How Social Technologies Have Disrupted Organizations [CDO Guide to Social Business Preview]

How Social Technologies Have Disrupted Organizations is a quick overview of the business and social environment around commercial, government and nonprofit organizations that sets the context for using social business for digital transformation.

[UPDATED] Social technologies are quickly changing the context around why people buy products and services. Leaders of organizations in business, government and nonprofit sectors harbor a false assumption that is becoming lethal in the digital social age: they assume that products and services have inherent value to customers and constituents. In fact, products and services represent costs to customers and revenue to producers and service providers.

Customers must use products or services to create outcomes that are personally or professionally meaningful. The use of the product or service is where the customer or constituent produces value. This is why they buy. “So what,” you might be thinking. In this post I’ll show how digital social technologies are weakening mediocre products and services and how organizations can use social business to strengthen their offerings. Read a more in-depth treatment in Personal Individualized Experience: The DNA of Digital Transformation.

This is the Preview of the CDO Guide to Social Business for Digital Transformation, which is part of the Social Business Competency Center in the Chief Digital Office. The preview summarizes thought leadership about market drivers that demand digital transformation of organizations, so each point leads to in-depth resources.

How Digital Social Venues Disrupt Products and Services

Digital social venues enable people to organize, exchange ideas and actively help each other in an unprecedented digital environment, and this phenomenon is rapidly changing the relationships among customers, producer/providers and products/services. Consider products like razor blades, smartphones, business suits and water heaters. Virtually no customer, in isolation, understands how these products are designed to be used, and how they may be used to produce optimal results. The same goes for services like dentists, accounting and Web hosting. This is because customers, in isolation, have little data with which to compare outcomes with choices they make when using products and services.

Customers, in isolation, have little data with which to compare outcomes with choices they make when using products and services. Together, they have better knowledge about outcomes than firms.

Digital social venues change this situation because millions of outcomes conversations, on every topic imaginable, exist online, and, since they are digital, they are relatively easy to find, access and engage. People are getting smarter about increasing the utility of products and services they use. This represents an unprecedented opportunity for and threat to organizations (hereafter “firms”). Find more at Building Post-Product Relationship in the Social Channel.

Threats to Organizations—And New Opportunities

The opportunity exists for firms to address directly the utility that stakeholders (customers, clients, partners, hereafter “users”) try to create with products and services. Before digital social, average user value was far lower because people didn’t appreciate their specific needs and which specific product or service would be the optimal fit. Moreover, they didn’t know how to apply products or services to achieve the best results. This represents a loss to the firm, which can charge higher prices for the same product/service when users are consistently able to create more utility.

The threat to firms arises because there’s nowhere to hide. The market is replete with mediocre products and services that are inferior in design, aftermarket service or any of several other characteristics that make it more difficult for users to attain their outcomes. Firms will have to raise the bar in all areas of their business that affect users, or users will stop buying. Read about IBM’s 2012 global study on retail and ecommerce, How Social Changed Retail: Empowered Customers and Omni-channel Commerce, which shows the impact of customer empowerment in eight mature and seven growth economies worldwide.

Outcomes Are the Key to Value and Profit

Firms that use social business to engage people in interactions about outcomes can become more competitive in the digital age. Firms actively seek to serve people online, and they stop trying to “sell” and “market” to them.

“Selling” and “marketing” refer to trying to compel users to buy when they might not otherwise want to buy.

Sales and marketing seek to create revenue for the firm at the expense of the user. That approach is no longer necessary because, assuming that the firm has products and services that enable users in specific situations to create the most value, the firm’s task is to interact with those users and help them create their outcomes, thereby attracting more users like them. In effect, users tell each other about the most appropriate products or services for their outcomes, so firms need to educate users without trying to “sell.” Communities of users will match appropriate products and services with the desired outcomes. Sales and marketing will never be the same.

Specifically, firms can use digital technologies and processes to transform their relationships with users. Social technologies, ecommerce and mobile interfaces and big data & analytics can enable firms to offer far more value to users by providing Personal Individualized Experience.

The Social Network Effect Enables Personal Interactions At Scale

The network effect transforms communications because it adds leverage and scale to online interactions, which are often broadcast to participants’ networks. Firms that understand this proactively seek to interact with niches of high-priority users. When they have such interactions in public, they demonstrate their care and consideration of users and model caring behavior. Naturally, they also respond to users who initiate interactions. By consistently going beyond expectations in these interactions, they inspire users who are motivated to interact, thereby sharing the interactions with their networks. This increases the audience of the interactions ten-fold on average. In addition, online digital “conversations” function like annuities; users can find them and reuse them at any time in the present or future, so firms’ assistance to users is immortalized.

Networked communications represent a completely new model: firms interact with the few to reach the many. This only happens when their interactions are above expectation, which is achievable when they focus on empowering users to attain their valued outcomes. Also see Networks vs Mass Communications: Using Disruption to Compete.

Social Business Is the Due Diligence Gold Mine for Digital Transformation

The Chief Digital Officer has an explicit transformation mission at most firms that create the position. The firm’s or business unit’s senior leadership recognizes that it must “transform” to increase or maintain competitiveness, and existing executives either lack the digital experience or the time and focus to lead transformation while they run their own functions. The Big Omni-Channel Trap explains how firms risk overspending for mediocre returns by using mobile, big data & analytics and social media for incremental change.

See CDO Guide to Social Business for Transformation Part1 for social business’s two-fold value proposition for Chief Digital Officers. (forthcoming)