a strateegic approach to soccial co mmercefiles.meetup.com/3214422/social commerce...

© Copyright

A

W

LaW

Contact I2825 East C

Salt Lake Ci

P (801) 990

socialcomm

t by Whitehall V

A Strate

White Paper

add E. ChrisWhitehall Ventu

Information

Cottonwood Pkw

ty, UT 84121

-3222

merce@whiteha

Ventures 2011 ●

egic Ap

| June 2011

stensen ures, Inc.

wy, Suite 517

llventures.com

All Rights Reser

pproach

1

rved

h to Soccial Commercce

Ver. 6

© Copyright by Whitehall Ventures 2011 ● All Rights Reserved Ver. 7 i | P a g e

Contents

Preface ............................................................................................................................................ 1

Jaws ................................................................................................................................................. 2

Waves of Innovation ....................................................................................................................... 3

Wave Intersections ..................................................................................................................... 3

Netflix vs. Blockbuster ................................................................................................................ 5

Social Commerce Wave .................................................................................................................. 6

Size—It’s Big ............................................................................................................................ 6

Nature –It’s Personal .............................................................................................................. 7

Focus—It’s Concentrated on Customer Interests ................................................................... 8

Harness The Wave .......................................................................................................................... 9

Opportunity ................................................................................................................................. 9

Typical Company ..................................................................................................................... 9

Better Company .................................................................................................................... 11

Ideal Company—the Social Commerce Power ..................................................................... 15

Threat ........................................................................................................................................ 16

Options to Embrace the Wave ...................................................................................................... 18

Go At It Alone ............................................................................................................................ 18

Flaws ..................................................................................................................................... 19

Quantifying Expensive .......................................................................................................... 20

Go At It Together ...................................................................................................................... 20

Conclusion ..................................................................................................................................... 22

Whitehall Ventures, Inc. ............................................................................................................... 23

© Copyright by Whitehall Ventures 2011 ● All Rights Reserved Ver. 7 1 | P a g e

Preface The power of social media is undeniable. Its ability to connect communities and enact change is unprecedented. And, the natural extension of social media is Social Commerce. Social Commerce has been defined as:

• “An appropriate term for the strategy of connecting customer to customers online and leveraging those connections for commercial purposes.” —Sam Decker

• Social Commerce is the use of social technologies to connect, listen, understand, and engage to improve the shopping experience.” —Lora Cecere

• Helping people buy where they connect and connect where they buy.” –Paul Marsden At Whitehall Ventures, we think of Social Commerce as businesses establishing enduring online relationships with customers by serving mutually reinforcing needs. In essence, we believe that the online world, especially its social aspects, allow enterprises to truly understand and serve their customers’ interests. This service will translate into increased sales and better products and services at lower costs. We believe this is why a prominent venture capitalist stated, “Social will be built into everything—just like the Web got built into everything”.1 We have taken enough steps in the Social Commerce arena to know that it is something that all of our businesses must incorporate. Thus, the purpose of this paper is to:

1. Introduce the next economic wave—Social Commerce;

2. Demonstrate the need for business enterprises to harness this wave; and,

3. Share our strategy to adapt our companies to the new wave and excel as Social Commerce companies.

1fastcompany.com. E.B. Boyd. 2011. http://www.fastcompany.com/1731789/baked‐in‐the‐vc‐who‐discovered‐facebook‐talks‐about‐why‐all‐businesses‐will‐become‐social

© Copyright

Jaws The formufew placeshore. Hebreak. Thterrifying Surfers hasurfable”.Hamilton combinaton a Jet S Figure 1:

t by Whitehall V

ula for giant ws on earth where, the barrehis liquid avalacombination

ad been comi. But in the eand his frienion of innovaki.

Laird Hamilt

Ventures 2011 ●

waves is simphere this violeeling swells slaanche can be of speed and

ng to marvel early 1990’s, ads finally conative board de

ton at Jaws

All Rights Reser

ple: massive dent equationam against the over 100 feed size that hav

at the fierceafter several yquered the gesigns, foot st

rved Ver. 7

deep water swmanifests itshe Maui reef aet high and chve given the w

beauty of Jawyears of reseagiant swell. Thtraps, stronge

wells plus sudself more perfand explode harge forwardwave its fittin

ws for decadearch and desiheir solution er fins and m

dden shallow fectly than ofupward into d at 30 miles ng name—“Ja

es—only to dign, surfing leto surfing sucost importan

2 | P

reefs. There ff Maui’s norta mammothan hour. It isaws”.

eclare it “un‐egend Laird ccess? A tly—teamma

P a g e

are th wave s this

‐

ates

© Copyright

Wave Giant wavthey havemarkets bquality, lowaves of the way wwhether oinnovatioinformatio Figure 2:

WaveThere arethese elemnext innovthe finite change weach subsefficiencieintersecti

t by Whitehall V

esofInn

ves exist in bue been manifeby radically imowering produinnovation cawe all do busior not they wn waves. Theon technolog

Waves of Inn

Intersece two critical ements determvation wave. period of timithin this timesequent wavees associatedons in Figure

