Sameer Patel has an intriguing new post on the problems of E2.0 and its juxtapositioning versus Business Process.  I wanted to comment, since Helpstream’s main claim to fame is the harmonious integration of Social and Business Process.  That’s not the only thing we do, but it is pretty unique as Sameer’s post points out. 

Process barfs on Social because most Business Process isn’t integrated with Social.  E2.0’s biggest problem is it lacks Business Process for the most part.  Too often it does get thrown out as the silver bullet.  Process insists on considering all aspects.  If you’ve left something out (like your E2.0 software), the Process is not well formed.  If there are ways of doing things outside the Process, that’s a bad thing, at least from the Process viewpoint.

What we’re lacking is simply a harmonious marriage of these two.  Social should be integrated into specific business processes, perhaps many if not most specific business processes. 

When it isn’t, what we have is ad hoc.  We lose the advantages of process in terms of measurability, repeatability, and consistency.  We lose the support of those who cannot see value in anything but process.  In the worst case, it sounds to them like we’re just arguing to hold hands and sing “Kumbaya”.

This is a matter of where we are in the evolution of Social Business Software.  The 1.0 E2.0 products are tools, in some cases they want to be dignified as platforms, but they lack that process component, so they really shouldn’t  be dignified as platforms because they are too incomplete.

We see this evolution over and over in Enterprise Software.  First we get the tools.  This is the Silver Bullet stage.  Everyone expects magic.  But the tools lack specific process.  They do not solve specific problems.  They are not solutions, in short.  As such, the results one sees from them vary wildly.  Nobody seems to be able to put their finger on why things work sometimes and not others.  The answer is that without Process, they haven’t factored people properly into the equation.  Ironic when this happens to software whose whole purpose is to be Social!

In the Tool Stage, only organizations that have really talented and properly empowered people can implement Process on top of their Tools without any help from the Tool get the full benefit.  Companies like Walmart and Dell had ERP and Supply Chain software capabilities back when only Tools were available because their talented people made it happen by brute force.  This is not a scalable model for an industry, but it is a model where some great franchises can be built.  So we have some great Social Case Studies available today.  The scalable model comes when somebody starts to bottle the magic that was done ad hoc by automating Business Processes.  At that point, suddenly everyone can get the benefits.  I’m not saying it’s easy, just a whole lot easier than when it has to be done by sense of smell like the Pinball Wizard.  We have to move beyond the sense of smell stage. 

We’ve reached a point in the evolution where there is enough smoke that it’s time to bring out the fire.  We need to move from the Tool Stage to the Solution Stage.  This is a time honored transformation that has happened before and spawned huge new markets like the ERP and Supply Chain areas I’ve already mentioned.  The requirements are pretty straightforward:

1.  Solve a Specific Business Problem:  No touchy feely stuff allowed.  You can’t just be about making things “better” or “empowering people.”  Passion is great, but call your shot, and if the ball doesn’t go into that pocket, you’ve scratched and forfeit the game.   Helpstream is all about Customer Service.  Our specific Business Problem is increasing the efficiency of your Customer Service organization in dealing with your Customers while increasing their Satisfaction at the same time.  Very specific.  We have just introduced a Social Marketing module whose specific Business Problem is making your Lead Generation and Lead Nurturing more efficient via Social.  How many of the existing Social products are that succinct?

2.  Include Specific Out-of-the-box Business Processes that are Configurable:  You can’t have a Business Process product that has no Process!  You can’t expect a Process to be one-size-fits-all.  What are the Business Processes included with your Social Product?  For example, Helpstream includes an integrated Social Business Process that is all about “getting help” for customers.  There are many other Processes in the product, but that is certainly the keystone.

3.  Map out how the Social Business Processes integrate with Existing Business Processes:  This one is absolutely critical.  Too often the answer from the Tool Stage is, “We won’t need those existing processes any more because our silver bullet is that good.”  Balooney!  Your organization has some sort of Business Process, defacto or formal, for everything it does.  If you’re solving a Specific Business Problem of any worth, there will be quite a lot that needs to be thought through and integrated with.  This is, again, something that has happened in the evolution of many types of Enterprise Software.  For Helpstream, we integrate with your CRM systems.  That means our software talks to your Case Management, Knowledge Base, Salesforce Automation, and Marketing Automation systems.

4.  Be Able to Measure Success:  For the Process world, if it isn’t measurable, it may not exist.  For most of the E2.0 world, measurement has either been beside the point or an after-the-fact nice-to-have that is done grudgingly when the Marketing Department needs a case study to sell more product.  If you’re doing #1, #2, and #3 correctly, your product should be able to measure its ROI continuously.  After all, you have an integrated end-to-end process solving real business problems.  Surely such a process is incomplete if you can’t measure whether the problems actually got solved or not, isn’t it?  Helpstream automatically measures success in exactly this way, by monitoring key business processes all the way to closure and then reporting on the results.  While it has been useful for our Marketing Department, it has been invaluable to our customers and for our product development.  By studying these analytics, we are able to fine tune Best Practices and ultimately distill those Practices into more functionality for our product.  We’ve just kicked off a benchmarking program with our customers where we share these key results about how they’re doing relative to others and help them analyze how to improve.

Social and Process are not strange bedfellows.  They actually work together very nicely.  Process can never spell out every critical detail and exception.  Social is the most powerful tool yet devised to help empower people to fill in those gaps.  This is one of those rare cases where the whole is actually much greater than the sum of its parts.  Aren’t we ready to move to the Solution Stage?

I recently did a couple of podcasts with Phil Wainewright to talk about the evolution of CRM from its original command and control origins to the Social CRM that companies like Helpstream are delivering today.

I have to say it was a lot of fun working with Phil on the podcast.  I’ve also got another one coming with Brent Leary.

