I am indebted to many for making Everywhere possible. To Lisa Leslie Henderson, my cowriter, for helping capture my thoughts into words on paper and for unearthing the vision of the social enterprise along with me: thank you. Heartfelt thanks and appreciation to Marijean Lauzier, Jackie Lustig, Jan Baxter, Ginger Lennon, and Brian Babineau at W2 Group for their keen insight and ability to see broad connections alongside important details and for their extraordinary dedication to this endeavor despite their already overbooked schedules. I am, as always, grateful to my terrific agent, Jill Kneerim, for her vision and confidence that we, in fact, had a book here.

This is the third book that I have published with John Wiley & Sons, Inc. My editor, Richard Narramore, has once again proved his polished skills in refining ideas and shaping a compelling story. Thank you to him and everyone else at Wiley, including Lydia Dimitriadis and Lauren Freestone for their always helpful and cheerful assistance in making the production process run smoothly.

Without the contributions of multiple business leaders, academics, and specialists, Everywhere would not be filled with as much proven-in-the-trenches and actionable experience and expertise as it is. Mark Fuller (Monitor), Jake Nickell (Threadless), Scott Griffith (Zipcar), David Holveck and Kevin Wiggins (Endo Pharmaceuticals), Dwayne Spradlin (InnoCentive), Jeremy Liew (Lightspeed Venture Partners), Dan Neeley (Network Analytics), Greg Matthews (WCG), Adam Weber (The Art of Shaving), Valertie Motis (Sony), Rick Wion (McDonald's), Ian Drew (ARM), Clay Shirky (NYU), Brian Gaspar (Researcher), Scott Monty (Ford), David Weinberger (Berkman Center at Harvard), Steve Goldbach, (Monitor), Robbie Vitrano (Naked Pizza), Anne Berkowitch (SelectMinds), David Hayes (HireMinds), Pauline Ores (Consultant), Andrew McAfee (MIT), Doc Searls (Berkman Center at Harvard), Reid Hoffman (LinkedIn and Greylock), and Beth Comstock, Anubhav Ranjan, and Victor Welch (GE) have all quite generously taken the time to share their vision and experience with all of us here.

Finally, and as always, I want to thank my family. My wife, Dawn, and each of my three children inspire me, provide me with immeasurable joy, and constantly teach me about this highly connected world in which we live. Their enduring support and enthusiasm is the best gift that a man could hope to receive in his lifetime.

Preface

Every year that goes by, I am more amazed at the inventiveness and creativity of the Internet entrepreneur. In a world that seems steeped in shallowness, negativity, and spectacle, they are a shining light of innovation to help remind us we are all in this world together, to make a better place governed by self-respect, transparency, and moral purpose!

Making sense of all the new tools, platforms, trends, and technologies can be daunting. I believe, however, that if we all take a collective breath, step back, observe keenly, and share our thoughts with one another, a greater world will evolve.

This is especially true in business. We are at the very beginning of a renaissance for enterprises based on an overwhelming opportunity to share best practices, knowledge, and data for the betterment of our companies, large or small.

I wrote Everywhere to explore this very exciting time in an era in which our digital “lives” have completely integrated with our real ones.

If enterprises listen, create, and share, our economic force will continually replenish. Please view Everywhere as a starting point, a foundation, toward comprehensive digital strategy in a world ready for explosive innovation.

—Larry Weber

Boston, Massachusetts

Introduction

Every so often, an unavoidable and pervasive shift takes place that affects every sector, every industry, every company, and every corporate function. Think automobiles, railroads, and information technology. And, now, think social media.

As social media use spreads beyond corporate marketing departments into sales, customer service, product innovation, human resources, finance, planning, operations, and the C-suite, it is transforming corporations and industries, creating a new source of competitive advantage or disadvantage for organizations depending on whether their leadership recognizes and embraces the change—or not.

This new source of competitive advantage is the social enterprise. Social enterprises are organizations characterized by their extensive use of social media tools, both internally and externally, and, more important, by the effect this über connectedness is having on them.

The dialog made possible by social tools is prompting companies to ask themselves: what would our business look like if we had a more collaborative relationship with our customers, employees, and other stakeholders? As companies put social tools to work seemingly everywhere throughout their organizations, they are beginning to answer that question, function by function. As they interact with a broader base of stakeholders, in unprecedented ways and with a frequency that has never before been possible, they are building communities, not just companies. These communities are allowing companies to do what they have been talking about for decades: place their customers at the center of their businesses.

