My Ten Favorite Tweets – Week Ending 012210

From the home office in Massachusetts, where I’m saying, “Kennedy who?”

#1: the six types of ideas http://bit.ly/6pKGGZ #innovation

#2: RT @InfoWeekSMB Spigit Introduces ‘Idea Management’ for SMBs http://bit.ly/6CGhWO

#3: RT @johnt Systems that eliminate failure, eliminate innovation by @snowded http://icio.us/xoupma

#4: This is really cool: @tyler_thompson decided to redesign airline boarding passes: http://bit.ly/75OWtU What do you think?

#5: RT @markfidelman My new Post: Hutch Carpenter on the Innovation X Factor http://tinyurl.com/y9hfvrq

#6: RT @stu: New Blog Post: Celebrating the Web at 20 http://bit.ly/6Vtjo5 incl interviews w/ @bhc3 @louisgray #emc #innovation

#7: @pgkiran Good to know Kiran! Got no beef with Conan, he’s getting a raw deal. But I don’t blame it on Leno.

#8: RT @MarkDykeman: I hereby coin the term “nanocause”. It’s a thing that you care about for no more than 15 min. before you get bored.

#9: Seventh Generation (cleaning products) ad on TV just referenced the vaunted “5-second rule” for food on the floor. #lifelessons

#10: There truly are times a parent can look at his lovely little children, and think: “savages”.

Why SMBs Need Social Software – Dunbar’s Number Limits Metcalfe’s Law

A general observation of collaborative work is this:

The larger and more diverse are your personal network of contacts,
the higher the quality of your ideas and project work.

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In the enterprise market, the opportunity being seized by companies is to better connect employees. The sheer size of these firms makes it obvious that they are not optimizing collaborative activities. Social software plays an important role in helping that. SunGard’s CEO has a great take on this issue in the New York Times.

But what about small and mid-sized businesses (SMBs)? Do they have issues with maintaining connections? We’ll tackle that issue in a second. First, however…

WE by Spigit: Innovation Management for SMBs

Spigit is introducing its SaaS application for SMBs, called WE. WE leverages the enterprise functionality of enterprise Spigit, but streamlines the features to account for a self-service process and cost in tune with an SMB’s budget. The critical things firms need for innovation are there: easy idea entry, community feedback, workflow stages, analytics, individual reputation scores, multiple ways to filter for ideas, social profiles, connections, activity streams, etc.

It also reflects a slick new user interface, with multiple themes to choose from.

You can see more about WE innovation management for SMBs on the Spigit website. And read eWeek’s coverage of the release here.

The Challenge of Growth: Traditional Collaboration Modes Don’t Scale

When a small company starts out, it’s rather easy to stay on top of what colleagues are doing. There just aren’t too many of them. You easily banter, bounce ideas off one another and contribute your part to projects.

It’s natural human interactions.

The problem is that small businesses continue to rely exclusively on the tried-and-true methods of collaborative work as they grow. Keep on with the emails, the desk meetings, the lunches. Sure, it’s fun to keep with those who sit essentially in your visual perimeter. But it means you’re missing out on a lot of valuable ideas and insight from colleagues.

The graphic below shows the challenge of scale in collaborative work:

The easy interactions of old are now replaced by the departmental exchanges, and the daily work inherent in those micro environments.The small firm mentality that employees enjoyed with fewer employees is no longer applicable as the company expands.

Yet as research has shown, employees who are able to break out of departmental silos and leverage a diversity of connections perform better in terms of innovation.

So how does this fit SMBs?

Metcalfe’s Law Hits Dunbar’s Number

Metcalfe’s Law. Initially addressing fax machines, it speaks to the value of networks. Specifically:

The value of a network is proportional to the square of the number of connected participants.

For those who study the value of information networks, this law makes sense. You increase your number of information sources. And all things being equal, the person with greater information has a decided advantage in term of:

  • Awareness of key issues
  • Long tail knowledge of different issues
  • Access to information that will solidify an idea
  • Identification of colleagues who can help advance an idea or a project
  • Different points of view and information that make up for the knowledge limitations we all have

Every new connection inside a company increases these information advantages, for all members of the network. The problem occurs when employees are only using traditional methods for making and accessing these connections: email, desk conversations, departmental meetings.

They run into Dunbar’s Number. I use Dunbar’s Number here as a heuristic, describing the mental limit we each have to stay in top of what others are working on. With traditional means of engaging in collaborative work, the Metcalfe’s Law advantages of information diversity are limited by our Dunbar’s Number ability to keep up with the new connections.

This graph describes the issue, and SMBs’ opportunity:

Up to a certain point, employees can stay on top of what their colleagues are working on, and interact relatively easily. Is this up to 150 employees? Maybe. As Danah Boyd noted about Dunbar’s Number:

He found that the MAXIMUM number of people that a person could keep up with socially at any given time, gossip maintenance, was 150. This doesn’t mean that people don’t have 150 people in their social network, but that they only keep tabs on 150 people max at any given point.

