(For the most recent articles on Web 2.0, check out my full Web 2.0 articles category.)

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Why (Almost) Every Company Should Stop Procrastinating and Start Blogging NOW


The time for equivocation, waffling, and procrastination is done. It is time to get blogging.

Ten years ago, people used to ask me: "Should we get email?" Then eventually everybody got email. Next they asked, "Do we really need a website?" Eventually, once search got good and their customers started to go online, the answer became "yes" and many businesses (but not all of them) went online.  Nowadays, whenever I give a talk on blogs, wikis and Web 2.0, I get this question: "Should OUR company blog?"

My answer to that is absolutely, unequivocally, "YES". There are a few exceptions that I will cover here, but for the most part, the time to ask that question is now over. In order to make that point, I will cover here the high-level value of blogging, the risks inherent in not blogging, address common fears that prevent companies from blogging, offer up some cautions, and finally, provide a summarized list of tips and tricks on how to "do" blogging well.


IS BLOGGING REALLY THAT IMPORTANT?

I'll let Tom Peters say it better than I ever could:

"Biz Blogging...WORKS. It is of...MONUMENTAL IMPORTANCE. (Or can be.) Listen. Please. If you don’t you’re a damn fool."

- Tom Peters in the foreward to Naked Conversations

WHO SHOULD NOT BLOG?

Before we begin, let's be clear that there are some organizations that shouldn't blog. If your company is closed and can't handle transparency it shouldn't blog. If you are a military contractor and your business relies upon non-disclosure, you shouldn't blog (at least not externally). If your employees are unhappy or can't be trusted, don't blog. If you don't want to know the truth about what the market thinks about your product, don't blog or read blogs. If your PR communication approach is command-and-control, you probably shouldn't blog. If your people and your story are boring, then you probably shouldn't blog. And if your reason for blogging is  "because everybody else is doing it", then you definitely shouldn't blog.

“If you don’t have genuine faith that you can evolve a better company by listening to what your customers, prospects, investors, vendors, and partners have to say, then a blogging effort will not provide you with its full value. If you don’t want to listen – REALLY listen – then blogs will be thorny for you and your culture. If you can’t be candid about your company’s dirty laundry, then blogging probably isn’t for you. If you insist your company doesn’t have dirty laundry, then your company may be too boring to write about. Every company has its share of problems. If you aren’t willing to discuss them with some degree of openness, then you’ll be missing a huge amount of power that the blog could bring to your company. People are hungry for companies that have conversations with them – warts and all. They tend to distrust companies that try to say 'everything’s perfect here.'" (Naked Conversations, Page 146)

WHO SHOULD BLOG?

Everybody else. If you have something unique to say to the world, your business creates something of value to people, you trust your people, you can be open and transparent, and you have a thick enough skin to have brutally honest communication with your ecosystem, then YES, YOUR COMPANY SHOULD BE BLOGGING! If you can tap into your "great vision", the thing that most motivates your employees and that excites your most loyal customers, then yes, you should be blogging! If you want to stay relevant as your customers move online, then yes, you should blog.

If you need some examples, Microsoft had 10,000 internal and 3,000 external bloggers by Summer 2006. IBM had more than 20,000 registered bloggers by the end of 2005. Sun had 1,000 bloggers by 2004, a year after beginning their initiative. If you need more examples to prove that this is not "bleeding edge" communication technology, how about Wal-Mart, General Motors, Chevron, Ford, GE, HP, Verizon, Dell, Boeing, Wells Fargo, and many more listed in the Fortune 500 Blog Project Wiki.


WHAT'S THE VALUE OF BLOGGING IN BUSINESS?

Corporate blogs can impact almost every part of your business - internal and external, all departments, all functions. Instead of simply being JUST a corporate communications channel, they can also be used to impact almost every aspect of your business. Let's look at some of those areas by exploring what companies have done in the real world.

Google Rank: Blogging gives the writer good "Google rank", more than almost all other search engine optimization tricks combined. This is a result of the way blogs work mechanically - they ping the engines and ask to be re-indexed when you post something. This results in higher ranking on the search page. This one reason alone should be enough to encourage any company to blog. If you don't, who knows how many disgruntled employees have blogged about you and are on the front page of Google or Yahoo! when prospects search for you.


Branding: Sun's CEO Jonathan Schwartz says: "The perception of Sun as a faithful and authentic tech company is now very strong. What blogs have done has autheticated the Sun brand better than a billion dollar ad campaign could have done." (Naked Conversations, P 55)

Finding, Hiring, and Training Great People: By having your smart and creative people out there blogging, they will attract more smart and creative people. Robert Scoble and Shel Israel wrote:

"Almost every Microsoft blogger we interviewed pointed to blogging's advantages as a recruiting tool. There are two HR blogs giving advice on applying to Microsoft and demystiying the process." (Naked Conversations, P 21)

By reading your prospective employees' blogs, you can get a sense of who they are and what they might be like to have on board.

