I had a chance to sit down with Ted Shelton, a Strategy Consulting Leader at PwC and author of Business Models for the Social Mobile Cloud to discuss some of the topics that you will see at the Social Shake-Up Conference where Ted will be speaking. The following is a transcript of that conversation.
SMT: Can you describe why companies should be focusing on how they use social, mobile, and cloud technologies?
T: Over the last decade as the Internet has matured, first of all, our ability to have persistent access to the Internet because of mobile devices has become ubiquitous. It's amazing when you think back at the first thing we now think of as a smart phone was introduced only in 2007. It's only been a few short years, and yet we now take for granted the idea that anywhere we are we can access the Internet, and that means instant access to information and people and services on-demand, all the time. So that's the mobile piece.
Social has been around for a while. What I would argue is that when we talk about social, the important thing to distinguish is social is sort of what we do every day as human beings. We interact with each other. Every productive activity that we have, whether we're innovating or producing or selling and marketing and distributing and servicing, requires interactions between people. What social does as a technology is it allows those human interactions to have an app scale - large numbers of people, cross-functional, across geographies, across organizational boundaries.
Social, too, has been evolving for a while, but the connection between social and mobile is that now those mobile devices that give us connectivity all the time everywhere we are, can be used in the social context - in the ability to have these scaled, personal interactions. The combination means that we are evolving a virtual presence that, in some sense, mirrors our physical presence. You wander around the world, you get dressed in the morning and make sure you look nice, you present yourself to other people, you have a presentation of your person in a physical sense, and the combination of social and mobile gives you the ability to similarly have a presentation of yourself in a virtual sense. So we start asking the question, what do I look like online? How do people perceive me? What is my current state? Where am I? Am I connected? Am I on top of what's going on there? Am I aware of where everybody else is?
In the book I talked about digital kinesthesia. Kinesthesia is your body sense. If you hold your hand behind your back, you know where it is. We're starting to evolve a digital kinesthesia, a sense of knowing where our presence is online even though we can't see it. Carrying that mobile device around lets us interact with workflow and decision-making and staying informed and reacting in shorter periods of time to customer inquiries or employee inquiries.
It's really not something entirely new. Both of these technologies have been involving for quite some time, but it's more of a turning point of maturity where they have reached mass adoption, where they have combined in a compelling way that is allowing us to really change the operating models for business in fundamental ways.
The reason I attach cloud to that is the only way that this new operating model functions is by having, at the backend of it, a ubiquitous computing and data storage and networking infrastructure that is 100 percent reliable, agile in terms of being able to give me new functionality on demand, and ubiquitous not just to me but all of my trading partners, customers, vendors, employees, everybody in my social graph. So it's the three coming together that suddenly creates a transformation opportunity for business.
SMT: What industries or businesses do you think are on to this in a big way?
T: I see two really interesting trends. First of all, I think every business and every industry is now paying attention today in 2013. I'm asked questions about these technologies literally from every business - B to B, B to C, every industry. But there are two interesting outliers, and they both have to do with the issue of dealing with large numbers of people when we interact around certain kinds of business processes.
The first category is B to C, consumer oriented businesses, whether it's a retailer or an entertainment company or a manufacturer of consumer products. Companies that are looking at these vast numbers of consumers need to be thinking about how do we create a new kind of customer experience - a customer experience that is fundamentally informed by and creates value through a digitization of that experience. So sometimes it's about how the physical device the company sells actually has a digital component, can generate data, can share that data over the network, can use that data in applications that extend the value of the use of that physical product. And sometimes it's about the service experience and how the service environment is digitized. Maybe it's moved entirely online, or because even in the physical world with sensors and other kinds of things, we're providing digital feedback with that customer experience. So that's one element.
Hold that in your mind for a moment because I'm going to switch to something that seems radically different on the surface, and that is businesses that have large, blue-collar workforces. Think about engineering and construction, or manufacturing, or any of the plant operations. Each of these companies has a problem that, in the 21st Century, seems a little strange which is a workforce that is digitally disconnected. Think about a white-collar workforce. We've all been knowledge workers and had computers on our desks for ages now, but it's been hard to connect the factory floor worker or the construction worker to the information systems of an organization.
