May 2, 2008 — I have been investigating the possibility that social networking is something that can be used inside an organization (intra-organizationally as my bureaucratic friends might say). That should really be no surprise — the entire employee base is a natural community, though in many companies the group is small enough that good old face-to-face communication works pretty well. But there’s at least one place where community oriented techniques not only work but they can have a lot to do with profit and loss.
I am referring to the forecast, not just the revenue forecast but the business forecast. What’s the difference? Glad you asked?
In CRM we’ve become accustomed to thinking about the revenue forecast as the only thing that matters but it turns out that may be a rather provincial way of looking at the world. The revenue forecast is a dandy way for a software company to figure out how it will make money but it doesn’t serve the rest of the world as well.
A software company, a telecommunications, provider and many other high tech businesses basically have one product to sell — maybe the product is SaaS or a box with a CD and a manual or time. In any case there is no real supply chain to worry about and the revenue forecast is the forecast. But!
Consider the situation where a company actually makes things and there is a supply chain. For such companies, the revenue forecast is nice to have but the operations people sweat about a whole different set of issues.
For example, if a company can make three different products and knows what its capacity is for making each, then that company also knows that it can’t make its numbers if it sells 300 percent of its capacity to make just one product. In that scenario, a sales team is selling things that operations cannot deliver (I know that’s highly speculative and has never happened, but bear with me). That’s not a happy problem because it leaves customers unhappy which is nothing compared to the tough love that the executive team get from the board.
A couple of weeks ago American Airlines had such an unhappy problem when it found that it couldn’t fly because its planes were receiving mandated maintenance — it had customers but no product. What I am about to say next won’t help American or any other airline because airlines seem to be refractory to help, but I digress.
I’ve recently been watching a company — Right90 — that helps companies manage the business forecast. By that term, they mean all the things that can and should be forecasted in addition to revenue so that a company can keep its supply chain informed of changes to the forecast. Think about it, if you want to optimize just in time inventory, then you have to be very good at knowing what to deliver just in time.
What’s interesting about Right90 is that they capture and track changes to the forecast in real time. If a sales person reports that a customer is doubling an order for 32-inch HDTVs, managers in sales and operations get alerted and the full implications of the change on the forecast get thoroughly reviewed.
This kind of attention to detail gives every relevant person and department a seat at the table and makes them accountable for bringing in the forecasted revenue in the forecasted product lines. More importantly, companies that make the stuff that makes our lives run, make so much of what they make that it’s almost impossible to do a good job of managing the forecast. And to make matters worse, they try to do it in spreadsheets. (The only winners here are the people who make Prilosec because they just make all they can all the time.)
At the end of the day, this looks an awful lot like a community working for the co-creation of value but because all this work happens internally, it has been overlooked as a good example of how communities and social networking techniques in general can be applied to business. What’s fascinating to me is that for a long time we have been thinking about social networking in the context of vendor-customer interactions without really considering the possibility that the same techniques could work inside the enterprise too.
This is a long way from Facebook or YouTube or any other first generation social networking site (did I say first generation?) which brings me to the question of the week — have we already crossed into, gulp, social Networking 2.0?
In a way this should not surprise anyone. It’s the normal evolution of an idea. First a product comes to market and then the early adopters figure out its real best application. For a long time we’ve used social networking as a toy but Right90 just might be giving us a glimpse of how this powerful interpersonal communication tool can be used as a powerful inter-personnel communication tool.
I just love it when things come together like this.