Consumer-Innovators (Part 2) & The End of Social Media 1.0

 

SoMeOnOldWayIn Part 1 of this series, I described how Social Media campaigns and programs may be unwittingly compromised by a villain residing below: The Industrial Age relic of a one-way product design flow.

I also reviewed Eric Von Hippel’s recent work on the surprisingly immense number of consumer-innovators  in the population, suggesting social media programs which target this group are more likely to demonstrate ROI.

In this post, I continue my discussion of how these Open Innovation concepts perhaps offer social media marketers an understanding of social media’s next phase.

The End of Social Media 1.0?

It seems the core problem with Social Media 1.0, as principally a communications strategy, is that it does not on its own anticipate any change in the traditional product design or service creation processes.

Think about the way social media campaigns typically connect a company to customers. In most cases teams of social media people chiefly work on programs to amplify the voice of customers, broadcasting it out to a wider realm of customers and would-be customers . The emphasis here is on increasing the total network size. We continue the mistaken viewpoint that increasing influence  is about finding more people to influence, instead of deepening the ties to those we have already influenced.

My thesis is that much of this is perpetuated by the fundamental one-way product design model below.

Car-pictures-2011-buggati-super-sport-tire-most-expensive-sports-carsIn some ways, building a sophisticated social media strategy on top of this old model is akin to putting high performance Michelin Bugatti Veyron tires on a V4 engine design: You just can’t get their full performance. To get full performance, companies have got to get under the hood, revise the fundamental engine and chassis design. Reading the struggles within the Open Innovation community itself, this is of course no mean feat and certainly far beyond marketing’s control alone.

But here’s what marketers do have control of: If we take Von Hippel’s thesis seriously as a latent opportunity, namely, the opportunity to leverage the  massive number of consumer-innovators out there, companies ought to have an equal size team of social media folks working on getting the customer messages back deep inside the company.

 

What Can Social Media Marketing People Do to Aid the Transition?

 As long as we point to “best examples” in social media as broadcasty, high buzz Old Spice-style campaigns, we’re still in a corporate media mode, casting broader nets, rather than tightening our relationships with customers for “what matters most”, namely, giving them products they want. 

Von Hippel suggests three steps companies can take to leverage consumer innovation. Here I’ve recast his points, adapting them to emphasise marketing’s role.

1. Marketing Needs to Provide a Bridge Bringing Consumer-Innovators into the Product Life-Cycle

DIGIPIXMarketing people need to step outside the traditional serial timeline of internal product innovation where their principal role is to educate consumers on why they need a product design by the company. Instead, they need to focus on reversing the process, bringing lead consumer innovations  into the company, educating the company on what its consumers want. A good start is to review the balance of social media team participants focused on outbound vs. inbound communications. Ask yourself: Are you over-weighted on purely outbound communications?

2. Creating Consumer Incentives to Contribute to Product Design

share_share_alike_smallMarketers need to not only identify and bring those lead innovators into the company design process, but include those lead consumers as part of the company reward system, whether that be by revenue sharing, IP sharing or other. Threadless does it by revenue-sharing and bonuses to designer-users, Quirky does it by sharing a percentage of profit with innovators. As trial programs, companies can experiment with Open Innovation challenges and innovation platforms, allowing lower-risk experimentation without wholesale rearchitecting of fundamental business processes and current operations.

 

3. Building the Consumer-Innovator Incentives into the Company Revenue Model

Ultimately, given that  incentives to your lead consumers are offered, these costs need to built into the cost of sales for product or services introduction. 

 

Is Social Media 2.0 = Social Innovation?

The much sought-after ROI of social media will come to a greater wealth of companies once we realise that “the people formerly known as customers” are far more than brand ambassadors to spread word of mouth,, more than influencers of  product buying decision, but as users of our products have a great deal of tacit knowledge of our product and services to aid  the product design process itself.

Some may question:  Aren’t you simply stating that crowdsourcing is the next evolutionary stage of social media?