Ventures 2011 ●

novation

usiness as weested throughmproving production costs aan intimidate ness. Howev

will “enter the y include thegy wave.

novation

ctionselements thatmine a compa The first ele

me companieseframe, theire of innovatiowith the new3 show each

All Rights Reser

n

ll. These wavhout history. ducts or serviand enhancinand threaten

ver, unlike surwater”. Figu

e agrarian wav

t occur at theany’s ability toement is the s have to adapr competitorson, the adoptiw innovation transition pe

rved Ver. 7

ves are knowThey can be ices in new ang marketing mn the unimagirfing waves, bure 2 illustrateve, the indust

e intersectiono successfullyadoption winpt to new tec in the new wion window bwave becomeeriod’s adopti

n as disruptivdefined as innd unexpectemethods. Likinative and thbusinesses does some of hitrial wave, th

n of each wavy migrate fromndow. The adchnologies. Ifwave will drivbecomes smae greater andion window.

ve waves of innovations thed ways by imke the swells he unprepareon’t have a chistory’s most e electronic w

e and its succm their curredoption windf companies ae them out oller and smald greater. The

3 | P

nnovation anat disrupt exi

mproving prodat Maui, thesed. They chalhoice about important wave and the

cessor. Manant period to tdow represenare unable to of business. Wler, as the e shaded

P a g e

nd isting duct se lenge

e

aging the ts

With

© Copyright

Figure 3:

The seconbecause tthe next wproducts each wave Figure 4:

The net efone precetheir strat

t by Whitehall V

Adoption W

nd element isthe rate of innwave’s technoand services te’s rate of inn

Rate of Innov

ffect of theseeding it. This tegies to the

Ventures 2011 ●

Windows

s the rate of inovation risesologies will fathat meet thenovation.

vation

e two elemenmeans compnew standar

All Rights Reser

nnovation. Es exponentialail to competee wave’s elev

ts is that eacpanies have lerd.

rved Ver. 7

Each new wavlly. Companiee in the new pvated quality a

h new wave oess time and

ve is steeper es that cannoperiod. Theyand cost stan

of innovationa narrower m

than the prevot efficiently ky will be unabndards. Figur

n is bigger andmargin of err

4 | P

vious wave keep pace witle to offer e 4 highlights

d faster than tor as they ad

P a g e

th

s

the djust


Netflixvs.BlockbusterAs a compelling recent example of failure to adapt to change, we look at Blockbuster. Only twelve years ago, Blockbuster was the king of the movie rental industry with the most customers, cash flow and brand awareness. However, it failed to change within the adoption window as the information technology wave swept through their industry. In contrast, Netflix, a startup, recognized the impact of innovation on the movie rental industry. Specifically, it recognized the potential of streaming in‐home delivery through internet ready devices. Netflix created strategies to compete as an “information wave enterprise”. As a result, it grew revenues from approximately $600,000 in 1998 to over $2.1 billion in 20102. Netflix currently enjoys a market value of over 12 billion dollars. Conversely, Blockbuster’s market value fell 7 billion dollars and in September 2010, it filed for bankruptcy3. As is evidenced by this example, even the biggest companies are vulnerable when they ignore innovation waves. They get crushed by them.

2 netflix.com, 2011. <http://ir.netflix.com/sec.cfm> 3 usatoday.com. 2011. <http://www.usatoday.com/money/media/2010‐09‐23‐blockbuster23_ST_N.htm>

© Copyright

Socia The prolifnext waverecently s The sheer

• Oso

• YeYeit an

• Ath

• Th• 25• 78

Figure 5:

The Sociafocus. Th

Size—IFirst, the where the 4 Commerc5 socialnomrefresh/>

t by Whitehall V

alComm

feration of one of innovatiosaid, “If I had

r kinetic poweOver 50% of thocial networkears to reachears). Facebowould be thend India. shton Kutchehe populationhere are over5% of search 8% of consum

The Social Co

l Commerce Wese three ele

It’sBigwave is masse customers a ce Gets Social. mics.com. Erik

Ventures 2011 ●

merceW

nline social meon is upon us—to guess, Soc

er inherent inhe world’s pok. 50 million usook added ove world’s 3rd

er and Ellen Dns of Ireland, r 200,000,000results for thmers trust pee

ommerce Wa

Wave is here ements are ou

ive and still rare. There ha David Rowan Qualman. 20

All Rights Reser

Wave

ediums such —the Social Ccial Commerc

n social mediaopulation is un

sers: Radio (3ver 200 milliolargest. It w

DeGeneres (coNorway, or P0 Blogs. he world’s toper recommen

ave of Innovat

and it will hautlined below

ising. Marketas never been

and Tom Ches11. <http://ww

rved Ver. 7

as Facebook Commerce Wce is the next

a is demonstrnder 30‐years

38 Years), TV n users in lesould be ahea

ombined) havPanama.

p 20 largest bndations, whil

tion

ave a huge imw.

