2nd Dec 2011
As a follow-up to Marketing talk-listen ratio: The formula for getting more from social media?, Jack Springman discusses grounding social media implementations in a higher level business or customer strategy.
Any CRM veteran reading through the array of analysts’ reports, articles and blog pieces on social media generally and social media CRM in particular could be forgiven for thinking of baseball legend Yogi Berra’s quote “It’s déjà vu all over again.” Berra’s malapropism was sparked by watching two New York Yankee team mates repeatedly hit back-to-back home runs. With SCRM the opposite is more likely to be the case. Unless there is a fundamental change in attitude, companies will strike out with their social media investments in much the same way as many did with their CRM implementations when the envisaged financial benefits failed to materialise.
One of the main learning points from the original CRM wave was ensuring the CRM strategy was anchored in a customer strategy that in-turn had been designed to support the over-arching business strategy. Few would disagree with that in principal – more of a problem is that what is frequently described as a social media strategy is little more than a standalone, wish-list of objectives – neither constituting a proper strategy nor serving a higher one. This often happens when the process works in reverse – rather than define the business’ strategy and work out how CRM or social media should support it, the opposite occurs. The strategy is developed with the technology in mind, effectively to justify its implementation – discordance with the organisation’s higher strategic purpose meaning the benefits assumed in the financial case never materialise.
With that in mind, it is perhaps worth identifying what a business or customer strategy that is to be the foundation of social CRM implementations should include.
1. Choice articulation
At its simplest, strategy is about placing bets - a strategy is a set of choices that a business makes. Ultimately this means that other choices have been rejected – a hallmark of companies that truly understand strategy is that they can describe what they will not do as clearly as what they will. That requires courage – both in terms of being willing to come down on one side or another and be transparent about it.
Typically a business needs to make choices in three areas which can be summarised as participation, competition and organisation.
- Participation refers to where the business chooses to operate – the geographies, sectors, parts of the value chain, customer segments, even down to specific customers that will be targeted.
- Competition covers the choices as to how the business competes – how it intends to create superior value for customers than its competitors on a sustained basis.
- Organisation covers choices about the capabilities the business develops to deliver its differentiated customer value proposition and maintain its competitive advantage.
2. Focus clarification
The second component of good strategy is that it outlines the critical challenges that the business faces - the 2-3 or so that will have the greatest impact on future profitability. These are the challenges that provide the most financial leverage – overcoming them will generate the greatest positive returns (including successfully defending existing positions against aggressive competitors as well as capturing opportunities created by a significant change in market conditions). Meeting these challenges is what the strategy needs to focus on.
Identifying the challenges and prioritising them requires detailed and honest analysis of external factors – market trends, competitor moves and changes in customers’ needs or expectations - and strengths or weaknesses in internal capabilities. The latter are both the springboard for meeting external challenges and sometimes the critical challenge if they are limiting financial performance.
3. Outcomes, objectives and performance measures
A good strategy will also describe the outcome that the business will achieve if it overcomes the challenges outlined, both in strategic terms (e.g. unique positioning; market, product or cost leadership; sustainable advantage) and financially - the revenue and profit uplift that will be generated.
High level outcomes are impacted by what others do (a simple example being a race in which you come third, despite running a personal best, because two others ran faster). Cascaded beneath these outcomes are the objectives that the business needs to achieve – new product introductions, service enhancements, facility consolidations, complaint resolution – if it is to reach the desired outcome. (These are what is within the business’s control – in the race analogy above it would be setting yourself a target of achieving a certain time.) These objectives will shape every day activities so the range needs to be broad enough to avoid the distorted behaviour that overly narrow targets introduce (even if for a number the objective is simply to maintain current performance levels).
Finally there are the KPIs or performance measures that will be used to track progress towards the financial goals, these typically relate to the assumptions in the financial case. The classic customer strategy measures relate to customer acquisition, retention, growth and profitability.
4. Customer value proposition
In the words of strategy guru, Michael Porter: “strategy must start with a different value proposition”. This defines how the business will compete. In the foreword to his seminal book on the subject he states “competitive advantage grows fundamentally out of the value a firm is able to create for its buyers. It may take the form of prices lower than competitors’ for equivalent benefits or the provision of unique benefits that more than offset a premium price.” (If he had only called it customer advantage instead, there would probably be far less of the macho posturing – including war, sports and chess analogies – that passes as strategic thinking.)
The customer value proposition needs to be the starting point because before a business can make money for itself, it has to create value for customers. (This argument can be extended to all stakeholder groups, as a follow up piece will highlight.) Unfortunately this frequently gets forgotten – the value created is assumed with the focus overwhelmingly on the business’s interests. Such thinking is innate to human nature. We are pre-disposed to egocentricity - to see the world from our perspective and focus on what is in it for us (for example, overly focusing on selfish listening). And it characterises much of the thinking on social media (as described below).