Additionally, blogs and podcasts can be used internally as excellent, cost-effective training tools. Try Googling "sales training podcasts" and you'll find a plethora of sales training guides in MP3 format. Will podcasts replace classroom training? No, of course not. But they are an excellent low-cost distribution network that can operate alongside traditional employee training.

Market Research: Lisa Poulson, President of Kirtland Enterprise Group Inc. said: "Watch and learn. There are a lot of people who have a lot of opinions about every corporation, and they're having conversations. That's free market research. A corporation that is afraid of the participation that comes with conversation has larger problems." And rather than just viewing the blogs, you can have your people note them, debate them, discuss them, and extract lessons from them. This is cheap qualitative research! Take advantage of it!

Innovation: blogs can act as a part of a system that sees your company engaging its customers, partners, suppliers, and employees in the discovery, ranking, and application of new innovations throughout the business. IBM has taken this to the extreme and created their Innovation Jam process which allowed IBMers, their clients, business partners, and family members to brainstorm online. Then they will fund up to $100M worth of follow-through on those ideas.

Collaboration & Brainstorming space: blogs (along with their related tools, wikis, RSS feed managers, and instant messaging) can be used as a platform for lightweight collaboration. Andrew McAfee, Associate professor with the Technology and Operations Management unit at Harvard Business School wrote a fantastic high-level overview of this titled "Enterprise 2.0: The Dawn of Emergent Collaboration" which is worth reading.

Connecting to Experts: Letting people blog about their passions, interests, and roles means that people of like minds will find each other faster.

Competitive & Environmental Analysis: By scanning the blogosphere for your company's name, your product names, your competitors names, and any other piece of information you want to keep track of. This can be done in a myriad of ways but one of the simplest is to use a site like PubSub where you can have it keep a list of keywords and then whenever a blog post is written that contains that keyword, PubSub can send route that post to you.

Find new uses of your "used" data: Do you have a technology or data set and you don't know what to do with it? Why not get the world to help you figure out how to capitalize on it. Don Tapscott discusses in his new book, Wikinomics, how Goldcorp's new CEO Rob McEwen had an epiphany that the open source collaboration model might help them find gold. So he released the crown jewels - their geographic data - over the internet to anybody who wanted it. He offered a $575,000 bounty to anybody who could tell him where the gold was located. After sifting and sorting through the myriad of entries from all sorts of people (many of whom weren't geologists), Goldcorp dug for gold and found $3.8B worth of it. This is not so much a story about blogging as it is about collaboration. The tools matter less than the underlying approach and philosophy so I think this is still a good story to tell here.

Have new markets find YOU: In another case documented by Scoble and Israel, DL Byron had blogged about his invention that allows people to seal anything they want between two sheets of plastic. He marketed it for biking and hiking, but other users soon found him including hazardous waste and nuclear labs, Scuba, aerospace, dairy farms, body bags, and organ donor deliveries, commercial coffee bean packaging, and a great deal more." (Naked Conversations, P 74)

Get new business ideas from your readers: "Such comments [from readers] may be worth millions, believes Tim Draper, the founder of venture capital firm Draper Fisher Jurvetson in menlo Park, California. Draper has been using his blog to discover new business ideas worth funding. "It has become a terrific source of leads," he says. After reading a slew of mini-pitches, Draper contacted three people whose ideas he especially liked to discuss the proposals further." (Blogging for Business)

Efficient Information Management: I currently have 66 RSS / podcast feeds in my RSS Reader software. That allows me to scan all 66 sites from one place without having to go check out each and every one. because each site is different and you don't know where to look, most people wouldn't even try to keep up manually with 10 websites per day. It's just too hard. Putting them into a feed reading program allows you to be far more effective with your time. Robert Scoble talked about how he was reading 1200+ websites with his blog reader! Most geeks I know have about 100 websites they regularly scan for new material.

If those sites provide "full feeds" (the entire article), you can also use an offline reader to catch up on a backlog while sitting on a plane or at the airport. I often skim 2000-3000 articles on a flight, blogging some of them as I go or flagging them for later viewing.

For an enterprise or large business, I would recommend looking at something like the Newsgator Enterprise Server which allows people to read their RSS feeds anytime, anywhere, and to keep their list updated at all times. This means that if you read an article on your laptop, then it will be "marked as read" on your PDA or on the web. A lighter, simpler version is Google's Blog reader (version 2) that also has a mobile version so that you can catch up on your feeds from your phone as well.

