As the dawn of an era known by early adopters as social business begins to spread its  colors across the business horizon, a chorus of voices is already raised in praise of new tools for promoting customer relationships. But I believe relationships are not built by tools, no matter how helpful they are. They’re built by attitudes. And by what we prioritize. If we prioritize business growth, we are almost always prioritizing transactions rather than relationships.We compensate sales teams much more highly than we compensate customer service teams. Or marketing teams. This is wrong. Anyone can bring in a customer once. But what does it take to KEEP that customer and unlock his value?

You can’t really talk about the lifetime value of a customer unless you have reached my age and have seen your customers stay with you for thirty years, through several different businesses of theirs and mine, through thick and thin. And until you are working with their sons and daughters, who are also your customers. The transactions have faded in memory, but the relationships remain. That’s “social business.”

To start thinking about social business, we must remember when we went to the bazaar with our goods, we put them in the hands of our customers, collected other goods or currency in return, and went home. The next week, it was rinse and repeat, often with the same customer. After a while, we got to know her, and inquired politely about her family, her health, her cows. But some customers we never knew. They came and went, and business with them was transactional — limited to a single interaction. They never seemed very important, because we never saw them again.

Time passes. The bazaar becomes a store, the store becomes virtual, the produces and services and customers multiply. The enterprise develops sophisticated CRM (Customer Relationship Management) software that alert sales and marketing teams to send  birthday cards to customers. Starbucks designs its Gold Rewards program — a fully automated buy-fifteen-and-get-one-free program that sends a free drink coupon to loyal customers.

But 98% of businesses are not the enterprise; they’re small businesses. Their owners are not tech savvy, and even if they are, they have no time to spend learning CRM tools. They realize they need something, so they adopt Constant Contact. Once they get that list entered, they feel home-free. They can mail a newsletter to it every month, or a sale notice every week. So much for  existing customers. Most businesses take for granted that they will come back, especially if they have that “drip marketing” program all set up to run automatically. They concentrate on building  business by getting NEW customers.

By far the lion’s share of marketing budgets goes to customer acquisition rather than to customer retention. This is wrong. It ignores several truths about customers that all marketers need to work on elevating to their front burners.

1)Customers need to understand what they are buying, and who they are buying it from. That’s how the bazaar came into existence. In 2006, I went to a cow auction in Bihar, India. All the cows for sale from the area  were on a dusty field, accompanied by their owners. You could see the sick looking cows, and the healthy ones. The cow auction aggregated the available merchandise so a farmer without much time to spare could make a choice. He could bargain.

2)Customers buy what they need. They don’t buy a cow unless their old cow died, or they are planning to expand. When a customer shows up at the auction, he’s “in the market.” You can’t bring a farmer who doesn’t need a cow to the cow auction.

3)Good customers educate themselves. What makes a good cow? How did you set the price on your cow? A customer will ask to educate himself. He will go from cow to cow to compare. He may need help evaluating things he cannot see (what is the lineage of this cow?).

4)Product and service comparisons are always available in the marketplace. It’s difficult to disguise a sick cow at a cow auction. Don’t bring your sick cow.

5)Your customer would probably rather not have to buy a cow. But his old cow died, so he has to. He trusts you to sell him a healthy cow.

6)If you don’t do that, if the cow dies next week, he will come with his relatives to your village and demand his money back. He will never buy from you again.

7) If the cow you sell him makes him wealthy because he has created an antibiotic from its urine (yes, that’s how it all starts), he will come back and buy another cow.

8) You won’t have to bring your cow to the auction to find this customer: when he needs hie next cow, he will find you.

9) Your family and his family will become interdependent, and his descendants may buy their cows from your descendants. He does not know the term “lifetime value of a customer.” He has no drip marketing tools. He only has his truth, his honor, his healthy cow that he displays and about which he doesn’t lie.

OK, so it’s a long story. But here are the takeaways:

1) Small business marketing tools don’t get or keep customers: business attitudes do

2)All business is based on relationships, yet in the industrial economy we focused on transactions

3)In the new economy we are headed back to relationships.

4)There is such a thing as the lifetime value of a customer.

5)And that’s they only metric that matters.

I was fortunate enough to be able to attend the Rock HealthHealth Innovation Summit on

Image by mariachily via Flickr

Jan.20th. It was the third day of a conference that highlighted development, design, and business issues around the potential for health care transformation through technology. The room was full, and the audience stayed until the end, even on a Friday afternoon.

Why? Because they knew something big was up. What’s up is the awareness of the Rock Health accelerator and the move to change a system only a young person from outside the industry could even hope to change. For three days, enthusiastic developers listened to cynics like me talk about business models, chasms, and challenges. I hope our doubts didn’t make a dent in their drive.

