Enterprise 2.0/Social Business

(Social Business patchwork elephant - Image courtesy of Elmer and www.echidnaontheloose.com)

 



Three years ago, in Social Media Week London, we took an in depth look at the emerging Social Business world. We called it a "patchwork elephant" as it is very large, in the room, but it's hard to see the whole thing!

This year we are doing a review (see here to book) - next Friday, September 27th from 1 to 5.30 pm at the Hub, Westminster.

The main trends from our first session were organisational and cultural, not technological:

Conclusions from the first Patchwork Elephant session in 2010

- “Demand Generation” (or whatever one wants to call it) will be the early win

- We are entering "Peak Organisation" - organisations designed on 18th century principles are just not fit for purpose today

- Differences between corporate hierarchy networks and the "real" networks that make things work are laid bare

- Social network projects growing "au naturel" in an organisation are patchy and have a few massive nodes, who cause mass failure if taken out.

- Traditional hierarchies are orthogonal to social media structures – resistance may be futile, but it will be strong.

- Need to aggregate an emerging body of knowledge about what works and what doesn't, and collect case studies.

Since then there's been quite a lot of data, one of the more useful being this piece by McKinsey. A key chart is the one I've put up top, predicting which parts of a company are most likely to benefit from Social Business:

- Product Development: Main benefit is in complex engineering, where the knowledge is based on physics and matehmatics and constant - "algorithmic" work rather than "heuristic".

- Operations: Mainly in high information/knowledge handling and co-ordination areas, so services and complex manufacturing

- Sales & Marketing: Mainly in B2C areas

- Customer Service: Only in Finance, say McKinsey. We disagree wih this, we've actually worked on Customer service in other industries where it works very well

- Business Support: Mainly in service industries. I wonder about the "Social Internet of Things" there though, that will have a big impact on shop floors

Join us on Friday to look at all these areas, and more.

How Marissa Mayer found out that Yahoo work-from-home employees were slacking - Business Insider:

Like a lot of companies, Yahoo has something called a Virtual Private Network or VPN. Remote workers can use it to securely log into Yahoo's network and do work. After spending months frustrated at how empty Yahoo parking lots were, Mayer consulted Yahoo's VPN logs to see if remote employees were checking in enough. Mayer discovered they were not — and her decision was made.

Those who have been reading the various Tech News sites, Twitter et al over the last week or so will know this has caused quite a flurry, as the techno-drumbeat has pretty much boomed out the message that there will be more and more remote working, despite most of us knowing that Wikis are a PITA to manage and Skype conferences are crap compared to the real thing.

Smart Work's Janet Parkinson notes, working remotely is just a part of an overall solution, and needs to be managed within an overall smart work strategy, and if not managed can lead to a lot of peanut butter. More at issue is the possible impact on Innovation, critical for knowledge businesses. As Janet notes:

“… telecommuting unfortunately reduces innovation. And because innovation brings in much higher profits than the traditional goal of corporate efficiency, many firms are now learning the value of emphasizing innovation as a primary strategic business goal.”

He also comments how face to face interaction increases collaboration, competition and energy, and how it increases learning and helps break down functional silos.

Companies like Google and Yahoo where innovation is at the core of their business therefore need to keep employees physically together and Google have known this for a long time – they only allow employees to work from home on a case by case basis.

I suspect if you look at the leverage for quite a lot of business roles, a 10% increase in Integration, Impact and Innovation has far more effect on the bottom than a 10% reduction in desk space costs. We would predict that this marks the high point in the remote work shift for this cycle, probably until far higher bandwidth and collaboration tools become available. (It's also a size thing - its hard to goof off in small teams, much easier in huge corporates)

But in the meantime, all is not lost for all those remote workers still out there. We modestly offer you the groundbreaking Broadstuff Remote Workbot - just install our App on your PC, link it to your Corporate Intranet and your email and it will randomly access the Intranet pages and whatever passes as your corporate research resource, scan other people according to criteria you fill in, mark emails as read, and randomly select a sample to reply to each hour with suitably corporate apparatchikly replies. If you have Yammer or some other Corporate Tweeting tool, you can use the Broadstuff Social Media Climber tool (Social Business 2.0 Version) to pretend you are present online there too. If you buy the both you also get the Boss Pinger , which alerts you by SMS when a bossmail has come in so you can handle it while at the mall/beach/etc. The bundle is cheap at the price, just 5% of your annual salary will do nicely.

