In a networked knowledge economy, co-creation is co-evolution

By Thierry de Baillon

Our world is changing, so is the way we are thinking about it. The rise of online networks has not only modified our possibilities to connect and exchange knowledge with other people, but also has it given anyone with internet access a new, almost (not yet totally, but for how long?) unalienable, power. From charities to tyrannies, from companies to markets, a lot of this power is shifting to citizens and customers. Paradoxically, the more people gain access to it, the less we can think in terms of mass. Individuals, their diversity, their relationships, their interactions, matter more than the standardized bulk dynamics prevailing in the industrial logic.

To adapt to this change, organizations have to reinvent most of the ways they operate. Customers are no more passive buyers to target. Companies are no more fierce industrial strongholds aimed at infinite growth and bracing their back against long-term competitive advantages. Work is no more a clearly designed set of tasks, defined by roles and rewarded by career paths. Trees grow no more to the sky. Previous equilibrium between production, sales and profit is broken, and a new one is required, which embraces the evolving complexity of relationships between customers, companies and workers.

SD-logic and co-creation of value

Service-dominant logic draws a framework in the quest for such an equilibrium. By switching from a transaction-based model of organizational justification (I sell therefore I am) to an interactive model of value creation, it provides us with critical insights on the necessary mutation economic actors must undergo to survive in an ever more challenging environment. I already wrote about service-dominant logic (and you can learn a lot more here -and on the SD-logic website if operational again-), but, at the risk to oversimplify the works of Steve Vargo and Robert Lusch, let me recall some basic principles of their theory: companies do not market products for customers to buy; they make proposals (of products, of services) which customers hire (thus on a momentary, but not instantaneous, basis) to help them get their job (the real-world activity they want to use the product or service for) done. Value is co-created by company and customers during the whole length of time the customer uses the product / service.

For companies, beyond profit and other measurable benefits (reputation and loyalty for instance), value means knowledge about their customers’ needs, expectations and uses, which drives further development of better products and services, and better engagement. For customers, value also means knowledge about how to better fit their needs. Through value co-creation, both parts evolve.

Furthermore, value is neither created in the void, nor in a simple dual firm-customers relationship. People talk, compare, their own networks influence the overall value creation. Companies, too, are part of networked ecosystems composed of suppliers, subcontractors and many other stakeholders. As more and more people share knowledge through their online networks, as more and more companies get in the use to listen and engage with them, they will get more and more involved into customer-driven innovation, and will co-evolve.

The dynamics of co-evolution: competition

Co-evolution dynamics are originally related to natural ecosystems and living species, but are more and more considered in organizational and societal theories, as an inherent part of complex systems behavior. Co-evolution happens when a system and its environment, or different subsystems, are influencing each other to change.

The first kind of co-evolution is competitive: a system evolves to gain advantage onto another, in a typical predator/prey relationship. As more companies turn to customers and other parts of their ecosystem for added value, they will compete for what best serves their needs in a particular category, which involves several risks.

The first risk of a purely competitive co-evolution is relativism: competition involves getting advantage, but a subcontractor may work for several competitors (as Vargo and Lusch acknowledged), or customers may give insight in reference to competing products (imagine I own both a Kindle and an iPad). Companies may end up trapped in a kind of Zeno’s paradox, a zero-value sum, driving just enough innovation to get closer to their competitors’ best proposal.

The second risk is called the Red Queen’s dynamics, and is a hypothesis formulated by the American biologist Van Valen in 1973, stating that co-evolution in tightly related species doesn’t preclude any of them from extinction, whatever the number of precedent evolutions might be, and more and more considered in economic research. In our business context, it means that companies might be obliged to dedicate more and more resources to value co-creation, thus to evolve, not to thrive, but just to stay in the competition. Following the Red Queen’s hypothesis, engaging in that sort of arms race would equal, for companies which aren’t deeply involved in design-driven innovation, an overwhelming takeover by customers.

The dynamics of co-evolution: cooperation

While a truly cooperative economy might be seen as a mere utopia, cooperation, whether between firms or with customers, is a business reality. Whereas collaboration’s dynamics, requiring aligned goals, resources and outcomes, are mostly endogenous and pertain to a shared system’s level, cooperation takes its power from diversity, empowering each actor through shared information and behaviors. Meaningful sustainability initiatives assume active cooperation between whole business ecosystems and customers. Coopetition, which combines cooperation and competition, is gaining acceptance as a powerful business strategy in our networked economy.

