Sunday, October 11, 2015

Sustainable Competitive Advantage

My contention is that the true object of strategy is to sustain value creation, which demands a capacity to relentlessly create and capture new value. The difficulty with setting a given market position or competitive advantage as your strategy’s goal is that its direction-giving guidance is effectively dead upon your arrival. It fails to reveal what’s next.
Sustainable competitive advantage is typically defined as "a long-term competitive advantage that is not easily duplicable or surpassable by the competitors.The American Enterprise Institute reports that the length of time that a company is in the Fortune 500 has declined from 75 years in the 1950s to just 15 years today. Why does is seem to be getting more difficult for companies to create long-term competitive advantage?
One answer, according to author and consultant Richard Foster, is that "creative destruction" is wiping out companies faster than ever. His observation is that big companies are very bad at out-innovating the market and a conclusion one could take from his research would be that big companies are going to continuously be disrupted and displaced by smaller competitors. 
In my opinion this would be the wrong conclusion. I believe that companies CAN get better at strategy and innovation and can participate in the same forces of creative destruction that threaten them. But most do not and here are three primary reasons and some things you can do about these challenges in your company:
  1. People will behave in ways that relate to their rewards. Companies have reward systems that reinforce old patterns and discourage change.
  2. Innovation in 2015 has a lot to do with technology and business leaders do not sufficiently understand technology trends to anticipate how those trends will create disruption. 
  3. Companies have not operationalized innovation as a core process in their businesses nor invested enough in innovation.

Behavior and Rewards
"Hey, our company has an award that the CEO gives out each year for innovation - what do you mean we reinforce old patterns?"
While companies may tinker at the edges with encouraging innovation, the reality is that running a successful business requires most people to focus most of their time on the way things are now and not on the way things might be in the future. Successful companies are successful because they have defined an operating model which allows them to efficiently accomplish a particular thing very well (at least at the moment).
Think of this as a smoothly oiled machine -- for example, a successful hotel chain needs to be good at setting up franchisee hotel owners, filling rooms with guests, monitoring and maintaining quality... and they need the majority of their staff to stay focused on continuing to do those tasks well and NOT be distracted by some disruptive idea like Airbnb.
Can anyone in your company come up with a good idea? Sure they can! Should you have a system in place in your company to let people suggest ideas? Definitely! But the reality of continuing to run the machine is that most people, most of the time, need to stay focused on keeping the machine running as it is and not thinking up how it might be in the future. You have to have sales goals and you need to reward people for achieving them. A successful business has a "business as usual" way of reaching those sales goals and doesn't need all the sales people running around testing new ideas for achieving those goals, many of which would be unsuccessful.
To be clear -- do not get confused about the difference between continuous improvement and innovation -- when you are running business as usual everyone should always be looking at how processes can be improved. But improvement is a fundamentally different activity from innovation. When we innovate we look for a way to do something entirely differently. Airbnb, for example, makes every home owner into a kind of franchisee hotel owner and each makes each hotel the size of one room (or house) -- you can't have your franchisee operations team off experimenting with an Airbnb model when they need to continue opening 100 room hotels. 
It may be a hard pill to swallow, but most people should not be innovating -- that is, should not be breaking the machine -- at least in their primary job. And the incentive models that encourage not-innovating are fine for the most part.
The problem most big companies get into, however, is that the people running "business as usual" have too much power over the future of the organization as opposed to the present. And companies don't have adequate incentive models for that portion of the company which should be exploring and inventing that future -- especially in cases where the future threatens the business as it is today.
Companies need to create the right incentives for all business leaders to embrace disruptive change that destroys business as usual when it has been shown to be successful. And a portion of the company must be given the explicit job of coming up with those ideas that will destroy business as usual and be given the resources to test and prove those ideas.
Technology and Business Leaders
For too long leaders in business roles -- sales, marketing, operations, service, finance -- have looked at information technology (IT) as a cost center. IT is a necessary evil and the CIO's job to manage cost down. But in an age of constant disruption from new technologies, companies need to develop what Gartner callsbi-modal IT. Gartner defines this as
"...the practice of managing two separate, coherent modes of IT delivery, one focused on stability and the other on agility. Mode 1 is traditional and sequential, emphasizing safety and accuracy. Mode 2 is exploratory and nonlinear, emphasizing agility and speed."
Business leaders and IT leaders need to be close partners around mode 2 -- recognizing that technology will be a primary source of competive advantage. Manage cost on mode 1 IT -- in fact outsource or send to SaaS as much of that category of IT as possible. But mode 2 will require a different operating model and a different level of investment. This is where your next product, business model, staffing method, or partnering strategy is going to come from. 
Operationalizing Innovation
Strategy and innovation, as Todd Zenger in the previously mentioned HBR article points out, will not reliably come through trial and error. Companies can not depend upon an ad hoc process for innovation. Any company which seeks to maintain a dominant position in its market must commit to a program ofcontinuous innovation just as successful companies commit to continuous improvement.
The amount of investment required will certainly vary from industry to industry and the strategy for these investments will entail different activities. Some mix of the following are certainly required for any large company:
  • Venture investing both to participate in and learn from disruptive start-ups
  • Mergers, acquisitions and disposal of unproductive assets
  • Continuous examination of market conditions and trends 
  • A scientific approach to the development and testing of hypotheses
  • Investment to engage in these activities at a sufficient scale
The right organizational structure for taking on these activities will include disciplines as widely ranging as business strategy, IT solution architects, experience designers, and data scientists. And these professionals will need to work hand-in-hand with the very business leaders whose "business as usual" operations will be threatened by this innovation.
Companies that succeed in developing long-term competitive advantage will be those that follow these three principles -- creating and investing in a strategy and innovation team and process, making sure that strategy and innovation is developed through close collaboration between business and IT, and fixing incentive models so that business leaders will embrace the creative destruction and benefit from the transition of their existing business as usual to new models.