Threadless.com: Born on the Web

Threadless.com, the Internet-based T-shirt company, puts its customers directly in the bull's eye of its operations. In 2000, after meeting through an online T-shirt design competition, its founders, Jake Nickell and Jacob DeHart, came up with a simple business model: invite customers to submit designs for T-shirts, let them vote on which ones to make, ask them what they will buy, and rely on them to spread the word about their company and its products. That's idea generation and vetting, sales forecasting, and marketing all rolled into one—and carried out by customers no less. Sound idealistic? It's not.

Today, Threadless nurtures a vibrant member community of more than 1.2 million members. (Another 3 million people have purchased Threadless's products but are not registered members.) Designers within the community submit, on average, 2,000 designs a week to the company and spend about 6 hours on each design—that's dedication. The company has expanded its product line to include kids' hoodies and T-shirts and is partnering with other companies to community-source designs for iPhone covers, computers, Havaianas flip-flops, and a whole host of other products. The design community embraces this expansion. As Nickell said, “The artists are all about it—they love seeing their work everywhere.”

The community continues to vote on the designs, indicate their purchase intent, and spread the word to their friends via Facebook, Twitter, and their own blogs. They are rewarded for customer referrals with Street Team points that can be applied to future purchases. The company itself has more than 1.5 million followers on Twitter and 100,000 fans on Facebook with which it enjoys ongoing dialog. Management is more involved in production decisions today than it was initially; it has standard batch sizes now, which it can tweak if social chatter indicates a potential spike in demand. Here's an astonishing fact: The company is so in sync with its market that it has never created a design failure.

“It's all about building community,” Nickell explains. While Threadless' communities have a life of their own, Nickell and his staff continue to stir the engagement pot with themed design competitions and a conscious linking of their digital and physical presences.

Its retail store incorporates many of the features of its digital environments: designs change weekly and each T-shirt is displayed with a monitor that captures comments about that particular design, which are piped in directly from the social web. Providing in-store shoppers with the opportunity to be photographed in Threadless T-shirts promotes interactivity; these images are projected onto mannequins that are stationed in the front windows. “Spotting a Threadless tee in the wild” and submitting a photograph of the sighting earns additional Street Points, pulling the buzz of the online community into the streets and funneling it back again. The company's Threadless Everywhere Tour, which generates meet-ups at art parties and craft fairs across the country, further integrates the company's digital and physical presences while moving the fun around geographically and transforming digital connections into physical friendships. Little did Nickell and DeHart know that their off-the-cuff idea that was never designed to make a lot of money, would gross more than $30 million a year a decade later and serve as a model for would-be social enterprises.

Dell: A Presocial Company Retools

Older, “presocial media age” companies are also learning how to put their customers at the center of their businesses—function by function. “Customer connectivity and the ability to have conversations that drive our brand are the most important things,” says Erin Nelson, chief marketing officer (CMO) of Dell. “Digital and social are tools that are allowing that to happen.”1

Suggestions gathered and voted on through its branded customer community, IdeaStorm.com, have led to more than 300 new product ideas and improvements—and in record time. The ideation process is now spreading beyond Dell's own digital domains. Through Facebook Connect, Dell's customers can choose to share Dell happenings with friends via their Walls; they can also invite friends to vote on ideas and suggestions. Dell is even gathering the input of the Threadless design community for its products.

In order to better understand consumers' sources of satisfaction and frustration and to uncover sales and innovation opportunities, Dell continually mines the social web. The company has a centralized listening function that monitors more than 4,000 brand mentions daily, determines what are anomalies and what are trends, and distributes summary information to the relevant business units. David Gardner, Fast Company's expert blogger understands firsthand how skilled Dell is at this, “They seem to know within minutes of anything that I write and post on the Internet. I jokingly say it feels like I'm being stalked but the reality is they are using the Internet powerfully to help drive customers and process corrective action.”2 To further engage customers in dialog, the company is establishing an internal social media university and is currently training more than a thousand employees to be the face and voice of Dell in social environments.

Like Threadless, the company augments its digital dialog with physical experiences. Thirty of its most passionate customers were recently invited to Dell's headquarters to participate in a newly formed Customer Advisory Panel. The idea was to get inside the minds of these customers in a deeper way to better understand their thoughts, feelings, and experiences with Dell products and service. Although it sounds like a variation on the age-old focus-group theme, consider this: Many of the participants were bloggers. What's more, half of the group consisted of ardent supporters of Dell and the other half was composed of people who have had serious issues with the company, primarily because of poor post-sale technical support. Clearly, Dell knew that the conversation would be colorful and that it would not be contained behind closed doors; nevertheless, it welcomed the dialog. Its leadership understood that focusing on quantitative measures of success were not enough; to be successful in a highly competitive marketplace, they needed to truly and transparently understand the full range of customers' experiences—as expressed in their own words.

