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Monday
Oct102011

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.

Ever 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. 

Source: Henry Chesbrough 2005In some sense, both the Social Media and Open Innovation movements struggle with the same enemy: Namely, the centuries-old serial model of product flow, where design starts internally and the consumer is the passive recipient of a product as a fait accomplis. The stuff of traditional MBA programs, too often embedded in the heads of today's senior management, this principally internally-driven process flow has been identified as the culprit in adopting innovation of both types.

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,

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.

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


Reader Comments (1)

Hello! I understand your concern about social media. It is a powerful source of information and influence and it should be used properly, without destroying the paradigm of the modern society.

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