I was fortunate enough to get a chance to sit down with John Hagel at last week’s Web 2.0 Summit and discuss a few big-ticket emerging trends: (1) the rise of the “real time” web, (2) the move from the information web (the web of documents) to the social web (the web of people) and (3) the continued promise of mobile devices.

John is the co-chair of Deloitte’s Center for Edge Innovation, has written,  numerous, influential books and is the co-author of the must-read blog, The Big Shift so I wanted him to analyze these trends from the lens of their potential impact on large organizations.

This first video discusses the rise of the real-time web which I am loosely defining as the convergence of three phenomena:

• Near zero latency communication protocols best embodied by something like Twitter but well described by Anil Dash as “The Pushbutton Web”
• Pervasive connectivity – our PCs are always on – able to send and receive up-to-the-minute with no barriers to “getting” online.
• Mobile access – Ubiquitous access to the web from mobile devices to view or create content wherever you are.

The effects of moving to the real time web are broad and deep.  Like the Internet itself there isn’t a single, totalizing meta-narrative to make sense of it.  John takes a slice of the real-time analysis and lays down an  argument that goes something like this:

A. The Internet as a global communications and computation platform has accelerated the rate of change for the enterprise –  faster product cycle times being one example

B. This accelerated rate of change depreciates the value of explicit knowledge (what I know – which can be summarized in documents, policies, procedures, workflow etc.) and privileges tacit knowledge (know how – the  “knowledge that is difficult to be transferred to another person by means of writing down or verbalizing”)

C. In this environment, the source of value for the enterprise is moving from what John calls, “stocks of knowledge” (what we know at any given point in time) toward flows of knowledge (what we know at this current moment in time).  Real-time “flows” of knowledge help an enterprise move at the pace of change but more importantly – they connect you to people – think about social CRM and being able to immediately recognize when you have customer issues (as opposed to surveys with huge lag times) and respond in the moment.   Real time flows provide real time feedback to assess effectiveness and recalibrate response.

John also talks about the “dark secret of the enterprise” – but you have to watch the video to get that insight.

Open beats Closed states a rather obvious law of doing business on the Internetwork:  There is more talent outside your company than within it.  Companies that harness the power of relationships using networks to tap that outside talent will win over those that don’t.

In another Open Beats Closed story, Netflix just announced the winner of its one million dollar contest to improve its ratings system.

Ratings and recommendations are a critical piece of Netflix’ infrastructure.  If Netflix can do a better job than anyone else deducing from your behavior what movies you will enjoy next, Netflix will enjoy an enormous amount of advantage in terms of customer loyalty and increased movie consumption.

Yet recommendation systems are based on  extremely complex and proprietary algorithms involving heavy math and some deep thinking to set up and test assumptions about behavior.   Employing a team of these people in-house for this work is difficult at best.  How do you assess their talent?  My guess is that 99% of Netflix couldn’t even understand the math involved… How will you build a team?  How long will that take?  How will you know if you have made the right bet once your team is hired?

An Open Beats Closed approach allows you to engage a myriad of already-assembled (or self-organizing) teams in competition to deliver an algorithm that demonstrates success.   How is the Open Beats Closed approach working for Netflix?  They are so happy with the results that they have announced another, more nuanced contest to further improve their recommendation system.    What I find interesting about this revised contest is that they are allocating the rewards over time to the teams that are providing sustained, proven results.  Smart.

From the article:

The new challenge focuses on predicting the movie preferences of people who rarely or never rate the movies they rent. This will be deduced from more than 100 million data points, including information about renters’ ages, genders, ZIP codes, genre ratings and previously chosen movies.

Instead of a single $1 million prize, this new challenge will be split into one $500,000 award to the team judged to be leading after six months and an additional $500,000 to the team in the lead at the 18-month mark, when the contest is wrapped up.

I was reviewing some notes for an upcoming presentation and found this gem of a quote from a BusinessWeek interview with Jeff Bezos.