To hear (or read) the 2 ‘casts with Phil, try these links:

-  From Soviet-Era CRM to the Social Fabric of the Web

-  Bringing the Service Ethos to Sales and Marketing

Enjoy!

Recently I was talking with Paul Greenberg and he presented me with a particularly elegant concept that he called the “Experience Portfolio.”  He was talking about the collection of factors that influence the overall customer reaction to the transaction they’re consumating with a vendor.  The Experience Portfolio consists of products, services, experiences and tools.  He talks about the balance between these components in a recent blog post and asks some interesting questions:

How do you think about this when you are developing your Social CRM strategy?

Do you break out the likely effect of the products, services, experiences and tools on the overall experience?

Do you weigh the likely impact of each “functional area” and look at how the ordinary is going to affect the overall experience.

Paul didn’t use the “Portfolio” concept in the post, which was a shame, because I found it to be very evocative of the kinds of tradeoffs that have to be made to optimize a strategy for balancing the components.   Investment portfolios are designed to play off different investments to maximize the returns while minimizing the risks.  Each investment is chosen not only for its strengths, but for its ability to offset the weaknesses of some of the other investments.  Investments must be chosen wisely, because there is not infinite capital to allocate among the various choices.  Putting too much capital in one place may work well for a time but ultimately fail spectacularly.  This concept of the need to balance and allocate scarce resources to produce an optimal outcome comes up over and over again in business, so it should be no surprise that we have to deal with it in terms of our CRM strategies, Social or otherwise.

Let’s look again at the components of our Experience Portfolio.  Think of each one as a place a business can invest in to maximize the likelihood of Customer Satisfaction (or whatever you’re trying to maximize for your customers):

Products:   What you are literally selling.  Zappo’s sells shoes, the hotels in Paul’s blog post sell rooms, and McDonald’s sells hamburgers.  Service companies sell Services, BTW, and we should not confuse their “Service Product” with the ancillary Services in our second category.

Services:  Something else that comes along in addition to the Product that the vendor made happen using People.  Zappo’s is legendary for the Service that comes with their Shoe Products.  The Ritz Carlton adds Service to their Room Product.  A public accounting firm may make a practice of hiring accountants that are especially personable or perhaps more likely to resonate with a particular demographic as an illustration of Services on top of a “Service Product”.

Experiences:   Experiences are the most intangible.   Paul’s examples involve Hotels that have gone out of their way to convey a hip atmosphere.  Clearly Apple conveys an Experience, and not just Products with Services.  So does Starbucks.  Many companies offer little or no Experience.  Think of the most generic possible retail products and outlets.

Tools:  Software and other tools used to help optimize, shape, or deliver the other three components.

To get back to Paul’s three questions, let me briefly answer and then expand.

1.  You have to think about the Experience Portfolio when defining your Social CRM strategy, or any other CRM strategy for that matter.  It has to inform how you think about your product, your brand, who you are selling to, and how you go about servicing, marketing, and selling.

2.  You should be making conscious strategy decisions about each one of the four Experience Portfolio components.  Otherwise you won’t have optimized you portfolio except by accident.

3.  You have to weigh the impact of each component in making your decisions, and you should understand how to measure that impact in practice as well in or to determine whether the strategies and weightings you’ve chosen are working.

How should we go about using the Experience Portfolio to help inform our decisions?   A full explanation would make for a nice Business Book and this is just a blog post, so let me borrow from Paul’s Hotel examples and from my earlier musings about Michael Porter’s Competitive Strategies.   Let’s use 3 hotels as our examples.   Each hotel has decided to optimize for one of Porter’s 3 successful competitive strategies.   One, Motel 6, will compete on price.  Another, the Ritz Carlton, will position itself as the very best hotel “product” that is available anywhere.  The last, and I think I’ll use Paul’s Allegro hotel since he liked it.  The Allegro is using the Porter strategy of positioning for a particular niche or demographic, in this case it is people who have an acute aesthetic sense and desire to be hip.

Now let’s go through the experience portfolio:

Product: 

-  Motel 6 has to deliver the absolute cheapest product bar none.  It is entirely focused on good enough not to be a total turn off, but no better.  Spending any more means not being able to pass on the savings to the customer.

-  The Ritz Carlton needs the best possible rooms.  It can’t afford to cut corners on the rooms at all.  The bed, the bathroom, the storage, comfortable seating, and every other aspect of the “Room Product” have to be the best that there is.

-  The Allegro needs to offer a room that is good enough for their niche audience, but no better.  Moreover, if there are aspects of the room that are relevant to that niche, they should be dramatically better even than the Ritz Carlton.  In this case, you get the très chic decor, but the room itself is pretty small.  Paul’s other experience, at the Hudson, made the room so small that they went below “good enough for the niche audience” and created a problem.  They didn’t balance their portfolio properly and underspent on the Product.

Services:

-  Motel 6 will be good enough on Services as well.  The rooms have to be clean, and check-in and check-out needs to be quick and easy.  That’s it.  No concierge.  The service help concentrates on being invisible.

-  The Ritz views Service as an essential part of the product, which is often the case if you’re going to deliver the Best of the Best.  As such, this is a huge focus for them.  They go to elaborate lengths.  Even the people who are just there to clean the rooms are selected for the friendly outgoing personalities.  Everyone you see greets you.  The hotel will go out of its way to do anything you ask, and they’ll spend time thinking of new things to offer before you ask.

-  The Allegro should be focusing on the service levels their niche expects, but without standing out.  They should be thinking of Services that may be uniquely attractive to their demographic.  Since all the decor is very contemporary, let’s assume for example they might benefit from the very best in-room Internet capabilities.  Perhaps you should have Social Media access to their staff rather than having to call.  Perhaps your reservation gets you a personalized web page “concierge” that let’s you get access to all the kinds of things this niche would care about.

Experiences:

-  Motel 6:  Free coffee and danish is a big deal if you’re at a really nice cheap hotel.  Maybe a pool.