Please Try This at Home

Threadless and Dell provide a glimpse of the rewards that are awaiting companies that embark upon the social enterprise path. When social media tools are used internally to foster conversation among employees, additional gains can be had. Here's an early peak at what companies are discovering.

The award-winning internal portal, Hello.bah.com, created for the consulting firm Booz Allen Hamilton (BAH), enables the firm's staff to blog, create wikis, and communicate with others who have similar interests or assignments. BAH claims that these tools help its employees find information faster, locate mentors, collaborate with subject experts, and network with colleagues—all the while having fun. To maximize the portal's value, the company's new-hire training process includes in-depth training on the platform's features and how to use it to connect with more seasoned employees. Senior Associate Walton Smith says, “Hello.bah.com provides users with a way to contribute their ideas and thoughts to issues shaping the firm. An individual who joined Booz Allen two weeks ago now has the ability to make the same connections as someone who has been here for 25 years.”3

Further capitalizing on the potential of social media applied internally, General Electric Company (GE) recently created MarkNet, an internal social network and collaborative platform designed specifically to connect and engage the company's 5,000 marketing professionals worldwide. A part of GE's Gold Standard marketing program, which is designed to help GE employees become the best marketers around, MarkNet helps GE's marketing professionals collaborate and learn together. Through MarkNet, they are able to share best practices, brainstorm ideas, and learn new marketing skills. One GE division, for example, recently saved itself a lot of time and money in consulting fees by working with another division to solve its marketing segmentation challenge. Although they operate in completely different industries, the marketing segmentation challenges that these different divisions face are quite similar. Use of MarkNet kept them from having to reinvent that marketing wheel.

MarkNet is organized into online communities, or hubs, which are segmented according to the eight skill sets championed by the Gold Standard program. GE marketers create personal profiles on MarkNet in which they indicate their preferred hubs of marketing interest and expertise. These areas of interest and expertise cut across business units and industries so that marketers of aircraft engines can readily approach and learn from marketers of health care devices and vice versa. This exchange “smartens” GE's entire marketing function, providing each and every marketer in the company with a sense of what knowledge is contained within the company and how they can best connect with and make use of the company's global expertise. “Any marketer, in any division, at any level, and in any geography can find someone who's got the expertise to solve a problem,” explains Anubhav Ranjan, Director, Strategic Marketing, at GE.

A senior marketing executive from one of GE's varied business units sponsors each of MarkNet's discussion hubs, facilitating direct engagement with senior leadership for marketers disbursed across the globe. Beth Comstock, GE's CMO, shares her ideas and observations with GE's entire marketing staff regularly through the social platform. “These ongoing updates keep the organization growing by continually refreshing its thinking,” explains Ranjan. “The ensuing dialog further develops these ideas and often translates into action.” MarkNet has been so well received that human resources and other functions across GE's businesses are exploring instituting their own. That's what can happen when organizations use social media to tap the wisdom and expertise of their internal communities.

It Doesn't Have to Be Made Here

Increasingly, in addition to looking to their customers and employees for insight and innovation, social enterprises are partnering with external organizations to better achieve goals, such as expanding the scope of their product offerings, monetizing underutilized intellectual property, accelerating research and discovery, developing formidable barriers to entry, and creating more agile and profitable overall business models. To do this most effectively, social enterprises are shifting work, skills, and operations around the globe, optimizing their expertise and capabilities with that of their partners.

Of course, partnering is nothing new, but because globally networked infrastructure has expanded connectivity and brought down the cost of communication, it has become much easier to integrate the knowledge and resources of people and companies disbursed across enterprises and oceans. As a result, more companies are now able to participate in a broader partnership model. Instead of having a handful of tight and exclusive relationships with business partners that are nurtured over telephone calls, dinners, and time-consuming business trips, firms today are employing social networks, video conferencing, podcasts and vcasts, blogs and other communication tools to help them build and leverage their relationships. In so doing, companies are forming broader and more fluid ecosystems that include customers, governments, research firms, universities, and even their competitors. The stand-alone company that carries on its business in isolation is being replaced with these porous ecosystems in which companies cocreate and engage regularly with a fluid set of partners.