Product Design: In an interview Scoble and Israel conducted with Loic Le Meur, EVP and GM for Europe for Six Apart's operations, Mr. Le Meur talked about "the t-shirt guy" from La Fraise Blog. This guy had a passion for t-shirts and wrote all about good t-shirt design on his blog. People found him, and eventually started submitting t-shirt ideas to the site. He has turned this into a full-time operation where his community submits ideas, they vote collectively on them, and then he produces the ones that the community wants. The consumers are the designers. If you think this is only possible for a guy selling t-shirts....you need to expand your context. This is happening across the board. I read a great quote recently which I can't seem to find right now and it was along the lines of "when your customer is your product designer, you no longer need focus groups." That's what I like about this trend. Poor companies build stuff and then look for customers. Great companies build only what customers want. If you can get the customer to pre-pay you (Dell), and help you design it (the shirt company), you're even further ahead of the game.

More Rapid Product Development: Even if you don't buy into the "customer as designer" concept above, it is still possible to simply engage customers on blogs in order to better understand how they are using them, what the issues and complaints are, and to iterate more quickly. Why is this better on a blog than on your forum? Because your customers are not necessarily complaining about your product in your forum, particularly if it's a poorly designed one. They are writing on THEIR blogs. By using the blog search engines (such as Technorati, Feedster, or PubSub), you can track what people are saying about your company or product, and then connect with them there. Feedback should be able to come back to your product team, no matter where that feedback is posted online. The entire internet should be your product forum.

Marketing: blogs can be used to establish thought leadership. There are a lot of blogs out there it's true. But we're still at a stage where a blogger can quickly become one of the leading voices simply by being very focused on their niche. There are probably not a thousand bloggers blogging about how to build great bird houses or how to knit. Even in the business space, there are still relatively few top bloggers in every business category so if your content is compelling and you can market yourself to the other bloggers in your space, it is possible to become well-known in your niche relatively quickly

Building community: Community isn't a technical infrastructure. Community is a group of people with a shared interest, context, language, and history. But blogs are means to building a community of people. There are communities that emerge around certain subjects, or bloggers, or cluster of bloggers.

Cost-effective communications: Scoble and Isreal write: "Because blogs are also the lowest-cost communications channel, you can reach thousands, perhaps millions of people for an investment of a few cents and some personal time. Blogs are infinitely more efficient than any other corporate communications medium.” (Naked Conversations, P 27)

Public Relations: moving from traditional command-and-control PR to PR being people who understand that "marketplaces are conversations". This paragraph from Naked Conversations so perfectly sums up this issue that I need to quote it in full:


PR is an absolutely critical function in any company. But good PR people realize that their industry is changing and that new tactics are becoming more useful and some tactics are becoming less useful.  What type of PR are your practicing? Command and control? Or conversational? You might want to go and find out.

Correcting the media: If your company does a one hour interview with a reporter and that reporter does a 3 minute piece or a 500 word column - and makes a mistake - what recourse do you have? In the past, you had none. Now it is a simple matter to correct the journalist right after the error is made. This is a definite power shift.

Reputation/Perception: Tom Peters wrote: Robert Scoble, single-handedly at first, has given the EVIL EMPIRE (Microsoft, who els?) a “Human Face”...thanks to his blog." Scoble did this by being himself, calling it as he saw it, which included praising the iPod, and slamming Microsoft when they screwed up. That honesty gave him huge points with his readers so that they knew when he said he saw something positive in Microsoft, that he wasn't just parroting the company PR. Microsoft has over 10,000 internal bloggers and over 3,000 external bloggers so Scoble wasn't alone in shifting the tide of public opinion but he was a big part of it.

Direct access to your customer: Blogs are a direct (public) channel of communication from you and your people to your customers/partners/vendors. They are the only channel of this kind that is this cost-effective. This alone is reason enough to blog.

Direct unfiltered communications FROM your customer: Companies are fond of doing customer surveys. You know the ones. They have 20-30 questions that all sound the same and a bunch of multiple choice answers that don't really capture what you mean. And that number rolls up to the Executive who say something like, "Hmmmm....we have a 7." So what? Do they know what to do to get an 8? Or a 10? Getting plain, open, honest, real communication from customers or partners is a HUGE benefit to a company. And the way to do this is to be scanning the blogosphere for mentions of your names

More efficient operations: using blogs, wikis, and RSS feeds can provide your company with low-cost knowledge management and project management systems that allow you to more cost-effectively share information inside and outside your company with your entire eco-system;

Coordination: blogs can allow a widely dispersed organization to more effectively coordinate its efforts by letting teams see what other teams are working on. The larger your company is, the more important this accidental discovery mechanism can be in finding duplicated effort (or in combining multiple projects into one project.)