Saturday, September 26, 2015

Media Spend: Traditional vs Digital

At least once a week I get asked a question by a client like this one I recently received, from one of the world's largest CPG companies:
How do we spend our Digital Marketing budget more rationally?
Often the question is more focused on the transformation underway as companies move from the "traditional" spending categories (print, broadcast, outdoor...) to digital categories (web, mobile, social), like this one from a computer hardware manufacturer:
What percentage of our marketing budget should be spent on digital?
Full disclosure: My qualifications in marketing (other than having worked in marketing for over two decades) are a bit suspect. While my first marketing job was in a direct mail marketing company in the 1980s, the vast majority of my direct expertise has been in leading marketing organizations for digital brands -- an Internet company, a software company, a mobile operating system...

So if you are a traditional marketer, selling soap (or whatever physical good), you might look at my advice and say something like "sure, that would work if my product was entirely online... but my products are made up of atoms, not bits..."

And I sympathize with you, I really do. The past 100 years have taught marketers to believe that there are two measurable things about advertising: reach and recall. How many people did you reach, and do they recall your brand. After all, the important question for marketers has been whether the consumer will reach for your bar of soap or someone else's when standing in the grocery store aisle.

And the medium that we have had available to us (largely broadcast in dollars spent) has lent itself to a logic about advertising that tells the marketer to focus on repetition of a simple and short brand message. Repetition because seeing something over and over again helps the human brain with that recall problem. Simple and short both because our attention span for advertising is short and also because the cost for each advertisement is high (and higher for longer ads).

But two things are happening that should cause every marketer to pause and re-examine everything they believe about marketing and begin asking a different set of questions. First, our purchase patterns are changing -- we are no longer buying something because the packaging stands out from a store shelf. In fact, we are going into physical retail less and less and this trend will continue to accelerate for most product categories. Second, people are moving from a diet high in traditional media to one high in digital media which is changing how we engage with brands and what we expect from them.

A starting point would be to reconsider what Marshall McLuhan had to say about hot and cool media. McLuhan argued that "hot" media were those that provided little stimulus and thus required an engaged and participatory consumption. Whereas "cool" media were those that offered substantial stimulus and where consumption required very little involvement. From his vantage point at the beginning of the development of 20th century media, McLuhan might have assigned "cool" or "hot" differently than we would today, but the basic model of differentiating levels of engagement is applicable as we think about marketing through traditional or digital means.

Traditional marketing fits McLuhan's "cool" media categorization, as epitomized by the goal of repetitive simple and short brand messages. The expectation by the marketer is that the recipient of such advertising will not expend effort in engaging, but must receive the message over and over again in order to get it to stick.