And as much as my answer is “Yes”,  my point is that companies can’t achieve this without deep change in  their product design process, a construct which is usually treated as outside the realm of social media discussion. Von Hippel’s research, showing the huge opportunity in tapping consumer innovation, makes it clear that crowdsourcing – with a specific focus on these consumer-innovators – should be the focus of our social media strategies. This keeps us centered on our product and service missions and not just emitting the “clever campaigns and rudimentary conversations” of which Foremski and Solis rightly despair.

Social media marketers wonder “What’s wrong with my social media strategy?”, “Why have my efforts plateaued?” and “Where’s the Social Media ROI?”.  But taking a hint from the Open Innovation camp, we realise the problem may not be with social media per se, so much as that the strategy rests on top of a strictly internal one-way design process. What the Open Innovation experts know is this:

You can’t build an effective 2-way customer communications strategy on top of an outdated one-way product design model.

In the end, I hope both groups step outside their separate rooms to begin a long-lasting conversation. It seems adopting the best of both paradigms  promises to unleash a tremendous force of consumer and company co-creation, aka social innovation.

SocialMedia2.0

 

What do you think? As a social media marketer, do you regard crowdsourcing consumer-innovators as an optional strategy? Or is it part of the endgame?

 

Bridge photo source (NY Daily News)

 

Postscript. For the sake of clarity, I have simplified real company situations in two respects. First, most companies do not have a strictly one-way flow of design – that’s an extreme.  Second and obviously, the use of the term “two-way” in here is more realistically replaced with “multi-way”, meaning interaction includes not only other groups beyond end-consumers,  but group collaboration.

 

 

 

Of Skateboards, Consumer-Innovators & The End of Social Media 1.0 – Part 1

Who should read this post: If you regard crowdsourcing customer ideas as a separate and optional evolutionary branch of social media.

Who should not read this post: If you’re already exploring or planning to crowdsource customers ideas.

vintage-skateboardEver notice how we  tend to stay safely inside our chosen paradigms? As Frank Beach, the biological psychologist, and a professor of mine at Berkeley once said, “We entertain the hypothesis because the hypothesis entertains us.” But a school of thought, a particular approach, even in so much as it provides a framework for thinking, can also trap us inside its frame.

Take for instance two paradigms that have radically shifted the way we do business over the past seven years or so: Social Media and Open Innovation. The first, principally a marketing paradigm, tells businesses that it’s time to start listening, engaging and adapting to customers. The second, more strongly affiliated with management consultants, and speaking to a somewhat deeper level of business practice, brings to light that we need to involve business partners, suppliers, potential licensees as well as customers at earlier stages of the product design (or service creation) process, The first focuses on getting closer to customers, the second focuses on leveraging external innovations and spinning out our own “pre-products” (if you will)  to lower costs, increase time to market and find new market opportunities.

But something’s been bothering me lately.

Rarely, do experts from the two schools of thought reference each other. (As I’ve lamented in the past, it seems the Open Innovation school rarely discusses marketing at all.) It’s as though the two groups are meeting in separate rooms with corporate management.  And that’s a shame. This post explores how current restrictions in the social media paradigm may stem not from within itself, but rather from the foundation of a business structure existing far below the usual level of discussion. I argue that it’s in the cross-fertilization of ideas from the Open Innovation camp that the next evolution in social media may occur.

oi-closed-vs-open
Source: Henry Chesbrough 2005

Much as  command-and-control style management style presented resistance to company employees using social media to  directly interact  with customers, this serial process timeline too, perpetuates an operating model of one-way broadcasting. For in this timeline, marketing and PR functions, the champions of social media, are at the tail-end of the process, whose primary objective is to educate customers  on an already internally created-manufactured-delivered product or service.  (Note these diagrams from the Open Innovation community do not even depict marketing and PR as part of the company process!)

 

Yet even at this tail-end of a one-way process, social media and its tools have contributed greatly to companies understanding that they alone do not control their brand or their reputation . Customer service has benefited as well: Rather than using 1 on 1 customer service calls, problems are solved (even while PR takes place) with company representatives tweeting solutions publicly over the web, providing social proof of a company’s accessibility and responsiveness. Indeed, in its best incarnation, a great humanization of brand has occurred. 