After all, consider the alternatives...

Went to what in my opinion became a fairly seminal event yesterday morning - the launch of the Microsoft Business Re-imagined session (Twitter link here). I think the title caught the zeitgeist square on - the issue is no longer about "what is Social Business, and what could it do" but is moving on to "How would one re-structure/transform a business to best use the techniques, and what are the threats of not doing so". Abigail Harrison has done an excellent post covering the whole event, so I won't repeat what she wrote, but here are my main observations and take-aways.

Firstly, I think Social Business is now starting the necessary transition from expectation to delivery. By that I mean:

1. For the last few years, Social Business has been "sold" on its transformative potential. Most people can see that the demonstrated power of social connectivity and by and large would agree with the potential, and history also tells us major shifts in communication drive major shifts in commercial, economic, social, physical and political structures (the related current creative destruction of the retail High Street is no accident).

2. All new movements have a conceptual stage, and many dreams are typically heaped onto the movement at this stage, not all of which can be fulfilled - the "Peak of unrealistic expectations" as Gartner's hype curve has it (and far be it for me to suggest these dreams are encouraged as part of the general hype bubble inflation )

3. But there comes a time, nicely prompted here by the title of "Re-Imagining" business, where to be credible ongoing, the rubber and the road must meet, the beef must be put in the sandwich, etc etc - i.e what is actually possible, now, becomes clear. This "art of the possible" is initially built up by pilots and case studies, then a set of general design principles emerges

4. This is necessary because, ultimately, businesses will change if - and only if - there is a "new model" that allows them to calculate, predictably, how to re-imagine themselves in the new mode, and why they will do better than they are doing now. The Gartner Hype model is essentially built around this dynamic of a "plateau of unrealistic expectation" followed by a collapse into a "slough of depond" if the new idea can't transition into real business benefits.

Secondly, typical of this "phase change" time, pointers to the Social Business future is around us - but unevenly distributed:

1. An event I went to on Thursday (see here), plus our own work over the last 2 years especially*, shows us that the hard data analysis is happening already, and in spades. Also, talking to some of the participants at yesterday's session made it clear that huge strides are being made in re-structuring operations to use Social Business, in many companies, but its piecemeal, consisting of pilots and small scale test operations in larger businesses.

2. There has been a lot of thinking over the last decade or so, nearing maturity now, on how "smart work" methods can take advantage of these techniologies.

3. There are pilots and case studies showing impact, but as yet its not clear exactly what works, so there will be massive experimentation for a while yet (as is always teh case with new innovations) until the dominant models emerge. Predictably, most innovation is still by smaller companies who have more to gain and less to lose, the difficulties of this path is the wheels may fall off when things need to scale

In my view, the buzz at yesterday's event was palpable, with so many people looking at this still emergent field from so many different angles, I haven't seen a room like that for some years - I think the timing of the session has hit the turning point, but Kudos to the organisers, panel and participants for creating the vibe, and I think there is a huge potential for this to really become something groundbreaking.

But, after all the excitement, may I now be boring and point out that when a business re-imagines itself and then prepares for transformation, and starts to look at the actual "why" and "how" of restructuring, when push comes to shove it always has to answer a very simple set of questions (usually in the form of a business model and case), about how this new thing will improve one or more of these basic business drivers:

Increase Revenue
- Sales volume
- Value per sale

Reduce Operating Cost
- Operating cost per customer
- Customer retention

Reduce Capital Expenditure
- Increase life of existing Capital equipment
- Reduce future Capital expenditure

And at this point, belief and good will just don't cut it.

So what is required now is for many of the fascinating new concepts that have emerged, like Return on Engagement and Interaction, the Intention and Connectivity economies, Collaborative co-working, deep customer connection, etc etc - to resolve themselves into what actually will work, and what won't. This means predictable methods, metrics and procedures that demonstrably impact those above 3 axes for companies to actually make more money than otherwise. Now to be sure, many Social Business techniques are more about second order impacts - raising barriers to competition, undercutting the capability of incumbents, increasing the net long term value of the customer, better product development, but the links to basic value creation have to be understood.

