A Perspective on Community Value (Part 1 of a Series)

This is the first of a four-part series on the topic of community value. The series is based in large part, on the output of a series of small-group working sessions and primary research that began in 2018, as well as learnings and observations from my career.

A Personal Perspective

I’ve worked with some form of community for the majority of my career. In 1999 I took a job with TechRepublic.com as “UX Program Manager” and spent 9 months helping design, build, launch and grow what would become one of the largest online communities of global IT Professionals. Community platforms, as we know them now, didn’t exist. We had to build everything from the ground up. A design for threaded discussions went from whiteboard to production over a weekend. Content editors played the roles of community managers and moderators – “community management” wasn’t a term of art yet. It seems quaint that for the first two years of TechRepublic we only cared about two numbers: uptime and membership. 

My first taste of what might be possible with communities beyond answering technical questions was volunteering to be one of the first Fast Company Company of Friends organizers in Louisville KY in 2000. The FastCo mothership gave me a list of local subscribers, a discussion guide, some facilitation guidelines and an organizer’s button. We held the first meeting in a local business conference room, and frankly, I was amazed that anyone showed up (we had 15 people at the first meeting) and also impressed that we all had so much to discuss. The central topic was about how technology -especially the Internet- was changing business.  

In 2001 I was offered the chance to move to California and work on an in-product community with Autodesk. The focus of the community was to support customer onboarding and product usage. Autodesk was the beginning of a personal journey to study the implicit and explicit value of communities to companies. That journey continued with Forum One, Dell, and now continues with Structure3C. Along the way I’ve studied and helped develop different methods and measurements for community value: the impact of forums on the support burden, the effect of community on NPS and LTV, the effect of community on purchase frequency and size, and much more.   

In my opinion, ground zero for community analytics has been measuring the value of knowledge generated in online communities, particularly in the context of customer support. Over the years different approaches have been fielded for measuring this value in support communities, including the cost savings of customer labor vs staff, the value of a call deflection, the long-term value of a qualified or accepted answer, and possible causal effects of participation on customer behavior. Several thoughtful methods have been formalized and documented by platform vendors and industry experts. This “ground zero” problem seems to have been solved, and cyclically re-solved and re-quantified to the point of diminishing returns, like a community version of the Bill Murray film Groundhog Day, we still have executives pushing back on the validity of the calculus, and the corresponding results. This is perplexing to me.

Keep in mind, the customer support scenario I describe above is arguably the most tested, proven and accepted (by community professionals) example of community value. Yet organizations continue to regularly debate this. When the conversation moves towards the value of community across customer lifecycle, and the potential value across business units our current methods, measurements and metaphors fail us.

It seems we missed something along the way in developing best practices for communities. Admittedly, it’s not a simple problem to solve, but the key problem areas seem fairly clear:

• Community as a concept is still largely misunderstood by the extended organization;
• Investments in social media activities have claimed large portions of budgets and resources and have been mistakenly viewed as the primary focus for community, as opposed to a component of the community ecosystem;
• Community strategies are often independent of, and so therefore misaligned with, corporate strategy and have no clear connection to corporate goals;
• Community as a function is separated from other customer-facing functions;
• Well intentioned, but misguided community leaders sometimes intentionally try to keep their teams and the overall community at arms-length from the organization;
• Community analytics and activities often don’t communicate value in the context and language of the business;
• Because the community function is separated from the business, it is often viewed as a cost center, as extra overhead for extended teams, and is asked to quantify value and impact in unusual or extraordinary ways – often in an ongoing, and sometimes ad hoc fashion;
• Hampered by the aforementioned factors, the final straw is that community analytics and data aren’t integrated technically or programmatically into enterprise analytics, data and reporting – a critical dimension of individual customer profiles and the ability to gain insight into entire market segments is wholly missing.

In Short: Many organizations are missing the community opportunity because of a short sighted focus on transactional value in the context of specific use cases. Growth-minded companies are fully embracing community as a concept and integrating community-building practices into the fabric of their business with great success. 

The Value of Networked Businesses & Connected Customer Experiences 

Organizations have engaged in various forms of online community development for well over 20 years, but questions central to the issues of strategy, investment priorities, performance analytics and business impact remain largely unanswered. The good news? An emerging body of research suggests that businesses that embrace community-building are more resilient and innovative, and that customers connected to a company’s community are more valuable customers. In the face of market disruption being driven primarily by exponential technologies, and in the midst of a range of business and digital transformation models intended to navigate market disruption, communities aren’t just a way to save a few million dollars in support costs – communities and networks are critical for future business success.  

Connected Customers Are More Valuable

The 1:1 relationship between a company and a customer is increasingly perishable. The customer is blessed by an abundance of choice in the market, and increasingly (especially for technology) the lifespan of a company to customer relationship can last only days, weeks or months — not years. As an example: most software companies are moving from a perpetual license to term-based licensing that can be as short as 24 hours. Creating a great customer experience and minimizing churn are key.

One key strategy is to develop customer communities where customers connect to people in the business (as hosts) as well as other customers and prospects (as peers). This creates a network of many:many connections, where bonds strengthen over time and value is exchanged in the form of knowledge, content, advice and help.