-  Ritz Carlton:  From the Old Wealth ambience to the High Tea (if you like tea, you’ll like the Ritz’s) to the locations chosen for Ritz Carlton hotels, you will not be disappointed.

-  The Allegro:  Sounded like they had their experience dialed in perfectly to appeal to their niche.

Tools:

-  Motel 6:  The purpose of any Tool is to let them deliver rooms cheaper.  Self-service on the web would be one example.

-  Ritz Carlton:  Has to be very careful that Tools are not percieved as cheapening the experience.  The Ritz would use tools behind the scenes to ensure the quality of the experience and to enable their people to deliver a better experience than they could without tools.  They would be unlikely to ever force a customer to use these Tools unless customers specifically wanted to do so, but for those customers that want access they would ensure the experience with the Tools was the best possible. 

-  The Allegro:  Good enough not to disappoint their niche, but perhaps quite innovative where that would appeal to the niche.  With a contemporary motif, there is a lot of opportunity to do interesting differentiation with the tools.

Conclusion

This approach to allocating scarce resources to the Experience Portfolio is pretty compatible with the comments I saw on Paul’s post:

Natalie got into an ugly situation with the Westin because someone there pulled a clever marketing trick to appeal to demographics that wanted a bike with their room, but failed to follow through on the Experience Portfolio.  The bike was a tactic, not a conscious strategy, and wound up making things worse for them.  She was absolutely right to be annoyed about it.

I take Mitch Leiberman’s post to be that at some point, you may have maxed out the Experience Portfolio along one dimension without creating a differentiated offering.   When that happens, try reducing the investment on one of the dimensions and refocusing it elsewhere to create a more optimal overall experience.  Classified ads are the same every you look.  Giving more font control or some such wasn’t really going to be worth the effort, so Craigslist broke the mold by investing in other portfolio categories than the “Product” specifically.

Wim does an excellent job of taking the tactical (just seek “engagement” for engagement’s sake) and casting it into a strategic frame:  Either gain insight through feedback or create a more personalized experience using engagement.  The nature of the personalization should be informed by your overall strategy for differentiating for your customers.

Esteban recognizes that customers make choices that are influenced by context, intent, expectations, and the subsconscious.   Have you taken care with your Experience Portfolio investments to properly align those inputs (context, intent, etc.) so that what your customers perceive when forming their impression of you are what you want them to percieve?  If not, you’d better hurry to achieve that alignment.

A collection of excellent blog posts from the Social CRM community are converging on what I think is the real secret of what Social CRM is all about. 

There has been much talk about the “Pillars of CRM”.  Traditionally we have Marketing, Sales, and Customer Service as the three pillars of CRM.  Clearly the world has changed.  I talk at some length about how in the first of a series of blog posts we’ve taken to calling Helpstream’s “Social CRM Manifesto“.  Give that article a read for a good introduction to how the Customer has come to be in Control, a development which impacts every aspect of how companies deal with Customer Relationship Management.  We’ll be publishing the Manifesto as a series that all hangs together and tells the story of Social CRM, at least the way we see it at Helpstream.

Getting back to the excellent series of posts, the first one I read was by Esteban Kolsky and has the wonderful Hawking-esque title, “A Brief History of CRM.”  He’s pushing the idea that Feedback is the Fourth Pillar.  For me, making Feedback that Fourth Pillar is close, but no cigar.  CRM as its practices today is at heart a command and control system, and Feedback as a role for the customer fits into that World View perfectly (it should, Esteban knows one heck of a lot about CRM!).  My problem is that it is way too passive a description of the role the Customer will play in our brave new world, and some of the comments on the post are also uncomfortable for that reason.  We will no doubt define Feedback in a way that seems more active, but it just doesn’t do it for me.  Make no mistake about it, the Customer is in Control.  Ignore at your own peril.  This is why I am so fond of using Paul Greenberg’s short definition of Social CRM which is that it is what companies do when the customer is in control of the conversation.  That’s why I say the Customer themselves are that Fourth Pillar.  They now have a seat at your table, more on that in a moment.

Esteban and I have been trading Tweets on whether Social CRM is really a new paradigm that changes everything, or whether it is more like a new channel or refinement to CRM.  This of course is an argument that erupts at the beginning of every paradigm shift.  It is uncomfortable when things don’t fit the old model and the established priesthood wants to make things fit.  Ultimately, this is semantics.  When the Social CRM revolution is over, it will be part of CRM.  We don’t need to rebuild the whole wheel.  But for the time being, it is productive to consider the two separately.  Make no mistake: Social CRM is not about replacing CRM at all.  It is productive to insist that Social CRM be integrated with CRM, but not to view it as a subset or adjunct fifth wheel to CRM.  The reason is that any subset or adjunct might be viewed as optional.  It might be viewed that CRM will inform the adjunct what to do and how to operate, not vice versa.  Neither one is true, and the fundamental changes the web has wrought in the power of the customer make that clear.  That’s why I keep harping on it as paradigm shift.  Social CRM will change CRM much more than CRM will shape Social CRM.  When that change is complete, that will be the time to put away the banners and place Social CRM strictly under the CRM banner.  Until then, we have a lot of work to do to get organizations to understand the transformative power that Social CRM makes available.

The next great article I came across this morning was Enabling Social CRM is a Convergence of E2.0 and CRM.  This one really expands on the idea that the Customer needs to become an integral part of the Enterprise.  That’s my Customer-as-Fourth-Pillar idea in a nutshell, and is captured with this great quote:

Should it be such a leap to suggest that in order to truly engage the customer, we should invite them into our Enterprise?

