Like the rising temperature of the water the proverbial frog is sitting in, organizations are feeling the social era all around them, but failing to notice how significant a change it has produced. Because it has shown up in bits and pieces, via freemium models, crowdsourcing, online communities, virtual workforces, social networks, and so on, it is easy to miss how much the overall context has changed for the way value is created.
You might notice that I have used the term social era. It’s not to create more jargon, it’s to emphasize a point: that social is more than the stuff the marketing team deals with. It’s something that allows organizations to do things entirely differently — if we let it become the backbone of our business models.
How does this work? What are the rules? What does it mean for all parts of my business? That’s something I will be exploring in several posts for HBR. Here, let me start with three major shifts that I see:
Lean, not big. Most organizations operating today started when companies needed more operating capital. Being big was in itself a mark of success. And in fact, being big created a natural barrier to entry for competitors. The “big” mindset continues to form an organizational framework for many institutions. Take banking as a visible example. Bank of America recently considered a $5 fee for customers to get their own money via their debit card because they have to find a way to fund all those retail storefronts. But if they were launching today, banks would likely ask themselves how to accomplish the transactions (deposits, withdrawals, financial management) of banking without the physical commitment of banks. They might try what ING is doing with its café model. They might even reimagine what it is to lend money. Instead of competing with new startups like Lending Club or ProFounder, they might be the ones reinventing the space.
Conversations, not chains. Many organizations still operate by Porter’s Value Chain model, where Z follows Y, which follows X. These linear models optimized efficient delivery of a known thing. But this doesn’t help us when faster, fluid responses are what we need. Fifteen years ago, The Cluetrain Manifesto taught us that markets are conversations and that was a great starting point. But “conversations” can actually go deeper if you allow them to become central to how you work, rather than leave them on the perimeter of the work. How many companies have figured out how to shift from supply chain management to integrating customer feedback directly into their product design, distribution, and delivery? Because that’s the point.
Mass markets were a convenient fiction created by mass media. Television and major magazines could only reach only very vague demographic segments like “women of child-bearing age” and “college students,” so a lot of organizations still think of that as “targeting” their offer. But real markets are much more precise.
Finding out where any particular customers hang out and talking with them directly is central to accurately understanding demand and building it into the business model. Case in point: Gap missed many of its performance numbers in 2011 by believing that their only interaction with their customers happened at the cash register.
