Figure 10.1 Three Major Types of Social Business Activity: Ad Hoc, Process Oriented, and Content Oriented
Chapter 10
Social Business Ecosystems
Engaging with Business Partners
Social media have never been the exclusive domain of business-to-consumer communications, although mainstream media might create that impression. In fact, companies have been using social media well beyond marketing and customer engagement for quite some time. The value chain formed by the social business continuum includes trading partners, vendors, suppliers, distribution networks, and other business-to-business functions. The example of Teva Pharmaceuticals in Chapter Three shows how social business methods can be expanded to include the supply chain and how companies can improve performance in conjunction with other organizations.
For many companies, the business partner landscape is a competitive environment fraught with shifting relationship dynamics, oversight requirements, and intensive ongoing support and maintenance. It's not uncommon for different departments to interact with the same customer, prospect, or partner, pursuing entirely separate corporate goals. Many partner management strategies reduce relationships to us-versus-them equations that avoid genuine collaboration. This reduces the chance of long-term value growth and innovation. Moreover, having more data about what's happening in the relationship process doesn't guarantee better outcomes. The existing people and processes of partnership management, particularly with affiliate networks and value-added resellers, struggle to filter and stay on top of information overload that comes from the many organizations they must work with and support.
Microsoft's example of supporting its partner network explored at the outset of the book provides an excellent example of business-to-business (B2B) social media used to engage with business partners. However, some readers might take issue with the fact that it's a technology company using technology well and therefore not necessarily indicative of what other industries might be able to achieve. For another example of how relationships with business partners can be transformed with social media, let's look at how some other companies are rethinking the way they operate across their B2B channels.
In 2005, American Express experienced scalability issues as it struggled to support a growing number of small businesses as part of its business expansion. American Express, like Intuit's TurboTax, had discovered that the need for information and support from small organizations was just as intensive—if not more so—as it was for its larger customers. Considering what some companies were already doing with online communities, in 2007 American Express launched the OPEN Forum, an online resource and social networking hub expressly designed for small and medium-sized businesses.
At its core, the idea of OPEN Forum is simple: enable small business owners to communicate and share ideas with each other. As American Express researched the idea initially, it discovered that small business owners were seeking to build better connections with similar business owners, compare ideas and strategy, and network with other businesses where they might be able to find and exchange services. OPEN Forum itself consists of two primary areas. The first element is shared content that's kept in an idea hub. It's a virtual community square where industry experts convey the latest ideas and thought leadership, while small business owners can browse through and comment on the information. American Express found that original, useful, and compelling content was the first step in meeting the large variety of informational needs of its small business customers. By ensuring that content was original and exclusive, American Express established OPEN Forum's reputation as a unique resource that drew participants in increasing numbers after the community was opened up to the public.
The second key element of the OPEN Forum is its social network, which demonstrates social business in action. The social network, available to card members, is called Connectodex: small businesses create a profile, connect or “friend” other business owners, and explain who they are and what their business does. Put simply, Connectodex is a social network designed especially for entrepreneurs. The OPEN Forum provides essential engagement opportunities for customers that American Express can't reasonably provide on its own, especially since it's not a small business itself. Often only another small business can provide the advice or information that another small business owner needs.
The success of OPEN Forum has validated the strength of the initial concept. Only three years after inception, the community was routinely passing the 1 million monthly unique visitors' mark.1 Thousands of helpful articles are available, and over ten thousand businesses use the service to help each other and use each other's services. American Express derives benefit from the community by employing a smaller customer relationship staff and hosting a valuable service for customers. The forum is also a strong marketing tool because customers use word-of-mouth to recommend the community and its members, as well as the unique and valuable information it contains.2
What sets the OPEN Forum example apart is how the service connects customers to each other just as much as it connects them to American Express. By making it easy for customers to help each other in unique and varied ways that no single company could match by itself, American Express's approach cultivates satisfied and successful customers over time without substantially increasing the cost of servicing overhead or dramatically raising the communication level required by the company itself. B2B social business enables cost-effective scaling of partner relations while forging a closer network of relationships among partners that's richer, more diverse, and useful for all parties.
In 2009, the international cosmetics and beauty firm L'Oreal found itself in a situation similar to American Express's as it evaluated its network of salons: over four thousand individual businesses located around the United States. The salons are a key distribution channel for the firm: they are the customers of L'Oreal's high-end cosmetic and beauty supplies in service delivery and a retail sales channel for consumer purchase. As it considered the impact that the sustained recession was having on its business, research confirmed that at least 25 percent of L'Oreal salon customers had been significantly affected by the downturn.3 This meant that the network of salons used and sold fewer L'Oreal products, which had a ripple effect up the value chain.