150 is a maximum number. Meaning for many of us it’s less. And I’d argue, in a work context, where we’re busy delivering on the daily tasks that define our jobs, it’s an even lower theoretical maximum.

Which means at some point, small businesses begin to lose out on those information advantages when they rely only on traditional collaborative work modes. In the graph above, that’s the part of the graph where Dunbar’s Number crosses over Metcalfe’s Law.

Call it the Metcalfe’s Law Opportunity Gap.

At that point, companies need to look at systems that allow employees to share and filter information, and to interact with others outside their daily sphere of contacts. To access non-redundant information and points of view.

This is a problem well-known to large organizations. It also applies to SMBs as well. It’s why they need social software at a certain point in their growth trajectory.

This is an important issue for innovation. So many of these employees will have front line customer and supplier experience, and ideas for the business. But visibility on these ideas will get harder and harder as the firm grows.

If this area interests you, check out WE by Spigit. Social software for SMBs.

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Foursquare + Square = Killer Small Business Social CRM

Parker Smith wrote a piece that got me thinking. In Foursquare: Democratizing the Loyalty Program, he posits that Foursquare could be the loyalty program provider to small businesses. I think he’s right.

Then I noticed these identical product benefits touted by the companies themselves, Foursquare and Jack Dorsey’s Square:

For example, foursquare can tell you how many times a customer has been to your venue or the frequency of their visits. Many venues are now using this data to reward their most loyal customers with freebies or discounts.

Foursquare

If you frequent a place that accepts Square, we’ll let them know you’re a repeat customer. That 10th cappuccino may be on the house, no paper coffee card required.

Square

Would you look at that? Are these guys going to end up competing with one another?

A few years back, I was the personalized marketing product manager at Pay By Touch, which offered the ability to pay for items with biometrics (i.e. your finger). Once you could identify the customer and her spending, interesting loyalty program solutions became available.

Which brings me to what Foursquare and Square are doing. Square is still in beta mode, so it’s hard to predict fully its uptake in the market. But let’s assume Twitter co-founder Jack Dorsey and his backer, Khosla Ventures, are on top of this opportunity. And Foursquare is growing quickly.

Each provides pieces of what would be needed for a small business CRM. The companies are independent, but I can see new value created if they were to work together.

There is no CRM for offline small businesses

At least, not for businesses that operate in the physical world. Dry cleaners, restaurateurs, retailers and other small businesses. They may have loyalty punch cards, but generally don’t have any programmatic way to track and engage customers.

But they could use CRM as much as a large business does. I like this customer lifecycle framework by Gary Hawkins in Customer Intelligence:

It shows the stages of a business’s customers: new, existing, declining, lapsing. And the ability to tier active customers also is valuable. Each tier has its own dynamics. There is much more to CRM than a simple frequency loyalty program. It’s a deeper level understanding of the customer base. Understanding the statuses of customers from this point of view is powerful marketing information.

Modern CRM is more than the analytics and outbound campaigns. The social CRM movement is gaining strength, and it’s incorporating many social network principles into the customer engagement process.

And it’s not readily available for small businesses that operate primarily in the “offline” world. Unlike the digital platforms of e-commerce, offline transactions are not measured. At least not beyond the credit card transaction for consumer transactions.

This is an area of enormous opportunity. The company that solves the CRM issue for the 4.3 million small businesses in the U.S. has an enormous opportunity in front of it.

Complementary CRM strengths of  Foursquare and Square

The two services each bring unique strengths to a small business CRM solution. Take a look:

Start with the commonality Diagram. Foursquare and Square both provide:

  • Customer identity = who are your customers?
  • Visit frequency = Foursquare check-ins, or Square credit card swipes

When you see them both tout free products for repeat customers, this is how they’d do it. Identity + frequency = loyalty punch card.

But what about the services’ other features?

Foursquare provides the social fuel:

  • Social incentives: It’s fun to build up points relative to your friends, show off your Foursquare badges. And who doesn’t want to be Mayor of some local business?
  • Social interactions: People use Foursquare to to broadcast their location. This lets other meet up with them. Or in the case of crowded venues, find someone else there.
  • Game dynamics: This reporting in on your locations is an addictive game for many. It’s cool to get your first check-in daily bonus, to unlock a new location (hooray!) and oust someone as the Mayor of a place.
  • Social media word of mouth: By following people on Foursquare or Twitter, you can see where your network hangs out. This raise awareness for businesses, an incredibly important benefit.

Here’s an example on that last point. Socialtext CEO Eugene Lee often tweets this:

I’m at Coupa Cafe (538 Ramona St, at University Ave, Palo Alto). http://4sq.com/IITeJ

I don’t spend much time in Palo Alto, and I’d never heard of Coupa Cafe. But you know what? If I find myself in Palo Alto needing lunch or a coffee, guess which place I’d specifically look for?

