Jeremiah: Please welcome Andrew Jones, as a guest poster on the Web Strategy blog. I worked with Andrew for many years at Altimeter, if you’ve read my research reports, you’ll often find him on the byline as a researcher involved in my work on social business, social media management systems, and more. Andrew has showed fantastic research chops, derives insights, and is growing his capability to forecast future markets. While I’ve moved on from Altimeter a month ago, I remain a friend of the firm (and on the board of advisors) and wanted to help showcase the new talent that’s rising, esp during these transition periods. Please show Andrew the same warm welcome that others have shown me, as he now covers the digital marketing space and more. In the following post, Andrew spells out the future of the growing digital marketing suite, which we see the large enterprise software players building. Andrew, the floor is yours…
Salesforce, Oracle, and Adobe are all building “suites” for cross-channel customer engagement through a series of acquisitions and integration with their existing offerings (see Figure 1). Among the components, each has bought marketing automation players as well as various social media tools. Having a complete social offering is a big part of this, but it’s also about integrating social with other customer engagement channels for the best data, targeting, and contextualization. The result: a technology suite that goes beyond just social, designed to entice CMOs with one-stop shopping convenience.
Figure 1: How Three Companies Are Creating Digital Marketing Suites
Social media monitoring
Salesforce Marketing Cloud (Radian6)
Adobe Social (Adobe SocialAnalytics)
Oracle SRM (Collective Intellect)
Social media management
Salesforce Marketing Cloud (Buddy Media)
Adobe Social (Efficient Frontier / Context Optional)
It should go without saying that this chart is not an exact comparison and that line item “components” vary in complexity; the degree of integration also varies significantly.
What does the future look like with Digital Marketing Suites?
Beyond the obvious benefits of integration, like fewer tools and logins, and platform security that come from an integrated suite, there are four impending changes that marketers should watch closely:
1. Internal and external social networking on a single platform
In SMMS, collaboration features are mostly limited to basic workflow (tag, flag, annotate, route). Yet as social permeates an organization, the need for internal communication through Enterprise Social Networks (ESNs) becomes necessary to plan and react to external engagement. Companies with installed ESNs are also eager to tap and evolve internal employee engagement and direct it toward external conversations for purposes like providing customer support and employee advocacy.
2. Company-wide utility—this is not just for one department
Most SMMS address one or two departments’ needs well, yet we found that companies today are likely to have up to 13 departments involved in social. Because each department has different use cases and metrics, these suites are looking to address the needs of many departments rather than just the one or few primarily addressed today. Marketing is central, but other stakeholders are increasingly being involved.
3. Customer relevance and targeting (Social CRM)
The growing need for a common view of customers’ social profiles and social behavior data is also driving a move to suites. Several SMMS vendors have focused on customer identification and targeting from the outset—but few integrate well with marketing automation and enterprise CRM systems in order to know and target customers based not only on social data, but all relevant customer data. This has been a long-term promise and the customer journey keeps getting more complex, but Adobe, Salesforce and Oracle have all been especially focused on this of late.
4. Bigger sticker price and IT involvement
The average enterprise deal size for SMMS has steadily increased over the past few years, rising from $76k last year to deal sizes of what we typically see today in the $100-150k range. This reflects a growing ability to spend on social software where there is perceived value. These larger Digital Marketing Suites will naturally be more expensive, and because these suites are larger in scale and require greater care to be “plugged in” correctly, marketers will need IT to be more involved than it has been in decisions like SMMS, which marketing departments have often been able to buy and “install” completely independently.
I’m starting a new company to help progressive corporations tap into the Collaborative Economy.
I’ll be leaving Altimeter in my current role, but will remain connected as I join Altimeter’s Board of Advisors.
One of the advantages of being an industry analyst is being able to see what’s coming in the future. To address this transformation, large corporations are going to need help to manage this radical market change. In the coming weeks, I’ll share my plans for this new venture.
It’s amazing to see four years at Altimeter Group go by so quickly. We’ve accomplished so much. The kickoff, our first conference, and the publication of Open Research reports, we have helped clients adopt disruptive technologies.
My business partner of four years, Charlene Li, has been very supportive of me in launching this next venture, and shares her thoughts. As I continue to support the firm, I’ll be finishing up specific client projects, and I’ll be joining Altimeter’s board of advisors where I’ll continue to support the firm.
Perhaps most important, I will continue my friendships with all the great folks at the firm that I care about so deeply. Altimeter clients will still be able to work with analysts like Charlene Li, Brian Solis, Susan Etlinger, Rebecca Lieb, and the growing consulting and research team.