But for all that social media has accomplished over its fairly brief lifespan,, an e-Marketer report suggested that we were beginning to see a slow-down in social media innovation. Some even  despaired (to some outcries of rage) that we were seeing a plateauing of growth.

Social Media is Not Corporate Media

Ever on the zeitgeist of the social media movement, Brian Solis elaborated on these trends in his excellent post The Demise of Social Media 1.0. writing,

 

quote

From Social Network Fatigue to Deals Fatigue to Follow Fatigue, businesses are facing a crossroads at the intersection of social and media. Following the path of media continues a long tradition of what Tom Foremski refers to as “Social Media as Corporate Media. …

As Foremski states, “Social media is not corporate media….if corporations try to turn social media into a corporate sales or marketing channel then they risk losing the naked conversations, and the insight into customer behaviors.”

His point is that there’s more to social media than clever campaigns and rudimentary conversations. Talking isn’t the only thing that makes social media social. Just like adding Facebook, Twitter and other sharing buttons will not magically transform static content into sharable experiences. Listening, learning and adapting is where the real value of social media will show its true colors.”

But have we really adapted?  

I’d say, in most cases, no. For there’s another ever-present vexation within the social media camp: Social media ROI continues to remain elusive   It seems so few show social media ROI  that some have concluded we are attempting to “measure the immeasurable”.

I believe some hint to getting to social media’s next evolutionary stage, how to adapt, close the last mile to the customer, is afforded by looking outside the social media paradigm, venturing into that room where the Open Innovation consultants are talking.  Even as much as companies marshal their social media campaign efforts, attempting to widen their influence, ride a large-scale ‘network effect’, amassing “shares” and “likes” and Google plus ratings, there’s a quite independent consumer movement in play. And it has less to do with what consumers are saying, but rather what they are actually doing.

Enter: The New Customer-Innovator Paradigm

A recent paper by MIT’s Eric von Hippel, The Age of the Consumer-Innovator, alerted me to the fact that the serial product design process, as the still dominant business process of most companies, may be the key deterrent to exercising the true value of social media. An extension of Von Hippel’s earlier work  and book, Democratizing Innovation, the paper explores how, users, much assisted by improvements in computer and communications technology, increasingly can develop their own products and services. 

We’ve always known that consumers can be a hot-bed of product ideas and, yeah, new markets. Legendary examples include the skateboard, created by kids by hammering a wheels onto a board. Or take the dish washing machine, devised by socialite Josephine Cochrane  to solve the problem that her servants, in washing, often chipped her fine china. Von Hippel’s examples are wide-ranging, including high performance sports equipment, library systems, PC-CAD systems, the Open Software movement and hospital surgical procedures. Even in financial services,  Hippel describes horw sweep accounts, long before they became profitable banking services, were used by retail and corporate banking clients to increase returns from interest payments.across their accounts.

The Millions of Consumer-Innovators

It turns out that consumer innovators are by no means outliers, but rather they number in the millions. Marshalling data from three recent consumer research studies conducted in  Japan, the UK and the US,  Von Hippel’s data shows that across these three countries alone, consumer-innovators are estimated to spend some $31.2 Bn on consumer-based product innovations per year and they number 18.5 million strong. Most remarkable is the finding that in the U.K., these consumer-innovators spend 144% more annually than what all commercial enterprises as a group spend on consumer product R&D.

Hippel-Consumer-Innovation-Market-Size (12)

Data from The Age of Consumer-Innovator, MIT Sloan Management Review, Sept 21, 2011. Eric vin Hippel, Susumu Ogawa & Jeroen P.J. de Jong

What I find ironic here is that even while companies are building social media strategy, growing large social media teams to outreach to consumers, a significant group of consumers independently are creating, modifying and testing novel functionality of products and services.