Square provides the transaction processing power:

  • Dollar spend: Incredibly valuable information to track. Does someone come in a couple times a week, but spend heavily on food? Or do they frequent the cafe more often, but only buy coffee? Dollars spent is an important complement to simple visit frequency.
  • In-the-flow process: Square captures it’s information in-the-flow. That is, you don’t have to do anything extra. You’re have to pay, it’s part of the normal process. Foursquare requires a check-in, which is outside-the-flow of regular small business-customer interactions.
  • Transaction handling: By owning the transaction handling, Square can implement low-maintenance marketing programs. Businesses can create promotions tied to specific accounts, and execute them at the point-of-sale via Square.
  • Merchant account process: The process of getting businesses signed up for these programs isn”t trivial. It is standardized, but there’s a lot to tackle to provide good service. Some early reports indicate that Square has a superior merchant account set-up process, which may be its best innovation.

The in-the-flow nature of Square should not be underestimated. Getting adoption for any service is tough, and removing whatever friction to participation that exists is a critical element. This commenter on a post about Foursquare makes a good point:

The sort of people who will stop and record their restaurant visits and who have friends who also stop and record their restaurant visits and then write reviews of same. And while that’s a prime demographic, I’m thinking it’s not nearly as large as you’d hope. Most people just don’t have the time or inclination to “play” FourSquare.

This is why putting the process of playing Foursquare in-the-flow would be valuable.

Making it happen

The challenge is in connecting a credit card transaction to a person’s Foursquare account. Then I realized Square’s intentions are much bigger than a simple transaction swipe. The company lets people set up their personal accounts on Square. I assume you will enter your credit card number online, and when that number comes through in a transaction, it’s associated to your Square account. Thus Square can manage loyalty punch card programs.

Well, why not associate your Foursquare account to your Square account? When you swipe your credit card at the local business, Square processes the transaction the way it normally does. But it also does something else. It prompts an update to your Foursquare account.

I’m not talking a Blippy-style broadcast of your credit card purchase amount. Rather, your location status is updated automatically on Foursquare. Just as if you’d updated from your iPhone.

The small business then gets the social part of the CRM program.

What do you think? Two great tastes that taste great together? Small business could use the combined elements of Foursquare and Square.

I’m @bhc3 on Twitter

My Ten Favorite Tweets – Week Ending 061909

From the home office in Tehran…

#1: RT @Brioneja The Future of Energy: A Realist’s Roadmap to 2050. Which technology will finally free us from oil? http://bit.ly/FXg7A

#2: People’s interest in the real-time web is as much a social thing as it is a need to stay on top of events as they happen.

#3: In case you didn’t know…Atlassian’s new release of Confluence 3.0 includes status updates: http://bit.ly/yNZn4

#4: RT @rhappe the tight engagement you build with a small group will go viral… a big group with a lot of ‘extras’ won’t have the same

#5: RT @prwpmp Very insightful article in today’s WSJ about the power of daydreaming! http://bit.ly/2hJZMs {Daydreaming = AHA! moments}

#6: Which are most likely to survive in social media-driven news world? The mega global media (e.g. NYT), regional newspapers or local papers?

#7: New Spigit blog post: Kaiser Permanente Crosses the O-Gap in Innovation http://bit.ly/PNcom #innovation

#8: What is the magic number where the size of a group outstrips its ability to stay on top of everyone’s ideas? 25? 50? 100? #innovation

#9: Is there such a thing as the “avg distance” between a firm’s employees & its customers? SMBs’ avg distance < enterprises’ avg?

#10: ABC7 prediction market: Will the Dow Jones Industrial Average end 2009 below 2008’s year end close? http://bit.ly/1rjAt My vote = NO

What factors do SMBs think are most important for innovation?

Thinking

Credit: Holly Marie Photography

I came across an nice 2003 study by Dutch academics titled, SME innovation and the crucial role of the entrepreneur. The study’s purpose was to ask small and midsize enterprises (SMEs) what they viewed the most important factors in innovation to be. In this study, SMEs consist of 100 employees or less.

Rather than have the businesses come up with their own factors, the academics conducted an extensive survey into the prevailing studies on the matter. From this survey, they culled to the 14 most commonly mentioned bases for innovation. The 14 factors

They then asked 167 firms to answer 50 different questions, which resolved to the 14 factors. From these responses, they generated a statistically valid ranking of the what small businesses consider to be the most important drivers of innovation.

Before discussing these ranked factors, it’s interesting to note the academics’ take on this. They came up with a really rough ordering of the most important innovation factors, based on their frequency in research studies. They then compared the research studies to what the businesses themselves identified. It’s of interest to see the discrepancies.

The chart below shows how business ranked the 14 factors, along with their approximate frequency in research work.

SMBs 14 factors for innovation

The findings are useful, and perhaps not surprising. In a firm with under 100 employees, the entrepreneurial zeal of a founder certainly is a key driver of innovation. Unique product advantages make sense as the #2 factor – although perhaps that’s a bit confusing in that innovation produces the unique product advantages.

Innovation culture comes in for #3. This is important, and my guess is that if you were to survey growing sizes of firms, this factor would rise in the rankings.

Check out the full paper for details.