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As some of you know, Ed Moran from Deloitte and I are writing a book that will be published next spring by McGraw Hill. The working title for the book is “The Hyper-Social Enterprise – Tapping the Social Power of People to Transform Your Business.”

Not surprisingly, the book’s premise is very much inline with what I have been writing about on my blog. Here is from the overview section in our original proposal:

Whether you call it social media, social computing, the social web, or social networking – it does not matter. The importance of this latest wave of innovation to hit business is not that we have new media or new tools with which to do business. The key take-away of the changes afoot is that all business is becoming social again – whether you like it or not.

Most other books that deal with the subject approach the concept of social media from a technology- and media-centric point of view, and focus on Web 2.0 rather than Human 1.0. They also fail to explore the broader, organization-wide changes that Hyper-Sociality will have on business.

We wanted to write a book that will be informed by research from fields as diverse as evolutionary biology, evolutionary sociology, neuro-economics, and behavioral economics, but that will also draw on our own experiences as business advisers. We are also fortunate to have access to the extensive data sources from the Tribalization of Business Study, of which the 2009 version will be released shortly.

While we have an advisory board with a dozen leading academic thinkers as well as forward thinking CMOs, I will periodically post concepts that we are developing for the book on this blog. In doing so, I hope to be able to engage with a larger audience in the development and refinement of those concepts.

(Cross-posted from the CMO 2.0 Conversation site)

Today’s CMO 2.0 Conversation with GE’s CMO Beth Comstock was packed with interesting insights. On a personal note it was certainly neat to get a one hour personal marketing tutorial from the CMO of one the largest companies in the world. By working in a real marketer’s laboratory, Beth must be one of the luckiest marketers around.

We touched on three main topics: the role of a corporate marketing group in a large diversified company with strong operating companies, how to foster innovation at GE, and general changes in marketing.

As a central corporate marketing group, Beth’s team is responsible for sales growth, innovation, and the GE brand platform. Even though the company has very diverse operating companies, her team has also been able to find opportunities for developing a customer platform (i.e., cross-sell accross business units), as well as product platforms (i.e., ecoimagination, the GE green platform, and a cross-operating-business battery project).

On the innovation side of things we touched on the importance of having a robust pipeline of innovations and on the need to have the right resources deployed across the right portfolio of innovations. We also discussed the need to kill ideas faster and the opportunity to create an innovation marketplace for ideas that may not be a good fit for the company. Beth described GE’s robust innovation process, and how they have both a formal process that very much resembles an in-house venture process as well as an online imagination network that relies much more on the wisdom of the crowd – in this case their employees. Other innovation related topics we covered include:

• how they use outside coaches and customer discovery sessions to bring outside insights into their innovation process
• the importance of including detractors in the innovation process
• how innovation is not just about technology innovation, but also about commercial innovations – and how they are constantly looking for new ideas around product, space, and business model
• the cultural changes required for fast-paced innovations and the creative tensions between being a process-driven organization and the inherent messiness and chaotic nature of innovation
• how in some cases you need to step away from traditional metrics to measure progress and success of ideas that are being incubated

We also talked about the changes afoot in marketing and how the new marketing challenge is in fact a knowledge management challenge – knowing enough about your customers so you can feed them data that will make them smarter.

On the need for new marketing skills Beth listed what she is looking for in marketers – people with new world skills, people who can simplify things and engage in customer communities, and people who can curate an experience for the customer. She also described how they set up a team of “rogue marketers” within the company, whose job it is to come up with rogue marketing techniques. It would be really interesting if at some point they would publish their findings in rogue marketing innovations.

You can listen to the podcast over at the CMO 2.0 Conversation site, in the near future we will also post the transcript from the interview.

In the recent eBook that Valeria Maltoni assembled I described the main reason for why social media may not go mainstream in the near future as follows:

For starters, many company executives don’t understand the fundamental forces that are changing their business. Sure, they realize that their cost of sales is increasing dangerously, that it is increasingly harder to engage with customers and prospects, that loyalty seems to have vanished, and that switching costs and barriers to entry do not carry the same weight as before. But what they don’t understand is that with social media as a platform for participation, people can behave the way they were hardwired to behave in the first place – humanly, tribally.

