Social Business - or whatever happened to Enterprise 2.0?

Scanning the London Social Media week programme I see that we seem to have traded in "Enterpise 2.0" for "Social Business" in about the last 2 years or so (Well, it was Enterprise 2.0 2 years ago in Social Media week ). I naturally got curious about whether it was a new bottle for old wine, or if there is genuinely something new going on. (Ironically, I can't attend as I am far away designing an Enterprise IT strategy, and it encompasses Enterprises 0, 1, 2 and elements of Social media - see further below)

Enterprise 2.0

Wikipedia defines it as:

Enterprise 2.0 is the use of "Web 2.0" technologies within an organization to enable or streamline business processes while enhancing collaboration - connecting people through the use of social-media tools. Enterprise 2.0 aims to help employees, customers and suppliers collaborate, share, and organize information. Andrew McAfee describes Enterprise 2.0 as "the use of emergent social software platforms within companies, or between companies and their partners or customers".

Social Business

This once meant (says Wikipedia):

"Social business, as the term is commonly used, was first defined by Nobel Peace Prize laureate Prof. Muhammad Yunus and is described in his books Creating a world without poverty—Social Business and the future of capitalism and Building Social Business—The new kind of capitalism that serves humanity's most pressing needs.

And I once understood Social Enterprises, which back in the day were:

"A social enterprise is an organization that applies business strategies to achieving philanthropic goals. Social enterprises can be structured as a for-profit or non-profit."

In essence, Social Busines has shifted its meaning to encompass for-profit enterprises, and the aim is to increase profits and reputation. As Wikipedia delicately puts it:

Many commercial enterprises would consider themselves to have social objectives, but commitment to these objectives is fundamentally motivated by the perception that such commitment will ultimately make the enterprise more financially valuable.

So has anything actually changed apart from For-Profits trying to put on prevously Not For Profit clothes? Whereas I think we have seen a semantic shift in the use of the term Social Enterprise/Business recently, no doubt partly motivated by the above, after reading Adam Tinworth's liveblogging, it did seem to me that Social Business is now also absorbing parts of what were once "Enterprise 2.0". I think this was clarified by some of the talks Adam covered, from people I have had a lot of time for, for a long time. JP Rangaswami talked quite a bit about the Cluetrain Manifesto, which was of course a cornerstone of Enterprise 2.0 as well, noting that:

Cluetrain suggested that there were two sets of conversations: one inside the firm, and one outside. And they’re different. If you live in a broadcast and hierarchical world, you have a measure of control – and safety.

Joanne Jacobs also made points that I recall were also fundamentals of Enterprise 2.0 - Cluetrain customer treatment, and crowdsourcing rare expertise

People flock together, but not just for safety, bit for an opportunity to work collectively towards goals, but individually their opinions count. They are a collective of individual opinions. The word “customers” belittles communities to buyers. Of course, we need to make money as businesses. We understand that. If you think of them as buyers, then you are not allowing them to contribute to your business except as buyers.

You’re missing the opportunity to involve your community in product development – and that’s what most business find most challenging. You have to consider you audience as possible experts in what you do – possibly more of an expert than you are.

But if you look very closely at what they were saying, there are some important differences - Euan Semple noted that Social Media is now "in the knitting":

We’re turning social media into a “thing” – it’s the thingification of social media. It becomes sellable, marketable, something people have to do. But what I see is the web becoming part people’s lives, and encroaching into their workplaces. And this is why IT gets jumpy – they have this ordered, structured thing they call the workplace.

JP I think really addressed the main change we have seen, i.e. it has increased the customer voice:

Customer interactions are always referred to in the past tense, because they’re only accessed after they happen. “Transaction processing” – it was once called, and it was expensive. Now, the pervasive presence of technology – and especially mobile – we can produce constant activity stream of what we’re doing. And it’s easy enough to do it in expectation of figuring out how it will be useful later on.

And customers have moved from being able to say nothing, to having a genuine voice. Social businesses are those where people are connected inside and outside of the firm. Customers and staff can interact together in real time. Social can look like social work, or social media, or social science. No-one has a right to define social.

And Joanne warned potential Snake Oil chuggers that it's not a surface fix anymore, another major trend we have found in the last 2 years or so:

Any marketer or PR person in the room who thinks it’s about controlling the message? You’re going to fail. Start thinking organically. Marketing warfare is dead. Get over it. If you think you can manipulate people’s opinions, you will create a muppet community.

Well, in our view what has really changed underneath all this is the sheer number of people using the online ecosystem - social and otherwise - far more heavily to research, to buy, and to get service. Thus there is a reason the "buzzword" has moved on from Enterprise 2.0, but in my opinion there is now a risk the "Social" bit is being seen as the The New Big Thing, rather than a component of what is still an end to end infrastructure, i.e it is stilll just a part of an end to end value delivery chain, and it is only as good as the weakest link. I therefore propose the term "Social Enterprise 2.0" to remind us that it is just a component, and that it won't work properly unless it is looked at systemically.

