I read an interesting article
by Joe McKendrick titled, "Should IT execs lead the business? Or should business execs lead IT?
" This article is posted on ZDNet and its summary is, “Every business is becoming a technology business, and IT leaders need to take charge. At the same time, business leaders are getting more involved in IT decisions.
" I could not agree more with this analysis as my research has also led me to this finding. Innovative businesses in different industries, segments and geographies are increasingly regarding themselves as software businesses. In that context, this paragraph from Joe’s article is particularly interesting for me-
“This is part and parcel of the trend of every company becoming a software company. IT professionals have the expertise and understanding of IT economics which vaults them into key decision-making roles. Businesses are leaning on their tech-wise professionals for guidance through the ever-encroaching digital thicket.
” [emphasis added]
I agree with this observation for two main reasons. First, a growing number of companies, irrespective of industry and sector, are thinking and acting like software companies. This is because software has become an important part of their products. Its fascinating that nowadays consumers can buy wi-fi enabled thermostats
, coffee makers
, and ovens
! Even industrial products such as many locomotives
are Internet enabled. It can be argued that, over the past decade, while the core hardware in these products has advanced only incrementally their software has progressed dramatically. Stated differently, these products are being transformed by virtue of the software that is embedded in them.
It appears that, in the future, this embedding of software within products will be the norm and not the exception. Therefore, business leaders will need to differentiate their products, in large part, on the basis of embedded software. Consequently, such embedded software will play an important role in the creation and sustenance of competitive advantage by firms. Michael Porter and James Heppelmann discuss this concept in their HBR paper
“How Smart, Connected Products Are Transforming Competition
”. This is why even though the Internet of Things is still a relatively new concept some first movers and early adopters are already pivoting their product portfolios to account for it
Secondly, and wholly apart from the embedded software aspect, Joe's assertion is also accurate because IT, in general, has become a key enabler of every organization's value chain
. News stories about outages of cloud applications mention disruption and turmoil for businesses that use those impacted applications. Similarly, news coverage of data breaches report adverse effects for businesses that are customers of attacked service providers. If IT wasn't an essential part of the value chains of these businesses then a little downtime here and a little intrusion there wouldn't make a big difference for these firms. However, IT plays a big role in firm performance and any business leader that takes IT for granted exposes his or her firm to unnecessary risks
Some may remember the debate that was catalyzed by Nick Carr's 2003 HBR article
"IT Doesn't Matter"? Well, a decade on from when that paper was published, the business value of IT is no longer in question. This is because many researchers of business technology, such as McAfee and Brynjolfsson, have shown that IT is a prime driver of productivity and competitiveness. A simple way of thinking about the reason for this is that not only can firms develop different IT solutions to out-compete their adversaries but they can also implement the same IT products in different ways to gain an edge over their rivals
. This feature of IT is what makes researching this field interesting for me - the same software package or programming framework can be used by two competitors in different ways to achieve different outcomes!
The role of the Chief Information Officer (CIO) has grown in prominence and prestige in many organizations. Originally regarded as a secondary CXO position CIOs now wield significant authority in many organizational decision centers. These days CIOs have become as powerful as other corporate leaders because it is CIOs who are tasked with ensuring the smooth flow of organizational information. Since information is the currency of our modern economic system it can be argued that the activities of other CXOs (such as CMO, CFOs, and even CEOs) are increasingly dependent on CIO performance.
Recognizing this paradigm, savvy CIOs have assumed greater responsibility for their organization's overall goals and behaviors. They have become aware of the need to align technology interventions with their organization's strategies and operations. Unsurprisingly, CIOs are demanding that their partners (such as software vendors) and employees (such as business analysts) defend the business value of their technology recommendations. As a result partners and vendors are having to engineer value and not just systems. Clearly then, what is needed to get buy-in for a technology intervention from a CIO is a clear explanation of its business impact.
