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I had a great conversation with Carnegie Mellon Professor Chris Labash this week. We discussed a wide range of topics as they relate to innovation, including:

• The role of technology
• The importance of understanding human behavior and culture
• The impact of non-financial rewards
• The need for methodologies and processes
• The limits of crowd-sourcing
• The requisite for risk intelligence
• The importance of communication and face-to-face exchanges

To listen to the podcast and read a more detailed post about the discussion, please visit the Collaborative Innovation community.

Last week I wrote for the Collaborative Innovation blog about the fact that perhaps you do not need a culture of innovation, since innovation has been an integral part of the culture of modern humans for thousands of years. This implies that you need to remove the barriers for innovation if you want to increase innovation within your company — not build new structures for it.

Another important Human 1.0 characteristic that most companies are not leveraging enough is social learning. Humans are the only species that are predominantly social learners. We learn by observing others. It is genetic and also part of our culture. Think of a baby that mimics adults before they can sit, walk,or talk — in fact they do it almost instantaneous after being born. That is the hardwired social learning system that humans have had for eons at work.

Where else could you leverage this innate human characteristic?

1. With your customers
   We mimic what others do and adopt the decisions of our tribes as our own. Some call it herding. The key here is to make visible how others make buying decisions to similar people who have not yet made those buying decisions. Amazon does a great job at that — how many books or other Amazon items have you bought because their system told you, after you purchased an item, that “others who bought this item, also bought this?” It works — we tend to imitate others that are like us. How can you make the way others buy your products and services visible to prospects that are like them? Think about it. Traditional reference programs are a step in the right direction, but in this digital and interconnected world, there must be much better ways to do that.
2. With your employees
   Many companies go through massive change management programs without ever leveraging the social learning for which we are hardwired. We mimic people who are successful — that is how we learn new things. So if your change management initiative is intended to produce certain new behaviors, make sure you reward and recognize those that are exhibiting that behavior, and make it easy for others to observe this behavior leads to success. Granted, in the real world it is much more complicated than that. For starters, behaviors are an externalization of shared beliefs and values — and so the right set of values and beliefs have to be in place for the proper behavior to show up in the first place. But once you have that — too few companies leverage the impact of the observability of success. Worse than that, many companies have a total dissonance between what they say and what they do — they may be encouraging a collaborative culture, while at the same time rewarding bullying management tactics by promoting the bullies. Guess what, this will inevitably lead to a bullying culture because we are social learners.

Do you have any other thoughts on this topic — write about it.

Being in the process of writing a book on culture, we quickly got frustrated with the existing models to evaluate and measure culture. We found many models such as the Power Distance Index or OCAI  to be overly simplistic. Plus, they often uncover only the visible parts of culture. We wanted a model and process that would allow us to accurately describe all the subcultures, including the hidden ones.

And so we started developing the Hyper-Social Culture Index. The Hyper-Social Culture index borrows from some of the other models, as there are good elements in all of them.

The index is a maturity model that analyses corporate cultures and subcultures on 8 different axes.

• Individual Behaviors: Learning vs. Knowing (includes the degree to which people strive to learn from data and results, will engage in debate, will adopt others’ processes, and will study failures)
• Trust: High trust vs. Low Trust (includes the degree to which people desire trust from the organization and from their peers, and how vigorously people will express disagreement with management)
• Passion: Passion at Work vs. Day at Work (includes the degree to which personnel feel passion for their daily work, interest in staying with their present employer, pride of belonging to the organization, and interest in taking on new work challenges)
• Risk Profile: Risk Intelligence vs. Risk Intolerance (includes the degree to which personnel will willingly risk failure in the pursuit of progress and will assume accountability)
• Organizational Structure: Tribe vs. Hierarchy (includes the prevalence of hierarchical power structures, organizational silos, self-assembled teams, etc., and the manner in which decisions are made)
• Organizational Beliefs: Human Centric vs. Company Centric (includes customs and norms that demonstrably place people (customers and workers) before organizational interests such as financial gain or products)
• Problem Solving Culture: System vs. Component (includes practices and attitudes that foster integrative thinking about value creation as opposed to simple task performance)
• Knowledge Culture: Sharing vs. Hoarding (includes customs and practices that encourage the sharing of information, status, and other elements that the organization deem valuable)

We use surveys, ethnographic interviewing techniques, participant observation techniques, and online business problem challenges to gather the information that can populate the maturity index. So far we have been able to use the model very successfully to help large organizations improve their innovation processes and successfully go through change management programs.

