Social CRM at a Crossroads? Guest Post #1 by Graham Hill

Social CRM at a Crossroads? Guest Post #1 by Graham Hill

Summary: Note from me: I've known Graham Hill for over 10 years - and I'm glad I do. He is brilliant, an iconoclast, a man of extremely strong convictions and opinions, someone who can show no mercy when no mercy is necessary, and he can bug the hell out of you - but with something to back up what he bugs you about.

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Note from me: I've known Graham Hill for over 10 years - and I'm glad I do. He is brilliant, an iconoclast, a man of extremely strong convictions and opinions, someone who can show no mercy when no mercy is necessary, and he can bug the hell out of you - but with something to back up what he bugs you about.  He is a good human being with a great mind.

Thing about Graham, unlike a lot of folks on the guru circuit, he's actually done this stuff, not just talks about it. He has more years than I'm sure he cares to remember being in the field developing the CRM strategies and programs for companies like Toyota. So he is both a thought leader and a leading practitioner of the art and science.

He is also, and this may be first and foremost, an educator.  He isn't in the business of wanting to be always necessary to your company - and always there - so he develops frameworks, methods, workbooks, and all the other tools necessary for you to learn and then remember what to do at your company.

Over the next few days, Graham will be blogging from the Enterprise 2011 Social Conference in Brussels, while I'm sure munching on some extraordinary chocolate during breaks. I'm happy to say that we'll be carrying his guest posts here on ZDNet (though not exclusively) from the conference which will feature interviews with some of the key participants and of course....Graham. What more could I possibly ask?

For the purposes of these posts, his formal stuff (click on the link if you want to follow him on Twitter, which you should) is:

Dr Graham Hill, Optima Partners

Social CRM at a Crossroads: Where to Next?

Social CRM has evolved from a novelty used by only a few organisations, to a powerful tool that practically all use. Much of this evolution has been powered by the hype cycle. Social CRM is now at a crossroads. It can go in three directions: it can become just another communications channel, it can become a technology solution, or it can become a way to co-create more value together with customers. Only by looking at Social CRM as an enabler for value co-creation can organisations use it to develop a sustainable and profitable business model.

A lot has happened in the last few years. From an interesting new experiment in influencing customers to buy an organisation's products, Social CRM has grown to become a bulwark of everyday business. When I watched a Ford advert on TV in New York recently, the only response mechanism advertised was to go to Ford's Facebook page. Social CRM is now mainstream. But the headlong growth of Social CRM, powered by the ever-present hype cycle, has not been without cost. Organisations that should have leaned from their failure with CRM in the 90s have made the same old mistakes again. Despite these setbacks, Social CRM has prospered to the point where it is estimated to take about 10% of budgets for customer management activities. With this growth comes management responsibility. Social CRM has now reached a crossroads. It can go down any one of three tracks in front of it. One of the tracks leads to short-term success, one leads to medium-term failure, but only one leads to the kind of sustainable success that companies are looking for. Management must now decide which track it wants to go down. The choice is not as straightforward as it might seem.

The first track is to see Social CRM as just another communication channel to market. As inside-out marketing has become less effective, marketers have been on the lookout for a new way to get their message out. What could be better than harnessing the natural sociability of customers to market to other customers? Just look at the success of companies like BMW, which uses Social CRM to identify, develop and support brand fans. And Roger Smith Hotels, which uses Social CRM to nurture relationships with niche networks of the hotel's guests. Or even Medecins Sans Frontières, which used Social CRM principles to communicate with front-line aid workers during the recent Haiti earthquake disaster. Social CRM as a channel for marketing, sales and customer service certainly works, but it is still mostly about the organisation, and not about the customer. Because of this, it can only ever be a short-term solution.

