Thought Leader Interview
Diane Hessan is President and CEO of Communispace, a company she helped found in 1999. She’s spent much of her career getting companies to think differently about their customers. Even before putting yourself in the customer’s shoes, as she calls it, Diane was advocating for companies to be more customer focused. She even co-authored a book, Customer-Centered Growth: Five Strategies for Building Competitive Advantage. Hessan is a very busy person and she has won recognition for her work including Ernst & Young’s Regional Entrepreneur of the Year, and the Greater Boston Chamber of Commerce Entrepreneur of the Year. As you will see, Diane is a good interview and she has been quoted frequently in the business media. When not thinking about customers, she takes a break and obsesses about the Red Sox.
Denis Pombriant: Communispace is over ten years old, founded in 1999. That has to make it one of the oldest companies working in the social networking field, especially in the enterprise market. What drove the initial decision to start the company back then, well before social networking surfaced in the general market as something important?
Diane Hessan: Well, we’d obviously never heard of the social networking space when we started Communispace and I’m not sure we even officially call ourselves a social networking company now. But if you went to conferences in 1999 what people were talking about was the promise of the Internet. “What will we do with the Web?” We were all obsessed with the possibilities for the Web and people used to talk about the three C’s — content, commerce and community. Content meant all the information in the world would be at your fingertips and you’d never need another encyclopedia. That was incredible but the fun thing is that that pretty much became true.
Commerce — which we remember was bricks and clicks — people used to say Walmart.com would be bigger than Walmart. That’s fun because that ended up not being true. Amazon became true and ecommerce became an enormous industry but people are still going to bricks.
The last C was community and the essence of community was that people would use the Internet to have conversations with one another. I think there were software developers doing that kind of stuff early on but the large proportion of community stuff going on in 1999-2000 was fluff. There were early versions of games, for instance. I remember the first time I played Backgammon with someone in India and what a cool experience that was and AOL was out with chat rooms. So we knew people could have conversations with one another but there just weren’t a lot of business applications. So, we said this community thing is really interesting — how might community apply to business? And our hypothesis was that it would have huge application to business and as you know we started by trying it out inside organizations before moving it to the customer community model.
DP: That seems like a big risk.
DH: You know, it didn’t feel that risky. People always say to me “You must have been concerned about what would happen.” But what’s the worst that could happen? I’d just get a job.
DP: Today, social media has a decided focus on outbound communication yet Communispace has made a name for itself in some of the world’s largest companies like Unilever, Nabisco, Charles Schwab and many others, by teaching them to listen better. Is there a lesson in that for the rest of us?
DH: You, know, there’s a paradox here because you’re right about outbound messaging and most of what’s going on in social media these days is crazy. It’s like we’re answering the question “How do we use the Web to talk at people even more and more quickly than we did before?” So there we are again as marketers talking at people, which is what we all hate.
Listening is a really underrated marketing strategy and that’s always been the case, it’s not a vestige of social media. It’s just unbelievable what happens from a marketing point of view if you just shut up and listen and I think that’s why we’ve grown and that’s why our customers renew their contracts. There’s magic to doing that. It doesn’t mean it’s the only thing to do but it is under rated.
There are lots of examples of people saying “Let’s do this with social media, it’ll go viral, we’ll get lots of customers,” but I think the examples of people having really successful outbound social media campaigns are fewer and farther between than you might think.
DP: Really?
DH: There are iconic stories of companies that have had loads of outbound success using social media. What we learn from those stories is “Wow, that could happen to me.” But sometimes the reason those things happen is luck, or you have an iconic brand and a fabulous product that would have done really well even without a perfect social media strategy. There are lots of reasons. But there are also lots of companies wasting lots of money as we speak on social media projects and strategies that don’t really have a purpose and that ultimately don’t get great results for them. They do it because they heard a great story and figure it will apply to them or they do it because it’s super cheap and what’s the worst that can happen, nothing?
DP: But you lose time too if you’re wrong.
DH: Sure, you lose time and you lose opportunity. I do think, though, that in the beginning of every disruptive shift, and social media is one of those shifts, you have to have people who are experimenting and getting it wrong.
DP: After ten years in the market you’d think that period is over.
DH: Right. We’re still learning and experimenting but there’s also a lot that we know, that we’re positive about. The most powerful thing that we do, that we’ve learned and that some people just don’t want to believe is this thing about size and intimacy on line and I think you’re going to hear a lot more about this.
DP: Can you elaborate?