Digital marketing is more complex because many of the techniques of traditional marketing were seemingly transplated into online spaces but the medium itself is "hot" -- we are engaged with the computer or mobile device, clicking and directing our experience and not just passively absorbing whatever might come next. Even with online advertising (the seemingly transpanted traditional marketing approach) success is measured by the click-through -- did the viewer engage!

For digital the marketing equation has been turned upside down. Instead of repeating short and simple brand messages and measuring reach and recall, marketers should be building vehicles that engage people more deeply and then measuring the degree of engagement achieved. And in digital we have an entirely new capability through this engagement: building our knowledge of people (both individually and as groups) through their interactions with our brands. Finally, digital can allow us to connect what we know about a person throughout their entire experience with our brand -- consideration, selection, transaction, receipt, consumption, satisfaction, return... recognizing when and where we have converted a prospect to a sale, or a purchaser into a loyal fan.

Given my self-admitted bias toward digital marketing, it would seem simple to say that companies should be prepared to move ALL of their media spend to digital over the next decade. But in working with hundreds of companies over the last 20 years as digital has continued to mature, I have come to a different conclusion:

Companies should be prepared to move a substantial amount of their total media spend into digital and away from traditional media. This will require a new set of competencies and even a new organizational structure in most marketing organizations. It is crucial to get to a sufficient amount of digital activities to develop true data-driven insights. Without achieving critical mass, evidence for how digital is impacting sales and customer satisfaction will remain anecdotal. For the largest advertisers I have worked with, the threshold was at about 25% of total spend. Smaller companies will likely need to spend a larger proportion on digital.

Digital media should not be limited to "advertising" but should include all experiential engagement with a customer - websites, mobile applications, social media, even customer service interactions -- anything where you can impact customer experience, measure engagement, and increase your knowledge of your prospects and customers. If you aren't already familiar with the concept of "earned, owned, and paid" media, make it a point to read up on these ideas (click for a good article from Forrester to get you started).

As you move to digital and start generating data-driven insights, the transition of spending from traditional to digital will accelerate. I believe that most companies will stabilize at more than 2/3 of their total budget on digital. But traditional marketing will develop to have a new role - the reinforcement of digital marketing activities. One way is to use traditional ads as traffic drivers to digital destinations. Another is to build positive reinforcement cycles for themes that can appear in both digital and traditional mediums. In any case, traditional will often provide the most value when it drives more digital engagement.

In 2015 the thing I am most surprised at is that we are still having this conversation -- that companies are still blindly spending their marketing dollars in the same way they were spent in the last century. Each company certainly still needs to answer for itself, based on the specific industry, buyers, and products, the kinds of questions I mentioned at the start of this article -- how do we spend our digital marketing budget more rationally, and what is the right percentage of spend to move to digital. But answers to those questions won't lead to greater success until we embrace the new role of marketing, that the marketer is now responsible for engagement and customer knowledge -- not reach and recall.

Sunday, September 20, 2015

Tech Bubbles and Escape Velocity

In 1997 I was one of many exuberant entrepreneurs working for a company in this new domain, "the Internet." In telling our stories to investors we all predicted future valuation based on the belief that someday everyone would have high speed connections to the Internet. Its hard to recall today that in December of 1997 only 70 million people had such connections.

By the time we had sold our company in August of 1998 many of these early Internet pioneers, including me, had started to say that we were in a period of gross overvaluation. And when Stephan Paternot and Todd Krizelman took their company,, public in November of 1998 and reached a valuation of almost $1 Billion the first day, our fears of a "tech bubble" were confirmed.

But of course, the party continued for quite awhile after that.

An interesting conversation circulates today amongst those of us that knew each other during the so-called dot-com bubble as we watch the current crop of "unicorn" and "decacorn" companies (and the worsening traffic and accelerating rise in the cost of living in the Bay Area). It feels like we've all seen this before and know how it ends -- but we can't decide, is this 1997 or 1998 or 1999? In other words, how much longer will this particular tech bubble last?

