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Download Chapter 4 of Living Networks on Emerging Technologies

Every chapter of Living Networks is being released on this blog as a free download, together with commentary and updated perspectives since its original publication in 2002.

For the full Table of Contents and free chapter downloads see the Living Networks website or the Book Launch/ Preface to the Anniversary Edition.

Living Networks - Chapter 4: Relationship Rules
Building Trust and Attention in the Tangled Web

OVERVIEW: Connectivity allows companies to integrate their systems more deeply and form many more business ties, but these opportunities are often neglected. In an increasingly transparent world, trust is becoming more rather than less important, and organizations must take steps to develop trusting relationships with their partners. The one scarce resource today is attention, so you must earn it from your clients and partners in order to create and maintain profitable relationships.

Chapter 4 of Living Networks - Commentary and updated perspectives

I opened the introduction to my first book Developing Knowledge-Based Client Relationships with the words: “Knowledge and relationships are where almost all value resides in today’s economy.” For the last decade I have explored the apparent paradox that in an increasingly digital world, human relationships, particularly trusted relationships, are becoming ever more important. At the same time, as the amount of information available swells, attention is becoming an increasingly valuable commodity. It is commonplace to talk of the attention economy, where value is based primarily on attention.

The feedback loop of customer attention and personalization
(See below for description)

Since trust and attention are so fundamental to where business is going, this chapter is absolutely as relevant today as when it was written. Arguably the underlying principles will become even more important in coming years.

I first caught up with Greg Oxton a few years ago while I was in San Francisco. It seemed like an obvious connection, as he runs the Consortium for Service Innovation, a group of very large organizations with significant service and support operations. Their focus on Knowledge-Centered Support overlaps with my idea of Knowledge-Based Client Relationships, and in the second edition of my book on the subject I referred to the very interesting work of a couple of their members.

Greg will be in Sydney on 20-21 February to speak at the Services Industry Best Practice Showcase and to run a one-day workshop on Knowledge-Centered Support. This material definitely represents leading global practice for service and support.

Tomorrow I am presenting a keynote at the Network Roundtable conference at University of Virginia on Tapping Networks to Bring the Best of the Firm to Clients. This is the fruition of many years of work applying network analysis approaches to high-value client relationships. I will be talking about the big picture of what has been learned from a wide range of different studies of client relationship teams, and I will then hand over to Robert Burnside, Partner and Chief Learning Officer at Ketchum PR, who will discuss how Ketchum PR has been applying organizational network approaches to a number of situations, including enhancing the performance of one of their largest offices, leadership development initiatives, and their relationship with a large global client.

I usually don’t share my Powerpoint slides online, as they are primarily visual accompaniments to my speeches and don’t make much sense on their own, however in this case my presentation is far more text-based than normal and is probably is of some use to read, so I’ve put it here.

My book Developing Knowledge-Based Client Relationships has popped up again on a few Popular lists on Amazon.com, notably on Consulting and Customer Service. The first edition, which came out in January 2000, was for two months #1 on Amazon.com from Australia, and spent two years in the top 20 book purchases from Deloitte & Touche among other topseller lists. Sales of the second edition have been solid and consistent but not spectacular so it's good to see it get some more prominence. While one of the chapters is devoted to how technology is used in professional client relationships, very little covered by the book dates quickly, which means it continues to be relevant over the years and has a long shelf life. Maybe a third edition in 2010 or so?

Dennis Howlett of AccMan fame recently wrote a brief review of the book, excerpted here:

If you don’t know the book, I recommend it goes on your must read list. It is packed full of examples, presents a coherent set of arguments and provides a framework for action.

A little while ago I was interviewed for an article in CIO magazine titled Remote Control, which looked at the issues in having employees work remotely. The article quoted me as follows:

While companies tend to think of telecommuting and remote access as something to support domestic employees, business strategist Ross Dawson believes it will be increasingly important to offer access to employees and collaborators working overseas. He believes companies should strategically review their information holdings and identify what information they would benefit from sharing with trusted partners and clients, and then establish an information infrastructure to support that.

Dawson says a first important step for companies that want to create a collaborative environment is to perform a strategic information audit. "An organization can categorize its information three ways: information which is openly available, information which it is happy to share with trusted partners and information which it does not share. Once you have worked out which information sits where, then you put in place the supporting technology and business processes. So far very few organizations have looked at this from a business process and technology view," Dawson says.

For a long time in my workshops and client work I’ve used the three core categories of organizational information, as illustrated in the diagram below, as a basis for strategy and organizational design.

When I was in Singapore last week to do a keynote for a client I was interviewed by Yiep Siew Joo on 938LIVE, the largest English-language news radio station, for its Bottomline business program.

Click here to go directly to audio of the radio interview, and here for the Bottomline Podpage where the article is described and featured.