Transparency and Authenticity: blogs allow your company to move from opacity to transparency, from generic corporate speak to authentic humans talking about their work. In an age of corporate mistrust, this is not to be underestimated!!

Write a book, one blog post at a time: In the olden days (pre-blog), the path to publishing was something like write a book summary, shop it around to 100 publishers, and then either give up or self-publish. The new path is: blog your book one post at a time, discuss your articles with people on the internet to get their feedback, revise as you go, and then you look for a publisher or in some cases the publisher will come to you! Some great examples of this are Chris Anderson's Long Tail (blog, book), Cliff Atkinson's Beyond Bullet Points (blog, book), and Hugh MacLeod's How to Be Creative (blog...book not yet published but there is lots of interest!)

Build a website without building a website: Blogs = High Google Rank. Search is now the dominant means for acquiring new customers. Therefore Blogs are the simplest, cheapest, best way to be found on the web so that people can buy from you. If your company is considering building a website, you're better off to just build a blog and nothing else than you are to build a standard HTML "Web 1.0" website that will have relatively little Google rank. Then start blogging and as Roland Tanglao would say, "Write constantly compelling content!"


WHY YOU FEAR BLOGS AND HOW TO DEAL WITH IT

When asked about blogging, many people and companies have the same base fears. They usually are one of the following:

"Losing control" of what people are saying about you: You never HAD control of the what people say about you. People have been talking about your company for years. And now they're blogging. You can't control the message. Get over it. But you CAN join the conversation.

"Losing control" of messaging: In fact, blogs are a great way to ensure you get to deliver your message exactly the way you want to deliver it, unfettered by filters. You have a direct conduit from the company to your customers. Have your CEO or senior Executives talk directly to the market. Your customers will love you for it.

"Somebody will say something bad about me/us/our product." Ben McConell and Jackie Huba (authors of Creating Customer Evangelists) said: “People are scared to death of anyone, anywhere saying something that might be construed as negative. This, of course, is highly irrational. It doesn’t take into account that your company has supporters, who have a higher level of credibiity and can shoot down unfair and untrue comments.” (Naked Conversations, P 89) Another great point is that if people do say something about your product that is untrue, you have an opportunity to correct it.

"Somebody will divulge corporate secrets": Do what you would do if they divulged them in person or on the phone or in email or from their webcam - sanction or fire them. Most companies have corporate confidentiality agreements already signed and in place. This is no different, it's just another channel.  “Corporate leaks have been with us for almost as long as have corporate secrets...The fear of leaks on blogs is real, but FUD has amplifed the dangers to  far greater level than seems reasonable to us ...Out of several million people in business blogging tens of millions of posts daily, we found fewer than 50 incidents in which employers felt compelled to take action and some of the actions taken were quite mild.” (Naked Conversations, P 141/189)

Our competitors may learn something from our blogs: This is true. They might. And your customers may also learn stuff about your company. Or at least they should. Competitors may be paying attention to your blog. But if you are paying more attention to creating stunningly great products for your customers than you are paying to what your competitors are doing, you're probably farther ahead. I am personally a fan of playing to win (which means following the customer as fast as possible to gain the top spot) vs. playing not to lose (watching the competitor so that you can shadow their every move.) The other comment on this fear is that just because somebody hears your idea, doesn't mean they have the ability to execute on that idea as well as you. This is why angels and venture capitalists refuse to sign NDAs for companies. Ideas are cheap. Execution is what counts.

"I don't want my people wasting their time blogging." Blogging takes time. that is absolutely true. But the reality is that your people are wasting time now in terms of duplicated efforts, not being able to find others in the organization who can help them, giving status updates, and a whole host of other time-wasting activities that will be positively impacted by blogging.


WHY ARE YOUR EMPLOYEES AFRAID OF BLOGGING?

Your employees will be afraid of blogging if there is not a clear policy of support and a clear message from the leadership that this is a positive thing for the company. Oddly, Microsoft has no blogging policy. That approach unfortunately lends itself to having some managers support it and others discourage it. All the while both Bill Gates and Steve Ballmer have supported it.

Give your people the trust they deserve, and give them clear guidelines and training if it's required. Then let them engage your community.