This now - in my opinion - is the emerging challenge to re-imagine business going forward. But if the first session was anything to go by, this could be a very interesting journey....

(*Details available on request )

Forbes has found that in company after company, when they ask the "Top Talent" about how retained they are, they get the following results:

More than 30% believe they’ll be working someplace else inside of 12 months.
More than 40% don’t respect the person they report to.
More than 50% say they have different values than their employer.
More than 60% don’t feel their career goals are aligned with the plans their employers have for them.
More than 70% don’t feel appreciated or valued by their employer.

But according to Forbes, all you need to do to retain top talent is to perform perfectly on 10 factors:

1. Unleash Their Passions: Smart companies align employee passions with corporate pursuits. Human nature makes it very difficult to walk away from areas of passion. Fail to understand this and you’ll unknowingly be encouraging employees to seek their passions elsewhere.

2. Challenge Their Intellect: Smart people don’t like to live in a dimly lit world of boredom. If you don’t challenge people’s minds, they’ll leave you for someone/someplace that will.

3. Engage Their Creativity: Great talent is wired to improve, enhance, and add value. They are built to change and innovate. They NEED to contribute by putting their fingerprints on design. Smart leaders don’t place people in boxes – they free them from boxes. What’s the use in having a racehorse if you don’t let them run?

4. Develop Their Skills: Leadership isn’t a destination – it’s a continuum. No matter how smart or talented a person is, there’s always room for growth, development, and continued maturation. If you place restrictions on a person’s ability to grow, they’ll leave you for someone who won’t.

5. Give Them A Voice: Talented people have good thoughts, ideas, insights, and observations. If you don’t listen to them, I can guarantee you someone else will.

6. Care: Sure, people come to work for a paycheck, but that’s not the only reason. In fact, many studies show it’s not even the most important reason. If you fail to care about people at a human level, at an emotional level, they’ll eventually leave you regardless of how much you pay them.

7. Lead: Businesses don’t fail, products don’t fail, projects don’t fail, and teams don’t fail – leaders fail. The best testament to the value of leadership is what happens in its absence – very little. If you fail to lead, your talent will seek leadership elsewhere.

8. Recognize Their Contributions: The best leaders don’t take credit – they give it. Failing to recognize the contributions of others is not only arrogant and disingenuous, but it’s as also just as good as asking them to leave.

9. Increase Their Responsibility: You cannot confine talent – try to do so and you’ll either devolve into mediocrity, or force your talent seek more fertile ground. People will gladly accept a huge workload as long as an increase in responsibility comes along with the performance and execution of said workload.

10. Keep Your Commitments: Promises made are worthless, but promises kept are invaluable. If you break trust with those you lead you will pay a very steep price.

Maybe - but according to my experience, its impossible to do all that with more than a very small number of people in a very large organisation, or for very long. Sooner or later you "increasing the responsibility" of Star Bod A conflicts with your plan for Star Bod B, and you can't "challenge their intellect and passion" when they all want to do the same high visibility, high status key tasks. Someone has to lose out eventually. Which is why you will always get the issue that 30% dont think they will be there in 12 months, and why any attempt to try and retain all the top talent, all the time is going to be fruitless.

Or as Pyrrhus (a far smarter man than he is usually given credit for) may have put it, "one more victory like this will break me".

But it won't stop the flood of learned articles telling businesses how they can all retain all their Top Talent - though you would have thought that if it was possible, everyone would (by now) know how and get on and be doing it, surely There is an entire industry of top talent retention gurus, strongly invested in top talent retention. What is far less convincingly tested is (i) the evidence that the Return on Investment is always so great (see banks, crashing of...) and (ii) that retention is even possible for many people over any reasonable time period.

Far more sensible to assume that you can't please everyone, all the time, assume that there will be attrition, and understand the cost/benefit of the productivity improvements top talent makes vs the costs of retention.

I saw this advertised today on the Twitter, and went along to the page linked (here), abuzz with hope - so what did I learn?

