Building a Smarter Planet. A Smarter Planet Blog.

Just like the Internet transformed retailing, media and entertainment in the 1990s, social networking and mobile communications are now putting even more power in the hands of individuals. Think of this as the era of the connected consumer.

The shift is a good thing. It means consumers know more than ever about their choices and can comparison shop for the best price with ease. They get what they want when they want it. And they can make their opinions known—positive or negative–to thousands or even millions of other consumers.

But it also creates challenges for businesses. In this networked environment, how do they best find out what consumers want, offer them differentiated products and services, and create and maintain a powerfully positive brand image? “Our clients are trying to figure out how to deal with these empowered customers,” says Craig Hayman, general manager of Industry Solutions for IBM Software Group. “They’re telling us, ‘It’s causing me this pain and I don’t know how to get out ahead of it.’”

Recognizing that companies need a wide array of technology tools and business techniques to deal with these challenges, IBM today launched an initiative that it calls “Smarter Commerce.” The company has amassed a broad portfolio of software and services aimed at enabling companies to better address the connected consumer. Last year, IBM added to its own commerce software with three related acquisitions — Sterling Commerce, for order management and supply chain optimization; Coremetrics, for analyzing customer behavior; and Unica, for managing marketing campaigns from beginning to end.  It has also put together a robust consulting services practice and a “university” program to teach commerce skills to clients. It’s now packaging all of these capabilities together and presenting them as an integrated set of technology and business solutions.

The seeds for this initiative were planted two years ago. Hayman and his colleagues in IBM’s Websphere Commerce group were hearing pleas for help from clients in retailing, distribution and communications. The clients were trying social media campaigns and other means of addressing connected consumers, but they wanted to be able to do much more.  A chief information officer of a large retailer who had formerly been stationed on a U.S. Navy submarine pointed out that submariners have standard operating procedures for everything they do while submerged. “When  it comes to commerce and reaching out and touching my consumer, I have no manual on how to engage with them end to end,” he told Hayman. “I need that for better enabling and serving my customer.”

This was an aha! moment for Hayman. He sensed that there was a big business opportunity for IBM if it could pull together a combination of software and services to give clients that end-to-end capability the CIO was asking for.

Hayman saw that the same capabilities that empower consumers can also be harnessed by the businesses that cater to them. Thanks to social networking and mobile communications, every individual consumer has become a sensor–an indicator of information, opinion and insight. By tracking consumer behavior and sentiment and interacting with consumers in new ways, companies can strengthen their connections to their customers and improve their business processes. Through the Smarter Commerce initiative, IBM is taking the lead in helping organizations respond to market shifts in real-time; automate marketing, selling and fulfillment, and create a consistent global brand experience.

This big shift in how customers connect brings profound consequences–redefining the term “commerce.” What used to be seen as a flow of goods from manufacturers through a distribution chain to customers has become an interactive feedback loop, where consumers, producers, distributors, the media, and marketers all have new roles to play. Smart companies see “selling” not so much as a traditional function of their organization but rather as an ever-evolving set of services they perform for their customers—in concert with their business partners. “Done well, when you market to individuals, it’s not an intrusion but truly is a service to the consumer,” Hayman says.

Already, powerful software tools are available for businesses. Hayman recounts a story he heard from the head of marketing for a major airline. The man had boarded one of the company’s airliners for a flight. His smartphone was equipped with a new system supplied by IBM that alerts customers when flights are canceled. He got an alert. Curious, he walked up to the cabin and asked the pilot about it. The pilot assured him that the aircraft would depart on time. But a few minutes later he walked back into the cabin and told the marketer that he was right: The flight had been canceled. How did he know?

The answer: some pretty nifty technology.

When businesses are capable of serving customers that efficiently across all of their interactions, we will truly have entered a new era in commerce.