Some of the issues we covered in the 4-minute interview were the role knowledge and relationships in the economy today, why the Chinese concept of guanxi is different from knowledge-based relationships, how commoditization is driving relationships in a global economy, and what the world’s largest multinational corporations are doing to improve their client relationships.

A recent article in Smartcompany magazine titled Sites for more eyes examines how companies can build online communities for their customers. It offers 10 tips on building communities, drawing on an interview with me for two of the tips:

Tip #3 – Create champions for your product

Find the people who are the champions of your community and get them on board. Contact them individually, have lunch with them and persuade them to make a contribution by writing a blog or participating in your forums.

If you can make opinion leaders in your area passionate advocates for your product, they can be very powerful in attracting eyeballs to your site.

Web 2.0 innovator and Future Exploration Network chairman Ross Dawson says you may only identify your champions through the participation opportunities provided by your site, but once identified it is important to make a connection with them.

“Not only will they bring other people in their orbit to your website, they will bring useful or thought-provoking opinions, which are a vital resources, so champions can be very important,” Dawson says.

…

Tip #7 – Let your customers interact – with your business, and each other

Forums are a crucial way of fostering a community around your brand. Ideally, your website should become a place where people who are connected by a common interest in what you do come to talk and socialise. This, more than anything else, will create content and keep people coming back to your website.

“Interaction is the main drawcard for any website; in effect, it is the payoff you offer visitors for coming to your website,” says Ross Dawson, chairman of Future Exploration Network.

Dawson says you can also give people a stake in your product by giving them the opportunity to participate in the way your business works: a competition to name or choose a colour or style for a product can give people a reason to come to your website, and tell their friends.

Yesterday I gave a keynote on Creating the Future of Business at the Q400 Business Summit in Brisbane, which was themed Future Shocks. The feedback was fantastic; I’m hoping to be able to post a video of my presentation soon.

One of the key themes of my presentation was the Open Economy, in which everything is laid out open, across business processes, visibility, transparency, borders, industry boundaries and more. One of the stories I used was that of Goldcorp, which I told briefly in my book Living Networks, in the context of business applications of open source models:

Open source thinking can be applied to completely different domains in business. Rob McEwen, chairman and CEO of Canadian gold miner Goldcorp, believed his company’s 55,000 acre stake had massive potential, but didn’t know how to access it. When attending an information technology seminar at MIT, McEwen drew inspiration from the session on open source software. He did what was previously unthinkable in the mining community—exposing all of their geological data online, and announcing a competition for the best analysis of where they should mine next. All four mines the company has drilled on the winners’ advice have hit high-grade ore.

Since then, the story has appeared in many different contexts, including being used as the opening example in Don Tapscott’s excellent book Wikinomics, and in Procter & Gamble’s internal communications promoting their open innovation initiatives. It remains a good inspiration for open business initiatives. It is told in more detail by Fast Company magazine.

Some of the other topics I covered in the speech were the acceleration of the global economy, how it is now impossible for businesses to hide, non-zero sum thinking, the role of competent jerks in organizational networks, and the characteristics of high-performers.

The June issue of BOSS magazine has a very interesting piece titled "Lost in Translation", which examines the role of building a shared corporate language for employees and clients. (The article is currently available online though AFR often takes these offline after a period.) The article quotes me as follows:

"Management consultant Ross Dawson, from Advanced Human Technologies, says there's good reason for specialists to talk this way. "You have to think about the broader context. When people become specialised they need a specialised vocabulary. It's useful to get a verbal shorthand. But it can create barriers to understanding, both within and outside organisations."

One of the perennial debates in linguistics is whether language is the origin of thought or the other way around. This seems like an odd question to a layperson. Surely it's a no-brainer to conclude that without thought there can be no language? But there is evidence that changing the way language is used can alter the way people think and then behave. It's the theory behind neurolinguistic programming, a still-controversial amalgam of linguistic and psychoanalytic techniques designed to improve the subject's ability to function, usually in the workplace.

Some psychotherapists contend that NLP practitioners try to duplicate their function without their qualifications. But at its simplest, NLP is a technique that asks people what they really mean, to encourage them to think and communicate clearly. It represents what Dawson sees as a kind of harmonising of language across different communities.

However there is another approach to reining in linguistic anarchy that Dawson describes as codification. Codification occurs when a company provides a strict definition of commonly used words and phrases. Take the word "incident". Does it just mean something that happened? Or does it go further than that?"

There’s currently a massive discussion going on in the blogosphere about a series of Microsoft ads in which they asked prominent bloggers such as Michael Arrington, Om Malik, Fred Wilson, and Richard MacManus (the links are to their comments on the brouhaha) to say what they thought the term “people-ready” meant. These were compiled in a site sponsored by Microsoft, which does not mention any products or services, but simply promotes the concept of people-ready.