But I've begun to think that we are asking the wrong question. Looking back on the crazy predictions that we made that someday we'd go from a mere 70 million people connected to the Internet to "everyone" connected -- we were right. And we were probably even right about the timing. And this is where tech bubbles are fundamentally different from other kinds of speculative asset bubbles -- there is an underlying economic dynamic that actually is in a state of transformation.

Take a step back and examine what economists mean when they describe something as a bubble. The most basic formulation is when assets are valued in a way that becomes disconnected with the intrinsic value of those assets. One way this happens is when supply and demand fall out of balance for what would otherwise be a stable commodity. Everyone wanting a particular toy as a Christmas present might cause speculators to buy up those presents and put them on eBay at a higher price, creating a kind of toy bubble which would ultimately be resolved either by the company increasing production or another toy coming into favor which would decrease demand.

But tech bubbles are different because we are looking at companies extracting value from a transformation of markets rather than from an unbalanced market. When we made our Excel charts of 70 million Internet users growing to billions of Internet users to convince investors of our future value, we were describing a transformation in the way everything would function on our planet. A transformation that has come to pass and is continuing to accelerate today.

The current set of maturing technologies founded on the infrastructure of the Internet -- social, mobile, analytics, and cloud -- are well on their way to reformulate the way our markets operate. How we select, purchase, receive, and consume products and services is being transformed.

Thus the target opportunity for the tech industry is virtually the entire $18 trillion US economy of which technology only represents 7.1% today. And the $80 trillion global economy of which technology is an even smaller component. Shifting cash flows (and thus valuations) by only a few percentage points would move trillions of dollars out of the old economy and into the hands of technology entrepreneurs and investors, thereby justifying the valuations we are seeing today. Why should Uber ($60 Billion) be worth more than General Motors ($50 Billion)? Because Uber has a plan to shift cash flows from old industries to themselves while GM is still making and selling cars (fewer and fewer as well - down to 3 million cars last year from over 5 million back in the dot-com bubble).

So what actually happened during the dot-com bubble? Why did it burst? Will the current tech boom also turn out to have been a bubble and will it burst as well?

Certainly one element of the valuation of assets outpacing their intrinsic value came through the uninteded consequences of tax policy changes (here is a good and brief overview). But capital could have flowed into many different financial vehicles. The reason that Internet companies attracted the most attention was that the underlying trends really did appear to be correct (and in hindsight they were correct). The Internet really was going to shift old economy cash flows into the hands of technology entrepreneurs and investors. But investor enthusiasm outpaced the speed at which this shift could happen. As a result, too much supply was created too fast -- too many companies selling pet food on the Internet. Business models and valuations diverged too far from intrinsic value and investors blinked.

Which brings me to the question that I think we should be asking right now about the current tech boom. The question is NOT "when will the bubble burst" but instead something a bit more subtle. The question is -- this time around can technology transform markets at a fast enough pace to keep up with growing valuations. I think of this as an escape velocity problem -- gravity in this case being investor expectations. Can the current crop of tech boom companies grow fast enough, deliver results fast enough, to outpace the come back to earth force of investor expectations?

Every old economy company on the planet should be frightened by now of the logic behind this process -- shift cash flow away from every other industry to the tech industry. Technology companies are serving as intermediary entities in which the retail (Amazon), entertainment (Apple or Netflix), or transportation (Uber) revenues go first to the tech company and, only after margin has been removed, back to the old economy creator or owner of those assets (often bypassing prior intermediary models). That isn't what technology used to be about. Tech companies used to create new products (personal computers) that created new markets. But increasingly the new products that tech companies create are disrupting old markets instead.

And this time around the tech industry is moving faster and has many more tools at its disposal to capture the $80 trillion global GDP. It may be the case that tech again fails to achieve escape velocity and that this boom also comes to an end. But over time, tech will win. In the future as the less mature technologies of accretive manufacturing, robotics, and artificial intelligence further accelerate market transformation, the tech industry will have an ever increasing array of tools to capture a larger and larger portion of global GDP.

Eventually we won't even talk about a "tech industry" because ALL companies will be tech companies -- that is, all companies will be dependent upon continuous technology innovation to achieve and maintain competitive advantage in their markets.

So next time someone asks you when you think the current tech bubble will burst, ask them instead when do they think tech companies will slow down in transferring wealth from other industries to the tech industry.

My answer: not until they have all of it.