Amen!  Now that is what engagement is all about.  That makes sense to me.  The best practitioners of the CRM art actually understood this before Social CRM came along, but so few actually did anything about it, that I continue to rebel against just viewing Social CRM as “more of the same.”  There are profoundly different ways to think about it.  In this case, Esteban himself is eloquent in a comment on this post (that’s why I know our argument is just semantics and he really does “get it”):

And the biggest shift we are seeing is not on technology, people (enterprise), or process – it is in the society and the customer.  The customer model we used for the past 2,000 years or so is no longer the norm.  We can setup any technology (easy, really) to support any processes we want, and train our people to do things in many different ways. But in doing all that we are not really looking at the source of all this change — the customer.

Absolutely positively 100% true, true, true.  And that last part about it not being just process is where you just have to feel Social CRM in your bones.  You either want to engage with your customers, giving them a seat at your management table as your real Fourth Pillar, or you don’t. 

If you don’t, you’re going to apply the old CRM ways and view the new Social as just a set of tools or a new channel to tack on.  This is not so bad.  I read a great story that describes exactly that model this morning too.  It describes a case where someone got terrible customer service, Tweeted about it, and suddenly they got excellent service.  What’s wrong with that picture?  Why did I have to Tweet in the first place?  Why did the company in question place me in a position of having to tell an unhappy story through the powerful megaphone that is Social Media?   Yes, the story ended well for the Tweeter, but in the end, a bad story got told.  In fact it got told not just in the Tweet but in the blog post.  It’s clearly better than a pure-CRM model, but viewing Social CRM as an “escalation mode” where you do what it takes to satisfy the screamers is just not the way to approach Social CRM.

Enough said.  The best news is that we live in a world where Social CRM is rapidly moving more and more mainstream.  The Social CRM conversation is refining and distilling it all down very quickly.  The players in the CRM market are making acquisitions and partnerships (we partner with Salesforce and Oracle, for example) and realizing that Social CRM is not optional.

The Twitter #scrm group is a wonderful place to pick up new threads around the whole Social CRM movement.  But as I’ve remarked before, it is so tough to wring a conversation out of Twitter’s fabric (this is a problem for Twitter, not those valiantly trying to have the conversation), that I generally watch without trying to join in. 

Recently, there has been a great back and forth on customer loyalty.  Does it exist anymore?  Don’t people just buy on price?  Can Social Media affect loyalty?

What had been troubling me about the discussion was its fairly one dimensional nature.  Loyalty either existed or it didn’t.  Blogger Glen Ross put it into a better context for me, by writing about customers that are loyal, versus customers that will always buy the cheapest offering no matter what the service levels are.  Exactly!

I was immediately reminded of one of my all time favorite business books, Michael Porter’s classic on Competitive Strategy.  If you’ve never read the book, you should, because it crystalizes competitive strategy in an extremely powerful way.  In this case, Porter says there are three ways that companies can compete:

-  On price

-  By having the best product

-  By focusing on a particular underserved market segment

Porter is at great pains in the book to point out that businesses have to pick just one of these focuses, and that they cannot afford to try to straddle the fence.  Resources are scarce and all the wood must go behind the winning arrow to succeed lest some competitor do a better job appealing.

If we turn that around to the customer’s perspective, and ask ourselves how it applies to customer service and how Social Media can help, it makes total sense.  These three competitive positions reflect 3 broad categories customers fall into.  They buy for value, quality, or because they are part of some special needs market that isn’t seeing the love.  Companies that successfully tap into the right competitive strategy and focus are simply connecting with one of these broad customer types.

There is a continuum of service experiences companies can provide that range from just enough service to avoid destroying the brand to Four Seasons and Ritz Carlton level pampering. 

Companies on the first part of the continuum are all about the cost savings.  For them service is a necessary evil.  BTW, their customers are very likely the ones who only care about price and service is a necessary evil for them too.  That doesn’t mean bad service can win or survive for this segment, BTW.  It means that at best, service done well for the value segment is service that creates no negatives.  Investing to create positives for this audience probably does not have the same benefit as returning that investment as further cost savings.  Really bad service destroys the notion of value, which is paramount.  If I can’t get the value from the product because of bad service, then no matter how cheap it was, that product cost too much and I”m going to talk about by disatisfaction.  Ironically, the value sellers may have less room for bad service than the other two categories because they already refuse to invest much in service, having passed that investment along as savings.  Hence they have little margin for error.

At the other end of the spectrum, service is part of the customer experience.  It is part of the product you are buying because it is the best possible product.  You’re going to Zappo’s not only because they have the great shoes you want, but because their service makes the “product” of buying shoes that much better than your other shoe buying customer experiences.  I liked Denis Pombriant’s recent description of this kind of service:

Customer experience has come to mean a literal experience had by a customer with a vendor, product or service rather than a product or service cultivated — through value add — to be an experience.

One has a sense that the “literal experience” side is very much reactionary.  It’s all it really can be in the case of a value sale.  The process of delivering service is one of reacting to service needs of customers in as inexpensive a way as possible that avoids doing too much damage.  The other end of the spectrum, the Zappo’s/Ritz Carlton end, is the service that is “cultivated through value add” until it becomes something uniquely valuable itself.

The focused competitive strategy deals with the needs of an underserved market.  It is often a vertical market, rather than a broadly horizontal market.  Yes, the major motorcycle makers may all have off-road bikes, but there are makers dedicated strictly to the off-road market.  That’s all they do, and it is a passionate focus.  They can afford to do better than a maker that wants to cater to all.

Moving back to Social Media and Social CRM, we can see how to mesh up our strategies there with these competitive strategies:

The value player wants to provide service that minimizes the negatives enough that costs are conserved and can be passed on to the customer.  Spending any more than that means they have to raise prices to pay for better service.  Spending any less than that on service means they have to raise prices to pay for marketing, refunds, and whatever else is needed to repair the damage.  The customers are pretty tolerant.  They just need answers when they have a problem that they don’t have to work too hard to get (the link is a hilarious Customer Service story by Zoli Erdos, BTW).  Social CRM is extremely effective at lowering service delivery cost while getting the customer the information they need.