5. Holistic capability development
The customer value proposition, key challenges and desired outcomes act as the anchors for capability development. Clear, unambiguous definition of all three enables prioritisation – which activities need to be performed to the highest level, which to only a basic level (or not at all) and which to a level somewhere in-between. That then clarifies which need to be retained in-house as they are strategically critical and which can be outsourced at no disadvantage.
Following this, the operating model can be defined. The operating model considers people, organisation, culture, processes, IT (including social media) and performance measurement. Critically these capability levers need to be considered holistically as they are both complements and substitutes. (For example, the more you invest in process design and automation, the less reliant you are on experienced and knowledgeable staff.)
Implications for social media strategy
1. Beware hype and self-importance
A social media strategy should not exist in isolation - it should serve a higher strategic intent. Social media may shape customer strategy through extending what businesses offer to their customers or enabling greater understanding of target communities, so the idea flow might be more two-way than with other capability strategies, but ultimately an enabler of customer strategy is what it is. As such it should also sync with other capability strategies (e.g. competency, CRM, etc.).
2. A social media vision is not enough, indeed it may well be damaging
Since Jim Collins and Jerry Porras wrote Built to Last, highlighting how great companies used visions, missions and values to shape their strategies, that template has become very popular. As with many ideas in management science, what works in great companies often does not work elsewhere. In his book Good Strategy, Bad Strategy, UCLA Professor Richard Rumelt highlights vision-based template-style planning as one of the hallmarks of bad strategy. It is an enjoyable and fun approach to use – we are all made a little giddy by stratospheric conversations on corporate purpose and 20-year goals – but it’s this appeal that makes them dangerous. Hard trade-offs can be ignored.
Fudging is the antithesis of good strategy which is why Vision-led strategies are inherently weak. Visions are intended to inspire and have wide-spread appeal. They talk about what a business will do, not what it won’t. Visions are designed to co-opt widespread agreement and articulating what won’t be done risks generating disagreement and discussion, both of which are critical to good strategy development. Going from vision to strategy requires a fundamental change in mind-set, but that is frequently missed. The result is a strategy designed to appeal more than create value. Have fun drafting your social media vision, then once you have perfected it, put it to one side and forget about it.
3. Fill in the blanks
It may be the case that no clearly defined customer strategy exists or that the business strategy does not:
- Clarify the choices made on participation, competition and organisation.
- Confirm the principal strategic focus and desired outcomes; articulate the customer value proposition.
- Define approach to capability development.
If that is the case you have two options. Firstly to inform the person responsible for strategy to improve the quality of their work (inadvisable – strategy directors tend to be a bit touchy about such matters). Alternatively you can infer what is missing by asking questions of relevant senior people (emphasising that you just need the answers to help with the development of the social media strategy) then document the conclusions that you draw as assumptions. That way you will both have the anchors you need to draw up a social media strategy that supports the corporate purpose while being completely transparent about the basis for your reasoning.
4. Focus first on customers interests, not the business
For all the talk of CRM systems improving the customer experience, the reality was something different – technology was used to automate customer-facing processes to improve efficiency, control sales teams, acquire new customers, increase cross-selling and move customers to lower cost channels. Such a one-sided perspective frequently degraded the customer experience to such a degree that customers defected so the predicated revenue gains did not materialise.
The same mind-set seems to be taking over social media implementations. But because social media amplify customers’ complaints, the risk of defection is multiplied. For all the talk of how social media will improve the customer experience by enabling a dialogue between companies and their customers, a company-centric rather than customer-centric agenda predominates.
If customers are mentioned, it is in the context of the business’ desire to better engage with them – not serve them better. (Ask a customer whether they would prefer to be better ‘engaged with’ or better ‘served’ and the answer will be pretty clear – they will rightly equate ‘engaged with’ as a euphemism for ‘sold to’.)
Worse, this is as good as it gets from a customer-centricity perspective as after the dubious merit of better engagement comes a long list of benefits that are totally one-sided - identifying influencers, protecting the brand, generating positive PR, lowering advertising costs, identifying leads and opportunities, reducing support costs, etc. Unless social media implementations are rooted in delivering meaningful value to customers – saving them money, increasing convenience, enabling speedier service, widening choice (not just of contact channels but also services provided), enhancing security or heightening enjoyment – the risk of a backlash is high.
Learning from the past
History has shown that technology implementations deliver greatest value when they serve business strategy. As tempting as it may be to create a social media strategy, it will be valueless unless firmly grounded in a higher level strategy that enables prioritisation. If such foundations do not exist, the chances of social media implementations not meeting desired objectives are much increased.
Jack Springman is head of customer analytics at business & decision and the author of Elusive Growth: Why Prevailing Practices in Strategy, Marketing and Management Education are the Problem, Not the Solution (2011). His blog can be found at www.jackspringman.com and his Twitter feed is @jackspringman