The second track is to see Social CRM as a new technology. Despite the lessons of the wasteful CRM years, many of those responsible for Social CRM just see it as the latest new technology to be implemented. Just buy the technology and you have Social CRM, goes the line of thought. Egged on by technology analysts, like Forrester, Gartner and Altimeter, organisations buy Social CRM tools and implement them without thinking through all the other complementary capabilities required to turn the tools from expensive pieces of software, into enablers for business value creation. There isn't anything intrinsically wrong with Social CRM tools per se, indeed, they can be a powerful enabler for business when part of a more comprehensive approach. Just look at how Lithium enables organisations to create communities that customers can use to get answer questions about its products answered by other customers. And how Attensity enables organisations to make sense of unstructured customer text data. Or even how Spigit provides a platform for organisations to use open innovation to crowdsource product ideas together with customers. But too many implementations of Social CRM technology fail to create value. They are living proof of the old saying about technology from the heyday of CRM: OO + NT = EOO (Old Organisation + New Technology = Expensive Old Organisation). Don't become an expensive old organisation!

The only sustainable track is to see Social CRM as an enabler for value co-creation throughout the customer and product lifecycles. Unlike the other two tracks, this one starts with understanding who is involved in value co-creation and what value delivery looks like to each person. It then looks at the touchpoints over the end-to-end customer and product lifecycles to see how value is delivered and what resources - knowledge, skills, experience, time, money, etc - each person needs to bring to each touchpoint to co-create the most value. And finally it looks at how value ‘flows' between the different people involved at each touchpoint, as they co-create value together through the customer and product lifecycles. Armed with these insights, the organisation can identify exactly which Social CRM tools should be used to enable more value to be co-created. Just look at how Vodafone works closely with customers to co-create new products and services that make customers' lives easier. And how KLM uses Twitter to support customers during their journeys, for example, during the recent Icelandic volcano eruptions when thousands of flights were cancelled or delayed. Or even how Lego provides an entire ecosystem where customers can co-design, co-produce and co-market new Lego building kits to other customers. This is the only track that is designed specifically around maximising the value created for customers as well as for organisation; through the intelligent use of Social CRM at just those touchpoints where it makes sense. It is also the only one that provides the organisation with the sustainable success from Social CRM that they are looking for.

If your organisation is standing at the Social CRM crossroads, I hope you know which track you should take. It is tempting to take the Social CRM as a communication channel track. But you know that will only provide short-term benefits. It is also tempting to follow the crowd and take the Social CRM as a technology track. But you know that just like CRM, you will struggle to achieve the promised benefits. You know that there is only one track to take for sustainable profitability. The Social CRM as value co-creation track. Good luck on your journey. If you chose the value co-creation track we will be with you every step of the way.

I will be one of the ‘Official Bloggers' at the Enterprise Social 2.0 event in Brussels during the 8th/9th March. I will be tweeting (hashtag #es20) and blogging interviews with the people responsible for Social CRM in many organisations just like these. Look out for my tweets and posts from the event over the next few days.

Topics: Software, CXO, Enterprise Software

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9 comments
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  • RE: Social CRM at a Crossroads? Guest Post #1 by Graham Hill

    Paul thanks for sharing this post from Graham

    I think that as Graham notes, most companies who are exploring SCRM right now are acquiring tools and capabilities that serve too singular a purpose and are not integrated into their existing workflows.

    While it is great to add capabilities like Social Media Monitoring to your organization's tool kit, unless you understand how to integrate that tool into your larger business and customer interaction strategy the tools just become stand alone pieces of a puzzle that doesn't quite fit together.

    The value in what is being done at Lithium, Attensity etc is that the SCRM tool is folded into a bigger company strategy on how to derive from and give value back to the customer.

    Michael G. Cohen
    www.michaelgcohen.com
    michaelgcohen
  • RE: Social CRM at a Crossroads? Guest Post #1 by Graham Hill

    Paul, that was a great note.

    Graham, excellent post. Your point about looking at Social CRM as an enabler is definitely the inflection point that will determine success of its adoption.