Still an emergent domain of research, cooperative co-evolution doesn’t suffer from the same flaws as its competitive counterpart. Furthermore, it provides to value co-creation an interesting analogy with the cognitive learning process; all actors gain and create knowledge from information available, according to his own needs, expectations and personal background. Could we therefore use the different types of cognitive learning to provide a practical frame to the promises of the service-dominant logic? That’s a great perspective I would love to discuss with you. Online networks are transforming the way we behave, chances are good they will transform the way business is done. For better.

There Is NO Social Customer

By Thierry de Baillon

Whether we like it or not, everything seems to have gone ‘social’. Social media (which has for me only little to do with media), social business (on which I merely agree with Stowe Boyd’s definition), social platforms, social commerce…

One of the latest additions to this list ‘à la Prévert’ is social customer. Our customers are now chatting online, extensively using (or not) social media, and we, benevolent companies (we are not yet social businesses, but will be very soon), are listening to them, engaging with, and, ultimately, selling them our products and services, which they will afterword comment together in social networks… This looks great, except that the social customer doesn’t exist.

Customers are still customers, regardless of how you look at them, and the fact of using new tools doesn’t mean they will buy more of your social-mediated products. Calling your customers ‘social’ is a lame attempt to say: “hey, we are a social business, notice how cool we are: we are both tagged as ‘social’. So let’s be friend, and for sure you’ll love what we are showing you”.

It is time for companies to grow up, and that rather than calling their customers ‘social’ and focusing on tools that are mostly meant for private conversations, they begin to build trusted relationships through their own channels and tools, and follow a business -not bozo- logic. Your customers deserve to be considered seriously, so does your business.

More on that in the presentation below:

Have We Yet Integrated Social, Scottie?

By Thierry de Baillon

Another day, another buzzword… Integration is quite a hot topic on these days of predictions, especially after both David Armano, from Edelman Digital, and Jeremiah Owyang, from Altimer, qualified 2011 as year of social (‘media’ for David, ‘business’ for Jeremiah) integration.

Integrating social into business

As many words, ‘integration’ has quite a few meanings, but they all rely to the fact of ‘getting the part to fit into the whole’. From a business perspective, the matter of integrating ‘social’ into every aspect of companies’ operations is of course a trend we will all see happening one day or another, but I cannot keep from being dubitative about the length of the road 99.9 percent of businesses will have to follow to transform themselves from their present state to truly social businesses. Integration requires parts to exist before they can fit into the whole.

More and more initiatives exist which prove the competitive advantages associated to becoming a social enterprise, and the exponential growth of the social web, where most of customers’ conversations now take place, is now an unavoidable business fact, but the vast majority of organizations still do not get it at all. These are still mainly emergent behaviors. Seriously, heralding 2011 as being the year of social integration amounts to claiming it the year of time travel.

Integrating social into platforms

Integration is also a technology matter. In this context, ‘integrating’ can be helpfully defined as ‘dealing with’. The iPod ‘deals with sound’ so that, when associated to iTunes, it integrates most of the ways we daily interact with sound. The result is a sleek, one-size-fits-all device able to generate the best ever user experience while hiding all internal complexity.  Similarly, Microsoft Excel ‘deals with numbers’ with the single elegant paradigm of a grid.

We all dream of integrated beauties such as Star Trek’s Tricorder, but ‘dealing with’ doesn’t always stands for a great user experience. Another Microsoft product, Word, for long, is a synonym for big bloated piece of software, with many features one doesn’t even want to hear about. In fact, Word ‘deals with words’ in the same way the iPod ‘deals with sound’, which shows that integration is far from being straightforward when it comes to deal with complex concepts. There are so many radically different ways we use words in written documents that no software can seamlessly integrate them.

When it comes to ‘dealing with social’, large platforms tend to look much more like Word than with the iPod or Excel.  Huge sets of collaborative tools clearly do not facilitate collaboration: not even do they facilitate the comprehension of what ‘social’ means. Time will tell if vendors will succeed in developing a new paradigm for collaborative interfaces, but, in that sense, actual toolsets clearly demonstrate a failure in what we can expect from integration.

Nevertheless, we are seeing today technological integration happening much faster than business integration… for better or for worse.

Integrating social into CRM?