For this reason, discussions with CIOs that include topics of critical success factors and key performance indicators are more relevant for their business than purely scientific lectures. CIOs want proposals for technology interventions that demonstrate a thoughtful and reasoned perspective on the organizational impacts of those interventions. In other words, all technology recommendations for CIO audiences should be accompanied by persuasive business value rationalizations. These business cases should account for the ecosystem (of partners and customers) as well as the industry (with competitors and regulators) of the CIO's organization.
You should follow these seven steps to build convincing business cases for CIOs:
(1) Recognize the ecosystem and industry of their organization.
(2) Identify the corporate strategy of their organization.
(3) Decompose their organization's strategic imperatives, based on its strategy, into functional objectives.
(4) Construct its business model (i.e, constellation of business processes and rules) based on these objectives.
(5) Discern critical success factors and key performance indicators that can be used to measure fitness of their organization's business model (for e.g., by evaluating and comparing process performance and rules enforcement).
(6) Ascertain metrics that can be used to measure the attainment of these critical success factors and key performance indicators.
(7) Map the impact of proposed technology intervention to these metrics.
The goal of this approach is to tie the contributions from enabling business technologies (such as Big Data, Cloud, Mobile, Social, etc.) (step 7) through these metrics (step 6) via KPIs and CSFs (step 5) all the way up to corporate strategy (step 2) and even the ecosystem (step 1). This causal-chain is what a CIO need to sell investment proposals to his or her CFO and CEO. While superficially this approach may seem to state the obvious but too often technology proposals focus exclusively on engineering and technical aspects. As such many of them are lack the analysis from steps 1 through 7 and thus exclude a proper business case.
Those that cover step 7 only and cursorily touch upon steps 1 through 6 yield an inchoate business case. It is important to note that steps 1 through 6 should not be regarded as afterthoughts. They are not self-evident for CIOs and should not be taken for granted. In my experience, nothing derails a CIO discussion faster than a glib claim about inescapable benefits that will accrue from a fashionable technology intervention. Ultimately, all conversations about technology procurement or development need to account for business value in a justifiable way. You should use these seven steps to build compelling business cases to support your technology proposals for your CIO.
Starting a new business venture can be a daunting task. It involves taking risks, facing uncertainties, managing volatility, and navigating flux. As a result many entrepreneurs prefer to start their ventures in teams. By joining up multiple co-founders can diversify the capabilities that are available to their venture. They can also diffuse the risks that each individual founder is exposed to by teaming up. However, co-founders also bring a multitude of personalities, attibutes, opinions, and ideas about their venture and this can potentially land their venture into an unending loop of analysis and theorizing. To avoid this inclement outcome co-founders should start their strategy formulation process by answering these five questions.
(1) How do the co-founders define a market (ie, globally, regionally, vertically, horizontally)?
This is to me the most important question that co-founders need to answer. At an intuitive level the word market is self-apparent. However, market is a loaded term with different meanings for different people. A market can be analyzed in terms of geography, industry, segment as well as many other attributes. So, just because someone might claim to advertise a product or service on the Internet that has some or all of the features and functions that a team of co-founders is thinking of delivering does not mean that it is a viable or feasible competitor. This might be because that other company might not serve the geography, industry, or segment that the co-founders are interested in for their product or service. In other words, in a day and age when anyone with a pulse and a keyboard can advertise anything on the Internet it is likely that whatever a team of co-founders thinks of offering in particular market is already being marketed by someone else somewhere else. So defining, and sizing, target markets is very important and it starts with finding a consensual position amongst the co-founders on the meaning of a market.
(2) Are the co-founders trying to invent something (ie., hasnt been brought to market before) or are they comfortable entering an existing market with competitors in the present?
The answer to this question requires the co-founders to answer two interrelated sub-questions. First, whether anyone anywhere claims to offer what the co-founders want to offer (this is related to question 1)? Second, if the answer to the first sub-question is yes then are there are pockets of demand that competitors can/do not meet? If the co-founders can identify markets which are not served by other vendors then they can penetrate them as an early mover to build up a customer base. If their chosen market is already rife with competitors then the co-founders should focus on a cost or differentiation strategy. Either way, answering this question is important because different co-founders will have different points of view about the two sub-questions mentioned above. So, it is important that they position their product or service in a way that reflects the vendor landscape in their market of interest.
