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Social Business Models - Where's the ROI?

During the height of the dot-com era, I worked at two startups where I experienced the euphoria and excitement of the "New Economy." Like me, most of you probably remember the accepted wisdom of that heady time, which stated that - capturing "eyeballs" was more important than earning revenues and achieving profitability. But, as everyone learned, what really matters is having a solid business model and products and services that customers want.

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During the height of the dot-com era, I worked at two startups where I experienced the euphoria and excitement of the "New Economy." Like me, most of you probably remember the accepted wisdom of that heady time, which stated that - capturing "eyeballs" was more important than earning revenues and achieving profitability. But, as everyone learned, what really matters is having a solid business model and products and services that customers want.

The current excitement about social networking reminds me of that period. Just like developing a web presence, corporations are scrambling to develop or increase their social presences because they know that their competitors are too. This time, however, business stakeholders, and not a few IT executives, are asking themselves, what is the return on this investment for the company, its customers and its shareholders? However, many find that question difficult to answer.

Is there something unique about social models that makes it impossible to identify the value provided by the model in question using the same yardstick?  I believe when looking at social business models, corporations should address certain basic questions: what service should we provide; why should we provide this service; who will consume these services and
how should we go about executing these services in light of our existing investments?

Further, corporations' should ask themselves some of these questions to tease out the ROI from their social investments:

1. Is this just the cost of doing business? Customers are demanding it and competitors are providing it. Is there a way to articulate the value provided by looking at what would happen if you did not provide this function?

2. Do some business functions adapt easier to social models? Certain corporations have had good success with crowdsourcing their customer service and product innovation, but have struggled with social marketing. I attribute this to the approach used to open up these functions to external stakeholders: It's easier to have your customers help each other to solve their service issues or identify newer product features with limited involvement but it requires more involvement to build relationships and trust using social channels. Currently most corporations use the same 'batch and blast' approach to social channels as for traditional marketing channels.

3. Should all industries invest in social models? Some industries can more naturally move from opening internal functions to customers and partners than others. Social channels are a natural fit for industries with high customer touch-points such as retail, consumer packaged goods, retail banks, and entertainment owing to the nature of their customer relationships. However, industries such as manufacturing or energy, too, can use social business models/channels.
 
 4. How can corporations use social models internally? Most corporations see social as a 'time sink' and are blocking employee access to social websites at work. Market leaders, on the other hand, see social channels as a way to foster collaboration and increase knowledge sharing amongst employees and external partners as well.

Over the next few posts, I'll be taking on these questions and raising new ones while sharing my views and insights and I look forward to those of others.

Note: Now that you've read my perspective, check out what Jack Keen has to say in his blog, Should Social Media Investments Get a Free ROI Pass?


 

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