The “most differentiated product” player wants service to be a part of the differentiation.  Prompt, attentive, and friendly service that does the unexpected in the customer’s favor is the order of the day.  Social Media is again, very effective at delivering personalized service experiences.  It’s also effective at helping customers to get together with one another.  Being a part of the group is often something this segment desires, which is why Porsche, Ferrari, and similar marques have owner’s clubs and driver’s course and other “team” activities for their customers.  This is where brand is so important because often brand is not just the indicator of value (that’s thinking for the value segment), but is instead a signalling device that says, “I’m a member of this group.”  Hence that polo player looms as large on the breast of you shirt as the big gold Rolex does on your wrist.  These sorts of customers want to display their affinities, and what better place to do that than Socially on the web?  They will also want more access to your experts and perhaps even celebrities within the organization than you can provide except by means of the Social Web.

The focus category also fits very well.  After all, what underserved community wouldn’t like a special place just for them?  A place that engages in the way they want to think about your products and markets, and that only engages that way, instead of making their world a tab on the side of some larger world they’re not really interested in.

So then what is Loyalty in the context of each one of these categories?  It should be easy to see that the category will determine the nature of the loyalty to an extent.  Loyalty is a measure of the conviction the customer has that your product is a good fit for their mode of buying.  For Walmart, loyalty is a conviction that the best prices can be had in those stores.  That conviction means they tell others about the great purchases they made there.  Like other forms of loyalty, it is emotional, not rational.  Most value customers do not have total awareness of prices from every venue for every product.  They have to let their guard down once in a while, and they will do so wandering the halls of a place like Walmart because they’ve gotten enough deals in the past that they would like to believe all the deals around them are good deals (BTW, they’re not!).

For the differentiated product customer, Loyalty is a conviction that the product is the best.  They are willing to pay more for it as a result and will defend that decision to the death.  It’s always entertaining to watch a value enthusiast (Corvette) locked in a discussion with a differentiated product enthusiast (Ferrari).  The former will remark that their car goes just as fast and costs 1/4 as much, so only an idiot would spend that much on the Ferrari.  The latter will shake their head and somewhat look down their nose at the pooly informed value buyer who thinks they know the soul of an automobile by reading a few road tests in magazines.  They know in their bones that there is more to their Ferrari than the 0-60 times.

I could spell out the meaning of Loyalty for the focused niche customer, but you get the idea.  In each case Loyalty exists and can be accessed by an appropriate strategy.  In each case there is a price to be paid when the company lets their customers down on expectations.  Remember that the same person may be a value buyer for some things, a best product buyer for others, and a focused niche person on still others.  I recall trying to buy a Fax machine one time.  I could care less about a Fax machine, but we had to have one for my startup.  So I was a value buyer.  I had always kind of thought Fry’s was a value seller (they aren’t really, they’re an underserved market seller for Geeks) and I was terribly disappointed when I went next door to Staples (which is a value seller) and saw the same Fax for less money.  Fry’s was never the same for me after that.

Esteban Kolsky writes a great account of Paul Greenberg’s keynote for CRMe09.  By all means, give it a read to get a sense.  Paul has always done a fabulous job of boiling down what’s really important whenever he writes or talks about CRM.

The part that caught my attention was the discussion of segmentation.  It was only a short paragraph, so I’ll repeat it here:

First, Paul rightly mentioned how each of us want to personalize the experiences, and expect the organization to deliver that. The solution is not to personalize on a one-by-one basis but rather to use segmentation wisely.  And that segmentation should not be done on financial value, but rather on the concept of Referral Value.  I would have spent more time talking about segmentation as critical to the success (which I think it is).

This one got my attention because it goes to the heart of a very sensitive yin and yang Social CRM has to delve in to:

-  We must personalize the Social Experience so it is authentic and compelling.  An un-authentic experience is going to do more harm than good.

-  We can’t afford to personalize the experience for everyone when there are so many.  We have to pick and choose using some segmentation strategy.

These two are at odds with one another, at least they seem to be.  Yet, I am not easily comfortable with the notion of segmentation.  For want of a better word, segmentation just seems deflective.  Recall that deflection is the practice of trying to push customers away so they service themselves.  It cannotes the Bad Old Days of Customer Service.  Deflection is anti-Engagement, and Engagement is the watchword of Social CRM.

I recently went back over one of Paul G.’s posts on creating that personal connection, and I remember thinking, “This is perfect, but how many companies will be able to execute it?”  And then I realized it really doesn’t matter if the company can execute or not.  Companies have become peers of their customers.  If a peer can’t execute they’re soon forgotten about and new peers take their place.  Companies really don’t have a choice but to find a way to execute.  It isn’t that the market is unforgiving (though it certainly can be), it is that the market is indifferent.  It is so hard to get the market’s attention these days through any means but word of mouth that you simply can’t succeed otherwise.

Which brings me back to Esteban’s thoughts of segmentation.  Perhaps there is some sanity there, a way to succeed if only it were executed well and with care and respect for the customers.

Segmentation is all about rationing your available engagement to the places where it will do the most good.  Sorry, rationing is a strong word, but that’s what it is.  If you had unlimited resources relative to your customer’s needs, you would not need to ration. 

Now before we talk further about how to segment, let’s consider that Social CRM does tremendously extend our resources.  My customers at Helpstream tell me very commonly that their agents are able to handle 3 times as many customers as they could before Helpstream.  The beauty is that Social is a one-to-many or many-to-many interaction.  If I close a case for a customer, I have only helped that customer.  If I help someone in a Social forum, I have not only helped that person, but I have created visible public content that can help many others.  At Helpstream we routinely measure that Social Help can be worth as much as 16x more than writing another incremental Knowledge Base article. 