Now, as you may know, we do a lot of the back end systems work (infrastructure layer, not presentation layer, if you like) and put in our first Social Network based system in 2007. We have been doing a lot of work in this emerging "Social Infrastructure" space over the last 2 years, and here is my take of what "Social Enterprise 2.0" is really all about. As a first point, bear in mind that there are only 2 ways a "For Profit" makes a profit:

(i) Increase Sales - to more people, or charge more for what you sell
(ii) Reduce Costs - labour, material, and (in consumer and network businesses especially) churn

(There is a 3rd option - tax avoidance - but you have to be a very big company with Friends In Power to pull that off it seems).

Anyway, taking these in turn we have found the following:

Increasing Sales

Social Media has two well known impacts here - everyone knows it can recruit more potential customers via word of mouth, viral marketing, friends recommendations etc. But this is pretty well known from Enterprise 2.0 days, and an entire Social Marketing/PR industry has emerged in the last 2 years or so to do all this. I think fewer people know that it can be a useful tool for cross selling, but this is more subtle and requires the company to set up trusted communities, as the ideal is customer A and B telling customer C that they should try Product Y as well as X. Many have tried....

However, our work has also found two other rather more subtle factors:

(i) One of the impacts of Social Media is that the customer service reputation is now a major part of the buying process. c 90% of all buyers go online before buying now, and a bad service reputation is quite a big part of the buying decision (We have researched this for clients - its is a major purchase driver, especially for higher cost/longer duration deals)

(ii) It is fairly well known that if there is a disconnect between the Company Spiel and reality, it is found out much faster, goes farther with social media, and is harder to manipulate. It is also now possible, by tracking the datastream, to understand which disconnects matter most, and understand it early. So far so good - now here is the kicker. More and more customers know this, and are becoming familiar with it, so they expect far more rapid action - and many more of your customers work in customer service in some form or another, or know someone who does, so are becoming far more savvy. And they are getting more clued up about privacy issues too.

In other words, as Joanne pointed out, it is going to get harder and harder to gloss over operational errors with glossy marketing and PR, and datascraping, so the pressure on getting the operations - and infrastructure - right is going to become more critical. Sockpuppeting the comment streams is not good enough anymore....

Reducing Costs

We have seen quiet a lot of trends here, not as visible as in the "presentation layer" but for the reason given above, probably more critical.

Firstly, As Euan and JP allude, it is to enable work methods outside of the traditional enterprise. As Ronald Coase pointed out in the 1930's, the size and shape of any Firm is defined by the transaction costs. The 'Net madks these lower, so it is easier to outsource more and more, and for all functions not to be located in the same geographical area. Or even to be done by humans. Social media has made them lower still, and - to my mind - has lowered the cost of establishing trust (and raised the cost of regaining it, by the way). We believe there will be a major shift in the way enterprises are structured coming, many have predicted it but in our view it has only just begun.

Secondly, as customers increase their familiarity with the online world, their demand for good service is rising - and that means the attention to this area will only increase (and cost more to provide, unless you are a monopoly supplier). In other words, this will be an area of cost increase, that will need to be offset against churn and new prospect recruitment. The precise economics of these correlations are not well understood yet, so lots of trials and errors will follow,.

There is an inreasing amount of data collectible to mine and process, and the necessity - and costs - of doing this will only increase in order to stay competitive. The risk is the temptation to play loose and fast on data privacy and security, but beware - if it gets out that you are a customer privacy risk, the business could crash very fast in a fast-feedback loop world.

And then there is the Great Spoiler, which we have found to be absolutely true in 5 years of this work - your top layer "Social Business" will only as good as the supporting Enterprise 0, 1 and 2 layers around it- ie:

Enterprise 0 - the non IT stuff - the processes, skills and culture of a company - the bedrock layer - will scupper any attempt to add higher layers if it isn't a strong enough foundation. In all our work we have g=found you have to strip back to the processes and skills as a minimum.

Enterprise 1 - the ERP, CRM, EDI, SOP and all the other TLAs that manipulate, manufacture and move base information around the enterprise. If the underlying data is crap, and the ability to see it correctly is non existent, then the Social Business layer will fail.

Enterprise 2 - as in the supporting Web 2.0 systems that support the Social Media modules - crap webpages, poor real time performance, inflexible CMS - these are only as good as the systems they sit on top of.

In other words, there is something new in "Social Business", but there is less to the eye than one may think if one drinks all the Snake Oil (or at least one should note the old bottles it may come from) and a lot of back end work to ensure you do get what you see.