In Summary:

1. Don't compete with Amazon.
2. Don't sell stuff Amazon sells
3. Don't sell stuff Amazon resellers sell
4. Don't sell stuff in countries where Amazon sells it
5. Don't sell stuff where people know that they want already, because they go to Amazon first
6. Sell branded stuff, but only that Amazon doesn't sell
7. Sell to iPad owners because they are richer....
8. .....and Amazon is too busy pumping Kindle
9. Sell stuff with high margins (and low delivery costs)
10. Mobile is The Future (unitil Amazon does it, of course....)

Tongue in cheek I know, and to be fair, there are some snippets of useful stuff there - but I don't think the above summary is far wide of the mark!

McKinsey Quarterly article on Crowdsourcing strategy, quoting a few case studies:

One example was HCL, who opened up the Business Planning cycle from a 300 managers to about 8000 employees - results were:

One HCL executive we spoke with credited the new process with a fivefold increase in sales to an important client over two years. The key, the executive explained, was the detailed comments—from more than 25 colleagues, ranging from junior finance professionals to software engineers— that together highlighted the need to reframe the business plan away from an emphasis on commoditized application support and toward a handful of new services where HCL had the edge over larger competitors. The employees provided more than good ideas: several even helped assemble the materials the executive needed to deliver the successful proposal.

The high degree of transparency increased the quality of insights, not just their volume. As Nayar notes, “Because the managers knew that the plans would be reviewed by a large number of people, including their own teams, the depth of their business analysis and the quality of their planned strategy improved. They were more honest in their assessment of current challenges and opportunities. They talked less about what they hoped to accomplish and more about the actions they intended to take to achieve specific results.”

The detailed comments point is interesting, as it suggests the process means the "voice of the customer" or at least the front line - was not moderated by the "In the Shit - to - All is Rosy" command chain

Red Hat similarly opened up the process to more employees, and apperntly:

This effort has reshaped the way Red Hat conducts strategic planning. Instead of refreshing strategy yearly on a fixed calendar, the company now updates and evaluates strategy on an ongoing basis. Initiative leaders use customized mailing lists and other tools to receive input continuously from employees and communicate back to them via town hall–style meetings, Internet chat sessions, and frequent blog posts. The company maintains its annual budget process, which is informed by the evolving funding needs of the initiatives.

The fresh perspectives generated by the new planning process have been instrumental in spurring value-creating shifts in the company’s direction. For example, a respected Red Hat engineer used the new process to make the case for a significant change in the way the company offers virtualization services for enterprise data centers and desktop computer applications. The changes led to the acquisition of an external technology provider—a move that would have been unlikely in the days when the company used its old, less inclusive planning process.

Red Hat’s vice president of strategy and corporate marketing, Jackie Yeaney, cites three key benefits of the company’s new approach:
- First, the process generated “more creativity, accountability, and commitment.”
- Second, “By not bubbling every decision up to the senior-executive level, we avoided the typical 50,000-foot oversimplification” of issues.
- Third, “We improved the flexibility and adaptability of the strategy.”

See point 2 - that "Voice Of The Customer" thing again

McKinsey's analysis is that:

"we’ve found that the actions companies can take that are most helpful in aligning individuals with the organization’s direction are moves like “making the vision meaningful to employees at a personal level” and “soliciting employee involvement in setting the company’s direction.” If that’s right, it suggests that making more employees part of the strategy process should be a powerful means of aligning them more closely with the company’s overall direction."

I think this is misreading the lesson a bit - what is happening in the Case Studies is that the organisation is re-aligning its overall direction to what the employees are telling them about the customer base reality. I'd bet that meant some Uncomfortable Truths had to be faced in the thick carpet suite. As they note, this has big implications on who is in charge, and what Senior management looks like:

Taking these principles to their logical conclusion suggests a shift in the strategic-leadership role of the CEO and other members of the C-suite: from “all-knowing decision makers,” who are expected to know everything and tell others what to do, to “social architects,” who spend a lot of time thinking about how to create the processes and incentives that unearth the best thinking and unleash the full potential of all who work at a company.

