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Business model design trumps product design for value creation

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At the Dots conference last month, Mark Earls gave some fresh takes on his favourite theme – humans-as-copying-machines. The best way to come up with something new, he showed, was to copy someone else, or something else. You come up with something new because, in the process of copying, you make errors.

He went further, arguing that one of the best things to do was “copy from far away” – from another field of endeavour, another country, another industry.

On the FT a week later there was an article about how new business models disrupt industries

…Apple became the biggest music retail seller without selling one CD; Netflix reinvented the video business without operating a single video store. Google continues to attack new industries with its data-based services and devices; Google’s products from glasses, to self-driving cars to smart thermostats are just a means for increasing and leveraging Google’s data-based consumer insights.

Of course, none of the business models are new, they are just copied from other industries. Copied from far away. Like Nestlé copying the Gilette razor-blade business model to sell Nespresso pods (pricing coffee at £60 a kilo).

Here’s a video of the whole interview…

 

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Public notebook

Meta-ROI and social media engagement for brands


I want to believe.

Granted, I’m finding it less of a credulity-stretching exercise than taking UFO-ologists seriously,

Charlene Li’s post for the Altimeter Group about their study of how engaged major brands were with social media – called ENGAGEMENTdb – says that there is a link between how deeply an organisation engages with its customers in social media and its performance:

…we also looked at the financial performance of the brands, grouping the companies with the greatest depth and breadth into a group called “Social Media Mavens”. These Mavens on average grew 18% in revenues over the last 12 months, compared to the least engaged companies who on average saw a decline of 6% in revenue during the same period. The same holds true for two other financial metrics, gross margin and net profit.

Note that we are not claiming a causal relationship — but there is clearly a correlation and connection. For example, a company mindset that allows a company to be broadly engage with customers on the whole probably performs better because the the company is more focused on companies than the competition.

I *believe* that this is right. It will be a tough one to defend in the court of cyncicism though, or even against healthy scepticism.

Kathryn Corrick (@kcorrick) Twittered last night that “It’s one of those things that looks mightily convenient. To really know you’d have to see the data and understand other activity.”

Absolutely, an I hope Altimeter and the rest of the network apply some rigour to testing this fascinating hypothesis. Once I’m back to work I will be taking a closer look myself…

One reason it rings true for me is that it gives a path to explaining the value of social media engagement to organisations hat doesn’t get trapped in the cul-de-sac of direct ROI, that is “dollar in, dollar fifty out” marketing as they say.

It makes sense that the value delivered by social media engagement would be delivered at an organisational level, that it would be meta-value rather than transactional value, trackable only to point where individual interacts with brand. It’s meta-ROI, then?

Social media is not about just marketing, it touches the whole organisatioin. Engagement as we are beginning to understand it. Because the principles and processes that are required to engage in social media leads organisations to a philosophical, ethical, strategic position where they need to start being useful in their networks.

…that means creating thick value, as Umair Haque calls it, as opposed to thin value, which is about squeezing the last drops of value of out of markets, systems at any cost.

…as brands develop social web literacy, the pull toward creating thick value becomes ever more compelling. It’s hard to resist, once you begin to understand the power and potential of networks.

…that’s why Andy Lark, VP of global marketing at Dell, starts off talking about social media being the most important thing that Dell (which scores very high in the Altimeter report)

…that’s why Dachis Group, founded by marketers is a “social business design(TM)” company, not a marketing company.

… that’s why if you design an engagement approach (as we do with the social spaces framework at iCrossing) you cannot limit what you do to the group of people known as the marketing department.

: : Bonus link: On the purchase funnel and engagement side of things -which we shouldn’t gloss over at all – @kcorrick recommended listening to this McKinsey podcast “The consumer decision journey”s…