ters often sayn a consumer

shire. Wired Mww.socialnomi

and Twitter aWave. Facebot area to reall

rated by the fs‐old and 96%

(13 Years), Ins than 1 yearad of the Unit

ve more Twitt

rands are linkle only 14% t

mpact on busin

y, “Fish where concentratio

Magazine. Febcs.net/2010/0

are ample eviok’s CEO, Maly blow up.”4

following stat% of this grou

nternet (4 Year. If Facebooked States and

ter followers

ks to user‐genrust advertise

ness due to it

e the fish areon of this mag

ruary 2011. 05/05/social‐m

6 | P

idence that thark Zuckerbu4

tistics5: p has joined

ars), iPod (3 k were a cound only trail Ch

than

nerated conteements.

ts size, nature

e”, meaning segnitude befor

edia‐revolutio

P a g e

he rg,

a

ntry, hina

ent.

e and

ell re

n‐2‐

© Copyright

now. Curonline6. Wnumber wplanet. Atime onlinSo, not onend up sw

NatureSecond, juIn its initiapseudonypeople—ireorganizmatter if People artrusted sotheir frienpotential Figure 6:

6 http://ww7 http://ww8 http://blodominate‐9 <http://b10 gigaom.c

t by Whitehall V

rrently 30% ofWorldwide inwill only incrend, social mene. In 2010, inly are there wimming a co

e–It’sPerust because tal stages, theyms and cloakit is both persation as a shi100,000 peope now increaource—each onds rather thafor exponent

Product Infor

ww.internetwoww.internetwoog.nielsen.comactivity/ blog.nielsen.cocom. Om Malik

Ventures 2011 ●

f the world hanternet usagease as smart edia not only nternet usersa lot of consuuple of laps w

sonalhe Social Com wave was mked in anonymsonal and inteft from the wple like x. If tsingly using tother9. They an from your tial growth th

rmation Chan

orldstats.com/orldstats.com/m/nielsenwire/

m/nielsenwirek. 2011. <http

All Rights Reser

as internet ace has increasephones becoclaims the higs spent nearlyumers who gowhile they are

mmerce Waveore like a giamity. Clearly,erpersonal. Fwisdom of crothe three peohe web to geare more andbusiness10. T

hrough social

nnels

emarketing.htstats.htm online_mobile

e/online_mobilp://gigaom.com

rved Ver. 7

ccess, which ted over 400% ome the majoghest numbey 30 percent oo for a dip in te there.

e is huge doent costume p the web hasFacebook’s COowds to the wople closest tet the purchasd more likely This personal media’s “vira

m

e/what‐america

le/friending‐thm/2011/04/30

translates to annually in trity of the 4.6r of internet of their time the social me

esn’t mean thparty, where us changed. It OO, Sheryl Sawisdom of frieto you like y, sing informatto find out ainterconnectal effect”.

ans‐do‐online‐

he‐social‐consu0/how‐social‐co

more than 2 the last ten ye6 billion cell pusers, it also online on socedia pool, but

at it isn’t incrusers were mhas re‐organandberg, descends. She sayyou want to tion they neebout producttivity is what

‐social‐media‐a

umer/> ommerce‐reall

7 | P

billion peopleears7. And thphones on thedominates thcial media sitt most of them

redibly personmasked by ized around rcribes this ys, “It doesn’see y.” d from their mts and brandscreates the

and‐games‐

ly‐works‐why/

P a g e

e his e heir es.8 m

nal.

real

t

most s from

>

© Copyright

Focus—Finally, threorganizthe interewere prevare now c Figure 7:

t by Whitehall V

—It’sConche Social Comed around peests of individviously separaclamoring to a

Social Comm

Ventures 2011 ●

centratedmerce Wave eople, the onlduals and theated by geograccess these g

merce Focus

All Rights Reser

donCustois focused online experiene interests of raphic limitatgroups.

rved Ver. 7

omerInten the interestnce is less abotheir friendstions are now

ereststs of individuaout companies. Consumersw able to gath

als. Because es and produs with shared er together o

8 | P

the web has cts than abouinterests wh

online. Comp

P a g e

ut o panies

© Copyright

Harn Due to itsconsumercustomermeaningfparticipatsales incre

OpporObviouslyenormousopportunby followithrough arange of b

TypicaTypically, resourcesaccount asmall teamsubscribeand compand Blogs Figure 8:

t by Whitehall V

essThe

s size, nature rs is unparallers by connectful by servingtive potential eases, better

rtunityy, with such sis opportunityity and are taing a typical Sa better Sociabenefits offer

alCompana company ps to complemand company m to manage rs. Again, thipany blog) wits) to serve one

Typical Socia

Ventures 2011 ●

eWave

and focus, theled. It allowing to them wg their interesof the new wproducts and

ignificant busy for those coaking steps toSocial Commel Commerce red by the wa

nypursues Sociaent their saleblog. The cotheir social mis approach tythin four Socie business fu

al Commerce

All Rights Reser

e Social Comws companieswhere they csts. This leadweb will ampld lower opera

siness ramificmpanies thato “get in the werce path. Otapproach. Idave. These th

l Commerce tes and brandiompany mightmarketing effoypically involvial Commercenction (Sales

Approach

rved Ver. 7

merce Wave’s to establish onnect to eads to customeify these inteational costs.

ations the Sot learn to ridewater” and stather companideal companiree distinctiv

through a comng efforts. Tht even start thorts and aim ves one techne categories (& Branding).

