Just like we learned in preschool…

…sharing is good.  Yes, it’s as simple as that, and it applies to more than just divvying up the Crayolas or the action figures.  In chapters 5 through 8 of Don Tapscott and Anthony Williams’ Wikinomics, the authors stress the importance of companies embracing their customers as co-innovators.  Of course, when it comes to sharing the “secret sauce”, many corporations have a hard time understanding how they can do this and remain profitable.  It’s definitely a valid concern, and I don’t think we have all the answers to this yet…but many of the examples cited in Wikinomics show that we’re at least heading in the right direction. 

Tapscott and Williams introduce a new term for these customers turned innovators: the prosumers.  “Prosumption,” they write, “is becoming one of the most powerful engines of change and innovation that the business world has ever seen.  Cocreating with customers is like tapping the most uniquely qualified pool of intellectual capital ever assembled, a reservoir of talent that is as keenly and uniquely enthusiastic about creating a great product or service as you are.”

Amazon is a great example of a company that’s embraced its prosumers.  Those who participate on Amazon.com have the opportunity to earn referral fees from products they imbed on their Web site or news feed, rate the products they buy, and so on.  Jeff Barr of Amazon’s Web services says that Amazon wouldn’t be able to make such great innovative strides if they didn’t open up their tools and data to the public: 

“The more data that we’re able to put in the hands of developers, the more interesting tools, sites, applications will be built, and the more of those that exist, the greater the return to Amazon.  We’re going to see more traffic, more clicks, and ultimately we’ll see more purchases.”

Another great example of a company that loves its prosumers is Threadless, a Chicago-based t-shirt company.  Their design team?  Anyone on the Web.  Users submit their designs to Threadless, and then the community votes on the ones they’d like to see printed on shirts.  The designs with the most votes win, and the creators of those designs are paid anywhere from $500-2,000.  Apparently the business model is working, because Jake Nickell and Jacob DeHart, creators of Threadless, pull in an annual revenue of about $15 million.

All companies who want to be successful in the future need to embrace their customers as co-creators.  It’s certainly easier said than it is done, and coming up with a way to allow collaboration while still making a profit is definitely challenging.  But in order to remain relevant in a Web 2.0 world, this is a must for corporations everywhere.

The world of “Wikinomics” (aka collaboration)

The first four chapters of Dan Tapscott and Anthony Williams’ Wikinomics can essentially be summed up with one sentence that appears on page 37: “Whether people are creating, sharing, or socializing, the new Web is principally about participating rather than about passively receiving information.”

The numerous examples used in the book demonstrate not only the fact that anyone can create content, but that individuals can now collaborate across platforms that were once thought to be barriers, such as regions and corporations. Participation is, for the most part, simple. Whether it’s the Goldcorp Challenge that turned a $100 million company into a $9 billion one or the tale of Linux, IBM, and the beginnings of open-source software, Tapscott and Williams’ stories illustrate that the opportunities for participation on the Web are constantly increasing because of the variety of Web-based tools available. (For more great examples of collaboration, check out the Web site for Howard Rheingold’s Smart Mobs. His book – which I think does a better job of explaining the phenomenon of how technology eases collaboration than Wikinomics – is a must read too.)

I think there are three big reasons people like participating in the online space and will continue to do so:

• The technical side of things, for the most part, is pretty easy. You don’t have to be an HTML expert to have a MySpace page or post your photos on Flickr. A lot of the technology is such that anyone – whether you’re incredibly tech-savvy or don’t have the slightest clue how to do anything on a computer besides type – can create material online.

• It’s inexpensive. There are numerous sites, such as Blogger and WordPress, that will host your blog for free. There’s no membership fee to be part of social networks like Facebook, MySpace, and LinkedIn. Sites like YouTube and Flickr don’t charge for posting multimedia, either. (Well, unless you have a pro account on Flickr, but the free accounts are more than sufficient.)

• Information is updated constantly. Instead of waiting for the 2008 edition of Encyclopedia Britannica to be released, visit Wikipedia. (Granted, the information in Wikipedia is not always guaranteed to be accurate – take this story about Kenneth Lay’s Wikipedia entry, for example – but it’s often corrected pretty quickly.) If you want to read the latest news stories, read a blog or an online news source instead of waiting for tomorrow’s Washington Post.

There are so many ways that people can, as Tapscott and Williams put it, “enhance the Web.” And the biggest advantage to all these social media and collaboration tools is that anyone can use them.