These executives think of their business as “controllable” processes that need to be optimized. And they evaluate their business in terms of assets and liabilities. Which leaves little room to truly understand the impact of the exploding mass of newly empowered individuals who are now free to hang out and share information with peers, help one another in finding the best products and services, and bad-mouth organizations and people who depart from the social norms that have made us the hypersocial (and hyper-successful) species we are.

This freedom to associate, speak and share is what is fundamentally transforming the game of business – not just the rules; but also the players, the scope of the game, the tactics and the added values.

Another way of thinking about this is that social media enabled the social messiness that characterizes humans to invade all our business processes.  You cannot fight this fundamental disruption with command and control approaches, nor can you do it through process optimization or re-engineering – which many companies have grown used to, if not addicted to.

What you need to do is to empower the people through transparency, embrace the messiness, and provide leadership to bring the best out of people. Sure some people will cheat, and others will have their own agenda of gossip, but in the end what will emerge is much more powerful than anything you can create through command and control.

In fact, we may have a perfect model to follow coming to us from the world of politics. Check out the Obama campaign and the first signs of the Obama administration. Look where it leads when you empower people through transparency, embrace the diversity and messiness, and provide clear leadership…

More and more people in the marketing space are starting to talk about doing marketing with social media, or leveraging social media in their marketing efforts, or better yet, and especially coming from the PR front, monitoring the social media space in addition to the traditional channels.

For some reason that started bothering me. And it should bother you too.

Unlike email, which was a new channel of communication with customers, social media is not a new channel. Social media is what transformed the rules of marketing. By providing a platform of participation to your employees, customers and prospects, social media has changed the fundamental pillars of the marketing game. Not only have the rules of game changed, so have the players, the scope, the tactics and the added values – to use the game theory elements of the game.

So marketing has become a new game because of social media. It is not just a new channel to reach and interact with customers. Not realizing that distinction will result in companies not being able to achieve their business objectives. And those objectives have not changed – and were best described by the late Peter Drucker when he said: “Because the purpose of business is to create a customer, the business enterprise has two–and only two–basic functions: marketing and innovation. Marketing and innovation produce results; all the rest are costs. Marketing is the distinguishing, unique function of the business.”

So the end goal of marketing has not changed – it still is to create a customer. It is everything in between to get to that goal that has changed! And you will not get there by monitoring the new social media channel. The only way you will get there is if you understand the new rules, the new players and all the other elements of the marketing game.

[6/20 update] I actually expanded on the topic on the Marketing 2.0 blog

An interesting question that came up during our workshop (slides here) at the community 2.0 conference was whether CMO’s and their marketing departments are changing with the advent of successful customer communities.

The answer so far is unfortunately: no… While a majority of customer community initiatives seems to migrate towards marketing, they are doing so by accident – not by design. In fact we have seen cases where communities were transitioned under marketing, only to have marketing push back and have them end up with the CFO.

It makes sense for customer communities to end up under marketing – whether new product innovation communities, customer support communities or marketing communities. But they should come with a transformation of the CMO role and that of their marketing department – one in which they become the representative of the voice of the customer within the company instead of the brand builders or the sales support department.

Unfortunately, and in a majority of the cases that we surveyed as part of our study, that is not what is happening. In companies with large marketing budgets, community spending is too small to even make it on the radar screen of the CMO – who often manages the importance of programs and initiatives relative to marketing dollars spent on it. In many companies, the CMO does not have the mandate to represent the voice of the customer within the company – sometimes having no say on new product innovation and in most cases being completely detached from customer support. Yet when looking at companies like Zappos.com, you could argue that customer support is the new sales and marketing channel.

So where does that lead us? For those companies who are not transforming the role of the CMO and their marketing departments, many community activities will fail – as there is no connection between what customers do and expect in those communities and the internal business processes that can actually make things happen. In the long run, and because of the game-changing nature of successful communities, those marketing departments will become totally irrelevant to the company strategy.