And when people take a risk and say something negative about the company (and it isn't in contravention of the financial or corporate secrets rules), then address their concerns publicly. As management learns how to respond in public to this sort of conversation, your organization has an opportunity to move towards more open, honest conversation - something that most large companies are not very good at!

I read of one company (and can't remember which one) that had an anonymous rant-blog where employees could ask the hardest questions or point out the largest flaws in the organization without fear of sanction. And it was moderated so that once the issue was aired, the moderator would then engage the audience again to ask how to resolve or address the issue. This surfaced a lot of issues and made people realize that the organization could criticize itself and learn.

WHAT ARE THE RISKS OF BLOGGING?

Building a Lame Blog: Some easy ways to build a lame blog include: having a "character" blog, having a ghost-written blog, or breaching the core values of blogs that have to do with authenticity and trust. If you don't know what a lame blog looks like, then hire somebody who does and let THEM build your blogging program.


Building a mediocre blog: I loved this quote from Scoble and Israel:




HOW TO BLOG WELL IN 100 WORDS

Be passionate. Be authentic. Be human. Take risks. Be the authority on your product and industry. Be transparent. Tell the truth. Use human language, not corporate speak. Link to everybody and everything. Be fanatical about metrics. Praise your competitors when they deserve it. Chastise yourself when YOU deserve it! Be controversial. Avoid the zone of mediocrity and the dire hell of lameness. Listen to negative comments, and address them. If they're true, admit it. If they're wrong, correct them! Post quickly about everything! Know who's talking about you and join those conversations. Engage your community! Most of all, have fun!

SUMMARY

Business is the management of risk, not the avoidance of it. The benefits of blogging FAR outweigh the risks of blogging. It is time for all companies to take advantage of this opportunity to cost-effectively connect and communicate with their partners and customers. Don't wait any longer. Do it NOW!


ACKNOWLEDGEMENTS AND NEXT STEPS

I highly recommend buying and reading these three books which provided much of the material for this post. Reading these books will give you all the ammunition you need to justify business blogging.  Good luck!!

• Naked Conversations, Robert Scoble and Shel Israel
• The Corporate Blogging Book, Debbie Weil
• Blogging for Business, Shel Holtz and Ted Dempoulos
  

(For the most recent articles on Web 2.0, check out my full Web 2.0 articles category.)

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This article was originally published in the October 2006 issue of Cutter IT Journal. For more information, please visit www.cutter.com/itjournal.html . The full Web 2.0 issue is available as a complimentary download here here: http://www.cutter.com/offers/web2.html

Full article below:

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DRIVING REVENUE GROWTH WITH WEB 2.0

Much has been written about Web 2.0 of late. Unfortunately, much of it is too conceptual, too utopian, too granular and technically detailed, or too basic in nature to be used by executives or IT managers to drive their organization’s success. It is the purpose of this article to attempt to fill that gap by clearly articulating a series of tactical applications of Web 2.0 that can be used today to drive increased shareholder value for your company. Much of the content can be equally applied to non-profit or government institutions but those types of organizations are not the focus of this article. It is expected that the reader will be familiar with the general concepts of Web 2.0 and many of the basic terms. This is not meant as a comprehensive laundry list but should serve as a starting point for readers to be able to assess their own organizations to see what would be most appropriate for their specific situation.

For the purpose of this article, a very brief definition of Web 2.0 is in order. There are many conflicting, overlapping, and somewhat contradictory definitions under development but for the purpose of this article we define Web 2.0 as the economic, social, philosophical, and technical transitions that are causing the shift from “personal computing” to “social computing”, from a read-only web to a readable/writeable/mixable/hackable web, and from the dominance of the desktop computer to the “web as platform”. That is both broad enough and simple enough to cover all of what we will discuss here.

Shareholder value is comprised of three key drivers (1): value drivers : revenue growth, operating margin, and external expectations. This article, the first in a series, will discuss how to impact revenue growth through the acquisition of new customers, the retention of existing customers, the increased sales from an existing customer base, and finally by optimizing pricing to maximize revenues.

REVENUE GROWTH THROUGH NEW CUSTOMER ACQUISITION

There are two primary drivers of new customer acquisition: marketing & sales; and product & service innovation. Both of these can be positively affected by using Web 2.0 tools and approaches.

Marketing & Sales

One of the first things one would normally be advised to do when looking at marketing and sales activities would be to focus on high-value / high-potential customers. Be warned – this may be a mistake if your business has digital product or could have digital/real product hybrids. If so, it may be subject to Long Tail economics which dictate that sometimes millions of markets of a few may be more profitable than a few markets of millions. (Long Tail theory is beyond the scope of this article - your best bet is to go buy Chris Anderson’s book The Long Tail and do an analysis of your business against the Long Tail principles.) Instead, focus on your most profitable products and services...and don’t assume that they are your “hits” and “best-sellers”. If your venture is Long Tail friendly, you may be making more profit off of the products you sell in smaller batches, and there may be an opportunity for you to drive further down the tail to sell fewer products to fewer people and to make more money at the end of the day.