Social and mobile and cloud are suddenly transforming that equation and allowing organizations to put devices in the hands of blue-collar workers, or even just allow the blue-collar workers to use devices they already have. I've walked into factory environments and asked do you have phones? They say yes. What kind of phones do you have? We have smart phones. They have phones with Internet access, and it's oftentimes the primary way or maybe the only way that they access the Internet. It's become a critical part of being a citizen and a consumer in our society to have a smart phone and Internet access. So now companies are able to let their employees use those devices that maybe they own themselves to access corporate infrastructure and engage in business processes.
The reason I wanted you to hold both of those ideas in your mind is because companies are thinking about the same category of problem, which is I have a large workforce or large customer base, a large number of people, who haven't been connected to my information systems and business processes. I now have the ability through social, mobile, and cloud to extend into the business processes - either production or consumption - but the business processes that are critical to how the rest of my company works. So we see those two businesses as being really active. And you wouldn't necessarily think of some of these companies, like a big engineering and construction firm, as being a groundbreaker around technology, and yet it solves a real business problem.
SMT: Let's talk a little bit about how social, mobile, and cloud technologies are impacting marketing departments.
T: We did a survey at the end of last year where my team had the opportunity to speak with 20 heads of digital brand marketing in the U.S. who are all working for firms that are in the Ad Age 100. These are big consumer advertisers. We talked about how they are using digital as part of their total advertising mix. How much are you spending today? How does that compare what you spent maybe three years ago, so how fast is it changing? What do you think you'll spend three years from now? How are you allocating that spend? What kinds of things are you doing digitally, and how are they different from what you might have done traditionally?
We found some really interesting things. Number one is just to appreciate the speed at which companies are moving from traditional to digital. The average spend across 20 companies was about 30 percent. There were some cases where it was higher than that, but that was the average. We are seeing a huge movement of dollars from traditional mediums to digital mediums.
We looked at the distribution curve across marketing organizations, and there was a clear tipping point line. When companies started to cross over between 20 and 25 percent of spend, there was a really interesting thing that happened. Before they got to that point, all of the information they had about how digital was working was anecdotal. They did a bunch of experiments, but they were at such a small scale and the competencies in these organizations were so early in their development that it was hard for them to make a strong case that digital was working, or at least working better than traditional.
But once you crossed over a certain point, there was really clear, statistically-significant data that showed how effective digital marketing was. This allowed them to make an argument to senior leaders in their organizations, who, by the way, uniformly are much more comfortable with staying the course of traditional tools. But they were able to make the case that, look, I can actually show you where a dollar spent here is going to result in this much in sales, and I can track that process in a statistically-significant way to show you what the impact to the business is.
The first impact of this is it's actually accelerating digital spend. The second impact is that it's fundamentally changing how people spend that money, or what they spend it on, and what they're focused on.
The best way to describe that characteristic is marketing organizations are very comfortable with creating messages and broadcasting those messages to their audiences. They are very uncomfortable with creating engagements and having two-way interactions and linking marketing with service organizations, sales organizations, the rest of the functional organizations that touch customers. Organizations that have passed this tipping point are shifting their dollar entirely towards engagement and customer experience and a linked, total awareness of the customer lifecycle from consideration through purchase consumption and loyalty and advocacy.
The fundamental operating model of the marketing organization is changing, in a traditional world, the marketing organization was made up of people who were really project managers. They managed external resources that created ad campaigns and purchased media, and they managed the invoicing process, they managed the reporting process, but they really didn't engage with customers. There might be some creative work internally in marketing, but a lot of it is outsourced to agencies.
Now with these digital marketing organizations what we're seeing is a lot more people internally in the organization, a lot more cross-functional behavior in actually building a persistent, ongoing interaction using social and mobile, and a lot more being spent on owned media rather than bought media - destinations that the company has built for themselves as opposed to buying space on a media company's property. So there are really fundamental changes in marketing.