And of course, there is always Not Listening:

Another important element of social-strategy leadership is honestly assessing the readiness of the organization to open up and, in light of that, determining the best way to stimulate engagement. This sounds simple, but overlooking it can be costly. As part of a new strategy dialogue, the leaders of one mutual insurance company enthusiastically called upon its workforce to share reflections on an innovative, soon-to-be-launched life insurance product. Despite the leaders’ expectation that the open call would generate a torrent of endorsements, it was met with a deafening silence. Closer inspection revealed that people were acutely aware of the strategic importance that senior management attached to this innovation. And nobody wanted to wreck the party by openly sharing the prevailing doubts, which were widespread. The doubts proved well founded: within a few months of being launched, the new product was declared a failure and shelved.

The Sounds of Silence.....

Article in Techcrunch arguing ERP needs to go all cloud:

SAP and Oracle should be pushing innovative cloud solutions that cannibalize their bases. Instead, they’re attempting to acquire themselves into innovation. That’s not a strategy. That’s a shift into survival mode.

Well, having worked with ERP systems and hosting and the Net for 20 years or so, we'd argue this is like saying all companies should buy electricity from the grid all the time. It is true for some companies all of the time, but for some companies it isn't. And information, despite what CloudCos like to argue, is still far from being a fungible commodity.

The argument though, is that by refusing to go cloud at the droplet of a hat, these companies are not innovative:

In each case, an industry leader first denies the relevance of a technology, then frets over losing marketshare to it, then finally spends big money to acquire it under the pretense that it’s the key to “expanding innovation”. Overnight, that technology is now worth far more in the eyes of customers and investors. But more importantly, the acquisition strategy failed in each case. Instead of leading the way, the deal makers never committed to the technology, and their actions usually helped open the door to a whole new class of companies to take over.

But this is basically saying "ignore your huge installed base to grab this small cool new thing over here". It's like telling Telcos in the 1990s to drop their huge PSTN revenues to embrace the Internet. Any smart company is going to manage the decline of it's bread and butter revenue while slowly moving up its ability in the new. These large businesses do not move when the new new thing is 1% of revenue, they acquire solutions that have come out of the primordial startup soup and jumped the chasm - ie proven themselves - at 5 to 10% of revenues. So to say:

The bottom line is this: A series of cloud acquisitions won’t help lumbering old ERP one bit. Acquiring cloud companies doesn’t make you a cloud company any more than buying a Giants jersey makes you Eli Manning. It’s not a strategy for an on-premise solutions company. It’s an attempt to distract customers and hope they will forget about the ERP boat anchor they’re stuck with.

...sort of misses the point. Yes you are right. And so? Can you buy a massive ERP from a CloudCo? No. Can you run a massive corporate on SOP, some Ajax and a Social Business network that a CloudCo sells? No. So rather than arguing that:

The big ERP players had their day, but now it’s coming to an end. This is the classic Innovator’s Dilemma. For too long SAP and Oracle have watched the enterprise market innovate around them, stuck to their knitting and failed to adapt. The cloud technology wave has passed them by, and now it’s too late.

...it is probably more interesting to ask the following question: Is it easier to stick your current Oracle system on some tins in the cloud, or easier to pull it pull it out and start afresh with a new ERP system?

The answer to that tells you the evolution of the game - which is why we still have Telcos. It's more useful to look at where earlier new point entrants came in. Where did PCs take hold? Where did the 'Net first take hold in corporates? Why hasn't Salesforce.com morphed into ERP.com yet?

Update - in other words, as Vruz points out, the real opportunity for CloudCos is the Medium sized business market (and point functions in corporate divisions)

Scanning the London Social Media week programme I see that we seem to have traded in "Enterpise 2.0" for "Social Business" in about the last 2 years or so (Well, it was Enterprise 2.0 2 years ago in Social Media week ). I naturally got curious about whether it was a new bottle for old wine, or if there is genuinely something new going on. (Ironically, I can't attend as I am far away designing an Enterprise IT strategy, and it encompasses Enterprises 0, 1, 2 and elements of Social media - see further below)

Enterprise 2.0

Wikipedia defines it as:

Enterprise 2.0 is the use of "Web 2.0" technologies within an organization to enable or streamline business processes while enhancing collaboration - connecting people through the use of social-media tools. Enterprise 2.0 aims to help employees, customers and suppliers collaborate, share, and organize information. Andrew McAfee describes Enterprise 2.0 as "the use of emergent social software platforms within companies, or between companies and their partners or customers".