ARM, the world's leading supplier of semiconductor intellectual property (IP), operates under a broad partnership model. Hundreds of companies, including Apple, Samsung, Qualcomm, Sony, and Microsoft, use ARM's designs to create and manufacture smart, low-energy chips that are then incorporated into digital electronic products. ARM's chips power more than 95 percent of mobile phones and a wide range of other products, including Apple's iPad, Amazon's Kindle, and Sony's TVs. The company's energy-efficient technology combined with its extensive network of partners, position ARM well for a future that will see countless new smart products in the marketplace.

Companies partner with ARM because it allows them to forgo the time and expense associated with the development of semiconductor IP, which ARM estimates would cost every semiconductor company between $50 and $150 million annually.4 Its low-energy chips, which provide ample power for consumer products offer a substantial cost savings over Intel's more powerful version. ARM's partners also benefit from the flexibility of being able to design and build chips that meet their individual needs rather than using completed products created under Intel's closed proprietary system.

What's in it for ARM? Instead of incurring the costs of manufacturing chips, ARM licenses its technology to companies in exchange for an upfront fee. Over time this fee recovers ARM's research and development costs. In addition, ARM receives a royalty, typically based on a percentage of the chip price, for every chip sold by its partners that contains ARM's technology.

Both ARM and its partners benefit from ARM's Connected Community, an online and offline community of more than 700 third-party technology providers and designers. This community provides networking opportunities for member companies, which helps ARM create better designs and shortens the time-to-market for ARM-powered products. The community also serves as a barrier to entry for ARM competitors.

ARM and its partners will be the first to tell you: don't get caught in thinking that it all has to be made in your own shop. As chief executive officer (CEO) Warren East said, “The unique thing about ARM is the combination of business model and technology. We have the lowest-power microprocessors there are, and, rather than trying to be Intel and rule the world, we share our revenue. We believe it is better to have a small slice of a big pie.”5

Mapping for Partnering Success

Recognizing the power of leveraging diverse external networks, GE has developed a formal mapping process to ensure that it is partnering with the most relevant players for its businesses. Here's a snapshot of how it works. To identify the key players around a business opportunity, project teams brainstorm about the relevant customers and channel members, competitors and complementers, influencers and changers, emerging technology players, suppliers, and other communities of interest that may potentially be involved. From there the company begins to further investigate the potential role of each player and create an action plan for leveraging the emerging network.

This process helps the company to discover blind spots and opportunities. A recent network mapping exercise surrounding GE's coal gasification business revealed that although the company was deeply engaged with partners on the electricity side of the business, they were not involved with several key coal producers. As a result of this mapping process, GE has developed collaborative relationships with several major coal producers, which is enhancing both GE's and the coal companies' business opportunities.

“The learning and skills that come out of these discussions prove to be very valuable,” explains Victor Welch, Marketing and Customer Insight Manager, GE Research. “It's very clear that we often do not all have a common understanding of what the world looks like. By thrashing it out together, we come close to articulating a common perspective that allows us to move forward.”

Although this process is powerful on the level of the individual initiative, consider the effect of this process and the resulting networks it builds when they are aggregated enterprise-wide.

From Twitter to Competitive Advantage

The real-time insights, networks, and market influence being harnessed from the far-reaching ecosystems surrounding social enterprises are setting these highly networked companies apart from their less-connected peers. Indeed, research conducted by marketing author David Meerman Scott, in which he examined the financial performance of the top 100 companies on the Fortune 500 list, found that the stock price of companies that engaged in real-time communications with their customers was up 67 percent during the period from December 31, 2009, through September 3, 2010, while the stock price of companies that were not engaged was up only 42 percent.6

The Wetpaint/Altimer Group's Engagement db study of the leading 100 global brands confirms this finding and documents a significant correlation between those companies that are deeply engaged in social media and those that outperform their peers on financial metrics.7 Similarly, 69 percent of executives from around the world in a recent McKinsey & Company Global Survey report that their companies have already reaped measurable business benefits from social web involvement.8 In fact, the greater the use of social technologies, the greater the benefits that have been realized.

What is it that the market recognizes in these companies? It is recognizing and affirming social enterprises' ability to develop competitive advantage. The foundation of this competitive advantage includes being more in sync with the marketplace; developing new sources of market influence; improving organizational efficiencies and cost structures; and being able to effectively recruit and retain employees—especially younger employees or digital natives—in an extremely competitive operating environment.