So before you consider segmentation, consider how much more powerful you Customer Service will be if you can convert as much of the effort spent today on cases as you can to Social Interaction in your Community.  Those 3x and 16x Social Force Multipliers leave you a lot of headroom before any rationing is necessary because you already have the resources in place to engage.

That’s a beautiful thing, but let’s continue under the assumption that at some point we still do not have enough resources to achieve the best possible Social Engagement without some sort of triage help from segmentation.

How might segmentation actually work in a Social World? 

In the Customer Serviec 1.0 world, segmentation was based on the value a customer brought to the organization.  Your best customers got better service.  The definition of “best” could be derived from your CRM system through a complex organization-centric equation that weighed factors such as:

-  How much business have they done with us in the past?

-  How much business will they do with us in the future?

-  Are they in a happy state of mind or have there been a series of crises such that we had better tread carefully?

-  Are they an important reference for us?

Interestingly, the last two points are very Social in nature.  Maybe there is hope after all!

Esteban talks about the new segmentation as being based on the concept of Referral Value.  That’s interesting to contemplate.  Perhaps it is a function of Social Reach.  Can our Social CRM system dynamically determine the Social Reach of an individual?  Is there some score based on how many channels they use (blogger, Facebook, Twitter, etc.) and how often they speak?

Here is a crude Straw Man attempt to create a set of Referall Value segmentation criteria.  The idea is to segment based on the avoidance of negative word of mouth and the maximization of positive word of mouth:

-  What is the Social Reach of the person?  (Measured by channels and followers of those channels)

-  What’s their Social history?  How much ink do they have out there?  (Never mess with the United Guitar Man again, people!)

-  Do they comment on products?  Have they commented on our products?  Recently?  How broadly?  Positive or negative?

-  What is their Org Credibility in Face Space?  e.g. Does their LinkedIn profile or our CRM record show they are powerful in the Real World?  They could be a 15 year old kid otherwise.

Of course we should also be grabbing some of the original segmentation metrics (such as how much business they’ve done with us) and blending those in as well.

This is all doable, and ultimately, perhaps essential, though we are some ways from needing it urgently today.  My problem is that while I can engage in the academic exercise, I am still deeply concerned about too little engagement moreso than I am about too much and any need to ration engagement.

Today companies are behind the eightball.  They need to prove good intentions.  They need to over-perform on the engagement front.  Many of the more famous brands from a Customer Service standpoint have made over-performance a powerful tool.  Zappo’s goes to insance levels of engagement.  Nordstrom once refunded a customer for a set of tires even though Nordstrom doesn’t sell tires.  There is that crazy notion again that being successfully Social pays back more than it costs, even in situations like these.  That same unfair advantage of being positively Social works negatively.  The cost of getting a segmentation strategy wrong is very high, and we have not yet clearly established the minimum norms needed for customers that segment low on the scale.  This latter is as important as the segmentation itself and leads to what ought to be the subject of another discussion: 

What are the minimum norms of engagement needed in a Social World?

Ross Mayfield just launched a long but interesting blog post entitled, “The CRM Iceberg and Social Software.”  The gist of it is to talk about how little listening companies do to customers and contrast that with how much power there is to be gained by being social.  Ross is a member of the Enterprise Irregular group I belong to, so his post started some discussion flowing.  Another of our members pointed out that being too social can also be a bad thing.  He liked being able to rent a Hertz car without speaking to a single employee, or going through self-checkout lanes at Walmart.  Moreover, he emphasizes that making every customer interaction a one-off social event is not only not what the customer wants, but it is also outrageously expensive to deliver.

I’m absolutely on board about not wanting interaction lots of times.  I would go out of my way and pay more to use a gas pump with a credit card reader rather than go in and pay a cashier.  Same with an ATM.  BTW, I think the web is the best possible place to do that self-service and things like interactive voice menus are just too maddening.  Some kinds of self-service are too hard and they piss more off than they help.  I’m also on board with the idea that being too social can be expensive to service.  We’ve spent a lot of time at Helpstream working on that side of the equation until we have a system for customer service that leaves our customers way ahead on the ROI front.

However, I absolutely don’t want to throw out the Social Baby with the Efficiency Bathwater.  Vinnie Mirchandani commented on the thread that he would avoid social interaction, “Unless the customer wants interaction.”  Excellent refinement, Vinnie.  I would augment that with, “Unless the efficient minimal customer interaction is not working.”  If I have a problem with my self-service gas pump, I want some social interaction right now.  I’m impressed when the operator gets up out of his booth, walks over, and makes the pump work for me.
 
The problem is that so many companies have been intent on making customer interaction efficient, that they have forgotten to keep score via customer satisfaction.  They’re cutting expenses by analzing call center metrics without enough regard to what is happening as a result. There is a second problem as well.  Since Ross brought up icebergs, let’s talk icebergs.  The Old School thinks in terms of triage when it comes to customer interaction.  Give the high value customers lots of interaction.  Minimize the cost associated with low value customers.  Assume that we can actually view these customers as some being icebergs (that one will sink the ship if we hit it) and some being ice cubes.
 
Unfortunately, the web has changed that calculus quite a lot.  Communication between customers and prospects used to be a pretty high friction proposition.  Many markets went out of their way to make it even higher friction.  You have those companies where everything is a total one off, because they don’t want everyone to know what’s going on.  The web, unfortunately for that mindset, gives everyone a pretty darned big megaphone.  Every ice cube can get on Twitter or Facebook, reach out to their network, and start a viral bad mouthing meme that turns that little ice cube into a full blown iceberg.
 
Suddenly, a random airline passenger can be trouble.  The guy may not be in charge of corporate travel for a Fortune 500.  They may not run even a travel agency.  They may never even have flown first class or overseas.  They are not frequent fliers.  Yet, if you break their guitar, suddenly you have a viral PR disaster on your hands.  What is the cost of the damage that little ice cube of a customer did to your brand?
 