Wednesday, November 12, 2014

Zero-Minute Crises

On November 3rd, 2014 at about noon EST, Bank of America experienced an online banking outage impacting its 31 million online banking customers and 16 million mobile banking users. The outage lasted almost three hours during which the company issued a single statement via twitter, almost two hours into the event:

Some customers may be experiencing issues accessing online & mobile banking. We’re working quickly to resolve. Thanks for your patience.

Customers turned to social media for answers as attempts to connect directly to BofA failed. Having long ago forwarded local branch phones to a national exchange, customers found it impossible to get someone live from BofA during the outage since the national phone lines appeared to be completely overwhelmed. For hours a bank's customers could not access their money or get any information about when the system would be restored. One week later, Bank of America has yet to issue any statement to customers on why the system went down.

While this one event is unlikely to cause any long term damage to Bank of America, it is an example of a new kind of challenge that companies are facing, one which they are remarkably unprepared to deal with.

Computer security experts describe a zero-day (or zero-hour) attack as one that exploits a previously unknown flaw and thus developers have no time to address and patch before damage is being done. In the same way, companies are increasingly facing emergent communications crises for which they have no time to formulate and communicate a response.


Social media and ubiquitous mobile connectivity are forever changing the expectations that customers have of the timely responsiveness to their questions. In a 2012 study by Nielsen, twitter users were found to expect a response from companies in less than 2 hours. As companies in some industries meet or beat this goal, expectations will continue to rise (or shorten).

Companies have no alternative but to engage with customers, where those customers already are -- today perhaps twitter and facebook but in the future other places and sometimes dependent upon the company, industry, or community that needs to be reached. By comparison to the core marketing budget, the cost of actually communicating with customers on social media is negligible. And customers now expect companies to communicate (they'd much rather get an answer than an ad).


First - you'll need a social media listening and analytics platform scaled to the size of your organization and customer outreach. One client recently described the objective of such a system as "never be surprised again."

Second - develop a team that monitors and responds to customers and also the processes to connect that team with other core customer facing parts of your company -- sales, marketing, customer service...

Third - prepare to be changed by these customer interactions -- expect to gain insights and to make sure those insights get embedded into new ways of operating or into your product/service innovation processes.


I know, it seems like this should all be second nature by now. And yes I have been writing and speaking on this topic for years. But events like the recent Bank of America outage show that our companies are still not understanding the imperative. Do we have to wait for the HBR case study on how a lack of communication with customers has a measurable financial impact on a company to finally make the investments needed here?

Wednesday, July 30, 2014

Social is the Key to Customer Experience

This article first appeared on July 30th, 2014 on Social Media Today -- Social is the Key to Customer Experience

Recently my colleague David Cushman published an article titled The Strategic Role of Content in Proving Brand Promise -- which I highly recommend. David offers a terrific analysis and infographic on how to think about content marketing. But for me the core message was in the scalpel that David applied to the question of why marketers often struggle to succeed with social technologies. I have often railed against the common attitude that social is a "channel" alongside print, broadcast, outdoor, etc for the marketer to consider when planning a campaign. But David puts it very precisely in the first paragraph of his article:

Social Media has confused many marketers for many years. Mostly because it isn’t a media. It’s an exercise in relationship building.

Right. It's an exercise in relationship building. Or, taking the "exercise" metaphor a bit further, its the connective tissue for customer experience (you know, muscles, exercise...). Marketers are now in the relationship building business, not just the communications business. And that joins them to their colleagues in sales and service who have always been relationship builders. As a customer talking with a company I expect that marketing, sales, and service will all be engaged, or each engaged at the right time in my journey. And social can provide that connection to the company through the different phases of consideration, purchase, and consumption.

As I've written about in previous articles, companies in every industry are engaged in digital transformation -- reforming their business to adapt to the changing customer expectations and new opportunities afforded by technology. A focus on customer experience can help align your organization in that transformation process to understand the role of social and how it creates the need for a very different kind of cross-functional behavior across your business. In order to address customer experience holistically (across the complete customer journey) your company will need to develop four distinct types of systems and related operational competencies which will then be utilized across marketing, sales, and service functions.

Systems of Record -- Where your transactional information is stored - critical to empowering your employees to know what is happened in the past with your customer in order to track performance, define additional sales opportunities, and provide service.