We are continuously refining the model and if you or someone you know could give us feedback we would very much appreciate that.

In a future post I will describe how we use consumer culture modeling to to drive successful new product strategies.

While attending the Enterprise 2.0 conference and hosting a great dinner with 28 thinkers in the space on Monday night (the dinner was sponsored by Clearvale, which is our client), I got a chance to reflect on what social CRM actually means, and how many people are thinking about it in a way that is too narrow.

Let’s start off by one of my favorite quotes from Peter Drucker: “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.” Ok, so creating a customer and managing the relationships with those customers should be the heartbeat of a company – we can all agree on that. That is also why Customer Relationship Management should be one of the most important processes within a company.

In the research leading to the writing of our (award winning – sorry couldn’t resist the chest thumping) book, the Hyper-Social Organization, we found that those companies that are successful in leveraging the social as part of their business, turn their business processes into social processes. So turning your CRM process into a social process makes a lot of sense.

The question is – How Do You Turn CRM Into a Social Process?

In order to answer that question, let’s peel back the various layers of the onion that make up the CRM process. And to do that it may be useful to categorize the parts of the overall process into the following elements – the actors, the processes that make up the CRM process, the places, and the data.

The actors are the people that should play a role in your overall CRM process – they don’t just  include your customers and prospects, which most companies will consider as part of their CRM process. They also include your detractors, your employees (those that interact, and those that should interact with the customers – e.g., those that share a passion with your customers), your suppliers (if you run on tight inventories and a supplier has an delivery issue, that will impact customer relationships), and your partners.

The processes that make up CRM include not just sales, marketing, and customer support, but also the buying process (most products are now being bought, not sold), the recommendation process, and the relationship management process – processes that have already gone social and been fundamentally transformed in the past decade.

The places refer to those places where you interact with your customers, or where they interact with one another while making buying decisions and sharing recommendations. They include face-to-face encounters, email, telephone, and social media environments.

The data refers too data that typically will reside in systems of record like CRM systems and financial applications. The data you keep about your customer relationship process should include customer data, transactional data, legal data, financial data, and increasingly social data.

Some people say that a CRM system that contains social data is social CRM – but when you look at all the parts of the social customer relationship process, you realize how myopic this view of social CRM is. Some consider the act of managing customer relationships in social media social CRM – an equally myopic viewpoint.

Social CRM needs to encompass all the different parts of the Customer Relationship Management Process – the Actors, the Processes, the Places and the Data.

That of course is not an easy task, and will not happen by deploying technology applications alone. Social CRM is about culture, people, and processes supported by technology.

What do you think?

I would also like to thank the people with whom I had good conversations on the topic: @elsua, @pgillin, @billives,@dankeldsen, @scratchmm, @mkrigsman, @mingk, @marklazen, @sameerpatel, @denispombriant, @absolutezero, @pitosalas, @rawn, @crmstrategies, @jyarmis, @_richardhughes, @skwilder, @debyang, @mjayliebs.

Seriously — is it?

I have finally had a chance to catch up with some blog reading and have been struck by the number of people who focus on building social media programs to reach customers and prospects in new ways. And they use advertising metrics like engagement to decide how successful their programs are.

That is not what this current wave of innovation is all about!

While using traditional marketing programs in social media environments may yield some results, they do not leverage the social…they are plain old marketing programs that are driven by incentives, coupons, or other traditional marketing drivers. They die the minute you stop fueling them.

As some people have called it, social media a platform for participation. It’s actually a massive platform of participation that allows the social for which humans have been hardwired, to scale to the point where it makes a difference in business again – both as employees or customers/prospects.

Those companies that are successful in leveraging social media do not use it as a channel to reach audiences. They use it to turn their business processes into social processes – they power their business with people. They get all their employees and customers participate in product innovation processes, customer support processes, knowledge management processes, marketing and sales processes and others. They don’t care about engagement, because in many cases, as is the case when you try glean insights from the marketplace, engagement with the company is not even required – its the engagement among the people that counts.

If you are interested in the topic, you may want to join us for our Hyper-Social Mini Summits coming up in January, where we will be joined by companies who have done it before and brainstorm with executives on how to make that work.

There is a lot of research on Brand Communities, defined by Muniz and O’Guinn as “a specialized, non-geographically bound community, based on a structured set of social relationships among admirers of a brand.” (Muniz and O’Guinn 2001).

But do brand communities really exist?