DH: Well, our communities are small. The average community has four hundred consumers in it. And very often we might have a client who says, “We have 42 skillion consumers and we want a community of 42 skillion.” The problem with 42 skillion is it’s really hard to get. I suppose you might get close if you have an iconic brand but most communities like that are dead. You have 42 skillion consumers who come in once never to return. People are always surprised about this but sometimes, depending on what your objective is, in social media the most powerful thing you can do is to create intimacy and familiarity and a reason for people to want to come back and engage with and really get to know each other. That is not easy to do but intimacy is the holy grail of engagement online.
DP: It strikes me that the way you set up a community, you spend a lot of time strategically selecting people. You don’t just take whoever shows up on your doorstep, you make sure that you have a statistically valid sample that you can later cross reference.
DH: Yes, but sometimes it isn’t about statistics. Sometimes brands get their biggest breakthroughs from one lone voice saying something that’s really compelling to them. We spend less time worrying about statistical validity and more knowing who is in the community and ensuring that these are the people that the client wants to talk to strategically.
For instance, a client might want to get a deeper understanding of the people who love them the most, or a client might want to understand people who are clients but who don’t frequent them the most. Think about a retailer who knows who shops at a store but who may want to know about the customers who have credit cards but who don’t use them very much. That would be interesting. Or a company might have just done a segmentation and have very granular profiles of exactly who they think they need to understand. So our responsibility is partially about having a valid sample but more about making sure our clients have a room full of people who are the ones they really want to talk to. If they can do that, they are even willing to give up statistical validity.
DP: The natural tendency in a down economy is for companies to work harder at what they’ve been doing and often the results are disappointing. You’ve been through two downturns with your customers. How have you and they performed and what’s your advice for these times?
DH: We’ve done great. We’re up about thirty percent this year and bookings are up way more than that. Through the last down turn we also did well. Why? I think some of it is pretty obvious, but some of it is luck. We happen to be in a space that is booming. But we also obsess over how to be invaluable to our clients. For example, you and I were talking before about our retention rate, which is ninety percent. We completely obsess over two things — why they renew and why they don’t. When a Communispace client doesn’t renew their contract time stops here. We don’t do what we’d like to do which might be to say “Ha! They don’t deserve us!” and move on which is what you’d like to do especially when you’ve worked very hard. We have a very specific protocol where we talk to clients and do whatever we can to understand what happened and we’ve learned a lot from that process.
We also obsess over why they do stay. I think our clients know, because I say this all the time, there’s nothing more important around here than our existing customers. So we try really, really hard not to take renewals for granted. I’m in the office today and it’s December 29th and a lot of people are in because we don’t take renewals for granted. There are contracts flying across my desk from clients that say let’s keep going and it’s the biggest high but we don’t go on vacation and say, it’ll all turn out fine.
Another thing, especially in a down economy, we work hard to make sure we have the measures to help clients understand the kind of payback they’re getting. So we’re trying to be better, faster and cheaper. Remember in the old days you’d say out of better, faster and cheaper, I can give you two out of three. I used to think that was fantastic but in 2011 with everything going on in the world and all the possibilities of technology, you have to figure out how to be better and faster and cheaper — not every day — but overall. Your client has to feel that they’ve gotten a bargain and you have to help them understand that on an ongoing basis, not just at renewal time. So we have a lot of measures of ROI and we’re doing everything we can to be mission critical for people.
DP: Other social networking vendors offer various approaches to getting information from customers through communities but there is a lot of variability in approaches. Many don’t invest the rigor in organizing and running their communities that Communispace does often relying on simple statistical averages of the people who respond to surveys in a Wisdom of Crowds approach. Why should a company go through effort off forming communities using methods like those used by Communispace?
DH: I think the short answer is that it’s not either/or, it’s really and. Most of the time when people are doing traditional surveys they’re getting the what — what should I do, what’s going on for consumers. I think where we shine is the why. Sometimes in a rush to do the right thing or to make decisions we get an answer but we look at things on a surface level and we never ask why. The real richness is in trying to understand what’s behind the numbers. So I think it’s both. I think companies are much more adept at understanding the statistics than understanding why. You know this, there are lots of statistics like eighty-seven percent of Stanford MBAs think they’re above average…
DP: Oh, the Lake Wobegone effect, all our kids are above average.
DH: Yes! I don’t think that means the statistics are wrong. Most of the time when you hear those things you can’t just stop what you’re doing but at some point you have to ask what’s going on there, how could that be? And if we knew the answer to that would it matter? Would it help us be more effective at marketing? Would it help us identify unmet needs? Would it help us avoid disasters? Would it help us create messaging that really resonates with what’s going on in people’s minds? So I think people are very interested in taking deeper dives, in walking in their customers’ shoes. And I don’t think that’s instead of statistics, it’s because people are looking for ways to bring statistics to life, to have the statistics provide insight and deliver something you can’t get any other way. That’s what we’re trying to do.