Considering the growing importance of the social web, it is not surprising that companies are looking for ways to monitor customers’ activity and interaction beyond engagement in communities. ‘Dealing with [social] customers’ is Social CRM’s ambitious promise. As you have guessed, integration is here too a key concern (or should be); but should we look after integration in this domain?

If I had one prediction to make for 2011, it would be the rise of analytics tools.  Dealing with customers means a lot of data mining and analysis, and most tools are either quite awfully imprecise, like sentiment analysis, or require deep knowledge and heavy hand-tuning, like social network analysis. Add to that the difficulty of tapping into real-time modifications of your customers’ interactions, and you will understand why we need much stronger analytics tools than those available today.

Furthermore, a global understanding of what your customers are talking about is a lame objective. What customers want is a personal experience, at every single point where they choose to interact –or not- with your company. Traditional CRMs are about personalized relationships, and Social CRMs must follow this track, and aim at offering a comprehensive view of individual customers’ interactions.

Unless being able to deliver on such a demanding promise, social CRM integration, from a toolset perspective, is quite nonsense. Whether you start from a collaborative or a CRM platform, present offering will leave you with a gathering of imperfect tools for a less than perfect result.

On the other hand, companies’ needs –and will- to better understand social customers’ behaviors grows rapidly, whether it be to progress toward a more social business, or, more often and prosaically, to ‘traditionally’ increase profit through social channels.  While integrating social into business is still far away, interacting with social customers is a reality most departments are facing today, to reach different goals, following different processes, using different tools. To understand how social business can drive better business, companies need to be able to reach them, they need to feel the way customers now want to get their jobs done better with the help of the goods and services they buy. Social CRM has this power, and, as fuzzy a concept it still is, its integration into business has the potential to change the way most business is done.

Is Collaboration a Crock?

By Thierry de Baillon

Let us face it; we, as humans, are selfish, individualists, and undoubtedly clinging to any privileges associated with power. Goodwill and sharing among peers follow Nielsen’s principle, and most of us wouldn’t even imagine acting differently unless obliged to. The social Web is opening a path to new ways of fostering knowledge flows inside and outside our organizations, but the need for collaborative behaviors to unlock models of work suitable to the new hyperlinked economy taking shape nowadays is only fulfilled (or even reachable) by few.

Communities and trust: a reality check

In this context, the pillars of efficient and creative collaboration, connected communities and trust, might be far more difficult to leverage than heralded by Enterprise 2.0 enthusiasts. Developing and nurturing communities is a hot topic, but which reality does it uncover? Communities are about passion, and passion is first about learning from your peers. No real community is ever thinkable without that. Thousands of Facebook pages are created every day on the mostly false promise to build communities. Coca-Cola’s page has almost fifteen millions fans but is there a reason to call this gathering a “community”? Is there any in-depth interaction or, let’s say it, collaboration, involved?

The internal version doesn’t behave better. At organizational level, most collaborative work is, in fact, teamwork, where cooperation is aligned along tasks in a linear and predictable way. Communities of practice, which develop truly collaborative and adaptive behaviors along time, rely much more on passion, patience and involvement than on 2.0 technologies to grow and operate. They usually perform well online because they already do offline. Beyond that, many “successful” Enterprise 2.0 case studies do not offer any reality check apart from the number of connections recorded and number of “communities” created. Socialwashing is the new rule of thumb.

Besides nurturing a favorable collective environment, true collaboration requires trust. The problem here is that trust is an endangered quality. Brands cannot ignore that customers are less and less confident every year, and that erosion of trust shows up everywhere, social media space included. Trust inside organizations scores even lower. Micro-management, continuous performance-based evaluation measured against predefined work conditions, hierarchical and economical pressure, have impaired trust among employees in many companies. In a vast majority of circumstances, collaboration is a crock.

Adoption is not diffusion

However, there is no doubt a truly collaborative enterprise is the best-suited organizational model to tackle the increasing complexity of our economical environments, to leverage the power of companies’ ecosystems toward sustainable competitive advantages. More than ever, organizations need a shift. Knowledge workers need to continually have new resources at their disposal, while work and learning must now blend in a continuous stream. But since so few are mature enough to embrace this complexity and allow for redefining work as a fluid, collaborative flow, how can we help and coach the others?