(3) How broad of an offering should the co-founders start with?
Land and Expand is a good strategy for bootstrapping and lean startup teams. A small team with limited resources should try to land that all-important first customer as quickly as possible. Then it should build up a profitable revenue stream by going after an unserved or underserved niche. After planting its brand at some key and recognizable customers in that niche it should expand into other markets. This approach is helpful as going narrow and deep allows the startup team to concentrate its limited resources on focused competition. Going broad can not only be a capacity challenge but will likely also subject the startup to fierce competition from well heeled rivals. The broader an addressable market is, in terms of customers and solutions, the more all inclusive as well as niche players are likely to be entrenched in it. Therefore, it is important for the co-founders to have a realistic expectation of how much ground they can cover at the start of their venture.
(4) What is going to satisfy the due diligence requirements of the co-founders prior to their commencing work on any product or service?
A common issue with any team of co-founders is that they may aim for moving targets. There are two variables in this-- the scope of the product or service and the definition of their analysis. First, as the co-founders think up new and interesting products they scale out the effort involved in conducting market and competitive analysis (based on regions and industries) for each of those products and services. Secondly, until they agree on a threshold that will determine whether an idea stays or goes they are likely to keep going round and round back and forth. For example, they might get stuck on discussions about competitors in this geography or that region for this set of features or those set of functions. So, the co-founders should lock down, via a template or a checklist, the list of criteria that all ideas need to scrutinized against. Otherwise, the team can set itself up for analysis ad infinitum by not agreeing on a principled basis for choosing which ideas will be acted on.
(5) What are the expectations and assumptions of geographically distant co-founders?
Many startups are founded by entrepreneurs who are based in different locations. This limits their ability to meet up and collaborate regularly in-person. In such situations, co-founders need to be practical about what their team perceives as opportunities and hurdles arising from this condition. This is particularly relevant with respect to the market as well investment options that will be available to their venture. In particular the co-founders need to be clear about where their initial customers and financiers will be located. It is peachy to aspire to become a transnational firm in the long run (i.e., one that raises funds and sells its products everywhere). However, the co-founders have to wear their socks before their shoes. So, fantasizing about some grand future state where they do everything everywhere is not useful during the initial phases of their venture. By answering this question the co-founders can build a shared mental model of how their respective presence in different locations can be leveraged to the advantage of their venture.
Co-founders need to answer these questions as a group in order to take demonstrable and measurable steps towards locking down their strategy. If they don't agree on the answers to these basic questions then they are likely to subject their venture to an open ended loop of unending analysis. Moreover, they should eschew willy nilly analysis that lacks methodological rigor and is devoid of a principled basis for decision making, Rather, the goal of their analysis should be to inform their decisions precisely so that they can operationalize their aspirations. It may be more convenient to gloss over these questions and jump right into the implementation of the product or service in the so-called "interest of time". However, this is likely to lead to misguided tactics and problematic operations that will result in a waste of time and resources.
Many entrepreneurs form startups while they hold full-time jobs elsewhere. Starting a venture while employed is an attractive proposition because it offers the founder with an opportunity to keep a steady paycheck while experimenting with their business idea. A founder might regard this as a de-risking technique because if their venture doesn't take off then he or she can fall back on their day job. In my analysis, this thinking is shortsighted and there is a lot more complexity to consider before making such a move. Every entrepreneur, as well as team of co-founders, should think about the following 5 Cs before starting a venture while employed.
(1) Credibility - Think about which customer or financier will regard an entrepreneur or team of co-founders seriously if the entrepreneur(s) are employed outside their venture. The impression this might create for a prospective buyer or investor is that the venture leader(s) do not have enough faith in the idea themselves to support it full-time. So, why should any customer or financier take the risk of dealing with a team of co-founders who are uncertain about their own venture to the point that some or all amongst them retain full-time employment somewhere else? A reputable venture capital firm is unlikely to invest in an entrepreneur or team, no matter how good its/their credentials are on paper, that is not fully participating in a venture. This is further complicated if a team of co-founders is comprised of first time entrepreneurs and/or the co-founders are based in distant locations.