Here is the presentation with the preliminary results of the 2008 Tribalization of Business Study (produced by Deloitte, Beeline Labs, and the Society for New Communications Research (SNCR)), which I presented at the SNCR New Communications Forum yesterday. The findings are very preliminary as the study is still in progress.

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If you are interested in more information about the study, or in participating in the study, please email me at francois [at] beelinelabs [dot] com.

Based on research in the field of virtual communities, most business thinkers will agree that there are 4 fundamental pillars to successful communities – content, members, member profiles and transactions. If managed properly, these 4 dynamics can lead to economics of increasing returns that characterize most successful communities. The more members you have, the more content they will create. That in turn will increase the value to the community members and attract more members. If you capture information about your members and you make it easier for them to find stuff in the community based on their profile, the higher the value of the community to the members and the more members you will attract. It’s easy to understand the workings and to get the benefits of the dynamics of increasing returns that happen in successful virtual communities. Many of those were first described by business thinker and management consultant John Hagel in Net Gain more than a decade ago.

There are other aspects that drive and define communities, such as the social and technology infrastructures of communities as well as the business processes that they support. But none of those characteristics have the power to create the positive value creation loops that the original four can.

While most successful communities will have a mix of all of the ingredients – we can characterize communities by their dominant dynamic.

First there are content-based communities, where members interact with one another primarily in the context of content – either consumer generated or licensed/acquired. News sites or blogs are communities that would fall in this category.

Then there are communities that are primarily member-based. Member-driven communities can take on many different forms. Brand communities like the Harley or the Ducati communities are clearly member-centric communities, even though some companies mistakenly think that the brand is at the center of those communities, and not the members. Networking communities like LinkedIn and Facebook are clearly communities that have members at their core. Many developer communities in the tech world also fall within this category.

Lastly there are transaction-centric communities. eBay and Amazon.com come to mind when talking about those communities.

Of course, all of those communities have content, and all have members, and most have transactions – it’s just that they are more heavily tilted towards one of the community ingredients than another. And in some cases communities with the same end-goal can take on very different forms. Brand communities could also be set up as content-centric communities or as transaction-centric communities. Customer support communities or developer communities could also be started as content-centric communities – and perhaps evolve into transaction-centric communities.

The reason it’s important to understand the different types of communities is because of the requirements to get them started. You cannot start a member-centric or a transaction-based community without a critical mass of members or offerings – something most companies do not have. Without a critical mass of members or offerings, there will not be enough content generated (i.e., customer reviews, etc.) in order to make the interaction for the community members valuable. So if you have a total potential number of users ranging in the hundreds, you will never be able to set up a vibrant customer support community as Intuit. Microsoft or Apple can. That does not mean that you cannot leverage customer support communities, it means that you have to start them up as content-driven communities. Instead of relying on the community members to re-write your manuals and to create meaningful FAQs, you may have to hire a few people to kick-start the process on a for-hire basis.

While the economics of increasing returns may be somewhat diminished with a smaller number of members and some hired guns, they are still very much present. Most likely they will handily beat the economics of diminishing returns that most business practitioners face when trying to interact with customers and prospects in the old-fashioned interrupt-driven way.

Some of these thoughts have been triggered by the many conversations I have had the pleasure to have as part of the Community Effectiveness Study that we are conducting with Deloitte and the Society of New Communications Research. Some of the preliminary results of this study will be discussed at the Society for New Communications Research Forum in two weeks and more detailed results will be unveiled at the Community 2.0 Conference in May.

As a senior research fellow with the Society for New Communications Research I can extend a special discount to some of my friends who want to attend the forum. Email me if you want to attend at a special rate (francois [at] emergencemarketing [dot] com). Note that there are also 1/2 day flex passes available for those who can’t attend the full event.

In interviewing a person in charge of communities at a Fortune 100 company as part of our community effectiveness study that we are doing with Deloitte and the Society for New Communications Research, I learned about a real neat side effect of business communities – the ability to sell products in the long tail.

