Social business - Just another channel or a different business model?

 Social business - just another channel or a different business model?

by Matt English, IBM Global Business Services (Melbourne) and MikeHandes, IBM Software Group (Sydney)

Over the years, organisations have faced several tipping points that herald a different way of operating and delivering value. The growth of the internet in the 90s and the expansion of e-business in the early 2000s represent two recent examples. But now, another tipping point is rapidly approaching (and some would argue is already here) and that is the growing wave of social business. But how significant is this shift? Does social business represent just another channel to manage in dealing with customers and stakeholders? Or is it something more fundamental in the way businesses are run and value is delivered?

In a recent article (Turning social media into social business), the above authors painted a picture of the changes required in moving to a social business - from customer dialogue to customer intimacy - from product information to product innovation - and from stakeholder connection to stakeholder collaboration.

But underpinning these changes is the need for organisations to view social business as a strategic weapon rather than simply the opportunity to try different channels. Indeed, organisations that view social business as just channel enhancement, may miss the boat when it comes to extracting real value from this emerging way of doing business. There is a bigger strategic perspective here. Organisations need to consider how social business can impact what they do and not just how they do it. Right now, social business can have a profound strategic impact on the business model in three interrelated ways.

First, social business can help to transform or re-shape an entire industry. Take the print media industry for example. Social tools have re-shaped what the industry does and the way it operates. This is an example of an industry having to change by necessity in order to maintain relevance and to simply survive! No longer is the media industry just a push model for information, news or other content. Rather, it is now very much an industry which is interactive and which provides for a real time two way flow of information and opinion. This is not only impacting the nature of the content, but is radically transforming the speed with which it is produced and distributed. Sourcing of content from "on the ground sources" has also rapidly changed given the growing pervasiveness of social tools in the hands of people across the broader community.

A second strategic angle is for social business to drive change in the way an organisation operates. The airline JetBlue in the US is a case in point. The airline actively uses Twitter for customer care issues. With a mobile customer base and some 1.6 million followers on Twitter, the airline realised that quick response to customer issues or queries was a key strategic lever. The airline engages in real time conversations with its customers and provides real time advice. For example, some recent Tweets such as "Please know we are doing everything we can to get you up and on your way soon" and "Please make sure you contact the Baggage Service Office in the destination airport" provide customers with immediate guidance and feedback, but in the context of a real time conversation . The key point here is there is a public conversation with the customer as well as delivering a solution to an individual issue or query. Additionally the very nature of the interaction has changed from one of reactive to pro-active. This provides a major shift in the customers perception of the responsiveness of the organisation. In Australia, the Queensland Police estimate that by virtue of their use of social media their communications with the public have shifted from 90% reactive to 70% pro-active!

Thirdly, social business can have a profound impact on the way that revenue streams are developed and grown. US fashion retailer Nordstrom has recently sought to develop an iPad app, and reached out to its Twitter followers with the question "What features would you like to see in the app?" Whilst the initial focus is on the app, the underlying strategy of driving greater mobile and e-business revenue is clear.

There is no doubt that social business brings to the table new channels in the way that connections are made between a wide range of customers and stakeholders, and a different and more demanding expectation in responsiveness. But whilst this is important, focussing on channels alone can be a limiting factor for organisations, and can be a constraint on driving more value from social business.

So the call to action for organisations is to ask some key questions about the strategic fit of social business into the way they deliver value. Organisations should strongly focus on the business model that will drive value, and should shape their thinking along three dimensions:

• how will social business impact my industry and how can my organisations play in that space?
• how will social business impact the way my organisation operates?
• how will social business be aligned with growing revenue streams in my organisation?

This will help organisations focus on the broader business model issues and not just on channel enhancements via social media.