    While path3 (social CRM as an enabler) is the way to go, I would also support that under certain contexts a firm can start with path1 and then work towards path3 (path 2 is definitely not advisable).


    You are also right about certain mistakes from the CRM years haunting the social CRM world as well. Many firms do not have a end-state framework and go with the assumption that technology will get them to the right station. Sustainability & profitability [in my opinion] depends on having a climate conducive to Social CRM success along with the right structure, roles, accountabilities, metrics and other support requirements to ensure the envisioned value creation and delivery does not remain an utopia.

    Regards,
    Ned
    nedkumar
  • Re: Social CRM and Innovation

    Very interesting viewpoint from Dr. Hill. It's very early days for Social CRM, and still at R&D stages even for early adopters. The three routes identified rather align with who is sponsoring and driving the project: Operational Marketing, IT, or Finance/Exec. Value co-creation is surely a mind-set and corporate attitude. Innovation lies at the core; in products/services, in the way they are delivered and in the way they are created. Social CRM may be an enabler or catalyst in all 3. And as with the innovation process, there are many failures along the way that ultimately contribute to the stellar successes.
    MarkStonham
  • No crossroads for SMB

    KLM, Vodafone, Lego, BMW. That's nice and all, but what about the long tail of millions of small companies who know more about their customers and value co-creation than anyone else in the world? I see no cross-roads for them, just another communication channel, track #1.

    http://blog.relenta.com/social-crm-in-practical-terms

    Respectfully,

    Dmitri Eroshenko
    Founder and CEO, Relenta
    http://www.relenta.com
    relenta
  • RE: Social CRM at a Crossroads? Guest Post #1 by Graham Hill

    I think the very challenge lies in our desire as an industry to put the word 'social' (and acronyms for that matter) in front of everything. Business leaders get fatigued with all the hype before they can even get to setting real business objectives with measurable business results.<br><br>In its simplest terms, business hasn't changed. The goal is to still be a profitable enterprise that serves it's customers in an excellent way. What has changed is the CUSTOMER. They are now online, connected, impatient and empowered. This is one of the single biggest consumer changes in history. The very way in which enterprises need to reach, sell to, service and delight customers by its very nature must change. That is an executive level conversation that has merit, urgency and strategic imperative. <br><br>So at Lithium we agree, it isn't just a communication channel. This is a wholesale shift in how we interact with customers. And it can't just be technology --because it touches every piece of the customer lifecycle, which means it involves processes, workflow, and business outcomes across vast departments. This is complex stuff that no one 'magic technology platform' can solve. It's a combination of strategy, technology, people and change management.<br><br>All that being said those that are going to figure it out first are those that are trying new approaches to engage with the social customer, deploying key technologies and solving the process and people challenges that go with it. Sitting on the sidelines won't get you further in a world that is moving very quickly. So while enterprises may have started with technology deployments, they are uncovering more quickly what they need to grow a comprehensive CUSTOMER strategy (drop the social and relationship management for just a minute and we get a lot closer!!!)<br><br>Loved the post and thanks PG for letting a guest onboard!
    katykeim
  • Thanks for all the Comments

    Thanks for all the comments.

    @Michael

    Like you, I have long been an advocate for the bigger complementary capabilities picture. Until companies recognise that just implementing a Social CRM tool will only result in them becoming an expensive old CRM 1.0 organisation they will fail to get the benefits from Social CRM as an enabler.

    @Ned

    There is value in starting with Social CRM as a channel. Research in new business models suggests that applied at the departmental level, they can be very successful, albeit on a small scale. They are easy to implement, easy to manage and easy to extract benefits from. Things get more difficult with Social CRM as a technology as other complementary factors have to be built alongside the technology to get the best out of it. For instance, Social CRM tools are not much use without social data and analytics to provide actionable insights. This is harder to implement, often requires resources from several departments and can easily tip over into a failed 'expensive old organisation'. The real benefits come when you pull all the business levers across the whole organisation over the longer-term. With the whole organisation focussed co-creating value with customers, Social CRM has a much bigger chance of creating of co-creating sustainable profits.