Social Business

This once meant (says Wikipedia):

"Social business, as the term is commonly used, was first defined by Nobel Peace Prize laureate Prof. Muhammad Yunus and is described in his books Creating a world without poverty—Social Business and the future of capitalism and Building Social Business—The new kind of capitalism that serves humanity's most pressing needs.

And I once understood Social Enterprises, which back in the day were:

"A social enterprise is an organization that applies business strategies to achieving philanthropic goals. Social enterprises can be structured as a for-profit or non-profit."

In essence, Social Busines has shifted its meaning to encompass for-profit enterprises, and the aim is to increase profits and reputation. As Wikipedia delicately puts it:

Many commercial enterprises would consider themselves to have social objectives, but commitment to these objectives is fundamentally motivated by the perception that such commitment will ultimately make the enterprise more financially valuable.

So has anything actually changed apart from For-Profits trying to put on prevously Not For Profit clothes? Whereas I think we have seen a semantic shift in the use of the term Social Enterprise/Business recently, no doubt partly motivated by the above, after reading Adam Tinworth's liveblogging, it did seem to me that Social Business is now also absorbing parts of what were once "Enterprise 2.0". I think this was clarified by some of the talks Adam covered, from people I have had a lot of time for, for a long time. JP Rangaswami talked quite a bit about the Cluetrain Manifesto, which was of course a cornerstone of Enterprise 2.0 as well, noting that:

Cluetrain suggested that there were two sets of conversations: one inside the firm, and one outside. And they’re different. If you live in a broadcast and hierarchical world, you have a measure of control – and safety.

Joanne Jacobs also made points that I recall were also fundamentals of Enterprise 2.0 - Cluetrain customer treatment, and crowdsourcing rare expertise

People flock together, but not just for safety, bit for an opportunity to work collectively towards goals, but individually their opinions count. They are a collective of individual opinions. The word “customers” belittles communities to buyers. Of course, we need to make money as businesses. We understand that. If you think of them as buyers, then you are not allowing them to contribute to your business except as buyers.

You’re missing the opportunity to involve your community in product development – and that’s what most business find most challenging. You have to consider you audience as possible experts in what you do – possibly more of an expert than you are.

But if you look very closely at what they were saying, there are some important differences - Euan Semple noted that Social Media is now "in the knitting":

We’re turning social media into a “thing” – it’s the thingification of social media. It becomes sellable, marketable, something people have to do. But what I see is the web becoming part people’s lives, and encroaching into their workplaces. And this is why IT gets jumpy – they have this ordered, structured thing they call the workplace.

JP I think really addressed the main change we have seen, i.e. it has increased the customer voice:

Customer interactions are always referred to in the past tense, because they’re only accessed after they happen. “Transaction processing” – it was once called, and it was expensive. Now, the pervasive presence of technology – and especially mobile – we can produce constant activity stream of what we’re doing. And it’s easy enough to do it in expectation of figuring out how it will be useful later on.

And customers have moved from being able to say nothing, to having a genuine voice. Social businesses are those where people are connected inside and outside of the firm. Customers and staff can interact together in real time. Social can look like social work, or social media, or social science. No-one has a right to define social.

And Joanne warned potential Snake Oil chuggers that it's not a surface fix anymore, another major trend we have found in the last 2 years or so:

Any marketer or PR person in the room who thinks it’s about controlling the message? You’re going to fail. Start thinking organically. Marketing warfare is dead. Get over it. If you think you can manipulate people’s opinions, you will create a muppet community.

Well, in our view what has really changed underneath all this is the sheer number of people using the online ecosystem - social and otherwise - far more heavily to research, to buy, and to get service. Thus there is a reason the "buzzword" has moved on from Enterprise 2.0, but in my opinion there is now a risk the "Social" bit is being seen as the The New Big Thing, rather than a component of what is still an end to end infrastructure, i.e it is stilll just a part of an end to end value delivery chain, and it is only as good as the weakest link. I therefore propose the term "Social Enterprise 2.0" to remind us that it is just a component, and that it won't work properly unless it is looked at systemically.

