Monthly Archives: July 2012
Do you have any interest in strategy, strategic thinking, strategy making? Have you wondered what strategy is, what it involves, how to go about it? Do you consider yourself a rational/analytical person? If you have answered yes then you might just want to consider reading The Strategy Book by Max McKeown. In this post I want simply to share some of what I found interesting/useful.
What is strategy about and why is it so important?
“Strategy is about shaping the future…… Your strategy will craft a response to external waves, needs of customers and the actions of competitors.”
That pretty much says it all. The future is not simply a continuation of the past. We, collectively, co-create the future and that means that the future is open to being shaped. Most important those that shape the future are the ones that are most likely to prosper from how the future turns out. Furthermore, the essence of the world is flow/change – that is to say that the world is dynamic and as such the external environment, customers and competitors will present your organisation with opportunities and threats.
If you are not open to detecting and responding to these then you are likely to find yourself in the same space as RIM or Nokia. And RIM and Nokia are the living embodiments of what happens when you focus solely on operational excellence – doing the existing things better/faster/smarter. No execution is not enough for a business to flourish: execution is necessary yet not sufficient, strategy is required.
What does strategy require/involve?
“Strategy is about outthinking your competition. Its about vision first and planing second. That’s why it is so important that you think before you plan. And that the thinking part of what you do is given priority….Thinking like a strategist is demanding intellectual work…”
I qualified as a chartered accountant many years ago and was heavily involved in business planning and analysis. Which is another way of saying that I have hands on experience in strategic planning. What did I experience? Lots of planning and a dearth of the kind of thinking that can be called strategic. It occurs to me that most of the organisations that I have worked in/consulted for do not create a clearing for strategic thinking to show up / take place.
Yet, I am not in complete agreement with Max. Kenichi Ohmae, a strategist, pointed out a long time ago that too many companies focus too much on their competitors and not enough on customers – in particular creating superior value for customers and potential customers. Interestingly, Max is aware of this because he mentions it later in the book.
Central to strategy is thinking like a strategist: what does this involve?
“Becoming a strategic thinker is about opening your mind to possibilities. It’s about seeing the bigger picture. It’s about understanding the various parts of your business, taking them apart, and then putting them back together again in a more powerful way. It’s about insight, invention, emotion and imagination focused on reshaping some part of the world.”
Now you know why great strategy is rare. Great strategy requires strategists with a sound understanding of the business along with a combination of competencies that are rare in one individual: imagination and creative thinking; systems (holistic) thinking; and critical/analytical thinking. Which kind of suggests to me that perhaps it is better to ‘play the strategy game’ as a team, preferably the entire organisation, rather than leave it to one or two individuals.
Thinking like a strategist: 4 tips
In part two (thinking like a strategist) of The Strategy Book, Max gives four tips.
Reacting is as important as planning
“Unplanned opportunities may be your best chance of creating a great strategy, so you need to be constantly looking for them…… the greatest opportunities come from unplanned events.”
Ingvar Kamprad, IKEA founder, lived near furniture makers so he started selling furniture. He reacted to a boycott from local rivals by making his own furniture. He reacted to excessive customer demand by coming up with self-service. Then there is the ‘Honda Effect’ – Honda made a successful entry into the US market despite the original strategy being a failure. This approach to strategy is in line with Mintzberg’s view on how strategy comes about in the real world.
“All decisions are about the future. Since the future is uncertain, all of your decisions will have an uncertain outcome. But because you’re trying to shape the future you still have to make decisions…..”
The point is that risk is inherent in strategy making and the course of action (strategy) that is chosen to be implemented. One source of risk is that we have finite minds seeking to grasp/comprehend an infinite world. Another source of risk is simply the ‘butterfly effect’ a tiny change, changes everything and renders our strategy ineffective. Then there is the risk of choosing a strategy that the organisation is simply not fit to implement….. Then there is the risk of doing nothing.
Risk cannot be avoided the challenge for the strategist is to know what risks are involved and have a correct grasp of these risks: how likely is it that the risk will turn into actuality and what is the most likely impact. With this understanding sensible choices can be made.
Looking over your shoulder
“Strategies compete with strategies…….. You need to be aware of the competition is doing. You need to know what customers are doing. Paranoid adaptation is part of the strategy game. Look up, down, back and ahead.”
I believe that Andy Grove said it best with his book Only The Paranoid Survive. Or as I told one of my clients, the bomb is ticking the only question is when it will explode and your business will be blown out of the water.