Happy Employees + Good Business Practices = High NPS

When I started reading Fred Reichheld’s book, “The Ultimate Question: Driving Good Profits and True Growth”, I more or less agreed with his theories.  His NPS formula makes sense (although realistically I think it would be very difficult to calculate): promoters minus detractors equal a company’s Net Promoter Score, or NPS.

Then I read the second half of the book and wasn’t so pleased.  It really bothered me that Reichheld spent several chapters telling companies that they needed to create things like the customer grid on page 120 to develop a plan to increase their NPS.  To me, an NPS is not about charts or complicated mathematic formulas.  It’s actually pretty simple: happy employees plus good business practices equals a high Net Promoter Score.

The corporation’s focus should be on its employees and customers, and the end result of satisfying them is an increase in the company’s NPS.  I disagree with Reichheld’s statement: “When a company focuses on improving its NPS, by contrast, its employees are happier.”  Although this is somewhat a case of, “What came first, the chicken or the egg?” I really think that this process has to begin with the customers and employees.  The ultimate goal of the NPS is to increase a company’s profits and, although this might be idealistic, a company should try to set aside its financial goals for just a moment and truly concentrate how it should treat the people who support the corporation every day.

The Irish supermarket chain Superquinn is a great example of how an NPS can increase as a result of focusing on making sure employees and customers are content.  Reichheld told the story of the chain owner, Feargal Quinn, hiring a new manager.  This manager saw that the stores were throwing out thousands of pounds of freshly baked bread each day, and he felt that the stores should keep it and sell it again the following day.  Even though the supermarket had a policy of selling fresh baked bread daily, the manager insisted that the stores make this change.  They did, and bakery sales dramatically decreased.

“The customer experience should never be sacrificed for profits,” Reichheld wrote.  And this is so true.  A very recent example of this lesson is apparent in Jane’s blog post from last week.  She tells the story better than I do – so you should read it – but the main point is that companies cultivate more promoters when they do genuinely nice things for customers instead of just focusing on the bottom line.  And when corporations treat their customers (and employees) with the utmost respect, their profits magically increase.  Funny how that happens, isn’t it?

And the Ultimate Question is….

When I first saw this book listed on our class syllabus, I was intrigued. The ultimate question? What exactly is the Ultimate Question? I found my answer on page 28:

“How likely is it that you would recommend company X to a friend or colleague?”

In Fred Reichheld’s book, “The Ultimate Question: Driving Good Profits and True Growth”, he argues that company’s profits are both good (coming from a satisfied customer) and bad (coming from an unsatisfied customer). Part of figuring out what portion of your profits are “good” (and knowing how to grow your profits in the future) is understanding who’s promoting you versus who is unhappy with your service or product. Reichheld even has a formula that will help companies calculate what he calls their Net Promoter Score, or NPS. A company’s NPS is essentially equal to its promoters minus its detractors (the unhappy customers)….and this score influences a company’s profits and growth.

Reichheld argues that “companies need to understand the economic value that results from building better relationships.” Yes, even one customer’s perception of a company can potentially affect its bottom line.  Actually, as my classmate Luke pointed out, Reichheld actually says that one negative comment about a company can neutralize between three and 10 positive comments. And this is where the Ultimate Question comes in: studies have shown that potential customers trust their peers more than they do advertisements or newspaper articles. According to the 2007 edition of the Edelman Trust Barometer (full disclosure: I work at Edelman), people are heavily influenced by their friends, family, coworkers, and other who they consider to be similar to themselves. “For the second consecutive year, “a person like me” or a peer is the most trusted spokesperson in the United States at 51%.”

Because people are so heavily influenced by what their friends and family are saying, corporations have to develop and maintain good relationships with their customers. But Reichheld points out that many companies are so huge that it’s becoming increasingly difficult (and often costly) to obtain feedback from a substantial number of customers. So how can companies effectively solicit responses from those who have bought their product or service?

Companies can come right here…to the Internet. With numerous types of social media available, the Internet allows companies to listen to what customers are saying about them and to build relationships with these customers. For example, a corporate blog can serve as a pseudo focus group but also allows companies the opportunity to respond to those commenting on the blog. This two-way communication is key to building relationships, and the Internet provides many effective, inexpensive outlets on which to do this. Granted, not all customers spend time online or feel inclined to comment on a blog, but creating corporate blogs or forums is certainly one good approach that a company can (and should) take when reaching out to customers.