Large companies typically cannot afford to pay attention to relatively small business opportunities. If your company has billions of dollars in revenue, and a goal of growing that revenue by 5% a year, and you identified a $50M new market opportunity, chances are that you will not be able to justify a business plan to tackle this new opportunity. Some of the more innovative companies have found ways to monetize those opportunities by selling or licensing the IP or partnering with companies for whom a $50M market makes sense.

With large business communities surrounding your company, you could potentially do it yourself, and in a profitable way. Say that you developed a software application that only has a tiny market potential relative to your company’s size. You could make that application available in your community, and rely on the community to deliver support, refine the documentation, etc. So in effect you developed a channel to enable your company to serve the long tail in a cost effective manner and in a way that is not defocussing. In the long run, leveraging business communities to serve the long tail could also increase your share of customer wallet as well as increase your customer switching costs for the bigger applications – all benefits that deliver dollars to the bottom line.

I had the pleasure to meet JP Rangaswami in person last week, who I had invited to speak as a keynote speaker at the FASTForward ‘08 conference. He spoke of the three main forces that are causing a powershift towards the individuals within the enterprise.

The first one is that of youth versus expertise. In this day and age, expertise is no longer connected to age, and while that is causing a fair amount of friction between the geeks and the geezers, it is an inevitable force that is driving change.

The second one is the democratization of participation. No longer is participation elitist, no longer do you need to ask for permission – the amateur hour has arrived.

The last one is that FAST is the new GOOD. Releasing alpha software, having perennial betas is the new way of doing business.

While there is major resistance to all those forces, combined they will cause a massive transformation within the enterprise. Combined with the powershift which already took place between companies and their customers, they could very well alter the way we think of firms forever.

One of the most fascinating companies at the BRITE conference was Eli Lilly, represented by Marc Kershisnik, Executive Director of Market Research.

It is one thing to talk about putting the customer at the center of your offering instead of your product or your company – but how do you do that when you are a pharmaceutical giant?

Eli Lilly seems to have figured that out – they no longer look at the drug as a way to fix a discreet biological/physiological problem, but instead at how the drug will fit within a sick patient’s lifestyle – so in effect putting the patient at the center of the offering. And that is not just in marketing, it starts at the time of product conception and product/market requirements, continues throughout the drug development phase, into clinical trials, and all the way to market introduction.

A good example of that is how they started the oncology on canvas community, which enables cancer patients to express how they deal with their disease though stories and art. They did not start this community after launching a new oncology drug – they started it before having any oncology drug offering.

Another example is how they dealt with their osteoporosis offering in France. The drug is for people with severe bone loss – the type who cannot take a child on their lap without causing a fracture. The treatment regenerates the whole bone structure and cures the disease in 18 months. The only problem is that patients need a daily injection of the drug for 18 month – something that many patients would give up or skip frequently enough to bring the outcome of the treatment in jeopardy. So how did they solve the problem? They enlisted an army of paid nurses to help patients with their daily treatment. In doing so they did not disrupt the patient-doctor trust relationship by injecting themselves into the process (which probably would not have worked anyway). They also focused not on the biological problem that the drug was curing, but instead on the patient ‘s lifestyle during the disease treatment process. The success ratio of the treatment in France: 90%.

No wonder then that a company with this amount of foresight would also transform itself from the inside out. Most recently they conducted one of the largest Vision Jams within their company – 6 days of 24 hour online brainstorming among 40,000 employees on the future strategy for the company. The whole strategy for Eli Lilly’s 15 year plan was created from the bottom up and not from the top down.

Now who said that you cannot teach an old dog new tricks? Of course it helps that the company does not think of its main purpose as making money for shareholders, but instead of considering its primary purpose and duty in the marketplace as treating diseases.

Guess what – with a strategy and market attitude like that, long term profits and shareholder returns will probably never be the problem.

PS – also check out my partner Lois Kelly’s post on the same topic…