Bertrand Duperrin proposes to introduce social routines in employees’ daily workflows. Such a framework facilitates adoption of collaborative practices, but neither does it question the actual relationships existing among members of a company and the underlying lack of trust, not does it address one of the main shortcomings of business processes: socializing them helps dealing with fuzzy operations, an approach somehow similar to Thingamy’s Barely Repeatable Processes, but does not perform well with uncertain outcomes. Processes need predictable outcomes, which are less and less available.

Gil Yehuda just proposed another framework, asserting that collaborative dynamics could (and should) take place aside traditional management models, hierarchy- and incentives-based forces. He has strong points here, but I believe that enabling collaborative mechanisms would deeply modify the organizational structure, and that their coexistence isn’t sustainable the way he exposes it. What we need is not forcing adoption in conservative structures, but facilitating diffusion, by the use and modification of some existing, but latent, mechanisms, to allow emergence of new ones.

Redefining the internal customer

I recently wrote about the way companies can (and have to) build new relationships with their customers and non-customers. These relationships are not transaction-based, but rely on the value companies can create on helping customers solve their daily problems by making better products and services proposals. The social web facilitates this service-dominant logic, allowing getting better insight from people’s interactions (this is what SocialCRM is about). Establishing this kind of relationships is a necessary prequel to collaboration, which ultimate goal is the co-creation of value. I am not talking about communication or funky social media marketing here, but about a shift in economic and marketing fundamentals. Lack of trust, and the inconsistence of so-called “brand communities” is not an issue in this context. Why couldn’t we apply the same framework into enterprise?

“Customers” always had an internal reality. But companies always work on an outdated definition, most internal interactions being oriented toward selling services or pushing decisions from management to teams. Rather than helping their customers getting their job done through continuous interaction, many support functions put them at the end of process-based funnels. For example, the IT department hopelessly formalizes its relationships with internal customers through requirements, despite their inability to address real-world problems in real-time. Redefining the internal customer according to a service-dominant logic would set up the organizational scene for collaboration. Most departments would benefit from it; HR, for instance, would leverage true career development, beyond roles and job descriptions.

At individual level, the same definition of “customer” (those who are impacted by our acting and proposals) and the very same behaviors would enable a new kind of relationships, and foster a shift toward a collaborative mindset. What if managers consider their teams as customers? Facilitating subordinates’ tasks and listening to the way they deal with them… As Olivier Blanchard pointed out to me, this sounds like good leadership practice. Sure, but while we know how to deal with customers, who knows what a leader exactly is?

I believe that applying internally what we are learning to do with external customers provides a real-life solution to help preparing the shift toward a collaborative enterprise, for the vast majority of organizations in which collaboration is a crock. There is no framework here, just a practical call to action. To facilitate the rise of collaboration, let us redefine the internal customer, and deal with him the same way we now have to deal with our brands’ customers.

The Importance of Non-Customers

By Thierry de Baillon

Michael Wu, Scientist of Analytics at Lithium, has posted a great article upon the different components defining the strength of a Relationship.

• Time: amount of time spent together
• Intensity: emotional intensity and the sense of closeness
• Trust: intimacy or mutual confiding
• Reciprocity: amount of reciprocal services

In his post, he details how companies can leverage their relationships with customers through the analysis of these four components. Nevertheless, there is in my opinion another component, which underlies any relationship, which shouldn’t be ignored in this framework: its direction.  Like magnets attract or repel each other, relationships are either positive or negative, and this has a deep impact on other components as well.

This isn’t a matter of love and hate, since those both sentiments, when applied to an individual, share in fact a lot of similarities, and we can find more than a few case studies explaining how brands’ more virulent detractors might be turned into ambassadors. (Group hatred obeys to different mechanisms, but here too, these mechanisms are quite close to those driving empathy in groups). Both can be considered as “positive” relationships.

“Negative” relationships, on the other side, are driven by sentiments like disgust, fear, or conscious avoidance.  Typically, people maintaining this kind of relationships with brands are to be found among non-customers. Non-customers who might have been customers before, or who might never have been but have built a distorted image of brands, this for a lot of reasons.

I remember my father who, when wanting to choose and buy some household appliance, systematically dismissed products from one famous brands. Some of his justifications were, of course, highly irrational, but he also had some very good points. So good, in fact, that, if the brand had heard about, this could have lead to real products improvements.

Listening to your non-customers is not an easy task. They don’t speak about you, they don’t interact with you, but they don’t ignore you; they are just staying away from any of your attempts to meet their expectations. They don’t eventually gather into communities. They have low, if any, expectations for your brand. But these non-customers are the ones who might give you the more clues about how to serve them better.