Q: Every company claims to be customer-focused. Why do you think so few are able to pull it off?
A: Companies get skills-focused, instead of customer-needs focused. When [companies] think about extending their business into some new area, the first question is “why should we do that—we don’t have any skills in that area.” That approach puts a finite lifetime on a company, because the world changes, and what used to be cutting-edge skills have turned into something your customers may not need anymore. A much more stable strategy is to start with “what do my customers need?” Then do an inventory of the gaps in your skills. Kindle is a great example. If we set our strategy by what our skills happen to be rather than by what our customers need, we never would have done it. We had to go out and hire people who know how to build hardware devices and create a whole new competency for the company.

Particularly in times of rapid change – the question of what you decide to focus on can be critically important.    This also, in my opinion, reinforces the business logic of Amazon’s recent purchase of Zappos which I wrote about here.

Roughly one year ago I was in conversation with the CEO of one of the largest online portals for Human Resources.  My pitch:  Human Resources should be leading the charge in helping businesses understand the possibilities and implications of social technologies such as blogs, wikis, social networks etc.  CEO’s response:  Human Resources is full of backwards people who are always behind the curve.  Don’t waste your (read “my”) time.  This is not an exaggerated paraphrasing.

While Human Resources is still trying to grasp the “what” and “why” of social technologies, they are missing an enormous opportunity to lead on “how” these tools are successfully employed in the enterprise. It is high time that they lead.

Why?

Ask anyone engaged in bringing social technologies into the workplace and you will hear the same thing;  “it’s the people stupid.” (what I call “The Harder Stuff”)   The primary resistance to the new operating principles at work in social technologies lies with the mindset, culture and leadership of today’s workplace.    So if Human Resources’ expertise is people, change and transformation (after all this is where our leadership, training, communications and change management groups are housed) why aren’t they leading the charge?   The market is quickly moving beyond the “what” (what are social technologies?) and the “why” (why are they important to my business strategy?) and engaging the deeper question of “how” (How do I employ them in my business?  How do they threaten business-as-usual?  How do I manage the transition?).

Simple test:

• Would your organization hire someone today in marketing that didn’t understand how social networks change marketing outreach and customer insight?
• Would your organization hire someone today in R&D that didn’t understand the role of online communities and customer led innovation?
• Would your organization hire anyone in Human Resources that had no understanding of how social networks are being used for talent management and employee retention?

The answer is likely no.  Yet the employees that most organizations have working for them today do not possess the skills the organization needs for tomorrow.

Human Resources is uniquely positioned to lead the inevitable move to incorporate social technologies into the enterprise in the form of:

• Skills training: organizing workshops to help employees grasp the operating instructions (what, why, how) for using social technologies.
• Policy support: helping define appropriate terms of use within their companies (one of the largest killers of any project is the lack of understanding between a business unit employing these tools and the legal department’s existing terms of use).
• Leadership development: helping leaders understand how social technologies prompt a new type of leadership
• Talent Management: how social networks can be used in recruiting and retention strategies.

Who better to address this than HR?  As lower skill responsibilities such as payroll get outsourced I am hoping that HR takes a strategic leadership position in the organization.  Anyone reading this that knows someone in HR – please forward this post.  Anyone in HR reading this – please add to the comments or contact me.  Let’s get HR into the game.

Imagine resellers, bloggers and trade press being able to host your videos, screencasts and demos on their own sites while you are  measuring response (engagement and demand).    Your company (especially those of you with reseller channels) should be syndicating your web content to reach a massive, global web audience beyond the reach of your own web site.   The reason is simple; at any given moment online, there are more prospects and customers viewing sites other than yours. Content syndication using widgets (think of YouTube videos that you watch on a site other than YouTube etc.). allows you wider reach and more consistent messaging from  channel partners.  It also allows resellers, bloggers etc. to add valuable content to their own sites at no cost (win/win).  Technically this is a simple operation but it requires leadership to drive this as a company-wide strategy.  Widgets in the consumer space are relatively old news but larger companies are just starting to get the picture in terms of how to create an extended content syndication strategy.   I have yet to see a major non-media company that is executing a strong off-domain strategy.