As the world's largest cosmetics company, L'Oreal realized that it had the centralized resources to help salons improve the way they engaged with and delivered services to their consumers. Knowing that salons already had the ability to use some Internet tools such as branded Web presence, appointment scheduling, and instructional beauty and makeover videos, L'Oreal decided that it could best help salons by providing them with an avenue to where consumers spent most of their time online: Facebook.
The result was a customer relationship program aimed at making it as easy as possible for salons to create effective interaction with their own consumers within Facebook. L'Oreal used its considerable marketing resources and experience to provide a tool kit for salons to overhaul their Facebook pages. The tool kit included a series of customizable modules that displayed information including salon logo, hours of business, and services provided, as well as a variety of informative and inspirational videos. L'Oreal also provided education for salons on how to use Facebook to engage consumers better. Another long-standing problem for salons was considered as well: appointment scheduling. Useful third-party social applications were incorporated into the tool kit so that salons could offer appointment scheduling through Facebook, making it possible for consumers to initiate new and repeat business with the salons more easily.
Many L'Oreal salons rapidly adopted the social media services, and the efforts were highly effective at incorporating social media into salons to drive business.4 Stylists were able to forge better direct connections with their clients, and owners benefited from using the more contemporary tools available. The L'Oreal Facebook program went on to win Forrester's 2011 Groundswell award for B2B social media.5 This example shows how a large business can use social media to connect with business partners better by giving them what they need to improve their own business operations. The solution in this case was self-service social media tools that were business specific (related to the beauty and cosmetics industry) and indirectly applied the tenets of social media such that salons could better build and support their customers.
Engaging with businesses though social media to better support them and help them engage with each other for useful outcomes illustrates the relationship management and support aspect of social business partner life cycle. Another key aspect is creating operating connections with partners through social media as part of a company's supply chain. Known as social supply chain management, this approach is a relative newcomer to social business applications, yet interesting results have started emerging. The Teva Pharmaceuticals example describes the story of an internal supply chain improved with the introduction of social tools. Taking things a step further, another Fortune 500 company moved to community-based approaches in the external portion of its supply chain.
In 2006, health care supply company Owens & Minor, a company based in Richmond, Virginia, with forty-six hundred employees and nearly $7 billion in revenue, found itself with a series of growing challenges. Developing new suppliers was a long, cumbersome process, and coordinating among suppliers and internal stakeholders needed significant improvement. Collaboration across individual elements of the supply chain was a related ongoing concern. Owens & Minor had to address these issues with new approaches while sustaining operations in a high-volume, low-margin business. In 2006, it acquired a major new line of business from a key competitor, requiring a major supply chain overhaul in order to complete integration.6
The solution was a familiar one: implementation of community-based supply chain management tools that were more open, transparent, collaborative, and self-service. However, instead of slavishly copying consumer social media, Owens & Minor ended up selecting a product from a company named RollStream that had taken many ideas from social media and online communities, including ease of use, user profiles, document and media sharing, and activity streams, and had crafted them into a working supply chain management tool that is highly social and collaborative and provides a high degree of visibility across supply chains through social media–style information sharing.
Within six weeks, with a new, much lower-barrier workflow for new suppliers, over 220 suppliers had made a successful transition to the new community-based supply chain environment. Suppliers could now enter the community, share files securely, find relevant contacts inside Owens & Minor, and communicate with the company about supply chain status. Perhaps most important, there was broader visibility across all supplier communications within the company. When a supplier said something in the supply chain community, everyone inside Owens & Minor saw it at the same time. Everyone could finally operate and make decisions with the same information because it came from the supplier in a synchronized fashion. The new social supply chain soon had a serious test: a new distribution center in New Mexico suddenly needed to come online quickly, having over four hundred additional suppliers to coordinate and funnel their products through the center effectively. Owens & Minor scrambled to put the new social supply chain environment to work. Because of self-service, ease of use, and smoother collaboration with the new suppliers, outreach and supplier setup were completed in less than a day—an impossible task with the old supply chain.
The Owens & Minor social supply chain demonstrates the effectiveness of adapting social media concepts to specific types of business activities instead of trying to adapt those activities entirely to social media. The results of applying the tenets of social business—create shared value by default, eliminate barriers to participation, engage the right community—on top of a business-specific solution was more effective and supportive of the new vision. Second, it showed how social media can be used effectively for all sizes of B2B companies. All organizations can benefit by allowing employees to tap directly into a current flow of information, enabling better decision making with the best and most up-to-date information at hand. Information becomes easily discoverable, flows naturally to where it's needed, informs others after the fact, and helps coordinate everyone who is involved without the need for additional overhead.
