This is part 6 of 12 from “Social Business: What Are Companies Really Doing?” a report on the findings of the 2012 Social Business Global Executive Study and Research Project.
We asked our respondents how important they thought social software would be to their organization’s success in meeting eight specific business challenges over the next two years. (See Figure 8.) The top two business challenges that could be addressed by social software were managing customer relationships and innovating for competitive differentiation.
The importance of marketing and innovation to an organization is difficult to overstate. According to management theorist Peter Drucker, “Because it is its purpose to create a customer, business has two — and only two — functions: marketing and innovation. Marketing and innovation create value; all the rest are costs.”12
But marketing and innovation are just the start of the value story for social business. In our interviews with thought leaders and executives, we also found that operations and leadership are benefiting from social tools. These four areas — marketing, innovation, operations and leadership — are where social business is creating significant opportunity and, for some companies, significant value.13 Using social tools for marketing is not the be-all or end-all of social business: it is a component of the overall value that social business can deliver.
The Importance of Social Software in Meeting Challenges
Organizations are using social software, social media and social networking to improve their relationship with customers in a number of ways: monitoring online communities; creating and supporting virtual communities; developing new communication channels; and fostering a wide range of customer engagements, including coupons, contests and other sponsored events. With their social business activities, enterprises have been able to enhance their understanding of and engagement with their customers. At the same time, customers, vendors and suppliers are clearly willing to engage with business in online social forums. In particular, product fan sites have proliferated across the Web, increasing the visibility of influencers and a core customer base.
McDonald’s In 2010, McDonald’s launched McRib, a limited-time-offer sandwich. It quickly developed a loyal fan base that was “raving about the product in social media,” according to Rick Wion, the company’s director of social media:
When we saw these superfans, we decided to use social media to engage with them. We found three of the biggest McRib fans. One had built the first Facebook fan page for McRib. Another was an author who had written a book chapter about McRib. A third man, from Minnesota, built a Google map of McRib locations. If you saw the McRib at a restaurant, you could pin it on a Google map, and other people could see it and know where they could go and get one.
We used their stories to tell the McRib story through Facebook and Twitter, and connected them with bloggers so that people heard about these fans. We had them at a media launch event. These customers were amazing spokespeople. What better way to get people excited about McRib than showcase three of its biggest fans?
It created not only a huge buzz in the core audience for McRib, but it also had a ripple effect. We started to see people saying, “What’s all this buzz about? I’ve never had McRib before. I’m going to go try it. I’m going to go buy it.” The buzz of the core audience brought in new customers. This was a huge success for us.
Companies are using social business activities to source new ideas and refine existing products and services. Survey respondents say that innovation will be the second most important challenge facing their organization over the next two years, after managing customer relationships.
These new ideas are coming not only from within the company but also from a more engaged group of customers. This is a relatively new phenomenon, or at least newly recognized. The traditional view has been that producers, and only producers, innovate.
“This traditional innovation paradigm is fundamentally flawed,” writes MIT professor Eric von Hippel and colleagues. “Consumers themselves are a major source of product innovations.”14 In many instances, social business activity mediates or forges the links between these consumer innovators and business. Volvo, Nike, Lego and Threadless (a Chicago-based clothing manufacturer and retailer) are just a few of the companies that are using virtual consumer environments to help improve products.15
Lego Group The Danish toy company Lego Group plans to launch Minecraft Micro World, a Lego set based on the wildly popular Minecraft video game by Swedish game developer Mojang, in summer 2012.16 As in the video game, Lego fans will be able to build landscapes with removable surfaces that shield mines and “hidden resources” and create a physical world that mimics their virtual online play.
The idea for Minecraft Micro World did not come from a veteran Lego product developer but from an adult Lego fan who submitted his idea to Lego through Lego Cuusoo, a website where Lego enthusiasts submit and vote for new product ideas. Within 24 hours of submission, the Minecraft Micro World idea received 10,000 votes, automatically kicking the concept up to Lego management. The idea received the green light within a month.
Lego Cuusoo, which was launched to encourage the development of “community-supported” Lego sets, is only one of many ways that Lego uses social tools to create greater intimacy with its consumers. When he joined Lego in 2004, CEO Jorgen Vig Knudstorp announced that transparency and collaboration would be the keys to innovating new Lego products. The company drew fans deeply into the brand experience by giving them a voice in identifying new product lines and distribution strategies. To Lego, consumers are far more than mere purchasers: they are true collaborators with a vested interest in ensuring that the company creates products that meet their needs.