Now, as you may know, we do a lot of the back end systems work (infrastructure layer, not presentation layer, if you like) and put in our first Social Network based system in 2007. We have been doing a lot of work in this emerging "Social Infrastructure" space over the last 2 years, and here is my take of what "Social Enterprise 2.0" is really all about. As a first point, bear in mind that there are only 2 ways a "For Profit" makes a profit:

(i) Increase Sales - to more people, or charge more for what you sell
(ii) Reduce Costs - labour, material, and (in consumer and network businesses especially) churn

(There is a 3rd option - tax avoidance - but you have to be a very big company with Friends In Power to pull that off it seems).

Anyway, taking these in turn we have found the following:

Increasing Sales

Social Media has two well known impacts here - everyone knows it can recruit more potential customers via word of mouth, viral marketing, friends recommendations etc. But this is pretty well known from Enterprise 2.0 days, and an entire Social Marketing/PR industry has emerged in the last 2 years or so to do all this. I think fewer people know that it can be a useful tool for cross selling, but this is more subtle and requires the company to set up trusted communities, as the ideal is customer A and B telling customer C that they should try Product Y as well as X. Many have tried....

However, our work has also found two other rather more subtle factors:

(i) One of the impacts of Social Media is that the customer service reputation is now a major part of the buying process. c 90% of all buyers go online before buying now, and a bad service reputation is quite a big part of the buying decision (We have researched this for clients - its is a major purchase driver, especially for higher cost/longer duration deals)

(ii) It is fairly well known that if there is a disconnect between the Company Spiel and reality, it is found out much faster, goes farther with social media, and is harder to manipulate. It is also now possible, by tracking the datastream, to understand which disconnects matter most, and understand it early. So far so good - now here is the kicker. More and more customers know this, and are becoming familiar with it, so they expect far more rapid action - and many more of your customers work in customer service in some form or another, or know someone who does, so are becoming far more savvy. And they are getting more clued up about privacy issues too.

In other words, as Joanne pointed out, it is going to get harder and harder to gloss over operational errors with glossy marketing and PR, and datascraping, so the pressure on getting the operations - and infrastructure - right is going to become more critical. Sockpuppeting the comment streams is not good enough anymore....

Reducing Costs

We have seen quiet a lot of trends here, not as visible as in the "presentation layer" but for the reason given above, probably more critical.

Firstly, As Euan and JP allude, it is to enable work methods outside of the traditional enterprise. As Ronald Coase pointed out in the 1930's, the size and shape of any Firm is defined by the transaction costs. The 'Net madks these lower, so it is easier to outsource more and more, and for all functions not to be located in the same geographical area. Or even to be done by humans. Social media has made them lower still, and - to my mind - has lowered the cost of establishing trust (and raised the cost of regaining it, by the way). We believe there will be a major shift in the way enterprises are structured coming, many have predicted it but in our view it has only just begun.

Secondly, as customers increase their familiarity with the online world, their demand for good service is rising - and that means the attention to this area will only increase (and cost more to provide, unless you are a monopoly supplier). In other words, this will be an area of cost increase, that will need to be offset against churn and new prospect recruitment. The precise economics of these correlations are not well understood yet, so lots of trials and errors will follow,.

There is an inreasing amount of data collectible to mine and process, and the necessity - and costs - of doing this will only increase in order to stay competitive. The risk is the temptation to play loose and fast on data privacy and security, but beware - if it gets out that you are a customer privacy risk, the business could crash very fast in a fast-feedback loop world.

And then there is the Great Spoiler, which we have found to be absolutely true in 5 years of this work - your top layer "Social Business" will only as good as the supporting Enterprise 0, 1 and 2 layers around it- ie:

Enterprise 0 - the non IT stuff - the processes, skills and culture of a company - the bedrock layer - will scupper any attempt to add higher layers if it isn't a strong enough foundation. In all our work we have g=found you have to strip back to the processes and skills as a minimum.

Enterprise 1 - the ERP, CRM, EDI, SOP and all the other TLAs that manipulate, manufacture and move base information around the enterprise. If the underlying data is crap, and the ability to see it correctly is non existent, then the Social Business layer will fail.

Enterprise 2 - as in the supporting Web 2.0 systems that support the Social Media modules - crap webpages, poor real time performance, inflexible CMS - these are only as good as the systems they sit on top of.

In other words, there is something new in "Social Business", but there is less to the eye than one may think if one drinks all the Snake Oil (or at least one should note the old bottles it may come from) and a lot of back end work to ensure you do get what you see.