Systems of Insight -- The extended data on your customers and prospects which provides the analytical base for insights, both about customer segments and about individual customers.

Systems of Engagement -- How you engage with the customer and manage those interactions

Systems of Co-ordination -- The platform for supporting interactions between employees and with business partners

These four systems together, used consistently across the organization, provide the framework for supporting customer experience. Social is key - providing both a way to link together the touchpoints of customer interaction but also to provide the means by which coordination can occur across the functional teams engaged in that interaction. Social can be a part of deriving insights, can be a part of how interactions are managed, and is core to the collaboration that has to occur in this new interconnected operating model.

So start exercising - you'll need strong social muscles to work through your digital transformation.

Saturday, June 28, 2014

From Advertising to Engagement

This article first appeared on June 28th, 2014 in Social Media Today: From Advertising to Engagement

How many of you have looked at the advertisements on the right hand side of the pages here on Social Media Today? Why is it that even here on a website dedicated to social, advertisers think that the way to achieve their objectives is some generic ad copy with a photo of someone smiling? Who clicks on these things anyway?

I'm not saying that advertising is going to go away anytime soon. But the savvy marketers have all realized one of the most important implications of digital transformation and the connected enterprise -- that they have to create meaningful engagement platforms that build relationships with customers and potential customers. And money spent on advertising must deliver people to those engagement platforms.

For the past several columns in this connected enterprise series I have been talking about the use of social in changing the way a company's own employees work together, changing how companies work with different kinds of partners, and even how digital transformation is impacting a particular industry (IME). In turning to what may seem like the most common way to use social -- engaging with customers -- I want to bring focus to what makes the best engagement strategies work and why they are critical for every company to master.

But let's start with advertising - the old way for a company to achieve its core objective: sales. For 100 years we have been perfecting mass marketing techniques. Buy the attention of a market and some number of people within that market will buy your product. Get the focus on the market, the dollars paid to reach each person, and the conversion rate just right and you make money. A lot of what happens in that process is mysterious (and the more mysterious the better for those Mad Men advertising agencies). But there is a basic formula to the possible ways in which you can get someone to pay attention to you in the interstitial world of broadcast media:

1) Interrupt: first break into whatever else your customer is doing, preferably in a way that makes them wait for you to be done telling them what you want them to hear before they are capable of going back to what they want to be doing

2) Entertain: then give them a little bit of entertainment value to tickle their brain cells into paying attention long enough for your message to sink in (although don't be surprised if you have to repeat an average of 6 times)

3) Inform: fill them up with your message goodness - buy now!

Whether the advertising is for a good product or a bad one and from a reputable company or a shady one, the formula is always about the same. And it worked for years - for a whole bunch of reasons that are no longer valid. Remember those bad old days where you couldn't research a product online? Where there wasn't even an online? Advertising was a content element in the media stream, a way that we actually learned what was going on in the world (at least the world of commercial products and services).

Companies now need to do a whole lot more to create the experience that we want as buyers of their products. Increasingly consumers have no patience for having their attention bought -- and this started happening BEFORE the Internet. The proliferation of cable channels starting in the 1980s combined with the advent of the remote control was an early way that consumers could avoid advertising by channel surfing. One client I worked with (a family style restaurant chain) did a study of the decline in television advertising effectiveness and traced the beginning of the end back to the launch of CNN.

But the Internet and social technologies have accelerated this decline in advertising effectiveness while simultaneously giving marketers an alternative -- a chance to transform their approach from advertising to engagement. Each of those steps in the old advertising formula have been replaced with an engagement step...

From Interrupting to Connecting -- the new marketing style starts with the curation of communities

From Entertaining to Collaborating -- your customers have things they want to do and when you connect to them instead of interrupting them you have a chance to work with them on what they what to do

From Informing to Supporting -- finally, the goal of the engagement must ultimately be the creation of value for your customers -- supporting them not just giving them the message you want to give them.

In the next three posts I will explore these three key transitions in depth and how marketers, salespeople, and service organizations must all work together to create valued engagement with markets.