The Owens & Minor example shows the impact of redesigning the way a process works, incorporating social media directly into the way the business goes about its daily activities. This leads to another social business tenet, one that complements tenet 3: focusing on business outcomes for social media:
Naturally a good portion of social business involves general-purpose conversation and collaboration that isn't tied directly to a particular business process. In fact, three primary types of social business activity exist: ad hoc, process oriented, and content oriented (see Figure 10.1).
Figure 10.1 Three Major Types of Social Business Activity: Ad Hoc, Process Oriented, and Content Oriented
These activities, which we address in detail in later chapters, give insight as to what B2B activities may best be addressed by tenet 10. Ad hoc activities consist of unplanned or informal communication and work and in a B2B setting may be simple social interactions between two companies as they seek high-level information or get to know one another. These are less likely to benefit from a focus on tenet 10. However, more process-oriented, and to a lesser extent content-oriented, social business activities are ideal for deeper integration into the flow of work. Many organizations keep their systems of record (IT systems that do the heavy lifting when it comes to record keeping and transactions) separate from their systems of engagement, which include e-mail, phones, and social media. Owens & Minor's overhaul of its B2B supply chain to a more social model demonstrates clearly that when organization brings both systems of record and systems of engagement together in the full context of the work process, improved results are more likely by making work processes and flows of information more open, shared, and participative.
This wide range of representative B2B social business stories, from Microsoft and Owens & Minor to American Express and L'Oreal, shows a spectrum of social business partner approaches, along with a clear story that social media can be used to improve many aspects of the B2B business partner engagement and management process. At the leading edge, such as with the reinvention of information flow across the supply chain, social business paints a picture of how to begin the transformation to new modes of operation with trading partners that provide results impossible to achieve in any other way. Social business has been successful at driving improvements in the B2B aspects of partner support (Microsoft, L'Oreal), customer relationship management (American Express), and supply chain management (Owens & Minor). This then begins to paint the picture of what B2B social business looks like and consists of (see Figure 10.2).
Figure 10.2 Examples of How to Use Social Business for B2B Engagement
B2B social business tends to be a bit more structured than some other types of social business approaches, such as social media marketing. The goal, at least in the examples that exist so far, is to improve specific and often very transactional activities such as overcoming barriers to product development, fixing problems in the supply chain, or getting support for a specific service issue. Relationships between companies are established for a particular purpose rather than just general flows of communication or collaboration. In terms of the ways that social business can be employed to improve B2B outcomes, generally there are at least seven major applications, which we explore in the following sections.
Over time, most companies reach their natural limit on the pace of innovation, while at the same time a series of long-standing product development or R&D barriers goes unsolved. Without a major change to innovation inputs or business situations giving rise to unresolved R&D obstacles, companies are prevented from providing customers with a sustainable, ongoing set of evolving products and services. This can have serious consequences over time and may ultimately lead to disruption as competitors provide solutions to the shortcomings or obsolescence of a company's product line. In fact, companies will try to preserve the problem to which they are a solution and will tend to preserve the thinking that the problem promotes rather than plan for inevitable change.7
Companies can use new social business methods to leave their innovation challenges behind and help break the R&D logjams in their organization. Innovation communities can help, such as those offered by companies like enterprise innovation provider InnoCentive. Based outside Boston, the company has used its expert community, known as Solvers, to tackle more than thirteen hundred challenges across industries including agriculture, life sciences, and high tech using a social business platform that connects companies with socially shared ideas. When companies want to tap into a deep pool of innovation, they can issue a challenge to InnoCentive's Solver community with an award for successful completion, usually between $10,000 and $100,000.
In November 2006, InnoCentive's community tackled a long-standing problem of tracking amyotrophic lateral sclerosis (ALS), also known as Lou Gehrig's disease. An organization called Prize4Life offered a $1 million prize to anyone who could provide a means of measuring the progression of the disease, which would be instrumental in helping to discover a cure. An inexpensive, easy-to-use tool that could accurately track disease advancement in patients would make clinical trials of ALS drugs cheaper, faster, and far more efficient. A solution to this difficult problem had eluded the biomedical industry for decades. The InnoCentive community took six years and the combined efforts of over a thousand Solvers from twenty countries to work diligently to find a solution.8 Ultimately Dr. Seward Rutkove developed a novel technique, electrical impedance myography (EIM), that sensitively measures the flow of tiny electrical currents through muscle tissue. Electric current travels differently through tissue depending on whether it's healthy or affected by ALS; by comparing the size and speed of electrical signals, EIM can accurately measure the progression of the disease. Rutkove later noted that without the effort of the community-based innovation effort by Prize4Life and InnoCentive, it's unlikely a solution would have resulted.