Brand communities imply that the brand is at the center of the community. So in the Harley community it would mean that the Harley bike is at the center, in the Jeep community the Jeep Wrangler or the Cherokee, in the Mini Cooper community the Mini, and in the Fiskateer community, the Fiskars tools.

Is this really what is happening? I don’t think so.

For communities to work, the members need to be at the center of the community, and so the motivations have to be different from the pure hedonistic pleasure of owning a brand/product. The Fiskateers may be the people who come up with most of the new Fiskars products ideas. And they may be their staunchest defenders when the brand comes under attack. But the reason they form a tight-knit community, one that some members say changed their lives, is because they share a passion for scrap-booking. The reason that Harley owners get together is because they share a riding lifestyle passion. Jeep owners, probably because they have a shared aspiration for being adventurous by “off-roading” their cars. Mini owners? Not sure, but according to ethnographic research even people who no longer own a Mini Cooper stay with the community, so it cannot be that the car is at the center of the community.

So why Jeep and not Ford, why Fiskars, why Mini, why Harley ? Because in all those cases the companies have provided environments in which those member communities can operate and thrive. Jeep marketers are providing training camps, and are organizing the barbecues around which members can share their passion. Fiskars provided an online environment for their members to thrive and connected those with offline events as well. But in all cases they are enablers of a shared passion that exists within a tribe or community.

The result of that is what I described in a recent blog post – people use the Jeep, the mini, the Fiskars scissors, or the Harley as symbols to associate with others who share that passion. In some cases they take that a step further and create rituals around those brands, which make the brands more sticky. But at the end of the day, these are not brand communities, they are passionate rider communities, scrapbooker community, adventure seeker communities.

What do you think? Do you buy that, or do you think I am missing something?

Everybody will agree that the social has reentered business and commerce as we know it.

In fact, in the beginning, all business was social. If someone sold you a bad chicken, you would badmouth the business and others would shun it until the merchant cleaned up his act. Then the business infrastructure scaled and we ended up with large multi-national companies. People were still social, but the impact of them being social was no longer affecting business – we became at their merci and the social all but disappeared from business. That is when businesses started to develop real bad habits – treating their employees as commodities and waging war with their customers. With social media, a massive platform of participation, the social infrastructure scaled to the point where the social made a difference once again. And because humans are hardwired to be the only Hyper-Social species without all being siblings – the social made a comeback in business with a vengeance.

So what do you do with that? Smart business people, like many of the ones I interviewed as part of the CMO 2.0 Conversation, will tell you that the only thing you can do is to allow your business processes to become social. Barry Judge, the CMO from Best Buy who I interviewed said: “So to the extent that we can basically be human with what we know, and share it as freely as we possibly can, I think we’ll go a long way towards gaining a higher or stronger level of trust with the consumers.” In talking with Luis Suarez recently, he told me that IBM went as far as letting its complete knowledge management process go social. Pfizer’s Sr. VP of Strategy and Innovation, Kristin Peck, was recently quoted in an interview about their innovation process as saying: “when we thought about innovation,we asked ourselves “how do we make it more social?”"

It looks so obvious, right? Yet what do many companies do? Looking at how to commercialize the social that is happening between their customers and prospects. Buying ads on social networks, trying to develop buzz networks, and paying people for recommendations and word of mouth.

That unfortunately will not work much longer. Let’s just hope that those who try to commercialize the social do not muddy the waters with decreased levels of trust among customers and prospects for the rest of us.

In reading the book The Happiness Hypothesis by Jonathan Heidt I came across an important element that makes ultrasocial societies work – reciprocity.

Heidt defines ultrasociality as: living in large cooperative societies in which hundreds of thousand of individuals reap the benefits of an extensive division of labor. Only four instances of ultrasociality are in existence – among hymenoptera (ants, bees and wasps), termites, naked mole rats, and humans. In all species but humans the force that makes that possible is the genetics of kin altruism. In an ants nest or a bee nest, everybody is brother and sister, and since you have as much genes in common with your siblings as you have with your children, the evolutionary drive to leave surviving copies of your genes makes those ultrasocial communities work – shared genes equals shared interest.

In societies that are not structured like bee or ant colonies, the shared set of genes that you have with others drops off rather dramatically – while you share 50% of the genes with your children and siblings, you only share 1/8 the genes with your cousins, and 1/32 with second cousins. In a strictly Darwinian calculation, you would only spend as much energy to save 4 of your cousins as you would for 1 child or brother. That is why kin altruism explains only how groups of a few dozen, or perhaps a hundred, animals can work together. The rest would be competitors in the Darwinian sense.