This is the same for many customers as well and especially enterprise customers looking for industrial strength business solutions. Broadly speaking, venture capitalists look for teams that can minimize risks and manage uncertainties in a way that maintains the upside while shoring up the downside for their investment. Likewise, customers seek entrepreneurs or teams of co-founders that can build and deliver solutions that creates economic value for them. The undivided attention and faculties of all entrepreneurs are expected for them to be able to minimize risks, manage uncertainties, as well design and build solutions that deliver customer value. Basically, neither a customer nor a financier is likely to put faith in a part-time venture whose co-founders are hedging their personal risks by maintaining their own full time day jobs.
(2) Commitment- In a venture with a team of co-founders think about who is going to decide which of the co-founders will commit to the venture and which ones will simply be involved with it? It would not be fair within the venture for some co-founders to take on more uncertainty than others especially if it is not commensurate with their ownership stakes. I am referring to uncertainties related to personal (family, lifestyle, social, etc.) as well as venture (losses, debts, litigation etc.) matters. Moreover, how is the team of co-founders going to determine the tradeoff between ownership and participation? Absent such a calculus it would be unfair if some co-founders are able to minimize their own responsibility for uncertainty bearing while still retaining their claim on the venture stock as well as future profits. Each co-founder has many personal and professional obligations and will incur many types of opportunity costs in collaborating on any venture. It is not prudent to start a venture without the full commitment of each co-founder on all fronts. Entrepreneurs must consider that if the timing isn't right then they should regroup when each of them can fully attend to the startup.
(3) Capacity - Think about how any long-term idea is going to even get off the ground when its co-founders can't devote their full attention to it during its planning and launch? In its early stage is when the venture is going to deal with high levels of volatility, turbulence, flux, and chaos. There might be a priori knowable and unknowable problems emanating from customers, partners, financiers, regulators, and other stakeholders. Dealing with these, and the regular tasks of operating a startup, will require all of the co-founders to apply their undivided capabilities to the venture. Dealing with predictable issues will be tough enough and taking on unforeseen problems will be harder. If the energies and resources (time, money, network, interest) of certain co-founders are diffused amongst many causes and needs then their expected input into the venture may not match their actual input. Thus, if any co-founder is not willing to apply their full concentration and focus to the venture during this important time then why are they interested in becoming a co-founder in the first place? There has to be a well-defined causal link between what each co-founder is expected to put in and actually does put into their venture. This also needs to be counterbalanced against what they plan to and really do get out of it.
(4) Contracts - Think about how will the ownership of the intellectual property and knowledge content of the venture be ensured if it was developed while some or all co-founders were contractually obligated to legally binding employment contracts by corporations? This is an important practical matter as the language on the employment contracts of the co-founders will affect the ownership of and proceeds from the products of their venture. Such language generally, though not always, bestows ownership of intellectual property and related work products to an employer if they were created by employees of that organization during their term of employment. Many times these clauses are open ended and provide an advantage to the organization if there is a dispute between the inventor/innovator (employee) and their employer (organization). It is true that such contracts are interpreted and enforced differently in various jurisdictions and so if this dispute arises then it can be arbitrated by attorneys and a settlement can be negotiated. However, this is an entirely avoidable risk that is a non-starter if the entrepreneur(s) are not employed somewhere else. Why would any of the co-founders want to bring this kind of a potential hurdle into their venture? Why would any co-founder feel comfortable in exposing the basis of the revenue stream of their startup to this type of a legal risk? Of all the challenges facing a startup is it really necessary to subject it to yet another vulnerability and especially a legal one?