’s potential toenduring onch other. It ter trust, loyaleractions and

ocial Commere it. Most comart getting a fies gain moreies can even gve business a

mbination of hey create a heir own Youfor more fannology or tooSocial Netwo.

o connect buline relationsthen makes tlty and collabtranslate the

rce Wave presmpanies recofeel for the we competitivego further to approaches ar

in‐house andFacebook paguTube channes, likes, followol (Facebook, orks, Multime

9 | P

sinesses to ships with those connecboration. Theem into dram

sents an ognize this wave. They doe advantages access the fure outlined be

d outsourced ge, Twitter el. They assigwers and YouTube, Twedia, Microblo

P a g e

ctions e atic

o so

ull elow.

gn a

witter, ogs,

© Copyright

Is this app

1. Thp

2. Yo3. Th4. R

it 5. Th

in6. Fi

p7. Th

in But is it rea brush tocompany infomercicollege m500 dollarshared it wpiece on t Figure 9:

Orabrush That transMart and sales and Commerc

t by Whitehall V

proach succeshe company costs it on theouTube usershose friends selevant bloggwith their onhe message cnformation toinally, the pieiece on the phe exercise nnto increased

eally possibleo remove bachad sold fewal and rejectiarketing studr video he prowith friends, the company

Orabrush

now has oveslates into mithe British phbranding succe for impress

Ventures 2011 ●

ssful? Can it creates an ineir YouTube chs share the vidshare it with gers pick up innline networkcontent and lio their social nece catches throduct. ets the compsales.

? Can this recteria from yower than 100 uions from Wadent who belioduced with ahealth and beto its nearly

er 250,000 Facillions of dollaharmacy gianccess. Blentecsive marketin

All Rights Reser

produce resuexpensive sochannel. deo with theitheir friends nterest in theks. ink is introdunetwork—friehe interest of

pany thousand

ally happen? our tongue—nunits despite al‐Mart, Walgeved he coula crew of foueauty bloggefour million v

cebook fans aars in online snt, Boots. Orac, Mentos, Olg results.

rved Ver. 7

ults? Here is tcial media vid

ir friends usinand followerse piece and bl

ced into mesends share wthe mainstre

ds of new fan

It is exactly wnot exactly a traditional mreens, Oral‐Bd use social mr has now bers blogged abviewers.

and its videossales and distabrush isn’t thld Spice and m

the theory: deo enhancin

ng Facebook as. log about it to

sage boards, ith friends wheam media, w

ns, followers a

what happen“sexy” produ

marketing effoB and Colgatemedia to sell teen viewed ovbout it and ev

s have been vtribution offehe only compmany others

g its brand aw

and Twitter.

o their reade

whose usersho share withwhich creates

and subscribe

ned to a smalluct. From ‘99orts, which inc. The inventothe product—ver 13 millionventually Nigh

viewed over 3rings from repany to experhave all lever

10 | P

wareness and

rs who then s

then share th friends. and airs a PR

ers and transl

l company se9 to ‘09 the cluded a faileor then engag—and he did. n times. Frienhtline aired a

36 million timetailers like Wrience this typraged the Soc

P a g e

d

share

he

R

lates

lling

ed ged a The nds

mes. Wal‐pe of cial

© Copyright

TypicalEvery comprobabilitexample dright. The OrabrresourcesSocial Comthe ability

BetterA compan“better” amore busonly to sabusiness f Figure 15

“Better” csuccess. Tadvantage

CustomeXbox levestarted a McKenziekind of lan

t by Whitehall V

CompanyCmpany has a cties of attainindemonstrate

rush case stus are only a femmerce straty to master th

Companyny that goes bapproach typisiness functioles and brandfunctions like

: Better Socia

companies unThey realize te over their “

erServiceeraged Twittecampaign to e Eakin, Xbox’nguage, a lot

Ventures 2011 ●

Conclusionchance to expng these kindes the potenti

dy clearly demew of the tooltegy to these he Social Com

ybeyond the tyically involvesons (See Figurding but also e Marketing, O

al Commerce

nderstand thathe careful ap“typical” appr

r to help withmonitor its cs Twitter proof times ther

All Rights Reser

nperience succeds of dramaticial and powe

monstrates thls available totools, catego

mmerce Wave

ypical approas more technre 15). Theseto customer Operations an

Approach

at the haphazpplication of aroach peers. T

h their continustomers’ Twgram managere’s legitimate

rved Ver. 7

ess by emploc results are ver of Social Co

he power of Yo companies iories and funce.

ch can enjoy ologies in mo “better” comservice, PR cand HR.

zard use of tea Social CommThe following

uous improvewitter chatter er, said, “Wheely something

oying the “typvery low. Neommerce for

YouTube, Facin the Social Cctions does no

greater Sociaore Social Commpanies also aampaigns, pro

echnology wimerce strategg examples ill

ement proceswhich contaen people areg wrong with

pical” approacevertheless, tthose compa

cebook and TwCommerce unot fully equip

al Commerce mmerce categapply Social Coduct researc

ll not lead togy will lead tolustrate the “

ss. In the fallined expletive passionate h our service.