For more info and syndication resources check these out:

Widget ‘platforms’
These companies all offer basic content syndication to the full range of social networks and blogs.  Very consumer focused.  No commerce or direct-response functionality apparent but that is the obvious direction.

Widgetbox (disclaimer – I have worked with Widgetbox before)
Consumer focused.  ‘Source’ publisher offers content (common blog formats supported).  ‘Distributor’ can design widget by selecting content, style and layout etc.
Example of taking Ben Smith’s blog from Politico.com and creating a widget for your own site here.

Clearspring
Premium platform gives more customization/control to the content owner.

Gigya
Similar to Clearspring.

Commerce widgets
Tumri
“Ad pod” designed to optimize display advertising by dynamically building/testing offers.

Popshops
Commerce syndication.  Let’s you build a store using affiliate programs and feeds from Popshop’s database of merchants.

Cartfly
Similar to Popshops.

I have made a few changes to my Open beats Closed diagram (thanks to Hastings who commented on the original post ).   Making these changes led me to realize I needed to speak about the distinction between the formal and the informal organization.

First, what I changed:  I added “Formal Organization” to the “Your Company” icon in the center and “Informal Organization” next to the “Employees” at the top left.  In the first version of the diagram I had simply placed “Employees” (with no added note)  outside of  “Your Company”    That was confusing because most people think of employees as being “inside” the company.   Well, physically they may be there  but in terms of involvement and contribution, not necessarily.

Most organizations are not tapping into the value, talent and energy of their employees.  These people might as well be outside of the business…

Amending the diagram led me to draw the distinction between the formal and the informal organization.  The formal organization refers to the official titles, roles and responsibilities (the chain of command) that organizations use to produce goods or services.   Managing the formal organization, while far from perfect,  is the subject of  focus for how companies try to improve (change a process, hire talent, restructure, change lines of reporting etc.).  We have decades of experience with this type of management. That being the case the competitive advantage it provides is marginal since everyone is reading from the same few playbooks honed over the past 50 years.
The Informal Organization describes “the interlocking social structure that governs how people work together in practice. It is the aggregate of behaviors, interactions, norms, personal and professional connections through which work gets done and relationships are built among people who share a common organizational affiliation”.    The informal organization exists outside of the boundaries of traditional management structure and “controls”;  “how work gets done here” who is the “go-to-guy” on this issue, “what four things should you never try here” etc.   Much of the power of social technologies lies in its potential to tap into the power of the informal organization by surfacing these relationships, by allowing tacit knowledge to be expressed and shared and for disparate groups to collaborate across internal boundaries.

The power of this was captured in Wikinomics with the case of Dresdner Kleinwort where,

…employees started using wikis in the IT department to document nes software in an informal pilot. Soon afterward, wikis began to migrate out of the IT department and into the broader workplace environment, where teams picked up on them as a way to get collaborative projects up and running quickly.

When DKW CIO J.P. Rangaswami learned of the process, he was intrigued by the technology’s versatility. The company went ahead with more pilots, and after just six months of usage, the traffic on the internal wiki exceeded that on the entire DKW intranet. Today the wiki has more than two thousand pages, and is used by more than a quarter of the company’s workforce. Lead users have decreased e-mail volume by 75 percent
and cut the company’s meeting times in half.

There are dozens of ways to think about unlocking the power of the informal organization… Here was another that is emerging (we’ll see how it does when it hits legal…)  I was working with a Fortune 500 HR executive who said to me, “why is my department writing the job description for field managers?  There are 1000 stores with managers doing the real work… they know what the job description is better than anyone here in corporate.  Why shouldn’t I put that on a wiki and allow it to be edited?”   What a powerful idea.

With this simple, social technology (in this case again a wiki) the executive is considering allowing all of the tacit knowledge managers know about their job to be surfaced as a jointly authored job description.

