It is not necessary to change. Survival is not mandatory.
—W. Edwards Deming
News flash: Your company is slowly going out of business. Just like the parable of the frog sitting in a pot of slowly warming water. The frog doesn’t jump out until it’s too late, and cooks to death.
Think you’re smarter than the average “frog?” Then consider an Innosight study of the S&P 500: The average tenure of a firm decreased from 61 years in 1958 to just 18 years now. At the current churn rate, 75% of the S&P 500 will be replaced by 2027. Will your company make it?
My point is that surviving if not thriving for the long term requires innovation and risk-taking. If you’re not willing to try something new until it’s “proven” with an ROI spreadsheet, it’s probably too late to get a competitive advantage. At best, you’ll just keep pace your fellow frogs, er, competitors.
Innovation, collaboration and the problem with “social”
One way companies can innovate is to improve the quality of the workforce to work faster, smarter and—this is the important part—deliver more value to customers.
I think Don Tapscott, in the white paper Social Software, What’s Next? gets it exactly right: “The business world is evolving to a flatter ecosystem to support complex integration resulting in a demand for innovation. Innovation is supported by a culture of collaboration.”
To me, collaboration simply means people working together to accomplish something. It’s not (just) about tools, it’s about a mutual effort to create value.
Good news: The dictionary agrees with me.
Bad news: “Collaboration” is often assumed to mean using the tools that can sometimes help people, um, collaborate.
Collaborative tools used to be called “groupware.” But in the past few years the Web 2.0 movement has resulted in a proliferation of so-called “Enterprise 2.0″ solutions, a term coined by Andrew McAfee in 2006 and now generally accepted to mean using social software platforms within companies. For customer-related social applications, the term “Social CRM” is used more commonly, although industry experts have yet to agree on a formal market definition.
Some (including me) are now using the term “Social Business” to include both internal (Enterprise 2.0) and external (Social CRM) use of social software for business. In either case, let’s remember the point is to enable better employee teamwork and/or customer engagement, to drive improved business performance. It’s not about singing Kumbaya around the campfire.
For business leaders who feel a little queasy about creating a “social enterprise,” I suggest using the word “collaborative” instead. People don’t come to work to share a la Facebook, just for the fun of it. But modern-day collaboration does involve more social sharing and communications in the context of getting something done.
Searching for social ROI
Since 2007, McKinsey has been researching the adoption of 12 different Web 2.0 technologies: blogs, mash-ups, microblogging, peer to peer, podcasts, prediction markets, rating, RSS, social networking, tagging, video sharing, and wikis. As you can see in the 2011 snapshot below, social networks (50% usage) and blogs (41%) are the most widely adopted technologies.
Source: McKinsey Quarterly (Business and Web 2.0: An interactive feature)
Spend some time with McKinsey’s nifty interactive tool, and you might think that Web 2.0 tools are a safe bet to deliver ROI.
- For employee usage, the top three “measurable benefits” cited by respondents were increasing speed to access knowledge, reducing communications cost and increasing speed to access internal experts.
- For customer usage, increasing marketing effectiveness, increasing customer satisfaction and reducing marketing costs topped the list of benefits.
That should do it, right? Nothing more to see here, move along and implement your social software, and let the benefits flow!
Damned with faint praise
Not so fast. Over the past three years, there’s been a lot of debate pro and con. The curmudgeonly Dennis Howlett, who famously posted Enterprise 2.0: what a crock in 2009, says business people “don’t give a damn about the ‘emergent nature’ of enterprise.” I agree: business people care about business results—along with getting promotions and bonuses, of course.
With marketers, PR leaders and collaboration specialists racing to lay claim to the movement from their own comfort zone / vantage point, I can only imagine executives getting very confused about what exactly all of this means to their business and if the needed upheaval is even warranted.
Independent research studies have raised more questions than they have answered. For example:
- CustomerThink’s 2010 Social Business study found most enterprises kicking the tires on both Social CRM and Enterprise 2.0, without a strong business case. Generally speaking, expectations of ROI were higher on the external (Social CRM) side. My concerns about unrealistic expectations led me to predict that 80% of Social CRM projects would fail to meet expectations.
- Chess Media Group’s 2011 State of Enterprise 2.0 Collaboration study found only 20% of respondents said they achieved (or nearly achieved) their performance indicators, while 48% didn’t know—probably because they didn’t set and monitor KPIs. On a more positive note, 73% of respondents said “solving a business problem or achieving an objective” was as good as showing a financial ROI.
- Altimeter Group’s 2012 study, Making The Business Case For Enterprise Social Networks found “an undercurrent of concern about the value creation and sustainable adoption of ESNs.”
I hate to say it, but this smacks of the early days of CRM when it got a reputation as a failure. How do you know if you’ve succeeded or failed without established goals?
Furthermore, the “goals” commonly mentioned for internal social projects were, ahem, a bit mushy. Improved sharing and collaboration has at best an indirect connection to more fundamental business imperatives: increasing sales, cutting costs or improving competitive differentiation. Maybe part of the ROI problem is that benefits are not directly linked to customer value?
Is “What is the ROI?” the right question?
After reviewing all the above and much more, I’ve come to the conclusion that “Where is the ROI?” may be the wrong question. At least, for those seeking a competitive advantage.
Fundamentally, improving collaboration is about working differently, which I believe all companies will need to do if they want to survive for the long-term. ROI, on the other hand, is a warm and comforting friend of Business As Usual. Because you can’t calculate an ROI on the unknown, can you?