(5) Collaboration - Think about how can it be expected that if all the co-founders maintain their status quo professional situations that they will cooperate effectively? Each of the entrepreneurs might keep busy schedules and have to make efforts to connect with each other by juggling their work obligations. If they do not commit to a venture full-time then there is no guarantee that they will be any better at inter-operating any more effectively after starting the venture. This is not a cynical prediction but rather a practical supposition. This is not a personal fault by anyone but rather the result of the primary devotion of each co-founder to his or her full time employment. It is a good thing that each entrepreneur puts his or her regular work obligations ahead of any side pursuits. However, it is unlikely that a successful venture can be borne out of a side pursuit especially when primary work keeps the entrepreneurs so busy that they hardly have time for anything else.
Why should any entrepreneur or co-founder think that he or she will have more time and attention to devote to any venture if nothing else changes at his or her work? So, given that the majority of their time and resources today go towards their full-time jobs then it is not practical to imagine that this will change even after they start a part-time venture. If their respective work situations remain the same as they are today then how can they expect to attend to their venture more frequently or holistically than they can today? So, every entrepreneur should perform due diligence before founding a startup while employed. In my analysis, considering these 5 Cs is likely to lead to the formation and operation of a sustainable business in the long run.
In the world of business technology new buzzwords pop up and fizzle out routinely. Techno-optimists regularly hype new labels and overestimate their projected business impacts. Conversely, techno-skeptics take every "innovation", real or imagined, with those metaphorical grains of sodium chloride. For my part, having researched and studied the field of business technology for over a decade, I have come to accept the rather less controversial position of techno-realism. From my perspective, while buzzwords are generally a distracting nuisance in business decision-making they are sometimes associated with durable and valuable phenomena.
Consider the case of cloud computing. Think about all the attention, and investment, that cloud computing has attracted over the last few years. While the label "cloud computing" has gained a significant foothold in the industry its nomenclative kin have enjoyed far less traction.
The hubbub around application service provider
has long faded and on-demand computing
doesn't carry the cachet that it used to. Software-as-a-Service
as well as other as-a-service
labels are still used by some software vendors but they are not nearly as popular as cloud computing
. This article
on Computer Weekly provides a short history of cloud computing as well as these labels. So, while these four labels represent similar phenomena (i.e., a particular type of distributed computing architecture) only one of them has exhibited staying power in the business community.
It is also worth noting that it is the least obvious and functionally descriptive of these four labels that has eclipsed others in popularity.
This schematic depicts a rough approximation of the relative popularity of each of these labels in the industry over time. This is not a quantitative graph but rather a back of the envelope kind of diagram. It shows that after a label is introduced in the industry it assumes its own distinct lifecycle. While some labels become popular and/or unpopular relatively quickly others do so more gradually. It also shows that there are temporal overlaps between various labels that describe similar concepts. Since various labels represent similar ideas they can experience rapid growth in popularity right from their introduction due to their association with extant labels.
The industry has come to accept the label cloud computing as a result of seemingly uncoordinated, yet convergent, marketing activities by software vendors.
Unsurprisingly, technology commentators and analysts have also capitalized on the rapid surge in popularity of this label as opposed to other, sometimes older, labels that describe similar concepts. So, while buzzwords pop up and fizzle out at different timescales the underlying phenomena that they are associated with can persist over longer time horizons. None of this takes away from the economic gains that can
accrue to businesses through their use of cloud computing. The purpose of this post was not to examine the business value of cloud computing but rather to comment on the labels that describe the phenomenon represented by it. The central idea in this post can be validated quantitatively by measuring the relative usage of these labels in the industry over time by software vendors, analysts, commentators and business technologists. It appears that I may have another topic search and content survey project in the offing.
In 2012 I surveyed about 30 users of various Internet social networks. I wanted to find out whether they preferred the usability or usefulness of social networks? I also wanted to identify what they liked about usability and usefulness of social networks. I picked these criteria because they are from the Technology Acceptance Model (TAM). TAM is commonly used for analyzing the user adoption of technology. In 2014 I repeated this survey with a different group of respondents. In this post I will share some findings from the 2012 data set and in future posts I will share those from the 2014 data set.