Knowing where grass (really) is greener
“It’s a fair bet that at some point what made your company money in the past will stop making money. New products replace old products, Entirely new services replace old services. The best places to sell your products will change. And customers who mattered so much will stop (or start) buying. You need to know when (and how) to switch focus.”
The key point is that one has to be constantly open to and looking for new markets. Are there customers who are not buying your products yet would love to buy your products? What can you do about that? Are there segments of the market that are growing faster than others? Are there new entrants to the market? Clayton Christensen says be wary of the new entrants that you are most likely to ignore – those that make inferior versions of your products and who sell them cheaper to a segment you are happy to walk away from. Remember Toyota and the crappy cars it made/sold and eventually it went on to compete with Mercedes in the luxury market!
If you would like a free copy of The Strategy Book then drop me an email. The first person to email me will receive the book.
Is the ‘product’ being neglected by the Customer movement?
It seems to me that many approach Customer Experience as if it is all about getting access to the voice of the customer and improving the interactions (marketing communications, buying, paying, service..) between the customer and the organisation. Is something important being missed?
I say that a critical piece is being missed: the core product or service that calls forth the customer to interact with your organisation. The danger I see is that of focussing effort on the interactions around the product and not giving the ‘product’ the kind of attention/love/priority that the likes of Jobs/Ive gave to Apple products. And thus leaving open an opportunity for someone to come along and render all of your work on interaction design worthless. How/why? A new entrant comes along with a radically better product – better at doing the job that the customer hires that product to do. Think salesforce.com when it comes to CRM.
Looking at the ‘product’ through the ‘job that the product is hired to do’ lens
What is a powerful access to revisiting your ‘product’ through the world of your customers? A great access is to think of the situation this way: the customer hires your ‘product’ to do a specific job. Allowing me to make this real and useful for you.
Clayton Christenson shares the story about milkshakes. He was working for an organisation that was selling milkshakes and there was a drive to sell more milkshakes. So the team dived into milkshake purchases and found out that milkshakes were bought in the early morning (breakfast time) and in the evenings. Who was buying these milkshakes and what had they hired these milkshakes to do?
The early morning crowd were people who were commuting to work. And they hired the milkshake to relieve the tedium of the commute (usually in a car). For these people the thickness and size of the milkshake worked great – it took time to drink the milkshake. How to improve it? Add stuff to it that made it last longer, that increased the prominence of the drinking experience and distracted the drinker from the tedious commute.
Parents were buying milkshakes for their children in the evening as a treat – after saying “no” many times they felt that they could and should say “yes” to the milkshake. How was the milkshake doing in terms of the job that the parent had hired it to do? Poorly. Why? Because the kids were taking forever to finish the milkshake. What was the issue? The thickness and size of the milkshake. How to improve it? Sell it in a smaller size and/or making it less thick.
By looking at the ‘product’ through the customer-centred lens of ‘the job that the customer hires the product to do’ one opens up the possibility of coming up with products that do a better job of meeting the core customer need and delivering a superior customer experience. And this creates the opening to sell more product.
How many parents chose not to buy milkshakes because they did not want to hang around 20 minutes or so for their children to finish drinking the milkshake. What is the price premium that could be charged by selling a larger, thicker, crunchier milkshake to the early morning commuters?
Finally, notice this level of understanding enables the organisation to improve its marketing and sales message: to talk about what matters to customers (job that customer is hiring product to do).
Looking at the usability of the ‘product’
In order to get value out of a ‘product’ – for this ‘product’ to do the job that it was hired to do – the customer has to be able to use this product effectively, easily. How many products meet that requirement?
I have bought electronic products where I cannot even get them out of the plastic packaging! I have had to look for the biggest scissors and then watch out lest I cut myself opening up the package. And once or twice I have just done that cut myself. It is another job to actually set these up and operate them.
How many products come with a lousy set-up instructions? Many. I have lost count of the amount of time I have wasted on trying to make sense of the instructions. Do I have to share with you the frustration that is involved in having a job to do, having bought the ‘product’ and not being able to do that job? I bet that you have had this experience many times. If you have not then you can count yourself lucky!
Getting value out of the ‘product’ can be a big issue especially for the more complex ‘products’. How much advice (whatever form it takes) is worthless because the customer does not know how to make sense of and use that advice effectively? Why has salesforce.com been so successful? I say because they took the hassle of setting up/operating / getting value of CRM systems away from the customers.