In Sync with the Marketplace

One of the most profound sources of competitive advantage for social enterprises is the ability to develop real-time, customer-infused strategy. Active cultivation of multiple networks allows companies like Threadless, Dell, Booz Allen, and GE to regularly tap into the insights and experience of people who are actively engaged with their companies, their products and services, their industries, and the forces that are shaping them. The collective intelligence contained within these social communities reduces the risk of uncertainty for companies by providing them with early indications of trends and issues and with new product and service ideas and improvements. Furthermore, the immediacy of feedback afforded by the social web facilitates socially enabled organizations' quick readjustment of their strategy, tactics, and practices, allowing them to take advantage of emerging windows of opportunity as well as to reduce the costs of mistakes made. Companies that dedicate themselves to monitoring and engaging with the communities in which these conversations are taking place are garnering a wealth of knowledge that is helping them to constantly improve themselves, their strategies, and their value propositions to their customers.

The clothing company, Marc Jacobs, for example, is embarking upon a new business line as a result of conversations with customers on Twitter. After listening to feedback about its fashion line from customers, Robert Duffy, the company's chief executive officer (CEO), recently decided that the company needed to begin offering plus sizes. “We gotta do larger sizes,” Duffy tweeted to the company's Twitter followers. “I'm with you. As soon as I get back to New York I am on it.”9 While building an expanded product line will surely take Marc Jacobs time and effort, this real-time feedback is allowing the company to get on with it, right away.

In another instance, in response to a “passionate outpouring from customers” across various online channels, within four days of rolling out an updated version of their corporate logo, the Gap decided to return to its traditional logo. As Marka Hansen, president of Gap Brand North America, explained in a blog post that she wrote for the Huffington Post:

We chose this design as it's more contemporary and current. It honors our heritage through the blue box while still taking it forward.

Now, given the passionate outpouring from customers that followed, we've decided to engage in the dialogue, take their feedback on board and work together as we move ahead and evolve to the next phase of Gap.10

Of course, companies still have to be able to separate the wheat from the chaff. Not all ideas that are derived from customers should be acted upon immediately—if ever. Companies still have to rigorously examine ideas with strategy implications, making sure that they are, indeed, up to par and on target. “Because our customers asked for it” is not enough of an endorsement, even in a customer-centric organization. For example, social enterprises still have responsibilities to their shareholders for profitability; they can't give everything away for free, even if their customers think it is a wonderful idea. An exaggerated example, I know, but hopefully it makes the point.

But when insights have been weighed and deemed to be on target, that's where competitive advantage is born. Rita Heise, chief information officer (CIO) of Cargill, which produces and markets food, agricultural, financial and industrial products and services, observed:

When it comes to redefining your product to suit your customers, the biggest gain often comes from discovering your company's own distinct capabilities. Often a company possesses special value-creating capabilities that it is not fully utilizing . . . . Frequently, it is when a company looks more closely at its customer's needs, that it will discover what it can do that its competitors cannot.11

Focus on the Future

In addition to informing companies' short-term strategy, these ongoing conversations with stakeholder communities are also helping companies to better integrate their strategies over time. Fueled by immediate feedback that has been tested and validated, companies can rebalance their strategy efforts to focus on what will fuel their growth over the longer term. It's not that they can forget about the short term, but information that used to take companies a year to gather can now be sourced via social media and fed into strategy almost instantaneously.

As a result, organizations are able to rebalance their efforts from spending, say, 90 percent of their time focusing on short-term, 9 percent on medium-term, and less than 1 percent of their time on the long-term strategy, to 60 percent, 30 percent, and 10 percent, respectively. That is 10 times as much effort going into considering the long-term future of companies than has been previously committed. That can be the difference between getting strategy right and missing the boat completely.

Improving Strategy Execution

In addition to formulating better strategy, and more quickly, social media is helping companies more effectively execute strategy. Mark Fuller, chairman of the strategy-consulting firm Monitor, tells me that, in his experience, 80 percent of the failures in strategy execution are a result of the friction along the boundaries among individuals, functions, business units, and even the C-suite and the rest of the company. Broad participation in social tools internally goes a long way toward reducing this friction by helping create environments in which silo thinkers can be transformed into bridge thinkers. That's a tall order, but here's a glimpse as to how social media is making it possible.