Of course, the idea of obtaining feedback online isn’t new. Listservs, online forums, and e-mail groups (like the one created by the Consumer Tax Group, as mentioned in Reichheld’s book) were among some of the original online methods used to garner comments from customers. But the current technology and social media landscape are continually making this process much easier.

Come on in, the water — er, blogosphere’s — fine

For probably 9 out of 10 corporations, the blogosphere is a scary place…and understandably so. We’ve all heard our share of the “corporate blogging gone wrong” stories, the Kryptonite lock incident I wrote about previously, and so on. Even if companies don’t get it right the first time around, one thing that they should remember is that the blogosphere is, generally speaking, pretty forgiving.

But this can be easy to forget when – like L’Oreal experienced – a corporation sees commenters writing how they think the company’s blog is “foisting a fraud upon the public.” This is exactly what happened with Vichy, a blog written by fictitious author Claire to promote a new L’Oreal product. The company generated this character, an all-too-perfect looking thirtysomething, whose language resembled (a little too closely) that of the Vichy advertisements. Of course the blog’s readers saw right through this, and they made it clear to L’Oreal that the blog was, well, lame.

Although the Vichy blog got off to a bad start, Scoble and Israel use it as their “favorite case of a bad blog turning good” in chapter 10 of Naked Conversations. After being inundated with so many negative comments, L’Oreal shut down the blog but reincarnated it shortly thereafter. The company found five women bloggers who were willing to test the anti-aging cream and gave them license to write whatever they wanted about it on the blog. The public’s reaction to the blog was exactly the opposite of their reaction to the first blog: people loved it. And the blog even earned praise from the press.

This is a great example of why corporations shouldn’t be afraid of delving into and participating in the online space. It might take a company several tries to get it right, but jumping in and trying to engage those online is far better than turning a deaf ear on the conversation that’s happening.

Even though a mistake or two in the blogosphere probably won’t make or break a corporation, it would be nice to do things right the first time around. As always, Scoble and Israel offer tips on how to make this happen. Chapter 11 focuses on “doing it right”, and here are some of the highlights:

• Read a bunch of blogs before you start. “Reading other blogs should help inspire you to write your own—and should give you some ideas of what is already being said and what you might contribute.”

• Demonstrate passion. Show your authority. “A good corporate blog is both passionate and authoritative. Blog what you know.”

• Add comments. “A good blog is a conversation, not a one-way PR channel. Get over the fact that you won’t have full control.”

• Be accessible. “It’s surprising how many people start conversations with blogs but foolishly choose to make themselves unreachable through e-mail or phone.”

 

Corporations should read and re-read Scoble and Israel’s suggestions and then get into the online discussion. Yes, they might make a mistake or two, but that’s okay. Just get out there. Because, like so many social media gurus have said, the conversation is going to continue regardless of whether your company is paying attention.

Talk is cheap (but can be very valuable)

I was pretty excited to see Robert Scoble and Shel Israel’s Naked Conversations on the reading list for this class.  I read the book several semesters ago for another course at Johns Hopkins and, even the second time around, I think Scoble and Israel have some great (and very honest) advice for corporations that are considering stepping into the blogosphere.

I’ve found that many people – including authors who write books on subjects similar to that of Naked Conversations – tend to imply that blogging is right for everyone and is a one-size-fits-all approach to building and keeping a customer base.  Jackie Huba, author of Citizen Marketers: Where People are the Message, said “I see no reason for any company not to blog – unless they’re sleazy.  Every company needs a feedback system.”   

And while Huba is correct about corporations needing feedback from their customers, is a blog always the best medium to use to obtain that feedback?  I don’t think blogging is right for every company.  But if a corporation is going to start a blog, it’s critical that their bloggers engrain Scoble and Israel’s five success tips in their heads:

• Talk, don’t sell.  “If you talk to them, they get to know you.  If you sell to them, they’ll just leave—if you’re lucky.” 

• Post often and be interesting.  “…being interesting is what motivates others to link to you.”

• Write on issues you know and care about.  “A good blog is passionate and shows authority.” 

• Blogging saves money but costs time.  “Being a good blogger takes time.”

• You get smarter by listening to what people tell you.  “As Dan Gillmor emphasized in We the Media, ‘My readers are collectively smarter than me.’” 

These five bullet points sum up the qualities that make a good corporate blogger.  Robert Scoble was a great candidate to blog for Microsoft; he was passionate and honest about what he wrote and he talked to his audience as he would a friend instead of being a marketing mouthpiece for Microsoft.  But does every company have someone who is willing to invest their time in blogging?  Can that blogger be conversational instead of sounding mechanical when they blog?  Is that company’s blogger truly going to listen to what others are saying, not just the week the blog launches but six months or a year from now? 