11 | P

ch. However,the previous anies that get

witter. Yet, tniverse. Lim companies w

success. Thisgories to servCommerce noch and core

o Social Commo competitive“better” appro

of 2009, Xboes. Why? and they use Our ability to

P a g e

, the

t it

hese iting with

s ve ot

merce e oach:

ox

that o

© Copyright

identify aXbox to qswoop in,customerparticularTwitter cu Figure 10

PublicRTwo impocan effectFacebookperiod. F“tagging” home wit Figure 11

t by Whitehall V

nd fix emergiuickly identify seemingly osupport out r drives our thustomer supp

: Xbox Twitte

Relationsortant aspectstively managek’s potential bacebook fansfeature. Essh them when

: IKEA

Ventures 2011 ●

ng issues is sy problems, wut of nowherof nowhere. hrough‐the‐roport rating.

er Customer S

s of Public Ree both. Whenby uploading ss had the oppentially, the fn the store op

All Rights Reser

o much fastewhich is transe, and say, ‘N This is so coooof customer

Support

elations are brn IKEA was lashowroom importunity to wfirst person topened.

rved Ver. 7

r with our easlating into stNo, we can heol.’ It’s a realsatisfaction.”

rand awareneunching a newmages to the swin those itemo tag merchan

rs to the stretrong brand loelp.’ They’re lly magical ex” This approa

ess and brandw store in Mastore’s Facebms by using Fandise in the p

eet.” This straoyalty. Eakin like, ‘[Wow], xperience andach has given

d protection. almo Swedenook album ovacebook’s popictures got to

12 | P

ategy is enabexplains, “Wproactive d I think that in Xbox the #1

Social Commn, they leveraver a two‐wepular photo o take the ite

P a g e

ling We

in

merce ged ek

ems

© Copyright

The wordand acrosIKEA and In 2008, Cblogger nMichael cno idea wWithin 20apologizeTwitter as

ProductA businesopportundon’t like,deploymeCommercproduct id Figure 12

The My StSome of t

• Fr• St

11 techcrunchicken‐tru12 brainmasocial‐med

t by Whitehall V

spread thougss news feedsits new store

Comcast utilizamed Michaecalled the comwhen his servi0 minutes, a C for the probs “an excellen

tResearchs strategy coity to join onl, what they went of producce website mydeas.

: MyStarbuck

tarbucks Ideathese ideas inree birthday ctarbucks VIP c

nch.com. Michust‐me‐i‐have‐tes.com. Paul dia‐in‐product‐

Ventures 2011 ●

gh Facebook s—including T to their frien

zed Twitter toel Arrington wmpany, he wace would resuComcast execlem. Mr. Arrnt early warni

andDevelonsultant receline conversawant and howts.”12 Starbuystarbuckside

ksIdea.com

a community nclude: coffee for Stacard

hael Arrington.‐a‐point/> Alex Grey. 20‐management>

All Rights Reser

as users startTwitter. In tunds.

o protect theiwas having ses told by an uume. He thenutive contactington then bing system to

opmentently said, “Sotions. This ca

w they want itcks exemplifiea.com to enc

votes on the

arbucks Gold

2008. <http:

010. <http://w>

rved Ver. 7

ted embeddinrn, thousand

r brand from erious issues wunhelpful cusn “lost his cooted him and sblogged abou flag possible

ocial media pran help in und. This insightes this concecourage custo

best ideas, w

Card membe

//techcrunch.c

www.brainmate

ng links and is and thousa

serious expowith his Comctomer serviceol” and tore isent out a teat the issue ane brand implo

rovides produderstanding wt is useful in tept. They creaomers to post

which are imp

rs

com/2008/04/

es.com.au/whi

mages in thends of users w

osure when a cast internet e representatinto Comcast am to fix the cnd praised Coosions.” 11

uct managerswhat customethe design, deated their owt ideas for ne

plemented by

/06/comcast‐tw

ite‐papers/whi

13 | P

ir own profilewillingly prom

well‐known tservice. Whetive that she on Twitter. connection anomcast for usi

s with an ers like, what evelopment awn Social ew Starbucks’

the company

witter‐and‐the

ite‐paper‐using

P a g e

es moted

tech en had

nd ing

they and

y.

e‐

g‐

© Copyright

• St• B

Ford, Alta

MarketiMany comfunctionstheir prodprivate pacrowdsouSuper Bow The Doritovideos tiedollars to Figure 13