Next, you will want to explore more effective sales channels and advertising channels. This is straightforward. If your product can be sold in a self-serve fashion over the internet and isn’t currently being sold that way, start doing it. If your product is too complicated to sell in that fashion, then consider building a simpler version if there is a market for it and selling it in a self-serve fashion over the internet. As for advertising channels, expand your use of internet search as a channel. Hire somebody or pay somebody to execute an effective internet search engine optimization campaign to maximize lead generation.

If your organization doesn’t already have corporate blogs, it needs to start. This is no longer optional when search is now becoming a primary way that your prospective customers will about you. Blog postings have inordinately high Google rank and always sit at or near the top of the Google listings. If you don’t want to suffer the fate of Kryptonite or U-Haul, both of which find themselves with pages and pages of negative customer rants on their first Google pages, then start blogging as soon as possible and have people say nice things about your company. There are many corporate blogging books and web-articles written on this subject. Two of the better books on the subject are Naked Conversations by Robert Scoble and Shel Israel (a good high-level overview of why companies should blog) and Blog Marketing by Jeremy Wright (a detailed look at how to “do” corporate blogging well.)

Product & Service Innovation

There are many routes to product and service innovation that can drive new customer acquisition. Among many other options, a company can: broaden its offerings (by rapidly modifying existing offerings to better suit customers or adding new ones) to appeal to more segments; move from a platform model to an eco-system model; increase the quantity and quality of offerings launches; improve time to market, improve the product design process, or improving the innovation skills of your people.

Following are a few suggestions for how to achieve some of the above with Web 2.0.  By employing Long tail theory, there is the option to create more offerings that would appeal to the “Tail”. Or by moving a software company from desktop-based software development to a Web 2.0 “light, small, fast, and cheap” development methodology, there will be more opportunity to get feedback from your customers, learn from it, and adapt the product, leading to more rapid product innovation. Another approach worth exploring is moving from the traditional platform model to an even more richly connected eco-system model, by creating smaller web services that can be linked to many, many more companies, which in turn makes your systems more valuable to a customer. Finally, blogs, wikis, RSS readers, blog editing tools, and RSS aggregators could be deployed as a light-weight knowledge management system with which to share innovation best practices, learning, and content. By opening this system up to a broad set of employees, partners, customers, and even competitors, innovation ideas can come from anywhere in the eco-system, not just from the core design team or business leaders. As an example of this, IBM recently launched an Innovation World Jam where they are asking their entire eco-system to help them innovate in public.

Another significant opportunity lies in creating web services that access your systems, processes, and information. No matter what kind of business it is, there is probably some sort of opportunity to expand the number and type of customers that it serves by offering access to its data, services, and systems such that it makes it easy for a customer to interoperate without having to go down the outmoded and expensive EDI path. Lightweight web services are quickly replacing expensive traditional EDI links. There is a great article by one of the Amazon.com architects on how they re-architected their entire operation around Web Services and how that allowed them to build an ecommerce platform with over a million active retail partners. The article can be found here. Look at your operations. Think about how you could open them up to the world and make it easier for people and companies to do business with you. How could you make it easy for a thousand or a million customers to connect to you?

CUSTOMER RETENTION AND REVENUE EXPANSION FROM THE INSTALLED BASE

Next, let’s look at customer retention and revenue expansion. There are four levers that can be modified to drive higher retention and volume of business: product & service innovation; account management, cross-sell/up-sell, and general retention practices. Since we covered product and service innovation in the previous section, we will discuss the latter three below.

Account Management

Traditional account management best practice would suggest that one should focus on the high-value clients. Just as in the case above, this is a mistake because of the Long Tail. There may be more value found by paying attention to the low-value customers in aggregate. Related to this would be the standard approach of rationalizing your customer base, weeding out the low-value customers and keeping the high-value ones. If you have a potential Long-Tail business, this is a mistake. Do the opposite of what conventional wisdom would suggest and see if you can derive more value from the customers that are buying smaller volumes but that aggregate to be a significant portion of your business. This requires that you drive your costs down as far as possible so that you can make money farther down the tail. This means having a search keyword strategy, using blogs as cheap marketing channels, and moving to a self-service model so that customers can find, learn about, and buy your service without interacting with your staff.