A year ago, there was no Rock Health, but more important, there was no community pulled together around the cause of health care innovation brought about by young people largely focused on digital and mobile technologies. A scant one year later, there is a vibrant health tech community in San Francisco, supported by large hospital systems, insurance providers, VCs, angels, entrepreneurs and mentors. The need is recognized, but until Rock Health, there hasn’t been a community. Health 2.0, another wonderful step in the direction of change, focused more on showcasing change than on financing or mentoring change.

The second class in the Rock Health program kicks off this week. Some of the grads from the first have already received additional funding or gotten to revenue.

They won’t all succeed. They have no concept of how complicated this industry is. But here’s the most important point: Rock Health has drawn together all the people inside and outside the system who want it to change, who are willing to take chances, and willing to support the effort to move the needle.

And thus I feel like 2011 was a tipping point for health care as an industry. After last year, for many reasons, it can’t remain the same. The larger providers and payers have already begun to circle the wagons around Obama’s health care reform law, because they are realists and know it’s not going to be repealed completely no matter who gets elected. So they’ve begun the journey toward bundled payments, Accountable Care Organizations, medical practice acquisitions, and better electronic health records. The battleships are slowly changing direction.

And the best part, Rock Health was founded and is run by women — the very people who make most of the health care decisions anyway.

Writing predictions is always/never fun, because you take a moon shot in advance and can always turn out to be wrong. That being said, I try never to predict things I don’t already know something about, and then I try to spread word about what’s coming to people who aren’t expert in what I’m predicting. For that reason, some of my predictions can appear out of the mainstream. What a surprise.

1) The success of Louis CK‘s unusual distribution strategy will once and for all change the publishing and entertainment industries. Right now, the publishers are wildly trying to control the distribution of content with legislation pending in Congress. Let’s assume it will fail, as there are petitions all over the internet to fight SOPA (otherwise known as the Stop Online Piracy Act HR3261) and its sister in the Senate. By the time you read this, the chips will probably have fallen one way or another on this particular attempt to screw up the internet by people who don’t understand it, but the legislation won’t matter, because of Louis CK.

Louis CK is a comic who had a hilarious show on HBO that later went to FX. He decided to produce a single ”

concert,” or whatever you call it when a comic stands up there and is funny in front of you, and distribute it himself over the internet. He offered it free, suggested a $5.00 donation, and made $750,000 profit after covering his $250,000 costs. He keeps all that profit. He shares it with no “label,” publishing company, network, or whatever. HE and WE are the network.

This will continue to happen. Once content goes from atoms to bits, “piracy” can’t be stopped, and neither can the worker (Louis CK) owning the means of production. Louis CK is now a publisher. There’s a train moving in a certain direction here, and  many lawyers and even creators think that standing in front of it and waving their arms in fear about the coming trains wreck will stop it. No way.

2) Just as Mark Zuckerberg and Eric Schmidt changed our views about social privacy, the number of data breaches this year will make people think twice about the privacy of health records. This year more than any other has been the year of electronic health records, and most of the small physician offices that installed them with ARRA (Stimulus) money are just figuring out how to use them. These providers have consultants, and some of these consultants are already privy to patient information, and bound by HIPPAA rules. But laptops get lost and stolen, physician staff turns over, and our records are not secure, no matter what anyone says. In fact, the only person who has real trouble getting access to medical records is the patient, who has to sign forms to receive his/her own data.

We are going to learn to live with our health information being “out there,” both intentionally and unintentionally.

If you are a patient with a serious or chronic condition, you may already have chosen to put it out there by joining a support group or a site like Diabetes Connect or Patients Like Me. You may also be monitoring your weight or blood pressure with a Withings scale and an iPhone app, wearing a Fitbit or a Jawbone. Slowly, we are learning to reap the benefits of sharing our health information and crowd sourcing our treatment plans.

3) The global startup movement will continue to accelerate, even though the funding for companies that need follow-on rounds will dry up. My friend Mark Suster from GRP Partners predicted that 2012 would be a “shitstorm” for startup companies seeking more money for expansion. There are several reasons for this. First, angels and VCs have funded too many of the same thing. Some of the clones will have to disappear. Second, VCs are having trouble raising funds because their institutional investors (pension funds, university endowments) are still reeling from losses in 2008 and have lost the taste for alternative investments. Nevertheless, there are now enough incubator/ accelerator programs in most cities to provide a richer ecosystem than we had five years ago, or even three. And since capital will come where there is a good deal, even states and countries without indigenous VC communities will get noticed.