DP: So it’s about understanding customers at a fundamental level so that you can make break-throughs?
DH: Sure, understanding someone else is hard to do — I can’t tell you how clueless I am sometimes about how other people think about the world. We all have our moments, whether it’s in politics or just watching the news, when you just look up and say “Who are these people who say this or feel this way?” It is always, always surprising to me to find out what consumers really think. And for our best clients, if we’re doing really great work, they’ll say, “I’ve got to tell you, I had no idea that my customers would feel this way, would think this way, would react this way.” Our customers are not us! You’ve got to dig and the people who dig don’t always win but they often do and that’s what I’m passionate about.
DP: Social networking and social media are increasingly intertwined with CRM but Communispace is positioned in a different space MROC (Marketing Research Online Communities). Do you see a clear separation or is there some overlap with CRM? Do organizations need both?
DH: One of the big differences between CRM and what we do is that our clients are different. CRM really started in the sales organization with the clients being IT executives and those people are not the ones who feel the responsibility of getting under the skins of their customers. That doesn’t mean they aren’t responsible for delivering a great experience or any of the other objectives you might have with CRM but they live in different parts of the organization. So what we do and what CRM does clearly overlaps and I think part of the reason for overlap is the natural tendency to have silos within large organizations. Having said that, I don’t really talk to people who spend full time in CRM roles. When I do speak with them I don’t hear them talking about listening and understanding consumers. I hear them talking about outbound marketing and analytics but those aren’t the people who’ve taken responsibility for real understanding. So some of it is different.
DP: As you look out over the next three to five years both in the economy and in your company’s future, what drivers do you think will be most significant for your market and your company?
DH: I think one of the biggest drivers for us is globalization. The primary reason is what we were just talking about — how much we don’t know about the consumer. The point I was trying to make was that you don’t understand consumers. You don’t even understand consumers in Massachusetts and you live here. You certainly don’t understand consumers in Kansas City. So, now, let me ask you about consumers in China. At that point you’re banging your head against the wall, you’re clueless.
DP: Let me just insert a statistic here to buttress your point — one of my favorites. According to the Brookings Institution, between 2008 and 2020 the world will add a billion people but the global middle class will grow by 1.8 billion. About 600 million in China and India each.
DH: Yes. So let’s go back to what we were just talking about. If it’s true that we really don’t understand the consumer, imagine how critical that problem will be once we’re even more global. If we don’t get better at understanding the consumer, we’re going to waste a whole lot of money creating products that don’t work or don’t really meet a need, creating messages that don’t resonate and so on. So I think globalization can really drive our evolution. If some day somebody says to me, “Diane, you’ve become a billion dollar company,” it will be because people realized how important it was to understand customers on a global level and we were able to deliver on that.
DP: Ok, moment of truth. Like you, a lot of people in this industry went to Harvard Business School and there’s a sort of Diaspora, they’ve dispersed throughout the industry and the world and I deal with many of them and if you scrape the paint off them you discover there’s a Red Sox fan underneath.
DH: I knew this was coming!
DP: Well you don’t have to answer this but I figure any CEO who decorates her lunch room to look like the inside of Fenway Park — including the scoreboard and the Green Monster — must have some insight into the coming season. So here’s the question.
The Rex Sox have been acquiring players left and right this off season including Adrian Gonzalez from the San Diego Padres and Carl Crawford from Tampa. I know you’re a fan so how do you assess their chances to make the playoffs in 2011? Do the Sox have enough pitching to go with this lineup?
DH: Well, as you know the goal isn’t the playoffs. The goal is the big ring! I think we’ll make the playoffs. If we trip we’ll be the wild card. But I think we’ll be in there.
DP: Do you think we have the pitching we need?
DH: Well, from my point of view, you never have enough pitching. Last year I literally thought it was impossible to have better pitching than what we went into the season with. We had Beckett, Dice-K, Buchholtz, Lester, Lackey, and Wakefield. But between injuries — especially to Beckett — a lot of injuries, and a few players under-performing and we just tanked. So I think you can never have enough pitching. Now in addition to Gonzalez and Crawford we have picked up some pitching in the bullpen. If Beckett is healthy, we’ve got Buchholtz and Lester, and if Lackey steps up and we have some help from the bullpen, we should be OK. I think we have enough firepower not to worry but you never know.
DP: I’ve asked that question of a lot of people but that’s the most insightful answer I’ve gotten yet. You are a true denizen of Red Sox Nation. Thanks for your time.
DH: Thanks.