Here are four key principles for creating a stronger business in the network economy:

• Listening beats Talking
• Open beats Closed
• Relationships Beat Transactions
• Questions beat Answers

Over the course of the next few posts I will be going into details on each.  This is the second post.

Open Beats Closed:
There are two readings to Open beats Closed

• There is more untapped value outside your organization than inside – those that harness that value win.
• Authenticity and Transparency are the coin of the realm on the Social Web.  Open companies are those that embody these principles in the way they do business.

Section One: There is more untapped talent outside your organization than inside.
Most of the “classic” Web 2.0 companies, Google, Wikipedia, Flickr and Amazon.com see their users as major contributors of value.   These companies inherently understand that Open beats Closed so let’s start with them before moving to examples of more traditional companies. (Disclaimer: you could write an entire book on how each of these companies leverage the network to build their business – below are examples to illustrate a general point.)

Google registers every click on a link as a “vote” for that link.  Google takes the aggregate of these votes to produce relevant search results for the next user (this is the essence of Web 2.0; programming systems that get better the more people use them).  Every search conducted on Google is teaching Google how to deliver a better customer experience.

Wikipedia is the largest encyclopedia ever assembled with a staff of only twenty-three full time employees.   All of the content is outsourced to volunteers and yet the accuracy of Wikipedia rivals Encyclopia Brittanica through a sophisticated set of system-imposed rules around editing.   The punchline here is that you can produce quality in mass collaboration provided you have the right boundary conditions in place.  For more on that check out the Harvard case study on Wikipedia.

Flickr allows anyone to upload photos but sets the default on those photos to “public” – meaning they can be shared with others.  This simple switching of the default creates an enormous reservoir of public photos (read: users adding value to the collective)…  Flickr then asks these same users to “tag” their photos with relevant keywords –  the job of classification is outsourced to the users themselves.  The result? Millions of accessible, searchable photos – uploaded, tagged and made available by the Flickr user community.  Most of them will have a Creative Commons license, meaning that you are free to reuse the image with proper attribution.   This phenomenon is devastating the stock photography business (source).
Try searching Flickr for nearly any image you can imagine – chances are you will find it.   An example, I own a home in a remote and relatively obscure village in France – there are 246 photos on Flickr (none uploaded by me) including this shot of my front door.

Yes, my front door.   While these photos may have existed before Flickr I would have had no ability to find them.   This is just one example.   There is an emerging world of goods (eBay) and services (Wikipedia, Flickr, Threadless etc.) produced by loosely affiliated groups of people that is becoming available to anyone with an Internet connection (1.6 billion as of this post).  As Kevin Kelly noted in his interview with me, we are just beginning to scratch the surface on how people come together to collaborate and get work done.

Amazon.com was one of the first web sites to allow its users (and not just customers) to rate and review the books themselves.   It turns out that ratings and reviews are extraordinarily helpful is assisting people when making a purchasing decision and have likely helped Amazon sell an enormous amount of books.  Amazon supplies a simple technology – users do the rest – and each successive customer gets a richer set of reviews to help them evaluate what they wish to buy.

So what does Open beats Closed mean for traditional business?
It is not just Internet based companies that are looking beyond their traditional boundaries for contribution and innovation.  Here are a few examples:

Proctor and Gamble uses Innocentive to put out calls for product development.  They set parameters of what they are looking for and let others do the R&D.  At this stage 35% of P&Gs new product innovations come from outside the company.  Where a closed company seeks all innovation from within, an open company seeks innovation everywhere.

The New York Times recently made a decision to syndicate content from three blogs, Read/Write Web, GigaOm and VentureBeat.  These blogs have a proven track record of building a discriminating audience; where a closed publisher would seek to write “all the news that’s fit to print” the NY Times is using an open strategy to harness the energy and quality content of the blogosphere. Smart move.
Intuit uses the aggregage knowledge of its TurboTax users to provide guidance for other users (e.g. “60% of people in your situation decided to list their dependents when filing…” etc.).   An open company harnesses the collective intelligence of its users.