Let’s see if Morpheus from The Matrix (1999) can help me get this point across. He explains to Neo that people are living in a programmed world:
The Matrix is a system, Neo. That system is our enemy. But when you’re inside, you look around, what do you see? Businessmen, teachers, lawyers, carpenters. The very minds of the people we are trying to save. But until we do, these people are still a part of that system and that makes them our enemy. You have to understand, most of these people are not ready to be unplugged.
People don’t want to be unplugged from Business as Usual. It looks normal and safe, but it’s just an illusion. Whether you choose to participate or not, the Real World outside your business continues to innovate and eventually will take your customers.
Choose your focus: Employees or Customers
After the CRM disappointments of the past 15-20 years, it should go without saying that throwing technology at a problem alone won’t work. But I’ll say it anyway, because the same is true of Social Business technology.
Yet it’s also true that, just like with CRM, technology is the enabler. So it’s fair to ask: Exactly how will social software (properly focused and implemented) drive value for the organization? There are two different strategies to consider, which I’ll illustrate with Yammer and Moxie Software.
- Empower employees to improve productivity and engagement
Social Business solutions can support a strategy to create a more “engaged” workforce, which Gallup research has found drives performance outcomes like productivity, profitability, retention and customer-focus.
An Enterprise Social Network (ESN), such as offered by Yammer, fits this approach. At a Yammer event in late 2011, early adopters extolled the value of an ESN to accelerate employee on-boarding, speed up decision-making, and help people find experts. Yet there was remarkably little discussion about justifying their ESN decisions. Frankly, it just seemed like the right thing to do to to support their collaborative cultures.
In a recent interview, Yammer CEO David Sacks acknowledged some “fuzziness around the ROI.” Yet he also points to a Forrester study of four large Yammer customers that found a 4.3 months payback and 365% ROI. Yammer now has 4 million corporate users with 85% penetration into the Fortune 500, says Sacks. Altimeter Group found Yammer to be the most popular ESN, cited by 19% of respondents.
Based on an analysis of hundreds of use cases, Altimeter Group suggests there are four major ways that ESNs can drive value by helping people connect with each other.
Source: Altimeter Group Making The Business Case For Enterprise Social Networks
However, based on the all the research and commentary I’ve read, I’d say most companies are not doing a formal ROI study before implementing an ESN. Instead, they are investing towards a strategic goal of a more engaged, nimble and productive workforce.
- Strengthen the customer value chain
Since CustomerThink is all about customer-centric business, I was intrigued by a recent Moxie Software announcement of the “First Customer-Centric Enterprise Social Software.” VP of Marketing Tara Sporrer says that means focusing social software on helping employees deliver value to customers, although in some cases the “customer” could be an end user.
A February 2012 Harris Interactive study found that nearly 80% of respondents said they use social media sites. Of those, about two-thirds agreed that they’d be able to provide better support to customers/end-users with more collaborative and easy-to-use tools at the workplace. It’s interesting to note, however, that enthusiasm for social tools was markedly lower for the minority who did not use (external) social media sites (e.g. Facebook, Twitter, etc.).
Source: Harris Interactive survey, commissioned by Moxie Software
Whether this is enough to be “customer-centric” is debatable. Sematics aside, the main point here is to help employees focus on the customer relationship.
And, based on my own research and many other studies, I believe that customer-related value—such as revenue, experience, loyalty etc.—is a well-traveled path to ROI using CRM and CEM methodologies.
These strategies are not mutually exclusive, of course. Some companies may wish to focus on employee productivity/engagement/empowerment and invest in a horizontal platform, either enterprise-wide or to support groups or departments. Others may choose to focus on adding a social/collaborative element to customer service and other CRM applications. This is the Enterprise 2.0 vs. Social CRM debate that many are having now.
But longer-term, it should be “and” and not “vs.” Social Business should connect the dots between internal collaboration and customer-facing activities. I believe this integrated approach will separate the top-performing companies from those that just socialize departmental silos.
Blue Pill or Red?
McKinsey’s research finds 65% of companies planning to increase Web 2.0 investments over the next three years. Social networks are already in use by about 50% of companies, along with an array of other tools.
Still undecided about whether to invest in social software? More advice from Morpheus:
This is your last chance. After this, there is no turning back. You take the blue pill – the story ends, you wake up in your bed and believe whatever you want to believe. You take the red pill – you stay in Wonderland and I show you how deep the rabbit-hole goes.
The safe choice is the “blue pill”—Business As Usual. Just keep doing what you’re doing, don’t take any risk until you can get a guarantee that social software will deliver an ROI.
But the “red pill” looks a lot more interesting. To be sure, there are risks in social software. ROI is uncertain, and it could create a kind of Arab Spring within your organization, if you introduce collaborative tools into a dictatorial culture. On the other hand, Social Business applications could open up new ways of working, enabling your organization to be more nimble and customer-focused.
One thing is certain, it won’t be boring. And who knows, you might even see the woman in the red dress!
Further reading, resources:
- Business and Web 2.0: An interactive feature (McKinsey)
- 2011: The year when 80% of Social CRM projects will #fail … (CustomerThink)
- Making The Business Case For Enterprise Social Networks (Altimeter Group)
- State of Enterprise 2.0 Collaboration (Chess Media Group)
Disclosure: This article was prepared through independent research. Selected vendors are mentioned to illustrate specific capabilities and industry developments; no endorsement is implied. Please visit our sponsor page for information on companies that have supported the CustomerThink community in the past year.