From the perspective of operational performance, social business offers value by enabling knowledge to flow within, and into, an organization. MIT’s Andrew McAfee sometimes cites former Hewlett Packard CEO Lew Platt’s comment, “If only HP knew what HP knows, we’d be three times more productive,” when trying to persuade CEOs of the value of social business. John Hagel III, co-chairman of Deloitte’s Center for the Edge, suggests that social business can help improve operational performance by advancing knowledge flows:
Increasingly, the ability to succeed hinges on participating in a broader and more diverse range of knowledge flows, both internally and externally to the enterprise. Sixty to 70% of headcount time in most functions is consumed by handling exceptions, things that get thrown out of automated processes. The employee typically scrambles around, can’t resolve it on his own and needs to get a number of other people engaged. We need to find those people, find ways to engage them as a group, get the relevant data. That is a hugely inefficient process today. Social technologies are providing an opportunity to significantly increase operating performance of a business, and that’s really the key driver of adoption of social technologies. This is a generation of technology that can be extremely helpful in terms of scaling participation in knowledge flows.17
We have found many companies in a range of industries that use social tools to enhance their collaboration efforts. Below are examples from the insurance, financial services and agriculture industries.
Nationwide Nationwide Mutual Insurance Company, a U.S.-based insurer with annual revenues in excess of $20 billion, offers a window into how companies are creating knowledge flows to solve real business problems. Last year, a Nationwide customer was stranded on vacation when his RV broke down. The customer called the Nationwide call center to see if his policy covered the situation. Due to the particulars of the customer’s circumstance, the call center agent was unsure and posted the case on the company’s internal collaboration platform. People from across the company, from product, claims and underwriting groups, began offering their feedback. Within 30 minutes, the call center rep had a detailed approach to helping the customer and covering the repair costs. Without this internal collaboration tool, this particular issue might have taken hours or days to resolve; the typical call center software has no ability to let people from other parts of the company participate in problem solving.
Capital One At financial services giant Capital One, teams are using tools like Facebook to facilitate group communication. Tom Poole, managing vice president, mobile and social media, at Capital One, says:
People have begun to realize there’s a better model to how we work as teams that is socially driven. Instead of a push model, where everybody is told about everything via the e-mail channel, you have more of a pull model, similar to an RSS feed. You actually subscribe to the content you want to hear about, and you contribute to the communities you want to contribute to. And the communities accept you or they don’t.
There is an incredible opportunity to use channels like Facebook or Chatter to drive this change. I use Facebook private groups with my social media team, and the amount of interaction is twice as much as on any other team. The ability to share articles and insights and industry happenings and to riff back and forth on ideas for new promotions is off the charts. Because it’s Facebook, it’s connected into our social lives as well, so it promotes connection throughout the day. When you have the idea, you share it and you’re hearing back an hour later. This is lightening in a bottle. I’m optimistic we can make this scalable and keep security where it should be.
Almond Board of California Creating efficiencies with collaboration tools is not restricted to internal efforts. Consider the Almond Board of California, an association of over 6,000 almond growers and 104 almond handlers. Richard Waycott, Almond Board of California’s CEO and president, says that Huddle, a cloud-based collaboration platform, has become “a mission-critical part of our market development and execution process.” He adds:
It’s the best way that we have found to develop strategic plans and communicate with agency partners around the world. It allows us to begin documents. It allows people to add content to those documents. It allows us to create approval checkpoints. It allows us to conduct minimal project management in terms of timelines and set up deadlines. It’s a very important tool for us right now, albeit still a very new one.
Social business activities can make valuable contributions to leadership in at least two different areas: strategic insight and strategic execution. In these areas, social tools can help leaders sharpen their vision and extend their reach.
Strategic Insight: Consider the problem of myopia, first popularized by Theodore Levitt in his famous Harvard Business Review article, “Marketing Myopia.”18 Levitt made the point that many companies failed to anticipate changes to their business landscape and lost their way as the demand characteristics of their products and services changed. As the transportation industry was revolutionized by new services, railroad executives continued to see themselves in the railroad industry, rather than the transportation industry. They subsequently failed to take advantage of new opportunities, such as air travel and automobile transportation. Levitt’s question, “What business are you in?” became a clarion call for businesses to focus on customers, rather than on improving operations for a product or service that, in a changing competitive landscape, may not advance the company’s long-term prospects.