One of the things we write about every so often on here (and were therefore sufficienly motivated to co-write the Big Potatoes Innovation Manifesto) is that Innovation has been morphed in the current corporate climate to mean "continuous improvement" at best, and "don't-rock-the-boatism" all too often (see Innovation - What innovation for starters). Now, some research from Cornell (The Bias Against Creativity: Why People Desire But Reject Creative Ideas) shows that as a species we may be culturally adapted against Innovation and creativity it seems.

The next time your great idea at work elicits silence or eye rolls, you might just pity those co-workers. Fresh research indicates they don't even know what a creative idea looks like and that creativity, hailed as a positive change agent, actually makes people squirm.

"How is it that people say they want creativity but in reality often reject it?" said Jack Goncalo, ILR School assistant professor of organizational behavior and co-author of research to be published in an upcoming issue of the journal Psychological Science. The paper reports on two 2010 experiments at the University of Pennsylvania involving more than 200 people.

The studies' findings include:

- Creative ideas are by definition novel, and novelty can trigger feelings of uncertainty that make most people uncomfortable.
- People dismiss creative ideas in favor of ideas that are purely practical -- tried and true.
- Objective evidence shoring up the validity of a creative proposal does not motivate people to accept it.
- Anti-creativity bias is so subtle that people are unaware of it, which can interfere with their ability to recognize a creative idea.

For example, subjects had a negative reaction to a running shoe equipped with nanotechnology that adjusted fabric thickness to cool the foot and reduce blisters.

To uncover bias against creativity, the researchers used a subtle technique to measure unconscious bias -- the kind to which people may not want to admit, such as racism. Results revealed that while people explicitly claimed to desire creative ideas, they actually associated creative ideas with negative words such as "vomit," "poison" and "agony."

The lesson for companies that want to take advantage of creativity and real innovation is that teh problem not fostering it, but making sure it isn't strangled at birth.

"uncertainty also makes us less able to recognize creativity, perhaps when we need it most," the researchers wrote. "Revealing the existence and nature of a bias against creativity can help explain why people might reject creative ideas and stifle scientific advancements, even in the face of strong intentions to the contrary. ... The field of creativity may need to shift its current focus from identifying how to generate more creative ideas to identify how to help innovative institutions recognize and accept creativity."

Now, I always felt this was the actual case. I think that too often, fighting this problem is too hard as it is institutionalised in most heirarchies, and is a classic "ekephant in the room" - so Creativity Consultants find it easier to sell a comfortable project on "fostering creativity" than a hearts and minds change program based on culling their clients' ability to stop the dangerous mavericks in the business.I never saw companies where there were no creative people - but I don't think I'm the only one who has observed in their corporate careers that the Power of No is an endemic problem - here's Machiavelli on the subject in the 1500's pre-saging a host of 20th century Business Sages:

There is nothing more difficult to take in hand, more perilous to conduct, or more uncertain in its success, than to take the lead in the introduction of a new order of things. For the reformer has enemies in all those who profit by the old order, and only lukewarm defenders in all those who would profit by the new order, this lukewarmness arising partly from fear of their adversaries … and partly from the incredulity of mankind, who do not truly believe in anything new until they have had actual experience of it.

QED as they say. Nice of Cornell to put the academic verification in 500 years later

One University has ended its evaluation of Gmail as the official e-mail program for its 30,000 faculty and staff members— Information Week.

In a joint letter last week to employees, University of California-Davis CIO Peter Siegel, Academic Senate IT chair Niels Jensen, and Campus Council IT chair Joe Kiskis said the school decided to end its Gmail pilot, which could have led to campus-wide deployment, because faculty members doubted Google's ability to keep their correspondences private.

Many faculty "expressed concerns that our campus’s commitment to protecting the privacy of their communications is not demonstrated by Google and that the appropriate safeguards are neither in place at this time nor planned for in the near future,” the letter said.

Google officials, for their part, insisted that their privacy controls are adequate

We disagree - we believe that Google's "Free to Consumer" cloud model does not meet the standards that any enterprise larger than a SOHO (Small Office / Home Office) sort of operation would find acceptable (and even a SOHO has near free and more secure options)