Open innovation can occur in many ways, and the one illustrated here is to tap into focused communities. This highlights a couple of key social business tenets central to the success of this B2B approach: tenet 1 (allow as many people as possible to participate) and tenet 5 (engage the right community for the business purpose).
Another way that companies can apply social business to drive forward R&D and innovation is to foster community much closer to their organization instead of using external communities like InnoCentive. Organizations encountering difficult problems have cultivated collaboration communities, sharing business information and opening processes to collaborate on solutions. To succeed, a company has to open up its internal supply chain to outsiders, typically by providing controlled, secure access to information and processes. It must also enlist and motivate a community of participants to help them solve the challenge at hand.
One example is the Goldcorp Challenge, where Goldcorp, a Canadian mining firm, was having difficulty finding more gold to prospect on its fifty-five thousand acres in Ontario. In literal desperation, it opened up all 400 megabytes of its valuable prospecting data to the geological community for help. Despite worries about loss of secrecy and looking foolish for not finding it themselves, they offered $575,000 in prize money for successful recommendations. More than one thousand entities from over fifty countries applied unique and highly disparate methods to crunching the data, including applied math, advanced physics, computer visualization, and many other creative methods. The success rate was impressive: over 80 percent of the new targets provided from the community yielded useful finds. Ultimately the challenge unearthed 8 million ounces of gold and catapulted the organization from a poorly performing company worth a mere $100 million into a $9 billion mining giant in a few years.9
A similar example comes from the highly competitive field of drug development. Pharmaceutical multinational GlaxoSmithKline (GSK) realized that large, internal R&D efforts were costly and often failed. R&D was more productive in smaller, more entrepreneurial environments, outside the cost structures and management overhead of a very large company.10 The company needed to mitigate the high-stakes risks of new drug development while better tapping a vast global knowledge base to drive innovation.11 GSK soon decided to launch a collaborative drug discovery initiative that would be entirely facing outward, with no internal drug development work of its own to manage; this community of B2B partners would be the sole source of new drugs in this model, and GSK could provide access to specialists, screening tools, and genetic databases, as well as help cooperatively bring new products to market.
The offshoot, known as Scinovo, steadily built its own community around the company, primarily a mix of small and midsized pharmaceutical companies and academic institutions. The result is a highly decentralized community process aimed at creating an effective pipeline of useful new drug compounds. Scinovo itself consists of a small community management and facilitation team that contributes to GSK entirely through the efforts of the community that it has built and no other source. The Scinovo effort has received a great deal of interest and scrutiny in the industry because it's a complete inversion of the process of traditional drug development, harvesting its community for useful ideas and then leveraging GSK's considerable global resources to deliver new products to market. Scinovo holds results close to the vest, but one of its partners, medicinal chemistry firm Ranbaxy Pharmaceuticals Canada, achieved a significant landmark by getting a breakthrough compound for respiratory inflammation into clinical trials. The result will be that GSK will acquire a powerful new drug to treat chronic obstructive pulmonary disease and Ranbaxy could ultimately receive $100 million in milestone payments for developing the drug in community partnership, as well as double-digit royalties.
The key to success for both Goldcorp and GSK was the realization that they had fundamentally limited innovation resources compared to the total knowledge possessed by those inside their industry as well as beyond and then opening up through the use of open community platforms. Success required the willingness to change expectations of how business gets accomplished, who does it, and how to collaborate in fundamentally new ways.
This approach works particularly well when a large company has a great number of smaller companies it must support. Offering traditional in-person representatives or even call centers to provide the often sustained and in-depth support required is a major challenge for companies that depend heavily on value chain partners to sell their products and services. The L'Oreal example illustrates a solution equally applicable to insurance agents, hotel franchises, e-commerce affiliates, and any other relationship where B2B collaboration must occur for the business relationship to realize effective results, such as increased sales in the channel and better customer acquisition and retention. Social business amplifies partner activities by driving network effects and other ecosystem benefits, such as having an organization come together with all of its partner companies to market, sell, innovate, support, or otherwise accomplish business objectives.
As in all social business, technology can be a key enabler for success, such as the tools that L'Oreal made available to its salons, but it's not required, as GSK's collaborative innovation program demonstrated. The program largely avoided traditional social media, but its actual processes and business model hewed directly to the key tenets of social business, making it possible for external innovators to have their drug development efforts amplified through the collaborative process with GSK. This is a key point worth repeating: social business is people-centric and can be supported by effective technology as long as the tenets are followed, but social media technologies themselves, though helpful in most cases, are not absolutely necessary to achieve usable results.