Social business can help avoid marketing myopia in at least two ways. One is to use members of an online community to identify shifts in customer preferences. For example, SAP, the enterprise resource planning software provider, has an online community with more than 2 million members. This community annually nominates about 100 of its members to be SAP mentors, influencers recognized for their subject matter expertise and their willingness to mentor other community members. SAP mentors are expected to mentor SAP itself. They are given extra access to product managers and can influence product development. As Mark Yolton, senior vice president of SAP communities and social media, explains, these mentors also mentor SAP’s executive team:
Hasso Plattner, our co-founder and chairman of the board, invites mentors to brainstorm with him. No PowerPoint, no set agenda. He just gets a bunch of mentors in the room, usually at one of our big events. They give him honest feedback from the field about what’s really going on with our customers and our partners — and our employees as well. Our co-CEOs and a board member, who is responsible for innovation at SAP, also meet with the mentors to hear their feedback. Mentors are people in our community who are very engaged with SAP partners and customers. They have a great deal of influence on outside perceptions of SAP, on influencing our own product direction and on our strategy.
Another way that social business can help companies avoid marketing myopia is through sentiment analysis — for example, analyzing Twitter streams or activity in online communities — to anticipate shifts in the competitive landscape. “Before, you might hear problems with the brand or product through a 1-800 number or complaints or warranty issues,” says Donna Hoffman, professor at the University of California, Riverside and co-director of its Sloan Center for Internet Retailing. “Now it is coming from the product development function or from listening to what is happening online.”
New technologies are enhancing organizations’ ability to listen to and analyze what is happening online. New software technologies can make sense of massive amounts of streaming data from Twitter or Facebook and provide insights about real-time consumer trends. The applications of these technologies, however, transcend analyzing word frequency patterns. Luminoso, a text-understanding company, offers a glimpse into a future in which computers make sense of the meaning behind natural language. (One caveat: The future is already here — Luminoso is currently generating revenues from its service.)
Luminoso Catherine Havasi is co-founder and CEO of Luminoso and a research scientist at the MIT Media Lab. Luminoso works with organizations in a variety of industries, including consumer goods, financial services, pharmaceuticals, media and information technology. Luminoso’s technology has intriguing applications for the health care sector as well. In one case, Luminoso analyzed a dataset of very brief (tweet-length) patient reviews about visits with their doctors. Havasi explains the value her company can provide:
Suppose a person responded to their doctor visit by saying: “He showed me my CAT scan, which was good; but he didn’t answer all of my questions.” Our system was able to discern that that person was not entirely happy with the visit despite their use of the word “good,” and that the patient felt “rushed.” It turns out that patient satisfaction depends on knowing that your doctor is intelligent, able to explain himself well and responds to your questions. The ability to analyze not just what is said, but what survey respondents actually meant, has big implications when you consider that the reimbursement system for government-covered health care will be determined, in part, by patient satisfaction and quality of care.
Strategic Execution: Social business activities also offer a way to extend the reach of organizations, including that of their leadership. A business-to-business company with a strategy to reach the end user in order to build product demand can use social tools to engage directly with the consumer. In corporations with a franchisee network, social tools can be used to effect change in front-line behaviors, even when these front-line employees do not work directly for the organization. Social business can advance a leader’s strategic agenda in a number of ways.
Cara Group Natasha Nelson is vice president of business intelligence at Cara Operations, a Canadian restaurant chain with five brands and 700 franchisees. When Nelson joined Cara, the CEO asked her to engage the company’s associates to improve service delivery on the front lines. The problem was that the associates worked for the franchisees, not corporate. Many associates were young, worked part-time, and for some, this was their first job. There was a high degree of turnover. Yet this group was an important factor in determining the quality of the customer experience. How could Cara engage this group in a way that was simple and easy, and use that engagement to improve front-line service?
Nelson researched the problem and found little assistance. An article from one of the leading technology research firms advised against using Facebook to engage with employees. She explored using a portal technology platform, but could not find a way to drive associates to use it since they were not typical information workers. Eventually, Nelson’s IT department partnered with HR and marketing to develop a strategy built upon a Facebook application:
The associates all have it on their mobile devices, and go onto Facebook anyway every day. That’s how they communicate, that’s how they stay in touch. So we decided to use a platform that they already are on and that they know and love. We launched this very, very slowly, starting at 12 locations of one of our more upscale brands, Milestones. We launched an application on Facebook, called the Staff Room, where we encouraged the associates to share stories about restaurant service and tips about managing their jobs. We are trying to encourage a hospitality gene, qualities that everyone should aspire to, like love serving people.
From this pilot we decided to make the Staff Room into a peer-to-peer recognition platform, because the center point of our strategy is guest experience. We’ll celebrate associate stories connected with the hospitality gene. More importantly, we’ll let staff recognize one another. Because their friends and family are also on their Facebook page, they’ll be recognized by them too. We believe that this will be very powerful. People will share stories of how they’ve improved the guest experience; and their peers, friends and family will recognize them.