OperatiIn additiooperationutility alloapplicatiosignificanttechnical

13 business<http://ww

t by Whitehall V

tarbucks Splauy coffee bea

assian and oth

ingmpanies are m. Doritos conduct. The winarty and haveurced videos wwl viewers. D

os’ videos weed for the top produce. Ma

: Doritos Mar

onsn to marketinns functions. ows communion is able to atly less expenquestion wor

sweek.com. Reww.businesswe

Ventures 2011 ●

ash sticks ans and get a

her companie

more frequennducted an onnners would be their video awent “viral” aDuring the ga

ere pronouncspot accordiarketing stud

rketing Crow

ng, other comIntuit introduity members nswer user pnsive. In fact,rkload since t

eena Jana. 200eek.com/maga

All Rights Reser

free cup of c

es have adopt

tly using Socinline campaigbe decided byaired during tand were viewame, these ad

ed the undispng to a USAToies tie this ca

wdsourcing

mpanies are tuuced its Live Cto learn and problems faste Intuit’s tech the program’s

09. “How Intuazine/content/

rved Ver. 7

offee

ted similar pr

ial Commercegn encouraginy online votinthe Super Bowwed millions ods generated 8

puted marketoday ad studyampaign to Do

urning to SocCommunity pshare from oter with a greasupport staffs launch.13

it Makes a Soc/09_28/b41390

roduct develo

e to “crowdsong customersng. They wouwl. In the weof times befo80,000 tweet

ting winners oy and only cooritos’ 49% in

ial Commerceproject two yether memberater degree of has experien

cial Network Pa066365300.htm

opment strate

ource” their ms to create vidld win a cash

eeks precedinore being seents.

of the night. ost the creatoncrease in Fac

e to crowdsoears ago. Thisrs of the grouof user satisfanced a 40% re

ay.” m>

14 | P

egies.

marketing deos promotinh prize, attendg the event, tn by 100 milli

In fact, one oor a few hundcebook fans.

urce compans Social Commup. Often, thiaction, while beduction in

P a g e

ng d a the ion

of the red

ny merce is being

© Copyright

Figure 14

Human80% of coTwitter, M

• To• It• In• To

Additionabefore a smany com

BetterCCompaniestarting tocompetitifunctions

IdealCIdeal comcompaniechanged fthese “ide 14 socialnorefresh/> 15 shrm.orgStaffing%2

t by Whitehall V

: Intuit Opera

Resourcesompanies use MySpace and o recruit job c is less expenncrease emploo target spec

ally, social mesingle word hmpanies that a

CompanyCoes that are goo understandive advantag.

Company—mpanies will lees . They undforever and theal” companie mics.com. Erik

g. 2011. < htt20Conference_

Ventures 2011 ●

ations Crowd

social mediaFoursquare fcandidates wnsive than othoyer brand reific job levels

edia allows emas been exchare capitalizin

onclusionoing beyond t the power oe by employi

—theSocieverage Sociaerstand that his fundamenes as “Social C k Qualman. 20

p://www.shrm_FINAL1.pdf>

All Rights Reser

dsourcing

for recruitmor the follow

who might nother recruitmeecognition and skill sets

mployers the anged. Allstang on this asp

he typical apf the Social Cing more too

ialComml Commerce ithe relationsntal change aCommerce Po

011. <http://w

m.org/Research

rved Ver. 7

ent14. Compaing reasons15

t otherwise apnt methods

s

opportunity tate, Microsofpect of Social

proach of FacCommerce Wals within mor

mercePowin a way that hip between affects all orgowers”. Thes

ww.socialnom

h/SurveyFindin

anies are utili5: pply

to gather infoft, MTV, UPS, Commerce.

cebook pagesave. Their “bre categories

wersurpasses “btheir organiz

ganizational fse visionary c

mics.net/2010/0

ngs/Documents

izing Linked I

ormation aboand Intel are

s and Twitter better” appros across multi

better” Social zation and cusfunctions. Wcompanies are

05/05/social‐m

s/Social%20Ne

15 | P

n, Facebook,

out job candide just a few of

hashtags areoach creates aiple business

Commerce stomers has

We will refer te willing to fu

media‐revolutio

etworking%20F

P a g e

dates f the

e a s

o ully

on‐2‐

Flyer_

© Copyright

invest in aevery appbusiness fstrategieseventuallyMr. Efrusyopportunwill do becompetito Figure 16

IdealCoSocial Comevery rele

• C• C• C• D

ThreaThe last thpresents. era. Howit or fight

16 fastcompfacebook‐t

t by Whitehall V

and brave theplicable Sociafunction, buts and tools toy create signiy, a prominenity, if you’re wetter than theors who do no

: Ideal Compa

ompanyConmmerce Comevant businesConnect themCommunicateCreate deeperDo it all much

athree sections Companies w

wever, there wagainst it. Th

pany.com. E.Btalks‐about‐wh

Ventures 2011 ●

e unknown deal Commerce t they will also harness theficant strategnt venture cawilling to takee ones who wot.”16

any—All Cate

nclusionpanies stratess function. Tm to more cuse faster than er consumer loh, much cheap

s demonstratewho embracewill be many chese compan

B. Boyd. 2011. hy‐all‐business

All Rights Reser

eveloping Soccategory, exiso commit to e power of thegic advantagepitalist, sharee advantage oait . . . The on

egories, Tool

egically use evThis strategy wstomers thanever before;oyalty and trper than ever

e the potentiae the opportucompanies whies will be cru

http://www.fes‐will‐become

rved Ver. 7

cial Commercisting technomastering fue Social Comes that will fores this perspeof it. The onenes who [jum

ls Application

very applicabwill: ever before;

ust than everr before.