    @Mark

    You are right that Social CRM is still work in progress. Almost all of the speakers at the Enterprise Social 2.0 event in Brussels confirmed that they were still in the early stages of experimenting with Social CRM. As Stanford entrepreneur Steve Blank says in his posts on Customer Development, ?there are no facts inside the building?. In other words, you have to get out and experiment with Social Media in the market to see what really works. The big shift will come when companies start to look beyond Social CRM as a largely inside-out channel or tool, and start to look at it as a way to co-create mutual value together with customers, as P&G does. This will require a lot of organisational changes if it is to stick. Fortunately, you don?t have to make all of them at the same time.

    @Dmitri

    What goes for MNCs goes equally for SMEs and SOHOs. If anything, value co-creation should be easier. They know their customers much better. They use simpler, leaner, more responsive business models. And the changes are often driven by the owner of the company. Just look at the SME Mittelstand powerhouse in Germany to see what I mean. In fact, many of these companies are already using value co-creation. They don?t call it that and they don?t use the value co-creation frameworks, tools and plans I will write about shortly. But they do work hard to understand what customers need, to bring together all the resources needed to give it to them and to flexibly price around value delivery rather than product sales.

    @katykelm

    The hype cycle is a problem, as are the technology analysts who do most of the hyping of new technology out of all proportion to its putative benefits. Analyst heal thyself! I think you are right when you point out the ideas behind building complementary capabilities (including technology enablers) have not changed. Not building them certainly doomed CRM to failure in the 80s and 90s. And I think you are right when you suggest that it is the CUSTOMER that has changed. Whilst not quite going as far as Paul when he suggest ?customers control the conversation?, they certainly have much more power than they did in the past: To investigate potential products. To contract with companies to buy them. And to get support during the all important value-in-use period that only starts at the point of sale. And customers are willing to use the power too. But I think you are missing the overarching paradigm shift. Once customers have all this information and the power that goes with it, they are going to demand that companies meet them in the middle. In mutual value co-creation. Most companies are still inside out; used to taking the lion?s share of value for themselves and to managing the fallout of defecting customers. Just look at mobile telcos with their 25-30% annual defection rates. That will have to change. Done intelligently, it will mean a move from focussing on just taking profits through occasional incremental sales (value-in-exchange), to focussing on earning potentially much larger profits through continuous incremental value co-creation together with customers over the entire lifetime of the product (value in exchange plus value-in-use). Industrial companies like Rolls Royce, BAe Systems and the UK?s National Health Service already do much of their business this way; using outcome-based contracting. (See Aim Research?s report on Outcome-based Contracting http://bit.ly/g6H5KI for more details). As William Gibson said, ?the future is already here, it is just unevenly distributed?.

    Feel free to engage with me on twitter @grahamhill if you want to know more.

    Graham Hill
    GrahamHill
  • Thanks for sharing

    Hi, I am studying retail management #mkt4760 with @dr4ward at Western Michigan University. After reading your blog, I realized CRM was more than just a strategy to manage a company's interaction with customers. This is very good information and I will share it with my classmates. Thank you for posting it up.
    csc0274
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  • Social CRM & Flexible working.

    Some good points raised here. We know that Social CRM is a recent technology and it will take its time to mature. I'd only like to add that thesame general rules for a CRM to work applies to social CRM as well. My 3 most important ones would be:

    1. A well defined CRM strategy,
    2. The right CRM tool that fits your company
    3. A list of critical success factors

    I'd also like to add that this technology is currently creating a new ways of flexible working, where people colloborate more from remote locations using online tools. There are some interesting articles about these here:
    http://www.vodafone.co.uk/business/perspective/

    .JV
    joseph.volcy