How Social Principles Can Bring Business Value

We talk a lot about the opportunity for social media to transcend the world of advertising and PR into a broader business context. In the industry, we’ve coined the term social business just to frame the value of social behavior and technology beyond the media itself.

But more often than not, social business doesn’t pass the elevator pitch test. People don’t fully grasp the concept. We’re still stuck in a cloud of buzzwords like “viral video,” “buzz marketing,” and “influencer outreach.”

And while I love a good viral video campaign as much as anyone else, I think we’re missing the bigger business opportunity of the social web movement.

At the heart of every business is a strategic supply chain setup, and this is where the most critical business value can be gained, or lost. Using the analogy of a casino, your supply chain is at the high stakes poker table, and your Facebook fan page is at the slot machines by the front door.

Think about where you’re playing most of your chips. So while social media has primarily been defined as a buzz marketing tool, it’s time we start considering how it can take on a bigger role to support, protect, and improve your existing supply chain setup. The business case for social supply chains has arrived.

Adjusting to Transparency

Supply chains require a delicate balance between risk and reward. On the one hand, you want to be secretive about your suppliers to keep your competitors away, and you also want to hide any problems before they go public. On the other hand, you’re constantly being pressured by investors, auditors, environmental activists, and customers to be more transparent about your business practices and partners. Social media has only further accelerated the speed and scale associated with this pressure. For example:

• Apple just released a disclosure report about all of its suppliers, setting a new standard of compliance for its supply chain and a new precedent of transparency of its multi-billion dollar operation.

• McDonald’s cut off one of its largest fresh egg suppliers after seeing video evidence of the farm’s unacceptable animal treatment practices.

• P&G has started to implement programs like Control Tower and Distributor Connect to be more transparent and efficient with distribution and retail partners.

Never before has it been more important to have an open and honest policy about your business suppliers and how it relates to your product and service. The social media world is watching you in real time and doing so with a very discerning eye. Know that you’ll be quickly criticized for your mistakes and know that you’ll need to be equally quick in responding. It’s an uncomfortable first step that even the biggest brands are beginning to take.

Turning the Tables

But social media’s impact on your supply chain isn’t simply about managing potential compliance disasters. If you embrace the open culture that social media enables, there’s the potential to collaborate with your discerning audience and turn some of them into co-owners of your supply chain. Customer collaboration in the supply chain isn’t a new concept. The original innovators in this space were successful because they believed in their customers as essential inputs to their supply chain, and not just end points of sale. For example:

• NikeID.com and Threadless.com are famous for inviting customers to create their own designs and share the profits of those sales.

• Kickstarter.com and Kiva.org are famous for inviting customers to contribute ideas, and more importantly, enabling other customers to fund those ideas.

By giving co-ownership to elements of the supply chain – e.g., design or funding – these brands were able to not only inspire advocacy from customers but also proactively prevent criticism of their supplier practices. After all, it’s harder to critique a product that you had a hand in creating.

The Radical Thinkers

Fast forward to now. We’re at the crossroads of two huge themes in the social supply chain management – transparency and collaboration. The promise of the future looks bright when you consider some of the innovative business models that have recently hit the market: Warbyparker.com is an eyewear company. It takes a transparent approach to its supply chain management and shows how its reduction of “the middle man” translates into direct savings for the customer. Any customer that investigates the costs behind their designer glasses will eventually stumble upon the fact that Warbyparker.com can get you the same quality eyewear for much cheaper and delivered directly to your home.

Honestby.com is a luxury fashion brand. It takes supply chain transparency to a whole new level, giving you every detail of the manufacturing process that goes into each garment it sells. It believes that complete transparency not only shows its sustainable supplier practices, but also gives customers an understanding of what goes into the price of its clothing, including its profit margins! Plukka.com is a designer jewelry store, founded by Hong Kong entrepreneur Joanne Ooi. It applies the social elements of the group-buying model straight into the manufacturing process of designer jewelry. Basically, if you don’t buy it, Plukka won’t make it. And the more people that buy an item, the lower the price becomes for everyone. This is another case of passing costs savings in the supply chain back to the end customers. By only manufacturing what is purchased, Plukka essentially holds very low inventory risk on high-priced jewelry items.

Only time will tell how many industries will get disrupted by socialized supply chain practices as consumers begin to see a better way to evaluate a company’s product.

Designer jewelry and fashion may already be on the verge of radical change. What we’ve learned so far is that there’s great value in consumer trust for your brand. But that trust must be earned and it will be tested.

So the first step is to be open and honest about your own supply chain. Is it ready to stand up to the speed and scale of social media? Can you find ways to embrace the opportunity and create new value for, or with, your customers? Does your supply chain represent the same brand promise you communicate in advertising? It would be wise to answer these questions before your competition or customers beat you to it.

This column was first published Feb. 20, 2012 on ClickZ.Asia.