So what happened to human societies? How did we get fictitious families, like the Mafia, where there is no real kinship, even though they talk about the Godfather and being part of the “family”, to work as ultrasocial societies? It’s the old fashioned “you scratch my back and I’ll scratch yours” phenomenon – which is in fact a mindless and automatic reciprocity reflex. if someone receives a favor, that person will be driven to repay that favor – not because it the proper thing to do – but because it is a built-in ethological reflex. It’s tit-for-tat, hardwired in our brains, that opens the possibility of forming cooperative relationships with strangers. Now mind you that tit-for-tat can only explain the existence of social groups up to a few hundreds. What allows larger social groups is its co-existence with vengeance, gratitude and gossip as tools that reduce the payoff to cheaters by the cost of making enemies.

Those very primitive hardwired human behaviors confirm a lot about what makes online communities work as well – the importance of reputation, the importance of self-organized posses to police communities, the importance of helping one another as a currency, and the failure of communities where reciprocity is not an integral component of the community.

Are you afraid of speaking up at work? That is the topic of ongoing research reported in the Harvard Business School Working Knowledge. Quoting from their research paper (abstract here) Amy Edmondson from Harvard Business School and James Detert from Penn State, the two researchers, made some interesting observations in this email interview.

While there are individual and contextual reasons why some people speak up more readily than others, the main reason why people do not speak up is “fear” – something that we inherited from our earliest ancestors. As the researchers point out: ” it seems we’re all hard-wired to overestimate rather than underestimate certain types of risk—it was better (for survival) to “flee” too often from threats that weren’t really there than to not flee the one time there was a significant risk. So, we’ve inherited emotional and cognitive mechanisms that motivate us to avoid perceived risks to our psychological and material well-being…Thus, fear of offending those above us is both natural and widespread.”

The interview talks about some ways to change a company culture so that people speak up more frequently. The reality is that changing a culture of hard-wired fear is very difficult. Add to that the fact that change hurts and it may be impossible to really change a company culture without also changing the fundamental hierarchical nature of companies.

[Tags: fear company culture hr change]

The most recent Harvard Business Review reports on a study (requires subscription) that was done on the impact of customer communities on customer behavior at eBay in Germany (disclosure – I have an active interest in this topic as I have agreed to chair a conference on the business of communities – Community 2.0 – but more on that later).

The numbers are quite interesting. The experiment involved 140,120 eBay customers who had bought or sold on eBay but who had not participated in the eBay customer communities before. 79.242 were invited to join the online customer community, while the remaining 60,878 were used as a control group. Of the people who were asked to join the community, 3,299 became active participants and 11,242 became lurkers. Over the course of a year they compared the behavior of the active participants and lurkers to that of the control group and found that:

• Lurkers and active participants won up to 25% more auctions
• Lurkers and participants paid prices that were as much as 24% higher
• Lurkers and participants spent up to 54% more money in total
• Active participants listed up to 4 times as many items
• Active participants earned up up 6 times as much monthly sales revenue
• For first time sellers who were lurkers and participants, 10 times as many of them started selling on eBay after joining the community

All in all the activities of the lurkers and participants resulted in 56% more sales during the year of the study – bringing in millions of additional dollars into eBay’s bottom line.

So can the results of this experiment be replicated in more traditional businesses?

Some people clearly think so, while others who used to be very enthusiastic about the business of communities are starting to become very skeptical.

Communities require a certain critical mass to get going – and not all companies have a large enough customer base to get to that point. They also require a lot more work and resources than most companies are willing to invest – to set up the infrastructure, to nurture the communities, to acquire content, etc.

Active communities of employees, customers and partners are clearly powerful management instruments that can dramatically improve core business processes like innovation, product development and marketing & sales. They can also backfire and have very negative impact if they are not managed properly, or set up wrongly. Before embarking on this path, companies have to truly understand the dynamics as well as the pros and cons of communities. They also need to find out if they have the resources and wherewithal to create their own communities or whether they should play in someone else’s sandbox.

Unfortunately, many will start the process by throwing technology at the problem – let’s just hope that those ignorants won’t destroy the market for the rest of us like email spammers destroyed email marketing and (un)ethical zealots are slowly destroying word of mouth marketing.

[Tags: community management customer community community marketing wom word of mouth marketing]