These are private online communities designed just for B2B purposes and may be restricted given the types of proprietary information that is often exchanged in them. The SAP Community Network and American Express OPEN Forum are key examples of this approach. They are typically not focused on a specific type of transaction (like customer support cases) or business outcome (R&D or marketing), but instead allow the community to self-organize in a more general way to do all of these things. Affiliate and partner portals and communities produce emergent outcomes, and benefits cluster around whatever collaborative subjects companies in them choose to focus on. There are two primary participative models: point-to-point, where members can interact only with the business that created the portal, and networked, where members can largely see and interact with everyone in the community (see Figure 10.3). While point-to-point gives the portal's owner more control, it largely eliminates the possibility of useful self-organized outcomes. The networked model is far preferable for results as long as privacy or regulatory issues prevent it from being used. Unfortunately, most organizations still largely provide B2B self-service portals that miss the networked social business opportunity of communities of participants to drive improved innovation, marketing, sales, support, and operations.
Figure 10.3 Outcomes of Point-to-Point Portals Versus Networked Communities
B2B social CRM can consist of a range of activities, from small scale to large, that generally has an effect in direct proportion to its intrinsic usefulness to participants and the size of the community that's engaged (tenet 4). A company doesn't necessarily have to build its own community or even make a large investment such as was required to build something with the quality and scope of the SAP Community Network. A popular way to support customers in social media is to watch their concerns being expressed in places like Twitter and engage with them as soon as issues arise.
This is exactly what Fortune 100 technology firm HP did for small business customers, creating a Twitter account, @HPBizAnswers, connected to the HP Business Answers blog to spread support information (along the way transitioning from local social media to external social media; see Figure 6.2) and complement discussions about small business use of its technology taking place across various outlets.12
For a more strategic use of B2B social CRM, Pitney Bowes turned to social media in order to reduce the ten dollar average cost to handle each customer support call it received in 2009. A large postal rate change took effect, causing a major rise in calls to the company's business support center, eventually exceeding 400,000 incidents. The company determined that social support was one of the few solutions that could provide a dramatic reduction in call center costs.13 It quickly developed a B2B social CRM site and connected it to the main Web site so customers could easily locate the resource and search for answers there instead of contacting the call center. The typical pattern of social support ensued: users began helping like-minded users, who could build up reputation scores through user feedback and “best answers” tags. The savings Pitney Bowes gained from the biggest month of customer service engagement was more than double the annual cost of the social CRM service itself.
Social supply chains offer new ways to engage processes, methodologies, tools, and delivery models of a company's supply chain management efforts. The limited scope and slow pace of enterprise supply chains pose growing challenges for organizations trying to balance the complex equations that govern and guarantee the healthy operation, growth, and evolution of increasingly dispersed businesses. Supply chain challenges are increasing due to intense global competition, rapid price and currency fluctuations, rising energy and transportation costs, short product shelf lives, demand for mass customization, offshoring, and talent scarcity. Applied well, social supply chains can offer compelling new solutions to many supply chain challenges for the following reasons:
Closely related to social supply chains, open supply chains represent the process of systematically opening up and connecting to a partner supply chain directly by self-service means. If two suppliers want to connect their inventory and shipping systems or communicate across their enterprise resource planning infrastructure, the process used to involve heavyweight integration. With open supply chains, the information portion of supply chains is laid open to partners using a simple set of technologies; the partners then connect themselves to a shared set of the company's data using self-service. While this was attempted in the days of electronic data interchange and other large-scale enterprise technologies, this new incarnation is significantly different, incorporating community-based approaches to engage and support participating business partners. In this manner, open supply chains combined with social supply chains support a set of highly complementary social business strategies. However, this aspect of B2B social business has been adopted largely only by Internet firms and Web start-ups, although this is beginning to change.
The most widely publicized success stories of social business hail primarily from the business-to-customer domain. There has long been a perception that relationships between businesses were an order of magnitude, or two or three times smaller than the relationships between business and consumers, leading to the conclusion that businesses may not have enough participants to achieve high levels of network effects. Social business technologies enable scale and distribute workloads to the edge of the network instead of doing everything centrally as in the past, driving meaningful benefits in B2B contexts. B2B social business is not only viable; it can be strategic in most of the many ways in which it can be employed.
The case examples in this chapter show the applicability of social media to B2B, as businesses are made up of people. Those people end up representing a large enough number to make an effective difference when redesigning who, where, and how productive capacity is made of social ecosystems. Given the importance of employees within social business, our focus now turns to workforce engagement and the connected company.