I’d love to hear from you, contact me if you want to discuss this exciting new opportunity (or peruse my body of work) as progressive corporations tap the Collaborative Economy:
Right now, customers are sharing media and ideas on social technologies, in the near future, they’ll use similar technologies to share products and services, which will cause a ripple of impacts far more disruptive than what we’ve seen before.
[The Collaborative Economy is an economic model where ownership and access are shared between people, startups, and corporations]
Disruption: Customers are now sharing products and services with each other, like AirBnb (vs hotels), Lyft (vs buying cars), Lendingclub (vs banks), 99 Dresses (instead of buying clothes), odesk (vs traditional hiring methods) as an alternative to traditional sales, in fact, our small list of 200 startups only has a portion of the services that have emerged, enabling this trend.
The executive summary encapsulates what you need to know:
The Next Phase of Social Business Is the Collaborative Economy. Social technologies radically disrupted communications, marketing, and customer care. With these same technologies, customers now buy products once and share them with each other. Beyond business functions, the Collaborative Economy impacts core business models.
Customers Are Sharing Goods and Services — Redefining the Buyer-Seller Relationship. Every car-sharing vehicle reduces car ownership by 9-13 vehicles; a revenue loss of at least $270,000 to an average auto manufacturer. The cascading impact to the ecosystem has far-reaching impacts to auto loans, car insurance, fuel, auto parts, and other services. For corporations, the direct impact is revenue loss that results from customers sharing products and services with each other.
Innovative Companies Are Already Moving Into Collaborative Economy. Some companies have joined this movement. For instance, Toyota rents cars from dealership lots, and Patagonia partnered with eBay to encourage customers to buy and sell its used products. NBC has partnered with Yerdle, a startup founded by former Walmart executives to foster peer-to-peer sharing. This movement impacts every industry.
Adopt the Collaborative Economy Value Chain. Companies risk becoming disintermediated by customers who connect with each other. The Collaborative Economy Value Chain illustrates how companies can rethink their business models by becoming a Company-as-a-Service, Motivating a Marketplace, or Providing a Platform. The forward-looking company
Above: Short Version from LeWeb (matches above video)
Above: Bloomberg TV interview.
Altimeter conducted a number of research interviews, as well tested the thesis with business leaders across multiple spaces. Special thanks to Loic Le Meur who triggered the ‘aha’ for me last year, on how this is the next phase.
Above Graphic: The first phase era of the internet allowed few to publish, yet disseminating knowledge, the second social era empowered everyone to share ideas, and now, the third era, the Collaborative Economy, empowers customers to share goods and services, continuing to shift power to the crowd.Select Coverage of the Report
Above Image: Headcount of social business (circled in orange) slightly decreases before large growth.
Social Business Headcounts Change as Programs Mature
Like the calm before the storm, your social business headcount is likely to decrease 10-20% before it radically expands. Altimeter found through two independent surveys to enterprise class (Companies with over 1000 employees) survey respondents in different years that they both have a drop off in headcount at year 2-4. We’ve survey corporations both in 2010, as well as in Q4 2012 to find out how social business programs are structured. Much of the research was recently published in the report, the Evolution of Social Business. So why this change?
After experimentation, unchecked programs get sanitized as a central body takes control. Many companies I’ve seen inside of have often experimental programs occurring for the first 1-3 years. Labeled skunkworks, rogue, or sandbox programs, this “wild west” grows out of control, sometimes causing stress or resulting in a social media crises. Often corporate communications, marketing, blessed by an executive sponsor seeks to wrangle control of these programs, by anointing a working team to build a strategy. In short, the wild wild west moves from unchecked teams in outposts to a new centralized model.
A core team consolidates, finds efficiencies in a hub and spoke model. We often see companies emerge in a hub and spoke model, where a core team is serving the rest of the company in a coordinated fashion. This leader, the Corporate Social Strategist, leads the charge, often reducing excess headcount deploying social and along with it, rogue efforts. Interestingly, the data shows this happening in the 2010 early market at year 3-4. Yet fast forward two years to 2012 and we see the consolidation happen much earlier, in years 2-3, as companies have gotten wiser from their peers.
Explosive growth occurs as team scales in “dandelion”, multiple hub and spoke model. After the consolidation occurs in both program strategy and the headcount as illustrated in the above diagram, companies see explosive growth as the company “gets the social religion”. If the core team has structured their program up for scale, they will have invested in social readiness, as well as have a strategy to avoid massive proliferation.
Social business follows a cycle expansion, contraction, then explosion before maturity. Two data distinct data sets helped to tell this story. Expect to see social business programs hit maturity to consistently spread across the enterprise in a safe manner after 5-6 years with proper care and planning. Watch the patterns in your company, after rapid consolidation and program efficiency occurs, be prepared for radical growth as the rest of the enterprise business groups start to adopt social, including their own social leaders in business lines, departments, geographies and product units.