Aggregated conversational data derived from customer communities provides identical information sets to multiple organizational functions, reducing distortion, and helping to better align their often competing agendas. What's more, these ongoing customer conversations provide companies with the opportunity to answer any outstanding questions in real-time, so that they can move forward quickly. This upfront concurrence can help make comprehensive strategy design and execution that much easier.

But that's not all. As we saw in the case of Booz Allen and GE, when applied internally, social media can “smarten” companies by providing employees at all levels with access to knowledge already contained within the company. They do so by expanding employees' networks of contacts, helping them determine where expertise is located, and facilitating timely access to these resources. This makes it easier than it ever has been for colleagues to work collaboratively and in real time. By providing a broader range of employees with the information they need to make more effective decisions, social tools can flatten organizations, helping to thaw the “frozen middle” of companies, and more effectively harness their collective intelligence. It's hard to argue with that proposition.

Staying Ahead of the Commoditization Cycle

If companies are not changing and innovating, then they are becoming irrelevant. If businesses are going to stay ahead of the commoditization cycle, then they have to be relentless about innovating. The social web makes it possible for organizations to expand their innovation capability, tapping the most knowledgeable sources available.

We have seen how Threadless, Dell, and Marc Jacobs connect directly with their customer communities to keep their innovation pipelines robust and how GE and Booz Allen keep their thinking fresh via internal cross-fertilization. In addition, several new open innovation models are emerging that make it possible for companies to readily tap into the insight of outside experts such as business partners, universities, and average citizens who have insight to share. This access furthers companies' ability to roll out relevant and meaningful products and services faster and more consistently.

In an article for Wired magazine, contributing editor Jeff Howe, described how Colgate-Palmolive used the social web to solve a technical challenge that had stumped its in-house researchers. The consumer products company was looking for a way to “inject fluoride powder into a toothpaste tube without disbursing it into the surrounding air.”12 The company posted its challenge on InnoCentive's web site, an innovation broker that links organizations' research and development (R&D) issues with a network of scientists from a variety of specialties via the social web. The solution came from Ed Melcarek of Barre, Ontario, who tackles InnoCentive's issues on weekends from his “weekend crash pad,” which Howe described as “a one-bedroom apartment littered with amplifiers, a guitar, electrical transducers, two desktop computers, a trumpet, half of a pontoon boat, and enough electric gizmos to stock a Radio Shack.”

“It was really a very simple solution,” says Melcarek who had happened upon the solution by the time he finished reading the challenge, earning himself a quick $25,000. If it was so simple, why had it stumped Colgate-Palmolive's R&D staff? “They're probably test tube guys without any training in physics,” offered Melcarek.

“It's all about diversity,” explains Dwayne Spradlin, president and chief executive officer (CEO) of InnoCentive.13 “It's about getting to everybody who might be able to bring an innovative idea to the table.” Spradlin notes that academics who have polled InnoCentive's problem solvers have found that typically their background is no less than six disciplines away from the subject area in which the problem emerged. “What that means is, if all the Stanford PhDs in your chemistry lab could have solved the problem, they would have solved it already.” Tapping the knowledge of the crowds may be just what your company needs.

Developing New Sources of Market Influence

Social enterprises are tapping into powerful new market influences. In addition to building resourceful partnership networks, the social web helps companies to engage and influence the all-important consumer peer network. Not long ago, customers looked to professional reviewers to rate restaurants, movies, books, and more. They looked to corporations to tell them about products. The read books by experts to assist them in reducing sibling rivalry, investing in the stock market, and reducing the risk of cardiovascular disease.

Today we live in a recommendation-based economy, where consumers can bypass these traditional resources, looking to their peers to assist them in making decisions about everything under the sun. While friends and family have the most influence—90 percent of consumers surveyed in a recent study by Nielsen noted that they trust recommendations from people they know—70 percent of consumers say that they have some degree of trust in consumer opinions posted online, even when they don't actually know the people that posted them.14

In a recommendation-based economy, consumers help to define brands. As consumers blog, write product reviews, and discuss products and experiences in social environments, consumers' voice and volume are becoming the primary means of influence for large and small purchases, investments, employment decisions, and policy recommendations. In many cases, consumers are becoming companies' primary customer acquisition tool. Internet Retailer reports that 67 percent of shoppers spend more online after receiving recommendations from their online community of friends.15 Similarly, Rubbermaid has found that when they added customer reviews to the freestanding inserts that they distribute via newspapers, conversion for their coupons increased by 10 percent.16 This represents an amazing marketing opportunity for companies that are able to harness the influence and advocacy of their customer communities.

