The path to Social CRM: do you have a Portfolio of Real Options?

About two weeks ago I wrote my post on What a Social CRM Strategy is all about. Despite the great responses and discussions in the comments I think there is still a huge part missing: How do you do it? The Strategic Framework statement I concluded with, provides just a very rough indication of the direction I believe one should work towards as well as how this can be achieved.

Does anyone have a map?

Several people in the Twitter #scrm accidental community have since written posts with views on how to proceed (you can find links to these posts at the bottom of this one). In general there seems some kind of agreement that there’s still lots of ground to cover and we should enjoy the ride. Nevertheless we should start now, plan our journey, cross the bridge when we get there and learn from our mistakes. And, this is a hell of a job, if you do not have a map.

Social CRM has not arrived (yet), not as a technology, nor as a strategy. The absence of a clear map does not mean though, that we cannot plan our journey. The journey will not be mapped out like you plan your journey from home to work and back. There are still many unknown variables and a huge number of what-if questions. There is more we don’t know than there is we do know. Fortunately more blanks are being filled every day.

Not knowing is no excuse for not going

So, what do you do? Sit around and wait for it to have happened? Jump-in without a good view on what could happen and how you would deal with those circumstances? I hope not for both questions.

What could be a sensible way to proceed is to develop a “portfolio of real-options“, or – in other words – a map that provides you with a series of options to choose from or decline. A map that allows you to value (technology) investments and other Social CRM strategic choices based on the implications of each step along the way — without committing to anything before you have to or want to (Please read any of the suggested reads at the bottom of this post).

If you understand your options you’re half way there

Creating a map of “real-options” is not a light task. If one reads the academic papers on this, it is actually complicated. Complicated because it requires a deep understanding of your business, your Customers, your competitors and all the variables that are in play to make your Social CRM Strategy successful. First you need to understand the “value-to-cost” ratio (also referred to as NPV or ROI) of the project/investment or initiative. Secondly you need to make an assessment of the risk/uncertainty involved in combination with how long you can afford NOT to make a decision (remember: you do not have to make a decision, you may; basically this provides you with a window of time to mitigate the risks or fill out the blanks to decrease uncertainty). The theory names this “volatility“. As you can imagine: the lower the volatility and the higher the value-to-cost ratio the stronger the advice to invest now.

What’s in it for you

The above may not make it clear for you how this can help you. Here are my views on this:

  • First of all creating a “real-options” mapping for only one investment (or real-option), will provide you with the insights on what variables are important to understand. E.g. when you map the risks involved, you would want to mitigate those, hence you need to start better understanding the variables that mitigate the risks. At the same time you will (or should) start small (research) projects to find out more about the variables and what drives their values. The journey (and the fun!) starts here.
  • Secondly creating a portfolio of “real-options” will provide you with insights on how all these options of the Strategy are linked (or not). (Do not limit yourself in the definition of options and linking them together. You should be creative here. But do not forget: you need to make them “real” eventually). Whenever you fill out one of the blanks in one of the strategic projects, you have the ability to assess the (potential) effect on other real-options of the strategy. When one thing moves, all things (can) move. This in itself is fascinating. Most of all you will recognize that you are actually executing the strategy and learning along the way.
  • Thirdly you make wise business decisions and still you may (probably will) fail. The good part is that you will notice quickly, with no major harm done yet. As one says: it is ok to fail, but do it quick and learn.

These are my 2 cents to the debate on how to proceed with a Social CRM Strategy. Bottom line: you can start the journey, and have the fun, in a business smart way, today!

Let me know if it makes sense to you. I’m enjoying the journey, I hope you are too.

Wim Rampen

Further reads:

Esteban Kolsky: The slow path to SCRM

Prem Kumar: All roads lead to Social CRM; But “Hanoz Dili Dur Ast”?

Mitch Lieberman: Social CRM is a journey – not a destination

Wall-Street Journal/MIT Sloan: Stay Loose

Harvard Business Review: Strategy as a Portfolio of Options (PDF)

Credit Suisse | First Boston: Get Real (PDF)

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