These communities translate into real value for the customer and for the host business. Companies like Autodesk have found that community members were more loyal and more likely to recommend than non-members. Autodesk was also able to quantify cost savings from their support community to be several million dollars. Similar research at Dell, uncovered the fact that IdeaStorm community members spent 50% more than non-members, and members’ purchase frequency was 33% higher than non-members. Community member ideas from IdeaStorm created $100’s of millions of dollars in revenue in the period between 2007–2011. Further, taking an account-based marketing approach, Dell was able to correlate patterns of community participation with increased purchase size and frequency on their TechCenter community for Large Enterprise customers. 

“Engaged consumers exhibit enhanced consumer loyalty, satisfaction, empowerment, connection, emotional bonding, trust and commitment.”

Brodie, Ilic, Juric, Hollebeek (2016) Consumer engagement in a virtual brand community: An exploratory analysis

Networked Companies Create More Value (and are more resilient) 

In a 2014 article from Harvard Business Review, a study between Deloitte and a team of independent researchers examined 40 years of S&P 500 data to examine how business models have evolved with emerging technologies. The study had 3 key findings, including the emergence of a distinct new business model of “Network Orchestrator”. As defined by the study:

Network Orchestrators. These companies create a network of peers in which the participants interact and share in the value creation. They may sell products or services, build relationships, share advice, give reviews, collaborate, co-create and more. Examples include eBay, Red Hat, Visa, Uber, Tripadvisor, and Alibaba.

The study also determined that fewer than 5% of the S&P 500 qualified as a Network Orchestrator. This signals both an opportunity and underscores the urgent need for transformation, as the average lifespan of the S&P 500 has sharply declined from 90 years (in 1935) to just 18 years.

Another study by NFX found that in the last 25 years (since the launch of the commercial Internet) 70% of value in tech is driven by network effects.

“In other words, companies that leverage network effects have asymmetric upside. They punch above their weight. They are the Davids that beat the Goliaths, and then become the Goliaths.”

NFX: 70 Percent of Value in Tech is Driven by Network Effects

What both the ’14 Deloitte study and the NFX study point to is the opportunity for businesses to accept the network contexts they are already operating in, and to evolve their businesses to cooperative models that look more like communities than the hierarchical company / customer models of the industrial age.

Value to Members

One aspect of value creation that is surprisingly overlooked is the value created for community members. At its most basic, value can take the form of questions answered in a technical community – and this is where many organizations primarily focus. This unfortunate limiting belief is holding many community programs back and preventing the community from reaching its full potential.

Leading organizations have taken a more sophisticated approach, with a focus on the “whole” customer and the potential for a career-long relationships being developed and strengthened through the community. Although more difficult to quantify, these more sophisticated approaches yield value to the members in the form of career advancement, skills development and mastery, and in the very best cases, the ability for members to discover and actualize their purpose.

Next, think about what a community might look like if the host organization was actively refining and expressing its purpose through community interactions. As an example: If a software company’s purpose is to empower the world through digital design software, you could imagine community activities going well beyond break/ fix support forums and into eduction, skills mentoring and specific efforts to reach people in the developing world and the associated technological challenges. The host organization evolves from an authoritarian role to become a responsive partner in co-development.

Purpose Will Power Future Online Communities – Bill Johnston

An Executive Mindset Shift

When most Executives think about customer communities, there is an unfortunate tendency to view them as “cost saving” vs “value producing”. This misguided thinking leads to strategies and outcomes that fail to realize the full value of customer communities. This typically manifests in the form of a myopic focus on customer support communities and an overburdening of customers taking on the role of customer support agent. In extreme examples, this sort of strategy breeds resentment with valuable customers, and leads to a dangerous dependence on an unsustainable resource. When the Executive mindset shifts to “value producing”, the aperture of community strategy widens to a rich set of possibilities: community advocacy programs, open innovation, peer to peer mentoring, complex content sharing, co-design of products and much more.

As we enter into an increasingly digital & connected era, future-state communities will be key locations where value is co-created and exchanged between companies and customers. To have any chance of long term success with customer communities, mindsets have to evolve beyond a fixation on cost savings to a more enlightened view of communities as a valuable catalyst for growth.

In order for businesses to begin defining a future state community model, they should:

• View community building as a capability and view their extended community ecosystem as a strategic asset;
• Explore and define what “community” means in the context of 1) the brand and 2) the customer experience;
• Understand how community can play a meaningful role during the entire lifespan of the customer relationship;
• Develop a community strategy that aligns with, and complements, corporate strategy as well as customer needs;
• Understand how the community ecosystem creates value for all business functions;
• Develop a community ecosystem – a portfolio approach versus investing only in a destination community or a social media outpost;
• Develop community programs, goals and KPIs that tie to Business Unit goals and objectives and are translated into team, manager and individual performance goals
• Prepare to integrate community ecosystem data, analytics and insights into enterprise analytics, communications and annual & quarterly business reviews;
• Most importantly: Be open to the possibility that as the community develops and becomes embedded in the fabric of the organization, the community can catalyze organizational transformation.

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Upcoming posts in this series will explore:

• methods for framing and sizing your community opportunity;
• how to develop a value-focused strategy;
• guidance on developing goals and measurements;
• how to evangelize community, secure funding and sustain engagement in community investments.

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