People Really Do Care

Are people really discussing company's products and services in social environments? You bet. Here's a statistic to remember: consumers in the United States have created more than 500 billion online impressions about products and services.17 What's more, a recent study conducted by the market research firm Chadwick Martin Bailey found that 79 percent of people who follow brands on Twitter are more likely to recommend those brands, and 60 percent of Facebook fans follow the same behavior.18 Everyday people going about their daily lives really do want to talk about their product experiences with each other.

Just how widespread is the influence of social environments? Is it just a niche phenomenon? Social enterprises are engaging in social environments, not because it is the latest craze among techies and teenagers, but because it is essential to being able to connect with today's consumer. Social web use has gone mainstream—more than 80 percent of adults in the United States who use the Internet also use social media.19 The social web is becoming the primary vehicle for disseminating news, entertainment, and information about companies and their products and services. Circulation and use statistics confirm this observation. In March 2010, for example, the Huffington Post recorded 13 million unique visitors to their news blog. Compare this with the Wall Street Journal's reported circulation of 2.1 million for April of the same year. To put this in perspective, consider that in 1950, on average, every household in America bought 1.23 newspapers per day. By 2000, only 53 percent of households bought even one newspaper. Television viewership is waning as well. In contrast, YouTube averages 2 billion page views per day—nearly double the number of people who tune into the three prime time TV stations combined in the United States.20 I predict that this trend will continue and that by 2015, you'll be hard pressed to find any newspapers or nightly news on TV.

This is not just a phenomenon in the United States. Nielsen recently published statistics that show that the world now spends more than one minute out of every four and half on social networks and blog sites.21 (The average user spends 66 percent more time on these sites than they did even a year ago.) Australian Internet users average the most time on social networking sites, followed by users in the United States and Italy. Social media usage is widespread; three quarters of global consumers who go online visit social networks. Brazil heads the pack with the highest percentage of Internet users visiting a social network site (86 percent). As global connectivity expands to previously underserved areas, primarily in the form of mobile devices, these numbers will skyrocket.

As a result, the traditional way of reaching consumers—mass-marketed advertising—is becoming increasingly ineffective and an incomplete marketing strategy. Furthermore, the widespread use of TiVo and DVR technology, spam filters, and iPods are making it possible for consumers to fast-forward right through corporations' advertising or to avoid it all together. What's more, whether they be involved in business-to-business or business-to-customer sales, companies must understand how social media has changed the customer purchase journey, so that they can effectively align their marketing, sales, and customer service efforts with this new behavior.

It's Not Just Your Customers

Remember, social media doesn't just reach companies' traditionally defined customers or potential customers. It reaches their other stakeholder communities as well. Institutional investors, for example, are gathering information through social media that is impacting their investment decisions. A 2010 study conducted at the University of Michigan Ross School of Business found that smaller companies that use Twitter to distribute financial information to investors experienced a lower bid-ask spread (“the difference between the highest price a buyer is willing to pay for shares of stock and the lowest price a seller is willing to sell them”).22 It also increased the number of shares available at each price. The impact was greater for smaller companies that traditionally have lower analyst coverage. Social media is critical for investor relations of larger companies as well. The most avid readers of GE's GEReports.com, which is a cross between a blog and a news site, are investors, who comb the site for financial news.

Human resources is using social media to connect with companies' employees. Utilizing Hello.bah.com, Booz Allen hosted an iSpeak Discussion Fest to solicit staff input about how the firm can improve its employees' career experiences.23 Twenty-two pages of responses provided a road map for the firm's People Strategy, which is the foundation for its efforts to recruit and retain employees.

Through its social media site “CloroxConnects,” Clorox, the consumer products company, reaches out to its consumers, employees, and suppliers. Utilizing gaming features, the company rewards suppliers that have gained enough points from solving problems and submitting ideas and comments on their site with 30-minute conference calls with relevant Clorox insiders.24

This is only the beginning. Here's the bottom line: If organizations want to connect with their stakeholders, they have to be active in social destinations.

It Takes Two to Tango

There is a price to be paid for consumer loyalty and advocacy. Today consumers expect more from the companies with which they interact. Diane Hessan, chief executive officer (CEO) of Communispace, which builds and runs private online customer communities, observed, “Customers are screaming to be more engaged with the companies that affect their lives . . . . They want to be asked and they want to be involved.” Organizations are expected to listen, consider, and respond to their stakeholders' input in a way that wasn't even imagined 20 years ago.