The controversy was sparked by a brief article on rabble-rousing blog site Valleywag, which starts its piece saying:

“The stodgy old media industry has a rule that newspaper reporters, and TV news hosts, shouldn't trade on their public trust to endorse products.”

…and goes on to attack the people-ready campaign. I don’t get this. These bloggers are not endorsing products in any conceivable form. They are giving thoughts on a concept. How this could be seen to affect their credibliity is beyond me.

Among other business activities, I am a professional speaker and writer. I’ve written white papers, done webcasts, and given keynote speeches for payment, for among many others Microsoft, SAP, and IBM. At no point in these activities do I ever endorse a product or company. I share my views and expertise, and my clients pay to be associated with these ideas, and to attract an audience who want to get an unbiased perspective on business trends and strategies. The fact that I’m being paid to share my opinions on business and technology issues does not impact my credibility.

The bloggers in this campaign have not done anything that would affect how any reasonable person would perceive their integrity. They have not endorsed anyone. They’ve shared their thoughts on a topic. The fact that some of these bloggers have now shied away or even apologized shows that their sensitivity to potential perceptions is extreme. The degree of propriety expected of bloggers now goes far beyond that expected for mainstream media. That there is transparency and debate on the limits of propriety is good. However it is crazy to say that sharing opinions and ideas is wrong, when these could apply to any company, any product, and any service, and are not linked to any of these.

I recently pointed to the launch of the second edition of Developing Knowledge-Based Client Relationships, including the free download of Chapter 1 of the book. Following on from this, the other free chapter from the book is
Chapter 6 - Enhancing Client Relationship Capabilities: Implementing Key Client Programs.

Over the last decade most major organizations have implemented key client programs or strategic account initiatives in various forms. Technology and institutional financial services organizations got there a little earlier in the piece, while most large professional services firms have developed solid initiatives just in the course of this decade.The fundamental issue is how organizations continually enhance their capabilities at client relationships. Whatever their organizational abilities at client relationships, they must develop these further over time. Increasingly the field of play that distinguishes competitors, particularly in professional services, are the firm-wide capabilities in engaging in collaborative, knowledge-based relationships. In this chapter I look in detail at the five domains that organizations must address to enhance their client relationship capabilities, as illustrated in the diagram below.

However the most vital issues are in the realities of how key client programs are successfully established and implemented. The majority of these initiatives experience limited success. The chapter goes into detail on launching programs, selecting key clients, segmentation, remuneration, developing client strategies, establishing client action plans, and more of the nitty-gritty of making key client programs work. Have a read.

The second edition of Developing Knowledge-Based Client Relationships was released 18 months ago now. The first edition, launched in January 2000, was on several Amazon.com bestseller lists, including ranking at #1 from Australia for the two months after its release, and on the top 20 sellers list for Deloitte & Touche for over two years, and sold through five printings. When the time finally came to update the book, it ended up as half new material, including a couple of entirely new chapters. I wanted to include what I’d seen in my work with major organizations, and what did and didn’t work in practice. The response to the second edition has also been very pleasing, with a good presence in the market, and getting named one of the Best Books of 2005 by BOSS magazine.

From the outset two of the book’s chapters have been available online for free download, but sometimes these kinds of things get overlooked. I thought it was worth pointing to the free chapters here.

Developing Knowledge-Based Client Relationships: Chapter 1: Leading Your Clients

To provide some context for the chapter and the changes I made, here’s a snippet from the preface to the second edition.

The first key lesson is that even if you are brilliant at engaging in knowledge-based relationships with your clients, that doesn’t help you if your clients don’t recognize the value you can create for them through this deeper level of engagement. Professionals must lead their clients into knowledge-based relationships by demonstrating the value of collaboration. On every front, the future success of professional services firms will depend absolutely on the leadership capabilities within the firm. They must lead their clients into new ways of working, they must lead their professionals into combining their expertise collaboratively, and they must lead their industries by showing that new business models and approaches to value creation are possible and desirable. Thus the new subtitle of this book: “Leadership in Professional Services.” The subtitle of the original edition, “The Future of Professional Services,” still applies, as knowledge-based relationships are indeed the future of the professions. However the essence of this second edition is how to develop the leadership that will brings these kinds of professional relationships to reality.

Here is an overview and link to Chapter 6, which is on implementing key client programs and enhancing client relationship capabilities.

This is great! Doc Searls of The Cluetrain Manifesto fame has written an extremely rich and interesting piece titled Building an Relationship Economy. He begins by describing a series of stimulating conversations, during which Eric S. Raymond, author of The Cathedral and the Bazaar, one of the seminal pieces of the open source movement, suggested that there are three levels to markets: transactions, conversations, and relationships. Doc goes on to discuss several perspectives on the relational foundation to the economy, notably in open source projects, but also in public broadcasting.