Forget about Enterprise 2.0, think brands

By Thierry de Baillon

Fostering collaboration means blurring boundaries. Internally, it involves letting knowledge flow across organizational silos, capitalizing on informal knowledge to reshape work according to more efficient and human-centric patterns. Externally, it assumes nurturing new relationships with customers to better help them in their day-to-day lives, providing a better service and learning from their interactions.

I am of course over-simplifying here the scope and complexity of Enterprise 2.0 and Social CRM fields, in order to make this simple and obvious statement: blurring internal (among stakeholders) and external (with customers) boundaries won’t be a sustainable evolution unless it is considered as a step toward a more radical change. The traditional (industrial) dyadic model of company-customers must also evolve to adapt to our new hyper-connected environment. But where do we go from here?

Avoiding decomposition

Sadly enough, most discussions around Enterprise 2.0 only scratch the surface of the consequences of evolving toward connected ecosystems on business. Socializing business processes merely keeps the fundamental nature and operational aspects of organizations unchanged. Internal collaborative problem solving, as well as social learning applied to in-work training, is often no more than a chase for efficiency, while staying stuck in present paradigm.

In large corporations, the main (if not only) reason of existence for many roles, and even departments, is to ‘keep things together’: insuring coherent vertical integration, bridging across silos, reducing internal friction… Diffusion of collaborative behaviors will at some point dismiss the necessity to maintain them. Nevertheless, effectiveness cannot be left to autopoiesis. On the other side, the more the companies have to reach out customers on multiple contact points, the more internal departments are involved in the walk, without necessarily speaking the same language. Retailers won’t take the same approach than wholesalers, who might be contradicted by customer service…

Enterprise 2.0 thinkers have put a strong emphasis on leadership, on the necessary role of leaders in employees’ empowerment. Leaders have indeed the necessary skills to fuel the collaborative engine. But how many leaders can a single, unified, organization afford? It takes some kind of personal vision to lead, and chances are good that coexistence of several leaders, or even some kind of distributed leadership, might induce more chaos than convergence. In our complex multi-relational world, maintaining a single, corporate, voice is no more an option. To blur internal boundaries while avoiding decomposition, companies need to experiment with new organizational models.

Brands as strange attractors

At the other side of the spectrum, do customers discuss together, gather into communities, they are wishful to improve their own personal life, they are ready to suggest improvements in products or services. But they don’t bother about an organization’s hierarchy, corporate culture, or… yikes, processes. They buy propositions made on behalf of brands. Whoever being at some point in contact with customers must meet the expectations raised by those brands, sharing a defined set of values, delivering a defined level, and nature, of service.

Brands are mainly considered as intermediaries between companies and customers. They convey factual, as well as emotional, information upon products, reinforcing both consumers’ confidence in their buying choices (through information accumulated in brand’s offering history) and their self-esteem (through symbolic exchanges channeled by brands values and personality). This linear approach (information against emotion) leads to companies hiding their internal structure and mechanism behind brands. This is perfectly on line with the traditional value-in-transaction model, but is clearly unsuitable with connected ecosystems, where companies and customers share an ever growing number of contact points.

Rather than transactional amplifiers, brands have another important role to play for connected organizations; they have to be considered as the strange attractors of the complex systems formed by companies, their stakeholders and customers.

A step toward a more sustainable model

A more and more important part of the value associated with a brand comes from interaction between the company and customers This either directly, both shaping the brand’s personality by transferring emotional values and sentiment generated (as in the case of brands communities), or indirectly, accumulated along cradle-to-grave customer’s journey with the brand.

All these interactions are the expression of forces at work between individuals during the whole brand’s lifecycle: companies’ internal mechanisms, customers’ relations circles and communities, customer service, empowerment and influence (which Michael Wu recently insightfully described ), open innovation, crowdsourcing… where the brand itself is no more an intermediary, but a representative symbol.

Customers and marketers have been accustomed to such transfer of value, value in expectation, for instance, being directly linked to the brand associated value. But organizations themselves should care much more about brands, as they offer a new model to maintain, and reinforce in a meaningful way, the collaborative enterprise. Let us envision networked specialized entities or departments, gathered around shared brands’ values and directly linked to customers. This model, as it works for Zappos and a few others, might prove itself an alternative, more sustainable, model for today’s rigid and bloated organizations.