My first look at ROI for social media focuses on revenue conversion, not surprisingly having recently worked in the online price comparison marketplace within eBay Inc this is an obvious starting point for me:

Simple equation to calc soc med ROI? Life time value of customer – cost of acquistion, divided by COA = %ROI hbsp.harvard.edu/multimedia/fla… for LTV

— Stuart G. Hall (@stuartgh) February 20, 2012

To explain that tweet (inspired by the holy grail of social media which is figuring out the return on investment (ROI) – it started with a good simple equation suggestion in the Hubspot webinar – slide 45:

On Monday evening I took the bull by the horns and jumped into the debate over how best to deal with building a successful corporate community at Cass Business School, organised by BrightLemon. And to give it some zip, some urgency, I based the story that was narrated with the help of some simple PowerPoint slides on my failure to create a successful online community at Shopping.com.

A confession first, being let’s say not one of the best public speakers (great to see that Cass was holding a Toastmasters event that same evening) I did my talk sitting down, and using a microphone, which was more fun and conversational in style. Anyhow in similar laid back fashion I have decided to publish my slides in text format, to add some reflective value (and pop in the occasion image now and then)..though I do relent at the end to include the clutch of slides with a lean start-up example.

My second slide was about the real subject of the talk, which is learning from setting up community to deliver to the Shopping.com mission, and how I might do it again differently with the benefit of lean start-up tools.

I also mentioned that my desire to talk about the value of start-up tools for building communities is based on discussions with community managers and entrepreneurs on the LinkedIn Community Roundtable Group and e-mint, who’ve shown support for the concept:

“I can’t say that I have really applied them directly to community building, but I certainly think that the approach makes sense. Since the fundamental tenet of the lean start-up is to be customer-focused and to continually seek actual customer validation for what you are creating, it seems to intuitively fit as a model for community development, agreed Terry Coatta.

“The biggest challenge I would foresee is critical mass. As a lean startup with a specific product/service you can engage in customer validation with a small number of customers — sometimes even just a single one. But in a community, you need to have interaction amongst the community members. So you clearly need to have more than one The actual numbers are going to depend on how willing people are to contribute, but given the 90/9/1 rule of thumb, it would seem like you might need at least some tens of people involved in order to have even a minimal level of interaction.”

A little about my background experience in social media and community starting at Headshift at the end of 2005 (now part of the Dachis Group) and most recently working for eBay Inc’s Shopping.com.

And as way of a sneaky-peeky into what I was up to at Shopping.com check out this quick overview of one successful social media campaign activity at the top price comparison site:

If there’s on thing I understand the value of it’s learning from failure, with experience of working on a start-up which failed to deliver on it’s initial promise to exiting from Shopping.com after a change in strategy. The good news is that failure is an important part of what being part of a lean start-up, when you go out and test customer assumptions through validation and experiment only to discover assumptions are wrong and you need to change strategy – pivoting to use the jargon.

Indeed the validated learning approach to quote our onsite mentor Gordon Guthrie, “gets companies only to build things customers want and helps startups get to cashflow and traction earlier. Most startups fail in cashflow – burning through any money (from funders, from founders, from family) before reaching a definitive conclusion on their proposition”.

The learning I had working last weekend came from an idea called Spare Space – based on the assumption that companies would want to rent out spare office space in the form of meeting rooms. But when we looked at the customer assumption from the supply side, it looked pretty obvious businesses would not want folks using their meeting rooms. (That said renting out desk space is a winning business in the US known as Loosecubes, where the co-working supplier benefits with creative mix of new business people). The issue comes with meeting spaces.

Photo by Stuart Glendinning Hall

Fortunately the team found there were a good sample of pubs and restaurants that had meeting rooms which they wanted to get more use from. So the supplier side seemed sorted. But then the consensus as to the demand side seemed to break down, and the end pitch was for any meeting rooms which didn’t seem to work. Did we fail? Sure. But what I learned was the value of the MVP approach to focusing in on what the customer wants.

This is the question I asked other community managers on the yahoo e-mint forum today – ‘How useful is an entrepreneurial approach to building online communities?’ And the reason why is because I’ve been working on a start-up idea since leaving a community management position at eBay, so it seemed a good opportunity to put together a presentation on how lean start-up methods can help build community, based on the methodology put forward by Eric Ries.

I’ve already had a couple of responses so I thought I’d share them more widely here too, starting with the reply from Benjamin Southworth:

This seems to be a slightly tautological question.

If you were building a community in other way than iterating on results you’d not be listening so your community would fail.

Eric Ries ideas regarding Lean, MVPs, testing, iterations and pivoting are solutions to the idea of silicon valley excess of funding runways, burn rates and throwing money as a solution to viral traction.

Ergo, all successful communities follow a listen, test, adapt, build, rinse, repeat model and always have.

And indeed Benjamin is right, building online community seems to follow very similar lines to the start-up building model – and that’s why I wanted to reflect on the subject. Eric Ries does aim with his method to cover corporate entrepreneurs, not just the Silicon Valley kind. Again why I thought it could be useful for online communities within organisations, not just for start-ups.

Fortunately I’ve signed up for a long weekend of lean start-up workshop this weekend, where I’ll get a good chance to reflect on this with my colleagues for 3 days. Should be fun from reading the introduction!

Lean Startup Machine is a competitive weekend workshop where you will apply Lean Startup techniques in the real world. Join a team and launch a startup–not by writing code– but by validating and iterating your key hypotheses quickly. Learn to identify the key risks in your business model through hands-on mentorship and our unique framework of tools.

Over the course of the weekend you will do the following:

• Ideate a startup or work on the one you have now
• Practice Customer Discovery
• Research your Target Market
• Practice Customer Development
• Test your Assumptions in Iterations
• Understand your Business Model
• Iterate and Pivot (when necessary)
• Build something you can Launch
• Present your Validated Learnings

I promise I’ll post the fruits of my labour after my short talk on this subject at Cass Business School, ‘Applying lean start-up principles and practice to building corporate communities’ on 13 February.

So what’s the Name That Place all about? The elevator pitch is this – a simple game of ‘i-spy’ but brought u to date by playing with your mobile or computer. Looking at i-spy from the online p.o.v., it came with a ready made container – a car or a room; and a ready made community of players, passengers or fiends.  And with mobile phones, mobile apps, and geo-tagging the possibilities technically mean theory an online Name that Place is superficially attractive to a wide range of people in a wide range of settings. But in reality it would only convert from the potential to the engaged game if people start to use it.

So how do you get proof of concept, through people using it? It’s already been shown to work in Barnaby’s home town in Sandbach through his Facebook Page. That’s because it was also with a limited container of 100 participants who all knew someone who knew someone.

So as per Facebook’s genesis take-up is down to a shared social network to compete with and a shared physical environment from which to source the pics.