To me, it’s no coincidence whatsoever and Von Hippel’s realisation explains why some of the best-known examples of social media success are  companies which have built customer-bridging platforms, if not wholly, at least in part, into their design process. It’s initiatives like Dell’s IdeaStorm, MyStarbucksidea.com and and the company Threadless that are fully leveraging social media’s value. There are other splendid examples: The Fiskars scrapbooking community and the many Forrester Groundswell Award winners, such as Godiva and the Intercontinental Hotel Group & Chase Card Services who developed  a new credit card with the help of and for loyal Priority Club members .

Why did it work in these instances? Because beyond listening, learning and engaging (Social Media 1.0), these companies actually adapted their product design process to incorporate the customer. In other words, they are no longer working off the simple, one-way  product process line.

True enough, only a small minority today, some 3.7- 7% of the total consumer base, are full-fledged, self-initiating consumer-innovators or “lead consumers”. But as von Hippel points out, there’s every reason to think that this base of independent innovators is expanding: Not only does the cost of computer-aided design tools continue to drop, but new web-based businesses exist to turn CAD design files into actual product prototypes. 

There are  other signs of a broader consumer-innovator and business problem-solver movement afoot: In recent years, we’ve seen the rise of design challenges (Innocentive, Spigit), third-party innovation platforms (Napkins Labs, IdeaScale) , independent entrepreneur idea platforms (Quirky, Edison Nation) as well as the rise of  Maker Fairs.

All this should be a wake-up call to social media marketers. You think customers are talking about your brand? What about those that are reinventing your products? Even as much as social media marketers continue to vex in search of  larger and larger group of influencers, its seems we’ve been ignoring those who have already been deeply influenced to become inventors and creators. You can listen, engage — but if you don’t really connect with these true influencees, you may well find yourself competing with them.

This speaks to a key flaw in most social media strategies, what Foremski and Solis are referring to in the (misguided) equation of social media with corporate media: We tend to overemphasise total reach, instead of focusing on the depth of conversation. (As I’ve written earlier, this fallacy of large networks as a basis of influence underlies many social marketers misguided obsession with the Klout score.)

 

Why Consumer-Innovator Communities are the Next Stage of Social Media

Companies and social media marketers need to stop treating social media as the tail-end of product process as well as an extension of their corporate media. Those that take the bold step to go beyond  listening and talking but to tap into the consumer-innovator communities stand to benefit immensely. The following benefits stem from Von Hippel but really echo what’s also been noted independently by crowdsourcing advocates:

  • Decrease R&D & Risk.Since lead consumers are already producing and vetting novel functionality product ideas on web communities, companies stand to benefit in reducing their R&D costs and risk in investing in those same/similar products.
  • Decrease Market Research Costs. As lead consumer-innovators are conducting market research for their innovations, companies stand to benefit in reducing expensive market research costs in detiming what product/service ideas would be in demand.
  • Decrease Inventory Excess. Where a consumer-innovator product/service idea has traction, companies may benefit in taking a high potential product concept to market, leaving them to focus on producing it at low manufacturing cost and with lower inventory as the product has already proven to be in demand.

Looking for social media ROI? Once the gap is jumped, moving beyond social media as a pure communication platform but , taken one step further, implemented as a design platform where co-created products or products created solely by users, herein ROI lies.

Is what I’m saying self-evident? Could it be, in many cases when we measure social media ROI, it’s because we’re tapping into these consumer-innovators? Could it be where we see a plateauing of social media’s effect it’s due to an outdated one-way product design process, residing far below our campaigns?


In Part 2 of this post, I’ll explore why this means the end of Social Media 1.0 and what marketers can do to aid the transition to true social innovation, a place where ROI becomes less elusive. To do that requires looking a level deeper than the usual social media discourse.

 

Related Posts:

Consumer-Innovators (Part 2) & The End of Social Media 1.0

Four Roles for Marketing in Kickstarting Open Innovation

Open Gov’s Prize-Palooza or How We All Became Creatives for The White House

Crowdsourcing and Open Innovation Fuel a Prize-Driven Economy

Start Innovating Already: A Punk View of 13 Poisons to Open Innovation & Building Engaged Communities (Slideshare)

Six Marketing Lessons of the Netflix Crowdsourcing Experiment