Summary of Lecture 2 – Part 1, 14/08/2012

We had back to back lectures on first two days. The readings for the second session were divided into a short case study on SAP (SAP – A Company Transforms Itself Through Social Media [PDF]) and a relatively more academic article “Social Media? Get Serious!” There was also the IBM CMO study, but a lot in that report doesn’t directly correlate to my course. The important takeaway from IBM study was that social media now appear among the top two challenges faced by most chief marketing officers (CMO)! I think that the combination of business analytics and social media is perhaps even more challenging. This graph here shows the under-preparedness of the CMOs. (On a side note, surprisingly they are relatively less unprepared in ROI accountability. More on this later on my other blog Marketing Equity)

Data explosion and social media are the top two areas of CMO under-preparedness

SAP Case

SAP is one of the largest enterprise software companies in the world. According to its ADR trading on the NYSE, the firm’s equity is valued at $76 billion with annual revenues of close to $19 billion. Chances are that you may not have heard about this German company because they operate in B2B segment. It is instructive to study how SAP decided to build an online developer community in order to become a software platform.

Wikipedia has an entry about what a platform is. Very broadly it is a foundation on which independent developers build their services. For example, Windows operating system has been perhaps the largest software platform in the world. Several third-party software are build on it. Similarly Apple’s iOS–the mobile operating system which powers iPhone and iPad–is another example of a platform where a multitude of third-party apps are built on the basic framework provided by Apple. A true platform creates network effects (see my post about Apple’s network effects), leading to locked-in customers who remain on the platform for years. They don’t switch easily. SAP was targeting to become a platform. An obvious question is how could it convince its developers to design applications for SAP.

The solution was to create an online community of developers, bring them together, engage with them, and share content. Such knowledge creation in Enterprise 2.0 is highly valuable. First, SAP created a space where developers could exchange ideas, resolve issues, and support each other. Second, SAP created and shared content such as powerpoint presentations with the developer community. Third, they encouraged active participation from the developers in creating content such as blogs. Fourth, SAP used a point system to enable earning reputation in the community. Finally, it possibly helped SAP to reach small businesses who were thus far wary of working with a software behemoth with a closed system. SAP, in other words, repositioned itself.

The lessons from SAP case are many. However, for brevity, I focus on a couple. First, big enterprises can benefit from opening up. There is always the threat from getting exposed to competitors and hackers. But when you know about these threats ex ante, safeguards can be put in place to mitigate them. SAP took a bold step of opening itself to the world, and it was richly rewarded. At the time of writing the case, they had a thriving community of half a million developers! SAP could add premium content to the community at a price, thereby using (sort of) a freemium model–providing stuff free to bulk of the people and value added stuff at a price to a few. Such opening up let SAP experiment with the pricing. It also created an opportunity to connect to numerous small businesses. Second lesson is that social media marketing is not limited to B2C firms. SAP showed that you can run and grow successfully an online community of developers. Such examples provide evidence that with careful consideration and unrelented effort, B2B social media strategy can be crafted.

[To be continued…]


2 thoughts on “Summary of Lecture 2 – Part 1, 14/08/2012

  1. Pingback: « Micro-Positioning

  2. Pingback: Summary of Lecture 2 – Part 2, 14/08/2012 « Micro-Positioning

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