In a recent editorial, Fast Company said: relationships are to the social era what efficiency was to the industrial era. The social media revolution of the past ten years has made it possible for organisations of all kinds to create relationships at scale with their stakeholders to realise value that previously took fifty years to evolve and develop. Launching a new product or service without a social media campaign is inconceivable today, co-creating new products and services with customers and partners is perfectly normal, sourcing talent from social networks is commonplace and some organisations are realising they can continue to tap into the knowledge of their retiring employees using collaboration platforms that connect them to their millennial generation workforce.
Some of the best product and service ideas now come from customers enabled by social software. Unilever has been at the forefront of customer centric product co-creation, in which one of the most obvious ideas of selling soaps and detergents in much smaller packages for third world populations came from ethnic members of an online community who migrated and settled in the West a generation ago.
Some observers believe Unilever’s global R&D spend has reduced by a third in the last ten years because all their best ideas come from customer networks, where they’re created, tested and evaluated in real time. This reduction would amount to savings measured in hundreds of millions of dollars for what amounts to a trivial investment in customer communities.
But Fast Company’s article like so many others, doesn’t make the connection between all these external collaboration activities and their overall goal, the ultimate benefit. When a company is sold as much as 80% of its purchase price can be made up of an intangible asset called good will. Problem is, no one knows how to measure it and it’s the reason why most (but not all) mergers and acquisitions fail to return value to shareholders. Until now.
Although still quite crude, relationship capital can be measured and its value can be realised without selling the company but instead raise its share price. How? Ask any trader in any investment bank in the world what most determines share price and the answer will almost certainly be market sentiment.
Today’s poster child for this phenomenon is without doubt Apple Computer Inc. Its market share in almost every one of its product categories is much less than its competitors and yet today, no company on planet earth could afford to buy Apple. Most studies of brand communities conclude that brands are undeniably and fundamentally social entities created as much by consumers as by marketers. That’s why organisational culture must reboot itself and upload a mind-set of community first, commerce second because relationships create transactions.