Wednesday, June 25, 2014

BPM and the Employee Code Halo

This article first appeared on June 25th, 2014 on Social Media Today -- BPM and the Employee Code Halo

Every employee in your company has a Code Halo - a set of information and activities that can be managed through your company's information systems. Building a set of social collaboration systems for your employees to work with one another establishes a system where this Code Halo is stored, how it is exposed to other employees, and how it can be used to improve coordination between employees. This information is used in the workflows and business processes that employees engage in every day to get their jobs done. And in the digitally transformed company, the tools used to manage those workflows are a primary source for improved business performance.

In my last post I emphasized the importance of what I called the "engaged employee" and the need for culture change in companies engaged in digital transformation (Culture Change and Engaged Employees). This post was part of a series that have been appearing here in Social Media Today on the broader topic of how social technologies play a crucial role in how companies will need to reinvent themselves to address the challenges of shifting customer expectations (Enterprise Transformation and the Role of Social).

Having outlined how social is impacting the way employees work, the way companies interact with partners, and new models for customer engagement, I had started to outline the people, processes, and technologies needed in the transformation process. And in doing so, I utilized Cognizant's concept of Code Halos which I had written about at the beginning of this year (2014: Year of the Code Halo).

The first article in this section addressed how companies should be using technology to improve customer interactions and the overall customer experience. Customer Relationship Management (or CRM) software provides the core "system of engagement" for companies to manage across the customer lifecycle -- marketing, sales, and customer service should all share one unified view of the customer, a view that includes social profiles and activity (CRM and the Customer Code Halo). In this article I will explore a second key technology -- business process management (BPM).

I suppose many reading this article are asking, why is it that I should care about BPM? Sure I've heard of the concept, you might be thinking, but then you think, "it doesn't apply to me or to my company." To address this thought and hopefully increase your interest in BPM, instead of using the technical name, I'll begin by breaking this down to the building blocks in order to explain why BPM does apply to you and to your company and is crucial to the use of social and the transformation of your business.

Everything we do in business has a set of written or unwritten rules about how and when it should be done. And rules about who should be doing the work and with whom they should collaborate. Workflow, approval processes, standard operating procedures, protocols... these are all words we use to describe these rules. As social systems for coordinating our activities become more sophisticated, the expression of these rules will become more explicit.

Consider an HR process that would benefit from social interaction -- for example hiring a new employee. In a typical company recruiting process, at least 4 people will likely need to interact with a candidate and will need to talk with one another as well. Each will express their opinions and perhaps yet another person will actually make the hiring decision. This is the kind of complex coordination problem that social tools can improve.

Whether the company has explicitly written down the process or not, there is a workflow and a series of approvals that have to happen during a hiring process. When these rules are expressed in social systems, they improve and streamline the way work with one another and companies realize the greatest benefit from those collaboration investments.

A simple process outline might include

  • routing the candidate to interviewers in a particular order,
  • providing a copy of the interview notes and tracking whether they have been reviewed,
  • recording the rating given by each interviewer,
  • notifying approvers of the need to review the candidate,
  • flagging interviewers to answer questions raised by approvers, and
  • recording the hiring decision and generating an offer letter.

Business Process Management (BPM) can streamline this process, reducing the need for a person to manage each step, track progress, and make sure that participants are engaged. The goal of BPM should be to fully automate as many processes and process management activities as possible and to facilitate those that cannot be fully automated, reducing the rote work of coordination to a minimum.

Two primary models are emerging for the use of BPM in social collaboration activities between employees.

In some complex business processes where dedicated BPM solutions have been implemented, there can be specific stages of a process where social collaboration is needed. In these cases, the BPM system should trigger an event within the social system and track engagement or resolution so that the next stage in a process can begin.

An emerging alternative is to define workflows and approval processes directly in the collaboration platform without the use of an external BPM product. At the present the sophistication of such systems is relatively low by comparison to dedicated BPM products and so the workflows that can be implemented are simple. But this will be one of the areas of significant growth in coming years, as social collaboration software is increasingly used to facilitate employee collaboration.

Just as mastering CRM technology will be essential to your company's use of social in managing customer interactions, mastery of BPM will be essential to the use of social in managing employee interactions. These are just two of the core building block competencies needed on the journey to digital transformation. In the next article I will address how the organizational model will change to allow companies to effectively embrace these competencies and change from functionally independent activities to integrated and coordinated activities.