The Power of Networked Customers

Editor's Note: This article originally appeared in The Telegraph (UK) and appears on CloudBlog with permission. Thanks to Shane Richmond, Head of Technology (Editorial) at Telegraph Media Group. - @jtaschek

Jp1During the Industrial Age, companies were formed for a number of reasons: to achieve scale; to increase reach; to simplify access to capital; and to contract for benefits. And, as Ronald Coase reminded us seventy-five years ago, to reduce transaction costs. Firms were therefore built on the industrial model, focused on transaction costs, integrating vertically whenever and wherever relevant.

As companies grew, management structures evolved in response to the task at hand. Management was about developing and setting priorities, allocating resources to the requisite tasks, monitoring progress against the priorities and providing mechanisms for intervention and conflict resolution. With scale came the need for hierarchy and for standardised processes.

This industrial-age manufacturing model is the same one that has been used to define the 20th century company. Even though companies have evolved beyond manufacturing into services, they have remained as hierarchies of products and customers.

Historically, customers could only 'speak' in the past tense: the resources required to record customer activity were expensive and so, only actual transactions were recorded. These were captured at the point of sale and aggregated by arrays of machines in a world called transaction processing. To reduce transaction costs companies did the only sensible thing they could, focusing on transaction processes and how to improve them. And while they did all that, the customer remained locked-in, lost, forlorn.

But today, everything's changed. You don’t need a company to achieve scale or get global reach. Your credit rating is probably better than your bank’s. And final salary schemes have gone the way of the dodo. Companies have changed.

Customers have changed as well. They no longer speak in the past tense, the cost of the recording infrastructure has dropped amazingly; billions own smart mobile devices.

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More employees are using their own devices to get their work done.

Wal-Mart realised that it made sense to connect distribution outlets, and transformed retailing as a result. Amazon came along and saw that the real edge of the distribution network was the home, and transformed retailing yet again. And then Facebook arrived and understood that customers are not the edge of the distribution network, they're the centre.

Now customers have figured this out and they've realised the power that comes from being networked with each other. They've migrated to the social networks, where they share who they are, where they are, what they're doing and importantly, what they do and don't like.

Savvy companies are recognising this, connecting their customers with their staff and their supply and distribution networks. This empowers customers, allowing them to avoid organisational complexity and silo-ing. It also empowers employees, providing them with 360-degree views of their customers, helping push the complexity of the organisation into the background and away from the customer. They do all this in real time, primarily across public networks.

Knowledge is aggregated at every layer of the organisation and made available to every person the customer touches. Feedback is actively sought, collected and acted upon. Information flows across the organisation, and through the supply and distribution networks in record time. Rather than spending time handling exceptions, companies now work on pattern-matching, empowering teams of employees to solve problems collectively rather than in isolated silos.

KLM has built an enterprise social network that connects teams wherever they are, collating company knowledge and making it available to staff everywhere. Groups of employees work on customer issues and assist the person at the edge, working closely with the individual involved.

A staff member is just a customer by another name, and so the customer-centric 'consumerisation' movement is now part and parcel of the workplace. More companies are adopting Bring Your Own Device policies and the devices used tend to be mobile, portable and wireless, primarily laptops and tablets.

At IG Group, rapid growth meant that new and more effective ways of informing staff were needed to keep them in touch. The challenge was to do all this without overloading employees with too much information. It turned to salesforce.com's Chatter application, where people subscribe to what they want rather than being bombarded with broadcasted information.

Toyota went one step further, connecting its customers to staff, garage forecourts, distribution network, and the products. As a result, Toyota customers can 'friend' their cars, getting updates about service requirements and battery and fuel levels, as well as communicate with friends and family.

The informed, always-on, ubiquitously connected, mobile customer is here today, empowered by smart devices and resident in the social networks. Customers expect to deal with informed, empowered staff in companies and that is the driving force behind the Social Enterprise.

The customer has changed. And with her, the world of work. Customers are now able to talk, to share their interests, their needs, their intentions, and companies are getting better at listening.

I've got to admit it's getting better, it's getting better all the time.