Even complex products can be made easy to use and thus more valuable to the customer. The best example I can think of is Apple. This is a company that is doing extremely well because Steve Jobs insisted on starting with the customer experience and working back to the technology. Put differently, making products that the average customer can use straight out of the box is a fundamental requirement of product design at Apple – at least as I understand it.
The product is not in one domain and Customer Experience in another domain. Any serious examination of the Customer Experience has to grapple with the product and how well it does the job that the customer is hiring it to do. That means designing that product so that it is both useful (does the job) and usable (easy/intuitive) to use.
In this post I wish to respond to the assertions made by Sampson Lee in Customer-Centricity Is Not The Solution; Its The Problem. If I understand it Sampson is asserting that pursuing the path of customer-centricity is the road to ruin and his logic is as follows:
- To the customer, customer-centricity is ‘listening to me and satisfying my needs‘;
- Yet, it simply is not possible, due to limited resources, to satisfy the needs of all customers especially as different customers have different needs;
- Simple customer needs have already been met and meeting the needs of savvy ‘mature’ customers in developed markets is too costly; and
- Even if you manage to satisfy all the needs of all of your customers you are playing the same game as every other company and so you will end up being like everyone else – a commodity.
It occurs to me that Sampson has come up with a definition that suits his argument: he has collapsed responding to any customer’s requests/demands with being customer-centric. His assumption is customer-centricity = saying yes to whatever any customer wants. Is this the correct way to think about / orient oneself toward customer-centricity?
As a strategist, I say being customer-centric involves saying “No” as much as it involves saying “YES”, it involves doing some stuff excellently and other stuff not at all or badly. Customer-centricity approached strategically involves thinking and then making choices. Here are some of the most important choices:
- which people are we seeking as customers and importantly which people do we NOT want as customers;
- which jobs will we do for these customers and which jobs will we NOT do for these customers; and
- which needs/preferences will we fulfill with these jobs and which needs/preferences will we NOT fulfill.
This need to think strategically and make integrated design choices has been explored by Frances Frei and Anne Morriss in their book Uncommon Service. They label it “Truth Number 1: You Can’t Be Good at Everything”. The point that the authors are making is that a company can do well by being clear on the value proposition and then making a series of carefully chosen and carefully integrated trade-offs. Trade-offs are carefully considered choices: being great at the attributes that really matter to the chosen customers and being poor at that attributes that don’t matter.
Let’s make this real through the example of the Commerce Bank created by Vernon Hill. According to the authors:
- Hill focussed on those customers who were fed up with the service experience of a traditional bank especially the hours and the attitude.
- Commerce Bank chose to stay open 7 days a week. Monday through to Friday the bank was open from 7:30 am to 8:00 pm. And full service banking was available on Saturdays and Sundays thus earning Commerce Bank tagline of America’s most convenient bank.
- This kind of service is expensive and to pull it off Commerce Bank choose to pay the lowest rates on deposits in every market that the bank operated. Notice, that these go together: the great/convenient opening hours were made possible through the low deposit rates. How was the bank able to make this choice? Because it knew that its target customers were willing to sacrifice the deposit rate for convenience of opening hours and good service.
- Commerce Bank also made the choice to be the best at serving customers, interacting with customers. The bank found that hiring employees who are best in class in both attitude and competence is expensive. And expense it could not afford given its business model. So, Commerce Bank chose to hire employees with the right attitude – the people who naturally had the disposition and interpersonal skills to deliver great service.
- Yet hiring people with great attitude but limited technical skills has consequences. These people were not in a position to understand/explain the differences between 27 varieties of checking accounts, much less explain any complex financial products. To accommodate this design choice – hiring people with attitude but not aptitude – Commerce Bank simplified its product line into one product: a checking account.
To sum up: Commerce Bank become a great success by focussing on customers who valued opening hours/great service and were willing to sacrifice deposit rates. To deliver this value proposition Commerce Bank had to make integrated design choices. They choose to excel at what really mattered to these target customers (convenience, great service/attitude) and chose to do badly on the dimensions that did not matter to the target customers: price (deposit rates) and product range.
Can customer-centricity lead you to ruin as Sampson Lee claims? No, if you approach customer-centricity strategically and take the kind of approach that Commerce Bank took, or Amazon does, or SouthWest Airlines does, or John Lewis does. Yes, if you go about it the way that Sampson suggests you are going to go about it: do whatever your competitors is doing, follow the latest shiny object, or simply respond to whatever is the latest whim of any person that chooses to do business with you.