On a more technical front, Best Buy recently opened a set of APIs – (for a fuller review see my Radar post from last September).  An API essentially “lets Web sites make their content easily available to other Web developers, who can import it, display it on their own sites and mash it up with other material.” (source NY Times)
Giving the developer community access to all the data that feeds Bestbuy.com creates the potential of creating your own, curated site on top of Best Buy’s catalog and supply chain. Imagine top Blue Shirts running their own online stores with select merchandise that they stand behind or imagine a thousand home-theater geeks and “go-to-guys” (and girls) extending their expertise and word-of-mouth via their own online stores.
Much needed breakthroughs in ecommerce usability (product and catalog navigation, visualization, design and findability) are now open to thousands of developers to work on. Best Buy will be able to bring that intelligence back into their organization. Where a closed company might see its data catalog as something to be jealously guarded, an open company like Best Buy sees an opportunity to capitalize on the ingenuity of the developer community.

For more on APIs see here
Key Insight: Leaders in this new network economy must look outside the organization for resources of all kinds. Traditional internal command and control is replaced by external influence, soft power and attraction.

Section Two: Authenticity and Transparency are the coin of the realm on the Social Web
As David Burk, CEO of Clear Ink likes to say, “The Internet is a cultural phenomenon – don’t go there without a guide.”  One of the big struggles companies have when trying to reach beyond their borders is understanding the culture that they are entering.   Open beats Closed is the literal injunction to be consistent with the norms of behavior on the Social Web; authentic, transparent and candid.
Violating these implicit norms (especially in marketing) can bring a rash of criticism that is spread by customers to other customers (see Walmart example here).  The epidemiological terminology surrounding the web, specifically the term “viral,”absolutely applies – just as you can create an army of evangelists, so too you can bring a plague upon your house.

Summing Up
In the age of open networks organizations finally have a scalable (meaning efficient at large scale) means to collaborate with the outside world on a critical series of issues:  innovation, product development, consumer insight etc.  And, let’s face it, there are more smart people outside your organization than inside. Leading companies like Google, Best Buy and Proctor and Gamble and the New York Times are pursuing open strategies to tap into informal networks of “outsiders” to get ahead.   Lagging companies are waiting for the case studies in their industry to come out before getting on board.
As we move deeper into the network economy closed companies are going to find it more and more difficult to survive against open companies.
(Note: The diagram above is a first attempt to capture this in an infographic.  I would love to have input on whether it captures the spirit of this post ). Based on comments from Hastings, I updated the graphic to show that the employees I reference are part of the “informal organization.”  In other words, they are not part of the traditional information flow inside of an organization.

Here are four key principles for creating a stronger business in the network economy:

• Listening beats Talking
• Open beats Closed
• Relationships Beat Transactions
• Questions beat Answers

Over the course of the next few posts I will be going into details on each.  If you have questions or other examples to put into the posts – please add them into the comments.  Part one focuses on Listening beats Talking.

Listening beats Talking
In the network – listening is a prerequisite to learning.  It is the critical precursor of everything we do – the beginning of joining conversations, building trust, learning and developing relationships.
Listening is not passive, it is another way of finding answers from new places – from customers, partners and employees outside of the traditional leadership circle.  It sounds simple but the problem is that most of our companies are structured to talk – Marketing, PR, Communications departments, even tradshows and events are all vehicles for advocacy – not inquiry or information gathering.
Fox, GM (yes, it is true), Salesforce.com are all examples of companies that are listening in new ways  but I want to take a deeper look at what Starbucks is doing as an illustration of Listening beats Talking:
I am no fan of the company but I have been impressed by www.mystarbucksidea.com.

Taking a quick look at the interface you can immediately see what they are doing right.  Users can submit any idea for consideration.  Other users (and this is critical) can vote these ideas up or down and discuss  them.  Often the comments build out the initial idea and give it more substance or potential value.  The key insight here is that the normal role of the product manager, the person who sorts through ideas and assesses their potential value, is being done by the community itself.    Rather than ask and answer the question from within the company, Starbucks is using listening as a form of customer led innovation. This same idea can also be applied to many areas of your business including product development (which ideas are most important to improve customer experience of my product) and human resources (more on that below).

