The Social Business Enabler of Digital Transformation [CDO Guide to Social Business Part1]

TheSocial Business Enabler of Digital Transformation reveals how social technologies have changed the economics of interacting and collaborating, and it presents four ways that Chief Digital Officers can use social to lower risk and boost returns of digital transformation.

Social business competency is pivotal to digital transformation because it combines four unusual characteristics. First, it makes interacting and collaborating an order of magnitude faster and less costly than current processes; second, few organizations understand how to use social business to interact with key customers to boost profit, so leaders enjoy rare advantage; third, when compared to ecommerce, mobile and big data & analytics investments, social business shows results quickly and costs less. Lastly, social business reveals what stakeholders really think when organizations aren’t in the room, so it’s effective for due diligence and “requirements analysis” for ecommerce, mobile and big data investments.

As Social Business Enabler of Digital Transformation explains, social business has a two-fold value proposition for Chief Digital Officers: they can use social directly to drive reputation, innovation and profit—and to mitigate the risks of digital transformation investments in mobile, ecommerce and big data & analytics. The Social Business Competency Center has even more resources.

One Tenth the Cost of Current Collaboration

Today’s organizations are built on work processes that were designed around costly analog communication and collaboration, so their productivity and results do not reach 21st century potential. Social business uses digital social technologies to transform organizations (companies, governments, nonprofits.. hereafter “firms”). Social technologies’ transformational power is based on several characteristics:

• Digital interactions are often asynchronous because software features enable coherent group interactions in which participants interact at different times. This drastically cuts the cost of interaction because each party participates at the most convenient time.
• Digital interactions are discoverable and reusable. Analog organizations spend billions each year because employees are solving the same problems concurrently, without knowing it. When people collaborate using digital social technologies, they can search, find and reuse interactions in which that problem has been addressed and perhaps already solved. In addition, the interactions carry the “social” context in which the problem was solved. Digital organizations are said to be transparent.
• Digital social technologies are instant and have built-in collaboration features such as tagging, threaded conversations, synchronous chat, video and co-authoring. This significantly increases their utility.

To put this in context, compare sending an email (asynchronous) to arrange an appointment for a face to face meeting with calling the person and organizing it on the phone (synchronous). The difficulty increases exponentially with the number of parties involved. It may require a month to get even one person on the phone to arrange the meeting! Now think about large firms, which have billions of analog interactions every year.

Digital social technologies make collaboration and innovation much less costly and much faster when firms break down their Industrial Economy organizations and business processes. Until they transform, they won’t compete.

Chief Digital Officers serve as digital change agents. In 2013, most CDOs’ focus is using digital to transform interactions between the firm and its customers, but social technologies transform all relationships.

Interact with Stakeholders to Boost Profit

Digital social technologies cut the cost of communication ten-fold, so they transform relationships. This means that the relationship life cycle moves ten times faster, from discovering specific types of people and initiating relationships to building and maintaining relationships. For example:

• A B2B firm sells industrial soldering supplies and equipment. It used to attend trade shows once a year to grow its pipeline. Now its blogs, which are written by engineers on various applications of industrial soldering [outcomes], are read by industrial engineers around the world, and it gets far higher quality leads continuously.
• A toymaker for special needs toddlers would advertise on TV and in special needs parenting magazines; now its medical and design experts interact online with parents, giving tips on educating their children while having fun [outcome], resulting in continuous leads and goodwill among thousands of individual users in special needs parenting communities.
• A lawn care company sells seed, sod, mowers, hedge trimmers. However, users buy outcomes such as: having a better lawn than the neighbors, having a reason to be outside, or creating a place for the kids to play. Note users have emotional outcomes beneath: increased social standing, connecting to the earth, or being better parents. So the company has its social business team feature horticulture experts and child play specialists interacting in carefully selected social venues where thousands of users are discussing their individual situations—and ten time more are watching. Experts respond to user questions, proving their relevance to outcomes.

The shrinking relationship life cycle is true for all firms and individuals. It means that firms can discover new business much more quickly and inexpensively. It also means that firms’ prospects find each other and discuss how the firm acts “behind the curtain,” from their experience. It means that everyone’s cost of interaction and collaboration has fallen by an order of magnitude. To use this to one’s advantage, however, people and firms must learn how to interact and collaborate in digital social venues, which are a new social context. I call this the Social Channel. Firms and their leaders are accustomed to having dominant roles in their markets. Their dominance stemmed from the fact that they usually had more information about markets, customers and other participants most other players. With few exceptions, commercial firms had more resources to invest in information and systems than most of their stakeholders (clients, customers, investors.. hereafter “users”). This is now less true every day. What most executives fail to appreciate is that “the market” is evolving much more quickly than firms, and users are collaborating in digital social venues and changing their expectations of firms. My analysis of the IBM study details how “connected customers” are now driving the market and retailers are trying to catch up with them. This will soon assail B2B companies; as with “Internet” adoption during the late 1990s and early 2000s, “consumer” developments came to business because people’s expectations changed in the consumer context and migrated to business.

… As with “Internet” adoption during the late 1990s and early 2000s, “consumer” developments came to business.

