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Reversing the Enterprise 2.0 Pricing Model

Why is the Enterprise 2.0 market not taking off more strongly? The reason has to do partly with ill-conceived pricing structures: volume-discount (VD) schemes. Fix them, and you fix one of the obstacles preventing the market from expanding rapidly. And by fixing them is meant reversing them, in particular by using volume-increasing schemes. Pricing Tied to Volume Enterprise social computing offerings -- such as social networks or the numerous Twitter-for-the-enterprise applications that currently abound -- generally don't have complex pricing structures. They are volume-discount based: that is, the more accounts customers buy, and the more employees who use them, the larger the discount vendors give them, and the lower their average price per user will be. Some vendors advertise flat pricing schemes, but when a customer is big enough, a volume-discount deal inevitably creeps in. Value and Cost Out of Balance

Volume-discount pricing structures are simple, tried, and true. So, why aren't they efficient? The reason is because of where returns on investment (ROIs) are located. Enterprise social computing offerings provide increasing marginal productivity as they scale, at both the individual and organizational level. The more that employees use a service, the higher the margin gained by their company in productivity, and the more the company extracts value from the product. A corporate customer that has 10% of its employees using a Twitter-like product won't extract as much value as one that has 50% of its employees using it.

from my experience most social media consultancies are a waste of time, money and effort - a disproportionate amount of effort is placed on marketing (esp branding). most of the real strategic value in this medium is beyond purely the marketing function, and needs attention at a the central organizing function of the business. many of "social marketers" are far too obsessed with measuring brand. this is a BIG distraction imo. the interactive agencies lack the business rigor and corp strategy competency. SM is growing up - should be focusing instead, on achieving whole new levels of value. real step function increases.  a tip paul - my advise would be to pick a real GROWN UP innovation strategy firm. It's that important. It's not about selling the same old stuff, in a new way, but focusing further up the value chain. your precious contacts will thank you for it.

Yet another reminder of the old saying “Those who can do. Those who can’t teach.” You couldn’ be further from the truth. Facebook, or more generically any social networking platform, has significant advantages such as the ability to instantly add/configure/customize/network an application. This dramatically lowers the barriers to entry (correct on that point), but it also lowers the cost of switching for users. Yes, creating a standard (massive usage) creates a barrier to switching, but not an insurmountable barrier. Frankly, “social networking” as application is boring to me and it may prove to be a fad. I don’t really care about the minor personal gestures of my 400+ friends. But the social platform is exceptionally compelling to me as a user, developer and visionary. Social discovery and vetting of application is huge. I’ll drop one app and add a competitor in 2 minutes. My friends will do the same if it offers a compelling value. Your application of the old school metrics of the PC platform to a social platform ignores the low switching costs, social discovery of applications, incredibly low marketing costs and all of the other benefits of a social platform that will power future applications. The fact that one person in a dorm room can write a killer app that can spread virally is exceptionally powerful. That simply cannot happen on the PC. It can happen on the web, but having done it a couple of times myself, I can tell you it is costly. Will Facebook become the ultimate platform, will OpenSocial win, will browsers encapsulate social connectivity across all websites/webapps, will the semantic web finally deliver? I don’t know the winner, but social apps are here to stay. Yes there will be a lot of crap apps, but the social fabric will help separate the wheat from the chaff. Sorry, but I give your analysis an F :)

Facebook’s most important strategic asset is not its community of developers but its network of users.

Does Platform build or leverage this strategic asset?

3. Growth PlatformsThis area of focus refers to the selection, prioritization and communication (both internal and external) of new growth platforms and business concepts that promise to deliver long-term, sustainable competitive advantage. It is here, most especially, that high performers begin separating themselves from the pack by making the strategic distinction between effective innovation in general and the effective commercialization of innovation. Accelerating growth through innovation requires becoming more disciplined at identifying a company's innovation "center," as it were. For some companies, such as Apple, innovation generally flows from its products and services. Other companies, such as Wal-Mart, fuel growth through operational innovations. Business model innovation has helped drive companies such as eBay and Skype. Companies must manage growth from that innovation center, rather than from the periphery. Part of that commitment to innovation involves embracing new and disruptive ideas. Another important aspect is leveraging open innovation and open sourcing methods that bring together suppliers, partners, employees and management. Companies that effectively commercialize innovation also develop more risk tolerance when scanning for opportunities outside their immediate business environment. They become more willing to cannibalize products and services when investigating new growth platforms. They become more adept at the operational requirements of their winning concepts, leveraging current partners, networks, assets and distinctive capabilities to help drive growth through innovation (see "Leading by imitation," Outlook, January 2007). Finally, these companies know how to communicate their growth and innovation strategy, both within their company and to the marketplace. Like the old story of the tree falling in a deserted forest, future value that is not communicated effectively to the marketplace doesn't make any noise.