How B2B firms can reduce their cost of sales 30-50% by using social platforms
Based on CSRA’s recent research as well as my 25 years’ experience with guiding B2Bs’ adoption of disruptive technology, I predict that 2012 will see significant social business takeup among B2B pioneers. First, a critical mass of B2B executive leaders are familiar enough with social technologies to consider them for the first time. Second, the business driver will be the economy. During the past 4-5 years, enterprises have continue to cut costs wherever they could, but few are performing at the level they want to be. B2B sales and marketing are under more pressure to perform very efficiently than ever, and some leaders will enlist social business because they have tried everything else.
Although I have served numerous B2C enterprises, I have a more profound understanding of B2B because my businesses and employers have sold to businesses. Web 1.0 (“The Internet”) adoption is a very useful pattern for understanding Web 3.0 adoption (we’re way past Web 2.0 now). For brevity, I’ll use it, along with some other patterns, to explain why my crystal ball says that 2012 will see serious B2B adoption of social business.
- Adoption of disruptive technology begins with consumers because their cost of trying new things is far lower than businesses’. In addition, families, since they include people of all ages, are hotbeds of disruptive technology adoption. What’s better than confounding parents by doing marvelous things that they don’t understand?
- B2B executive parents, being upstanding responsible adults, always reject such frivolities at first; however, they cannot stop themselves from peering over their kids’ shoulders. When a situation occurs in which the disruptive innovation adds surprising value, their attitudes begin to change. They start experimenting (what’s the No. 1 reason execs joined Facebook?), but since they have preconceived notions about how things should work, the learning process is slow. But they eventually learn to adopt the disruption in their personal lives.
- Once executives get comfortable enough with the disruption, the adventurous portion of them starts taking its disruption-enabled “approaches” to doing things to work. Experimentation continues for a while, during which the disruption is a “nice to have” option. In some cases a situation develops in which the innovation adds surprising value in the work context, which drives adoption further.
- Social business — applying social technologies to evolve business processes — is reaching this point. Another Web 1.0 lesson is that the early 2000s’ bad economy helped Internet adoption after the meltdown. Although most executives were too ready to dismiss “the Internet” as a fad, enough of them persisted and proved the value in increasing areas of business.
- At PricewaterhouseCoopers, I helped B2Bs apply Internet applications to their business processes. Once they dropped the assumption that the Internet was about Pets.com and money-losing online bookstores, they could start thinking about how they could save serious money by empowering stakeholders with real-time information and the ability to transact with their enterprise systems.
- Since 2006, social media has been used for mostly public relations while individuals, executives and management have been learning the tools and processes well enough to understand it. One of the false lessons of Web 1.0 is, “It’s a technology disruption,” so most people still focus on Facebook, LinkedIn, Twitter, Google+ and other platforms. Web 1.0 provided information and transactions on demand. Yes, website designers talked about “human factors” and “usability,” but they were only important to make Web pages more usable.
- Social business hinges on human group dynamics, emotional motivations and sociology. These are implicit in all human interactions, and most business people and agencies have very rudimentary knowledge of them at best. This continues to dampen adoption. In Facebook’s immortal words, “It’s complicated.”
- In B2B, transactions tend to be large, complex and fraught with risk. There are many unknowns, so the client tries to manage risk by testing the provider’s trustworthiness and commitment. This leads to long, expensive sales cycles. Even today, B2C-oriented social media gives trust short shrift because the B2C world emphasizes Super Bowl ads, product placements and other consumer-oriented techniques. That is changing, too, but out of scope here.
- When I was talking about the importance of trust in 2006, people didn’t really understand what I meant because they didn’t have enough experience to understand how to build and lose trust online. Now they are starting to see that it is possible to spark business relationships on LinkedIn. More executives are having meaningful interactions online.
- When you realize that behavior, online and offline, dramatically affects prospects’ trust — and the sales cycle — things get interesting. Online interactions are far less costly than offline. I estimate that most B2B firms can reduce their cost of sales 30-50% by using social platforms in “the pipeline” to: 1) discover and qualify prospects; 2) get meetings; 3) share breaking insights with existing clients; 4) research prospects through their alumni; 5) introduce firm experts or existing clients in online discussions; 6) build relevance and reputation of individual sales professionals and the firm.
- B2B executives’ favorite protestation is, “But my clients aren’t online.” A more informed observation is, some clients are online but not all. But the portion of the total that’s online increases every quarter. If B2Bs’ salespeople could reduce cost of sales with that portion, it would affect the bottom line significantly in most cases. And this is an expanding market.
- But what of other enterprise functions? Many economists are predicting a more tepid recovery. But even if this materializes, it has been a long time of attrition. Margins are squeezed and more firms are getting out of their comfort zones. If the economy goes into recession, that will add more pressure, and more firms will turn to social business. I expect more functions to begin adopting. For example:
- B2B marketing will downsize participation in trade shows and conferences, which rarely produce consistently strong ROIs when faced with intense scrutiny. Social business can dramatically increase leverage of events by engaging people online before the event, during the event (engaging people who would have liked to attend but couldn’t make it) and afterward. After all, events are only a means to engagement. In addition, B2Bs can revitalize their channels with social business by collaborating with channel partners online.
- Human resources will push the envelope (most of their recruiting processes are very basic so far). Smart ones will develop outplacement programs and connect laid-off colleagues with alumni. They will be decreasingly likely to pay outplacement fees.
- Customer service will get more courageous. Online customer service discussions can be fantastic money-saving opportunities. B2B is ideal because products, services and problems tend to be complex. Once online, the discussion becomes an artifact for others who have the same problems.
- Product development is ripe for disruption via crowdsourcing. No, B2Bs aren’t going to fire their engineers. More likely, they will develop online “advisory boards” of whom they ask advice i real time. Remember, innovation might be in new contract terms, service options, financing options, etc. These can dramatically affect “client experience” and value.
- I.T. can reduce the risk of tapping the free agency world that is growing fast around it by developing strong alumni networks and asking for consulting suggestions. Once they have consistent results, they can continue to reduce staff (which they will have to do anyway).
- Once you realize that social technologies digitize certain aspects of discovering, starting, building and maintaining relationships, thereby dramatically lowering costs, it’s obvious that social business will dramatically affect B2B business processes. Thus far, the impediment has been that executives haven’t realized it and taken social business seriously. Meanwhile, skills and comfort levels have been increasing.
- Another trend pushing adoption is persistent unemployment in executive ranks. Although most executives still don’t know how to use the tools effectively, by now everyone knows someone that got a job or a deal through LinkedIn. Again, even when a minority succeeds, the innovation gets proven over time.
- Start thinking about how to supplement very expensive offline processes with social business. You can start small. Analyze your ecosystem to ascertain what your stakeholders are doing online to look for opportunities to engage. Remember, you want to discover what can work. Build competency internally.
- I have never advocated that online will replace offline. The telephone didn’t replace face-to-face meetings. We do everything. But social business will enable B2Bs to make their business processes far more productive. Salespeople will have meetings, but they will be far better qualified. In some cases, it will make the difference in who survives and thrives.
- Realize that social business is business (borrowing my alma mater PwC’s slogan, “E-Business IS Business”). It’s not Facebook (although it could be depending on stakeholders). It can be silly, frivolous. But it doesn’t have to be. You can make it serve you the way you want.
- Think of how profound it is. Social business changes the economics of relationship.
What do you think?Christopher S. Rollyson is a partner in Socialmedia.biz and managing director of CSRA, a management consultancy that advises enterprises and startups on social business strategy and execution. Contact Christopher by email, follow him on Twitter and Google Plus or leave a comment below.