Brands Focused on Managing Social Proliferation
For those that like to be where they money be, this data is for you. Altimeter’s research continues to survey buyers of disruptive technologies, and continues our coverage on social technologies. In our recent Q4 survey to enterprise buyers, focused on marketing business decision makers, which are global national corporations with over 1000 employees, we posed a series of questions in our survey battery. In particular, we wanted to find out where decision makers are bullish on investing and found the following trends on marketers with intent to increase spending:
To manage proliferation in enterprise, marketers purchase social media management systems. Altimeter has been covering this software category since March 2010 (see all posts), and has published reports on how companies are managing social using software. These social media management system tools, which allow brands to manage marketing, support, and employee interaction of social continue to spread throughout the enterprise (data). We’ve also seen deal size for this specific market on the increase over the past few years, some deals crossing over the six figure dollar range. We’ve also found that companies are straddled with a number of social accounts (on average, 178 social media accounts) as social strategists struggle to avoid being constantly reactive in a role of social sanitation.
Insufficient tools means investments in education programs key for employee masses. A solution requires a strategy, education, business processes, then with software to facilitate. While most marketers realize that technology is a key method to achieving their goals, they know that education within an enterprise is required for social business success. Marketers invest in educating various business units (departments, regions, and product groups) to ensure they properly know how to use these technologies and avoid risk. Yet, in our previous research, we’ve seen that brands are eager to educate, they don’t put large dollars against this investment. To help corporations solve this need, we’ve launched our own Academy offering, and are working with large brands, agencies, and consulting firms to roll-out.
Surprise! Marketers “volun-told” as system integrators of fragmented software. The opposite of volunteering is being volun-told (credit: Zena Weist). Marketers have been VolunTold that they are unwilling system integrators in the era of VC funded startups who’ve created clones serving similar use cases. As a result, brand side marketers and their agency and consulting partners are investing in integration disparate software together to commonly share data, in order to manage a single customer journey, or obtain data on one persona or customer type. While Oracle, Adobe, Salesforce, IBM, and others offer suites, don’t expect this trend to go away anytime soon, as the proliferation of new web tools means that brands will forever be rushing to catch up.
Summary: Companies seeking to scale social in their enterprise.
So there you have it, today’s buyers are investing their resources and time on scaling social within their organization before it spirals out of control. They’re deploying software, coupled with internal training, and then trying to glue together many pieces into one system. While I’m not going to provide insights to each one of bullets, here are a number of other trends from this data that we can discuss in the comments.
Altimeter Data Above: Social spreads further to the edges in Hub and Spoke, and Distributes to Multiple Hub and Spoke, aka “Dandelion”
Social Business Evolution Spreads In Corporations
Altimeter’s most recent social business buyers survey of global national corporations with over 1000 employees has yielded interesting results. One data set that we’ve carefully watched over the years, and perhaps I’m most known for, is how companies organize their internal structure for social business. Over a year ago, we conducted this same study, to glean where the market is; we’re back with additional benchmarking data, and you can read the full report of Social Business Evolution (embedded below) This most recent data resonates the trends that we’re hearing and seeing in many of our brand side clients, here’s my take:
Decentralized gains no growth. Companies in this model are afflicted with unchecked proliferation and will have to eventually undergo considerable investments to clean up mis-managed or worse, un-managed efforts. This unscalable model leaves companies fragmented in an uncoordinated method. We predict this structure will eventually dissipate as companies must formalize their programs.
Centralized remains stagnant, holds at under one third. This model, in which a single business unit (often corp comms) manages the program on behest the corporation is a short term fix. While many regulated companies can easily make the business case for a single group, it cannot scale –and this group will eventually become overwhelmed with requests from business units.
Hub and Spoke loses 6 points, yet still dominant. This popular model, in the previous year, sinks 6 points. Why this drop? Companies are seeing that social is spreading beyond a coordinated team (often referred to as a center of excellence) to a broad set of business units including regional, departmental, and product lines. Despite the dip, this continues to be the dominant model most corporations are in now.
Dandelion model shows growth. In this model, decision making and management for social spreads to various business units –beyond the centralized team. This sign of maturity often means there’s coordination in the center, but freedom for local groups to manage within guidelines. We expect this model to continue to rise year over year.
Holistic remains elusive. This very challenging formation, where a majority of all employees use social for business in a safe and consistent manner continues to remain miniscule. Why? This requires a cultural mindset of trust from leaders, and a workforce that is trained and ready to accept social into every fabric of employee and customer relationships. Don’t expect this model to grow anytime soon.