CEO and founder of on Internet strategy

Everybody likes the idea of online communities. But how do they really work? Do they add value to your enterprise? How do they fit into your Internet strategy? Listen in on our conversation with the CEO of an online management company to get some answers.

The Web has altered the manner in which we do business in countless ways. One significant change has come with the incorporation of online communities into the commercial universe. When corporations like Procter & Gamble and AT&T want expert advice in this area, they turn to, a Chicago-based online-community management company. Founded in 1997 by Alan Warms, a former Boston Consulting Group management consultant, is the primary outsourcer responsible for the design and management of the Internet communities of clients like IBM, Cisco, Compaq, and Ace Hardware. Recently, I spoke with Alan about the real-world aspects of online communities.

Second of two parts
This is a continuation of an interview with Alan Warms, the first part of which was published on June 4, 2001. To read the earlier selection, click here.

Freedman: So for a real-world application, how do you take a company that’s trying to figure out how to create an Internet strategy and help them integrate online community into their plan?
Warms: Let me start by saying we’re vendor-neutral. We’re focused on the best solutions for our clients, not on selling a particular product. Here are the questions we think about: What are the overall strategies of the company—why do they want to go on the Net? Is this a service to their customers, a way of acquiring new customers? [We ask the clients to] tell us about the type of people who would participate in [their] community—are they businesses or consumers? We also take that one step deeper. We help our clients reach the equivalent of those people who would raise their hands at a conference. We do a deep analysis, and from that analysis, we recommend a series of community programs that the client will put in place. We define [both] some metrics by which the client would measure success and some tasks they will need to execute every day. From there will emerge a series of requirements. We’ll then integrate [those requirements into the community that] we’ll build for them. We’re an outsourcing firm, but we’ll strategize, design, and build the community piece for our clients on the front end. We’re the EDS of community management, but the difference is that EDS came along when there were IT departments existing, while we came along and there were no community departments, so we build out the capability and then take over the operations.

Freedman: So just give me a peek under the covers as to how this works—if I’m a community participant at one of your client’s sites and I log in to my discussion group, how does it work technically?
Warms: We have a community management center here in Chicago, and every client gets a dedicated community manager. There is somebody in our facility in charge of managing the technology, processes, and methodology required to maintain each client community. When you participate in a community, this manager can manage all our resources, and we report and consult with our clients to help them understand what people are saying, what’s working and what’s not working, [and what they] need to do differently.

Freedman: So how do you present Participate to your clients?
Warms: This is about hard business results….This is about hard revenue dollars. There is a hard revenue figure you can associate with retention. For subscription-based business like ISPs, online community is a powerful churn-control mechanism. That’s hard dollars. Other clients tell us that customers who participate in communities are twice as likely to refer other members to their business. We know word-of-mouth marketing is driven by online community. That lowers the cost of customer acquisition, another hard-dollar benefit. There’s also a hard benefit for the sharing of best practices. Ace Hardware, one of our clients, tells us that Ace dealers share best practices about how they acquire and keep customers, for example. That results in incremental revenue to the company and the individual dealer. If you set up an exchange and you don’t provide a mechanism for the most valuable members to share information, that exchange will not succeed.

Freedman: When you’re selling to a company that you think can benefit from your services, do they grasp the benefit of online community immediately or is there a large education component in your sales cycle?
Warms: Three years ago, it took me about 25 minutes to explain what this is about; now I tell them what I do in about three sentences and they immediately articulate back to me exactly how it applies to their business. Before it was hard, but now they get it. We’ve got full-time people who do nothing but research the efficacy of online community, and we publish papers to help teach people what this is all about. Yankee Group came out with an independent report that featured us as a leader in this space, and that really helps people understand Participate as well.

Freedman: So where is this going in the next few years?
Warms: When wireless is pervasive, you can get people to participate in the context of their day. This will result in an explosion in the number of people who’ll be able to participate. Wherever you are, you’ll have access to the people you work with. The next important trend is that our clients are starting to understand that there is an incredibly rich set of data about their customers coming from these communities. How much are they participating, and what are they talking about? We believe that there are going to be incredibly useful sets of data coming to our clients from the communities, and it’ll make them say, “This is the data I really want.”

What’s your take on the impact of online communities?
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About Rick Freedman

Rick Freedman is the author of three books on IT consulting, including "The IT Consultant." Rick is an independent consultant and trainer, working, through his company Consulting Strategies Inc., to help agile teams and organizations understand agile...

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