Another implication there is the degree to which the CMOs of these advanced organizations have to work hand-in-hand with the CIOs of their organizations because of the information density. A customer record has become such a critical part. There's a whole new systems of engagement evolving in marketing organizations that's really a shared resource between these functional areas of marketing, sales, and service, and even product development. But now it has this incredible information systems component to the work that marketing does that marketing never had before.
I know I went further than you wanted in answering that question, but there are big, big changes in marketing.
SMT: How should marketing teams be preparing for what's coming and what's ahead of them right now?
T: The biggest challenge I see in talking to marketing organizations is that they have completely misaligned set of competencies and KPIs in their marketing organizations. In terms of preparing, the smart digital CMO is recognizing that there is a digital operations competency that has to evolve within their organization around every aspect of how persistent engagement opportunities are created and in the way in which marketing becomes really integrally-linked to the rest of the functional organization.
I think it starts with thinking about the entire customer lifecycle. Secondly, think about all of the data that you're capable of gathering from the customer 360 - Social data, your own transaction/interaction data, and then third-party data that you're capable of purchasing - at each stage of the lifecycle. How does that information allow you to enhance the customer's experience? How do you, through enhancing the customer experience, use that experience to create more data? How does that data get used to inform your marketing strategies, your sales strategies, your service strategies, and your product set?
That is a huge operating model change for organizations, and it's not going to happen overnight. Organizations need to put in place a roadmap of two, three, five years, how they are going to create initially a center of excellence around these topics to begin to build competency, and then how that competency is going to be infused into every part of their organization, and what the longer-term roadmap is about the role of marketing as really a new kind of driver in the business for all of these other touch points around customer experience. No longer can we think of the functional activity of sales or service or product development as being disconnected from marketing because all of it touches customer experience, and marketing needs to own that entire picture.
SMT: Do you think this change is going to yield a more accountable, more accurate marketing group longer-term?
T: I think that's one of the real drivers that the CFO ought to be focused on, is holding the feet to the fire in the marketing organization and start being accountable. The old adage that that goes all the way back to the 1800s, I know that half of my marketing money is wasted, I just don't know which half. It's so inappropriate today for an organization to still behave that way.
The way I would characterize it is there's this challenge that organizations face of the illusion of explanatory depth. What I mean by that is, as human beings, we like to feel like we understand things. An example is you hear the end-of-day reports from the stock markets. It's up or down or wherever it went, and then the talking head has to say, well, stock markets are down today because of uncertainty about the Italian elections, or whatever it happens to be. Somehow, by putting a label on it, we feel like we know why the markets are down. In reality, stock markets are so much more sophisticated and complex that that little label doesn't really explain what's going on. It's an illusion that it explains what's going on.
The same thing is true in the way we run our companies. We put people who have experience in roles where they collect these limited sets of data points to try to tell them what's going on, and they apply their experience to then come up with an explanation to be able to make the decision about how their business moves forward. And that's the way marketing has been run. We sort of look at them and say our sales are up so our banner campaign must be doing well, or our billboard campaign must be doing well. It's not that there's no rigor in marketing. There's some. There have been a lot of attempts made, and I've seen some pretty good attempts to draw corollaries between marketing activities and actual commercial results, and those were a lot more effective when you controlled the media and knew how your customers were getting information about your product.
But today we don't have that scenario. I can run a TV campaign and have no idea whether it's the TV campaign effects driving or retarding sales, or it's a whole bunch of conversations about the TV campaign online that's actually affecting it. So organizations have to go to that next level of being diligent about the analytics and understanding the data - building up the data models, recognizing the patterns, and building multi-touch attribution models, to understand how everything they do that touches the customer, what the impact of it is, how it relates ultimately to the transaction decision, to the advocacy decision, to the satisfaction around the brand. And we can do that today. The data is available, the system are in place, there's certainly more maturity to be done, but organizations need to be grasping these marketing automation platforms and really begin to instrument how they do marketing and understand how it impacts the rest of the customer experience as well.
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