At the same time, you have a world where surveys indicate people don’t trust companies at all, they barely trust the pundits, and they are turning increasingly to their peers to understand what’s really going on.  They’ve just been taken advantage of too many times as companies preyed on the lack of good communication.  What is the value of being able to leverage the word of mouth of your happy customers to drive more sales?  The reduced friction of communication that the web brings has both the advantage of communicating value much faster, and the disadvantage of communicating negatives more quickly too.
 
So you can’t just motor along in your big ocean liner, secure that you have enough water tight compartments that even a small iceberg won’t sink you.  There are no water tight compartments.  Any leak fills the whole ship rapidly.  There are also no lifeboats.  Suddenly you need to take care to listen to any customer that might be a problem, if that customer wants to be heard.  You have another choice to make too.  You can force them to go somewhere else to get the word out, or you can welcome them into your own community to talk about it.
 
Either place is going to be pretty public.  That isn’t a choice you get to make.  But at least if you’re making every effort to welcome their opinion and show them you’re listening, you have a better shot at demonstrating to them (as well as to all the onlookers) that you’re trying to do a good job.  If you’ve been good to your customers, they’ll help you in this social setting to convince the unhappy customer to get happier.
 
Companies can really no longer afford to compartmentalize Customer Service and customer interaction.  They can’t count on keeping customers and prospects separate either.  That’s a pretty radical paradigm shift.  But it’s why I love Paul Greenberg’s short form definition of what Social CRM is: “The company’s response to the customer’s control of the conversation.”  Paul is exactly right, which I guess is why I sometimes hear him referred to as the ”Godfather of CRM.”

This loss of control is a scary dynamic that the vast majority of companies have not begun to internalize and deal with.  OTOH, it is a huge opportunity and competitive advantage for those that move ahead of the curve to embrace it while their competitors flounder.

The Microhoo deal looks good to me because the parts are in the right places.  In other words, the deal maximizes the strengths of each of the two players.  Microsoft is essentially going to be providing technology in the form of the Bing search engine and the Ad Center advertising engine.  Yahoo will provide the traffic.

What does this mean for these two companies and for Google?  Techcrunch has a good transcription of Carol Bartz and Steve Ballmer going over it.  The companies moved away from any big up front payments and have focused on ongoing revenue.  I’m sure that’s a good thing for Bartz, who is probably trying to put as solid a foundation as she can under Yahoo’s revenue. 

These articles all seem to provide a lot less detail about how Microsoft will quantify benefits, however.  I have been feeling for some time that it might be a good plan for Microsoft to divest its consumer web properties to Yahoo.  Unfortunately, Yahoo is in a lousy position to pay up.  In fact, they’re actually planning to move expenses in the form of engineers off their books and onto Microsoft’s.

The deal does, however, give Microsoft a huge shot in the arm in terms of Search share.  It leaves Microsoft and Google neatly splitting most of the remaining search share, although Google continues to have to Lion’s Share of search (about 65%).  In exchange, Microsoft will pay Yahoo a whopping 88% of the search revenue in so-called Traffic Acquisition Costs.  At least they’re simply giving up the incoming revenue rather than paying cash sweeteners.  And, the deal is for 10 years, plenty long enough to cover the tenures of Ms Bartz and Mr Ballmer.

Despite the long term of the deal, the companies have budgeted 2 years of transition just to get it all operating.  That’s a typical Microsoft development timeframe, but it certainly does not reflect living in “Internet Years.”  Hopefully that’s a conservative estimate they can beat.  If it takes 2 years to get this thing up and running there’s no telling what kind of moving target Google will be able to put up between now and then.

All in all, it seems a reasonable deal.  MSFT gets to continuing trying to steal share from GOOG with a big uptick from this deal alone.  They’ll be fighting a guerilla war from here on out.  YHOO gets an immediate revenue boost and some significant Opex relief, making their numbers look better.   There’s nothing too earth shattering here, no big acquisition, and no silver bullet against Google, but it is a credible effort.  Google, meanwhile, is going to find it harder and harder to continue to steal share.  They have regressed to the mean and will now grow at the overall rate of the market, because they are the mean with so much share.  The implication is that they need a new growth engine, and until they get one, they will need to focus on profitability through expense controls. 

As I wrote some time ago, their anti-gravity ray has failed and they are now earthbound.  The same could be said of Yahoo’s share price.  It’s a great pity for shareholders that management didn’t take that big juicy merger offer made lo these many months ago.  In the end, said management got tossed and Yahoo shareholders got a much worse deal.  OTOH, MSFT shareholders are getting most of the value at a much more reasonable price.

Seth Godin writes an interesting post about win, place, or show.  Microhoo is definitely about showing.  They’re a long ways from figuring out how to win.  Larry Dignan is a lot less kind.  He says they’re set up to be the new AOL.

What do you think?

Caught VC Fred Wilson’s post today about the importance of not ignoring the lowest common denominator.  In this case he’s talking about SMS and Twitter.  Simeon Simeonov concurs, and its easy to agree with this approach, but let me be a dissenting voice on this kind of strategy.

It’s tempting, oh so tempting, to want to pull in the lowest common denominator.  It’s the theory of getting a few percent of an incredibly large market.  Absent real information, you may as well swing for the big market fence, even though the lights on the stadium are turned off, it’s pitch black, and you have no idea how far out there that fence may be.

Sometimes this strategy works, but most of the time it doesn’t.  Why?  Because the early adopters generally aren’t on the lowest common denominator.  They don’t care about it.  Throughout the years, the winning strategy has been to build something for next year’s highest common denominator.  That’s right.  Build software that doesn’t even work very well on what we have today, trusting that by the time you need a big market to be there, you would have created the perfect product for it.  Go ahead.  Use too much memory.  Use too much cpu.  Use graphics that won’t render on the cheap cards.  It doesn’t matter.  The early adopters already have the more powerful machines, and by the time you have crossed the chasm, everyone else will too.  The origjnal Macs barely ran at all as did the original Windows PC’s.  You see this pattern over and over in the technology adoption cycle.