al commerciaunity will migrho fail to undushed by it. T

fastcompany.ce‐social

ce landscape. ology and strauture technolmerce Waverce lesser comective. He sayes that jump ip in] will hav

ns and Strateg

le tool in eve

;

r before; and

al opportunityrate to and therstand the SThis concept

com/1731789/

They will noategy to servelogies and dee. Social Commpetition outys, “[Social Coin first to takee an advanta

gies

ery applicable

d,

y that Social Chrive in the SoSocial Commeis underlined

/baked‐in‐the‐v

16 | P

ot only utilizee every applieveloping newmerce Powert of the markommerce] is ae advantage oge over their

e category for

Commerce ocial Commeerce Wave, ig by the autho

vc‐who‐discove

P a g e

e icable w rs will et. an of it r

r

rce gnore or of

ered‐


Socialnomics. He says, “The [Return on Investment] of social media is that your business will still exist in 5 years17.” We agree—the wave’s adoption window is too short and its rate of innovation is too steep for any late movers to long survive its impact. The old business methods—the expensive, interruptive, one‐way, top‐down approaches are too slow, costly and untrackable. They are being wiped out by the new Social Commerce methods—social media, blogs, streams, deals, events and forums being just a few. As the Social Commerce Wave continues to break, it will become less about strategic advantage and more about business survival.

The Social Commerce Wave is more than an opportunity for increased sales and brand awareness—it will become essential to business survival.

.

17 socialnomics.com. Erik Qualman. 2011. <http://www.socialnomics.net/2010/05/05/social‐media‐revolution‐2‐refresh/>

© Copyright

Optio It is evideoverwhelthe highecapabilitiedevelop stechnologalternativaccomplistwo logica

These opt

GoAtThe instindevelop Sthat the “collaborat Figure 19

Implementhrough:

• C• C• C

These thr

t by Whitehall V

onstoE

nt that the Soming threat. st Social Comes that the betrategies to hgies. In essenve. If one agreshed with a gal answers to

• Go At• Go At

tions are disc

ItAlonenctive approaSocial Comme“go at it alonetion with oth

: Alone

nting a solo a onstant in‐deomprehensivareful execut

ee elements

Ventures 2011 ●

mbrace

ocial CommerTo remain su

mmerce capabetter Social Coharness the pnce, they musees with this good probabithis question

t It Alone t It Together

ussed in deta

ech to developerce capabilitie” company wer companies

pproach invo

epth researchve planning; ation.

are summariz

All Rights Reser

etheWa

rce Wave is eustainable, cobilities. Not oommerce comower of existst become andpremise, thelity of succesn are:

r

ail below.

ping these stries independewill avoid thirds.

lves creating

h and developand,

zed below.

rved Ver. 7

ave

either an excitompanies muonly must commpanies are eting and futurd remain a Son the resultinss while being

rategies and sently of otherd party vendo

successful st

pment;

ting competitst migrate tompanies deveexhibiting, bure Social Comocial Commerng question isg cost affectiv

skills is to “gor companies. ors and consu

trategies, too

tive opportun the new wavelop all the skut they must gmmerce categorce Power—ts: How can thve and risk a

o at it alone” b This approaultants, but in

ls and vendo

18 | P

nity or an ve by developkills and go further anories and here is no his be dverse? The

by trying to ch does not instead exclud

r relationship

P a g e

ping

d

only

nfer des

ps


ResearchandDevelopmentSocial Commerce research involves gathering, organizing and evaluating information from books, blogs, articles, videos, seminars, statistics, consultants and other industry experts. It also involves finding, vetting and engaging potential third party vendors. Finally, fusing careful research with clear and creative thinking will lead to innovative and effective strategies. Effective strategy maximizes both the potential of individual Social Commerce tools and their collective synergistic possibilities. Research is also constantly adapting to the evolving competitive landscape. It’s important to note that the research and development phase is never static. The wave’s rate of innovation requires constant research, vigilance, and stamina.

PlanningTranslating Social Commerce strategies into comprehensive plans is essential to efficiently lead an organization onto the Social Commerce stage. These strategies must involve more than superficial fans, followers, and subscribers. A good plan involves a series of staged, interactive and coordinated moves resulting in genuine loyal customers, improved products and services and lower operational costs.

ExecutionCareful execution involves a combination of internal and outsourced projects. In‐house projects demand staffing attention, organizational changes, and resource allocation decisions. Outsourced projects require clear objectives, precise controls and proactive communication. It is essential that in‐house and outsourced projects employ careful project management including project tracking, analysis, and reporting.

FlawsOur analysis of this “go at it alone” method suggests that its probability of success is limited due to the following flaws:

• It is time‐consuming; • It is risky; and, • It is expensive.

Each of these shortcomings is discussed in more detail below.

Time‐ConsumingFirst, because the wave is new and moves so quickly, careful research into the wave requires a large time investment. This investment has the potential to delay strategic deployment leading to competitive disadvantages.