The threat is that firms have lost control of the agenda. Digital social technologies, because they make communication and collaboration virtually free, are knowledge accelerators; learning is fast, furious and continuous. That means users educate each other very quickly. Since they are accelerators, it becomes very difficult for laggards to “catch up.” In addition, there’s nowhere to hide. Unprecedented opportunity awaits firms that engage users proactively to attain the outcomes they want by using relevant products and services. When firms collaborate with users in (primarily) public digital social venues, several things happen:

• Firms become aligned with users, who only use products and services to create outcomes in their personal and professional lives. Prior to digital social, firms had to pay high fees for very imperfect user research (customers, clients, employees, other stakeholders), so they could only do it periodically. Now their insight into users’ desired outcomes can be continuous. Keep in mind that users’ behaviors are changing faster than anything firms have seen before because they are sharing their outcomes online, hastening everyone’s learning.
• Firms no longer have to “fake it ‘til they make it” because they know what users want. Old-style “selling” is no longer needed because firms build their reputations among dozens, hundreds or thousands of users at once by interacting online and helping users to attain outcomes. In full view of the digital public.
• Firms can collaborate with users to improve their outcomes, thereby creating more value. More value means more revenue and profit.
• When users experience exceptions/unmet expectations, firms can respond in public where they can address the unmet expectations, help the user with attaining the outcome or show their understanding and reasonableness toward the small portion of users that want to be unhappy and complain. Serving users in public by helping them attain outcomes is more effective than any “marketing” a firm can do.
• Firms get continuous access to how users are using their products/services to attain outcomes, which unleashes a continuous innovation capability.
• Firms can offer products and services that add the highest value to specific users; in some cases, they can even get purchase commitments before they make the products!

Most firms harbor some degree of paternalistic attitude toward users: employees, customers, clients, community groups. This is understandable because these individuals and organizations used to have inferior knowledge about the application of products and services to obtain results. However, individuals in digital social venues are far smarter, and they are becoming ideal collaboration partners for firms. Accepting groups of users as collaboration partners requires a major mind shift at most firms. The basis of the collaboration is this:

• Firms will always have superior knowledge about designing products and delivering services
• Users have superior knowledge about outcomes.
• It’s a perfect complement.

To capitalize on this development, all firms need is an approach to social business that’s grounded in developing relationships, not selling products. Most “social” initiatives today are grounded in promoting the firm or its products, which often pushes potential users away. Once firms shift their focus away from themselves and to user outcomes, they can align their stakeholder relationships and boost profitability.

Lower Cost, Faster Results

The four main levers of “digital transformation” that are cited most often are social business, mobile, big data & analytics and ecommerce. Mobile, big data & analytics and ecommerce represent large technology investments in most cases:

• As detailed in the CDO Guide to Mobile, mobile can refer to developing mobile applications, using mobile data to serve users better, using smart device data and others. Applications can be modest in themselves but significant outreach is usually required; mobile data projects are costly.
• “Ecommerce” can refer to online sales of products and services, but we expand it to refer to all websites, all of which have business goals. Websites often involve many technologies, vendors and services, and development necessary to create new “customer experiences” is very costly.
• Big data & analytics almost always requires extensive financial, management and time investments.

By contrast, social business usually uses public resources and free tools. Feedback from interactions is immediate. It requires small teams that interact in short engagements and get quantitative data on the impact of their interactions. It interacts with users on their terms, in the real world.

Social business serves as a continuous, real-time window into user outcomes and “requirements” for mobile, ecommerce and big data.

Touchstone of Due Diligence

Investments that aim to enhance user experience depend on understanding users’ goals (i.e., outcomes), use cases (how they try to use a technology to meet their goals) and overall “requirements.” Most requirements analysis depends on interviewing users prior to development. There are several problems with this approach.

• Interviews only get explicit knowledge from users, and implicit knowledge is often overlooked. Conversely, when users interact online to discuss their challenges and goals, extensive implicit knowledge is unlocked due to the social context. Users mirror other users far better than firms can mirror users.
• Users may not know what they want at the time they are interviewed. Their needs and wants change constantly, based on learning and experience.

Social business, because it uses free or low-cost technology and few people resources, is easy to scope small. Since its interactions are digital, measuring results is instant once the team develops quantitative models to measure change in trust and relationship.

Most of all, social business engages and impacts user outcomes directly. By interacting with groups of users, firms learn about outcomes and can verify their understanding very quickly and efficiently. Developing and validating understanding of outcomes enables firms to increase their reputations and relevance to users. Moreover, it taps the constant channel of changing user requirements and enables firms to create a continuous innovation process. Big data & analytics and ecommerce and “experiences” also seek to impact user outcomes. The CDO Guide to Social Business for Digital Transformation Part2 shows how to use social business strategy to begin digital transformation.

Key Points

• Social technologies have changed the economics of interaction and collaboration. Therefore, they have also affected organizations’ relationships with their most important stakeholders (users). Users’ focus is moving toward the results of using products and services, away from products and services themselves.
• Social business is the fastest and cheapest way to learn about the outcomes of an organization’s users. It enables the organization to assist users directly to have better outcomes (usually involving its products or services). In a short time, it gains deep and broad insight into the impact its products and services have on users’ lives.
• Social business is the most expeditious means of due diligence for digital transformation investments in mobile, ecommerce and big data & analytics.