Survey candidates were asked to identify the criterion that they preferred over the other and numerically indicate how strongly they liked it. Along these criteria, 56% of respondents chose usefulness over ease of use and 44% chose ease of use over usefulness. The average preference strength of ease of use was 80% while the average preference strength of the usefulness was 75%. Stated differently, respondents who preferred ease of use liked that criterion more intensely than those respondents who preferred usefulness liked that criterion. However, respondents who favored usefulness outnumbered those who preferred ease of use by nearly 2 to 1. Thus, usefulness prevailed over ease of use in the overall preference calculation.
Respondents identified communication, association, entertainment and productivity as the key usefulness characteristics. Access to information (6% of responses) and Learning (3% of responses) were noted as relatively minor usefulness characteristics. This information was based on the responses to the survey question ‘What aspect of usefulness do you like the most about social networks in general (eg., productivity, updates, entertainment, communication, association)?’ One of the respondents answered this question by stating, “I like that social networks provide a connected (sic) between individuals and organizations. Simplify communication between people who would normally never be able to stay in touch otherwise.” Another respondent stated that, “I also value the communication ability but more for reconnections than carrying a conversation.”
Respondents identified simplicity, real-time, consistency and multichannel as the key ease of use characteristics. Ubiquity (6% of responses) and Cleanliness (3% of responses), which is freedom from clutter, were noted as relatively minor ease of use characteristics. This information was based on the responses to the survey question ‘What aspects of ease of use do you like the most about social networks in general (eg., ubiquity, multichannel, realtime, consistency, simplicity)?’ One respondent answered this question by stating, “Hands down SIMPLICITY. The less complicated/confusing the better.” Another respondent stated, “I like the realtime aspects of twitter - showing what is being talked about most at every second (trending topics based on region). I value simplicity in social media, thoughts mean more than pictures which is why I like twitter more than facebook which has too much going on at all times.”
These findings suggest that these respondents consider social networks primarily as a communication channel. However, since they also use it for the purposes of association (i.e, connecting with people), entertainment and productivity it means that social networks are the locus of virtual communities for these respondents. Not only can social networks be used for maintaining contact with people and communicating with them but they can also be used for social gaming and professional collaboration all via one platform. Over the next few weeks I will organize the 2014 data set and post some findings after analyzing it.
In the previous two posts I discussed the application of social networks for market segmentation
and customer targeting
. According to Johan Strydom
, "Positioning is the last phase in the STP process. A product’s positioning is the place the product occupies in the minds of customers. Through product positioning, marketers influence how customers perceive the characteristics of the brand relative to those of competing products." This means that to position its products or services a marketeer needs to understand, as well as influence, what its consumers think about its products and services
. In this post I will review some of the ways in which social networks can be leveraged to achieve these goals. Positioning represents a sense-and-respond loop in which a marketeer can derive business value from social networks
. The goal of a marketeer is to create an impression in the minds of its consumers that is aligned with its economic, or some other, interests. This goal requires a marketeer to know the extant perceptions of its consumers as this information is helpful for framing persuasive messages. Social networks comprise two complementary facets that are of interest to marketeers in this regard. First, they contain a lot of information about consumers and this information can be mined to identify their perceptions. Second, they are channels through which these consumer perceptions can be influenced. So, any marketeer would be remiss in ignoring social networks for the purposes of positioning.
Social networks provide a range of opportunities for isolating and understanding the consumer perceptions. A marketeer can use social networks to gather data about consumer perceptions directly as well as indirectly
. Direct methods include the probing of targeted customers, on social networks, via surveys, games, contests, and polls. These types of engagement vehicles have become integral parts of our user experiences on social networks. Many prominent brands use them to interact with consumers while simultaneously gathering data about them. Indirect methods include the elicitation of information about targeted customers through the mining of their connections and interactions on social networks. These days, various analytic techniques
are available for discerning sentiment and intent from text. Such techniques
can be applied to communications on social networks in order to isolate commentaries and reviews about brands.