Social media offers numerous venues and a communication style that allow organizations to interact with their customers and other stakeholders in this personalized way. Rather than talking at people as they have in the past, companies are learning to speak with them. Everything is fair game in these conversations: the good, the bad, and the ugly. Furthermore, rather than expecting stakeholders to come to them, organizations are learning to be where their constituencies are. As a result of this new mode of engaging, organizations are beginning to address consumers' increased expectations for responsiveness.

This is good news. When customers feel listened to and when they know that they are critical to an organization's success, it becomes almost like fashion: people wear their organizations like a favorite sweater—or T-shirt in the case of Threadless—becoming a fan of them in social destinations and advocating for them among their peers. They act as consultants about companies' products, services, and operations and help them discover unmet needs that can fuel organizations' innovation funnel for years to come.

Woe to the company that doesn't grasp this shift and tries to alter brand promises, features, or logos without the consent of their customers. Indeed, as the GAP found out with its recent logo redesign, companies today must keep their stakeholders in the loop and solicit their feedback constantly, not just after the fact. Had the GAP brought their customers into the design process, a new logo may have been developed and ultimately greeted with positive fanfare; the whole experience would have enhanced customer engagement and brand loyalty. In the absence of such collaboration, the new logo release did the opposite: it essentially said, “We are out of touch with our customers.”

Rebuilding Trust in Business

Ongoing collaboration and engagement can also build stakeholder trust in business. That's significant in what has become a widespread climate of distrust of corporations. In 2009, the annual Trust Barometer survey conducted by the public relations firm, Edelman, found that only 44 percent of consumers trust business.25 Although there is still much progress to be made on this front, the 2010 Edelman study found that the number of consumers who trust business jumped to 54 percent. This is more than a coincidence. Edelman attributes the growth to a rise in the stock market; companies communicating more honestly, openly, and regularly with their employees and other stakeholders; and businesses' involvement in addressing important societal challenges.26

Social enterprises get this. While there is not much they can do about the stock market's overall performance, they can—and are—communicating transparently and regularly with their stakeholder communities. Many are pursuing multiple bottom lines—social, environmental, and financial—recognizing that being a responsible corporate citizen and having a motivating moral purpose in addition to profitability are vital in today's business environment.

How much is stakeholder trust and loyalty worth to your business?

Improving Corporate Cost Structures

With the ability to almost instantaneously test ideas, tactics, and strategy, social enterprises are putting significant pressure on their less socially engaged competitors. The social gaming industry, which has seen enormous growth over the past two years, illustrates how companies that are developing, marketing, and/or distributing their products on the social web are able to alter their cost structures and that of their industries. Jeremy Liew, Managing Director at Lightspeed Venture Partners, shared the following analysis on paidContent.org.27

Video games take a lot of time and money to develop. In fact, the best games can take between 3 to 5 years to create and can cost between $30 million and $50 million to bring to market. Big hits make the process and expense worthwhile and keep developers and venture capitalists busy. Modern Warfare 2, for example, grossed $550 million in its first five days—that's a pretty nice return. Not every game is a hit, however, and success is not readily apparent from the get-go.

Social web-based games like FarmVille and Friends for Sale have a very different development profile. They can be launched in three to six months with development costs running in the neighborhood of hundreds of thousands of dollars. Furthermore, social games are often launched in beta. If they catch on, they receive further investment; if they don't, they are scrapped. “Because social games reduce development time by an order of magnitude and development costs by two orders of magnitude, they offer a very different risk-return profile,” Liew explained.

Distribution costs differ significantly as well. More than 75 percent of console and videogame sales are made through retail stores and the average new release costs consumers around $40 to $60 per game. Social games, on the other hand, can be played by anyone who has access to the Internet—many through Facebook— without delay and without having to part with a dime. (Companies make their money through upselling digital goods.) “That dynamic helps drive much more trial,” Liew observed, “and explains how Zynga now has more than 100 million unique visitors per month, which compares to the 8 million units sold of Modern Warfare 2, the best game launch of all time.”

Finally, the differential in the cost of marketing the two types of games is sizeable. Modern Warfare 2 had a launch budget of $200 million versus many social games whose marketing budget is close to zero—they are discovered by invitation and word of mouth. Zynga is an exception; it supports its social games with some traditional advertising. “But once again, the amount that Zynga spends to launch a social game is one to two orders of magnitude less than what Activision spent to launch Modern Warfare 2,” Liew said.