4) Rapid fire technological change in health care  will taken place in advance of “Obamacare.” Obama’s health plan may not be ideal, but it has done something I have been waiting for. It has shaken up the industry and forced it to consider new business models and ways to deliver service. Both insurers and providers are facing about 32,000,000 formerly uninsured patients, coupled with the need to spend 80% of premiums collected on actual care. Look for (finally) the rise of technology in remote patient monitoring and wellness incentives. Look also for an increase in primary care docs, retail facilities that treat non-urgent illnesses, and fewer conversations with the actual doctor, who will become the medical director of her own practice. And employers are already beginning to penalize  us for some health conditions like high blood pressure or smoking, shifting a larger percentage  of our health insurance premiums to us. There’s an amazing amount of activity around using technology to produce behavior change. Let’s call this human engineering.

Well, it wasn’t GeeksonaPlane, but the past ten days have given me another lesson on the global startup culture. I spent three days in Paris at LeWeb, and then a week in London. And everywhere it is the same: smart, wonderful people with good ideas and Silicon Valley envy.

Anywhere outside Silicon Valley, for all intents and purposes, is Phoenix. By that I mean the people think they lack something only Silicon Valley can provide. They either want to be in Silicon Valley or they want Silicon Valley capital and mentorship in their city. Never mind that people are now leaving the Bay Area faster than they are moving in because of high housing costs, poor educational systems, diminished quality of life, and inability to compete with their more successful neighbors (few people in the Bay Area feel rich, satisfied, or happy)

.Fortunately, I am both part of and apart from the Bay Area ecosystem. I’ve invested and mentored there, even lived there part of the year, but always had Arizona as a reality check. And now I’ve got most of the rest of the world. I have even visited entrepreneurs in Uganda. But now I know that even London does not feel up to par with SIlicon Valley.

Silicon Valley capital isn’t stupid. If there’s a deal to be made in another city or country, it is already there on the ground. Just yesterday, stepping outside Marks & Spencer on Oxford Street, a glance at my Waze app told me Benchmark Capital had an office across the street. And the incubators already exist in London, despite the perception of a resource shortage. Tech Stars is in Cambridge, Tech Hub is on Old City Road, and there’s a Seedcamp, a Leancamp, a Digital Entrepreneurs Club, Ecademy, and an event every night.

In most of the places I’ve visited through GOAP, the same thing is true. From Santiago to Seoul, from Shanghai to Sao Paolo, there are startup outposts and events for entrepreneurs, who are already connected through social media and sharing best practices. For the past decade, VCs who understand these forces of globalization have been on planes chasing deal flow, while entrepreneurs have pined for the place the VCs fly from.

So what’s missing in these cities that causes the entrepreneurs to feel so inferior? At first I thought it was training or mentorship, but now I am coming to the conclusion it’s a feeling of community.Every city needs more collaboration, someone to pull the pieces together. And someone to stay involved for the long term, because there is no such thing as an overnight success. Companies may need to be mentored and supported for five or ten years.

Look at Twitter. Not out of the woods yet and almost six years old.

The biggest problem I see outside Silicon Valley is continuity– the existence of a group of local entrepreneurs who make it themselves and then turn around and reinvest in the younger people coming up. The best example of this is TIE, which began as a way for Indian entrepreneurs who profited from the diaspora to mentor and give back to people back home. About ten years ago, TIE was the way a graduate of IIT found a job in the US, and a way Indian entrepreneurs found funding. It was, and probably still is, an ecosystem.

No Silicon Valley luminary who flies in for a Lean/Seed/bar Camp can ever have the impact of an ongoing entrepreneurial community that collaborates and encourages its own. In Arizona, everyone bemoans the lack of local founders who have experience with large exits. They think the state doesn’t have them.

It does, but after their liquidity events they retreat on to the golf course. They don’t stay engaged. They aren’t trained to give back like Silicon Valley guys do.

I propose a global series of screenings of a documentary I saw last month called “Something Ventured.” It is about the entrepreneurs and VCs who invested before Silicon Valley had acquired its mythic sheen, when it was fruit orchards. Back then, the capital was in New York, and had to be persuaded to take chances on young entrepreneurs.

That’s how it is now in London, Phoenix, Shanghai, or Sao Paolo. In fifty years, one of those places will have the luster Silicon Valley enjoys now. Successful people in every city need to be shown how much satisfaction there is in mentoring and financing their successors. And in the meantime, be advised: a very small number of startups get funding even in the Bay Area. And 90% of startups still fail. Let’s not use the wrong metric to measure success: for every Mark Zuckerberg there are thousands of failures. But that’s okay as long as we don’t condemn them. Perhaps the next time, having learned, they will succeed.

Remember, everywhere but New York and California, entrepreneurial communities are still in the first generation. In fifty years, who knows where the grass will be greener.