Some other actions one could take under the general category of account management include improving your understanding of customer needs, customer satisfaction, and customer interactions in order to be more responsive to their needs. There are quite a few Web 2.0 ways to achieve this in the following example.

Let’s look at an example company and see where we might apply some Web 2.0 tools and approaches. ABC Widget co. makes consumer electronic devices including toys and games. They are having a tough year after the exploding doll recall incident from last year where they were hammered by bloggers for not recalling the doll sooner. They have supply chain problems that are causing some issues but the biggest problem seems to be the fact that their products of late aren’t really hitting the mark and aren’t selling that well, even when they do get them to the store. Customer support calls are up because of some complex product designs and they have a vague sense that customers are frustrated but aren’t sure how frustrated they really are.

This company needs to start blogging. Yesterday. They need to get out there and tell their side of the story with a human voice. Apologize for the doll incident and ask forgiveness. This is not the job of the PR department or the Legal department, the first of which will speak in corporate speak and the second of which will deny responsibility in order to protect against lawsuits. Next, they could implement some RSS reading infrastructure to start tracking what people are saying about the company. When people say negative things, the company needs to admit it if it’s true, or defend it if it’s false. Engage those bloggers online and learn how to do it well. They are not the enemy – they are ABC’s customers, partners, vendors, and suppliers who now have a forum for their opinions that ABC doesn’t own or control. ABC’s only two choices are to ignore that conversation or to join it. Once it has begun to engage its customers, the company should consider building out some online community for its users so that it can begin to find out what those users really care about. ABC could design and build a site that serves their customer’s needs and that allows them to meet and interact. Post community guidelines up front. Invite customers to help build the community, generate content, and moderate the site. Reward the good contributors, and sanction/isolate those who are harmful to the community. These people are ABC’s future. Now, invite them in to help design new products. Invite them to be on a panel where they can provide both qualitative and quantitative feedback on your plans. Fixing product design and development up front will cause lower support issues later on in time. For now, all the company can do is add more bodies to the support team, and maybe put up blogs and forums where customers can explain their support issues and maybe even help ABC to document the problems in an open wiki. After all, they know ABC’s products better than the designers or the support personnel. If there are any web-based aspects to this business, then ABC must immediately begin to instrument their web-applications so that they can watch every single action that users take. There are nuggets of gold buried in that mountain of “usage pattern data”. By watching their users’ use the web-based systems and applications that interface with the ABC toys and games, it is possible to deduce needs that the users themselves can not even articulate but that are obvious from the patterns. There are many more things that could be done but that is a first sampling of ideas that would all support better account management practices.

Cross-sell / Up-sell

This leads us to cross-sell and up-sell improvement. Now it will become apparent that when we apply Web 2.0 tools and thinking in one area, it often has positive spill-over effects in other areas. For example, typical cross-sell thinking would have us once again revisit the high potential customers and the high potential products, both of which are covered above. We should also look at our sales and advertising channels to identify opportunities to cross-sell/up-sell to existing customers and when we do that, we now know to be aware of the entire tail and to use low-cost models where appropriate to move further down the tail into potentially more profitable territory.

Back at ABC Widgets, there are a few things that could be done that seem pretty straight forward. They could examine their total customer experience and make sure that those experience touch points are fast and functional. People are getting used to Amazon.com, eBay, and Google where the time space between thinking of what they want and receiving what they want has shrunk and the quality of that interaction has gone up compared to dealing with other companies. Revising heavy ERP systems doesn’t count as Web 2.0 thinking, but there might be some places that ABC could apply some light-weight application development to solve some particularly knotty issues, build out moderated forums for their users to improve the support, and/or move their traditional CD-based software applications online where they can build, learn, and adapt them to the users quickly. This will give them a faster order to delivery cycle time (search for the software/game, click a button, and pay for it and play it immediately.) Again, much of this was covered by earlier initiatives. One big area of weakness and opportunity is in brand strength and goodwill. There is no longer any place to hide. Companies that used to bury their customer horror stories in their online forums (or worse, delete them from the forums as Apple Computer has done many times in the past), are now faced with the ugly truth every day when they search for their name. This was discussed above in the Marketing & Sales section but bears repeating. Chris Anderson said it best: “For a generation of customers used to doing their buying research via search engine, a company’s brand is not what teh company says it is, but what Google says it is.”  If ABC wants to retain their current customers and sell them, more they need to react to what their customers are telling them. And if their products are crappy, then they should admit it, fix them, and then move forward in collaboration with their (remaining) customers.