Fred is talking about Twitter and SMS in his post.  He admits probably less than 15% of Twitter posts use SMS.  What kinds of handsets do you think the vast majority of real live (not the ones who signed up and went away, which may be 2/3’s of the Twitter audience) Twitter enthusiasts have?  Motorola Razors that need SMS?  Or smartphones of one kind or another like the iPhone that don’t? 

His best example is how easy it is to sign up for Twitter with SMS.  That’s great when the Twitterati is at a cocktail party and a bunch of buds are gathered around to see the wonders.  They can be signed up instantly no matter what phone they have (though I don’t ever remember seeing anyone do this even in Silicon Valley, but hey, it’s a good anecdote).  But what are the chances they actually matter?  What are the chances they use the service?  This is resource put into lowering the friction to look, but not to adopt.  As I’ve written before, this is Twitter’s biggest problem.  They did a great job lowering the friction of trial, but the friction of extracting value is still way to high.

Twitter is showing in spades that the problem for a startup is not just to get noticed and tried, it is also to do something so insanely great that people stick to it and care.  As Scoble says (and he refers to Twitter), all the PR hype in the world isn’t enough to build your business.  That’s not to say a lot of people don’t care about Twitter (I’m one of them, BTW), but getting people to care is hard.  It’s a never ending process.  It is not based on balance, diversification, or lowest common denominators.  It is based on focus and value creation.

The Mobile Web is incredibly accessible, but there is growing evidence that it lacks usability and value creation in a major way.  Sarah Perez writes that the success rate for performing various tasks there is only 59% versus 80% on the PC.  Her post is appropos of the common denominator:

Surfing the web with your hot pink Razr’s built-in browser is an experience that leaves a lot to be desired.

It is, in fact, the rise of the smartphone that has made the mobile web such a popular destination on both consumer devices and those designed for business use, like the Blackberry.

Successful apps aimed higher.  They aimed for the Smartphones and the better user experience they provide.

Isn’t it interesting to note how often the more successful and happy Twitter users have to augment Twitter with external clients?  The Tweetdecks of the world?  What if the effort expended around adding SMS support to Twitter had gone to something sexier?  Facilitating real conversations or doing any one of the myriad of things that people turn to these clients to do?

This issue of lowest common denominators is related to diversification, focus, and military strategy.  It comes up in so many ways that are related.  Seth Godin writes constantly about the need to really find your focus carefully and not succumb to too broad a spread.  Mike Speiser on GigaOm writes a great post on how diversification leads to mediocrity.  And military strategists have been avoiding the lowest common denominator for years.  They try to focus strength at a weakpoint, create a breakthrough, and expand that breakthrough to win the battle.

Startups are weak organisms.  Most of the time they can’t afford to chase the lowest common denominator.  There is opportunity cost there that can be fatal.  It is the opportunity cost of failing to diversify, failing to do something really different, and failing to grab your audience in a way that convinces them they just can’t get what you have anywhere else.

By now, you’ve heard Microsoft Office 2010 will include web versions of the Office apps.  Some speculated that Monday’s announcement by Microsoft was what led Google to upstage them with the ChromeOS announcement.  But did ChromeOS really upstage Microsoft, and what will be the impact of a thin client MS Office?

Having been a General in the Office Wars of the 80’s and early 90’s, I can tell you it is about to get ugly for the upstarts and their Webby Office Wannabes.  Zoho, Google Apps, et al have not yet achieved sufficient traction to be anywhere near critical mass players.  They’re not even as far along as the long line of players (including my own Borland with Quattro Pro) that Microsoft dispatched the first time around.  Guys, fair warning: this is the kind of down and dirty competitive fighting that Microsoft does extremely well.  Your days are numbered or at least your growth is capped unless you can find a way around the Redmond Horde, and a lot of folks have tried before you with a lot of resources in the form of dollars and IQ points.

Microsoft will be fighting from their competitive strength.  They own the Office market.  Wannabes have so far failed to even match Office functionality, have many serious incompatibilities (leading to adoption barriers), and have failed to introduce much in the way of innovations short of running in a browser.  Microsoft will shortly eliminate that point of differentiation and at the same time they’ll be adding a whole raft of juicy looking new functionality.  You already weren’t caught up to them on functionality and the bar is about to go higher.  This feature war game is something Microsoft can play all day long, holding your heads underwater until you’re just tired of it.  Even if you one up them on some apps, they have a whole suite and the power of inertia.  Whatever you build, they will deliver their own version of it very shortly thereafter.  It’s an arms race where they bury you much the way Reagan did the old Soviet Union.

The best news is that it’s all good for customers.  It’s all good for us.  At least for as long as it lasts.

This is Microsoft as we haven’t seen them in years.  They are only at their best when they get their backs against the wall.  Bing showed up after years and years of failure against Google and even Yahoo.  Now we’re getting Office 2010.  Real new functionality of interest has been lacking for an extremely long time.  Office 2010 is blowing out all sorts of cool stuff: it runs in a browser, lots of new visual coolness (take that Apple!), and lots of new collaborative functions.  Heck even Scoble is excited.  As he points out, those that declared MS Office dead four years ago turn out to have been very wrong.

So keep it up competitors.  This is good stuff.  You bring out the best in Microsoft.  We know you’re likely to fall on your swords (or theirs) doing it, but it is a valuable service.  Complacent monopolies are a bad thing.  And guess what?  You do have a chance in the war.  It ain’t over and the fat lady hasn’t sung.  But you had sure better get your acts together in a hurry because the sleeping grizzly bear is wide awake and she’s pissed you’re in her territory.