Once the ideas are in motion Starbucks has managers that can respond in the comments.   Ideas that get a lot of votes/comments can then be put into review.  As a user you can see that the idea is actively under consideration.  The whole process is public; from “under review” to “reviewed” and (potentially) “Launched”

For a quick tour of all the changes and innovations that have been inspired by their customers – check out the Starbucks blog here.  This is just one detailed example of Listening beats Talking.
Dell and Salesforce.com have also had great results with these types of idea exchanges.  On the B2B front Salesforce used the same Idea Exchange platform has has been able to deliver “four new releases [in 2007], in contrast to only two in 2006.  New releases now include three hundred new features, three times as many as in previous years.” (source, Groundswell pg. 186)

Human Resources Where Art Though?
Lest you think that this is just a business-to-consumer idea – what about hooking your internal employee population up to something like this?  Imagine two big buttons on your intranet, “Things we Should Do Less Of” and “Things We Should Do More Of”  -  “…Less Of” lists suggestion to drive down waste and inefficiency   “…More Of” drives employee led innovation through suggestions on what the company should be doing.   Following Starbuck’s example, all suggestions are transparent to other employees and can be voted up or down – management closes the loop by putting winning ideas under review and implementing select ones.  Traditional “workout” sessions aimed at eliminating redundancies and waste that used to be conducted with a limited team together in a room can now be distributed on a simple platform accessible to all employees regardless of title or workplace.  That is powerful.

How to Prepare:
In its more mature form Listening is a commitment to take action on the part of your company so if you launch something like this then be prepared to handle the “tail costs” of reviewing ideas, responding to comments and honestly committing to a few winning ideas.  Also, be prepared to see some criticism aired in the open.  Trust me, that criticism is already happening around the proverbial watercooler (for your employees) or in other public forums (for your customers).  The difference here is that you will be able to see it and do something about it.

Next Post will focus on “Open beats Closed”

This is a cross-post from Radar

I am fascinated by what I see as Zappos’ ongoing evolution from a simple, online retailer to a leading online innovator. A few months back I wrote about Zappos pioneering what I called “Experience Syndication” with their Powered by Zappos (PBZ) service. In brief, PBZ syndicates the end-to-end value of shopping with Zappos – from the online store experience to shipping, to returns, to the call center – everything. Clarks Shoes, Stuart Weitzman and many other online sites are providing a customer experience entirely syndicated by Zappos.

Last night I saw CEO Tony Hsieh’s tweet about Zappos Insights - a paid membership site “that allows ‘Fortune one million’ companies to gain insights from the learnings of Zappos.com. The site will allow access to Zappos.com management and contacts and provide guidance and direct answers for user generated questions via video responses.”

If PBZ syndicates the customer experience, Zappos Insights is syndicating the internal business experience; providing a window into the leadership and culture that has made Zappos such a successful business. What is so radical about this is the notion that Zappos is willing to let go of the very thing that makes them so exceptional.

I think Zappos has good reason to think it can stay ahead of the crowd – Toyota shared all their manufacturing “secrets” and have been studied by other companies up-close and personal for 15 years — by sending teams and teams of people to Japan for months at a time……nobody has been able to duplicate their manufacturing success. Why?  Changing people is the harder stuff – and getting your management on board with big culture shifts is incredibly difficult.

During a client meeting this week on creating an online community I was trying to understand what might motivate their customer to participate.  (Principle: think of your user first when getting into any social technology like blogs, wikis, social networks and communities.  More on that here).   The client’s response to my question essentially was, “they save money” – hardly a rallying cry.  This led me to a concept I have wanted to put in writing for some time now.

Every transaction has two components –one rational and one emotional.   If you win the rational component – you get a rational buyer.  If you win the emotional – you get loyalty and a shot at community.   Rational loyalty is an oxymoron.