Like Scoble and Israel said, blogging definitely is cheap in terms of monetary cost, but it’s a big time commitment.  The positive value in having a corporate blog can be huge.  On the flip side, though, poorly executed blogs can sometimes damage a company’s reputation. 

There are a number of great corporate blogs that exist, some which are mentioned in Scoble and Israel’s book such as the GM FastLane Blog and Jonathan’s Blog, written by the CEO of Sun Microsystems.  But speaking of poorly executed blogs, have you ever visited Google’s blog?  Why don’t users have the option to leave a comment?  Where are the author’s bios?  And maybe it’s just me but this post – while it’s a bit conversational – seems like a press release in disguise.  Of course, this blog certainly hasn’t hurt Google’s bottom line or the company’s popularity, but it’s disappointing that a corporation that’s so innovative and creative has a blog that’s just the opposite.

The bottom line is that if a company is thinking of creating a blog, they need to have someone blogging who is passionate, conversational, a good listener, and is willing to invest their time.  Every corporation can potentially have a blog…they’d just better have the right blogger.

“Google never forgets.”

It’s obvious that, although social media isn’t exactly brand new (according to Wikipedia, Justin Hall was the first blogger in 1994 and the term “weblog” was coined in ’97), companies are still grappling with how to respond to citizen marketers. McConnell and Huba’s book “Citizen Marketers” Where People are the Message” is full of stories about corporations who’ve decided not to respond to what could potentially be some of their company’s greatest allies. New tales of companies shying away from interacting with these 1 Percenters are popping up all the time. All these incidents raise an important question: how do we get companies to change their thinking about citizen marketers and realize that corporations can no longer fully control the message?

One of my favorite points that McConnell and Huba make is this: “With the Power of One, Google never forgets.” This is so true. One company misstep, one missed opportunity to connect with a 1 Percenter, and the entire world will probably read about it…and will be able to read about it for years to come.

Remember what happened with Kryptonite Locks in 2004? This article from Wired gives a good rundown of the events that ensued. Chris Brennan, a “bike enthusiast and network security consultant” opened a pricy Kryptonite bike lock with a Bic pen. Brennan posted his experience on an Internet forum, and then additional posts began appearing on related forums and Web sites. Instead of directly addressing Brennan’s discovery, Kryptonite declined to comment. Instead, they talked about releasing a new lock design that is supposedly more secure. Brennan said he would never purchase a Kryptonite lock again. (And who can blame him?)

For obvious reasons, this is great example of a “don’t” when it comes to citizen marketers and corporations. Companies can no longer ignore what’s being said about them in the online space. And trying to ignore that conversation usually only hurts corporations in the long run.

This leads back to the point of “Google never forgets.” Try running a Google search for “Kryptonite bike lock.” Guess what? Not counting the sponsored links, the first link is to the Wikipedia entry about Kryptonite which, in the brief summary on the search page, mentions the Bic pen incident. The second and third search results are posts from the popular blog Engadget about the company’s locks being “hacked by a Bic pen.” The fourth link is the Kryptonite Web site. And remember that Brennan cracked the Kryptonite lock three years ago.  Once this missteps occur, they don’t just fall into oblivion a month later….which is why it’s so important that companies learn to adapt to and work with citizen marketers.

So many companies don’t understand the idea of citizen marketers because they’re so determined to control their image at any cost, even if it means ignoring the people to whom they should be listening. McConnell and Huba give some great examples of companies who, on some occasions, didn’t quite embrace the 1 Percenters; check out the sections about “iPod’s Dirty Little Secret”, the woman with the “Slave to Target” blog, and Coca Cola’s reaction to the Diet Coke and Mentos video.

Although these citizen marketers are forcing many companies out of their comfort zones, the online conversation about corporations isn’t going to go away. Companies have to learn how to listen and respond to citizen marketers. Pete Blackshaw makes a great point in that companies must put themselves in the shoes of the consumer. It’s all about – as Blackshaw says – “listening-centered marketing.” But he also acknowledges that this isn’t easy.

Blackshaw writes: “But let’s face it; listening is hard. I’m not terribly good at it, nor are many of my industry friends who wave the “listening” banner. It takes work. What we hear can throw us off track. But without new frameworks for putting our ear to the consumer pulse, we’ll never get it right, and we’ll never have the benefit of conversation to inform judgment or “marketing optimization.”