Retention practices

Traditional retention policies use a fairly heavy-handed approach whenever they can get away with it. This would include setting up barriers to switching. The telephone companies used to rest safe in the knowledge that people wouldn’t leave, no matter how awful the service was, because they didn’t want to give up their phone numbers. Once local number portability passed as a law in the United States, people defected in droves (often unfortunately from one frying pan into another fire.) The entire concept of creating barriers to fence your customers in is wrong-headed and disrespectful.

Here are some suggestions for the management at ABC to improve retention. Start by trying to get a grasp on defection drivers, candidates and metrics. This is a lot easier if you are delivering some sort of hosted services. It has been suggested that the sales people at Salesforce.com and Jot (hosted software companies that specialize in CRM and wikis respectively), know within 24 hours if a new customer will become a real paying customer. They also know if an existing customer is declining in their usage and likely to stop paying for the service. They have done this by measuring everything and then looking in the usage pattern data for patterns that predict buy signals as well as defection signals. Without having frequent touch points such as those in an online environment, most companies can not take advantage of this type of approach. But for those with online interactions with their customers, this is a must. Measure, recognize patterns, and then intervene before things go too far wrong and it’s too late to retain that customer. Establishing customer communities, forums, advisory panels and the like are good ways to solicit feedback, find out issues that are causing customers to consider defection so that they can be addressed early and often.

PRICE REALIZATION

Finally, we come to price realization. There are two key levers that can affect pricing. Harkening back to Economics 101, it is easy enough to remember that if you want higher pricing, you can restrict supply or increase demand. And you can also optimize pricing in your market such that it maximizes revenues. Remember the old lesson that if you price your widget at $20 and sell 10 of them, garnering $200, there is also the possibility of selling it for $18 and selling 20 of them, realizing  $360. (We’re assuming that you are still profitable at the $18 price point.)

So, where can we apply Web 2.0 to impact the price we receive for our offerings? Let’s start, as we have with the others, by disabusing some traditional thinking. Standard economic pricing theory dictates that you want to find price insensitive buyers so that you can drive the price higher. Except that Long Tail theory challenges that assumption and states that you might find very price sensitive customers way down in the tail that might still buy a lot from you (in aggregate) if you get the offering / pricing matrix right and it can still be profitable for you to produce. Once again, review your offerings with Long Tail glasses and be careful not to be trapped by this old mode of thinking.

Back at ABC Widgets, in order to drive higher prices, they could increase product innovation and work on their brand image (and related search results), both of which have been covered off above. Next, by moving from their software offerings from perpetual license CDs to recurring revenue Software as a service models, they can shorten time to market (using Web 2.0 development methodologies such as Ruby on Rails. AJAX, and general agile development principles), and improve the functionality of those offerings through rapid customer-driven iteration. In order to optimize pricing, ABC could experiment with pricing in the new customer segments and run tests on the web to see how prices affect conversion rates from prospects to customers in order to maximize conversions and therefore revenues. And the blogs, customer advisory panels and communities they have already set up can be used to explore and better understand the benefits of their offerings that their customers really care about so that the features can be modified and the pricing can be optimized.

SUMMARY

The examples and suggestions above are not encyclopedic and nor were they meant to be. They were intended as a general starting point for companies to begin to explore how they might think about driving revenue as well as to begin to understand how the various technologies and attitude shifts fit together and map to the various shareholder value levers.

We have seen how specific Web 2.0 approaches and tools such as Long Tail theory, blogs. wikis, RSS readers and aggregators, online communities, web services, metrics, usage pattern recognition, user generated content, and self-service can be used...today...to drive revenue growth in an organization by impacting the acquisition and retention of customers, the amount of revenue that is earned from those customers, and the prices that your company can charge for its products and services.

As for next steps, pick up a Deloitte Shareholder Value Map (or map out your own business), read up on the various technologies and see if you can fulfill any of your business goals using the tools above. Then prioritize them, and start building. Test, learn, adapt, and repeat!

BIOGRAPHY

Troy Angrignon is the Emerging Technology Strategist for Business Objects, where he is tasked with identifying new growth opportunities, offerings, and business models that arise from new and emerging technologies. He is currently focused on Web 2.0 strategy, software as a service, and web services strategy. Outside of that role, he also mentors and advises startups on business strategy, business planning, and market analysis. In addition, Troy is a passionate outdoor sports enthusiast and non-profit volunteer and lives in Vancouver, BC, Canada.

1.  The fourth value driver in the Deloitte Shareholder Value Map which was used as the basis for this article is “Asset efficiency” but there were very few ways to impact that driver so it was excluded from the discussion. The Deloitte shareholder value map can be found here
2.  The Long Tail. Anderson, Chris. p. 99.