7 dimensions of the branded customer experience and other interesting insights from the latest research
According to the CIM: “Over the last fifteen years, the concept of branding has evolved from merely a design and communications-led ideal to one which runs far deeper into the DNA of an organisation. Today’s CMO has little choice but to acknowledge that whilst brands are built on promises, it’s the experience delivered that makes the difference between a myth and a reality.” So how are marketers and the organisations they work for/within getting on in making this shift?
According to the research/report put out by CIM there are 7 key dimensions at the heart of the branded customer experience: strategic vision, leadership, customer-centricity, culture, operations, measurement and marketing clout. Here’s what caught my attention under each of these dimensions:
The priority is making the short-term profits. How have I come to this conclusion? Only 20% of the respondents say that their organisation is willing to sacrifice short-term profits to adhere to the brand promise. Which means that 4 out of 5 organisations are NOT willing to adhere to the promises they make to their customers if this means sacrificing short-term profits.
Which brand management tool is considered useful and yet the least used? Employee brand behaviour guidelines. How are employees going to live the brand if there are not clear brand behaviour guidelines? And even that is not enough in itself, the brand guidelines have to be embodied/enacted. What do the marketing folks excel at? Issuing brand values and identity guidelines – strikes me that we are in the land of messaging/design/PR.
I suppose the critical question here is whether the Tops (the leadership team) embody/live the brand through their decision making and their behaviour. Here’s what the research throws up:
- 6 out of 10 leadership teams do NOT use the brand positioning/brand promise to guide their decision making;
- 7 out of 10 leadership teams do NOT know what the brand means for their part of the organisation;
- Only 1 out of 2 leadership teams embody/enact behaviours that are in line with the brand positioning/brand promise.
How does that show up for you? For me it speaks volumes as to how leadership teams see and relate to the brand.
Given all the talk about generating customer insight and acting rapidly/effectively on this insight to both improve the customer experience and to develop/introduce new products/services to address unmet customer needs I found it instructive to look at the reality as viewed/shared by the marketers. According to the research the issue is not with the lack of insight nor the sharing of this insight within/across the organisation. The issue is in the organisation’s failure to act on that insight:
- For 9 out of 10 businesses customer insight and research are NOT the main drivers of decision making in the business.
- At least 8 out of 10 businesses do NOT anticipate customer needs with new products and services; and
- Only 4 out of 10 businesses understand and track customer preferences.
It is fashionable to say that ‘culture eats strategy for lunch’. I’d like to modify it and say ‘culture eats brand for lunch’. If I am correct then the fit between the culture and the brand promise/positioning really matters. Here are the key point coming out of the research: “brand values are well represented during recruitment and on-boarding, but lacking translation to the customer experience.” This suggests that there is no strong linkage between espoused values (the brand values, the brand promise, the brand positioning) and the behaviour of the people within the organisation. Put differently it appears that brand values/brand promise is all talk in most organisation. Here are a couple of stats:
- Only 3 out of 10 organisations empower everyone regardless of department or level to build the brand and work to protect it;
- In 8 out of 10 organisations employees do NOT understand their role in creating/delivering a branded customer experience.
A promise is a promise whether made by marketing or sales and this promise is made real by operations. What does the research say on this? It says “Operations and internal support services aren’t supporting the customer experience” Here are some stats that go along with this conclusion:
- Only 2 out of 10 organisations have put in place operations and internal support services that support the delivery of the branded customer experience;
- Only 2 out of 10 organisations have employee policies and processes that are in line with the brand promise/positioning;
- Only 2 out of 10 organisations insist that their suppliers and partners be compatible with the brand promise.
The key highlights here are:
- Only 3 out of 10 organisations consistently measure brand and customer related non-financial metrics;
- Only 2 out of 10 organisation reward/value brand and customer related non-financial measured of success; and
- Only 2 out of 10 organisations are able to link the quality of the branded customer experience to business value.
How powerful is the marketing function within the organisation? Is this even a function that is listened to with respect? It doesn’t seem so, the report says “respect and influence under pressure, but positive signs of input into cross business initiatives”. This claim is supported by the following:
- In 7 out of 10 organisations the brand/marketing function is NOT well respected throughout the organisation;
- In 7 out of 10 organisations the marketing function does NOT have a strong influence on what other departments do; and
- In only 3 out of 10 organisations do other business functions/teams freely invite the marketing folks to their project teams and workshops.
Want to get hold of a summary infographic? You can get hold of a pdf by clicking on the following: Branded Customer Experience 2012 infographic