RiskySecond, while all strategies have inherent risk, Social Commerce strategy risks are magnified by the size, speed, and nature of the Social Commerce Wave. A wave this big and fast and so interconnected is incredibly intolerant of poorly conceived strategies. And, poor social commerce strategy can result in brand catastrophe as evidenced by the following companies’ social commerce mis‐steps: United Airlines18, Honda19, Belkin20 and Kenneth Cole21.

18 economist.com. Did Dave Carrol lose United Airlines $180m?” 2009. http://www.economist.com/blogs/ gulliver/2009/07/ did_dave_carroll_cost_united_1 19 penn‐olson.com. Sebastian Barros. 2009. < http://www.penn‐olson.com/2009/09/21/5‐social‐media‐disasters/>


ExpensiveFinally, Social Commerce projects carry high costs. These costs include:

• Research costs; • Development and organizational costs; • Core operation dilution costs; • Failed strategy costs; and, • Vendor selection misfire costs.

QuantifyingExpensiveIt is important to take an even closer look at how much it would cost to execute a modest Social Commerce plan focused on one Social Commerce function (crowdsourced design) and a single Social Commerce application (a niche network micro‐site). This analysis includes costs for consultants, Social Commerce manager, micro‐application and social media monitoring:

• Social Commerce Consultant: 20 hours @ $100/hour = $ 2000 • Social Commerce Manager: 20 hours per week @ $25/hour = $26,000 • Micro‐site Build = $10,000 • Mobile Application= $10,000 • Social Media Monitoring: $2000/month = $24,000 • Total Annual Cost22 = $72,000

This is a very conservative estimate. Similar plans have been estimated closer to $200,000 a year. While this remains a more cost‐effective solution than a traditional media solution, Social Commerce strategies still require significant capital allocations. Also, this example represents only one single facet of the Social Commerce Wave. That cost becomes exponentially greater when it is translated across all Social Commerce categories (social networks, business networks, multimedia, streams, blogs, events, etc.) and their related technologies (LinkedIn, Yelp, wikis, Groupon, etc.) and when applied to all organizational functions of a business.

GoAtItTogetherSocial Commerce strategy can constitute a significant investment with significant risks. However, we still maintain that it is absolutely essential for business survival in the new world. Recognizing the flaws inherent with the “go at it alone” approach, we believe that cost and risk can be significantly mitigated through a “go at it together” approach.

20 gizmodo.com. Dan Nosowitz. 2009. < http://gizmodo.com/5133627/belkin‐rep‐pays‐for‐positive‐reviews‐of‐belkin‐products‐on‐amazon> 21 latimesblogs.latimes.com. Lindsay Barnett. < http://latimesblogs.latimes.com/chatter/2011/02/kenneth‐cole‐twitter‐egypt‐cairo.html> 22stackoverflow.com. 2010. <http://stackoverflow.com/questions/209170/how‐much‐does‐it‐cost‐to‐develop‐an‐iphone‐application>

© Copyright

Figure 20

This approCommercCommercits resour We suggepossible cindividualrisk.

t by Whitehall V

: Together

oach will gathce powers in tce answers, brces and skills

est that this acost and shorl company wo

Ventures 2011 ●

her a group otheir industryut collectivelys to develop S

pproach offertest timeframould pursue, o

All Rights Reser

of like‐mindedy. Individuallyy it will have tSocial Comm

rs its participme. In essenconly do it mu

rved Ver. 7

d companiesy, this group mthe capabilitierce capabili

ants the bestce, this approch better, mu

who are commay not currees to find theities and strat

t Social Commoach will pursuch more effi

mmitted to beently have allem. The collategies.

merce solutiosue the same iciently and w

21 | P

ecoming Social the Social aboration will

ns at the lowgoals that an

with much les

P a g e

al

l pool

west n ss

© Copyright

Concl The Sociaopportunbusiness sthe effect Like the sthinking alike‐mindeWave as i For more Figure 22

t by Whitehall V

lusion

l Commerce Wity for increassurvival. It wtiveness of th

urfers who coand teamworked companiets members b

information

: Catching th

Ventures 2011 ●

Wave of innosed sales andill change theese functions

onquered Mak is the key tos can rise to mbecome Socia

on Whitehall

he Wave

All Rights Reser

ovation is hered brand awaree way many os at a much lo

aui’s massive o mastering Smeet this chaal Commerce

Ventures’ So

rved Ver. 7

e. Again, we eness. We beorganization fower cost.

wave, Jaws, wSocial Commeallenge and suPowers. We

ocial Commer

contend thatelieve that mafunctions are

we believe a cerce. We are uccessfully nae invite you to

rce initiatives,

t this wave is astering it is ebeing fulfilled

combination confident thaavigate the Soo explore thes

, please conta

22 | P

more than aessential to d by enhancin

of innovativeat a consortiuocial Commerse waters wit

act us.

P a g e

n

ng

e um of rce th us.


WhitehallVentures,Inc.

2825 East Cottonwood Pkwy Suite 517 Salt Lake City, UT 84121 (801) 990‐3222 [email protected]