Social networks also offer many capabilities for shaping perceptions. A marketeer can work with extremely focused target segments on social networks and so it can, at least in theory, craft unique messages for each of its targeted customers
. One way of doing this is to prepare advantageous messages ex ante
and allocate them to different customers based on their respective perceptions of a brand. This information about consumer perceptions can be mined on social networks via a range of social user profiling techniques. Some interesting papers on this idea include this
one by Jain et al., this one
by Balduzzi et al., and this one
by Mislove et al. Using such techniques a marketeer can deliver highly personalized messages to establish or reinforce its desired position in the minds of its targeted customers.
In a previous post
I discussed the application of social media for market segmentation. In this post I will cover the role of social media for customer targeting. Chee and Harris explain
that, “targeting involves identifying those segmented groups with the highest potential and selecting one or more of them.” Per Clemente
, "targeting is based on an evaluation of the market potential of each segment - as determined by such factors as market size, growth, competitor activity, and the company’s own resources and corporate objectives." This means that a firm should target customers based on its strategic motivations
which can include revenue growth, margin improvement, competitive displacement, and market entry to name a few.
Two ideas associated with social networks that are quite useful for customer targeting are social data collection and nanotargeting
. Social data collection refers to the accumulation of user data (profiles and interactions) from Internet social networks. For the purposes of STP marketing, these data can be analyzed to extract targeting-relevant data points about individuals. The data points that are relevant for targeting will depend on the strategic intentions of the marketeer. Nanotargeting involves the extremely precise selection of very small (nano) and well-defined customer groups. I have also come across other terms that are similar to nanotargeting in terms of their definitions-- these include microtargeting and hypertargeting. Some commentators use
these terms interchangeably while others portray
Social networks have become platforms where users share information about themselves and others with whom they are connected. Much of this information is shared willingly and voluntarily by the users or by someone in their network. These features of user information on social networks make it both accurate and actionable. It can generally be regarded as accurate because it represents correspondences that are exchanged between individuals and their family members, friends, and acquaintences. So there can be a presumption of some level of trust and honesty in those communications. It can also be considered as actionable because the content of many of the communications on social networks have a temporal aspect-- e.g. announcements, notifications and updates. Social data collectors are systems that scan social channels and warehouse the profiles and interactions on them. They gather this information from social fora like Facebook walls, Twitter streams, Google+ feeds and YouTube comment boards. After gathering this information in their information warehouses many social data collectors sell access to it.
For a marketeer, proper analysis of this information can be very useful for identifying certain individuals that fit a customer profile. Similarly, it can also be useful for generating a unique customer profile for an individual. Identifying customer groups accurately requires a rich dataset with fine-grained information about each individual and information from social data collectors facilitates the targeting of very small groups of customers. Marketeers strive to target very small groups of customers (ideally a segment of one
) because it allows them to create highly customized messages for each customer. These personalized messages result in higher response rates and yield improved customer engagement in contrast to undifferentiated and generic communiques. Given these factors, sustainable nanotargeting at scale would not be possible without Internet social networks.
Marketeers across industries and geographies support a range of business activities using social networks. Social networks offer unparalleled richness, pace and volume of customer information to marketeers. Thus, social networks are leveraged in various marketing use cases that include customer profiling, trade promotion, and product ideation amongst others.
. An example of the use of social networks in marketing is in the area of For the purposes of marketing, social networks supplement traditional media such as television, radio, websites and printsegmentation, targeting, and positioning
. In this post I will focus on some aspects of social networks as they relate to market segmentation. Targeting and positioning will be the subjects of future posts.