Towards the end of the piece Doc alludes to ProjectVRM, which is a project to explore “VRM”:

VRM, or Vendor Relationship Management, is the reciprocal of CRM or Customer Relationship Management. It provides customers with tools for engaging with vendors in ways that work for both parties.

CRM systems until now have borne the full burden of relating with customers. VRM will provide customers with the means to bear some of that weight, and to help make markets work for both vendors and customers — in ways that don't require the former to "lock in" the latter.

I will be following this very closely – there are already some very interesting resources on the site. I have to admit I’m guilty of writing a White Paper for Microsoft titled “How to Lock-in Your Clients,” though I think the spirit of what I write in the paper is in keeping with the project:

Wouldn’t it be wonderful if you could lock-in your clients, make them yours forever more? It’s a nice idea, however the reality is we live in an increasingly open world. Today it’s almost impossible to get clients to buy closed systems that would mean substantial switching costs if they then chose to move to another supplier. Given a choice, clients will always go for the option that gives them more flexibility. The trick is to create lock-in in a business environment in which systems and standards are more and more open.

In this world, the only way to lock-in clients is by consistently being able to create more value for them than your competitors can. This is a positive form of lock-in, in contrast to the negative lock-in of trying to make it expensive for clients to leave you. There are three key foundations for how professional services firms can keep clients coming back through positive lock-in.

1 You know your client better.
It is nothing new for professionals to have to know their clients well. It is just that now doing this better is the primary field of competition. Today, it is important not just to know your client better, but also to apply it in customizing your communication and service delivery, as discussed above. If you do, this creates a very powerful form of lock-in through the unique value you can create.

I have previously written about blogging and Regulation FD, which is a Securities and Exchange Commission (SEC) regulation that requires egalitarian dissemination of substantive news that could affect the share price. On the face of it, blogs and RSS are the perfect way to allow perfectly equal access to news by everyone. Yet this is not allowed by current SEC regulations. So Jonathan Schwartz, CEO of Sun Microsystems, has written to Christopher Cox, the chaiman of the SEC, to ask him to change the regulations to allow blogs and similar tools to be used for disclosure of substantive news. He says that previous conversations with Cox indicate this will be heard with receptive ears. Schwartz has of course disclosed this on this own blog, together with the full letter to Cox. If this change is approved, this will be an enormous boost for blogs, because it will mean investors and intermediaries will have to monitor the blogs of public company officers, and it will allow company directors to disclose substantive information on their blogs, in turn reducing the governance issues of corporate blogging. It makes all the sense in the world to use the power of RSS to disseminate information – this in fact would be a significant improvement to current mechanisms – so with just a tiny variation in the regulations on what are appropriate ways of disseminating corporate information, blogging could become quite a different world, with the development a thoroughly corporate segment of the blogosphere focused on egalitarian diffusion of investor information, and by-the-by, resulting a deeper and broader view of public company activities, and better informed investors.

BusinessWeek reports that Apple is readying release of move downloads from its iTunes site, pitched at $14.99 for new movies and $9.99 for back catalogue. At the same time, it says, WalMart is actively lobbying Hollywood studios not to allow Apple to provide these downloads. Wal-Mart’s actions are said to have included threatening not to sell Disney’s High School Musical for a period, subsequent to Disney releasing it initially exclusively on iTunes. Disney is apparently the only studio signed up for the iTunes movie releases, with the others on the sidelines for now. Wal-Mart has clout with the studios, since it accounts for 40% of DVD sales in the US, which is one of their most important revenue sources.

This is an oft-told tale, in which the shift to new and more efficient distribution channels is blocked by incumbents who have the power to slow progress. In this case Wal-Mart’s actions seem to be on the border of US anti-trust legislation. However its ability to generate revenue for their wholesale providers gives it enormous power to influence. Notably, Wal-Mart is also said to be readying its own movie download site, so it recognizes that the shift to the new distribution channel is inevitable. It just wants that shift to happen on its own terms. Of course Apple and Wal-Mart are hardly the only players in this market, with an array of pretenders to the online movie distribution market, notably Amazon.com. The primary bottleneck here is that any distribution rights have to be approved by the studios, and it really has to be all of them for a download site to become predominant. Apple has the Disney relationship and access to a ready market of buyers, Wal-Mart has existing distribution channels, others have different offers. As in so many other cases, the incumbent will try to shape change to its favor. Yet there is little reason to think that Wal-Mart has what it takes to be a big success in the online distribution market. One other thing to note is that Wal-Mart only stocks the very top selling DVDs, so studios can gain revenue from their hits but nothing else. Online distribution, such as on iTunes, enables them to generate revenue from their entire list. As the Long Tail story tells, there is gold beyond the hits.