For years the emphasis of business transactions (checking in to a hotel, resolving a customer service issue, buying a product) has been on the efficiency of the transaction.  Success is measured in time saved or dollars spent etc.  Yet each transaction contains an emotional component that eludes our traditional metrics.  Paying attention to the emotional component of each transaction (happiness, contentment, surprise, delight, insecurity) delivers the keys to the new kingdom; engagement, loyalty and community.   I am not talking about a generic notion of creating a “great customer experience.”   I am talking about understanding the specific emotional context in which the transaction is occurring and creating ways to emotionally connect with your customer.
Here are three stories of companies delivering on the emotional side of the transaction:
1. Zappos understands the emotional component of shopping for a personal item (in this case, shoes) online.   Will they fit?  Will I need to return it?  Will it be a hassle?   In other words, the emotional component at work here is insecurity or doubt.  They proactively address these with a free shipping and free return policy.   Then they take the emotional transaction to another level.  When you are a first-time buyer they automatically (and unbeknownst to you) upgrade your shipping to next day air.  Your shoes arrive the next day compliment of Zappos – your new best friend.   There are two pieces at work here.  First, the surprise of something welcome and unexpected.  More importantly – Zappos has done you a favor – and in the primordial social contract, favors bind people together in mutual reciprocity. Another tidbit on that here.

Insight: Consider how you might deliver a pleasant surprise of the unexpected.  Better yet, do your customers a favor.  They will owe you one.

2. The Fiskateers is an online community of what might appear to be scissor enthusiasts.  Scissor enthusiasts?  Well, yes and no… It turns out that many people who buy these high-end scissors are actually scrapbookers… They may buy the scissors for rational reasons of quality – but when it came to creating a community, Fiskars tapped into the passions these scissor owners had about scrapbooking.  They recruited four passionate users and asked them if they would form an ambassador program…  These ambassadors invited other members personally – each new member received an engraved pair of scissors with their name and their number in the community.   Fiskars had a goal of having 250 members in the first six months… They beat that goal in 48 hours.  They now have 5,000 members.   The Fiskateers have had a great affect on sales though they won’t say how much.
Fiskars delivers community by tapping into the shared passion of a small group of their customers – it isn’t about scissors, it is about scrapbooking and crafting.  They also gave their members a clear sense of belonging and exclusivity (custom scissors with your community identity engraved on them).

Insight: The emotional life of your customer is likely not about your product – but it may be about what they do with your product.   Build on that possibility. (For more on The Fiskateers see my video interview with Francois Gossieaux where he discusses it in more detail – or see this great case study from B.L. Ochman)

3. Ethnography is another powerful tool in reaching the emotional side of transactions.   This example of how ethnography had an impact on a hotel comes from INC magazine:

“…while the hotels had long offered packages to families, the ethnography revealed that children were essentially ignored at the hotels. Now, when families arrive, the front desk ignores the parents and checks in the kids. That tiny gesture has been wildly popular, building lots of goodwill — and promises of return visits. Thanks to these kinds of changes, leisure business is up some $500,000, Conklin says. Not a bad return on the $45,000 he spent on the ethnography.”

The rational transaction might be measured by how quickly I can be checked into the hotel (save you time, saves me money) but the winning solution is to check the kids in first.  Why?  Because if you make my kids happy you have made me happy.  “Goodwill” is earned through the emotional transaction.

Insight: look deeper into the minute interactions you are having with your customers and there are likely some small but powerful changes to the way you interact with them.

While we think of ourselves as rational creatures, new research is finding that emotions lie at the center of our memory and decision-making skills.  Recently, David Brooks gave a lecture at the Aspen Institute discussing the case of Elliot (minute six in video)  who, after a stroke lost the ability to feel emotion.  As a consequence he began making a series of terrible personal and business decisions (lost his wife and his business).  Without emotional cues he also lost the ability to remember events.  The punchline Brooks tells us is that emotions tell us what to remember, what to value and are the central organizing principle for thinking.   When you frame it this way you see clearly that getting to the emotional transaction is critical to building sustained, meaningful relationships with customers.