Compared to traditional media, social networks offer a valuable set of market segmentation capabilities to a firm. According to Doyle and Stern
(pg. 64), "a market segment is a customer group within the market that has special characteristics which are significant for marketing strategy." Marketing segmentation is the process of identifying these customer groups
website describes the market segmentation process thusly, "Market segmentation starts with a commitment to satisfy one or more groups of customers, requiring a thorough knowledge of both the targeted customers and the benefits of the goods and services being offered." A marketeer can use social networks to learn about its current or prospective customers as well the benefits of the goods and services that it offers. Ideally, as this
article points out, "a business can try to operate so that every customer is treated, to the greatest extent possible, as a unique individual – a market segment of one ."A marketeer can analyze the contents of posts, tweets, comments, and messages to learn about the individuals who share them. They can uncover psychographic, demographic, and other attributes (termed bases
) about the users which can be used to segment a market. What is interesting about social networks, in contrast to traditional media, is that marketeers can glean extremely fine grained information about large numbers of individuals in a vast population relatively unintrusively. Marketeers do not need to send out questionnaires only to receive low single digit response rates with many useless submissions. Instead, they can scan social networks and use social data mining techniques to discover segmentation bases. For e.g., refer to '4.1 Community Detection Using Hierarchical Clustering' in this paper
or 'Name Entity Recognition' on this website
to get an idea of the concepts that can be applied to this purpose. Segmentation bases, in this sense, can be derived from what users are talking about as a reflection of who they are and what they are like.
Social networks also offer a novel means for market segmentation through a combination of social network analysis
and competitive intelligence
. Many brands foster customer communities on social networks via dedicated fora, bulletin boards, and fan pages. A firm can analyze the structure and membership of a competitor's customer community to uncover content themes and participation trends
. From this information it can elicit the segmentation bases that are likely being used by its competitor and thus design or calibrate its own bases accordingly. In this manner, some of the benefits that accrue to brands from supporting open customer communities on social networks are countermanded by the risks that arise from potentially exposing some of their marketing techniques to their competitors.
Last week I had the privilege of attending a thought provoking and insightful talk by Prof. Izak Benbasat
. It was quite enjoyable to have heard from an intellectual giant in the field of information technology as he shared the highlights of his research activities
. His research interest over the last decade has been on electronic commerce and he has examined this domain from the perspectives of computer science as well as sociology and psychology. He has analyzed consumer and user behavior on e-commerce websites and has identified normative layouts, functionality, activities, and integrations on e-commerce websites.
From my perspective, a related research endeavor would be to analyze the value equation for a firm in operationalizing the normative recommendations that he has proposed. The essence of IT planning requires that before a firm adopts any technology it must compare the benefits of adopting that technology with the costs of doing so
. Without a positive rationalization (benefit > cost) the value (benefit - cost) equation is generally unsustainable in the long run. Thus, in my assessment, such research will increase the level of understanding into the economic value of e-commerce related investments by firms. During question and answer time, I asked him whether he thought this would be a productive research area and he answered in the affirmative.One pathway for linking his consumer/user-oriented findings with firm-centric research would be to align objective measures from a consumer/user perspective (that Prof. Benbasat has identified) with firm-related measures
. For example, commonalities and associations should be discovered in ways that consumers/users and firms (or their IT departments) measure efficiency and effectiveness of e-commerce websites. These commonalities and associations should be used to correlate consumer/user behavior with e-commerce outcomes (and conceivably firm performance). Of course, this will require the researcher to control for many types of variables that, along with e-commerce outcomes, affect the performance of a firm. This will not be a trivial activity in a modern firm which is a complex and interrelated network of actors and agents inter-operating within a dynamic environment.A related approach can be to specify the design characteristics of a technology, such as an e-commerce website, based on consumer/user preferences and perceptions
. This way a firm can start with those attributes and properties that matter to the consumers/users first and then base the design of an e-commerce website on that. For example, preferences can be measured using tools like Analytic Hierarchy Process and Electre III and perceptions using Multidimensional Scaling and Factor Analysis. Consumer/user preferences and perceptions can be used by the firm to inform the design characteristics of a technology like an e-commerce website. In this way, e-commerce metrics that are relevant for consumers/users will be in alignment with those that are pertinent for firms. I welcome your thoughts on these lines of reasoning.